|Exhibit 12                                                                                                                                                                        |                                                              
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------
|General Electric Company
Ratio of Earnings to Fixed Charges                                                                                                                       |                                                              
|(Dollars in millions)                                                                                                                                                             | Years ended December 31                                      
|                                                                                                                                                                                  |                                                              
|                                                                                                                                                                                  |                                                              
|                                                                                                                                                                                  |                                                              
|General Electric Company and consolidated affiliates                                                                                                                              |                                                              
|Earnings (a)                                                                                                                                                                      | $                                                            
|Plus:                                                                                                                                                                             | Interest and other financial charges 
    included in expense
|                                                                                                                                                                                  | One-third of rental expense (b)                              
|                                                                                                                                                                                  |                                                              
|Adjusted "earnings"                                                                                                                                                               | $                                                            
|                                                                                                                                                                                  |                                                              
|Fixed Charges:                                                                                                                                                                    |                                                              
|                                                                                                                                                                                  | Interest and other financial charges                         
|                                                                                                                                                                                  | Interest capitalized                                         
|                                                                                                                                                                                  | One-third of rental expense (b)                              
|                                                                                                                                                                                  |                                                              
|Total fixed charges                                                                                                                                                               | $                                                            
|                                                                                                                                                                                  |                                                              
|Ratio of earnings to fixed charges                                                                                                                                                |                                                              
|                                                                                                                                                                                  |                                                              
|                                                                                                                                                                                  |                                                              
|(a) Earnings before income taxes, minority interest
    and cumulative effect of accounting changes.(b) Considered to be representative of interest factor
    in rental expense. |                                                              





---

Exhibit 99(b)

FINANCIAL SECTION

ABOUT THESE FINANCIAL STATEMENTS

Keeping our investors well informed about GE is vitally
important to us. In 2001, we committed to increasing our transparency, which led
to the presentation of significantly more financial information and analysis in
our annual report. We continue to be guided by that commitment. We believe the
2003 financial statements will provide you with even more insight about our
company.

The pages that follow have been organized to walk you
through our financial condition and results from top to bottom.

FINANCIAL TABLE OF CONTENTS

|42         | Management's Discussion of Financial Responsibility                                                              | We begin with Management's Discussion of Financial
    Responsibility. Here our Chief Executive and Financial Officers
    discuss our unyielding commitment to rigorous oversight, controllership and
    visibility to investors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|---------- | ---------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|          
|43         | Independent Auditors' Report                                                                                     | Then we present our Independent Auditors' Report,
    submitted by KPMG LLP. Here our auditors express their independent opinion
    on our consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|          
|4444444955 | Management's Discussion and AnalysisOperationsOverview of Our EarningsSegment OperationsInternational Operations | The next section is Management's Discussion and
    Analysis. We begin the Operations section with an overview of our
    earnings from 2001 to 2003, which provides perspective on how the global
    economic environment has affected our businesses over the last three years.
    We then discuss various key operating results for GE industrial (GE) and
    financial services (GECS). Because of the fundamental differences in their
    businesses, reviewing certain information separately for GE and GECS offers
    a more meaningful analysis. This year's discussion of our segment results
    includes expanded quantitative and qualitative disclosure about the factors
    affecting segment revenues and profits, and the effects of recent
    acquisitions and significant transactions. Next is an overview of our
    operations from an international perspective.
|          
|57         | Financial Resources and Liquidity                                                                                | We then move to a discussion of our Financial
    Resources and Liquidity. Here we provide an overview of the major
    factors that affected our consolidated financial position. This section has
    been significantly expanded and reorganized to provide better insight into
    the liquidity and cash flow activities of GE and GECS.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|          
|65         | Selected Financial Data                                                                                          | Selected Financial Data provides five years of
    financial information for GE and GECS. This table includes commonly used
    metrics that facilitate comparison with other companies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|          
|67         | Critical Accounting Estimates                                                                                    | Following that is our discussion of Critical
    Accounting Estimates used by management in preparing our financial
    statements. We discuss what these estimates are, why they are important, how
    they are developed and what could cause them to change.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|          
|70         | Audited Financial Statements                                                                                     | Finally, we present our Audited Financial Statements,
    including consolidating data for GE and GECS, and related notes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|          
|114        | Glossary                                                                                                         | For your convenience, we provide a Glossary of
    key terms used in our financial statements. We also continue to present our
    financial information electronically at www.ge.com/investor. This
    award-winning site is interactive and informative.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   





41         GE 2003 ANNUAL REPORT

---

MANAGEMENT'S DISCUSSION OF FINANCIAL RESPONSIBILITY

High quality financial reporting is an excellent measure of a
company and its management. We demonstrate our commitment to high quality
reporting by adopting appropriate accounting policies, devoting our full,
unyielding commitment to ensuring that those policies are applied properly and
consistently, and presenting our results in a manner that is complete and clear.
We welcome suggestions from those who use our reports.

Rigorous Management Oversight

Members of our corporate leadership team review each of our
businesses constantly, on matters that range from overall strategy and financial
performance to staffing and compliance. Our business leaders constantly monitor
real-time financial and operating systems, enabling us to identify potential
opportunities and concerns at an early stage, and positioning us to develop and
execute rapid responses. Our Board of Directors oversees management's business
conduct, and our Audit Committee, which consists entirely of independent
directors, oversees our system of controls and procedures. We continually
examine our governance practices in an effort to enhance investor trust and
improve the board's overall effectiveness. Our Presiding Director, who conducts
at least three meetings per year with non-employee directors, has helped us to
set more focused and effective meeting agendas. We changed compensation policies
for our executives, including modifying CEO compensation to award equity grants
only if key performance metrics are met, thereby aligning leadership's interests
with the long-term interests of GE investors.

Dedication to Controllership

We maintain a dynamic system of controls and
procedures–including internal controls over financial reporting–designed to
ensure reliable financial record-keeping, transparent financial reporting and
disclosure, protection of physical and intellectual property, and efficient,
effective use of resources. We recruit, develop and retain a world-class
financial team, including 520 internal auditors who conduct thousands of
financial, compliance and process improvement audits each year, in every
geographic area, at every GE business. The Audit Committee oversees the scope
and results of these reviews. Our global integrity policies–the "Spirit &
Letter"–require compliance with law and policy, and pertain to such vital
issues as upholding financial integrity and avoiding conflicts of interest.
These integrity policies are available in 27 languages, and we have provided
them to every one of GE's more than 300,000 global employees, holding each of
these individuals–from our top management on down–personally accountable for
compliance. Our integrity policies serve to reinforce key employee
responsibilities around the world, and we inquire extensively about compliance.
Our strong compliance culture reinforces these efforts by requiring employees to
raise any compliance concerns and by prohibiting retribution for doing so. We
hold our consultants, agents and independent contractors to the same integrity
standards.

Visibility to Investors

We are keenly aware of the importance of full and open
presentation of our financial position and operating results. To facilitate
this, we maintain a Disclosure Committee, which includes senior executives with
exceptional knowledge of our businesses and the related needs of our investors.
We ask this committee to evaluate the fairness of our financial and
non-financial disclosures, and to report their findings to us and to the Audit
Committee. We further ensure strong disclosure by holding more than 250 analyst
and investor meetings every year, and by communicating any material information
covered in those meetings to the public. In testament to the effectiveness of
our stringent disclosure policies, investors surveyed annually by Investor
Relations magazine have given us 19 awards in the last eight years, including
Best Overall Investor Relations Program by a mega-cap company for six of those
years. We are in regular contact with representatives of the major rating
agencies, and our debt continues to receive their highest ratings. We welcome
the strong oversight of our financial reporting activities by our independent
audit firm, KPMG LLP, who are engaged by and report directly to the Audit
Committee. Their report for 2003 appears on page 43.

A Great Company

GE continues to earn the admiration of the business world. We
were named "The World's Most Respected Company" for the sixth consecutive year
in the Financial Times annual CEO survey, ranking first for governance and
integrity.

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

/s/ Jeffrey R. Immelt

---

/s/ Keith S. Sherin

---

February 6, 2004

42         GE 2003 ANNUAL REPORT

---

INDEPENDENT AUDITORS' REPORT

To Shareowners and Board of Directors of 
General Electric Company

We have audited the accompanying statement of financial position
of General Electric Company and consolidated affiliates ("GE") as of December
31, 2003 and 2002, and the related statements of earnings, changes in
shareowners' equity and cash flows for each of the years in the three-year
period ended December 31, 2003. These consolidated financial statements are the
responsibility of GE management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.

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

In our opinion, the aforementioned financial statements
appearing on pages 70, 72, 74, 48 and 76-113 present fairly, in all material
respects, the financial position of General Electric Company and consolidated
affiliates at December 31, 2003 and 2002, and the results of their operations
and their cash flows for each of the years in the three-year period ended
December 31, 2003, in conformity with accounting principles generally accepted
in the United States of America.

As discussed in note 1 to the consolidated financial statements,
GE in 2003 changed its methods of accounting for variable interest entities and
asset retirement obligations, in 2002 changed its methods of accounting for
goodwill and other intangible assets and for stock-based compensation, and in
2001 changed its methods of accounting for derivative instruments and hedging
activities and impairment of certain beneficial interests in securitized assets.

Our audits were made for the purpose of forming an opinion
on the consolidated financial statements taken as a whole. The accompanying
consolidating information appearing on pages 71, 73 and 75 is presented for
purposes of additional analysis of the consolidated financial statements rather
than to present the financial position, results of operations and cash flows of
the individual entities. The consolidating information has been subjected to the
auditing procedures applied in the audits of the consolidated financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the consolidated financial statements taken as a whole.

/s/ KPMG LLPKPMG LLP
Stamford, Connecticut

February 6, 2004



43         GE 2003 ANNUAL REPORT

---

MANAGEMENT'S DISCUSSION AND ANALYSIS

OPERATIONS

Our consolidated financial statements combine the industrial
manufacturing and product services businesses of General Electric Company (GE)
and the financial services businesses of General Electric Capital Services, Inc.
(GECS or financial services).

We present Management's Discussion of Operations in three
parts: Overview of Our Earnings from 2001 through 2003, Segment Operations and
International Operations.

In the accompanying analysis of financial information, we
sometimes refer to data derived from consolidated financial information but not
required by U.S. generally accepted accounting principles (GAAP) to be presented
in financial statements. Certain of these data are considered "non-GAAP
financial measures" under the U.S. Securities and Exchange Commission (SEC)
regulations; those rules require the supplemental explanation and reconciliation
provided on page 69.

ON JANUARY 1, 2004, WE SIMPLIFIED OUR ORGANIZATION. With 11
operating segments, we will achieve lower costs of operations in platforms that
will accommodate our future growth. The new segments most affected by this
change follow:

- Advanced Materials–plastics, silicones and quartz
- Infrastructure–water, security, sensors and Fanuc Automation
- Transportation–aircraft engines and rail
- Consumer and Industrial–appliances, lighting and  industrial
- Commercial Finance–the combination of Commercial Finance and the Fleet
  Services business that was previously part of Equipment Management
- Equipment and Other Services–the combination of Equipment Management and
  the former All Other GECS segments

Results for 2003 in this financial section are reported on the
13 business basis in effect in 2003.

During 2003, we entered into an agreement to acquire
U.K.-based Amersham plc, a world leader in medical diagnostics and life
sciences. We also entered into an agreement to merge NBC with Vivendi Universal
Entertainment to create one of the world's premier media companies, NBC
Universal.

We announced in November 2003 our intent for an initial
public offering (IPO) of a new company, Genworth Financial, Inc. (Genworth),
comprising most of our life and mortgage insurance businesses. We plan to sell
approximately one-third of Genworth's equity in the IPO, and we expect (subject
to market conditions) to reduce our ownership over the next three years as
Genworth transitions to full independence. We commenced the IPO process in
January 2004 and expect to complete the IPO in the first half of the year,
subject to market conditions and receipt of various regulatory approvals.

WE DECLARED $7.8 BILLION IN DIVIDENDS IN 2003. Per-share
dividends of $0.77 were up 5% from 2002, following an 11% increase from the
preceding year. We have rewarded our shareowners with 28 consecutive years of
dividend growth. Our dividend growth for the past five years has significantly
outpaced dividend growth of companies in the Standard & Poor's 500 stock index.

Except as otherwise noted, the analysis in the remainder of
this section presents the results of GE (with GECS included on a one-line basis)
and GECS. See the Segment Operations section on page 49 for a more detailed
discussion of the businesses within GE and GECS.



Overview of Our Earnings from 2001 through 2003

The global economic environment must be considered when
evaluating our 2001 to 2003 results. Important factors for us included slow
global economic growth, a mild U.S. recession that did not cause significantly
higher credit losses, lower global interest rates, distinct developments in
three industries that are significant to us (power generation, property and
casualty insurance and commercial aviation), and escalating raw material prices.
As you will see in detail in the following pages, our diversification and risk
management strategies reduced the earnings effects of many of the significant
developments of the last three years.

If, for comparison, we adjust 2001 results for the required
accounting change to stop goodwill amortization, our earnings would have
increased modestly in percentage terms over this three-year period. This modest
increase results from a combination of factors, both positive and negative.

First, consider two businesses whose results were
noteworthy.

- Power Systems is significant to our consolidated results, at 16% and 21%
  of three-year revenues and earnings before accounting changes, respectively.
  Power Systems was significantly affected by the unprecedented industry
  dynamics sometimes referred to as the "U.S. power bubble," a phenomenon that
  dramatically increased demand for power generation



44         GE 2003 ANNUAL REPORT

---

MANAGEMENT'S DISCUSSION AND ANALYSIS

equipment, peaking during 2002. Power Systems continued
  shipping large numbers of gas turbine units in 2002, reaching $0.09 per share
  growth in earnings–up 29% from 2001. (Note that per-share results we present
  in this discussion are on a diluted basis.) The subsequent 2003 decline in
  shipments was reflected in the $0.14 per share drop in 2003 earnings. We
  foresaw the 2002 end of the "bubble" and took appropriate action to cushion
  the downturn, right-sizing the business and growing and investing in other
  lines of the power generation business such as product services and GE Wind.
  The result is a Power Systems business whose results are remarkable from any
  perspective save its own extraordinary recent history.



- At Employers Reinsurance Corporation (ERC), we, like most of the
  reinsurance industry, faced volatility throughout the period. We are now
  confident we have worked through our historical underwriting mistakes. But in
  2002 we recognized losses on our 1997-2001 business, increasing loss reserves
  by $3.5 billion, resulting in a loss of $0.18 per share in 2002, a decline of
  $0.19 per share from 2001. In 2003, our turnaround efforts started to pay off.
  We realized benefits from improved ERC operations and ERC earnings rebounded
  by $0.23 per share to a profit of $0.05 per share.

Most of our operations achieved operating results in line with
expectations in the 2001 to 2003 economic environment.

- Commercial and Consumer Finance at 22% and 33% of  consolidated three-year
  revenues and earnings before accounting changes, respectively, are large,
  profitable growth  businesses in which we continue to invest with confidence.
   In a challenging economic environment, these businesses grew earnings by
  $0.09 per share in 2003 and $0.06 per share in 2002. Solid core growth,
  disciplined risk management and successful acquisitions have delivered these
  strong results.
- Our transportation businesses–Aircraft Engines and Transportation
  Systems–continued to invest in market-leading technology and services. While
  our commercial  aviation and rail customers were sometimes understandably
  reluctant to buy new equipment in these markets, our  business model also
  succeeds by diversification. Product services and the military engines
  business continued strong, and overall these businesses grew 6%, or $0.01 per
  share,  in 2003, following a 3% decline in 2002.
- NBC and Medical Systems contributed strong performances in their distinct
  markets. NBC's leadership in key demographics yielded higher pricing on strong
  demand from advertisers. Medical Systems continued to invest in new products
  and sustained its product leadership position, with strong double-digit growth
  in Healthcare IT and Ultrasound. The successful acquisitions of Bravo and
  Instrumentarium also provided growth, and Telemundo improved to a  promising
  position entering 2004. Earnings from these  segments increased $0.03 per
  share in 2003 following a $0.02 per share increase in 2002.
- Plastics, Equipment Management, Consumer Products, Industrial Products and
  Systems and Specialty Materials  are economically sensitive and consequently
  were affected adversely by the U.S. recession and by slow global growth  in
  developed countries. Even in the difficult environments they face, these
  businesses continued to succeed in their  primary role in GE, to generate
  cash. Higher capacity, in combination with declining or weak volume growth in
  many of these industries, resulted in fierce competitive price pressures.
  Plastics was hit particularly hard because of  additional pressures from
  inflation in certain raw materials such as benzene and natural gas. Earnings
  from this group of businesses as a whole declined by $0.07 per share over this
  period with Plastics down $0.03 per share in 2003 and $0.02 per share in 2002.
  Acquisitions of new growth  platforms, such as security and water, offset some
  of the  weakness in these core product lines, and we continue to foresee
  dramatic growth in these platforms.

Other factors that were important to our recent earnings
performance included reduced earnings from our principal postretirement benefit
plans (down $0.05 per share in 2003 following a decline of $0.07 per share in
2002) and unusual events in 2002 such as the gains on the sale of Global
eXchange Services ($0.03 per share) and the Bravo exchange net of restructuring
($0.03 per share), as well as favorable tax settlements with the U.S. Internal
Revenue Service (IRS) in 2002 ($0.04 per share).

Acquisitions affected our operations and contributed $5.4
billion, $7.2 billion and $3.5 billion, respectively, to each of the last three
year's consolidated revenues. Our consolidated net earnings in 2003, 2002 and
2001 included approximately $0.5 billion,



45         GE 2003 ANNUAL REPORT

---

MANAGEMENT'S DISCUSSION AND ANALYSIS

$0.6 billion and $0.2 billion, respectively, from acquired
businesses. We integrate acquisitions as quickly as possible and only revenues
and earnings during the first 12 months following the quarter in which we
complete the acquisition are attributed to such businesses.

Significant matters in our Statement of Earnings, pages 70
and 71, are explained below.

OPERATING MARGIN is sales of goods and services less the costs
of goods and services sold, as well as selling, general and administrative
expenses. GE operating margin was 15.9% of sales in 2003, down from 19.1% in
2002 and 19.6% in 2001. The decrease in 2003 was attributable to lower operating
margins at Power Systems and Plastics. The decline in 2002 was attributable to
Plastics and the Lighting business in Consumer Products, and also reflected $0.6
billion of restructuring and other charges, partially offset by improvements in
operating margins at Power Systems and NBC. Restructuring and other charges
included $0.4 billion for rationalizing certain operations and facilities of
GE's worldwide industrial businesses.

Sales of product services were $22.9 billion in 2003, a 10%
increase over 2002. Increases in product services in 2003 and 2002 were
widespread, led by continued strong growth at Power Systems, Medical Systems and
Specialty Materials. Operating margin from product services was approximately
$5.3 billion, compared with $5.2 billion in 2002. The increase reflected
improvements at Power Systems and Specialty Materials.

TOTAL COST PRODUCTIVITY (sales in relation to costs, both on a
constant dollar basis) for GE was negative 1.3% in 2003 on declining volume at
Power Systems and Plastics. In 2002 variable cost productivity improvements (led
by Industrial Systems and Plastics) and base cost productivity improvements at
Plastics were more than offset by lower base cost productivity, primarily at
Power Systems, Industrial Systems and Specialty Materials.

PRINCIPAL POSTRETIREMENT BENEFIT PLANS contributed modestly to
pre-tax earnings in 2003, compared with $0.8 billion and $1.5 billion in 2002
and 2001, respectively. Benefit costs relating to these plans increased in 2003
primarily because of a reduction in the pension discount rate for the year from
7.25% to 6.75% (which increased the pension obligation), amortization of prior
years' investment losses, plan benefit changes resulting from union negotiations
and increases in retiree medical and drug costs.

Considering current and expected asset allocations, as well
as historical and expected returns on various categories of assets in which our
plans are invested, we assumed that long-term returns on our pension plan assets
would be 8.5% in 2003 and 2002 and 9.5% in 2001. Reducing the assumed return by
100 basis points in 2002 increased annual pension costs by about $480 million
pretax. Actual annual investment returns are extremely volatile. Because this
short-term market volatility occurs in context of the long-term nature of
pension plans, U.S. accounting principles provide that differences between
assumed and actual returns are recognized over the average future service of
employees. See notes 5 and 6 for additional information about funding status,
components of earnings effects and actuarial assumptions of the plans. See page
68 for discussion of pension assumptions.

We believe our postretirement benefit costs will increase
in 2004 for a number of reasons, including a further reduction in the pension
discount rate from 6.75% to 6.0%, additional amortization of investment losses,
plan benefit changes as a result of union negotiations and continued increases
in retiree healthcare costs. We continue to expect that our plan assets will
earn 8.5%, on average, over the long term.

We will not make any contributions to the GE Pension Plan
in 2004. To the best of our ability to forecast the next five years, we do not
anticipate making contributions to that Plan so long as expected investment
returns are achieved. The present funding status provides assurance of benefits
for our participants, but future effects on operating results and funding depend
on economic conditions and investment performance.

GE INTEREST AND OTHER FINANCIAL CHARGES amounted to $0.9
billion, $0.6 billion and $0.8 billion in 2003, 2002 and 2001, respectively.
Interest costs in 2003 were higher as a result of our issuing $5.0 billion of
long-term bonds in the first quarter of the year and higher average short-term
borrowings, partially offset by lower average interest rates. The decrease in
2002 was primarily the result of reduced interest on lower tax liabilities
following the 2002 settlements described on page 47.



46         GE 2003 ANNUAL REPORT

---

MANAGEMENT'S DISCUSSION AND ANALYSIS

GECS INTEREST EXPENSE ON BORROWINGS was $9.9 billion in 2003 and
2002, compared with $10.6 billion in 2001. Changes over the three-year period
reflected the effects of lower interest rates, partially offset by the effects
of higher average borrowings of $279.7 billion, $250.1 billion and $212.2
billion in 2003, 2002 and 2001, respectively, used to finance asset growth and
acquisitions. The average composite effective interest rate was 3.5% in 2003,
compared with 4.1% in 2002 and 5.1% in 2001. In 2003, average assets of $521.6
billion were 15% higher than in 2002, which in turn were 18% higher than in
2001. See page 60 for a discussion of interest rate risk management.



INCOME TAXES on consolidated earnings before accounting changes
were 21.7%, compared with 19.9% in 2002 and 28.3% in 2001. Our consolidated
income tax rate increased in 2003 by 1.8 percentage points over 2002 because our
savings from 2003 business dispositions were less than our 2002 savings from
settlements with the IRS. Income tax rates were lower than what they otherwise
would have been in both 2003 and 2002 because of the increasing share of
earnings from lower taxed international operations. A more detailed analysis of
differences between the U.S. federal statutory rate and the consolidated rate,
as well as other information about our income tax provisions, is provided in
note 7. The nature of business activities and associated income taxes differ for
GE and for GECS, and a separate analysis of each is presented in the paragraphs
that follow.

Because GE tax expense does not include taxes on GECS
earnings, the GE effective tax rate is best analyzed in relation to GE earnings
excluding GECS. In 2003, 2002 and 2001, respectively, GE's pre-tax earnings
excluding GECS were $10.7 billion, $14.3 billion and $12.7 billion. On this
basis, GE's effective tax rate was 26.7% in 2003 and 2002, and 32.9% in 2001.
The 2003 GE rate was reduced by approximately 1.7 percentage points because
certain reductions in pre-tax earnings–specifically, lower earnings at Power
Systems and from our principal pension plans–affected taxes at higher than our
average rate. The 2003 GE rate was also reduced by approximately 1.0 percentage
point (after adjusting for the effect of the lower pre-tax income at Power
Systems and our principal pension plans) from a tax benefit on the disposition
of shares of GE Superabrasives U.S., Inc., included in the line, "All
other–net" in note 7. In 2002, GE entered into settlements with the IRS
concerning certain export tax benefits. The effect of the settlements, the tax
portion of which is included on the line "Tax on international activities
including exports" in note 7, was a reduction of the GE tax rate of
approximately 2.7 percentage points. Also in 2002, GE entered into a
tax-advantaged transaction to exchange certain assets for the cable network
Bravo. The related reduction of approximately 1.0 percentage point in the GE
effective tax rate is reflected in the line, "All other–net" in note 7.

GECS effective tax rate was 15.8% in 2003, negative 1.7% in
2002 and 19.8% in 2001. The increase from 2002 to 2003 reflected the absence of
a current year counterpart to the 2002 pre-tax loss at ERC and the IRS
settlements discussed below, as well as lower pre-tax losses at GE Equity,
partially offset by an approximately three percentage point decrease due to the
2003 pre-tax loss and tax benefit on the disposition of shares of ERC Life
Reinsurance Corporation (ERC Life), included in the line "All other–net" in
note 7.

GECS 2002 effective tax rate reflected pre-tax losses at
ERC and GE Equity, the effects of lower taxed earnings from international
operations and favorable tax settlements with the IRS. Pre-tax losses of $2.9
billion at ERC and $0.6 billion at GE Equity reduced the effective tax rate of
GECS by approximately 17 percentage points.

During 2002, as a result of revised IRS regulations, GECS
reached a settlement with the IRS allowing the deduction of previously realized
losses associated with the prior disposition of Kidder Peabody. Also during
2002, we reached a settlement with the IRS regarding the treatment of certain
reserves for obligations to policyholders on life insurance contracts in the GE
Financial Assurance business. The benefits of these settlements, which reduced
the GECS tax rate approximately four percentage points (excluding the ERC and GE
Equity losses), are included in the line "All other–net" in note 7.



47         GE 2003 ANNUAL REPORT

---

MANAGEMENT'S DISCUSSION AND ANALYSIS

SUMMARY OF OPERATING SEGMENTS

|                                              |                                                     
|--------------------------------------------- | ----------------------------------------------------
|                                              | General Electric Company and consolidated affiliates
|                                              |                                                     
|For the years ended December 31 (In millions) |                                                     
|                                              |                                                     
|REVENUES                                      |                                                     
|Aircraft Engines                              | $                                                   
|Commercial Finance                            |                                                     
|Consumer Finance                              |                                                     
|Consumer Products                             |                                                     
|Equipment Management                          |                                                     
|Industrial Products and Systems               |                                                     
|Insurance                                     |                                                     
|Medical Systems                               |                                                     
|NBC                                           |                                                     
|Plastics                                      |                                                     
|Power Systems                                 |                                                     
|Specialty Materials                           |                                                     
|Transportation Systems                        |                                                     
|All Other GECS                                |                                                     
|Corporate items and eliminations              |                                                     
|                                              |                                                     
|CONSOLIDATED REVENUES                         | $                                                   
|                                              |                                                     
|SEGMENT PROFIT                                |                                                     
|Aircraft Engines                              | $                                                   
|Commercial Finance                            |                                                     
|Consumer Finance                              |                                                     
|Consumer Products                             |                                                     
|Equipment Management                          |                                                     
|Industrial Products and Systems               |                                                     
|Insurance                                     |                                                     
|Medical Systems                               |                                                     
|NBC                                           |                                                     
|Plastics                                      |                                                     
|Power Systems                                 |                                                     
|Specialty Materials                           |                                                     
|Transportation Systems                        |                                                     
|All Other GECS                                |                                                     
|                                              |                                                     
|Total segment profit                          |                                                     
|GECS goodwill amortization                    |                                                     
|GE corporate items and eliminations           |                                                     
|GE interest and other financial charges       |                                                     
|GE provision for income taxes                 |                                                     
|                                              |                                                     
|Earnings before accounting changes            |                                                     
|Cumulative effect of accounting changes       |                                                     
|                                              |                                                     
|CONSOLIDATED NET EARNINGS                     | $                                                   
|                                              |                                                     

The notes to consolidated financial statements on pages 76-113 are an integral part of this summary.



48         GE 2003 ANNUAL REPORT

---

MANAGEMENT'S DISCUSSION AND ANALYSIS

Segment Operations

REVENUES AND SEGMENT PROFIT FOR OPERATING SEGMENTS are shown on
page 48. As discussed in our 2002 Annual Report, effective January 1, 2003, we
made changes to the way we report our segments, including the use of business
specific, market-based leverage in measuring performance of our financial
services businesses. Also, as a result of changes in the way we operated our
industrial businesses during 2003, we disaggregated and reported Medical
Systems, Plastics, Specialty Materials and Transportation Systems as separate
segments. Prior year information has been reclassified to conform to the 2003
presentation. For additional information, including a description of the
products and services included in each segment, see pages 112 and 113.

Segment profit is determined based on internal performance
measures used by the Chief Executive Officer to assess the  performance of each
business in a given period. In connection with that assessment, the Chief
Executive Officer may exclude matters such as charges for restructuring;
rationalization and other similar expenses; certain gains/losses from
dispositions; and litigation settlements or other charges, responsibility for
which precedes the current management team.

Segment profit always excludes goodwill amortization, the
effects of principal pension plans and accounting changes. Segment profit
excludes or includes interest and other financial charges and segment income
taxes according to how a particular segment management is measured–excluded in
determining operating profit for Aircraft Engines, Consumer Products, Industrial
Products and Systems, Medical Systems, NBC, Plastics, Power Systems, Specialty
Materials and Transportation Systems; included in determining segment profit
which we refer to as "segment net earnings" for Commercial Finance, Consumer
Finance, Equipment Management, Insurance and All Other GECS.

AIRCRAFT ENGINES revenues decreased 4% to $10.7 billion in 2003
reflecting lower volume ($0.5 billion), primarily related to commercial aircraft
and industrial aero-derivative engines, partially offset by higher military
spare parts volume. Despite the decrease in revenues, operating profit rose 4%
to $2.1 billion reflecting the effects of productivity ($0.2 billion) largely
from workforce efficiency, and lower research and development spending upon
completion of certain development programs, more than offsetting the effect of
decreased volume ($0.1 billion). Aircraft Engines reported a 2% decrease in
revenues in 2002 as commercial engine pricing pressures and reduced commercial
product services revenues, combined with lower industrial units, were
substantially offset by increased military sales. Operating profit in 2002 was
4% lower than in 2001, primarily as a result of lower pricing ($0.1 billion)
including pricing for commercial engines, lower product services volume from
reduced customer flight hours, and higher labor costs, partially offset by lower
material costs and productivity.

See GE Corporate Items and Eliminations on page 55 for a
discussion of items not allocated to this segment.

In 2003, revenues from sales to the U.S. government were
$2.4 billion, compared with $2.2 billion and $1.9 billion in 2002 and 2001,
respectively.

Aircraft Engines received orders of $10.4 billion in 2003,
compared with $11.6 billion in 2002 as military orders decreased from $4.3
billion to $2.2 billion and commercial engines increased $0.6 billion to $2.3
billion. The $10.5 billion total backlog at year-end 2003 comprised unfilled
product orders of $7.9 billion (of which 37% was scheduled for delivery in 2004)
and product services orders of $2.6 billion scheduled for 2004 delivery.
Comparable December 31, 2002, total backlog was $11.4 billion.

COMMERCIAL FINANCE

|(In millions)                  |   | 2003   |   |   | 2002   |   |   | 2001   |  
|------------------------------ | - | ------ | - | - | ------ | - | - | ------ | -
|                               |  
|REVENUES                       |   |        |   |   |        |   |   |        |  
|Real Estate                    | $ | 2,386  |   | $ | 2,124  |   | $ | 1,886  |  
|Commercial Equipment Financing |   | 4,494  |   |   | 4,539  |   |   | 4,212  |  
|Corporate Financial Services   |   | 2,467  |   |   | 2,350  |   |   | 1,758  |  
|Structured Finance             |   | 1,423  |   |   | 1,243  |   |   | 1,093  |  
|Aviation Services              |   | 2,881  |   |   | 2,694  |   |   | 2,173  |  
|Vendor Financial Services      |   | 4,456  |   |   | 4,130  |   |   | 3,954  |  
|Healthcare Financial Services  |   | 735    |   |   | 665    |   |   | 372    |  
|Other Commercial Finance       |   | 27     |   |   | 36     |   |   | 311    |  
|                               |  
|Total revenues                 | $ | 18,869 |   | $ | 17,781 |   | $ | 15,759 |  
|                               |  
|NET REVENUES                   |   |        |   |   |        |   |   |        |  
|Total revenues                 | $ | 18,869 |   | $ | 17,781 |   | $ | 15,759 |  
|Interest expense               |   | 5,577  |   |   | 5,753  |   |   | 5,754  |  
|                               |  
|Total net revenues             | $ | 13,292 |   | $ | 12,028 |   | $ | 10,005 |  
|                               |  
|NET EARNINGS                   |   |        |   |   |        |   |   |        |  
|Real Estate                    | $ | 834    |   | $ | 650    |   | $ | 528    |  
|Commercial Equipment Financing |   | 817    |   |   | 719    |   |   | 640    |  
|Corporate Financial Services   |   | 675    |   |   | 599    |   |   | 384    |  
|Structured Finance             |   | 576    |   |   | 488    |   |   | 399    |  
|Aviation Services              |   | 506    |   |   | 454    |   |   | 497    |  
|Vendor Financial Services      |   | 432    |   |   | 369    |   |   | 332    |  
|Healthcare Financial Services  |   | 153    |   |   | 122    |   |   | 37     |  
|Other Commercial Finance       |   | (228   | ) |   | (212   | ) |   | (29    | )
|                               |  
|Total net earnings             | $ | 3,765  |   | $ | 3,189  |   | $ | 2,788  |  
|                               |  
|                               |   |        |   |   |        |   |   |        |  

49       GE 2003 ANNUAL REPORT

---

MANAGEMENT'S DISCUSSION AND ANALYSIS

|December 31 (In millions)      |   | 2003    |  |   | 2002    | 
|------------------------------ | - | ------- |  | - | ------- | 
|                               |  
|TOTAL ASSETS                   |   |         |  |   |         | 
|Real Estate                    | $ | 27,767  |  | $ | 29,522  | 
|Commercial Equipment Financing |   | 53,273  |  |   | 51,757  | 
|Corporate Financial Services   |   | 29,646  |  |   | 26,897  | 
|Structured Finance             |   | 21,309  |  |   | 19,293  | 
|Aviation Services              |   | 33,271  |  |   | 30,512  | 
|Vendor Financial Services      |   | 24,855  |  |   | 25,518  | 
|Healthcare Financial Services  |   | 8,367   |  |   | 7,905   | 
|Other Commercial Finance       |   | 5,495   |  |   | 2,841   | 
|                               |  
|Total assets                   | $ | 203,983 |  | $ | 194,245 | 
|                               |  
|Financing receivables–net      | $ | 130,129 |  | $ | 128,277 | 
|                               |  
|                               |   |         |  |   |         | 



Commercial Finance revenues and net earnings increased 6% and
18%, respectively, compared with 2002. The increase in revenues resulted
primarily from acquisitions across substantially all businesses ($0.9 billion),
higher investment gains at Real Estate ($0.1 billion) and origination growth,
partially offset by lower securitization activity at Commercial Equipment
Financing ($0.1 billion). The increase in net earnings resulted primarily from
origination growth, acquisitions across substantially all businesses ($0.2
billion), higher investment gains at Real Estate as a result of the sale of
properties and our investments in Regency Centers and Prologis ($0.1 billion),
lower credit losses ($0.1 billion) resulting from continued improvement in
overall portfolio credit quality as reflected by lower delinquencies and
nonearning receivables, and growth in lower taxed earnings from international
operations ($0.1 billion).

The most significant acquisitions affecting Commercial
Finance 2003 results were the commercial inventory financing business of
Deutsche Financial Services and the structured finance business of ABB, both of
which were acquired during the fourth quarter of 2002. These two acquisitions
contributed $0.5 billion and $0.1 billion to 2003 revenues and net earnings,
respectively.

The 2002 increase in revenues of 13% principally reflected
acquisitions and increased originations across substantially all businesses,
partially offset by reduced market interest rates and lower securitization
activity at Corporate Financial Services and Commercial Equipment Financing. The
2002 net earnings increase of 14% primarily reflected acquisitions ($0.4
billion) and origination growth, productivity across all businesses and growth
in lower taxed earnings from international operations, partially offset by
increased credit losses and lower securitization activity at Corporate Financial
Services and Commercial Equipment Financing.

See All Other GECS on page 54 for a discussion of items not
allocated to this segment.

CONSUMER FINANCE

|(In millions)           |   | 2003   |   |   | 2002   |   |   | 2001  |  
|----------------------- | - | ------ | - | - | ------ | - | - | ----- | -
|                        |  
|REVENUES                |   |        |   |   |        |   |   |       |  
|Global Consumer Finance | $ | 8,502  |   | $ | 6,489  |   | $ | 5,561 |  
|Card Services           |   | 4,343  |   |   | 3,777  |   |   | 3,947 |  
|                        |  
|Total revenues          | $ | 12,845 |   | $ | 10,266 |   | $ | 9,508 |  
|                        |  
|NET REVENUES            |   |        |   |   |        |   |   |       |  
|Total revenues          | $ | 12,845 |   | $ | 10,266 |   | $ | 9,508 |  
|Interest expense        |   | 2,696  |   |   | 2,143  |   |   | 2,179 |  
|                        |  
|Total net revenues      | $ | 10,149 |   | $ | 8,123  |   | $ | 7,329 |  
|                        |  
|NET EARNINGS            |   |        |   |   |        |   |   |       |  
|Global Consumer Finance | $ | 1,478  |   | $ | 1,224  |   | $ | 1,034 |  
|Card Services           |   | 781    |   |   | 670    |   |   | 669   |  
|Other Consumer Finance  |   | (98    | ) |   | (95    | ) |   | (101  | )
|                        |  
|Total net earnings      | $ | 2,161  |   | $ | 1,799  |   | $ | 1,602 |  
|                        |  
|                        |   |        |   |   |        |   |   |       |  





|December 31 (In millions) |   | 2003    |  |   | 2002   | 
|------------------------- | - | ------- |  | - | ------ | 
|                          |  
|TOTAL ASSETS              |   |         |  |   |        | 
|Global Consumer Finance   | $ | 87,387  |  | $ | 58,310 | 
|Card Services             |   | 19,143  |  |   | 18,655 | 
|                          |  
|Total assets              | $ | 106,530 |  | $ | 76,965 | 
|                          |  
|Financing receivables–net | $ | 90,693  |  | $ | 63,254 | 
|                          |  
|                          |   |         |  |   |        | 



Consumer Finance revenues increased 25% in 2003, a result of
acquisitions ($1.1 billion), the net effects of the weaker U.S. dollar ($0.7
billion), origination growth as a result of continued global expansion and the
premium on the sale of The Home Depot private label credit card receivables
($0.1 billion). Net earnings increased 20% in 2003 as a result of origination
growth, growth in lower taxed earnings from international operations, the
premium on the sale of The Home Depot private label credit card receivables
($0.1 billion) and acquisitions. These increases were partially offset by lower
securitization activity at Card Services ($0.2 billion) and lower earnings in
Japan, principally as a result of increased personal bankruptcies.

The most significant acquisitions affecting Consumer
Finance 2003 results were First National Bank, which provides mortgage and sales
finance products in the United Kingdom, and the retail sales finance unit of
Conseco Finance Corp., both of which were acquired during the second quarter of
2003. These businesses contributed $0.7 billion and $0.1 billion to 2003
revenues and net earnings, respectively.

Revenues increased in 2002 primarily as a result of
acquisitions ($0.8 billion) and increased international originations, partially
offset by lower securitization activity at Card Services ($0.4 billion). Net
earnings increased 12% in 2002, as a result of origination growth, acquisitions
($0.1 billion), growth in lower taxed earnings from international operations and
productivity benefits, partially offset by lower securitization activity at Card
Services ($0.1 billion).

See All Other GECS on page 54 for a discussion of items not
allocated to this segment.



50         GE 2003 ANNUAL REPORT

---

MANAGEMENT'S DISCUSSION AND ANALYSIS

CONSUMER PRODUCTS revenues decreased 2% to $8.3 billion in 2003,
reflecting lower selling prices ($0.2 billion) primarily of home appliances and
consumer lighting products. Operating profit rose 13% to $0.6 billion in 2003,
as lower base costs ($0.1 billion), primarily achieved by combining the lighting
and appliance businesses, and the mix of higher-margin appliances more than
offset the effects of lower product pricing ($0.2 billion). In 2002, Consumer
Products revenues of $8.5 billion were flat compared with 2001 as 5% higher
appliances revenues, reflecting success of new products, were offset by a 9%
decline in revenues from lighting products. Operating profit decreased 24% in
2002 to $0.5 billion, with adverse results in the lighting products business,
particularly lower prices, higher base costs and higher charges resulting from
customer credit issues. Lower prices reduced 2002 operating profit by $0.1
billion.

EQUIPMENT MANAGEMENT

|(In millions)      |   | 2003  |  |   | 2002  |   | 2001 
|------------------ | - | ----- |  | - | ----- | - | -----
|                  
|REVENUES           | $ | 4,707 |  | $ | 4,766 | $ | 4,904
|                  
|NET REVENUES       |   |       |  |   |       |   |      
|Total revenues     | $ | 4,707 |  | $ | 4,766 | $ | 4,904
|Interest expense   |   | 741   |  |   | 812   |   | 905  
|                  
|Total net revenues | $ | 3,966 |  | $ | 3,954 | $ | 3,999
|                  
|NET EARNINGS       | $ | 172   |  | $ | 313   | $ | 377  
|                  
|                   |   |       |  |   |       |   |      





|December 31 (In millions)  |   | 2003   |  |   | 2002   | 
|-------------------------- | - | ------ |  | - | ------ | 
|                           |  
|TOTAL ASSETS               | $ | 25,469 |  | $ | 25,222 | 
|                           |  
|Equipment leased to others | $ | 12,482 |  | $ | 11,285 | 
|                           |  
|                           |   |        |  |   |        | 



Equipment Management revenues and net earnings decreased 1% and
45%, respectively, in 2003 compared with 2002. The decrease in revenues resulted
primarily from lower asset utilization and lower prices ($0.2 billion), an
effect of industry-wide excess equipment capacity reflective of current economic
conditions in the road and rail transportation sector. Also contributing to the
decrease were $0.1 billion lower gains on asset sales related to our continuing
strategy to optimize fleet mix, age and size. These decreases were substantially
offset by the net effects of the weaker U.S. dollar ($0.3 billion) and the
results of acquisitions. The decrease in net earnings resulted primarily from
lower asset utilization, lower price and lower gains on asset sales.

Equipment Management experienced business-wide declining
utilization rates throughout 2002, resulting in both lower revenues and lower
earnings. Equipment Management realized productivity benefits in 2002, partially
offsetting lower utilization rate's effect on earnings.

See All Other GECS on page 54 for a discussion of items not
allocated to this segment.

INDUSTRIAL PRODUCTS AND SYSTEMS

|(In millions)          |   | 2003  |  |   | 2002  |  |   | 2001  | 
|---------------------- | - | ----- |  | - | ----- |  | - | ----- | 
|                       |  
|REVENUES               |   |       |  |   |       |  |   |       | 
|Industrial Systems     | $ | 5,517 |  | $ | 4,968 |  | $ | 4,440 | 
|GE Supply              |   | 2,879 |  |   | 2,473 |  |   | 2,302 | 
|                       |  
|Total revenues         | $ | 8,396 |  | $ | 7,441 |  | $ | 6,742 | 
|                       |  
|OPERATING PROFIT       |   |       |  |   |       |  |   |       | 
|Industrial Systems     | $ | 501   |  | $ | 488   |  | $ | 527   | 
|GE Supply              |   | 130   |  |   | 109   |  |   | 99    | 
|                       |  
|Total operating profit | $ | 631   |  | $ | 597   |  | $ | 626   | 
|                       |  
|                       |   |       |  |   |       |  |   |       | 



Industrial Products and Systems reported revenues of $8.4
billion, 13% higher than in 2002, primarily as a result of $0.5 billion of sales
from recently acquired businesses that more than offset the effects of lower
prices, while operating profit rose 6% to $0.6 billion in 2003. Industrial
Systems revenues rose $0.5 billion on higher volume ($0.3 billion). Operating
profit was slightly higher as productivity ($0.1 billion), higher volume,
primarily as a result of recently acquired businesses, and an investment gain
were partially offset by $0.1 billion from lower prices. In 2002, Industrial
Systems revenues rose 12% compared with 2001 on higher volume ($0.6 billion),
but operating profit declined 7%, reflecting the negative effects of lower
selling prices ($0.1 billion).

INSURANCE

|(In millions)          |   | 2003   |  |   | 2002   |   |   | 2001   | 
|---------------------- | - | ------ |  | - | ------ | - | - | ------ | 
|                       |  
|REVENUES               |   |        |  |   |        |   |   |        | 
|GE Financial Assurance | $ | 13,130 |  | $ | 12,317 |   | $ | 12,826 | 
|Mortgage Insurance     |   | 1,293  |  |   | 1,090  |   |   | 1,075  | 
|GE Global Insurance    |   |        |  |   |        |   |   |        | 
|Holding (ERC)          |   | 11,600 |  |   | 9,432  |   |   | 9,453  | 
|Other Insurance        |   | 171    |  |   | 457    |   |   | 536    | 
|                       |  
|Total revenues         | $ | 26,194 |  | $ | 23,296 |   | $ | 23,890 | 
|                       |  
|NET EARNINGS           |   |        |  |   |        |   |   |        | 
|GE Financial Assurance | $ | 918    |  | $ | 934    |   | $ | 1,088  | 
|Mortgage Insurance     |   | 564    |  |   | 538    |   |   | 500    | 
|GE Global Insurance    |   |        |  |   |        |   |   |        | 
|Holding (ERC)          |   | 481    |  |   | (1,794 | ) |   | 78     | 
|Other Insurance        |   | 139    |  |   | 227    |   |   | 213    | 
|                       |  
|Total net earnings     | $ | 2,102  |  | $ | (95    | ) | $ | 1,879  | 
|                       |  
|                       |   |        |  |   |        |   |   |        | 



Insurance revenues increased $2.9 billion (12%) in 2003 on
increased premium revenues ($2.2 billion), a gain of $0.6 billion on sale of GE
Edison Life Insurance Company (Edison Life) by GE Financial Assurance, higher
investment income ($0.4 billion) and the net effects of the weaker U.S. dollar
($0.7 billion). The premium revenue increase reflected continued favorable
pricing at ERC ($0.5 billion), net volume growth in certain ERC and GE Financial
Assurance businesses ($0.8 billion), absence of prior year loss adjustments
($0.4 billion), adjustment of current year



51         GE 2003 ANNUAL REPORT

---

MANAGEMENT'S DISCUSSION AND ANALYSIS

premium accruals to actual ($0.3 billion) and lower levels of
ceded premiums resulting from a decline in prior year ERC loss events ($0.1
billion). Partial revenue offsets resulted from absence of revenues following
the sale of Edison Life ($0.7 billion) and a $0.2 billion loss on the
disposition of Financial Guaranty Insurance Company (FGIC) at the end of 2003.
Revenues decreased 2% in 2002, principally the result of ongoing planned run-off
of acquired policies at Toho and lower realized investment gains.

Net earnings increased $2.2 billion in 2003, primarily from
the substantial improvement in current operating results at ERC ($2.3 billion)
reflecting improved underwriting, lower adverse development (discussed below)
and generally favorable industry conditions during the year. Net earnings also
benefited from the gain on the sale of Edison Life ($0.3 billion). These
increases were partially offset by the absence of a current year counterpart to
the favorable tax settlement with the IRS in 2002 ($0.2 billion) and the loss on
the sale of FGIC ($0.1 billion after tax).

Net earnings decreased $2.0 billion in 2002, primarily the
result of adverse development at ERC. Also in 2002, investment gains decreased,
an effect partially offset by core premium growth including higher premium
pricing at ERC, and benefit from the favorable tax settlement with the IRS at GE
Financial Assurance.

As described on page 68 under the caption "Insurance
liabilities and reserves," insurance loss provisions are adjusted up or down
based on the best available estimates. Reported claims activity at ERC related
to prior year loss events, particularly for liability-related exposures
underwritten in 1997 through 2001, has performed much worse than we anticipated.

- In the fourth quarter of 2002, considering the continued acceleration in
  reported claims activity, we concluded that our best estimate of ultimate
  pre-tax losses was $2.5 billion higher in the range of reasonably possible
  loss scenarios than we had previously estimated. The more significant 2002
  adverse development was in hospital medical malpractice, product  liability
  and professional liability ($0.3 billion each) and umbrella liability, workers
  compensation, individual liability and asbestos ($0.2 billion each). With
  amounts recognized in the first three quarters of 2002, our total 2002 pre-tax
  charge for adverse development at ERC amounted to $3.5 billion.
- In 2003, we continued to monitor our reported claims activity compared
  with our revised expected loss levels. In a majority of our lines of business,
  reported claims activity in 2003 was reasonably close to expected amounts. In
  a few lines–principally medical malpractice, product liability and certain
  director and officer related coverage–reported claims volumes exceeded our
  revised loss expectations. Accordingly, we increased our loss reserves to the
  newly-indicated ultimate levels in 2003, recording adverse  development of
  $0.9 billion pretax. We are confident we have worked through our historical
  underwriting mistakes.

Throughout 2003, ERC has remained disciplined in rejecting risks
that either fail to meet the established standards of price or terms and
conditions, or that involve risks for which sufficient historical data do not
exist to permit us to make a satisfactory evaluation. For risks that pass our
criteria, we have sought to retain and even judiciously expand our business. On
the other hand, we have curtailed or exited business in particular property and
casualty business channels when expected returns do not appear to justify the
risks.

ERC's improved operating performance is illustrated by its
"combined ratio"–the sum of claims-related losses incurred plus related
underwriting expenses in relation to earned premiums. A combined ratio of less
than 100% reflects an underwriting profit, that is, profit before investment
income, another significant revenue source for most insurance entities. ERC's
2003 combined ratio was 106%, but, in an early indication of the effectiveness
of our revised underwriting standards, the combined ratio excluding prior-year
loss events was 93%.

Our Mortgage Insurance business had favorable development
throughout the three years ended December 31, 2003, primarily reflecting
continued strength in certain real estate markets and the success of our loss
containment initiatives in that business.

See All Other GECS on page 54 for a discussion of items not
allocated to this segment and the discussion on page 44 of our planned Genworth
offering.

MEDICAL SYSTEMS revenues increased 14% to $10.2 billion in 2003
reflecting $0.5 billion of sales from recently acquired businesses, primarily
Instrumentarium, and other volume growth ($0.7 billion) that more than offset
lower prices ($0.4 billion). Operating profit of $1.7 billion rose 10% as
productivity ($0.3 billion) and higher volume ($0.2 billion) more than offset
the $0.4 billion effects of lower prices. Medical Systems revenues increased 6%
to $9.0 billion in 2002, on higher equipment and product services volume,
partially offset by lower prices ($0.4 billion) and weak market conditions in
Latin America and Japan. Operating profit rose 3% to $1.5 billion in 2002 as
productivity ($0.2 billion) and increased volume ($0.2 billion) were partially
offset by a $0.4 billion effect of lower pricing.



52         GE 2003 ANNUAL REPORT

---

MANAGEMENT'S DISCUSSION AND ANALYSIS

See GE Corporate Items and Eliminations on page 55 for a
discussion of items not allocated to this segment.

Orders received by Medical Systems in 2003 were $10.5
billion, compared with $9.4 billion in 2002. The $4.6 billion total backlog at
year-end 2003 comprised unfilled product orders of $2.8 billion (of which 95%
was scheduled for delivery in 2004) and product services orders of $1.8 billion
scheduled for 2004 delivery. Comparable December 31, 2002, total backlog was
$4.0 billion.

During 2003, we entered into an agreement to acquire
U.K.-based Amersham plc, a world leader in medical diagnostics and life
sciences.

NBC revenues decreased 4% to $6.9 billion in 2003 following a
24% increase to $7.1 billion in 2002. Operating profit rose 21% to $2.0 billion
in 2003, following an 18% increase in the prior year. Results were affected by
several events during the three-year period. Improved pricing and higher
syndication and network sales increased revenues by $0.2 billion in 2002 and
higher prices and network sales increased revenues $0.5 billion in 2003, but
were partially offset in 2003 by advertising reductions because of coverage of
the Iraq war ($0.1 billion). The Salt Lake City Olympic Games and final year of
NBA coverage contributed $0.7 billion and $0.3 billion, respectively, to 2002
revenues, but the NBA contract resulted in a loss that exceeded profit from the
Olympics. We acquired Telemundo and Bravo in 2002; together they added $0.7
billion and $0.3 billion of advertising revenues in 2003 and 2002, respectively,
and $0.1 billion operating profit in 2003. The 2002 exchange of certain assets
for Bravo resulted in $0.6 billion of gain, $0.2 billion of which was attributed
to NBC's segment results, an amount equal to $0.2 billion of other charges for
impairments in 2002. The remainder was included in GE Corporate Items and
Eliminations as discussed on page 55.

During 2003, we entered into an agreement to merge NBC with
Vivendi Universal Entertainment to create one of the world's premier media
companies, NBC Universal.

PLASTICS revenues in 2003 were flat at $5.2 billion as lower
volume ($0.3 billion) offset the effects of the weaker U.S. dollar ($0.2
billion) and price increases. Operating profit of $0.4 billion was 50% lower
than in 2002 reflecting higher material costs ($0.2 billion), primarily benzene,
and lower productivity ($0.2 billion). Plastics revenues of $5.2 billion in 2002
were relatively unchanged from 2001 levels, as weakness in pricing ($0.5
billion) offset increased volume ($0.4 billion). Operating profit declined 28%
in 2002 to $0.8 billion as productivity was not sufficient to offset the effects
of lower prices ($0.5 billion) and increased raw material costs.

See GE Corporate Items and Eliminations on page 55 for a
discussion of items not allocated to this segment.

POWER SYSTEMS revenues fell 19% to $18.5 billion as growth in
the energy services and wind businesses was more than offset by lower volume
($4.7 billion) reflecting the continued effects of the decline in sales of large
gas turbines (208 in 2003 compared with 362 in 2002) and industrial
aero-derivative products, partially offset by the net effects of the weaker U.S.
dollar ($0.7 billion). Operating profit dropped 35% to $4.1 billion in 2003,
principally reflecting the combined effects of lower volume ($1.3 billion),
lower productivity ($0.7 billion) and lower prices ($0.4 billion). Customer
contract termination fees, net of associated costs, were $0.6 billion in 2003
and $0.9 billion in 2002, reflecting the decline in demand for new power
generation equipment that began in 2002, with such fees primarily occurring in
that year and the first half of 2003. Power Systems revenues increased 13% to
$22.9 billion in 2002 on higher volume ($2.3 billion) and price ($0.2 billion).
Operating profit rose 29% to $6.3 billion in 2002 on higher volume ($0.6
billion), and productivity ($0.6 billion) which included the $0.9 billion
positive effect of customer contract termination fees, net of associated costs.
Results in 2002 also included restructuring and other charges of $0.2 billion as
Power Systems adjusted its cost structure.

Power Systems orders were $15.4 billion in 2003, compared
with $13.3 billion in 2002, reflecting strong demand for wind turbines, oil and
gas turbomachinery, and services. The $12.3 billion total backlog at year-end
2003 comprised unfilled product orders of $7.8 billion (of which 70% was
scheduled for delivery in 2004) and product services orders of $4.5 billion
scheduled for 2004 delivery. Comparable December 31, 2002, total backlog was
$16.1 billion.

SPECIALTY MATERIALS reported a 30% increase in revenues, to $3.1
billion in 2003, on higher volume ($0.5 billion) primarily from acquisitions.
Recently acquired businesses, the largest of which were Betz-Dearborn, Osmonics
and OSi, contributed $0.6 billion of sales in 2003. Operating profit rose 35% to
$0.4 billion on higher volume from acquisitions, the effect of dispositions and
productivity, partially offset by price declines and higher material costs.
Specialty Materials revenues increased 32% to $2.4 billion in 2002 on higher
volume ($0.6 billion), reflecting the contributions of acquisitions, partially
offset by lower selling prices ($0.1 billion). Operating profit at Specialty
Materials rose 6% to $0.3 billion in 2002, reflecting higher volume ($0.1
billion) and lower material costs, partially offset by lower pricing ($0.1
billion) and higher base costs.



53         GE 2003 ANNUAL REPORT

---

MANAGEMENT'S DISCUSSION AND ANALYSIS

TRANSPORTATION SYSTEMS revenues of $2.5 billion increased 10%
compared with 2002 on higher volume ($0.2 billion), primarily locomotive sales
and growth in the global signaling business. Operating profit rose 14% to $0.5
billion in 2003 on the higher volume, partially offset by reduced pricing. In
2002, Transportation Systems revenues of $2.3 billion were 2% lower and
operating profit of $0.4 billion was about the same as in 2001, as product
services revenues, strong variable cost productivity and lower material costs
offset the effects of lower volume and pricing pressures.

Transportation Systems received orders of $2.9 billion in
2003, compared with $2.8 billion in 2002. The $2.4 billion total backlog at
year-end 2003 comprised unfilled product orders of $1.3 billion (of which 69%
was scheduled for delivery in 2004) and product services orders of $1.1 billion
scheduled for 2004 delivery. Comparable December 31, 2002, total backlog was
$2.1 billion.

ALL OTHER GECS

|(In millions)        |   | 2003  |   |   | 2002  |   |   | 2001  |  
|-------------------- | - | ----- | - | - | ----- | - | - | ----- | -
|                     |  
|REVENUES             |   |       |   |   |       |   |   |       |  
|IT Solutions         | $ | 496   |   | $ | 1,992 |   | $ | 2,301 |  
|GE Equity            |   | (169  | ) |   | (384  | ) |   | (126  | )
|Americom             |   | –     |   |   | –     |   |   | 1,698 |  
|Not allocated        |   | –     |   |   | –     |   |   | (436  | )
|Other–All Other GECS |   | 1,337 |   |   | 982   |   |   | 1,358 |  
|                     |  
|Total revenues       | $ | 1,664 |   | $ | 2,590 |   | $ | 4,795 |  
|                     |  
|NET EARNINGS         |   |       |   |   |       |   |   |       |  
|IT Solutions         | $ | (45   | ) | $ | (46   | ) | $ | 13    |  
|GE Equity            |   | (176  | ) |   | (375  | ) |   | (264  | )
|Americom             |   | –     |   |   | –     |   |   | 901   |  
|Not allocated        |   | –     |   |   | –     |   |   | (656  | )
|Other–All Other GECS |   | (225  | ) |   | (159  | ) |   | (502  | )
|                     |  
|Total net earnings   | $ | (446  | ) | $ | (580  | ) | $ | (508  | )
|                     |  
|                     |   |       |   |   |       |   |   |       |  



All Other GECS includes our activities and businesses that we do
not measure within one of the other financial services segments.

In addition to comments on All Other GECS elsewhere in this
report, the following comments relate to the table above:

- IT Solutions–Revenues decreased by 75% in 2003 primarily as a result of
  geographic market exits in Europe. Net losses remained flat in 2003 compared
  with 2002, largely because of tax benefits recorded in 2002 associated with,
  and offsetting losses generated by, certain European operations that we sold.
- GE Equity–GE Equity manages equity investments in early-stage,
  early-growth, pre-IPO companies. GE Equity revenues include income, gains and
  losses on such investments. Revenue and loss performance reflected the overall
  improvement in equity markets and lower level of losses  in 2003. Operating
  performance during 2002 reflected increased losses on investments, including
  losses in the telecommunications and software industries, and lower gains. GE
  Equity ceased making new investments in 2002, but continues to provide
  financial support to companies  in its portfolio which will be managed for
  maximum value over time, eventually liquidating.
- Americom–On November 9, 2001, we exchanged our satellite operations,
  comprising the stock of Americom and other related assets and liabilities, for
  a combination of cash and 31% of the publicly-traded stock of SES Global, a
  leading satellite company, in order to create the world's largest  satellite
  services provider. The transaction resulted in a gain of $1.2 billion ($0.6
  billion after tax), representing the  difference between the carrying value of
  the 69% investment in Americom and the amount of cash plus the market value
   of SES Global shares received at the closing date. No gain was recorded on
  the 31% interest in Americom that was indirectly retained by us. Our
  investment in SES Global is accounted  for on the equity method in Commercial
  Finance.
- Not allocated–Certain amounts are not included in other financial
  services operating segments or businesses because they are excluded from the
  measurement of their operating performance for internal purposes. In 2001,
  after-tax  charges of $0.7 billion primarily related to asset impairments and
  product line exits, including: other-than-temporary impairments of investments
  totaling $0.3 billion, the largest of which were held by GE Financial
  Assurance, GE Equity and ERC; charges of $0.1 billion related to loss events
   and the exit of certain insurance and financing product lines at ERC,
  primarily non-standard automobile and higher  limit industrial property
  insurance coverages; charges of  $0.1 billion related to the exit of certain
  financing product lines at Consumer Finance; and costs related to
  restructuring totaling $0.1 billion, consisting of involuntary termination
  benefits, facilities exit costs, and asset impairments.
- Other–All Other GECS includes GECS corporate expenses, liquidating
  businesses and other non-segment aligned operations. In 2003, the most
  significant of these activities were the consolidation of certain entities in
  our financial statements as a result of our July 1, 2003, adoption of
  Financial Accounting Standards Board (FASB) Interpretation No. (FIN) 46,
  Consolidation of Variable Interest Entities (see note 29); Auto Financial
  Services; the U.S. Auto and Home business, which was sold in the third quarter
  of 2003; and a tax benefit related to the sale of ERC Life. In 2002 and 2001,
  the most significant of these activities were Auto Financial Services and the
  U.S. Auto and Home business.



54        GE 2003 ANNUAL REPORT

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MANAGEMENT'S DISCUSSION AND ANALYSIS

GE CORPORATE ITEMS AND ELIMINATIONS

|(In millions)                    |   | 2003   |   |   | 2002   |   |   | 2001   |  
|-------------------------------- | - | ------ | - | - | ------ | - | - | ------ | -
|                                 |  
|REVENUES                         |   |        |   |   |        |   |   |        |  
|Eliminations                     | $ | (3,918 | ) | $ | (2,522 | ) | $ | (2,819 | )
|                                 |  
|OPERATING PROFIT                 |   |        |   |   |        |   |   |        |  
|Principal pension plans          | $ | 1,040  |   | $ | 1,556  |   | $ | 2,095  |  
|Eliminations                     |   | (717   | ) |   | (817   | ) |   | (769   | )
|Underabsorbed corporate overhead |   | (582   | ) |   | (367   | ) |   | (334   | )
|Not allocated                    |   | (228   | ) |   | 115    |   |   | (545   | )
|Other                            |   | (254   | ) |   | 288    |   |   | 85     |  
|                                 |  
|Total                            | $ | (741   | ) | $ | 775    |   | $ | 532    |  
|                                 |  
|                                 |   |        |   |   |        |   |   |        |  



GE Corporate Items and Eliminations include the effects of
eliminating transactions between operating segments; cost reductions from our
principal pension plans; liquidating businesses; underabsorbed corporate
overhead; certain non-allocated amounts described below; a variety of sundry
items; and, before 2002, goodwill amortization. Corporate overhead is allocated
to GE operating segments based on a ratio of segment net cost of operations,
excluding direct materials, to total company cost of operations. This caption
also includes internal allocated costs for segment funds on deposit.

Not allocated–Certain amounts are not included in GE
operating segments because they are excluded from the measurement of their
operating performance for internal purposes. In 2003 and 2002, these comprised
charges of $0.2 billion and $0.1 billion, respectively, for settlement of
litigation, restructuring and other charges at Medical Systems; in 2002, a
portion of NBC's gain from the Bravo exchange; in 2002, a total of $0.1 billion
for restructuring and other charges at Aircraft Engines and Plastics; and in
2001, a total of $0.5 billion of goodwill amortization.

Other includes a $0.5 billion gain from the sale of 90% of
Global eXchange Services in 2002.

International Operations

Our international activities span all global regions and
primarily encompass manufacturing for local and export markets, import and sale
of products produced in other regions, leasing of aircraft, sourcing for our
plants domiciled in other global regions and provision of financial services
within these regional economies. Thus, when countries or regions experience
currency and/or economic stress, we often have increased exposure to certain
risks, but also often have new profit opportunities. Potential increased risks
include, among other things, higher receivables delinquencies and bad debts,
delays or cancellation of sales and orders principally related to power and
aircraft equipment, higher local currency financing costs and a slowdown in
established financial services activities. New profit opportunities include,
among other things, more opportunities for lower cost outsourcing, expansion of
industrial and financial services activities through purchases of companies or
assets at reduced prices and lower U.S. debt financing costs.

Estimated results of international activities include the
results of our operations located outside the United States plus all U.S.
exports. We classify certain GECS operations that cannot meaningfully be
associated with specific geographic areas as "Other international" for this
purpose.



International revenues rose 14% to $60.8 billion in 2003
compared with $53.4 billion and $51.9 billion in 2002 and 2001, respectively.
International revenues as a percentage of consolidated revenues were 45% in
2003, compared with 40% and 41% in 2002 and 2001, respectively. The effects of
exchange rates on reported results were to increase revenues by $3.8 billion and
$0.4 billion in 2003 and 2002, respectively, and increase earnings by $0.1
billion in 2003 and decrease earnings by $0.1 billion in 2002.

CONSOLIDATED INTERNATIONAL REVENUES

|(In millions)                               |   | 2003   |  |   | 2002   |  |   | 2001   | 
|------------------------------------------- | - | ------ |  | - | ------ |  | - | ------ | 
|                                            |  
|Europe                                      | $ | 30,505 |  | $ | 24,813 |  | $ | 24,381 | 
|Pacific Basin                               |   | 13,119 |  |   | 12,026 |  |   | 11,447 | 
|Americas                                    |   | 5,854  |  |   | 5,165  |  |   | 5,507  | 
|Other international                         |   | 4,608  |  |   | 3,911  |  |   | 3,456  | 
|                                            |  
|                                            |   | 54,086 |  |   | 45,915 |  |   | 44,791 | 
|Exports from the U.S. to external customers |   | 6,719  |  |   | 7,481  |  |   | 7,149  | 
|                                            |  
|Total                                       | $ | 60,805 |  | $ | 53,396 |  | $ | 51,940 | 
|                                            |  
|                                            |   |        |  |   |        |  |   |        | 



GE international revenues were $33.0 billion, $29.0 billion and
$28.3 billion in 2003, 2002 and 2001, respectively. The $4.0 billion increase in
GE international revenues related to increased operations outside the U.S.,
partially offset by lower U.S. exports.



55        GE 2003 ANNUAL REPORT

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MANAGEMENT'S DISCUSSION AND ANALYSIS

GE revenues in Europe rose 25%, led by Power Systems,
Medical Systems and Industrial Products and Systems, reflecting the net effects
of the weaker U.S. dollar and volume growth. GE revenues in the Pacific Basin
increased 14% as most businesses reported improved results. Industrial Products
and Systems and Power Systems were the primary contributors to a 16% increase in
revenues in the Americas and Power Systems more than accounted for the 10%
decrease in U.S. exports. The increase in 2002 related to both an increase in
operations outside the U.S. and higher U.S. exports. Revenue increases in Europe
were led by Medical Systems and Industrial Systems in 2002. Growth in Specialty
Materials revenues across all geographic areas was partially offset by lower
sales in all areas by Aircraft Engines. Increases in U.S. export sales in 2002
were primarily in Plastics and Power Systems, partially offset by lower exports
by Medical Systems and Transportation Systems.



GECS international revenues were $27.8 billion, $24.4
billion and $23.6 billion in 2003, 2002 and 2001, respectively. The $3.4 billion
increase related to a 21% increase in Europe in 2003 as a result of the growth
in premiums and price increases at Insurance ($2.1 billion), acquisitions ($1.0
billion) and the net effects of the weaker U.S. dollar ($0.7 billion), primarily
at Consumer Finance and Commercial Finance, partially offset by geographic
market exits at IT Solutions ($1.3 billion).

International operating profit was $8.8 billion in 2003, an
increase of 35% over 2002, which was 7% higher than in 2001. Operating profit in
2003 rose 89% to $4.0 billion in Europe, primarily as a result of lower adverse
development at Insurance ($1.1 billion). Operating profit also rose 30% to $1.5
billion in the Americas and was relatively unchanged in the Pacific Basin ($2.4
billion) and "Other international" ($0.9 billion).

Total assets of international operations were $258.9
billion in 2003 (40% of consolidated assets), an increase of $29.9 billion, or
13%, over 2002. GECS international assets grew 12% from $207.5 billion at the
end of 2002 to $231.9 billion at the end of 2003. GECS assets increased 31% in
Europe as a result of acquisitions ($14.8 billion), primarily at Consumer
Finance and Commercial Finance, the net effects of the weaker U.S. dollar ($11.7
billion) and growth at Consumer Finance and Insurance. GECS assets increased 13%
in the Americas as a result of growth at Commercial Finance and Insurance.

Financial results of our international activities reported
in U.S. dollars are affected by currency exchange. We use a number of techniques
to manage the effects of currency exchange, including selective borrowings in
local currencies and selective hedging of significant cross-currency
transactions. Such principal currencies are the British pound sterling, the
euro, the Japanese yen and the Canadian dollar.

Environmental Matters

Our operations, like operations of other companies engaged in
similar businesses, involve the use, disposal and cleanup of substances
regulated under environmental protection laws.

We have developed environmental, health and safety
management systems that are implemented at all of our facilities and track our
performance. Since 1996, we have reduced employee injuries by over 70% as well
as reducing air and wastewater exceedances and emissions at our facilities. We
also actively participate in various programs that recognize facilities with
health and safety programs that exceed legal requirements, including the United
States Occupational Safety and Health Administration's Voluntary Protection
Program (VPP) as well as a similar government program in Mexico. Participation
in these programs requires government audits to verify our comprehensive health
and safety management systems. We are a leading participant in the U.S. VPP
program with 82 sites, and have an additional 25 sites participating in the
Mexico program. We have a Global Star program designed to recognize sites with
world-class health and safety programs in those countries without government VPP
programs. The 44 Global Star sites have passed a rigorous evaluation conducted
by GE internal health and safety experts. We also have 79 sites accredited by
outside auditors under the ISO 14000 Standard for Environmental Management
Systems.



56        GE 2003 ANNUAL REPORT

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MANAGEMENT'S DISCUSSION AND ANALYSIS

Over the last two years we spent a total of about $0.1
billion for projects related to the environment. These amounts exclude
expenditures for remediation actions, which are principally expensed and are
discussed below. Capital expenditures for environmental purposes have included
pollution control devices–such as wastewater treatment plants, groundwater
monitoring devices, air strippers or separators, and incinerators–at new and
existing facilities constructed or upgraded in the normal course of business.
Consistent with policies stressing environmental responsibility, we expect our
capital expenditures other than for remediation projects to total about $0.1
billion over the next two years for new or expanded programs to build facilities
or modify manufacturing processes to minimize waste and reduce emissions.

We also are involved in a sizable number of remediation
actions to clean up hazardous wastes as required by federal and state laws. Such
statutes require that responsible parties fund remediation actions regardless of
fault, legality of original disposal or ownership of a disposal site.
Expenditures for site remediation actions amounted to $0.1 billion in each of
the last two years. We presently expect that such remediation actions will
require average annual expenditures in the range of $0.1 billion to $0.2 billion
over the next two years.

The U.S. Environmental Protection Agency (EPA) ruled in
February 2002 that approximately 150,000 pounds of polychlorinated biphenyls
(PCBs) must be dredged from a 40-mile stretch of the upper Hudson River in New
York State. We have submitted what is known as a "Good Faith Offer" under the
Superfund law and began negotiations with the EPA to undertake the design and
engineering of the remedy. Our Statement of Financial Position as of December
31, 2003 and 2002, included liabilities for the estimated costs of this
remediation.

FINANCIAL RESOURCES AND LIQUIDITY

This discussion of financial resources and liquidity addresses
the Statement of Financial Position (pages 72-73), Statement of Changes in
Shareowners' Equity (page 70) and the Statement of Cash Flows (pages 74-75).

Only a small portion of GECS business is directly related
to other GE operations. The fundamental differences between GE and GECS are
reflected in the measurements commonly used by investors, rating agencies and
financial analysts. These differences will become clearer in the discussion that
follows with respect to the more significant items in the financial statements.

Overview of Financial Position

Major changes in our financial position resulted from the
 following:

- During 2003, we completed our acquisitions of First National Bank, Allbank
  and the retail sales finance business of Conseco. At the acquisition date,
  these transactions resulted in an increase in total assets of approximately
  $13.2 billion of which $11.6 billion was financing receivables before
  allowance for losses, and an increase in total liabilities of approximately
  $5.0 billion, $4.0 billion of which was debt.
- During 2003, we sold our Tokyo-based Edison Life and  U.S. Auto and Home
  businesses to American International Group, Inc., our FGIC business to a group
  of investors led by The PMI Group, Inc. and our ERC Life business to Scottish
  Re Group Limited. These sales resulted in a reduction in assets at the
  disposition date of $24.9 billion, comprising primarily $18.8 billion of
  investment securities. Liabilities were reduced by approximately $21.4
  billion, relating primarily to $19.9 billion of insurance liabilities and
  reserves.
- In 2003, Medical Systems acquired Instrumentarium at a total cost of $2.4
  billion.
- We adopted FIN 46 on July 1, 2003, and consequently  consolidated certain
  entities in our financial statements for the first time. New balance sheet
  captions, "Consolidated,  liquidating securitization entities," included $36.3
  billion of assets and $35.8 billion of liabilities at transition. Also,
  investment securities and other GECS receivables included an additional $14.1
  billion and $1.0 billion, respectively, at transition for investment
  securities related to guaranteed investment contracts (GICs) issued by
  Trinity, a group of  sponsored special purpose entities. The related GIC
  liabilities of $14.7 billion consolidated at transition are displayed in the
  caption, "Insurance liabilities, reserves and annuity benefits."

Statement of Financial Position (pages 72-73)

Because GE and GECS share certain significant elements of their
Statements of Financial Position–property, plant and equipment, and borrowings,
for example–the following discussion addresses significant captions in the
"consolidated" statement. Within the following discussions, however, we
distinguish between GE and GECS activities in order to permit meaningful
analysis of each individual statement.



57         GE 2003 ANNUAL REPORT

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MANAGEMENT'S DISCUSSION AND ANALYSIS

INVESTMENT SECURITIES for each of the past two years comprised
mainly investment-grade debt securities held by Insurance in support of
obligations to annuitants and policyholders. Investment securities were $120.7
billion at the end of 2003, compared with $116.9 billion at the end of 2002. The
increase of $3.8 billion was primarily the result of $14.4 billion of investment
securities held by Trinity. The increase was also attributed to the investment
of premiums received, reinvestment of investment income and the performance of
the equity and debt markets, net of impairments and losses ($5.7 billion). These
were partially offset by the sales of Edison Life, U.S. Auto and Home, FGIC and
ERC Life businesses ($18.6 billion).

We regularly review investment securities for impairment
based on criteria that include the extent to which carrying value exceeds market
value, the duration of that market decline, our ability to hold to recovery and
the financial strength and specific prospects for the issuer of the security. Of
securities with unrealized losses at December 31, 2003, approximately $0.1
billion of portfolio value is at risk of being charged to earnings in the next
12 months. Impairment losses recognized in 2003 and 2002 were $0.5 billion and
$0.8 billion, respectively.

Gross unrealized gains and losses were $4.7 billion and
$1.2 billion, respectively, at December 31, 2003, compared with $4.4 billion and
$2.5 billion, respectively, at December 31, 2002, reflecting broad market
improvement in 2003. We estimate that available gains, net of hedging positions
and estimated impairment of insurance intangible assets, could be as much as
$2.1 billion at December 31, 2003. Market value used in determining unrealized
gains and losses is defined by relevant accounting standards and should not be
viewed as a forecast of future gains or losses. See note 9.

WORKING CAPITAL, representing GE cash invested in inventories
and receivables from customers, less trade payables and progress collections,
increased to $5.3 billion at the end of 2003 from $3.8 billion at the end of
2002. Working capital balances are significantly affected by progress
collections, primarily from Power Systems customers, as shown below:

|December 31 (In millions)                       |   | 2003   |   |   | 2002   |  
|----------------------------------------------- | - | ------ | - | - | ------ | -
|                                                |  
|Working capital                                 | $ | 5,282  |   | $ | 3,821  |  
|Less progress collections                       |   | (4,381 | ) |   | (6,603 | )
|                                                |  
|Working capital, excluding progress collections | $ | 9,663  |   | $ | 10,424 |  
|                                                |  
|                                                |   |        |   |   |        |  

We expect Power Systems progress collections to continue to
decline in 2004. We discuss current receivables and inventories, two important
elements of working capital, in the following paragraphs.

CURRENT RECEIVABLES for GE were $11.0 billion at the end of 2003
and 2002, and included $6.7 billion due from customers at the end of 2003,
compared with $6.3 billion at the end of 2002. Turnover of customer receivables
from sales of goods and services was 10.4 in 2003, compared with 10.9 in 2002.
Excluding Power Systems, turnover improved from 12.6 in 2002 to 13.3 in 2003.
Other current receivables are primarily amounts that did not originate from
sales of GE goods or services, such as advances to suppliers in connection with
large contracts. See note 10.

INVENTORIES for GE were $8.6 billion at December 31, 2003, down
$0.4 billion from the end of 2002. GE inventory turnover was 7.4 in 2003, a
decrease from 7.7 in 2002, as a result of declining sales at Power Systems.
Excluding Power Systems, turnover was 7.7 and 7.6 in 2003 and 2002,
respectively. See note 11.

FINANCING RECEIVABLES is our largest category of assets and
represents one of our primary sources of revenues. The portfolio of financing
receivables, before allowance for losses, increased to $232.3 billion at
December 31, 2003, from $203.6 billion at the end of 2002, as discussed in the
following paragraphs. The related allowance for losses at the end of 2003
amounted to $6.3 billion compared with $5.5 billion at December 31, 2002,
representing our best estimate of probable losses inherent in the portfolio.

A discussion of the quality of certain elements of the
financing receivables portfolio follows. For purposes of that discussion,
"delinquent" receivables are those that are 30 days or more past due;
"nonearning" receivables are those that are 90 days or more past due (or for
which collection has otherwise become doubtful); and "reduced-earning"
receivables are commercial receivables whose terms have been restructured to a
below-market yield.

Commercial Finance financing receivables, before allowance
for losses, totaled $132.3 billion at December 31, 2003, compared with $130.9
billion at December 31, 2002, and consisted of loans and leases to the
equipment, commercial and industrial, real estate and commercial aircraft
industries. This portfolio of receivables increased primarily from origination
growth ($16.4 billion), the net effects of international receivables translated
into the weaker U.S. dollar ($5.2 billion) and acquisitions ($4.3 billion),
partially offset by securitizations and sales ($24.6 billion). Related
nonearning and reduced-earning receivables were $1.7 billion (1.3% of
outstanding receivables) at December 31, 2003, compared with $2.2 billion (1.7%
of outstanding receivables) at year-end 2002, the result of improving economic
conditions and collection results. Commercial Finance financing receivables are
generally backed by assets and there is a broad spread of geographic and credit
risk in the portfolio.



58         GE 2003 ANNUAL REPORT

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MANAGEMENT'S DISCUSSION AND ANALYSIS

Consumer Finance financing receivables, before allowance
for losses, primarily card receivables, installment loans, auto loans and
leases, and residential mortgages, were $94.7 billion at December 31, 2003,
compared with $66.0 billion at December 31, 2002. This portfolio of receivables
increased as a result of acquisitions ($13.9 billion), the net effects of
international receivables translated into the weaker U.S. dollar ($8.6 billion)
and origination growth, partially offset by the sale of The Home Depot private
label credit card receivables. Acquisitions are a key to our growth strategy as
we expand our global market presence. Nonearning consumer receivables at
December 31, 2003, were $2.5 billion (2.6% of outstanding receivables), compared
with $1.6 billion (2.4% of outstanding receivables) at year-end 2002. This
increase is the result of adverse credit performance in Japan and growth in our
secured financing business, a business that tends to experience relatively
higher delinquencies but relatively lower losses than the rest of our consumer
portfolio.

Financing receivables in Other, principally Equipment
Management, amounted to $5.3 billion and $6.6 billion at December 31, 2003 and
2002, respectively, before allowance for losses. Nonearning receivables of $0.1
billion, 1.3% and 1.2% of outstanding receivables at December 31, 2003 and 2002,
respectively, were about the same as at the end of 2002.

Delinquency rates on managed Consumer Finance financing
receivables at December 31, 2003, were 5.57%; at year-end 2002 were 5.58%; and
at year-end 2001 were 5.34%. Delinquency rates remained stable from 2002 to
2003, as a change in portfolio mix related to the growth in our secured
financing business was offset by improved collection results. Increased 2002
delinquency rates reflected our secured financing business acquired in 2001 and
volume growth in that business in 2002. When delinquent, these loans have
relatively lower losses than the rest of our consumer portfolio. Delinquency
rates on managed Commercial Finance equipment loans and leases were 1.34%, 1.71%
and 2.16% at year-end 2003, 2002 and 2001, respectively. The decline at December
31, 2003, primarily reflected improved economic conditions and collection
results. The decline at December 31, 2002, primarily reflected a higher
concentration of Vendor Financial Services receivables coupled with improved
collection results at Commercial Equipment Financing. See notes 12 and 13.

OTHER GECS RECEIVABLES totaled $11.9 billion at December 31,
2003, and $13.0 billion at December 31, 2002, and consist primarily of
nonfinancing customer receivables, accrued investment income, amounts due from
GE (generally related to certain material procurement programs), amounts due
under operating leases, receivables due on sale of securities and various sundry
items. Balances at December 31, 2003 and 2002, include securitized, managed GE
trade receivables of $2.7 billion and $2.4 billion, respectively.

PROPERTY, PLANT AND EQUIPMENT (including equipment leased to
others) was $53.4 billion at December 31, 2003, up $4.3 billion from 2002,
primarily reflecting acquisitions of commercial aircraft at Commercial Finance
and vehicles at Equipment Management. GE property, plant and equipment consists
of investments for its own productive use, whereas the largest element for GECS
is equipment provided to third parties on operating leases. Details by category
of investment are presented in note 15.

GE expenditures for plant and equipment during 2003 totaled
$2.2 billion, compared with $2.4 billion in 2002. Total expenditures for the
past five years were $12.5 billion, of which 37% was investment for growth
through new capacity and product development; 35% was investment in productivity
through new equipment and process improvements; and 28% was investment for other
purposes such as improvement of research and development facilities and safety
and environmental protection.

GECS additions to property, plant and equipment (including
equipment leased to others) were $7.6 billion and $11.7 billion during 2003 and
2002, respectively, primarily reflecting additions of commercial aircraft at
Commercial Finance and vehicles at Equipment Management.

INTANGIBLE ASSETS were $55.0 billion at year-end 2003,  up from
$46.2 billion at year-end 2002. GE intangibles increased to $30.2 billion from
$23.1 billion at the end of 2002, principally as a result of goodwill and other
intangibles related to acquisitions by Medical Systems, NBC and Specialty
Materials. GECS intangibles increased $1.7 billion to $24.8 billion, reflecting
goodwill and other intangibles associated with acquisitions, and the net effects
of the weaker U.S. dollar, partially offset by the disposition of Edison Life.
See note 16.

ASSETS IN CONSOLIDATED, LIQUIDATING SECURITIZATION ENTITIES were
$26.5 billion at December 31, 2003, as a result of our adoption of FIN 46 on
July 1, 2003. At transition we consolidated $36.3 billion of assets, but because
we have stopped transferring assets to these entities, balances decreased
reflecting repayments. See note 29.

ALL OTHER ASSETS totaled $97.1 billion at year-end 2003, an
increase of $3.9 billion. This increase resulted principally from investment of
funds received as collateral on securities loaned from the GE Financial
Assurance investment securities portfolio, increases in separate accounts
(investments controlled by policyholders) resulting from the net effects of
exchange rates and broad market improvements in 2003 and an increase in the
prepaid pension asset. These increases were partially offset by the sale of The
Home Depot private label credit card receivables, decreases in associated
companies and the disposition of Edison Life. See note 17.



59         GE 2003 ANNUAL REPORT

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MANAGEMENT'S DISCUSSION AND ANALYSIS

CONSOLIDATED BORROWINGS were $304.9 billion at December 31,
2003, compared with $279.4 billion at the end of 2002.

GE total borrowings were $10.9 billion at year-end 2003
($2.5 billion short term, $8.4 billion long term), an increase of $1.1 billion
from year end 2002. GE total debt at the end of 2003 equaled 12.0% of total
capital, down from 13.1% at the end of 2002.

GECS total borrowings were $295.5 billion at December 31,
2003, of which $133.0 billion is due in 2004 and $162.5 billion is due in
subsequent years. Comparable amounts at the end of 2002 were $270.9 billion in
total, $130.1 billion due within one year and $140.8 billion due thereafter. A
large portion of GECS borrowings ($80.6 billion and $84.2 billion at the end of
2003 and 2002, respectively) was issued in active commercial paper markets that
we believe will continue to be a reliable source of short-term financing. The
average remaining terms and interest rates of GE Capital commercial paper were
50 days and 1.48% at the end of 2003, compared with 47 days and 1.95% at the end
of 2002. The GE Capital ratio of debt to equity was 6.20 to 1 at the end of 2003
and 6.58 to 1 at the end of 2002. See note 18.

LIABILITIES IN CONSOLIDATED, LIQUIDATING SECURITIZATION ENTITIES
were $25.7 billion at December 31, 2003, as a result of our adoption of FIN 46
on July 1, 2003. At transition we consolidated $35.8 billion of liabilities, but
because we have stopped transferring assets to these entities, balances
decreased reflecting repayments. See note 29.

INSURANCE LIABILITIES, RESERVES AND ANNUITY BENEFITS of $136.3
billion at December 31, 2003, were $0.4 billion higher than in 2002. The
increase is primarily attributable to the additional liabilities associated with
the consolidation of Trinity upon our 2003 adoption of FIN 46 ($14.1 billion),
the net effects of the weaker U.S. dollar and growth in separate accounts,
deferred annuities and adverse development ($6.2 billion), partially offset by
the sale of Edison Life, U.S. Auto and Home, ERC Life and FGIC businesses ($19.7
billion). See note 19.

EXCHANGE RATE AND INTEREST RATE RISKS are managed with a variety
of straightforward techniques, including match funding and selective use of
derivatives. We use derivatives to mitigate or eliminate certain financial and
market risks because we conduct business in diverse markets around the world and
local funding is not always efficient. In addition, we use derivatives to adjust
the debt we are issuing to match the fixed or floating nature of the assets we
are acquiring. We apply strict policies to manage each of these risks, including
prohibitions on derivatives trading, derivatives market-making or other
speculative activities. Following is an analysis of the potential effects of
changes in currency exchange and interest rates using so-called "shock" tests
that model effects of shifts in rates. These are not forecasts.

- If, on January 1, 2004, interest rates had increased  100 basis points
  across the yield curve (a "parallel shift" in that curve) and that increase
  remained in place for 2004, we estimate, based on our year-end 2003 portfolio
  and holding everything else constant, that our 2004 GE and GECS net earnings
  would decline pro-forma by $0.1 billion and $0.2 billion, respectively.
- If, on January 1, 2004, currency exchange rates were to decline by 10%
  against the U.S. dollar and that decline remained in place for 2004, we
  estimate, based on  our year-end 2003 portfolio and holding everything else
   constant, that the effect on our 2004 GE and GECS net earnings would be
  insignificant.

Statement of Changes in Shareowners' Equity (page 70)

Shareowners' equity increased $15.5 billion, $8.9 billion and
$4.3 billion in 2003, 2002 and 2001, respectively. The increases were largely
attributable to net earnings of $15.0 billion, $14.1 billion and $13.7 billion,
partially offset by dividends declared of $7.8 billion, $7.3 billion and $6.6
billion in 2003, 2002 and 2001, respectively. Currency translation adjustments
increased equity by $5.1 billion in 2003, compared with an increase of $1.0
billion in 2002 and a reduction of $0.6 billion in 2001. Changes in the currency
translation adjustment reflect the effects of changes in currency exchange rates
on our net investment in non-U.S. subsidiaries that have functional currencies
other than the U.S. dollar. In 2003 and 2002, the euro and, to a lesser extent,
Asian currencies strengthened against the dollar. In 2001, Asian currencies
weakened versus the dollar, while the euro was relatively unchanged. Accumulated
currency translation adjustments affect net earnings only when all or a portion
of an affiliate is disposed of or substantially liquidated.



60        GE 2003 ANNUAL REPORT

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MANAGEMENT'S DISCUSSION AND ANALYSIS

Overview of Our Cash Flow from 2001 through 2003 (pages
74-75)

GE cash from operating activities (CFOA) is a useful measure of
performance for our non-financial businesses. Our GE Statement of Cash Flows on
page 74 shows CFOA in the required format. While that display is of some use in
analyzing how various assets and liabilities affected our year-end cash
positions, we believe it is also useful to supplement that display and to
examine in a broader context the business activities that provide and require
cash. This overview provides that perspective.

CFOA in 2003 totaled $12.9 billion, an increase of $2.8
billion from the previous year's $10.1 billion. Power Systems experience over
this period, which was significantly affected by the 2002 peak of the U.S. power
bubble, can obscure significant ongoing trends. For example, one major factor
that affects CFOA comparisons is the effect of progress collections in Power
Systems. Excluding these effects, CFOA was $15.2 billion in 2003, the same as
2002 and up from $13.8 billion in 2001, including effects of receivable
monetization programs in both years.

Generally, factors that affect our earnings–for example,
pricing, volume, costs and productivity–affect CFOA similarly. However, while
management of working capital, including timing of collections and payments and
levels of inventory, affects operating results only indirectly, the effect of
these programs on CFOA can be significant. Excluding progress collections,
working capital improvements contributed $2.2 billion and $0.1 billion to CFOA
in 2003 and 2002, respectively, as we applied our inventory and other working
capital management tools broadly.

The most significant source of cash in CFOA is
customer-related activities, the largest of which is collecting cash following a
product or services sale. Excluding Power Systems, GE cash collections from
customer-related activities were about $52.5 billion in 2003, an increase of
about $2.4 billion from 2002. This increase is consistent with the change in
comparable GE operating segment revenues, including increases at Medical
Systems, Specialty Materials and Transportation Systems, partially offset by
decreases at Aircraft Engines, Consumer Products and NBC. Including Power
Systems, cash from customer-related activities was about $68.4 billion and $67.5
billion in 2003 and 2002, respectively. Analyses of operating segment revenues
on page 49 is the best way of understanding their customer-related CFOA.

The most significant operating use of cash is to pay our
suppliers and employees for the wide range of material and services necessary in
a diversified global organization. Excluding payments by Power Systems, GE cash
paid to suppliers and employees was about $41.5 billion in 2003, an increase of
about $1.7 billion from 2002. Including Power Systems, cash paid to suppliers
and employees was about $56.2 billion and $57.1 billion in 2003 and 2002,
respectively.

CFOA also included cash dividends from GECS, totaling $3.4
billion in 2003 and $2.0 billion in 2002 and 2001. These dividends represented
distribution of a portion of GECS retained earnings, and are distinct from cash
from operating activities within the financial services businesses, which
decreased in 2003 by $0.1 billion to $21.4 billion. Financial services cash is
not necessarily freely available for alternative uses. For example, cash
generated by our Insurance businesses is restricted by various insurance
regulations (see note 23). Further, any reinvestment in financing receivables is
shown in cash used for investing, not operating activities. Therefore
maintaining or growing Commercial and Consumer Finance assets requires that we
invest much of the cash they generate from operating activities in their earning
assets. Also, we are increasing the equity of our financial services businesses
as discussed on page 63. The amount we show in CFOA is the total dividend,
including the normal dividend as well as any special dividends.



Based on past performance and current expectations, in
combination with the financial flexibility that comes with a strong balance
sheet and the highest credit ratings, we believe we are in a sound position to
grow dividends and continue making selective investments for long-term growth.
With the financial flexibility that comes with excellent credit ratings, we
believe that GE and GECS should be well positioned to meet the global needs of
its customers for capital and to continue providing our shareowners with good
returns.



61         GE 2003 ANNUAL REPORT

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MANAGEMENT'S DISCUSSION AND ANALYSIS

Cash Requirements

Achieving optimal returns on cash used often involves making
long-term commitments. SEC regulations require that we present our contractual
obligations, and we have done so in the table that follows. However, our future
cash flow prospects cannot reasonably be assessed based on such obligations–the
most significant factor affecting our future cash flows is our ability to earn
and collect cash from customers. Future cash outflows, whether they are
contractual obligations or not, will vary based on our future needs. While some
such outflows are completely fixed (for example, commitments to repay principal
and interest on fixed-rate borrowings) most depend on future events (for
example, supply agreements to purchase commodity raw materials at quantities to
be determined in the future at then-market prices). Many purchase obligations
are linked to cash-generating revenue contracts (for example, payments to
subcontractors under long-term contracts). Further, normal operations involve
significant expenditures that are not based on "commitments," for example,
expenditures for income taxes or for payroll.

As defined by reporting regulations, our consolidated
contractual obligations as of December 31, 2003, follow:





|                                     | Payments due by period
|------------------------------------ | ----------------------
|                                     |                       
|(In millions)                        | Total                 
|                                    
|Borrowings (note 18)                 | $304,921              
|Operating lease obligations (note 4) | 7,118                 
|Purchase obligations(a)(b)           | 62,000                
|Insurance liabilities (note 19)(c)   | 52,000                
|Other liabilities(d)                 | 58,000                
|                                    
|                                     |                       





(a)

(b)

(c)

(d)

Other matters that provide additional context for considering
our liquidity position are discussed below.

WE USE OFF-BALANCE SHEET ARRANGEMENTS in the ordinary course of
business to improve shareowner returns. Beyond improving returns, these
securitization transactions serve as funding sources for a variety of
diversified lending and securities transactions. Our securitization transactions
are similar to those used by many financial institutions. In a typical
transaction, assets are sold by the transferor to a special purpose entity,
which purchases the assets with cash raised through issuance of beneficial
interests (usually debt instruments) to third party investors. Investors in the
beneficial interests usually have recourse to the assets in the special purpose
entities (SPEs) and often benefit from credit enhancements supporting the assets
(such as overcollateralization). The SPE may also hold derivatives, such as
interest rate swaps, in order to match the interest rate characteristics of the
assets with those of the beneficial interests. An example is an interest rate
swap converting fixed rate assets to variable rate to match floating rate debt
instruments issued by the SPE.

Historically, we have used both sponsored and third-party
entities to execute securitization transactions in the commercial paper and term
markets. With our adoption of FIN 46 on July 1, 2003, consolidating $36.3
billion of assets and $35.8 billion of liabilities in certain sponsored
entities, we stopped executing new securitization transactions with those
entities. We continue to engage in securitization transactions with third party
conduits and through public market term securitizations.

Assets held by SPEs include: receivables secured by
equipment, commercial real estate and other assets; credit card receivables; and
trade receivables. Examples of these assets include loans and leases on
manufacturing and transportation equipment, loans on commercial property,
commercial loans, and balances of high credit quality accounts from sales of a
broad range of products and services to a diversified customer base. In certain
transactions, the credit quality of assets transferred is enhanced by providing
credit support. Off-balance sheet assets securitized totaled $26.8 billion and
$54.9 billion at December 31, 2003 and 2002, respectively. This comparison is
significantly affected by the consolidation of a majority of our sponsored and
supported securitization entities.

In order to provide comparative information about our
overall securitization activities, the disclosures that follow describe all
entities used for securitization, including those that were recently
consolidated under FIN 46.

We provide financial support related to assets held by
certain SPEs through liquidity agreements, credit support, and guarantee and
reimbursement contracts. Net 2004 credit and liquidity support amounted to $21.5
billion at January 1, 2004, down from $27.5 billion a year earlier. Of the
total, $18.4 billion relates to assets and debt that were consolidated under FIN
46. The $21.5



62         GE 2003 ANNUAL REPORT

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MANAGEMENT'S DISCUSSION AND ANALYSIS

billion includes credit support, in which we provide recourse
for a maximum of $14.1 billion of credit losses in SPEs. Of this amount, $8.6
billion related to assets that were consolidated under FIN 46. Potential credit
losses are provided for in our financial statements. Based on management's best
estimate of probable losses inherent in the portfolio of assets that remain
off-balance sheet, our financial statements included $0.1 billion representing
fair value of recourse obligations at year-end 2003. See note 29.

We periodically enter into guarantees and other similar
arrangements as part of transactions in the ordinary course of business. These
are described further in note 30.

We have extensive experience in evaluating economic,
liquidity and credit risk. In view of this experience, the high quality of
assets in these entities, the historically robust quality of commercial paper
markets, and the historical reliability of controls applied to both asset
servicing and to activities in the credit markets, we believe that, under any
reasonable future economic developments, the likelihood is remote that any
financial support arrangements could have an adverse economic effect on our
financial position or results of operations.

Debt Instruments, Guarantees and Covenants

The major debt rating agencies routinely evaluate the debt of
GE, GECS and GE Capital, the major borrowing affiliate of GECS. These agencies
have given the highest debt ratings to GE and GE Capital (long-term rating
AAA/Aaa; short-term rating A-1+/P-1). One of our strategic objectives is to
maintain these ratings as they serve to lower our cost of funds and to
facilitate our access to a variety of lenders. We manage our businesses in a
fashion that is consistent with maintaining our Triple-A ratings.

GE, GECS and GE Capital have distinct business
characteristics that the major debt rating agencies evaluate both quantitatively
and qualitatively.

Quantitative measures include:

- Earnings and profitability, including earnings quality,  revenue growth,
  the breadth and diversity of sources of income and return on assets,
- Asset quality, including delinquency and write-off ratios  and reserve
  coverage,
- Funding and liquidity, including cash generated from  operating
  activities, leverage ratios such as debt to capital, market access, back-up
  liquidity from banks and other sources, composition of total debt and interest
  coverage, and
- Capital adequacy, including required capital and tangible leverage ratios.

Qualitative measures include:

- Franchise strength, including competitive advantage and market conditions
  and position,
- Strength of management, including experience, corporate governance and
  strategic thinking, and
- Financial reporting quality, including clarity, completeness and
  transparency of all financial performance communications.

GE Capital's ratings are supported contractually by a GE
commitment to maintain the ratio of earnings to fixed charges at a specified
level.

Before 2003, GE Capital maintained a capital structure that
included about $8 of debt for each $1 of equity–a "leverage ratio" of 8:1. For
purposes of measuring segment profit, each of our financial services businesses
was also assigned debt and interest costs on the basis of that consolidated 8:1
leverage ratio. As of January 1, 2003, we extended a business-specific,
market-based leverage to the performance measurement of each of our financial
services businesses. As a result, at January 1, 2003, debt of $12.5 billion
previously allocated to the segments was allocated to the All Other GECS
segment. We refer to this as "parent supported debt."

During 2003, a total of $4.6 billion of such debt was
eliminated, reducing the total to $7.9 billion at year end. This reduction was
the result of the following:

- The decision of the GECS Board of Directors to reduce  GECS dividend
  payments to GE to 10% of operating earnings ($1.7 billion),
- Strategic dispositions of Edison Life and U.S. Auto and Home assets and
  FGIC ($1.7 billion),
- Rationalization of other insurance related activities including
  disposition of certain originated mortgages ($0.7 billion), and
- The continuing strategy to optimize fleet mix, age and size at Equipment
  Management ($0.5 billion).

We plan to continue to reduce debt relative to our equity in
financial services businesses. As such, we remain on track to eliminate parent
supported debt by the end of 2005. Proceeds from further strategic dispositions,
including Genworth, will continue to be evaluated when and if they are received,
but we anticipate using at least some of those proceeds to reduce financial
services debt.

During 2003, the financial services business declared
special dividends to GE of $2.7 billion which related to the strategic
dispositions in the Insurance segment ($1.7 billion) and more efficient capital
management programs ($1.0 billion).

GE Capital issued $51.1 billion of long-term debt in the
U.S. and 13 international markets in 2003 with maturities ranging from two years
to 37 years bearing fixed and floating interest rates. This debt was issued to
both institutional investors and retail investors.



63         GE 2003 ANNUAL REPORT

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MANAGEMENT'S DISCUSSION AND ANALYSIS

These funds were used primarily for maturing long-term
debt, acquisitions and asset growth, with the remainder used to reduce the
amount of commercial paper outstanding. GE Capital anticipates issuing
approximately $50 billion to $60 billion of long-term debt using both U.S. and
international institutional and retail markets during 2004. The ultimate amount
of debt issuances will depend on the growth in assets, acquisition activity,
availability of markets and movements in interest rates.

Following is the debt composition of GECS:

|December 31                          | 2003 |   |  | 2002 |  
|------------------------------------ | ---- | - |  | ---- | -
|                                     |     
|Senior notes                         | 55   | % |  | 52   | %
|Commercial paper                     | 27   |   |  | 31   |  
|Current portion of long-term debt    | 13   |   |  | 13   |  
|Other–bank and other retail deposits | 5    |   |  | 4    |  
|                                     |     
|Total                                | 100  | % |  | 100  | %
|                                     |     
|                                     |      |   |  |      |  



We target a ratio for commercial paper of 25% to 35% of
outstanding debt based on the anticipated composition of our assets and the
liquidity profile of our debt. GE Capital is the most widely held name in global
commercial paper markets.

We believe that alternative sources of liquidity are
sufficient to permit an orderly transition from commercial paper in the unlikely
event of impaired access to those markets. Funding sources on which we would
rely would depend on the nature of such a hypothetical event, but include $57.2
billion of contractually committed lending agreements with 85 highly-rated
global banks and investment banks, an increase of $3.1 billion since December
31, 2002. See note 18.

Beyond contractually committed lending agreements, other
sources of liquidity include medium and long-term funding, monetization, asset
securitization, cash receipts from our lending and leasing activities,
short-term secured funding on global assets, and potential asset sales.

PRINCIPAL DEBT CONDITIONS are described below.

The following two conditions relate to GE and GECS:

- If the long-term credit rating of either GE or GECS under certain swap,
  forward and option contracts falls below A-/A3, certain remedies are required
  as discussed in note 28.
- If GE Capital's ratio of earnings to fixed charges, which was 1.84:1 at
  the end of 2003, were to deteriorate to 1.10:1 or, upon redemption of certain
  preferred stock, its ratio of debt to equity, which was 6.20:1 at the end of
  2003, were to exceed 8:1, GE has committed to contribute capital to GE
  Capital. GE also has guaranteed subordinated debt of GECS and GE Capital with
  a face amount of $1.0 billion at December 31, 2003 and 2002.

The following three conditions relate to securitization SPEs and
apply to entities that were consolidated upon adoption of FIN 46 on July 1,
2003, that are reported in the captions, "Consolidated, liquidating
securitization entities":

- If the short-term credit rating of GE Capital or certain consolidated SPEs
  discussed further in note 29 were to fall below A-1/P-1, GE Capital would be
  required to provide substitute liquidity for those entities or provide funds
  to retire the outstanding commercial paper. The maximum net amount that GE
  Capital would be required to provide in the event of such a downgrade is
  determined by contract, and amounted to $19.9 billion at January 1, 2004.
  Amounts related to non-consolidated SPEs were $2.1 billion.
- If the long-term credit rating of GE Capital were to fall below AA/Aa2, GE
  Capital would be required to provide substitute credit support or liquidate
  the consolidated SPEs. The maximum amount that GE Capital would be required to
  substitute in the event of such a downgrade is determined by contract, and
  amounted to $1.4 billion at December 31, 2003.
- For certain transactions, if the long-term credit rating of GE Capital
  were to fall below A/A2 or BBB+/Baa1 or its short-term credit rating were to
  fall below A-2/P-2, GE Capital could be required to provide substitute credit
  support or fund the undrawn commitment. GE Capital could be required to
  provide up to $3.2 billion in the event of such a downgrade based on terms in
  effect at December 31, 2003.

The following condition relates to the Trinity SPEs, which are
reported in the captions, "Investment securities" and "Insurance liabilities,
reserves and annuity benefits":

- If the long-term credit rating of GE Capital were to fall below AA-/Aa3 or
  its short-term credit rating were to fall below A-1+/P-1, GE Capital could be
  required to provide up to $1.2 billion to the Trinity SPEs and could be
  required to repay up to $4.1 billion of the Trinity's guaranteed investment
  contracts based on terms in effect at December 31, 2003.

In our history, we have never violated any of the above
conditions either at GE or at GECS. We believe that under any reasonable future
economic developments, the likelihood that any such arrangements could have a
significant effect on our operations, cash flows or financial position is
remote.



64        GE 2003 ANNUAL REPORT

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MANAGEMENT'S DISCUSSION AND ANALYSIS

COMMERCIAL AVIATION is an industry in which we have a
significant ongoing interest. As has been widely reported, this industry has
been under pressure, but has undertaken steps to reduce unused capacity and
align costs. Consequently, during 2003, major U.S. and European airlines
achieved moderate improvements in operations, including traffic, revenues and
load factors. Our customers that had been operating at losses generally reduced
those losses in 2003, and their year end cash positions were improved.

At December 31, 2003, we had the following positions
related to our global commercial aviation business, principally in our
Commercial Finance segment:

- 1,239 commercial aircraft, of which 1,236 were on lease,
- $29.0 billion of loans and leases,
- $2.3 billion of investment securities including $0.4 billion in our
  insurance businesses and $0.2 billion in the Trinity SPEs,
- $1.2 billion of funding commitments,
- $13.5 billion (list price) of multiple-year orders for various Boeing,
  Airbus and other aircraft. We had 104 aircraft  ($4.5 billion) scheduled for
  delivery in 2004, of which  101 were under agreement to commence operations
  with commercial airline customers.

Regional jets, with capacity for 50-90 passengers, have had a
significant effect on the commercial aviation industry in recent years. These
jets have enabled airlines to replace less efficient equipment, both turboprop
and older, narrow-bodied jets. At December 31, 2003, our fleet included 278
regional jets, diversifying our total aircraft holdings. Two of our businesses
have capitalized on the trend toward regional jets; Aircraft Engines through
engine sales and servicing and Commercial Finance through leases. We believe
that we continue to offer a suitable range of equipment that is attractive to
the industry.

Aircraft Engines sales of new equipment often include
long-term customer financing commitments. Under these commitments, it is our
policy to establish a secured position in the aircraft being financed. At
year-end 2003, guarantees of $0.4 billion were in place. Further, we had
committed $1.2 billion to provide financial assistance on future aircraft sales
(see note 30). Our guarantees and commitments are secured by individual aircraft
or pools of aircraft engines related to the specific financing arrangement. When
particular guarantees exceed the value of the associated security, we consider
credit risk of the associated customer and provide for estimated losses. At
December 31, 2003, the total estimated fair value of aircraft securing these
guarantees exceeded the guaranteed amounts, net of the associated allowance for
losses.

UAL Corp. and Air Canada, the parent companies of two of
our major airline customers, are experiencing significant financial difficulties
and both filed for reorganization in bankruptcy. UAL Corp. filed for bankruptcy
protection in 2002 and Air Canada filed in Canada on April 1, 2003. At December
31, 2003, our total exposure related to these airlines amounted to $4.3 billion,
including loans, leases, investment securities and commitments. Various Boeing,
Airbus and Bombardier aircraft secure substantially all of these financial
exposures. Included in this exposure is a $0.7 billion debtor-in-possession
financing commitment to Air Canada. Another major airline customer, US Airways
Group, parent of US Airways, filed for reorganization in bankruptcy in 2002 but
emerged from bankruptcy on March 31, 2003. At December 31, 2003, our total
exposure related to US Airways amounted to $2.5 billion, including leases,
loans, investment securities and commitments. Atlas Air Worldwide Holdings Inc.
(Atlas Air) filed for reorganization in bankruptcy in January 2004. At December
31, 2003, our total exposure to Atlas Air was $1.0 billion of operating leases,
secured loans and investment securities. Our financial statements include
provisions for probable losses based on our best estimates of such losses.

Commercial Finance tests the recoverability of its
commercial aircraft operating lease portfolio as described on page 67, and
recognized impairment losses of $0.2 billion in each of the last two years.

SELECTED FINANCIAL DATA

Information summarized on the following page is divided into
three sections: upper portion–consolidated data; middle portion–GE data that
reflect various conventional measurements for such enterprises; and lower
portion–GECS data that reflect key information pertinent to financial services
businesses.

GE'S TOTAL RESEARCH AND DEVELOPMENT expenditures were $2.7
billion in 2003, compared with $2.6 billion and $2.3 billion in 2002 and 2001,
respectively. In 2003, expenditures from GE's own funds were $2.1 billion
compared with $2.2 billion in 2002. Expenditures funded by customers (mainly the
U.S. government) were $0.6 billion in 2003, compared with $0.4 billion in 2002.
The decrease in company funded expenditures was attributed to commercial
introduction of major development programs, including the H System gas turbine
at Power Systems and U.S. Federal Aviation Administration certification of the
GE90-115B jet engine at Aircraft Engines. Product technology efforts in 2003
included continuing development work on the next generation of gas turbines,
further advances in state-of-the-art diagnostic imaging technologies, developing
reduced emissions and more fuel-efficient locomotives, improving the performance
and efficiency of wind energy turbines and continuing development of more
fuel-efficient, cost-effective aircraft engine designs. Services technologies
include further advances in diagnostic applications, including remote diagnostic
capabilities related to repair and maintenance of medical equipment, aircraft
engines, power generation equipment and locomotives. Information technology
advances in the healthcare field are helping our customers integrate their
various devices and critical systems. Process technologies provided improved
product quality and performance and increased capacity for manufacturing
engineered materials.



65        GE 2003 ANNUAL REPORT

---

MANAGEMENT'S DISCUSSION AND ANALYSIS

SELECTED FINANCIAL DATA

|(Dollar amounts in millions; per-share amounts in dollars) | 2003        |         | 2002        |   |         | 2001        |  |   | 2000        |   |  | 1999        |        
|---------------------------------------------------------- | ----------- | ------- | ----------- | - | ------- | ----------- |  | - | ----------- | - |  | ----------- | -------
|                                                           |            
|GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES       |            
|Revenues                                                   | $           | 134,187 |             | $ | 132,210 |             |  | $ | 126,416     |   |  | $           | 130,385
|Earnings before accounting changes                         |             | 15,589  |             |   | 15,133  |             |  |   | 14,128      |   |  |             | 12,735 
|Cumulative effect of accounting changes                    |             | (587    | )           |   | (1,015  | )           |  |   | (444        | ) |  |             |       
|Net earnings                                               |             | 15,002  |             |   | 14,118  |             |  |   | 13,684      |   |  |             | 12,735 
|Dividends declared                                         |             | 7,759   |             |   | 7,266   |             |  |   | 6,555       |   |  |             | 5,647  
|Return on average shareowners equity excluding the        |             |         |             |   |         |             |  |   |             |   |  |             |        
|effect of accounting changes                               |             | 22.1    | %           |   | 25.8    | %           |  |   | 27.1        | % |  |             | 27.5   
|Per share                                                  |             |         |             |   |         |             |  |   |             |   |  |             |        
|Earnings before accounting changesdiluted                 | $           | 1.55    |             | $ | 1.51    |             |  | $ | 1.41        |   |  | $           | 1.27   
|Cumulative effect of accounting changesdiluted            |             | (0.06   | )           |   | (0.10   | )           |  |   | (0.04       | ) |  |             |       
|Earningsdiluted                                           |             | 1.49    |             |   | 1.41    |             |  |   | 1.37        |   |  |             | 1.27   
|Earnings before accounting changesbasic                   |             | 1.56    |             |   | 1.52    |             |  |   | 1.42        |   |  |             | 1.29   
|Cumulative effect of accounting changesbasic              |             | (0.06   | )           |   | (0.10   | )           |  |   | (0.04       | ) |  |             |       
|Earningsbasic                                             |             | 1.50    |             |   | 1.42    |             |  |   | 1.38        |   |  |             | 1.29   
|Dividends declared                                         |             | 0.77    |             |   | 0.73    |             |  |   | 0.66        |   |  |             | 0.57   
|Stock price range                                          | 32.4221.30 |         | 41.8421.40 |   |         | 52.9028.25 |  |   | 60.5041.67 |   |  | 53.1731.42 |        
|Year-end closing stock price                               |             | 30.98   |             |   | 24.35   |             |  |   | 40.08       |   |  |             | 47.94  
|Total assets                                               |             | 647,483 |             |   | 575,244 |             |  |   | 495,023     |   |  |             | 437,006
|Long-term borrowings                                       |             | 170,004 |             |   | 140,632 |             |  |   | 79,806      |   |  |             | 82,132 
|Shares outstandingaverage (in thousands)                  | 10,018,587  |         | 9,947,113   |   |         | 9,932,245   |  |   | 9,897,110   |   |  | 9,833,478   |        
|Shareowner accountsaverage                                |             | 670,000 |             |   | 655,000 |             |  |   | 625,000     |   |  |             | 597,000
|                                                           |            
|GE DATA                                                    |             |         |             |   |         |             |  |   |             |   |  |             |        
|Short-term borrowings                                      | $           | 2,555   |             | $ | 8,786   |             |  | $ | 1,722       |   |  | $           | 940    
|Long-term borrowings                                       |             | 8,388   |             |   | 970     |             |  |   | 787         |   |  |             | 841    
|Minority interest                                          |             | 1,079   |             |   | 1,028   |             |  |   | 948         |   |  |             | 968    
|Shareowners equity                                        |             | 79,180  |             |   | 63,706  |             |  |   | 54,824      |   |  |             | 50,492 
|                                                           |            
|Total capital invested                                     | $           | 91,202  |             | $ | 74,490  |             |  | $ | 58,281      |   |  | $           | 53,241 
|                                                           |            
|Return on average total capital invested                   |             |         |             |   |         |             |  |   |             |   |  |             |        
|excluding effect of accounting changes                     |             | 19.9    | %           |   | 24.5    | %           |  |   | 27.0        | % |  |             | 27.4   
|Borrowings as a percentage of total capital invested       |             | 12.0    | %           |   | 13.1    | %           |  |   | 4.3         | % |  |             | 3.3    
|Working capital(a)                                         | $           | 5,282   |             | $ | 3,821   |             |  | $ | (2,398      | ) |  | $           | 799    
|Additions to property, plant and equipment                 |             | 2,158   |             |   | 2,386   |             |  |   | 2,876       |   |  |             | 2,536  
|Employees at year end                                      |             |         |             |   |         |             |  |   |             |   |  |             |        
|United States                                              |             | 122,000 |             |   | 125,000 |             |  |   | 125,000     |   |  |             | 131,000
|Other countries                                            |             | 96,000  |             |   | 94,000  |             |  |   | 94,000      |   |  |             | 92,000 
|                                                           |            
|Total employees                                            |             | 218,000 |             |   | 219,000 |             |  |   | 219,000     |   |  |             | 223,000
|                                                           |            
|GECS DATA                                                  |             |         |             |   |         |             |  |   |             |   |  |             |        
|Revenues                                                   | $           | 64,279  |             | $ | 58,699  |             |  | $ | 58,856      |   |  | $           | 66,709 
|Earnings before accounting changes                         |             | 7,754   |             |   | 4,626   |             |  |   | 5,586       |   |  |             | 5,192  
|Cumulative effect of accounting changes                    |             | (339    | )           |   | (1,015  | )           |  |   | (169        | ) |  |             |       
|Net earnings                                               |             | 7,415   |             |   | 3,611   |             |  |   | 5,417       |   |  |             | 5,192  
|Shareowners equity                                        |             | 45,308  |             |   | 36,929  |             |  |   | 28,590      |   |  |             | 23,022 
|Minority interest                                          |             | 4,701   |             |   | 4,445   |             |  |   | 4,267       |   |  |             | 3,968  
|Total borrowings                                           |             | 295,528 |             |   | 270,962 |             |  |   | 239,935     |   |  |             | 205,371
|Ratio of debt to equity at GE Capital                      |             | 6.20:1  |             |   | 6.58:1  |             |  |   | 7.31:1      |   |  |             | 7.53:1 
|Total assets                                               | $           | 554,526 |             | $ | 489,828 |             |  | $ | 425,484     |   |  | $           | 370,636
|Insurance premiums written                                 |             | 18,602  |             |   | 16,999  |             |  |   | 15,843      |   |  |             | 16,461 
|Employees at year end                                      |             |         |             |   |         |             |  |   |             |   |  |             |        
|United States                                              |             | 33,000  |             |   | 36,000  |             |  |   | 33,000      |   |  |             | 37,000 
|Other countries                                            |             | 54,000  |             |   | 60,000  |             |  |   | 58,000      |   |  |             | 53,000 
|                                                           |            
|Total employees                                            |             | 87,000  |             |   | 96,000  |             |  |   | 91,000      |   |  |             | 90,000 
|                                                           |            
|                                                           |             |         |             |   |         |             |  |   |             |   |  |             |        

Transactions between GE and GECS have been eliminated from the consolidated information.
(a)Working capital is defined as the sum of receivables from the sales of goods and services, plus inventories, less trade accounts payable and progress collections.
(b)Excludes employees of Montgomery Ward in 1999.



66         GE 2003 ANNUAL REPORT

---

MANAGEMENT'S DISCUSSION AND ANALYSIS

GE'S TOTAL BACKLOG of firm unfilled orders at the end of 2003
was $31.2 billion, a decrease of 12% from year-end 2002, reflecting softening
demand for new equipment in the power generation business at Power Systems and
at Aircraft Engines, partially offset by higher backlog at Medical Systems. Of
the total backlog, $21.2 billion related to products, of which 63% was scheduled
for delivery in 2004. Product services orders, included in this reported backlog
for only the succeeding 12 months, were $10.0 billion at the end of 2003. Orders
constituting this backlog may be canceled or deferred by customers, subject in
certain cases to penalties. See Segment Operations beginning on page 49 for
further information.

CRITICAL ACCOUNTING ESTIMATES

Accounting estimates and assumptions discussed in this section
are those that we consider to be the most critical to an understanding of our
financial statements because they inherently involve significant judgments and
uncertainties. For all of these estimates, we caution that future events rarely
develop exactly as forecast, and the best estimates routinely require
adjustment.

LOSSES ON FINANCING RECEIVABLES are recognized when they are
incurred. Our best estimate of such probable losses requires consideration of
historical loss experience, adjusted for current conditions, and judgments about
the probable effects of relevant observable data, including present economic
conditions such as delinquency rates, financial health of specific customers and
market sectors, collateral values, and the present and expected future levels of
interest rates. Our lending and leasing experience and the extensive data we
accumulate and analyze facilitate estimates that have been reliable over time.
Our actual loss experience was in line with expectations for 2003, 2002 and
2001. While losses depend to a large degree on future economic conditions, we do
not anticipate significant adverse credit development in 2004. Further
information is provided in the financing receivables section on page 58, and in
notes 1, 12, 13 and, for special purpose entities, in note 29.

REVENUE RECOGNITION ON LONG-TERM AGREEMENTS to provide product
services (product services agreements) requires estimates of profits over the
multiple-year terms of such agreements, considering factors such as the
frequency and extent of future monitoring, maintenance and overhaul events; the
amount of personnel, spare parts and other resources required to perform the
services; and future cost changes. We routinely review estimates under product
services agreements and regularly revise them to adjust for changes in outlook.
Revisions that affect a product services agreement's total estimated
profitability will also result in an immediate adjustment of earnings. We
provide for probable losses. We also regularly assess customer credit risk
inherent in the carrying amounts of contract costs and estimated earnings. We
gain insight into future utilization and cost trends, as well as credit risk,
through our knowledge of the installed base of equipment and the close
interaction with our customers that comes with supplying critical services and
parts over extended periods. Carrying amounts for product services agreements in
progress at December 31, 2003 and 2002, were $3.2 billion and $2.9 billion,
respectively, and are included in the line, "Contract costs and estimated
earnings" in note 17. Adjustments to earnings resulting from revisions to
estimates on product services agreements have been insignificant for each of the
years in the three-year period ended December 31, 2003.

ASSET IMPAIRMENT assessment involves various estimates and
assumptions as follows:

INVESTMENTS We regularly review investment securities for
impairment based on criteria that include the extent to which the investment's
carrying value exceeds its related market value, the duration of the market
decline, our ability to hold to recovery and the financial strength and specific
prospects of the issuer of the security. We perform comprehensive market
research and analysis and monitor market conditions to identify potential
impairments. Further information about actual and potential impairment losses is
provided on page 58 and in note 9.

LONG-LIVED ASSETS We review long-lived assets for impairment
whenever events or changes in circumstances indicate that the related carrying
amounts may not be recoverable. Determining whether an impairment has occurred
typically requires various estimates and assumptions, including determining
which cash flows are directly related to the potentially impaired asset, the
useful life over which cash flows will occur, their amount, and the asset's
residual value, if any. In turn, measurement of an impairment loss requires a
determination of fair value, which is based on the best information available.
We use internal discounted cash flow estimates, quoted market prices when
available and independent appraisals as appropriate to determine fair value. We
derive the required cash flow estimates from our historical experience and our
internal business plans and apply an appropriate discount rate.

Commercial aircraft are a significant concentration of
assets in our Commercial Finance business, and are particularly subject to
market fluctuations. Therefore we test recoverability of each aircraft in our
operating lease portfolio at least annually. Additionally we perform quarterly
evaluations in circumstances such as when aircraft are re-leased, current lease
terms have changed or a specific lessee's credit standing changes. Future
rentals and residual values are based on historical experience and information
received routinely from independent appraisers. Estimated cash flows from future
leases are reduced for expected downtime between leases and for estimated
technical costs required to prepare aircraft to be redeployed. Fair value used
to measure impairment is based on current market values from independent
appraisers.



67         GE 2003 ANNUAL REPORT

---

MANAGEMENT'S DISCUSSION AND ANALYSIS

GOODWILL AND OTHER IDENTIFIED INTANGIBLE ASSETS We test goodwill
for impairment annually and whenever events or circumstances make it more likely
than not that an impairment may have occurred, such as a significant adverse
change in the business climate or a decision to sell or dispose of a reporting
unit. Determining whether an impairment has occurred requires valuation of the
respective reporting unit, which we estimate using a discounted cash flow
methodology. When available and as appropriate, we use comparative market
multiples to corroborate discounted cash flow results. In applying this
methodology, we rely on a number of factors, including actual operating results,
future business plans, economic projections and market data.

If this analysis indicates goodwill is impaired, measuring
its impairment requires a fair value estimate of each identified tangible and
intangible asset. In this case we supplement the cash flow approach discussed
above with independent appraisals, as appropriate.

We test other identified intangible assets with defined
useful lives and subject to amortization by comparing the carrying amount to the
sum of undiscounted cash flows expected to be generated by the asset. We test
intangible assets with indefinite lives annually for impairment using a fair
value methodology such as discounted cash flows.

Further information is provided on page 59 and in notes 1,
9, 15 and 16.

INSURANCE LIABILITIES AND RESERVES differ for short and
long-duration insurance contracts. Short-duration contracts such as property and
casualty policies are accounted for based on actuarial estimates of losses
inherent in that period's claims, including losses for which claims have not yet
been reported. Short-duration contract loss estimates rely on actuarial
observations of ultimate loss experience for similar historical events.
Measurement of long-duration insurance liabilities (such as guaranteed renewable
term, whole life and long-term care insurance policies) also is based on
approved actuarial methods that include assumptions about expenses, mortality,
morbidity, lapse rates and future yield on related investments. Historical
insurance industry experience indicates that a greater degree of inherent
variability exists in assessing the ultimate amount of losses under
short-duration property and casualty contracts than exists for long-duration
mortality exposures. This inherent variability is particularly significant for
liability-related exposures, including latent claims issues (such as asbestos
and environmental related coverage disputes), because of the extended period of
time–often many years–that transpires between when a given claim event occurs
and the ultimate full settlement of such claim. This situation is then further
exacerbated for reinsurance entities (as opposed to primary insurers) due to
coverage often being provided on an "excess-of-loss" basis and the resulting
lags in receiving current claims data.

We continually evaluate the potential for changes in loss
estimates with the support of qualified reserving actuaries and use the results
of these evaluations both to adjust recorded reserves and to proactively modify
underwriting criteria and product offerings. For actuarial analysis purposes,
reported and paid claims activity is segregated into several hundred reserving
segments, each having differing historical settlement trends. A variety of
actuarial methodologies are then applied to the underlying data for each of
these reserving segments in arriving at an estimated range of "reasonably
possible" loss scenarios. Factors such as line of business, length of historical
settlement pattern, recent changes in underwriting standards and unusual trends
in reported claims activity will generally affect which actuarial methodologies
are given more weight for purposes of determining the "best estimate" of
ultimate losses in a particular reserving segment. As discussed in the insurance
section on page 51 and in note 19, reported claims activity at ERC related to
prior year loss events, particularly for liability-related exposures
underwritten in 1997 through 2001, has performed much worse than we anticipated.
This trend was considered in the actuarial reserve study completed in the fourth
quarter of 2002, resulting in a significant increase in recorded reserves.
Following these actions, we have continued to monitor reported claims volumes
relative to our revised expected loss levels. While for the majority of our
lines of business, reported claims activity in 2003 was reasonably close to
expected amounts, for certain lines of business the reported claims volumes
exceeded our revised loss expectations. In response to this new data, we further
increased our loss reserves in 2003. ERC continues its comprehensive efforts to
apply more rigorous underwriting standards that began in 2002. Actuarial reserve
studies and recorded reserves continue to be updated accordingly.

PENSION ASSUMPTIONS Pension benefit obligations and the related
effects on operations are calculated using actuarial models. Two critical
assumptions–discount rate and expected return on assets–are important elements
of plan expense and asset/liability measurement. We evaluate these critical
assumptions at least annually. Other assumptions involving demographic factors
such as retirement age, mortality and turnover are evaluated periodically and
are updated to reflect our experience. Actual results in any given year will
often differ from actuarial assumptions because of economic and other factors.

The discount rate enables us to state expected future cash
flows at a present value on the measurement date. We have little latitude in
selecting this rate; it is the yield on high-quality fixed income investments at
the measurement date. A lower discount rate increases the present value of
benefit obligations and increases pension expense. To reflect market interest
rate conditions, we reduced our discount rate at December 31, 2003, from 6.75%
to 6.0%.



68         GE 2003 ANNUAL REPORT

---

MANAGEMENT'S DISCUSSION AND ANALYSIS

To determine the expected long-term rate of return on
pension plan assets, we consider the current and expected asset allocations, as
well as historical and expected returns on various categories of plan assets. We
assumed that long-term returns on our pension plans were 8.5% in 2003 and 2002
and 9.5% in 2001.

Sensitivity to changes in key assumptions follows:

- Discount rate–A 75 basis point reduction in discount rate would increase
  pension expense in 2004 by $0.3 billion.
- Expected return on assets–A 50 basis point increase in the expected
  return on assets of our principal plans would decrease pension expense in 2004
  by $0.2 billion.

Further information on our principal postretirement benefit
plans is provided on page 46 and in notes 5 and 6.

OTHER LOSS CONTINGENCIES are recorded as liabilities when it is
probable that a liability has been incurred and the amount of the loss is
reasonably estimable. Disclosure is required when there is a reasonable
possibility that the ultimate loss will exceed the recorded provision.
Contingent liabilities are often resolved over long time periods. Estimating
probable losses requires analysis of multiple forecasts that often depend on
judgments about potential actions by third parties such as regulators.

CERTAIN SIGNIFICANT ACCOUNTING POLICIES do not involve the same
level of measurement uncertainties as those discussed above, but are
nevertheless important to an understanding of the financial statements. Policies
related to revenue recognition, financial instruments and business combinations
require difficult judgments on complex matters that are often subject to
multiple sources of authoritative guidance. Certain of these matters are among
topics currently under reexamination by accounting standard setters and
regulators; based on their tentative conclusions, significant changes to GAAP,
and therefore to certain of our accounting policies, are possible in the future.
Also see note 1, Summary of Significant Accounting Policies, which discusses
accounting policies that we have selected from acceptable alternatives.

OTHER INFORMATION

New Accounting Standards

In December 2003, the FASB modified FIN 46, Consolidation of
Variable Interest Entities with FIN 46R, which amended FIN 46 and deferred its
application in certain cases. Our adoption of FIN46 on July 1, 2003, was
unchanged by FIN 46R. However, on January 1, 2004, we will adopt FIN 46R, adding
approximately $2.5 billion to our total assets and liabilities. No cumulative or
significant future effect on our earnings or equity will result from this
change.

Financial Measures that Supplement GAAP

We sometimes refer to data derived from consolidated financial
information but not required by GAAP to be presented in financial statements.
Certain of these data are considered "non-GAAP financial measures" under SEC
regulations. Specifically, we have referred to:

- 2003 revenue and earnings growth excluding the operations of Power
  Systems,
- GECFOA excluding progress collections for the three years ended December
  31, 2003, and
- GE earnings before income taxes and accounting changes and the
  corresponding effective tax rate for the three years ended December 31, 2003.

We believe trends in the Power Systems segment may be so
significant as to obscure patterns and trends of our businesses in total. For
this reason, we believe that investors may find it useful to see the measures
noted above.

REVENUES EXCLUDING POWER SYSTEMS

|                                 |   |       |  |   |       |  | Percentage |  
|-------------------------------- | - | ----- |  | - | ----- |  | ---------- | -
|(In billions)                    |   | 2003  |  |   | 2002  |  | change     |  
|                                 |  
|Revenues as reported             | $ | 134.2 |  | $ | 132.2 |  |            |  
|Less Power Systems               |   | 18.5  |  |   | 22.9  |  |            |  
|                                 |  
|Revenues excluding Power Systems | $ | 115.7 |  | $ | 109.3 |  | 6          | %
|                                 |  
|                                 |   |       |  |   |       |  |            |  



EARNINGS BEFORE ACCOUNTING CHANGES EXCLUDING POWER SYSTEMS

|                                                           |       |       | Percentage |  
|---------------------------------------------------------- | ----- | ----- | ---------- | -
|(In billions)                                              | 2003  | 2002  | change     |  
|                                                           |      
|Earnings before accounting changes as reported             | $15.6 | $15.1 |            |  
|Less Power Systems at 35% tax rate                         | 2.6   | 4.0   |            |  
|                                                           |      
|Earnings before accounting changes excluding Power Systems | $13.0 | $11.1 | 17         | %
|                                                           |      
|                                                           |       |       |            |  



GE CFOA EXCLUDING PROGRESS COLLECTIONS

|(In billions)                          |   | 2003 |   |   | 2002 |   |   | 2001 | 
|-------------------------------------- | - | ---- | - | - | ---- | - | - | ---- | 
|                                       |  
|GE CFOA excluding progress collections | $ | 15.2 |   | $ | 15.2 |   | $ | 13.8 | 
|Progress collections                   |   | (2.3 | ) |   | (5.1 | ) |   | 3.4  | 
|                                       |  
|GE CFOA as reported                    | $ | 12.9 |   | $ | 10.1 |   | $ | 17.2 | 
|                                       |  
|                                       |   |      |   |   |      |   |   |      | 



GE TAX RATE EXCLUDING GECS EARNINGS

|(In millions)                                          |   | 2003   |  |   | 2002   |  |   | 2001   | 
|------------------------------------------------------ | - | ------ |  | - | ------ |  | - | ------ | 
|                                                       |  
|GE earnings before income taxes and accounting changes | $ | 18,446 |  | $ | 18,970 |  | $ | 18,321 | 
|Less GECS earnings                                     |   | 7,754  |  |   | 4,626  |  |   | 5,586  | 
|                                                       |  
|Total                                                  | $ | 10,692 |  | $ | 14,344 |  | $ | 12,735 | 
|                                                       |  
|Provision for income taxes                             | $ | 2,857  |  | $ | 3,837  |  | $ | 4,193  | 
|Effective tax rate                                     |   | 26.7%  |  |   | 26.7%  |  |   | 32.9%  | 
|                                                       |  
|                                                       |   |        |  |   |        |  |   |        | 



69         GE 2003 ANNUAL REPORT

---

STATEMENT OF EARNINGS

|                                                                               | General Electric Company
   and consolidated affiliates |        
|------------------------------------------------------------------------------ | ------------------------------------------------------- | -------
|                                                                               |                                                         |        
|For the years ended December 31
   (In millions; per-share amounts in dollars) |                                                         | 2003   
|                                                                              
|REVENUES                                                                       |                                                         |        
|Sales of goods                                                                 | $                                                       | 49,963 
|Sales of services                                                              |                                                         | 22,391 
|Other income (note 2)                                                          |                                                         | 602    
|Earnings of GECS before accounting changes                                     |                                                         |       
|GECS revenues from services (note 3)                                           |                                                         | 60,536 
|Consolidated, liquidating securitization entities (note 29)                    |                                                         | 695    
|                                                                              
|Total revenues                                                                 |                                                         | 134,187
|                                                                              
|COSTS AND EXPENSES (note 4)                                                    |                                                         |        
|Cost of goods sold                                                             |                                                         | 37,189 
|Cost of services sold                                                          |                                                         | 14,017 
|Interest and other financial charges                                           |                                                         | 10,432 
|Insurance losses and policyholder and annuity benefits                         |                                                         | 16,369 
|Provision for losses on financing receivables (note 13)                        |                                                         | 3,752  
|Other costs and expenses                                                       |                                                         | 31,727 
|Minority interest in net earnings of consolidated affiliates                   |                                                         | 290    
|Consolidated, liquidating securitization entities (note 29)                    |                                                         | 507    
|                                                                              
|Total costs and expenses                                                       |                                                         | 114,283
|                                                                              
|EARNINGS BEFORE INCOME TAXES AND ACCOUNTING CHANGES                            |                                                         | 19,904 
|Provision for income taxes (note 7)                                            |                                                         | (4,315 
|                                                                              
|EARNINGS BEFORE ACCOUNTING CHANGES                                             |                                                         | 15,589 
|Cumulative effect of accounting changes (note 1)                               |                                                         | (587   
|                                                                              
|NET EARNINGS                                                                   | $                                                       | 15,002 
|                                                                              
|PER-SHARE AMOUNTS (note 8)                                                     |                                                         |        
|Per-share amounts before accounting changes                                    |                                                         |        
|Diluted earnings per share                                                     | $                                                       | 1.55   
|Basic earnings per share                                                       | $                                                       | 1.56   
|Per-share amounts after accounting changes                                     |                                                         |        
|Diluted earnings per share                                                     | $                                                       | 1.49   
|Basic earnings per share                                                       | $                                                       | 1.50   
|                                                                              
|DIVIDENDS DECLARED PER SHARE                                                   | $                                                       | 0.77   
|                                                                              
|                                                                              
|CONSOLIDATED STATEMENT OF CHANGES IN SHAREOWNERS' EQUITY                      
|                                                                               |                                                        
|(In millions)                                                                  |                                                         | 2003   
|                                                                               |                                                        
|CHANGES IN SHAREOWNERS EQUITY (note 24)                                       |                                                         |        
|Balance at January 1                                                           | $                                                       | 63,706 
|                                                                               |                                                        
|Dividends and other transactions with shareowners                              |                                                         | (5,520 
|                                                                               |                                                        
|Changes other than transactions with shareowners                               |                                                         |        
|Increase attributable to net earnings                                          |                                                         | 15,002 
|Investment securitiesnet                                                      |                                                         | 549    
|Currency translation adjustmentsnet                                           |                                                         | 5,123  
|Derivatives qualifying as hedgesnet                                           |                                                         | 320    
|                                                                               |                                                        
|Total changes other than transactions with shareowners                         |                                                         | 20,994 
|                                                                               |                                                        
|Balance at December 31                                                         | $                                                       | 79,180 
|                                                                               |                                                        
|                                                                               |                                                         |        

The notes to consolidated financial statements on pages 76113 are an integral part of these statements.

70           GE 2003 ANNUAL REPORT

---



|                                                                               |   | GE     |   | GECS |       
|------------------------------------------------------------------------------ | - | ------ | - | ---- | ------
|                                                                               |   |        |   |      |       
|For the years ended December 31
   (In millions; per-share amounts in dollars) |   | 2003   |   |      | 2002  
|                                                                               |  
|REVENUES                                                                       |   |        |   |      |       
|Sales of goods                                                                 | $ | 47,767 |   | $    | 51,957
|Sales of services                                                              |   | 22,675 |   |      | 21,360
|Other income (note 2)                                                          |   | 645    |   |      | 1,106 
|Earnings of GECS before accounting changes                                     |   | 7,754  |   |      | 4,626 
|GECS revenues from services (note 3)                                           |   |       |   |      |      
|Consolidated, liquidating securitization entities (note 29)                    |   |       |   |      |      
|                                                                               |  
|Total revenues                                                                 |   | 78,841 |   |      | 79,049
|                                                                               |  
|COSTS AND EXPENSES (note 4)                                                    |   |        |   |      |       
|Cost of goods sold                                                             |   | 35,102 |   |      | 35,951
|Cost of services sold                                                          |   | 14,301 |   |      | 14,245
|Interest and other financial charges                                           |   | 941    |   |      | 569   
|Insurance losses and policyholder and annuity benefits                         |   |       |   |      |      
|Provision for losses on financing receivables (note 13)                        |   |       |   |      |      
|Other costs and expenses                                                       |   | 9,870  |   |      | 9,131 
|Minority interest in net earnings of consolidated affiliates                   |   | 181    |   |      | 183   
|Consolidated, liquidating securitization entities (note 29)                    |   |       |   |      |      
|                                                                               |  
|Total costs and expenses                                                       |   | 60,395 |   |      | 60,079
|                                                                               |  
|EARNINGS BEFORE INCOME TAXES AND ACCOUNTING CHANGES                            |   | 18,446 |   |      | 18,970
|Provision for income taxes (note 7)                                            |   | (2,857 | ) |      | (3,837
|                                                                               |  
|EARNINGS BEFORE ACCOUNTING CHANGES                                             |   | 15,589 |   |      | 15,133
|Cumulative effect of accounting changes (note 1)                               |   | (587   | ) |      | (1,015
|                                                                               |  
|NET EARNINGS                                                                   | $ | 15,002 |   | $    | 14,118
|                                                                               |  

In the consolidating data on this page, GE means the basis of consolidation as described in note 1 to the consolidated financial statements; GECS means General Electric Capital Services, Inc. and all of its
affiliates and associated companies. Transactions between GE and GECS have been eliminated from the General Electric Company and consolidated affiliates columns on page 70.

71         GE 2003 ANNUAL REPORT

---

STATEMENT OF FINANCIAL POSITION

|                                                                               | General Electric Company
   and consolidated affiliates |        
|------------------------------------------------------------------------------ | ------------------------------------------------------- | -------
|                                                                               |                                                         |        
|At December 31 (In millions)                                                   |                                                         | 2003   
|                                                                              
|ASSETS                                                                         |                                                         |        
|Cash and equivalents                                                           | $                                                       | 12,664 
|Investment securities (note 9)                                                 |                                                         | 120,724
|Current receivables (note 10)                                                  |                                                         | 10,732 
|Inventories (note 11)                                                          |                                                         | 8,752  
|Financing receivables (investments in time sales, loans and financing leases) |                                                         |        
|net (notes 12 and 13)                                                          |                                                         | 226,029
|Insurance receivablesnet (note 14)                                            |                                                         | 27,053 
|Other GECS receivables                                                         |                                                         | 9,545  
|Property, plant and equipment (including equipment leased to others)          |                                                         |        
|net (note 15)                                                                  |                                                         | 53,382 
|Investment in GECS                                                             |                                                         |       
|Intangible assets net (note 16)                                               |                                                         | 55,025 
|Consolidated, liquidating securitization entities (note 29)                    |                                                         | 26,463 
|All other assets (note 17)                                                     |                                                         | 97,114 
|                                                                              
|TOTAL ASSETS                                                                   | $                                                       | 647,483
|                                                                              
|LIABILITIES AND EQUITY                                                         |                                                         |        
|Short-term borrowings (note 18)                                                | $                                                       | 134,917
|Accounts payable, principally trade accounts                                   |                                                         | 19,824 
|Progress collections and price adjustments accrued                             |                                                         | 4,433  
|Dividends payable                                                              |                                                         | 2,013  
|All other current costs and expenses accrued                                   |                                                         | 15,343 
|Long-term borrowings (note 18)                                                 |                                                         | 170,004
|Insurance liabilities, reserves and annuity benefits (note 19)                 |                                                         | 136,264
|Consolidated, liquidating securitization entities (note 29)                    |                                                         | 25,721 
|All other liabilities (note 20)                                                |                                                         | 41,357 
|Deferred income taxes (note 21)                                                |                                                         | 12,647 
|                                                                              
|Total liabilities                                                              |                                                         | 562,523
|                                                                              
|Minority interest in equity of consolidated affiliates (note 22)               |                                                         | 5,780  
|                                                                              
|Common stock (10,063,120,000 and 9,969,894,000 shares outstanding              |                                                         |        
|at year-end 2003 and 2002, respectively)                                       |                                                         | 669    
|Accumulated gains/(losses)net                                                 |                                                         |        
|Investment securities                                                          |                                                         | 1,620  
|Currency translation adjustments                                               |                                                         | 2,987  
|Derivatives qualifying as hedges                                               |                                                         | (1,792 
|Other capital                                                                  |                                                         | 17,497 
|Retained earnings                                                              |                                                         | 82,796 
|Less common stock held in treasury                                             |                                                         | (24,597
|                                                                              
|Total shareowners equity (notes 24 and 25)                                    |                                                         | 79,180 
|                                                                              
|TOTAL LIABILITIES AND EQUITY                                                   | $                                                       | 647,483
|                                                                              

The sum of accumulated gains/(losses) on investment securities, currency translation adjustments, and derivatives qualifying as hedges constitutes Accumulated nonowner changes other than earnings, as shown in note 24, and
was $2,815 million and $(3,177) million at year-end 2003 and 2002, respectively.

The notes to consolidated financial statements on pages 76113 are an integral part of this statement.

72         GE 2003 ANNUAL REPORT

---



|                                                                               | GE |         | GECS |  
|------------------------------------------------------------------------------ | -- | ------- | ---- | -
|                                                                               |    |         |      |  
|At December 31 (In millions)                                                   |    | 2003    |      |  
|                                                                               |   
|ASSETS                                                                         |    |         |      |  
|Cash and equivalents                                                           | $  | 1,670   |      | $
|Investment securities (note 9)                                                 |    | 380     |      |  
|Current receivables (note 10)                                                  |    | 10,973  |      |  
|Inventories (note 11)                                                          |    | 8,555   |      |  
|Financing receivables (investments in time sales, loans and financing leases) |    |         |      |  
|net (notes 12 and 13)                                                          |    |        |      |  
|Insurance receivablesnet (note 14)                                            |    |        |      |  
|Other GECS receivables                                                         |    |        |      |  
|Property, plant and equipment (including equipment leased to others)          |    |         |      |  
|net (note 15)                                                                  |    | 14,566  |      |  
|Investment in GECS                                                             |    | 45,308  |      |  
|Intangible assets net (note 16)                                               |    | 30,204  |      |  
|Consolidated, liquidating securitization entities (note 29)                    |    |        |      |  
|All other assets (note 17)                                                     |    | 30,448  |      |  
|                                                                               |   
|TOTAL ASSETS                                                                   | $  | 142,104 |      | $
|                                                                               |   
|LIABILITIES AND EQUITY                                                         |    |         |      |  
|Short-term borrowings (note 18)                                                | $  | 2,555   |      | $
|Accounts payable, principally trade accounts                                   |    | 8,753   |      |  
|Progress collections and price adjustments accrued                             |    | 4,433   |      |  
|Dividends payable                                                              |    | 2,013   |      |  
|All other current costs and expenses accrued                                   |    | 15,343  |      |  
|Long-term borrowings (note 18)                                                 |    | 8,388   |      |  
|Insurance liabilities, reserves and annuity benefits (note 19)                 |    |        |      |  
|Consolidated, liquidating securitization entities (note 29)                    |    |        |      |  
|All other liabilities (note 20)                                                |    | 18,449  |      |  
|Deferred income taxes (note 21)                                                |    | 1,911   |      |  
|                                                                               |   
|Total liabilities                                                              |    | 61,845  |      |  
|                                                                               |   
|Minority interest in equity of consolidated affiliates (note 22)               |    | 1,079   |      |  
|                                                                               |   
|Common stock (10,063,120,000 and 9,969,894,000 shares outstanding              |    |         |      |  
|at year-end 2003 and 2002, respectively)                                       |    | 669     |      |  
|Accumulated gains/(losses)net                                                 |    |         |      |  
|Investment securities                                                          |    | 1,620   |      |  
|Currency translation adjustments                                               |    | 2,987   |      |  
|Derivatives qualifying as hedges                                               |    | (1,792  | )    |  
|Other capital                                                                  |    | 17,497  |      |  
|Retained earnings                                                              |    | 82,796  |      |  
|Less common stock held in treasury                                             |    | (24,597 | )    |  
|                                                                               |   
|Total shareowners equity (notes 24 and 25)                                    |    | 79,180  |      |  
|                                                                               |   
|TOTAL LIABILITIES AND EQUITY                                                   | $  | 142,104 |      | $
|                                                                               |   

In the consolidating data on this page, GE means the basis of consolidation as described in note 1 to the consolidated financial statements; GECS means General Electric Capital Services, Inc. and all of its
affiliates and associated companies. Transactions between GE and GECS have been eliminated from the General Electric Company and consolidated affiliates columns on page 72.

73         GE 2003 ANNUAL REPORT

---

STATEMENT OF CASH FLOWS

|                                                                      | General Electric Company
   and consolidated affiliates |        
|--------------------------------------------------------------------- | ------------------------------------------------------- | -------
|                                                                      |                                                         |        
|For the years ended December 31 (In millions)                         |                                                         | 2003   
|                                                                     
|CASH FLOWS  OPERATING ACTIVITIES                                     |                                                         |        
|Net earnings                                                          | $                                                       | 15,002 
|Adjustments to reconcile net earnings to cash provided                |                                                         |        
|from operating activities                                             |                                                         |        
|Cumulative effect of accounting changes                               |                                                         | 587    
|Depreciation and amortization of property, plant and equipment        |                                                         | 6,956  
|Amortization of goodwill                                              |                                                         |       
|Earnings (before accounting changes) retained by GECS                 |                                                         |       
|Deferred income taxes                                                 |                                                         | 1,127  
|Decrease (increase) in GE current receivables                         |                                                         | 534    
|Decrease (increase) in inventories                                    |                                                         | 874    
|Increase (decrease) in accounts payable                               |                                                         | 802    
|Increase (decrease) in GE progress collections                        |                                                         | (2,268 
|Increase in insurance liabilities and reserves                        |                                                         | 1,679  
|Provision for losses on financing receivables                         |                                                         | 3,752  
|All other operating activities                                        |                                                         | 1,244  
|                                                                     
|CASH FROM OPERATING ACTIVITIES                                        |                                                         | 30,289 
|                                                                     
|CASH FLOWS  INVESTING ACTIVITIES                                     |                                                         |        
|Additions to property, plant and equipment                            |                                                         | (9,767 
|Dispositions of property, plant and equipment                         |                                                         | 4,945  
|Net increase in GECS financing receivables                            |                                                         | (14,273
|Payments for principal businesses purchased                           |                                                         | (14,407
|Investment in GECS                                                    |                                                         |       
|All other investing activities                                        |                                                         | 10,599 
|                                                                     
|CASH USED FOR INVESTING ACTIVITIES                                    |                                                         | (22,903
|                                                                     
|CASH FLOWS  FINANCING ACTIVITIES                                     |                                                         |        
|Net increase (decrease) in borrowings (maturities of 90 days or less) |                                                         | (11,107
|Newly issued debt (maturities longer than 90 days)                    |                                                         | 67,545 
|Repayments and other reductions (maturities longer than 90 days)      |                                                         | (43,155
|Net dispositions (purchases) of GE shares for treasury                |                                                         | 726    
|Dividends paid to shareowners                                         |                                                         | (7,643 
|All other financing activities                                        |                                                         | (9,998 
|                                                                     
|CASH FROM (USED FOR) FINANCING ACTIVITIES                             |                                                         | (3,632 
|                                                                     
|INCREASE (DECREASE) IN CASH AND EQUIVALENTS DURING YEAR               |                                                         | 3,754  
|Cash and equivalents at beginning of year                             |                                                         | 8,910  
|                                                                     
|Cash and equivalents at end of year                                   | $                                                       | 12,664 
|                                                                     
|SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION                     |                                                         |        
|Cash paid during the year for interest                                | $                                                       | (10,561
|Cash recovered (paid) during the year for income taxes                |                                                         | (1,539 
|                                                                     
|                                                                      |                                                         |        

The notes to consolidated financial statements on pages 76113 are an integral part of this statement.

74         GE 2003 ANNUAL REPORT

---



|                                                                      | GE |        | GECS |        
|--------------------------------------------------------------------- | -- | ------ | ---- | -------
|                                                                      |    |        |      |        
|For the years ended December 31 (In millions)                         |    | 2003   |      |        
|                                                                      |   
|CASH FLOWS  OPERATING ACTIVITIES                                     |    |        |      |        
|Net earnings                                                          | $  | 15,002 |      | $      
|Adjustments to reconcile net earnings to cash provided                |    |        |      |        
|from operating activities                                             |    |        |      |        
|Cumulative effect of accounting changes                               |    | 587    |      |        
|Depreciation and amortization of property, plant and equipment        |    | 2,277  |      |        
|Amortization of goodwill                                              |    |       |      |        
|Earnings (before accounting changes) retained by GECS                 |    | (4,319 | )    |        
|Deferred income taxes                                                 |    | 389    |      |        
|Decrease (increase) in GE current receivables                         |    | 585    |      |        
|Decrease (increase) in inventories                                    |    | 909    |      |        
|Increase (decrease) in accounts payable                               |    | 676    |      |        
|Increase (decrease) in GE progress collections                        |    | (2,268 | )    |        
|Increase in insurance liabilities and reserves                        |    |       |      |        
|Provision for losses on financing receivables                         |    |       |      |        
|All other operating activities                                        |    | (913   | )    |        
|                                                                      |   
|CASH FROM OPERATING ACTIVITIES                                        |    | 12,925 |      |        
|                                                                      |   
|CASH FLOWS  INVESTING ACTIVITIES                                     |    |        |      |        
|Additions to property, plant and equipment                            |    | (2,158 | )    |        
|Dispositions of property, plant and equipment                         |    |       |      |        
|Net increase in GECS financing receivables                            |    |       |      |        
|Payments for principal businesses purchased                           |    | (3,870 | )    |        
|Investment in GECS                                                    |    |       |      |        
|All other investing activities                                        |    | 236    |      |        
|                                                                      |   
|CASH USED FOR INVESTING ACTIVITIES                                    |    | (5,792 | )    | (17,435
|                                                                      |   
|CASH FLOWS  FINANCING ACTIVITIES                                     |    |        |      |        
|Net increase (decrease) in borrowings (maturities of 90 days or less) |    | (6,704 | )    |        
|Newly issued debt (maturities longer than 90 days)                    |    | 7,356  |      |        
|Repayments and other reductions (maturities longer than 90 days)      |    | (277   | )    |        
|Net dispositions (purchases) of GE shares for treasury                |    | 726    |      |        
|Dividends paid to shareowners                                         |    | (7,643 | )    |        
|All other financing activities                                        |    |       |      |        
|                                                                      |   
|CASH FROM (USED FOR) FINANCING ACTIVITIES                             |    | (6,542 | )    |        
|                                                                      |   
|INCREASE (DECREASE) IN CASH AND EQUIVALENTS
   
       DURING YEAR    |    | 591    |      |        
|Cash and equivalents at beginning of year                             |    | 1,079  |      |        
|                                                                      |   
|Cash and equivalents at end of year                                   | $  | 1,670  |      | $      
|                                                                      |   
|SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
   
       INFORMATION          |    |        |      |        
|Cash paid during the year for interest                                | $  | (248   | )    | $      
|Cash recovered (paid) during the year for income taxes                |    | (2,685 | )    |        
|                                                                      |   
|                                                                      |    |        |      |        

In the consolidating data on this page, GE means the basis of consolidation as described in note 1 to the consolidated financial statements; GECS means General Electric Capital Services, Inc. and all of its
affiliates and associated companies. Transactions between GE and GECS have been eliminated from the General Electric Company and consolidated affiliates columns on page 74.

75         GE 2003 ANNUAL REPORT

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation

Our financial statements consolidate all of our
affiliates–companies that we control and in which we hold a majority voting
interest. In 2003, as we describe on page 79, we added certain non-affiliates
that we do not control to our consolidated financial statements because of new
accounting requirements that require consolidation of entities based on holding
qualifying residual interests.

Associated companies are companies that we do not control
but over which we have significant influence, most often because we hold a
shareholder voting position of 20% to 50%. Results of associated companies are
presented on a "one-line" basis.

Financial statement presentation

We have reclassified certain prior-year amounts to conform to
this year's presentation.

Financial data and related measurements are presented in
the following categories:

- GE This represents the adding together of all affiliates  other than
  General Electric Capital Services, Inc. (GECS), whose operations are presented
  on a one-line basis.
- GECS This affiliate owns all of the common stock of  General Electric
  Capital Corporation (GE Capital) and  GE Global Insurance Holding Corporation
  (GE Global Insurance Holding), the parent of Employers Reinsurance Corporation
  (ERC). GE Capital, GE Global Insurance Holding  and their respective
  affiliates are consolidated in the GECS columns and constitute its business.
- CONSOLIDATED This represents the adding together of  GE and GECS.

Effects of transactions between related companies are
eliminated. Transactions between GE and GECS are immaterial and consist
primarily of GECS services for material procurement and trade receivables
management, aircraft engines and medical equipment manufactured by GE that are
leased by GECS to others, buildings and equipment leased by GE from GECS, and GE
investments in GECS commercial paper.

Preparing financial statements in conformity with generally
accepted accounting principles requires us to make estimates and assumptions
that affect reported amounts and related disclosures. Actual results could
differ from those estimates.

Sales of goods and services

We record sales of goods when a firm sales agreement is in
place, delivery has occurred and collectibility of the fixed or determinable
sales price is reasonably assured. If customer acceptance of products is not
assured, sales are recorded only upon formal customer acceptance.

Sales of goods in the Consumer Products, Industrial
Systems, IT Solutions, Plastics, Specialty Materials and Supply businesses
typically do not include multiple product and/or service elements, in contrast
with sales in certain of the businesses referred to below. Consumer lighting
products and computer hardware and software are often sold with a right of
return. Accumulated experience is used to estimate and provide for such returns
when we record the sale.

Sales of goods in the Aircraft Engines, Medical Systems,
Power Systems, Transportation Systems and certain Industrial Systems businesses
sometimes include multiple components and sometimes include services such as
installation. In such contracts, amounts assigned to each component are based on
that component's objectively determined fair value, such as the sales price for
the component when it is sold separately or competitor prices for similar
components. Sales are recognized individually for delivered components only if
undelivered components are not essential to functionality of delivered
components, fair values of delivered components have been objectively
determined, and the delivered components have value to the customer on a
standalone basis. However, when undelivered components are inconsequential or
perfunctory and not essential to the functionality of the delivered components
(like certain training commitments), we recognize sales on the total contract
and make provision for the cost of the incomplete elements.

We record sales of product services and certain power
generation equipment in accordance with contracts. For long-term product
services agreements, we use estimated contract profit rates to record sales as
work is performed. For certain power generation equipment, we use estimated
contract profit rates to record sales as major components are completed and
delivered to customers. Estimates are subject to revisions; revisions that
affect an agreement's total estimated profitability result in an immediate
adjustment of earnings. We provide for probable losses. We expense costs to
acquire or originate sales agreements as incurred.

Sales by NBC are recorded when advertisements are
broadcast, with provision made for any shortfalls from viewer commitments ("make
goods") based on specific contracts and independent viewer census information.

GECS revenues from services (earned income)

We use the interest method to recognize income on all loans.
Interest on time sales and loans includes origination, commitment and other
non-refundable fees related to funding (recorded in earned income on the
interest method). Nonearning loans are loans on which we have stopped accruing
interest at the earlier of the time at which collection of an account becomes
doubtful or the account becomes 90 days past due. We recognize interest income
on nonearning loans either as cash is collected or on a cost-recovery basis as
conditions warrant. We resume accruing interest on nonearning, non-restructured
Commercial Finance loans only when (a) payments are brought current according to



76         GE 2003 ANNUAL REPORT

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the loan's original terms and (b) future payments are reasonably
assured. When we agree to restructured terms with the borrower, we resume
accruing interest only when reasonably assured that we will recover full
contractual payments, and pass underwriting reviews equivalent to those to which
we subject new loans. We resume accruing interest on nonearning Consumer Finance
loans only upon receipt of the third consecutive minimum monthly payment or the
equivalent. Specific limits restrict the number of times any particular type of
delinquent loan may be categorized as non-delinquent and interest accrual
resumed.

We record financing lease income on the interest method to
produce a level yield on funds not yet recovered. Estimated unguaranteed
residual values of leased assets are based primarily on periodic independent
appraisals of the values of leased assets remaining at expiration of the lease
terms. Significant assumptions we use in estimating residual values include
estimated net cash flows over the remaining lease term, results of future
remarketing, and future component part and scrap metal prices, discounted at an
appropriate rate.

We recognize operating lease income on a straight-line
basis over the terms of underlying leases.

Fees include commitment fees related to loans that we do
not expect to fund and line-of-credit fees. We record these fees in earned
income on a straight-line basis over the period to which they relate. We record
syndication fees in earned income at the time related services are performed
unless significant contingencies exist.

See below and page 78 for a discussion of income from
investment and insurance activities.

Depreciation and amortization

The cost of GE manufacturing plant and equipment is depreciated
over its estimated economic life. U.S. assets are depreciated using an
accelerated method based on a sum-of-the-years digits formula; non-U.S. assets
are depreciated on a straight-line basis.

The cost of GECS equipment leased to others on operating
leases is amortized on a straight-line basis to estimated residual value over
the lease term or over the estimated economic life of the equipment. See note
15.

Losses on financing receivables

Our allowance for losses on financing receivables represents our
best estimate of probable losses inherent in the portfolio. Our method of
calculating estimated losses depends on the size, type and risk characteristics
of the related receivables.

Our consumer loan portfolio consists of homogeneous card
receivables, installment loans, auto loans and leases and residential mortgages.
The allowance for losses on these receivables is based on ongoing statistical
analyses of our historical experience adjusted for the effects of economic
cycles.

Our allowance for losses on our commercial and equipment
loan and lease portfolios is based on relevant observable data that include, but
are not limited to, historical experience; loan stratification by portfolio and,
when applicable, geography; collateral type; credit class or program type; size
of the loan balance; and delinquency. In certain commercial loan and lease
portfolios, we review all loans based on a number of monitored risk factors
other than size, including collateral value, financial performance of the
borrower, aging and bankruptcy. We stratify portfolios in which we believe that
it is informative to differentiate between small and large balance loans
depending on geography and portfolio. For loans deemed individually impaired, we
determine allowances using the present values of expected future cash flows. If
repossession is expected to be a source of repayment, we estimate the fair value
of that collateral using independent appraisals when necessary.

Delinquencies are the clearest indication of a developing
loss, and we monitor delinquency rates closely in all of our portfolios.
Experience is not available with new products; therefore, while we are
developing that experience, we set loss allowances based on our experience with
the most closely analogous products in our portfolio. When we repossess
collateral in satisfaction of a commercial loan, we write the receivable down
against the allowance for losses. We transfer the asset to "Other assets" and
carry it at the lower of cost or estimated fair value less costs to sell.

Cash and equivalents

Debt securities with original maturities of three months or less
are included in cash equivalents unless designated as available for sale and
classified as investment securities.

Investment securities

We report investments in debt and marketable equity securities,
and equity securities at our insurance affiliates, at fair value based on quoted
market prices or, if quoted prices are not available, discounted expected cash
flows using market rates commensurate with credit quality and maturity of the
investment. Substantially all investment securities are designated as available
for sale with unrealized gains and losses included in shareowners' equity, net
of applicable taxes and other adjustments. We regularly review investment
securities for impairment based on criteria that include the extent to which the
investment's carrying value exceeds its related market value, the duration of
the market decline, our ability to hold to recovery and the financial strength
and specific prospects of the issuer of the security. Unrealized losses that are
other than temporary are recognized in earnings. Realized gains and losses are
accounted for on the specific identification method.

Inventories

All inventories are stated at the lower of cost or realizable
values. Cost for substantially all of GE's U.S. inventories is determined on a
last-in, first-out (LIFO) basis. Cost of other GE inventories is determined on a
first-in, first-out (FIFO) basis. GECS inventories consist of finished products
held for sale. Cost is determined on a FIFO basis.



77        GE 2003 ANNUAL REPORT

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Intangible assets

As of January 1, 2002, goodwill is no longer amortized but is
tested for impairment using a fair value approach, at the "reporting unit"
level. A reporting unit is the operating segment, or a business one level below
that operating segment (the "component" level) if discrete financial information
is prepared and regularly reviewed by management at the component level. We
recognize an impairment charge for any amount by which the carrying amount of a
reporting unit's goodwill exceeds its fair value. We use discounted cash flows
to establish fair values. When available and as appropriate, we use comparative
market multiples to corroborate discounted cash flow results. When a business
within a reporting unit is disposed of, goodwill is allocated to the gain or
loss on disposition using the relative fair value methodology.

We amortize the cost of other intangibles over their
estimated useful lives unless such lives are deemed indefinite. Amortizable
intangible assets are tested for impairment based on undiscounted cash flows
and, if impaired, written down to fair value based on either discounted cash
flows or appraised values. Intangible assets with indefinite lives are tested
annually for impairment and written down to fair value as required.

Before January 1, 2002, we amortized goodwill over its
estimated period of benefit on a straight-line basis; we amortized other
intangible assets on appropriate bases over their estimated lives. No
amortization period exceeded 40 years. When an intangible asset's carrying value
exceeded associated expected operating cash flows, we considered it to be
impaired and wrote it down to fair value, which we determined based on either
discounted future cash flows or appraised values.

GECS insurance accounting policies

Accounting policies for GECS insurance businesses follow.

PREMIUM INCOME. We report insurance premiums as earned income as
follows:

- For short-duration insurance contracts (including property and casualty,
  accident and health, and financial guaranty insurance), we report premiums as
  earned income, generally on a pro-rata basis, over the terms of the related
  agreements. For retrospectively rated reinsurance contracts, we record premium
  adjustments based on estimated losses and loss expenses, taking into
  consideration both case and incurred-but-not-reported (IBNR) reserves.
- For traditional long-duration insurance contracts (including term and
  whole life contracts and annuities payable for the life of the annuitant), we
  report premiums as earned income when due.
- For investment contracts and universal life contracts, we report premiums
  received as liabilities, not as revenues. Universal life contracts are
  long-duration insurance  contracts with terms that are not fixed and
  guaranteed;  for these contracts, we recognize revenues for assessments
  against the policyholder's account, mostly for mortality,  contract
  initiation, administration and surrender. Investment contracts are contracts
  that have neither significant mortality nor significant morbidity risk,
  including annuities payable for a determined period; for these contracts, we
  recognize revenues on the associated investments and amounts credited to
  policyholder accounts are charged to expense.

LIABILITIES FOR UNPAID CLAIMS AND CLAIMS ADJUSTMENT EXPENSES
represent our best estimate of the ultimate obligations for reported claims plus
those IBNR and the related estimated claim settlement expenses for all claims
incurred through December 31 of each year. Specific reserves–also referred to as
case reserves–are established for reported claims using case-basis evaluations
of the underlying claim data and are updated as further information becomes
known. IBNR reserves are determined using generally accepted actuarial reserving
methods that take into account historical loss experience data and, as
appropriate, certain qualitative factors. IBNR reserves are adjusted to take
into account certain additional factors that can be expected to affect the
liability for claims over time, such as changes in the volume and mix of
business written, revisions to contract terms and conditions, changes in legal
precedents or developed case law, trends in healthcare and medical costs, and
general inflation levels. Settlement of complex claims routinely involves
threatened or pending litigation to resolve disputes as to coverage,
interpretation of contract terms and conditions or fair compensation for damages
suffered. These disputes are settled through negotiation, arbitration or actual
litigation. Recorded reserves incorporate our best estimate of the effect that
ultimate resolution of such disputes have on both claims payments and related
settlement expenses. Liabilities for unpaid claims and claims adjustment
expenses are continually reviewed and adjusted; such adjustments are included in
current operations and accounted for as changes in estimates.

DEFERRED ACQUISITION COSTS. Costs that vary with and are
directly related to the acquisition of new and renewal insurance and investment
contracts are deferred and amortized as follows:

- Short-duration contracts–Acquisition costs consist of commissions,
  brokerage expenses and premium taxes and are amortized ratably over the
  contract periods in which the related premiums are earned.
- Long-duration contracts–Acquisition costs consist of first-year
  commissions in excess of recurring renewal commissions, certain variable sales
  expenses and certain support costs such as underwriting and policy issue
  expenses. For traditional long-duration insurance contracts, we amortize these
  costs over the respective contract periods in proportion to either anticipated
  premium income, or, in the case of limited-payment contracts, estimated
  benefit payments. For investment contracts and universal life contracts,
  amortization of these costs is based on estimated gross profits and is
  adjusted as those estimates are revised.



78         GE 2003 ANNUAL REPORT

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We review deferred acquisition costs periodically for
recoverability considering anticipated investment income.

PRESENT VALUE OF FUTURE PROFITS. The actuarially determined
present value of anticipated net cash flows to be realized from insurance,
annuity and investment contracts in force at the date of acquisition of life
insurance policies is recorded as the present value of future profits and is
amortized over the respective policy terms in a manner similar to deferred
acquisition costs. We adjust unamortized balances to reflect experience and
impairment, if any.

Accounting changes

We adopted Financial Accounting Standards Board (FASB)
Interpretation No. (FIN) 46, Consolidation of Variable Interest Entities, on
July 1, 2003, and consolidated certain entities in our financial statements for
the first time. New balance sheet captions, "Consolidated, liquidating
securitization entities," included $36.3 billion of assets and $35.8 billion of
liabilities at transition related to entities involved in securitization
arrangements. Given their unique nature and the fact that their activities have
been discontinued, they are classified in separate financial statement captions.
Further information about these entities is provided in note 29. In addition,
$14.1 billion and $1.0 billion were added to "Investment securities" and "Other
GECS receivables," respectively, at transition for investment securities related
to guaranteed investment contracts (GICs) issued by Trinity, a group of
sponsored special purpose entities. The related GIC liabilities of $14.7
billion, consolidated at transition, are displayed in "Insurance liabilities,
reserves and annuity benefits." As issuance of GICs by these entities is likely
to continue in the future, we have displayed these investment securities in
financial statement captions consistent with like items of our Insurance
businesses. Our consolidation of these entities resulted in a $372 million
after-tax accounting charge ($0.04 per share) to net earnings and is reported in
the caption "Cumulative effect of accounting changes." This charge resulted from
several factors. For entities consolidated based on carrying amounts, the effect
of changes in interest rates resulted in transition losses on interest rate
swaps that did not qualify for hedge accounting before transition. Losses also
arose from the FIN 46 requirement to record carrying amounts of assets in
certain securitization entities as if those entities had always been
consolidated, requiring us to eliminate certain previously recognized gains. For
certain other entities that we were required to consolidate at their July 1,
2003, fair values, we recognized a loss on consolidation because their
liabilities, including the fair value of interest rate swaps, exceeded
independently appraised fair values of the related assets.

Statement of Financial Accounting Standards (SFAS) 143,
Accounting for Asset Retirement Obligations, became effective for us on January
1, 2003. Under SFAS 143, obligations associated with the retirement of
long-lived assets are recorded when there is a legal obligation to incur such
costs. This amount is accounted for like an additional element of cost, and,
like other cost elements, is depreciated over the corresponding asset's useful
life. SFAS 143 primarily affects our accounting for costs associated with the
future retirement of facilities used for storage and production of nuclear fuel.
On January 1, 2003, we recorded a one-time, non-cash transition charge of $330
million ($215 million after tax, or $0.02 per share) which is reported in the
caption "Cumulative effect of accounting changes."

In 2002, we adopted SFAS 142, Goodwill and Other Intangible
Assets, under which goodwill is no longer amortized but is tested for impairment
using a fair value methodology. Using the required reporting unit basis, we
tested all of our goodwill for impairment as of January 1, 2002, and recorded a
non-cash charge of $1.204 billion ($1.015 billion after tax, or $0.10 per
share). Substantially all of the charge related to the GECS IT Solutions
business and the GECS U.S. Auto and Home business. Factors contributing to the
impairment charge were the difficult economic environment in the information
technology sector and heightened price competition in the auto insurance
industry. No impairment charge had been required under our previous goodwill
impairment policy, which was based on undiscounted cash flows.

Also in 2002, we adopted the stock option expense
provisions of SFAS 123, Accounting for Stock-Based Compensation. A comparison of
reported and pro-forma net earnings, including effects of expensing stock
options, follows.

(In millions; per-share
      amounts in dollars)
      
      2003
      
      
      2002
      
      
      2001Net earnings, as reported
      $
      15,002
      
      $
      14,118
      
      $
      13,684Earnings per share, as
      reportedDiluted
      
      1.49
      
      
      1.41
      
      
      1.37Basic
      
      1.50
      
      
      1.42
      
      
      1.38Stock option expense included
      in net earnings
      
      81
      
      
      27
      
      
      –Total stock option expense(a)
      
      315
      
      
      330
      
      
      296PRO-FORMA EFFECTSNet earnings, on pro-forma
      basis
      
      14,768
      
      
      13,815
      
      
      13,388Earnings per share, on
      pro-forma basisDiluted
      
      1.47
      
      
      1.38
      
      
      1.33Basic
      
      1.47
      
      
      1.39
      
      
      1.35


(a)



79         GE 2003 ANNUAL REPORT

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In 2001, we adopted SFAS 133, Accounting for Derivative
Instruments and Hedging Activities, as amended. Under SFAS 133, all derivative
instruments are recognized in the balance sheet at their fair values. Further
information about derivatives and hedging is provided in note 28. The cumulative
transition effect of adopting this accounting change at January 1, 2001, was a
$324 million ($0.03 per share) reduction of net earnings and $827 million
reduction in equity.

Also in 2001, we adopted Emerging Issues Task Force (EITF)
Issue 99-20. Under this consensus, impairment of certain retained interests in
securitized assets must be recognized when (a) the asset's fair value is below
its carrying value, and (b) it is probable that there has been an adverse change
in estimated cash flows. The cumulative effect of adopting EITF 99-20 at January
1, 2001, was a one-time reduction of net earnings of $120 million ($0.01 per
share).

NOTE 2

GE OTHER INCOME

(In millions)
      
      2003
      
      
      2002
      
      
      2001Licensing and royalty income
      $
      135
      
      $
      103
      
      $
      75Associated companies
      
      118
      
      
      (170
      )
      
      (106
      )Marketable securities and bank deposits
      
      75
      
      
      31
      
      
      184Bravo exchange
      
      –
      
      
      571
      
      
      –Global eXchange Services gain
      
      –
      
      
      488
      
      
      –Other items
      
      317
      
      
      83
      
      
      280Total
      $
      645
      
      $
      1,106
      
      $
      433




NOTE 3

GECS REVENUES FROM SERVICES

(In millions)
      
      2003
      
      
      2002
      
      
      2001Premiums earned by insurance businesses
      $
      18,646
      
      $
      16,484
      
      $
      15,634Interest on time sales and loans
      
      16,495
      
      
      14,068
      
      
      12,136Operating lease rentals
      
      7,199
      
      
      6,879
      
      
      6,762Investment income
      
      6,468
      
      
      5,570
      
      
      6,593Financing leases
      
      4,077
      
      
      4,441
      
      
      4,346Fees
      
      3,349
      
      
      2,943
      
      
      2,535Other income
      
      5,122
      
      
      5,018
      
      
      7,223Total
      $
      61,356
      
      $
      55,403
      
      $
      55,229




For insurance businesses, the effects of reinsurance on premiums
written and premiums earned were as follows:

(In millions)
      
      2003
      
      
      2002
      
      
      2001PREMIUMS WRITTENDirect
      $
      11,640
      
      $
      11,659
      
      $
      9,958Assumed
      
      9,616
      
      
      9,409
      
      
      9,603Ceded
      
      (2,654
      )
      
      (4,069
      )
      
      (3,718
      )Total
      $
      18,602
      
      $
      16,999
      
      $
      15,843PREMIUMS EARNEDDirect
      $
      11,433
      
      $
      10,922
      
      $
      9,912Assumed
      
      9,964
      
      
      9,569
      
      
      9,471Ceded
      
      (2,751
      )
      
      (4,007
      )
      
      (3,749
      )Total
      $
      18,646
      
      $
      16,484
      
      $
      15,634


NOTE 4

SUPPLEMENTAL COST INFORMATION

Total expenditures for research and development were $2,656
million, $2,631 million and $2,349 million in 2003, 2002 and 2001, respectively.
The portion we funded was $2,103 million in 2003, $2,215 million in 2002 and
$1,980 million in 2001.

Rental expense under operating leases is shown below.

(In millions)
      
      2003
      
      
      2002
      
      
      2001GE
      $
      733
      
      $
      773
      
      $
      694GECS
      
      893
      
      
      977
      
      
      1,006


At December 31, 2003, minimum rental commitments under
noncancelable operating leases aggregated $2,764 million and $4,354 million for
GE and GECS, respectively. Amounts payable over the next five years follow.

(In millions)
      2004
      2005
      2006
      2007
      2008GE
      $568
      $466
      $375
      $298
      $240GECS
      759
      627
      539
      509
      418


GE's selling, general and administrative expense totaled $9,870
million in 2003, $9,131 million in 2002 and $8,637 million in 2001. Capitalized
interest is insignificant in 2003, 2002 and 2001.

We recorded restructuring charges of $270 million ($354 million
including other related charges) in 2002 to rationalize certain operations and
facilities of GE's worldwide industrial businesses. Major elements of these
restructuring programs included costs for employee severance, lease termination,
dismantlement, and other exit costs. These programs were essentially completed
by the end of 2003.



80         GE 2003 ANNUAL REPORT

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5

RETIREE HEALTH AND LIFE BENEFITS

We sponsor a number of retiree health and life insurance benefit
plans (retiree benefit plans). Principal retiree benefit plans are discussed
below; other such plans are not significant individually or in the aggregate.

PRINCIPAL RETIREE BENEFIT PLANS generally provide health and
life insurance benefits to employees who retire under the GE Pension Plan (see
note 6) with 10 or more years of service. Retirees share in the cost of
healthcare benefits. Benefit provisions are subject to collective bargaining.
These plans cover approximately 250,000 retirees and dependents. Our principal
retiree benefit plans have a December 31 measurement date.

The effect on operations of principal retiree benefit plans
is shown in the following table.

EFFECT ON OPERATIONS

(In millions)
      
      2003
      
      
      2002
      
      
      2001Expected return on plan assets
      $
      (159
      )
      $
      (170
      )
      $
      (185
      )Service cost for benefits earned
      
      307
      
      
      277
      
      
      191Interest cost on benefit obligation
      
      535
      
      
      469
      
      
      459Prior service cost
      
      191
      
      
      96
      
      
      90Net actuarial loss recognized
      
      127
      
      
      78
      
      
      60Retiree benefit plans cost
      $
      1,001
      
      $
      750
      
      $
      615


ACTUARIAL ASSUMPTIONS. The discount rate at December 31 was used
to measure the year-end benefit obligations and the earnings effects for the
subsequent year. Actuarial assumptions used to determine benefit obligations and
earnings effects for principal retiree benefit plans follow.

ACTUARIAL ASSUMPTIONS

December 31
      2003
      
      2002
      
      2001
      
      2000Discount rate(a)
      6.0
      %
      6.75
      %
      7.25
      %
      7.5
      %Compensation increases
      5
      
      5
      
      5
      
      5Expected return on assets
      8.5
      
      8.5
      
      9.5
      
      9.5Healthcare cost trend rate(b)
      10.5
      
      13
      
      12
      
      10




(a)

To determine the expected long-term rate of return on retiree
life plan assets, we consider the current and expected asset allocations, as
well as historical and expected returns on various categories of plan assets. We
apply our expected rate of return to a market-related value of assets, which
reduces the underlying variability in assets to which we apply that expected
return.

We amortize experience gains and losses, as well as the
effects of changes in actuarial assumptions and plan provisions, over a period
no longer than the average future service of employees.

FUNDING POLICY for retiree health benefits is generally to pay
covered expenses as they are incurred. We fund retiree life insurance benefits
at our discretion. Under the provisions of these plans, we expect to contribute
approximately $640 million in 2004 to cover unfunded healthcare benefits.

Changes in the accumulated postretirement benefit
obligation for retiree benefit plans follow.

ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATION (APBO)

|(In millions)                       |   | 2003  |   |   | 2002  |  
|----------------------------------- | - | ----- | - | - | ----- | -
|                                    |  
|Balance at January 1                | $ | 7,435 |   | $ | 6,796 |  
|Service cost for benefits earned    |   | 307   |   |   | 277   |  
|Interest cost on benefit obligation |   | 535   |   |   | 469   |  
|Participant contributions           |   | 33    |   |   | 32    |  
|Plan amendments(a)                  |   | 2,483 |   |   | (60   | )
|Actuarial (gain) loss               |   | (416  | ) |   | 567   |  
|Benefits paid                       |   | (720  | ) |   | (687  | )
|Other                               |   | 44    |   |   | 41    |  
|                                    |  
|Balance at December 31(b)           | $ | 9,701 |   | $ | 7,435 |  
|                                    |  



(a)

Increasing or decreasing the healthcare cost trend rates by one
percentage point would have had an insignificant effect on the December 31,
2003, accumulated postretirement benefit obligation and the annual cost of
retiree health plans. Our principal retiree benefit plans are collectively
bargained and have provisions that limit our per capita costs.



81         GE 2003 ANNUAL REPORT

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

FAIR VALUE OF ASSETS

|(In millions)                     |   | 2003  |   |   | 2002  |  
|--------------------------------- | - | ----- | - | - | ----- | -
|                                  |  
|Balance at January 1              | $ | 1,426 |   | $ | 1,771 |  
|Actual gain (loss) on plan assets |   | 309   |   |   | (225  | )
|Employer contributions            |   | 565   |   |   | 535   |  
|Participant contributions         |   | 33    |   |   | 32    |  
|Benefits paid                     |   | (720  | ) |   | (687  | )
|Other                             |   | 13    |   |   | –     |  
|                                  |  
|Balance at December 31            | $ | 1,626 |   | $ | 1,426 |  
|                                  |  

Plan assets are held in trust, as follows:

PLAN ASSET ALLOCATION

|                  | 2003                  |   | 2002                  |  
|----------------- | --------------------- | - | --------------------- | -
|                  |                       |   |                       |  
|December 31       | Target
    allocation |   | Actual
    allocation |  
|                  |                      
|Equity securities | 62-74                 | % | 73                    | %
|Debt securities   | 20-26                 |   | 20                    |  
|Real estate       | 1-5                   |   | 1                     |  
|Other             | 3-9                   |   | 6                     |  
|                  |                      
|Total             |                       |   | 100                   | %
|                  |                      
|                  |                       |   |                       |  

Plan fiduciaries set investment policies and strategies for the
trust. Long-term strategic investment objectives include preserving the funded
status of the trust and balancing risk and return. The plan fiduciaries oversee
the investment allocation process, which includes selecting investment managers,
setting long-term strategic targets and monitoring asset allocations. Target
allocation ranges are guidelines, not limitations, and occasionally plan
fiduciaries will approve allocations above or below a target range.

Trust assets invested in short-term securities must be
invested in securities rated A1/P1 or better. GE common stock represented 5.4%
and 4.8% of trust assets at year-end 2003 and 2002, respectively, and is subject
to a statutory limit when it reaches 10% of total trust assets.

Our recorded assets and liabilities for retiree benefit
plans are as follows:

RETIREE BENEFIT ASSET/(LIABILITY)

|December 31 (In millions)                                |   | 2003   |   |   | 2002   |  
|-------------------------------------------------------- | - | ------ | - | - | ------ | -
|                                                         |  
|Funded status(a)                                         | $ | (8,075 | ) | $ | (6,009 | )
|Unrecognized prior service cost                          |   | 3,045  |   |   | 753    |  
|Unrecognized net actuarial loss                          |   | 1,584  |   |   | 2,277  |  
|                                                         |  
|Net liability recognized                                 | $ | (3,446 | ) | $ | (2,979 | )
|                                                         |  
|Amounts recorded in the Statement of Financial Position: |   |        |   |   |        |  
|Prepaid retiree life plans asset                         | $ | 81     |   | $ | 87     |  
|Retiree health plans liability                           |   | (3,527 | ) |   | (3,066 | )
|                                                         |  
|Net liability recognized                                 | $ | (3,446 | ) | $ | (2,979 | )
|                                                         |  



(a)

The U.S. Medicare Prescription Drug, Improvement and
Modernization Act of 2003 is not expected to have a significant effect on our
operations, obligations or cash flows.



82         GE 2003 ANNUAL REPORT

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6

PENSION BENEFITS

We sponsor a number of pension plans. Principal pension plans
are discussed below; other such plans are not significant individually or in the
aggregate. Principal pension plans constitute about 90% of global pension assets
and obligations.

PRINCIPAL PENSION PLANS are the GE Pension Plan and the GE
Supplementary Pension Plan. These plans have a December 31 measurement date.

The GE Pension Plan provides benefits to certain U.S.
employees based on the greater of a formula recognizing career earnings or a
formula recognizing length of service and final average earnings. Benefit
provisions are subject to collective bargaining. The GE Pension Plan covers
approximately 508,000 participants, including 136,000 employees, 171,000 former
employees with vested rights to future benefits, and 201,000 retirees and
beneficiaries receiving benefits.

The GE Supplementary Pension Plan is an unfunded plan
providing supplementary retirement benefits primarily to higher-level,
longer-service U.S. employees.

Details of the effect on operations of principal pension
plans, and the total effect on cost of principal postretirement benefit plans,
follow.

EFFECT ON OPERATIONS

|(In millions)                                                       |   | 2003   |   |   | 2002   |   |   | 2001   |  
|------------------------------------------------------------------- | - | ------ | - | - | ------ | - | - | ------ | -
|                                                                    |  
|Expected return on plan assets                                      | $ | 4,072  |   | $ | 4,084  |   | $ | 4,327  |  
|Service cost for benefits earned(a)                                 |   | (1,213 | ) |   | (1,107 | ) |   | (884   | )
|Interest cost on benefit obligation                                 |   | (2,180 | ) |   | (2,116 | ) |   | (2,065 | )
|Prior service cost                                                  |   | (248   | ) |   | (217   | ) |   | (244   | )
|Net actuarial gain recognized                                       |   | 609    |   |   | 912    |   |   | 961    |  
|                                                                    |  
|Income from pensions                                                |   | 1,040  |   |   | 1,556  |   |   | 2,095  |  
|Retiree benefit plans cost (note 5)                                 |   | (1,001 | ) |   | (750   | ) |   | (615   | )
|                                                                    |  
|Net cost reductions from principal postretirement benefit
    plans | $ | 39     |   | $ | 806    |   | $ | 1,480  |  
|                                                                    |  

(a)

ACTUARIAL ASSUMPTIONS. The discount rate at December 31 was used
to measure the year-end benefit obligations and the earnings effects for the
subsequent year. Actuarial assumptions used to determine benefit obligations and
earnings effects for principal pension plans follow.

ACTUARIAL ASSUMPTIONS

|December 31               | 2003 |   | 2002 |   | 2001 |   | 2000 |  
|------------------------- | ---- | - | ---- | - | ---- | - | ---- | -
|                          |     
|Discount rate             | 6.0  | % | 6.75 | % | 7.25 | % | 7.5  | %
|Compensation increases    | 5    |   | 5    |   | 5    |   | 5    |  
|Expected return on assets | 8.5  |   | 8.5  |   | 9.5  |   | 9.5  |  
|                          |     

To determine the expected long-term rate of return on pension
plan assets, we consider the current and expected asset allocations, as well as
historical and expected returns on various categories of plan assets. We apply
our expected rate of return to a market-related value of assets, which reduces
the underlying variability in assets to which we apply that expected return.

We amortize experience gains and losses, as well as the
effects of changes in actuarial assumptions and plan provisions, over a period
no longer than the average future service of employees.

FUNDING POLICY for the GE Pension Plan is to contribute amounts
sufficient to meet minimum funding requirements as set forth in employee benefit
and tax laws plus such additional amounts as we may determine to be appropriate.
We have not made contributions to the GE Pension Plan since 1987; any such GE
contribution would require payment of excise taxes and would not be deductible
for income tax purposes. We will not make any contributions to the GE Pension
Plan in 2004. We expect to pay approximately $100 million for GE Supplementary
Pension Plan payments and administrative expenses in 2004.

BENEFIT OBLIGATIONS. Accumulated and projected benefit
obligations (ABO and PBO) represent the obligations of a pension plan for past
service as of the measurement date. ABO is the present value of benefits earned
to date with benefits computed based on current compensation levels. PBO is ABO
increased to reflect expected future compensation.

Changes in the PBO for principal pension plans follow.

PROJECTED BENEFIT OBLIGATION

|(In millions)                       |   | 2003   |   |   | 2002   |  
|----------------------------------- | - | ------ | - | - | ------ | -
|                                    |  
|Balance at January 1                | $ | 33,266 |   | $ | 30,423 |  
|Service cost for benefits earned(a) |   | 1,213  |   |   | 1,107  |  
|Interest cost on benefit obligation |   | 2,180  |   |   | 2,116  |  
|Participant contributions           |   | 169    |   |   | 158    |  
|Plan amendments                     |   | 654    |   |   | 9      |  
|Actuarial loss(b)                   |   | 2,754  |   |   | 1,650  |  
|Benefits paid                       |   | (2,409 | ) |   | (2,197 | )
|                                    |  
|Balance at December 31(c)           | $ | 37,827 |   | $ | 33,266 |  
|                                    |  

(a)

(b)

(c)

ABO balances for principal pension plans follow.

ACCUMULATED BENEFIT OBLIGATION

|December 31 (In millions)     |   | 2003   |  |   | 2002   | 
|----------------------------- | - | ------ |  | - | ------ | 
|                              |  
|GE Pension Plan               | $ | 33,859 |  | $ | 29,698 | 
|GE Supplementary Pension Plan |   | 1,619  |  |   | 1,296  | 
|                              |  
|Total                         | $ | 35,478 |  | $ | 30,994 | 
|                              |  

83         GE 2003 ANNUAL REPORT

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Changes in the fair value of assets for principal pension plans
follow.

FAIR VALUE OF ASSETS

|(In millions)                     |   | 2003   |   |   | 2002   |  
|--------------------------------- | - | ------ | - | - | ------ | -
|                                  |  
|Balance at January 1              | $ | 37,811 |   | $ | 45,006 |  
|Actual gain (loss) on plan assets |   | 8,203  |   |   | (5,251 | )
|Employer contributions            |   | 105    |   |   | 95     |  
|Participant contributions         |   | 169    |   |   | 158    |  
|Benefits paid                     |   | (2,409 | ) |   | (2,197 | )
|                                  |  
|Balance at December 31            | $ | 43,879 |   | $ | 37,811 |  
|                                  |  

The GE Pension Plan's assets are held in trust, as follows:

PLAN ASSET ALLOCATION

|                  | 2003                  |   | 2002                  |  
|----------------- | --------------------- | - | --------------------- | -
|December 31       | Target
    allocation |   | Actual
    allocation |  
|                  |                      
|Equity securities | 51-63                 | % | 60                    | %
|Debt securities   | 21-27                 |   | 20                    |  
|Real estate       | 4-8                   |   | 7                     |  
|Private equities  | 5-11                  |   | 7                     |  
|Other             | 3-7                   |   | 6                     |  
|                  |                      
|Total             |                       |   | 100                   | %
|                  |                      

Plan fiduciaries set investment policies and strategies for the
GE Pension Trust. Long-term strategic investment objectives include preserving
the funded status of the trust and balancing risk and return. The plan
fiduciaries oversee the investment allocation process, which includes selecting
investment managers, commissioning periodic asset-liability studies, setting
long-term strategic targets and monitoring asset allocations. Target allocation
ranges are guidelines, not limitations, and occasionally plan fiduciaries will
approve allocations above or below a target range.

Trust assets are invested subject to the following policy
restrictions: short-term securities must be rated A1/P1 or better; investments
in real estate–7% of trust assets at year end–may not exceed 25%; other
investments in securities that are not freely tradable–11% of trust assets at
year end–may not exceed 20%. GE common stock represented 6.3% and 6.0% of trust
assets at year-end 2003 and 2002, respectively, and is subject to a statutory
limit when it reaches 10% of total trust assets.

Our recorded assets and liabilities for principal pension
plans are as follows:

PREPAID PENSION ASSET/(LIABILITY)

|December 31 (In millions)                                |   | 2003   |   |   | 2002   |  
|-------------------------------------------------------- | - | ------ | - | - | ------ | -
|                                                         |  
|Funded status(a)                                         | $ | 6,052  |   | $ | 4,545  |  
|Unrecognized prior service cost                          |   | 1,571  |   |   | 1,165  |  
|Unrecognized net actuarial loss                          |   | 7,588  |   |   | 8,356  |  
|                                                         |  
|Net asset recognized                                     | $ | 15,211 |   | $ | 14,066 |  
|                                                         |  
|Amounts recorded in the Statement of Financial Position: |   |        |   |   |        |  
|Prepaid pension asset                                    | $ | 17,038 |   | $ | 15,611 |  
|Supplementary Pension Plan liability                     |   | (1,827 | ) |   | (1,545 | )
|                                                         |  
|Net asset recognized                                     | $ | 15,211 |   | $ | 14,066 |  
|                                                         |  

(a)



84         GE 2003 ANNUAL REPORT

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7

PROVISION FOR INCOME TAXES

|(In millions)                                   |   | 2003  |  |   | 2002   |   |   | 2001  | 
|----------------------------------------------- | - | ----- |  | - | ------ | - | - | ----- | 
|                                                |  
|GE                                              |   |       |  |   |        |   |   |       | 
|Current tax expense                             | $ | 2,468 |  | $ | 2,833  |   | $ | 3,632 | 
|Deferred tax expense from temporary differences |   | 389   |  |   | 1,004  |   |   | 561   | 
|                                                |  
|                                                |   | 2,857 |  |   | 3,837  |   |   | 4,193 | 
|                                                |  
|GECS                                            |   |       |  |   |        |   |   |       | 
|Current tax expense (benefit)                   |   | 720   |  |   | (1,488 | ) |   | 517   | 
|Deferred tax expense from temporary differences |   | 738   |  |   | 1,409  |   |   | 863   | 
|                                                |  
|                                                |   | 1,458 |  |   | (79    | ) |   | 1,380 | 
|                                                |  
|CONSOLIDATED                                    |   |       |  |   |        |   |   |       | 
|Current tax expense                             |   | 3,188 |  |   | 1,345  |   |   | 4,149 | 
|Deferred tax expense from temporary differences |   | 1,127 |  |   | 2,413  |   |   | 1,424 | 
|                                                |  
|Total                                           | $ | 4,315 |  | $ | 3,758  |   | $ | 5,573 | 
|                                                |  
|                                                |   |       |  |   |        |   |   |       | 

GE and GECS file a consolidated U.S. federal income tax return.
The GECS provision for current tax expense includes its effect on the
consolidated return.

Consolidated current tax expense includes amounts
applicable to U.S. federal income taxes of $1,555 million, $137 million and
$2,514 million in 2003, 2002 and 2001, respectively, and amounts applicable to
non-U.S. jurisdictions of $1,304 million, $1,061 million and $1,225 million in
2003, 2002 and 2001, respectively. Consolidated deferred tax expense related to
U.S. federal income taxes was $685 million, $2,112 million and $1,455 million in
2003, 2002 and 2001, respectively.

Deferred income tax balances reflect the effects of
temporary differences between the carrying amounts of assets and liabilities and
their tax bases and are stated at enacted tax rates expected to be in effect
when taxes are actually paid or recovered. See note 21 for details.

We have not provided U.S. deferred taxes on cumulative
earnings of non-U.S. affiliates and associated companies that have been
reinvested indefinitely. These earnings relate to ongoing operations and, at
December 31, 2003, were approximately $21 billion. Because of the availability
of U.S. foreign tax credits, it is not practicable to determine the U.S. federal
income tax liability that would be payable if such earnings were not reinvested
indefinitely. Deferred taxes are provided for earnings of non-U.S. affiliates
and associated companies when we plan to remit those earnings.

Consolidated U.S. income before taxes and the cumulative
effect of accounting changes was $11.2 billion in 2003, $12.0 billion in 2002
and $13.9 billion in 2001. The corresponding amounts for non-U.S.-based
operations were $8.7 billion in 2003, $6.9 billion in 2002 and $5.8 billion in
2001.

A reconciliation of the U.S. federal statutory tax rate to
the actual tax rate is provided below.

RECONCILIATION OF U.S. FEDERAL STATUTORY TAX RATE TO ACTUAL TAX
RATE

|                                                                                                   | Consolidated |   | GE    |   | GECS |  
|-------------------------------------------------------------------------------------------------- | ------------ | - | ----- | - | ---- | -
|                                                                                                   |              |   |       |   |      |  
|                                                                                                   | 2003         |   | 2002  |   | 2001 |  
|                                                                                                   |             
|Statutory U.S. federal income
         tax rate                                                    | 35.0         | % | 35.0  | % | 35.0 | %
|Increase (reduction) in rate 
         resulting from:                                             |              |   |       |   |      |  
|Inclusion of after-tax earnings 
              of GECS in before-tax 
              earnings of GE | –            |   | –     |   | –    |  
|Amortization of goodwill                                                                           | –            |   | –     |   | 1.0  |  
|Tax-exempt income                                                                                  | (1.1         | ) | (1.2  | ) | (1.3 | )
|Tax on international activities
              including exports                                    | (9.0         | ) | (10.6 | ) | (5.4 | )
|Americom/Rollins goodwill                                                                          | –            |   | –     |   | (1.1 | )
|All other–net                                                                                      | (3.2         | ) | (3.3  | ) | 0.1  |  
|                                                                                                   |             
|                                                                                                   | (13.3        | ) | (15.1 | ) | (6.7 | )
|                                                                                                   |             
|Actual income tax rate                                                                             | 21.7         | % | 19.9  | % | 28.3 | %
|                                                                                                   |             
|                                                                                                   |              |   |       |   |      |  

85        GE 2003 ANNUAL REPORT

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8

EARNINGS PER SHARE INFORMATION

|(In millions; per-share amounts in dollars)                             | 2003    |        | 2002  |   | 2001    |  
|----------------------------------------------------------------------- | ------- | ------ | ----- | - | ------- | -
|                                                                        |         |        |       |   |         |  
|                                                                        | Diluted |        | Basic |   | Diluted |  
|                                                                        |        
|CONSOLIDATED OPERATIONS                                                 |         |        |       |   |         |  
|Earnings before accounting changes                                      | $       | 15,589 |       | $ | 15,589  |  
|Dividend equivalents–net of tax                                         |         | 1      |       |   | –       |  
|                                                                        |        
|Earnings before accounting changes 
         for per-share calculation  |         | 15,590 |       |   | 15,589  |  
|Cumulative effect of accounting changes                                 |         | (587   | )     |   | (587    | )
|                                                                        |        
|Net earnings available for per-share 
         calculation              | $       | 15,003 |       | $ | 15,002  |  
|                                                                        |        
|AVERAGE EQUIVALENT SHARES                                               |         |        |       |   |         |  
|Shares of GE common stock outstanding                                   |         | 10,019 |       |   | 10,019  |  
|Employee compensation-related shares, 
         including stock options |         | 56     |       |   | –       |  
|                                                                        |        
|Total average equivalent shares                                         |         | 10,075 |       |   | 10,019  |  
|                                                                        |        
|PER-SHARE AMOUNTS                                                       |         |        |       |   |         |  
|Earnings before accounting changes                                      | $       | 1.55   |       | $ | 1.56    |  
|Cumulative effect of accounting changes                                 |         | (0.06  | )     |   | (0.06   | )
|                                                                        |        
|Net earnings per share                                                  | $       | 1.49   |       | $ | 1.50    |  
|                                                                        |        

NOTE 9

INVESTMENT SECURITIES

|                                              | 2003               |         | 2002                           |  
|--------------------------------------------- | ------------------ | ------- | ------------------------------ | -
|December 31 (In millions)                     | Amortized
    cost |         | Gross
    unrealized
    gains |  
|                                              |                   
|GE                                            |                    |         |                                |  
|Debt–U.S. corporate                           | $                  | 350     |                                | $
|Equity                                        |                    | 42      |                                |  
|                                              |                   
|                                              |                    | 392     |                                |  
|                                              |                   
|GECS                                          |                    |         |                                |  
|Debt                                          |                    |         |                                |  
|U.S. corporate                                |                    | 50,779  |                                |  
|State and municipal                           |                    | 12,707  |                                |  
|Mortgage-backed                               |                    | 13,441  |                                |  
|Asset-backed                                  |                    | 12,471  |                                |  
|Corporate–non-U.S.                            |                    | 14,720  |                                |  
|Government–non-U.S.                           |                    | 8,558   |                                |  
|U.S. government and 
          federal agency |                    | 1,611   |                                |  
|Equity                                        |                    | 2,593   |                                |  
|                                              |                   
|                                              |                    | 116,880 |                                |  
|                                              |                   
|Total consolidated                            | $                  | 117,272 |                                | $
|                                              |                   
|                                              |                    |         |                                |  



86         GE 2003 ANNUAL REPORT

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the gross unrealized losses
on, and estimated fair value of, our investment securities, aggregated by
investment category and length of time that individual investment securities
have been in a continuous unrealized loss position, at December 31, 2003.

|                                   | Less than 12 months      |        | 12 months or more               |  
|---------------------------------- | ------------------------ | ------ | ------------------------------- | -
|                                   |                          |        |                                 |  
|(In millions)                      | Estimated
    fair value |        | Gross
    unrealized
    losses |  
|                                   |                         
|Debt:                              |                          |        |                                 |  
|U.S. corporate                     | $                        | 7,915  |                                 | $
|State and municipal                |                          | 1,620  |                                 |  
|Mortgage-backed                    |                          | 4,299  |                                 |  
|Asset-backed                       |                          | 2,279  |                                 |  
|Corporate–non-U.S.                 |                          | 2,925  |                                 |  
|Government–non-U.S.                |                          | 3,317  |                                 |  
|U.S. government and federal agency |                          | 256    |                                 |  
|Equity                             |                          | 402    |                                 |  
|                                   |                         
|Total consolidated                 | $                        | 23,013 |                                 | $
|                                   |                         
|                                   |                          |        |                                 |  

Of the $583 million of investment securities in an unrealized
loss position for twelve months or more, approximately $355 million relates to
securities collateralized by commercial aircraft, of which approximately $288
million are enhanced equipment trust certificates. Commercial aircraft positions
are in a loss position as a result of ongoing negative market reaction to
commercial airline industry difficulties. We review all of our investment
securities routinely for other than temporary impairment as described on page
77. In accordance with that policy, we provide for all amounts that we do not
expect either to collect in accordance with the contractual terms of the
instruments or to recover based on underlying collateral values.

A substantial portion of our mortgage-backed securities are
collateralized by U.S. residential mortgages.

CONTRACTUAL MATURITIES OF GECS INVESTMENT IN DEBT SECURITIES
(EXCLUDING MORTGAGE-BACKED AND ASSET-BACKED SECURITIES)

|               |   | Amortized |  |   | Estimated  | 
|-------------- | - | --------- |  | - | ---------- | 
|(In millions)  |   | cost      |  |   | fair value | 
|               |  
|Due in         |   |           |  |   |            | 
|2004           | $ | 7,220     |  | $ | 7,265      | 
|2005–2008      |   | 20,445    |  |   | 20,895     | 
|2009–2013      |   | 25,232    |  |   | 25,829     | 
|2014 and later |   | 35,478    |  |   | 37,230     | 
|               |  



We expect actual maturities to differ from contractual
maturities because borrowers have the right to call or prepay certain
obligations.

Supplemental information about gross realized gains and
losses on investment securities follows.

|(In millions)                 |   | 2003  |   |   | 2002   |   |   | 2001  |  
|----------------------------- | - | ----- | - | - | ------ | - | - | ----- | -
|                              |  
|GE                            |   |       |   |   |        |   |   |       |  
|Gains                         | $ | 3     |   | $ | –      |   | $ | 236   |  
|Losses, including impairments |   | (38   | ) |   | (76    | ) |   | (100  | )
|                              |  
|Net                           |   | (35   | ) |   | (76    | ) |   | 136   |  
|                              |  
|GECS                          |   |       |   |   |        |   |   |       |  
|Gains                         |   | 1,322 |   |   | 1,578  |   |   | 1,800 |  
|Losses, including impairments |   | (914  | ) |   | (1,277 | ) |   | (838  | )
|                              |  
|Net                           |   | 408   |   |   | 301    |   |   | 962   |  
|                              |  
|Total                         | $ | 373   |   | $ | 225    |   | $ | 1,098 |  
|                              |  
|                              |   |       |   |   |        |   |   |       |  

Proceeds from securities sales amounted to $36.4 billion, $46.4
billion and $40.0 billion in 2003, 2002 and 2001, respectively.



87        GE 2003 ANNUAL REPORT

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10

GE CURRENT RECEIVABLES

|December 31 (In millions)        |   | 2003   |   |   | 2002   |  
|-------------------------------- | - | ------ | - | - | ------ | -
|                                 |  
|Aircraft Engines                 | $ | 1,782  |   | $ | 1,841  |  
|Consumer Products                |   | 565    |   |   | 734    |  
|Industrial Products and Systems  |   | 908    |   |   | 1,041  |  
|Medical Systems                  |   | 2,024  |   |   | 1,411  |  
|NBC                              |   | 938    |   |   | 891    |  
|Plastics                         |   | 651    |   |   | 821    |  
|Power Systems                    |   | 3,644  |   |   | 3,754  |  
|Specialty Materials              |   | 470    |   |   | 421    |  
|Transportation Systems           |   | 202    |   |   | 165    |  
|Corporate items and eliminations |   | 275    |   |   | 347    |  
|                                 |  
|                                 |   | 11,459 |   |   | 11,426 |  
|Less allowance for losses        |   | (486   | ) |   | (453   | )
|                                 |  
|Total                            | $ | 10,973 |   | $ | 10,973 |  
|                                 |  

Receivables balances at December 31, 2003 and 2002, before
allowance for losses, included $6,746 million and $6,269 million, respectively,
from sales of goods and services to customers, and $226 million and $304
million, respectively, from transactions with associated companies.

Current receivables of $444 million at year-end 2003 and
$344 million at year-end 2002 arose from sales, principally of aircraft engine
goods and services, on open account to various agencies of the U.S. government,
which is our largest single customer. About 4% of our sales of goods and
services were to the U.S. government in 2003, 2002 and 2001.

NOTE 11

INVENTORIES

|December 31 (In millions)         |   | 2003  |   |   | 2002  |  
|--------------------------------- | - | ----- | - | - | ----- | -
|                                  |  
|GE                                |   |       |   |   |       |  
|Raw materials and work in process | $ | 4,530 |   | $ | 4,894 |  
|Finished goods                    |   | 4,376 |   |   | 4,379 |  
|Unbilled shipments                |   | 281   |   |   | 372   |  
|                                  |  
|                                  |   | 9,187 |   |   | 9,645 |  
|Less revaluation to LIFO          |   | (632  | ) |   | (606  | )
|                                  |  
|                                  |   | 8,555 |   |   | 9,039 |  
|                                  |  
|GECS                              |   |       |   |   |       |  
|Finished goods                    |   | 197   |   |   | 208   |  
|                                  |  
|Total                             | $ | 8,752 |   | $ | 9,247 |  
|                                  |  

LIFO revaluations increased $26 million in 2003, compared with
decreases of $70 million in 2002 and $169 million in 2001. Included in the 2003
change was an increase of $3 million that resulted from higher LIFO inventory
levels. Included in the 2002 and 2001 changes were decreases of $21 million and
$8 million, respectively, that resulted from lower LIFO inventory levels. Net
costs increased in 2003 and decreased in 2002 and 2001. As of December 31, 2003,
we are obligated to acquire certain raw materials at market prices through the
year 2023 under various take-or-pay or similar arrangements. Annual minimum
commitments under these arrangements are insignificant.

NOTE 12

GECS FINANCING RECEIVABLES (INVESTMENTS IN  TIME SALES, LOANS
AND FINANCING LEASES)

|December 31 (In millions)                        |   | 2003    |   |   | 2002    |  
|------------------------------------------------ | - | ------- | - | - | ------- | -
|                                                 |  
|COMMERCIAL FINANCE                               |   |         |   |   |         |  
|Equipment                                        | $ | 60,370  |   | $ | 61,961  |  
|Commercial and industrial                        |   | 39,383  |   |   | 36,512  |  
|Real estate                                      |   | 20,171  |   |   | 21,041  |  
|Commercial aircraft                              |   | 12,424  |   |   | 11,397  |  
|                                                 |  
|                                                 |   | 132,348 |   |   | 130,911 |  
|                                                 |  
|CONSUMER FINANCE                                 |   |         |   |   |         |  
|Non-U.S. installment, revolving credit and other |   | 34,440  |   |   | 23,655  |  
|Non-U.S. residential                             |   | 19,593  |   |   | 9,731   |  
|Non-U.S. auto                                    |   | 18,668  |   |   | 15,113  |  
|U.S. installment, revolving credit and other     |   | 16,545  |   |   | 14,312  |  
|Other                                            |   | 5,431   |   |   | 3,225   |  
|                                                 |  
|                                                 |   | 94,677  |   |   | 66,036  |  
|                                                 |  
|Other, principally Equipment Management          |   | 5,260   |   |   | 6,613   |  
|                                                 |  
|                                                 |   | 232,285 |   |   | 203,560 |  
|Less allowance for losses (note 13)              |   | (6,256  | ) |   | (5,500  | )
|                                                 |  
|Total                                            | $ | 226,029 |   | $ | 198,060 |  
|                                                 |  

GECS financing receivables include both time sales and loans and
financing leases. Time sales and loans represents transactions in a variety of
forms, including time sales, revolving charge and credit, mortgages, installment
loans, intermediate-term loans and revolving loans secured by business assets.
The portfolio includes time sales and loans carried at the principal amount on
which finance charges are billed periodically, and time sales and loans carried
at gross book value, which includes finance charges.

Investment in financing leases consists of direct financing
and leveraged leases of aircraft, railroad rolling stock, autos, other
transportation equipment, data processing equipment and medical equipment, as
well as other manufacturing, power generation, commercial real estate, and
commercial equipment and facilities.



88         GE 2003 ANNUAL REPORT

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As the sole owner of assets under direct financing leases
and as the equity participant in leveraged leases, GECS is taxed on total lease
payments received and is entitled to tax deductions based on the cost of leased
assets and tax deductions for interest paid to third-party participants. GECS is
generally entitled to any residual value of leased assets.

Investment in direct financing and leveraged leases
represents net unpaid rentals and estimated unguaranteed residual values of
leased equipment, less related deferred income. GECS has no general obligation
for principal and interest on notes and other instruments representing
third-party participation related to leveraged leases; such notes and other
instruments have not been included in liabilities but have been offset against
the related rentals receivable. The GECS share of rentals receivable on
leveraged leases is subordinate to the share of other participants who also have
security interests in the leased equipment.

NET INVESTMENT IN FINANCING LEASES

|                                                                    | Total financing
    leases |         | Direct financing
    leases |   | Leveraged
    leases |  
|------------------------------------------------------------------- | -------------------------- | ------- | --------------------------- | - | -------------------- | -
|December 31 (In millions)                                           |                            | 2003    |                             |   | 2002                 |  
|                                                                    |                           
|Total minimum lease payments receivable                             | $                          | 87,400  |                             | $ | 88,640               |  
|Less principal and interest on third-party 
       nonrecourse debt |                            | (22,144 | )                           |   | (24,249              | )
|                                                                    |                           
|Net rentals receivable                                              |                            | 65,256  |                             |   | 64,391               |  
|Estimated unguaranteed residual value 
       of leased assets      |                            | 9,733   |                             |   | 9,807                |  
|Less deferred income                                                |                            | (13,496 | )                           |   | (13,947              | )
|                                                                    |                           
|Investment in financing leases                                      |                            | 61,493  |                             |   | 60,251               |  
|Less amounts to arrive at net investment                            |                            |         |                             |   |                      |  
|Allowance for losses                                                |                            | (830    | )                           |   | (861                 | )
|Deferred taxes                                                      |                            | (10,250 | )                           |   | (9,763               | )
|                                                                    |                           
|Net investment in financing leases                                  | $                          | 50,413  |                             | $ | 49,627               |  
|                                                                    |                           
|                                                                    |                            |         |                             |   |                      |  

CONTRACTUAL MATURITIES

|(In millions)  |   | Total time sales
    and loans |  |   | Net rentals
    receivable | 
|-------------- | - | ------------------------------ |  | - | -------------------------- | 
|               |  
|Due in         |   |                                |  |   |                            | 
|2004           | $ | 55,044                         |  | $ | 16,490                     | 
|2005           |   | 28,020                         |  |   | 13,272                     | 
|2006           |   | 23,249                         |  |   | 10,148                     | 
|2007           |   | 13,951                         |  |   | 6,883                      | 
|2008           |   | 12,650                         |  |   | 4,066                      | 
|2009 and later |   | 37,878                         |  |   | 14,397                     | 
|               |  
|Total          | $ | 170,792                        |  | $ | 65,256                     | 
|               |  
|               |   |                                |  |   |                            | 

We expect actual maturities to differ from contractual
maturities.

"Impaired" loans are defined by generally accepted accounting
principles as large balance loans for which it is probable that the lender will
be unable to collect all amounts due according to original contractual terms of
the loan agreement. An analysis of impaired loans follows.

|December 31 (In millions)                |   | 2003  |  |   | 2002  | 
|---------------------------------------- | - | ----- |  | - | ----- | 
|                                         |  
|Loans requiring allowance for losses     | $ | 940   |  | $ | 1,140 | 
|Loans expected to be fully recoverable   |   | 1,355 |  |   | 845   | 
|                                         |  
|                                         | $ | 2,295 |  | $ | 1,985 | 
|                                         |  
|Allowance for losses                     | $ | 378   |  | $ | 397   | 
|Average investment during year           |   | 2,193 |  |   | 1,747 | 
|Interest income earned while impaired(a) |   | 33    |  |   | 16    | 
|                                         |  

(a)



89         GE 2003 ANNUAL REPORT

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13

GECS ALLOWANCE FOR LOSSES ON  FINANCING RECEIVABLES

|(In millions)                   |   | 2003   |   |   | 2002   |   |   | 2001   |  
|------------------------------- | - | ------ | - | - | ------ | - | - | ------ | -
|                                |  
|BALANCE AT JANUARY 1            |   |        |   |   |        |   |   |        |  
|Commercial Finance              | $ | 2,634  |   | $ | 2,513  |   | $ | 1,682  |  
|Consumer Finance                |   | 2,782  |   |   | 2,173  |   |   | 2,149  |  
|Other                           |   | 84     |   |   | 106    |   |   | 195    |  
|                                |  
|                                |   | 5,500  |   |   | 4,792  |   |   | 4,026  |  
|                                |  
|PROVISION CHARGED TO OPERATIONS |   |        |   |   |        |   |   |        |  
|Commercial Finance              |   | 883    |   |   | 1,092  |   |   | 756    |  
|Consumer Finance                |   | 2,808  |   |   | 1,950  |   |   | 1,646  |  
|Other                           |   | 61     |   |   | 42     |   |   | 79     |  
|                                |  
|                                |   | 3,752  |   |   | 3,084  |   |   | 2,481  |  
|                                |  
|OTHER ADDITIONS(a)              |   | 648    |   |   | 704    |   |   | 563    |  
|                                |  
|GROSS WRITE-OFFS                |   |        |   |   |        |   |   |        |  
|Commercial Finance              |   | (1,317 | ) |   | (1,247 | ) |   | (551   | )
|Consumer Finance                |   | (3,114 | ) |   | (2,383 | ) |   | (2,076 | )
|Other                           |   | (61    | ) |   | (92    | ) |   | (147   | )
|                                |  
|                                |   | (4,492 | ) |   | (3,722 | ) |   | (2,774 | )
|                                |  
|RECOVERIES                      |   |        |   |   |        |   |   |        |  
|Commercial Finance              |   | 126    |   |   | 95     |   |   | 66     |  
|Consumer Finance                |   | 710    |   |   | 534    |   |   | 417    |  
|Other                           |   | 12     |   |   | 13     |   |   | 13     |  
|                                |  
|                                |   | 848    |   |   | 642    |   |   | 496    |  
|                                |  
|BALANCE AT DECEMBER 31          |   |        |   |   |        |   |   |        |  
|Commercial Finance              |   | 2,219  |   |   | 2,634  |   |   | 2,513  |  
|Consumer Finance                |   | 3,984  |   |   | 2,782  |   |   | 2,173  |  
|Other                           |   | 53     |   |   | 84     |   |   | 106    |  
|                                |  
|Balance at December 31          | $ | 6,256  |   | $ | 5,500  |   | $ | 4,792  |  
|                                |  
|                                |   |        |   |   |        |   |   |        |  

(a)

SELECTED FINANCING RECEIVABLES RATIOS

|December 31                                                                                                             | 2003 |   | 2002 |  
|----------------------------------------------------------------------------------------------------------------------- | ---- | - | ---- | -
|                                                                                                                       
|ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES 
         AS A PERCENTAGE OF TOTAL FINANCING RECEIVABLES                  |      |   |      |  
|Commercial Finance                                                                                                      | 1.68 | % | 2.01 | %
|Consumer Finance                                                                                                        | 4.21 |   | 4.21 |  
|Other                                                                                                                   | 1.01 |   | 1.27 |  
|Total                                                                                                                   | 2.69 |   | 2.70 |  
|                                                                                                                       
|NONEARNING AND REDUCED EARNING FINANCING 
         RECEIVABLES AS A PERCENTAGE OF TOTAL 
         FINANCING RECEIVABLES |      |   |      |  
|Commercial Finance                                                                                                      | 1.3  | % | 1.7  | %
|Consumer Finance                                                                                                        | 2.6  |   | 2.4  |  
|Other                                                                                                                   | 1.3  |   | 1.2  |  
|Total                                                                                                                   | 1.8  |   | 1.9  |  
|                                                                                                                       
|                                                                                                                        |      |   |      |  

NOTE 14

GECS INSURANCE RECEIVABLES

|December 31 (In millions)                  |   | 2003   |   |   | 2002   |  
|------------------------------------------ | - | ------ | - | - | ------ | -
|                                           |  
|Reinsurance recoverables                   | $ | 12,067 |   | $ | 13,551 |  
|Commercial mortgage loans                  |   | 6,164  |   |   | 5,358  |  
|Premiums receivable                        |   | 4,510  |   |   | 5,314  |  
|Residential mortgage loans                 |   | 1,258  |   |   | 1,919  |  
|Corporate and individual loans–Edison Life |   | –      |   |   | 1,801  |  
|Policy loans                               |   | 1,245  |   |   | 1,539  |  
|Funds on deposit with reinsurers           |   | 623    |   |   | 830    |  
|Other                                      |   | 1,407  |   |   | 1,552  |  
|Allowance for losses                       |   | (221   | ) |   | (279   | )
|                                           |  
|Total                                      | $ | 27,053 |   | $ | 31,585 |  
|                                           |  



90        GE 2003 ANNUAL REPORT

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15

PROPERTY, PLANT AND EQUIPMENT (INCLUDING EQUIPMENT LEASED TO
OTHERS)

|                                                           | Estimated |      |      |   |        | 
|---------------------------------------------------------- | --------- | ---- | ---- | - | ------ | 
|                                                           | useful    |      |      |   |        | 
|December 31 (In millions)                                  | lives     |      | 2003 |   | 2002   | 
|                                                           |          
|ORIGINAL COST                                              |           |      |      |   |        | 
|GE                                                         |           |      |      |   |        | 
|Land and improvements                                      |           | 8    | (a)  | $ | 861    | 
|                                                           |           |      |      |   |        | 
|Buildings, structures and related equipment                |           | 8-40 |      |   | 8,369  | 
|Machinery and equipment                                    |           | 4-20 |      |   | 24,184 | 
|Leasehold costs and manufacturing plant under construction |           | 1-10 |      |   | 2,228  | 
|                                                           |          
|                                                           |           |      |      |   | 35,642 | 
|                                                           |          
|GECS(b)                                                    |           |      |      |   |        | 
|Buildings and equipment                                    |           | 1-40 |      |   | 4,792  | 
|Equipment leased to others                                 |           |      |      |   |        | 
|Aircraft                                                   |           | 6-19 |      |   | 23,065 | 
|Vehicles                                                   |           | 3-12 |      |   | 16,600 | 
|Railroad rolling stock                                     |           | 3-30 |      |   | 3,356  | 
|Mobile and modular                                         |           | 3-20 |      |   | 3,164  | 
|Construction and manufacturing                             |           | 3-25 |      |   | 1,562  | 
|All other                                                  |           | 2-35 |      |   | 3,025  | 
|                                                           |          
|                                                           |           |      |      |   | 55,564 | 
|                                                           |          
|Total                                                      |           |      |      | $ | 91,206 | 
|                                                           |          
|NET CARRYING VALUE                                         |           |      |      |   |        | 
|GE                                                         |           |      |      |   |        | 
|Land and improvements                                      |           |      |      | $ | 814    | 
|Buildings, structures and related equipment                |           |      |      |   | 4,332  | 
|Machinery and equipment                                    |           |      |      |   | 7,547  | 
|Leasehold costs and manufacturing plant under construction |           |      |      |   | 1,873  | 
|                                                           |          
|                                                           |           |      |      |   | 14,566 | 
|                                                           |          
|GECS                                                       |           |      |      |   |        | 
|Buildings and equipment                                    |           |      |      |   | 2,827  | 
|Equipment leased to others                                 |           |      |      |   |        | 
|Aircraft(c)                                                |           |      |      |   | 19,093 | 
|Vehicles                                                   |           |      |      |   | 9,745  | 
|Railroad rolling stock                                     |           |      |      |   | 2,220  | 
|Mobile and modular                                         |           |      |      |   | 1,814  | 
|Construction and manufacturing                             |           |      |      |   | 1,120  | 
|All other                                                  |           |      |      |   | 1,997  | 
|                                                           |          
|                                                           |           |      |      |   | 38,816 | 
|                                                           |          
|Total                                                      |           |      |      | $ | 53,382 | 
|                                                           |          
|                                                           |           |      |      |   |        | 

(a)

Amortization of GECS equipment leased to others was $4,224
million, $3,919 million and $3,461 million in 2003, 2002 and 2001, respectively.
Noncancelable future rentals due from customers for equipment on operating
leases at year-end 2003 are due as follows:

|(In millions) |   |       
|------------- | - | ------
|             
|Due in        |   |       
|2004          | $ | 5,267 
|2005          |   | 4,662 
|2006          |   | 3,426 
|2007          |   | 2,373 
|2008          |   | 1,661 
|After 2008    |   | 5,673 
|             
|Total         | $ | 23,062
|             
|              |   |       



91         GE 2003 ANNUAL REPORT

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16

INTANGIBLE ASSETS

|December 31 (In millions)              |   | 2003   |  |   | 2002   | 
|-------------------------------------- | - | ------ |  | - | ------ | 
|                                       |  
|GE                                     |   |        |  |   |        | 
|Goodwill                               | $ | 25,960 |  | $ | 20,044 | 
|Capitalized software                   |   | 1,678  |  |   | 1,559  | 
|Other intangibles                      |   | 2,566  |  |   | 1,446  | 
|                                       |  
|                                       |   | 30,204 |  |   | 23,049 | 
|                                       |  
|GECS                                   |   |        |  |   |        | 
|Goodwill                               |   | 21,527 |  |   | 19,094 | 
|Present value of future profits (PVFP) |   | 1,562  |  |   | 2,457  | 
|Capitalized software                   |   | 800    |  |   | 894    | 
|Other intangibles                      |   | 932    |  |   | 686    | 
|                                       |  
|                                       |   | 24,821 |  |   | 23,131 | 
|                                       |  
|Total                                  | $ | 55,025 |  | $ | 46,180 | 
|                                       |  

GE intangible assets are net of accumulated amortization of
$5,759 million in 2003  and $5,203 million in 2002. GECS intangible assets are
net of accumulated amortization of $11,515 million in 2003 and $10,603 million
in 2002.

INTANGIBLE ASSETS SUBJECT TO AMORTIZATION

|December 31 (In millions)   | Gross
    carrying
    amount |        | Accumulated
    amortization |   | Net     |  
|--------------------------- | ----------------------------- | ------ | ---------------------------- | - | ------- | -
|                            |                              
|2003                        |                               |        |                              |   |         |  
|PVFP                        | $                             | 4,571  |                              | $ | (3,009  | )
|Capitalized software        |                               | 4,911  |                              |   | (2,433  | )
|Servicing assets(a)         |                               | 3,539  |                              |   | (3,392  | )
|Patents, licenses and other |                               | 2,721  |                              |   | (806    | )
|All other                   |                               | 1,095  |                              |   | (417    | )
|                            |                              
|Total                       | $                             | 16,837 |                              | $ | (10,057 | )
|                            |                              
|2002                        |                               |        |                              |   |         |  
|PVFP                        | $                             | 5,261  |                              | $ | (2,804  | )
|Capitalized software        |                               | 4,269  |                              |   | (1,816  | )
|Servicing assets(a)         |                               | 3,582  |                              |   | (3,240  | )
|Patents, licenses and other |                               | 1,665  |                              |   | (675    | )
|All other                   |                               | 556    |                              |   | (341    | )
|                            |                              
|Total                       | $                             | 15,333 |                              | $ | (8,876  | )
|                            |                              

(a)

Indefinite-lived intangible assets were $758 million and $585
million at December 31, 2003 and 2002, respectively, and principally comprise
U.S. Federal Communication Commission licenses and cable affiliation agreements.

Consolidated amortization expense related to intangible
assets, excluding goodwill, for 2003 and 2002 was $1,407 million and $1,999
million, respectively. The estimated percentage of the December 31, 2003, net
PVFP balance to be amortized over each of the next five years follows.

| | 2004 | 2005 | 2006 | 2007 | 2008
| | ---- | ---- | ---- | ---- | ----
| |     
| | 8.8% | 8.2% | 7.5% | 6.9% | 6.4%
| |     

Change in PVFP balances follow.

|(In millions)          |   | 2003  |   |   | 2002  |  
|---------------------- | - | ----- | - | - | ----- | -
|                       |  
|Balance at January 1   | $ | 2,457 |   | $ | 2,198 |  
|Acquisitions           |   | 46    |   |   | 494   |  
|Dispositions           |   | (658  | ) |   | –     |  
|Accrued interest(a)    |   | 80    |   |   | 83    |  
|Amortization           |   | (318  | ) |   | (369  | )
|Other                  |   | (45   | ) |   | 51    |  
|                       |  
|Balance at December 31 | $ | 1,562 |   | $ | 2,457 |  
|                       |  

(a)

Recoverability of PVFP is evaluated periodically by comparing
the current estimate of expected future gross profits to the unamortized asset
balance. If such comparison indicates that the expected gross profits will not
be sufficient to recover PVFP, the difference is charged to expense. No such
expense was recorded  in 2003 or 2002.

Amortization expense for PVFP in future periods will be
affected by acquisitions, realized capital gains/losses or other factors
affecting the ultimate amount of gross profits realized from certain lines of
business. Similarly, future amortization expense for other intangibles will
depend on acquisition activity and other business transactions.

The amount of goodwill amortization included in net
earnings (net of income taxes) in 2001 was $499 million and $552 million for GE
and GECS, respectively.

The effects on earnings and earnings per share of excluding
such goodwill amortization from 2001 follow.

|                                                    | 2001 |             
|--------------------------------------------------- | ---- | ------------
|                                                    |      |             
|(In millions;
    per-share amounts in dollars)     |      | Consolidated
|                                                    |     
|Net earnings, as reported                           | $    | 13,684      
|Net earnings, excluding goodwill amortization       |      | 14,735      
|                                                    |     
|                                                    |      |             
|                                                    |     
|Earnings per share, as reported                     |      |             
|Earnings per share, excluding goodwill amortization |      |             
|                                                    |     



92         GE 2003 ANNUAL REPORT

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Changes in goodwill balances, net of accumulated amortization,
follow.

|                                        | 2003                  |        | 2002                                                      |    
|--------------------------------------- | --------------------- | ------ | --------------------------------------------------------- | ---
|(In millions)                           | Balance
    January 1 |        | Acquisitions/
    purchase
    accounting
    adjustments | (a)
|                                        |                      
|Aircraft Engines                        | $                     | 2,286  |                                                           | $  
|Commercial Finance                      |                       | 7,987  |                                                           |    
|Consumer Finance                        |                       | 5,562  |                                                           |    
|Consumer Products                       |                       | 396    |                                                           |    
|Equipment Management                    |                       | 1,242  |                                                           |    
|Industrial Products 
       and Systems |                       | 2,372  |                                                           |    
|Insurance                               |                       | 4,176  |                                                           |    
|Medical Systems                         |                       | 2,898  |                                                           |    
|NBC                                     |                       | 4,941  |                                                           |    
|Plastics                                |                       | 1,857  |                                                           |    
|Power Systems                           |                       | 3,095  |                                                           |    
|Specialty Materials                     |                       | 1,643  |                                                           |    
|Transportation Systems                  |                       | 556    |                                                           |    
|All Other GECS                          |                       | 127    |                                                           |    
|                                        |                      
|Total                                   | $                     | 39,138 |                                                           | $  
|                                        |                      
|                                        |                       |        |                                                           |    

(a)



93         GE 2003 ANNUAL REPORT

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 17

ALL OTHER ASSETS

|December 31 (In millions)              |   | 2003   |   |   | 2002   |  
|-------------------------------------- | - | ------ | - | - | ------ | -
|                                       |  
|GE                                     |   |        |   |   |        |  
|Investments                            |   |        |   |   |        |  
|Associated companies(a)                | $ | 1,348  |   | $ | 3,640  |  
|Other                                  |   | 1,228  |   |   | 1,016  |  
|                                       |  
|                                       |   | 2,576  |   |   | 4,656  |  
|Prepaid pension asset                  |   | 17,038 |   |   | 15,611 |  
|Contract costs and estimated earnings  |   | 3,505  |   |   | 3,466  |  
|Prepaid broadcasting rights            |   | 1,582  |   |   | 1,053  |  
|Long-term receivables, including notes |   | 1,932  |   |   | 1,824  |  
|Derivative instruments(b)              |   | 454    |   |   | 364    |  
|Other                                  |   | 3,361  |   |   | 3,193  |  
|                                       |  
|                                       |   | 30,448 |   |   | 30,167 |  
|                                       |  
|GECS                                   |   |        |   |   |        |  
|Investments                            |   |        |   |   |        |  
|Associated companies(a)                |   | 12,764 |   |   | 11,635 |  
|Real estate(c)                         |   | 13,390 |   |   | 14,395 |  
|Assets held for sale(d)                |   | 1,833  |   |   | 2,998  |  
|Other                                  |   | 8,052  |   |   | 5,164  |  
|                                       |  
|                                       |   | 36,039 |   |   | 34,192 |  
|Separate accounts (see note 19)        |   | 16,820 |   |   | 14,978 |  
|Deferred acquisition costs             |   | 7,879  |   |   | 8,086  |  
|Derivative instruments(b)              |   | 1,797  |   |   | 2,071  |  
|Other                                  |   | 5,094  |   |   | 4,755  |  
|                                       |  
|                                       |   | 67,629 |   |   | 64,082 |  
|                                       |  
|ELIMINATIONS                           |   | (963   | ) |   | (1,035 | )
|                                       |  
|Total                                  | $ | 97,114 |   | $ | 93,214 |  
|                                       |  

(a)

Separate accounts represent investments controlled by
policyholders and are associated with identical amounts reported as insurance
liabilities in note 19.



NOTE 18

BORROWINGS

SHORT-TERM BORROWINGS

|December 31 (In millions)              | 2003 |         |   | 2002 |                 
|-------------------------------------- | ---- | ------- | - | ---- | ----------------
|                                       |      | Amount  |   |      | Average
    rate
|                                       |     
|GE                                     |      |         |   |      |                 
|Commercial paper                       |      |         |   |      |                 
|U.S.                                   | $    | 1,149   |   |      | 1.08            
|Non-U.S.                               |      | 340     |   |      | 2.72            
|Payable to banks, principally non-U.S. |      | 388     |   |      | 4.89            
|Current portion of long-term debt      |      | 392     |   |      | 2.58            
|Other                                  |      | 286     |   |      |                 
|                                       |     
|                                       |      | 2,555   |   |      |                 
|                                       |     
|GECS                                   |      |         |   |      |                 
|Commercial paper                       |      |         |   |      |                 
|U.S.                                   |      | 65,536  |   |      | 1.11            
|Non-U.S.                               |      | 15,062  |   |      | 2.93            
|Current portion of long-term debt      |      | 37,885  |   |      | 3.32            
|Other                                  |      | 14,505  |   |      |                 
|                                       |     
|                                       |      | 132,988 |   |      |                 
|                                       |     
|ELIMINATIONS                           |      | (626    | ) |      |                 
|                                       |     
|Total                                  | $    | 134,917 |   |      |                 
|                                       |     
|                                       |      |         |   |      |                 

(a)



94        GE 2003 ANNUAL REPORT

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

LONG-TERM BORROWINGS

|December 31 (In millions)                      | 2003
    Average
    rate(a) |   | Maturities |   | 2003    |   |   | 2002    |  
|---------------------------------------------- | ---------------------------- | - | ---------- | - | ------- | - | - | ------- | -
|                                               |                             
|GE                                             |                              |   |            |   |         |   |   |         |  
|Senior notes                                   | 3.74                         | % | 2005–2013  | $ | 7,483   |   | $ | –       |  
|Industrial development/pollution control bonds | 1.39                         |   | 2005–2027  |   | 331     |   |   | 346     |  
|Payable to banks, principally non-U.S.         | 6.70                         |   | 2005–2008  |   | 212     |   |   | 246     |  
|Other(b)                                       |                              |   |            |   | 362     |   |   | 378     |  
|                                               |                             
|                                               |                              |   |            |   | 8,388   |   |   | 970     |  
|                                               |                             
|GECS                                           |                              |   |            |   |         |   |   |         |  
|Senior notes                                   | 3.42                         |   | 2005–2055  |   | 149,049 |   |   | 127,573 |  
|Extendible notes                               | 1.27                         |   | 2007–2008  |   | 12,229  |   |   | 12,000  |  
|Subordinated notes(c)                          | 7.52                         |   | 2005–2035  |   | 1,262   |   |   | 1,263   |  
|                                               |                             
|                                               |                              |   |            |   | 162,540 |   |   | 140,836 |  
|                                               |                             
|ELIMINATIONS                                   |                              |   |            |   | (924    | ) |   | (1,174  | )
|                                               |                             
|Total                                          |                              |   |            | $ | 170,004 |   | $ | 140,632 |  
|                                               |                             
|                                               |                              |   |            |   |         |   |   |         |  

(a)

Our borrowings are addressed below from the perspectives of
liquidity, interest rate and currency risk management. Additional information
about borrowings and associated swaps can be found in note 28.

LIQUIDITY is affected by debt maturities and our ability to
repay or refinance such debt. Long-term debt maturities over the next five years
follow.

|(In millions) | 2004       | 2005        | 2006      | 2007       | 2008       
|------------- | ---------- | ----------- | --------- | ---------- | -----------
|             
|GE            | $      392 | $     2,571 | $     194 | $       58 | $        40
|GECS          | 37,885     | 45,457(a)   | 28,671    | 18,140     | 13,141     
|             

(a)

Committed credit lines totaling $57.2 billion had been extended
to us by 85 banks at year-end 2003. Included in this amount was $48.3 billion
provided directly to GECS and $8.9 billion provided by 22 banks to GE to which
GECS also has access. The GECS lines include $19.9 billion of revolving credit
agreements under which we can borrow funds for periods exceeding one year. The
remaining $37.3 billion are 364-day lines of which $26.9 billion contain a
term-out feature that allows GE Capital to extend the borrowings for one year
from the date of expiration of the lending agreement. We pay banks for credit
facilities, but compensation amounts were insignificant in each of the past
three years.

INTEREST RATE AND CURRENCY RISK is managed through the direct
issuance of debt or use of derivatives. We take positions in view of anticipated
behavior of assets, including prepayment behavior. We use a variety of
instruments, including interest rate and currency swaps and currency forwards,
to achieve our interest rate objectives. Effective interest rates were lower
under these "synthetic" positions than could have been achieved by issuing debt
directly. The following table shows GECS borrowing positions considering the
effects of currency and interest rate swaps.

GECS EFFECTIVE BORROWINGS (INCLUDING SWAPS)

|                                      | 2003     | 2002        
|------------------------------------- | -------- | ------------
|                                     
|December 31 (In millions)             | Amount   | Average rate
|                                     
|Short-term(a)                         | $66,501  | 1.73%       
|                                     
|Long-term (including current portion) |          |             
|Fixed rate(b)                         | $121,098 | 4.89%       
|Floating rate                         | 107,929  | 1.96        
|                                     
|Total long-term                       | $229,027 |             
|                                     

(a)

At December 31, 2003, interest rate swap maturities ranged from
2004 to 2048, including swap maturities for hedges of commercial paper that
ranged from 2004 to 2024. The use of commercial paper swaps allows us to match
our actual asset profile more efficiently and provides more flexibility as it
does not depend on investor demand for particular maturities.



95         GE 2003 ANNUAL REPORT

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 19

GECS INSURANCE LIABILITIES, RESERVES  AND ANNUITY BENEFITS

|December 31 (In millions)                        |   | 2003    |  |   | 2002    | 
|------------------------------------------------ | - | ------- |  | - | ------- | 
|                                                 |  
|Investment contracts and universal life benefits | $ | 55,119  |  | $ | 43,614  | 
|Life insurance benefits(a)                       |   | 28,040  |  |   | 39,254  | 
|Unpaid claims and claims adjustment expenses(b)  |   | 29,176  |  |   | 30,571  | 
|Unearned premiums                                |   | 7,109   |  |   | 7,436   | 
|Separate accounts (see note 17)                  |   | 16,820  |  |   | 14,978  | 
|                                                 |  
|Total                                            | $ | 136,264 |  | $ | 135,853 | 
|                                                 |  

(a)

When insurance affiliates cede insurance to third parties, they
are not relieved of their primary obligation to policyholders. Losses on ceded
risks give rise to claims for recovery; we establish allowances for probable
losses on such receivables from reinsurers as required.

We recognize reinsurance recoveries as a reduction of the
statement of earnings caption "Insurance losses and policyholder and annuity
benefits." Reinsurance recoveries were $1,781 million, $2,234 million and $5,863
million for the years ended December 31, 2003, 2002 and 2001, respectively.

The insurance liability for unpaid claims and claims
adjustment expenses related to policies that may cover environmental and
asbestos exposures is based on known facts and an assessment of applicable law
and coverage litigation. Liabilities are recognized for both known and
unasserted claims (including the cost of related litigation) when sufficient
information has been developed to indicate that a claim has been incurred and a
range of potential losses can be reasonably estimated. Developed case law and
adequate claim history do not exist for certain claims, principally due to
significant uncertainties as to both the level of ultimate losses that will
occur and what portion, if any, will be deemed to be insured amounts.

A summary of activity affecting unpaid claims and claims
adjustment expenses, principally in property and casualty lines, follows.

|(In millions)                                 |   | 2003   |   |   | 2002   |   |   | 2001   |  
|--------------------------------------------- | - | ------ | - | - | ------ | - | - | ------ | -
|                                              |  
|Balance at January 1–gross                    | $ | 30,571 |   | $ | 27,233 |   | $ | 22,886 |  
|Less reinsurance recoverables                 |   | (9,646 | ) |   | (9,400 | ) |   | (5,477 | )
|                                              |  
|Balance at January 1–net                      |   | 20,925 |   |   | 17,833 |   |   | 17,409 |  
|Claims and expenses incurred                  |   |        |   |   |        |   |   |        |  
|Current year                                  |   | 9,002  |   |   | 9,505  |   |   | 9,199  |  
|Prior years                                   |   | 740    |   |   | 3,188  |   |   | 682    |  
|Claims and expenses paid                      |   |        |   |   |        |   |   |        |  
|Current year                                  |   | (2,565 | ) |   | (3,173 | ) |   | (3,021 | )
|Prior years                                   |   | (7,079 | ) |   | (6,918 | ) |   | (6,694 | )
|Claims reserves related to acquired companies |   | –      |   |   | 81     |   |   | –      |  
|Other                                         |   | (160   | ) |   | 409    |   |   | 258    |  
|                                              |  
|Balance at December 31–net                    |   | 20,863 |   |   | 20,925 |   |   | 17,833 |  
|Add reinsurance recoverables                  |   | 8,313  |   |   | 9,646  |   |   | 9,400  |  
|                                              |  
|Balance at December 31–gross                  | $ | 29,176 |   | $ | 30,571 |   | $ | 27,233 |  
|                                              |  

Claims and expenses incurred–prior years represents additional
losses (adverse development) recognized in any year for loss events that
occurred before the beginning of that year. Adverse development, which amounted
to 4%, 18% and 4% of beginning of year loss reserves in 2003, 2002 and 2001,
respectively, was primarily encountered at GE Global Insurance Holding.

In 2001, we began to experience an acceleration of reported
claims activity in certain liability-related coverages, specifically, hospital
liability, non-standard auto (automobile insurance extended to higher-risk
drivers) and commercial and public entity general liability lines of business,
and recognized the increase in projected ultimate losses.

During 2002, reported claims activity accelerated
dramatically, affecting much of our liability-related insurance written in 1997
through 2001. In connection with our normal actuarial updates, we adjusted our
best estimate of ultimate losses to reflect our experience, increasing recorded
reserves by $2.5 billion in the fourth quarter of 2002, for a total of $3.5
billion adverse development in ERC for the year.

In 2003, we continued to monitor our reported claims
activity compared with our revised expected loss levels. In a majority of our
lines of business, reported claims activity in 2003 was reasonably close to
expected amounts. In a few lines–principally medical malpractice, product
liability and certain director and officer related coverage–reported claims
volumes exceeded our revised loss expectations. Accordingly, we increased our
loss reserves to the newly-indicated ultimate levels in 2003, recording adverse
development of $0.9 billion. We will continue to monitor reported claims
activity for all lines of business in the future and take necessary reserve
actions–either to increase or decrease reserves–as our estimates continue to
mature.



96         GE 2003 ANNUAL REPORT

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Our Mortgage Insurance business experienced favorable
development during the three-year period, primarily reflecting continued
strength in certain real estate markets and the success of our loss containment
initiatives.

Financial guarantees and credit life risk of insurance
affiliates are summarized below.

|December 31 (In millions)                                                  |   | 2003    |   |   | 2002    |  
|-------------------------------------------------------------------------- | - | ------- | - | - | ------- | -
|                                                                           |  
|Guarantees, principally on municipal bonds and asset-backed
    securities | $ | 1,190   |   | $ | 226,559 |  
|Mortgage insurance risk in force                                           |   | 146,627 |   |   | 101,530 |  
|Credit life insurance risk in force                                        |   | 25,728  |   |   | 23,283  |  
|Less reinsurance                                                           |   | (2,207  | ) |   | (38,883 | )
|                                                                           |  
|Total                                                                      | $ | 171,338 |   | $ | 312,489 |  
|                                                                           |  

Certain insurance affiliates offer insurance guaranteeing the
timely payment of scheduled principal and interest on municipal bonds and
certain asset-backed securities. Substantially all of this business was
conducted by Financial Guaranty Insurance Company (FGIC), which we sold in the
fourth quarter of 2003. Other insurance affiliates provide insurance to protect
residential mortgage lenders from severe financial loss caused by the
non-payment of loans and issue credit life insurance designed to pay the balance
due on a loan if the borrower dies before the loan is repaid. As part of their
overall risk management process, insurance affiliates cede to third parties a
portion of their risk associated with these guarantees. In doing so, they are
not relieved of their primary obligation to policyholders.

NOTE 20

ALL OTHER LIABILITIES

This caption includes noncurrent compensation and benefit
accruals at year-end 2003 and 2002 of $10,380 million and $8,826 million,
respectively. Also included are amounts for deferred income, derivative
instruments, interest on tax liabilities, product warranties and a variety of
sundry items.

We are involved in numerous remediation actions to clean up
hazardous wastes as required by federal and state laws. Liabilities for
remediation costs at each site are based on our best estimate of undiscounted
future costs, excluding possible insurance recoveries. When there appears to be
a range of possible costs with equal likelihood, liabilities are based on the
lower end of such range. Uncertainties about the status of laws, regulations,
technology and information related to individual sites make it difficult to
develop a meaningful estimate of the reasonably possible aggregate environmental
remediation exposure. However, even in the unlikely event that remediation costs
amounted to the high end of the range of costs for each site, the resulting
additional liability would not be material to our financial position, results of
operations or liquidity.

NOTE 21

DEFERRED INCOME TAXES

Aggregate deferred income tax amounts are summarized below.

|December 31 (In millions)         |   | 2003   |  |   | 2002   | 
|--------------------------------- | - | ------ |  | - | ------ | 
|                                  |  
|ASSETS                            |   |        |  |   |        | 
|GE                                | $ | 7,594  |  | $ | 6,817  | 
|GECS                              |   | 9,948  |  |   | 7,584  | 
|                                  |  
|                                  |   | 17,542 |  |   | 14,401 | 
|                                  |  
|LIABILITIES                       |   |        |  |   |        | 
|GE                                |   | 9,505  |  |   | 8,744  | 
|GECS                              |   | 20,684 |  |   | 18,174 | 
|                                  |  
|                                  |   | 30,189 |  |   | 26,918 | 
|                                  |  
|NET DEFERRED INCOME TAX LIABILITY | $ | 12,647 |  | $ | 12,517 | 
|                                  |  
|                                  |   |        |  |   |        | 

Principal components of our net liability/(asset) representing
deferred income tax balances are as follows:

|December 31 (In millions)         |   | 2003   |   |   | 2002   |  
|--------------------------------- | - | ------ | - | - | ------ | -
|                                  |  
|GE                                |   |        |   |   |        |  
|Provisions for expenses(a)        | $ | (4,723 | ) | $ | (4,693 | )
|Retiree insurance plans           |   | (1,206 | ) |   | (1,043 | )
|Prepaid pension asset             |   | 5,963  |   |   | 5,464  |  
|Depreciation                      |   | 1,714  |   |   | 1,536  |  
|Other–net                         |   | 163    |   |   | 663    |  
|                                  |  
|                                  |   | 1,911  |   |   | 1,927  |  
|                                  |  
|GECS                              |   |        |   |   |        |  
|Financing leases                  |   | 10,250 |   |   | 9,763  |  
|Operating leases                  |   | 3,523  |   |   | 3,627  |  
|Deferred acquisition costs        |   | 1,501  |   |   | 1,494  |  
|Allowance for losses              |   | (2,036 | ) |   | (1,569 | )
|Insurance reserves                |   | (1,109 | ) |   | (1,218 | )
|Derivatives qualifying as hedges  |   | (1,029 | ) |   | (1,252 | )
|AMT credit carryforward           |   | (351   | ) |   | (597   | )
|Other–net                         |   | (13    | ) |   | 342    |  
|                                  |  
|                                  |   | 10,736 |   |   | 10,590 |  
|                                  |  
|NET DEFERRED INCOME TAX LIABILITY | $ | 12,647 |   | $ | 12,517 |  
|                                  |  
|                                  |   |        |   |   |        |  

(a)



97         GE 2003 ANNUAL REPORT

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 22

GECS MINORITY INTEREST IN EQUITY OF CONSOLIDATED AFFILIATES

Minority interest in equity of consolidated GECS affiliates
includes preferred stock issued by GE Capital and by affiliates of GE Capital.
The preferred stock primarily pays cumulative dividends at variable rates. Value
of the preferred shares is summarized below.

|December 31 (In millions) |   | 2003  |  |   | 2002  | 
|------------------------- | - | ----- |  | - | ----- | 
|                          |  
|GE Capital                | $ | 2,600 |  | $ | 2,600 | 
|GE Capital affiliates     |   | 1,841 |  |   | 1,588 | 
|                          |  
|                          |   |       |  |   |       | 

Dividend rates in local currency on the preferred stock ranged
from 0.91% to 5.65% during 2003 and from 1.44% to 6.20% during 2002.

NOTE 23

RESTRICTED NET ASSETS OF GECS AFFILIATES

Certain GECS consolidated affiliates are restricted from
remitting funds to GECS in the form of dividends or loans by a variety of
regulations, the purpose of which is to protect affected insurance
policyholders, depositors or investors. At December 31, 2003 and 2002, net
assets of regulated GECS affiliates amounted to $46.7 billion and $43.7 billion,
respectively, of which $37.0 billion and $37.8 billion, respectively, was
restricted.

At December 31, 2003 and 2002, the aggregate statutory
capital and surplus of the insurance businesses totaled $15.9 billion and $17.9
billion, respectively. Accounting practices prescribed by statutory authorities
are used in preparing statutory statements.

NOTE 24

SHAREOWNERS' EQUITY

|(In millions)                                                                                                              |   | 2003   |   |   | 2002   |   |   | 2001   |  
|-------------------------------------------------------------------------------------------------------------------------- | - | ------ | - | - | ------ | - | - | ------ | -
|                                                                                                                           |  
|COMMON STOCK ISSUED                                                                                                        | $ | 669    |   | $ | 669    |   | $ | 669    |  
|                                                                                                                           |  
|ACCUMULATED NONOWNER CHANGES 
         OTHER THAN EARNINGS                                                                 |   |        |   |   |        |   |   |        |  
|Balance at January 1                                                                                                       | $ | (3,177 | ) | $ | (4,323 | ) | $ | (2,500 | )
|Cumulative effect of adopting SFAS 133–net of 
         deferred taxes of $(513)                                           |   | –      |   |   | –      |   |   | (827   | )
|Investment securities–net of deferred taxes 
         of $505, $805 and $111(a)                                            |   | 799    |   |   | 1,555  |   |   | 203    |  
|Currency translation adjustments–net of deferred taxes 
         of $(1,447), $20 and $48                                  |   | 5,119  |   |   | 1,000  |   |   | (562   | )
|Derivatives qualifying as hedges–net of deferred taxes 
         of $(448), $(822) and $(505)                              |   | (803   | ) |   | (2,070 | ) |   | (690   | )
|Reclassification adjustments–
          Investment securities–net 
         of deferred taxes of $(135), $(135) and $(274) |   | (250   | ) |   | (252   | ) |   | (509   | )
|Currency translation adjustments                                                                                           |   | 4      |   |   | –      |   |   | –      |  
|Derivatives qualifying as hedges–net of deferred taxes
    
         of $643, $207 and $397                                |   | 1,123  |   |   | 913    |   |   | 562    |  
|                                                                                                                           |  
|Balance at December 31                                                                                                     | $ | 2,815  |   | $ | (3,177 | ) | $ | (4,323 | )
|                                                                                                                           |  
|OTHER CAPITAL                                                                                                              |   |        |   |   |        |   |   |        |  
|Balance at January 1                                                                                                       | $ | 17,288 |   | $ | 16,693 |   | $ | 15,195 |  
|Gains on treasury stock dispositions(b)                                                                                    |   | 209    |   |   | 595    |   |   | 1,498  |  
|                                                                                                                           |  
|Balance at December 31                                                                                                     | $ | 17,497 |   | $ | 17,288 |   | $ | 16,693 |  
|                                                                                                                           |  
|RETAINED EARNINGS                                                                                                          |   |        |   |   |        |   |   |        |  
|Balance at January 1                                                                                                       | $ | 75,553 |   | $ | 68,701 |   | $ | 61,572 |  
|Net earnings                                                                                                               |   | 15,002 |   |   | 14,118 |   |   | 13,684 |  
|Dividends(b)                                                                                                               |   | (7,759 | ) |   | (7,266 | ) |   | (6,555 | )
|                                                                                                                           |  
|Balance at December 31                                                                                                     | $ | 82,796 |   | $ | 75,553 |   | $ | 68,701 |  
|                                                                                                                           |  
|COMMON STOCK HELD IN TREASURY                                                                                              |   |        |   |   |        |   |   |        |  
|Balance at January 1                                                                                                       | $ | 26,627 |   | $ | 26,916 |   | $ | 24,444 |  
|Purchases(b)                                                                                                               |   | 1,177  |   |   | 2,851  |   |   | 4,708  |  
|Dispositions(b)                                                                                                            |   | (3,207 | ) |   | (3,140 | ) |   | (2,236 | )
|                                                                                                                           |  
|Balance at December 31                                                                                                     | $ | 24,597 |   | $ | 26,627 |   | $ | 26,916 |  
|                                                                                                                           |  

(a)



98         GE 2003 ANNUAL REPORT

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In December 2001, our Board of Directors increased the
authorization to repurchase GE common stock to $30 billion. In 2003 we
repurchased 12 million shares for a total of $0.3 billion. Through year-end
2003, 1,103 million shares having an aggregate cost of approximately $23.0
billion had been repurchased under this program and placed in treasury.

Common shares issued and outstanding are summarized in the
following table.

SHARES OF GE COMMON STOCK

|December 31 (In thousands) |  | 2003       |   |  | 2002       |   |  | 2001       |  
|-------------------------- |  | ---------- | - |  | ---------- | - |  | ---------- | -
|                           | 
|Issued                     |  | 11,145,212 |   |  | 11,145,212 |   |  | 11,145,212 |  
|In treasury                |  | (1,082,092 | ) |  | (1,175,318 | ) |  | (1,219,274 | )
|                           | 
|Outstanding                |  | 10,063,120 |   |  | 9,969,894  |   |  | 9,925,938  |  
|                           | 

GE has 50 million authorized shares of preferred stock ($1.00
par value), but has not issued any such shares as of December 31, 2003.

The effects of translating to U.S. dollars the financial
statements of non-U.S. affiliates whose functional currency is the local
currency are included in shareowners' equity. Asset and liability accounts are
translated at year-end exchange rates, while revenues and expenses are
translated at average rates for the period.

NOTE 25

OTHER STOCK-RELATED INFORMATION

We grant stock options, stock appreciation rights (SARs),
restricted stock units (RSUs) and performance share units (PSUs) to employees
under the 1990 Long-Term Incentive Plan as described in our current Proxy
Statement. In addition, we grant options and RSUs in limited circumstances to
consultants, advisors and independent contractors (primarily non-employee talent
at NBC) under a plan approved by our Board of Directors in 1997 (the
consultants' plan). There are outstanding grants under two separate shareowner
approved option plans for non-employee directors; the last grant was made in
2002 and no further grants are expected to be made under these plans. With
certain restrictions, requirements for stock option shares may be met from
either unissued or treasury shares. RSUs give the recipients the right to
receive shares of our stock upon the lapse of their related restrictions.
Restrictions on RSUs lapse in various increments and at various dates after
three years from date of grant to grantee retirement. Although the plan permits
us to issue RSUs settleable in cash, we have only issued RSUs settleable in
shares of our stock.

We measure the total cost of each stock option grant at the
date of grant using a market-based option trading model. We recognize the cost
of each stock option, SAR, RSU and PSU straight-line over its vesting period.

Stock options and stock-settled SARs expire 10 years from
the date they are granted; options and SARs vest over service periods that range
from one to five years.

All grants of GE options under all plans must be approved
by the Management Development and Compensation Committee, which comprises
entirely outside directors.

STOCK OPTION ACTIVITY

|                      |  |                              |   |   | Average per share  | 
|--------------------- |  | ---------------------------- | - | - | ------------------ | 
|(Shares in thousands) |  | Shares subject
    to option |   |   | Exercise
    price | 
|                      | 
|Balance at            |  |                              |   |   |                    | 
|December 31, 2000     |  | 333,179                      |   | $ | 21.03              | 
|Options granted       |  | 60,946                       |   |   | 41.15              | 
|Options exercised     |  | (31,801                      | ) |   | 10.04              | 
|Options terminated    |  | (7,871                       | ) |   | 39.02              | 
|                      | 
|Balance at            |  |                              |   |   |                    | 
|December 31, 2001     |  | 354,453                      |   |   | 25.08              | 
|Options granted       |  | 46,928                       |   |   | 27.37              | 
|Options exercised     |  | (29,146                      | ) |   | 9.45               | 
|Options terminated    |  | (10,177                      | ) |   | 38.14              | 
|                      | 
|Balance at            |  |                              |   |   |                    | 
|December 31, 2002     |  | 362,058                      |   |   | 26.26              | 
|Options granted       |  | 8,261                        |   |   | 31.19              | 
|Options exercised     |  | (43,829                      | ) |   | 9.45               | 
|Options terminated    |  | (10,643                      | ) |   | 38.98              | 
|                      | 
|Balance at            |  |                              |   |   |                    | 
|December 31, 2003     |  | 315,847                      |   | $ | 28.30              | 
|                      | 
|                      |  |                              |   |   |                    | 

STOCK COMPENSATION PLANS

|December 31, 2003
    (Shares in thousands) |  | Securities
    to be issued
    upon exercise |  |   | Weighted
    average
    exercise price |  |  | Securities
    available for
    future issuance | 
|------------------------------------------- |  | --------------------------------------------- |  | - | --------------------------------------- |  |  | ------------------------------------------------ | 
|                                            | 
|APPROVED BY SHAREOWNERS                     |  |                                               |  |   |                                         |  |  |                                                  | 
|Options                                     |  | 314,579                                       |  | $ | 28.31                                   |  |  | (a)                                              | 
|RSUs                                        |  | 28,074                                        |  |   | (b)                                     |  |  | (a)                                              | 
|PSUs                                        |  | 250                                           |  |   | (b)                                     |  |  | (a)                                              | 
|SARs(c)                                     |  | (d)                                           |  |   | (c)                                     |  |  | (a)                                              | 
|NOT APPROVED BY SHAREOWNERS                 |  |                                               |  |   |                                         |  |  |                                                  | 
|Options                                     |  | 1,268                                         |  |   | 24.37                                   |  |  | (e)                                              | 
|RSUs                                        |  | 3,867                                         |  |   | (b)                                     |  |  | (e)                                              | 
|                                            | 
|Total(f)                                    |  | 348,038                                       |  | $ | 28.30                                   |  |  | 130,622                                          | 
|                                            | 

(a)



99         GE 2003 ANNUAL REPORT

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Outstanding options and SARs expire on various dates through
December 11, 2013.

The following table summarizes information about stock
options outstanding at December 31, 2003.

STOCK OPTIONS OUTSTANDING

|(Shares in thousands) | Outstanding |                     | Exercisable                   
|--------------------- | ----------- | ------------------- | ------------------------------
|Exercise price range  | Shares      | Average
    life(a) | Average
    exercise
    price
|                     
|$6.67-13.23           | 61,303      | 1.0                 | $9.05                         
|13.48-26.42           | 71,992      | 3.5                 | 19.96                         
|26.65-35.48           | 70,106      | 8.5                 | 29.79                         
|35.79-43.17           | 60,992      | 5.8                 | 39.54                         
|43.75-57.31           | 51,454      | 7.3                 | 47.55                         
|                     
|Total                 | 315,847     | 5.2                 | $28.30                        
|                     
|                      |             |                     |                               

At year-end 2002, options with an average exercise price of
$18.75 were exercisable on 214 million shares; at year-end 2001, options with an
average exercise price of $14.73 were exercisable on 209 million shares.

(a)

OPTION VALUE INFORMATION(a)

|(In dollars)                 |   | 2003 |   |   | 2002 |   |   | 2001  |  
|---------------------------- | - | ---- | - | - | ---- | - | - | ----- | -
|                             |  
|Fair value per option(b)     | $ | 9.44 |   | $ | 7.73 |   | $ | 12.15 |  
|Valuation assumptions        |   |      |   |   |      |   |   |       |  
|Expected option term (years) |   | 6.0  |   |   | 6.0  |   |   | 6.0   |  
|Expected volatility          |   | 34.7 | % |   | 33.7 | % |   | 30.5  | %
|Expected dividend yield      |   | 2.5  | % |   | 2.7  | % |   | 1.6   | %
|Risk-free interest rate      |   | 3.5  | % |   | 3.5  | % |   | 4.9   | %
|                             |  
|                             |   |      |   |   |      |   |   |       |  

(a)

NOTE 26

SUPPLEMENTAL CASH FLOWS INFORMATION

Changes in operating assets and liabilities are net of
acquisitions and dispositions of principal businesses.

"Payments for principal businesses purchased" in the
Statement of Cash Flows is net of cash acquired and includes debt assumed and
immediately repaid in acquisitions.

"All other operating activities" in the Statement of Cash
Flows consists primarily of adjustments to current and noncurrent accruals and
deferrals of costs and expenses, adjustments for gains and losses on assets,
increases and decreases in assets held for sale, and adjustments to assets.

Non-cash transactions include the following: in 2003, the
acquisition of Osmonics, Inc. for GE common stock valued at $240 million; in
2002, the acquisition of Interlogix, Inc. for GE common stock valued at $395
million and the acquisition of Bravo for GE common stock and other investment
securities valued at $335 million and $886 million, respectively; and in 2001,
the acquisition of Imatron Inc. for GE common stock valued at $205 million.



100         GE 2003 ANNUAL REPORT

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Certain supplemental information related to GE and GECS cash
flows is shown below.

|For the years ended December 31 (In millions)                                                |   | 2003     |   |   | 2002     |   |   | 2001     |  
|-------------------------------------------------------------------------------------------- | - | -------- | - | - | -------- | - | - | -------- | -
|                                                                                             |  
|GE                                                                                           |   |          |   |   |          |   |   |          |  
|PURCHASES AND SALES OF GE SHARES 
              FOR TREASURY                                 |   |          |   |   |          |   |   |          |  
|Open market purchases under share repurchase program                                         | $ | (340     | ) | $ | (1,981   | ) | $ | (3,137   | )
|Other purchases                                                                              |   | (837     | ) |   | (870     | ) |   | (1,571   | )
|Dispositions (mainly to employee and dividend 
              reinvestment plans)             |   | 1,903    |   |   | 1,866    |   |   | 2,273    |  
|                                                                                             |  
|                                                                                             | $ | 726      |   | $ | (985     | ) | $ | (2,435   | )
|                                                                                             |  
|GECS                                                                                         |   |          |   |   |          |   |   |          |  
|FINANCING RECEIVABLES                                                                        |   |          |   |   |          |   |   |          |  
|Increase in loans to customers                                                               | $ | (263,815 | ) | $ | (209,431 | ) | $ | (139,793 | )
|Principal collections from customers–loans                                                   |   | 229,823  |   |   | 185,329  |   |   | 120,334  |  
|Investment in equipment for financing leases                                                 |   | (22,825  | ) |   | (19,828  | ) |   | (20,618  | )
|Principal collections from customers–financing leases                                        |   | 18,018   |   |   | 15,305   |   |   | 11,764   |  
|Net change in credit card receivables                                                        |   | (11,483  | ) |   | (19,108  | ) |   | (14,815  | )
|Sales of financing receivables                                                               |   | 36,009   |   |   | 29,651   |   |   | 29,291   |  
|                                                                                             |  
|                                                                                             | $ | (14,273  | ) | $ | (18,082  | ) | $ | (13,837  | )
|                                                                                             |  
|ALL OTHER INVESTING ACTIVITIES                                                               |   |          |   |   |          |   |   |          |  
|Purchases of securities by insurance and annuity
    businesses                              | $ | (50,127  | ) | $ | (64,721  | ) | $ | (53,452  | )
|Dispositions and maturities of securities by
              insurance and annuity businesses  |   | 43,720   |   |   | 54,423   |   |   | 45,403   |  
|Proceeds from principal business dispositions                                                |   | 3,337    |   |   | –        |   |   | 2,572    |  
|Consolidated, liquidating securitization entities                                            |   | 9,375    |   |   | –        |   |   | –        |  
|Other                                                                                        |   | 3,483    |   |   | (4,936   | ) |   | (2,264   | )
|                                                                                             |  
|                                                                                             | $ | 9,788    |   | $ | (15,234  | ) | $ | (7,741   | )
|                                                                                             |  
|NEWLY ISSUED DEBT HAVING MATURITIES 
              LONGER THAN 90 DAYS                       |   |          |   |   |          |   |   |          |  
|Short-term (91 to 365 days)                                                                  | $ | 1,576    |   | $ | 1,796    |   | $ | 12,622   |  
|Long-term (longer than one year)                                                             |   | 57,572   |   |   | 93,026   |   |   | 16,118   |  
|Proceeds–nonrecourse, leveraged lease debt                                                   |   | 791      |   |   | 1,222    |   |   | 2,012    |  
|                                                                                             |  
|                                                                                             | $ | 59,939   |   | $ | 96,044   |   | $ | 30,752   |  
|                                                                                             |  
|REPAYMENTS AND OTHER REDUCTIONS OF DEBT 
              HAVING MATURITIES LONGER THAN 90 DAYS |   |          |   |   |          |   |   |          |  
|Short-term (91 to 365 days)                                                                  | $ | (38,694  | ) | $ | (32,950  | ) | $ | (29,195  | )
|Long-term (longer than one year)                                                             |   | (3,402   | ) |   | (5,936   | ) |   | (6,582   | )
|Principal payments–nonrecourse, leveraged lease debt                                         |   | (782     | ) |   | (339     | ) |   | (274     | )
|                                                                                             |  
|                                                                                             | $ | (42,878  | ) | $ | (39,225  | ) | $ | (36,051  | )
|                                                                                             |  
|ALL OTHER FINANCING ACTIVITIES                                                               |   |          |   |   |          |   |   |          |  
|Proceeds from sales of investment contracts                                                  | $ | 9,319    |   | $ | 7,894    |   | $ | 9,080    |  
|Redemption of investment contracts                                                           |   | (9,556   | ) |   | (6,834   | ) |   | (7,033   | )
|Capital contributions from GE                                                                |   | –        |   |   | 6,300    |   |   | 3,043    |  
|Consolidated, liquidating securitization entities                                            |   | (9,761   | ) |   | –        |   |   | –        |  
|Cash received upon assumption of insurance liabilities                                       |   | –        |   |   | 2,813    |   |   | –        |  
|                                                                                             |  
|                                                                                             | $ | (9,998   | ) | $ | 10,173   |   | $ | 5,090    |  
|                                                                                             |  



101         GE 2003 ANNUAL REPORT

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 27

OPERATING SEGMENTS

REVENUES

|                                                  | Total revenues |         |   | Intersegment revenues |         |   | External revenues |        
|------------------------------------------------- | -------------- | ------- | - | --------------------- | ------- | - | ----------------- | -------
|                                                  |                |         |   |                       |         |   |                   |        
|For the years ended December 31
    (In millions) |                | 2003    |   |                       | 2002    |   |                   | 2001   
|                                                  |               
|Aircraft Engines                                  | $              | 10,703  |   | $                     | 11,141  |   | $                 | 11,389 
|Commercial Finance                                |                | 18,869  |   |                       | 17,781  |   |                   | 15,759 
|Consumer Finance                                  |                | 12,845  |   |                       | 10,266  |   |                   | 9,508  
|Consumer Products                                 |                | 8,282   |   |                       | 8,456   |   |                   | 8,435  
|Equipment Management                              |                | 4,707   |   |                       | 4,766   |   |                   | 4,904  
|Industrial Products and Systems                   |                | 8,396   |   |                       | 7,441   |   |                   | 6,742  
|Insurance                                         |                | 26,194  |   |                       | 23,296  |   |                   | 23,890 
|Medical Systems                                   |                | 10,198  |   |                       | 8,955   |   |                   | 8,409  
|NBC                                               |                | 6,871   |   |                       | 7,149   |   |                   | 5,769  
|Plastics                                          |                | 5,245   |   |                       | 5,245   |   |                   | 5,252  
|Power Systems                                     |                | 18,462  |   |                       | 22,926  |   |                   | 20,211 
|Specialty Materials                               |                | 3,126   |   |                       | 2,406   |   |                   | 1,817  
|Transportation Systems                            |                | 2,543   |   |                       | 2,314   |   |                   | 2,355  
|All Other GECS                                    |                | 1,664   |   |                       | 2,590   |   |                   | 4,795  
|Corporate items and eliminations                  |                | (3,918  | ) |                       | (2,522  | ) |                   | (2,819 
|                                                  |               
|Consolidated revenues                             | $              | 134,187 |   | $                     | 132,210 |   | $                 | 126,416
|                                                  |               
|                                                  |                |         |   |                       |         |   |                   |        

Revenues of GE businesses include income from sales of goods and
services to customers and other income. Sales from one company component to
another generally are priced at equivalent commercial selling prices.

Revenues originating from operations based in the United States
were $84,795 million, $90,954 million and $85,999 million in 2003, 2002 and
2001, respectively. Revenues originating from operations based outside the
United States were $49,392 million, $41,256 million and $40,417 million in 2003,
2002 and 2001, respectively.

102        GE 2003 ANNUAL REPORT

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





|                                    | Assets         |         | Property, plant and
    equipment (including
    equipment leased
    to others) (a) |   | Depreciation and
    amortization   | 
|----------------------------------- | -------------- | ------- | ------------------------------------------------------------------------------------ | - | ----------------------------------- | 
|                                    |                |         |                                                                                      |   |                                     | 
|                                    | At December 31 |         | For the years ended
    December 31                                                  |   | For the years ended
    December 31 | 
|                                    |               
|(In millions)                       |                | 2003    |                                                                                      |   | 2002                                | 
|                                    |               
|Aircraft Engines                    | $              | 10,785  |                                                                                      | $ | 10,326                              | 
|Commercial Finance                  |                | 203,983 |                                                                                      |   | 194,245                             | 
|Consumer Finance                    |                | 106,530 |                                                                                      |   | 76,965                              | 
|Consumer Products                   |                | 4,439   |                                                                                      |   | 5,165                               | 
|Equipment Management                |                | 25,469  |                                                                                      |   | 25,222                              | 
|Industrial Products and Systems     |                | 7,215   |                                                                                      |   | 6,891                               | 
|Insurance                           |                | 169,882 |                                                                                      |   | 182,297                             | 
|Medical Systems                     |                | 10,816  |                                                                                      |   | 7,573                               | 
|NBC                                 |                | 11,619  |                                                                                      |   | 10,401                              | 
|Plastics                            |                | 9,207   |                                                                                      |   | 9,137                               | 
|Power Systems                       |                | 16,532  |                                                                                      |   | 15,835                              | 
|Specialty Materials                 |                | 5,837   |                                                                                      |   | 4,277                               | 
|Transportation Systems              |                | 2,240   |                                                                                      |   | 2,102                               | 
|All Other GECS                      |                | 48,662  |                                                                                      |   | 11,099                              | 
|Corporate items and eliminations(b) |                | 14,267  |                                                                                      |   | 13,709                              | 
|                                    |               
|Consolidated totals                 | $              | 647,483 |                                                                                      | $ | 575,244                             | 
|                                    |               
|                                    |                |         |                                                                                      |   |                                     | 



(a)

Property, plant and equipment associated with operations based
in the United States were $20,790 million, $19,778 million and $18,557 million
at year-end 2003, 2002 and 2001, respectively. Property, plant and equipment
associated with operations based outside the United States were $32,592 million,
$29,295 million and $25,386 million at year-end 2003, 2002 and 2001,
respectively.

Basis for presentation

Our operating businesses are organized based on the nature of
products and services provided. Segment accounting policies are the same as
described in note 1.

A description of our operating segments can be found on
pages 112-113 and details of segment profit by operating segment can be found on
page 48 of this report.



103         GE 2003 ANNUAL REPORT

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 28

DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS

Derivatives and hedging

Exchange rate and interest rate risks are managed with a variety
of straightforward techniques, including match funding and selective use of
derivatives. We use derivatives to mitigate or eliminate certain financial and
market risks because we conduct business in diverse markets around the world and
local funding is not always efficient. In addition, we use derivatives to adjust
the debt we are issuing to match the fixed or floating nature of the assets we
are acquiring. We apply strict policies to manage each of these risks, including
prohibitions on derivatives trading, derivatives market-making or other
speculative activities.

To qualify for hedge accounting, the details of the hedging
relationship must be formally documented at inception of the arrangement,
including the risk management objective, hedging strategy, hedged item, specific
risks that are being hedged, the derivative instrument and how effectiveness is
being assessed. The derivative must be highly effective in offsetting either
changes in fair value or cash flows, as appropriate, for the risk being hedged.
Effectiveness is evaluated on a retrospective and prospective basis based on
quantitative measures of correlation. If a hedge relationship becomes
ineffective, it no longer qualifies as a hedge. Any excess gains or losses
attributable to such ineffectiveness, as well as subsequent changes in the fair
value of the derivative, are recognized in earnings.

Cash flow hedges

Cash flow hedges are hedges that use simple derivatives to
offset the variability of expected future cash flows. Variability can appear in
floating rate assets, floating rate liabilities or from certain types of
forecasted transactions, and can arise from changes in interest rates or
currency exchange rates. For example, GECS often borrows at a variable rate of
interest to fund our financial services businesses. If Commercial Finance needs
the funds to make a floating rate loan, there is no exposure to interest rate
changes, and no hedge is necessary. However, upon making a fixed rate loan, we
will contractually commit to pay a fixed rate of interest to a counterparty who
will pay us a variable rate of interest (an "interest rate swap"). We then
designate this swap as a cash flow hedge of the associated variable rate
borrowing. If, as expected, the derivative is perfectly effective in offsetting
variable interest in the borrowing, we record changes in its fair value in a
separate component in equity, then release those changes to earnings
contemporaneously with the earnings effects of the hedged item. Further
information about hedge effectiveness is provided on page 105.

We use currency forwards and options to manage exposures to
changes in currency exchange rates associated with commercial purchase and sale
transactions. These instruments permit us to eliminate the cash flow
variability, in local currency, of costs or selling prices denominated in
currencies other than the functional currency. In addition, we use these
instruments, along with interest rate and currency swaps, to optimize borrowing
costs and investment returns. For example, currency swaps and non-functional
currency borrowings together provide lower funding costs than could be achieved
by issuing debt directly in a given currency.

At December 31, 2003, amounts related to derivatives
qualifying as cash flow hedges amounted to a reduction of equity of $1,792
million, of which we expect to transfer $392 million to earnings in 2004 along
with the earnings effects of the related forecasted transactions. At December
31, 2003, the amount of unrecognized losses related to cash flow hedges of
short-term borrowings was $2,242 million. In 2003, there were no forecasted
transactions that failed to occur. At December 31, 2003, the maximum term of
derivative instruments that hedge forecasted transactions, other than interest
rate swaps designated as hedges of commercial paper (discussed in note 18), was
24 months.

Fair value hedges

Fair value hedges are hedges that eliminate the risk of changes
in the fair values of assets, liabilities and certain types of firm commitments.
For example, we will use an interest rate swap in which we receive a fixed rate
of interest and pay a variable rate of interest to change the cash flow profile
of a fixed rate borrowing to match the variable rate financial asset that it is
funding. We record changes in fair value of derivatives designated and effective
as fair value hedges in earnings, offset by corresponding changes in the fair
value of the hedged item.

We use interest rate swaps, currency swaps and interest
rate and currency forwards to hedge the effect of interest rate and currency
exchange rate changes on local and nonfunctional currency denominated fixed-rate
borrowings and certain types of fixed-rate assets. Fair value adjustments
decreased the carrying amount of debt outstanding at December 31, 2003, by
$1,671 million. We use equity options to hedge price changes in investment
securities and, at Insurance, equity-indexed annuity liabilities.

Net investment hedges

Net investment hedges are hedges that use derivative contracts
or cash instruments to hedge the foreign currency exposure of a net investment
in a foreign operation. We manage currency exposures that result from net
investments in affiliates principally by funding assets denominated in local
currency with debt denominated in that same currency. In certain circumstances,
we manage such exposures with currency forwards and currency swaps.



104        GE 2003 ANNUAL REPORT

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Derivatives not designated as hedges

We must meet specific criteria in order to apply any of the
three forms of hedge accounting. For example, hedge accounting is not permitted
for hedged items that are marked to market through earnings. We use derivatives
to hedge exposures when it makes economic sense to do so, including
circumstances in which the hedging relationship does not qualify for hedge
accounting as described in the following paragraph. We also will occasionally
receive derivatives, such as equity warrants, in the ordinary course of
business. Derivatives that do not qualify for hedge accounting are marked to
market through earnings.

We use option contracts, including caps, floors and
collars, as an economic hedge of changes in interest rates, currency exchange
rates and equity prices on certain types of assets and liabilities. We
occasionally obtain equity warrants as part of sourcing or financing
transactions. Although these instruments are considered to be derivatives, their
economic risk is similar to, and managed on the same basis as, other equity
instruments we hold.

Earnings effects of derivatives

The table that follows provides additional information about the
earnings effects of derivatives. In the context of hedging relationships,
"effectiveness" refers to the degree to which fair value changes in the hedging
instrument offset the corresponding expected earnings effects of the hedged
item. Certain elements of hedge positions cannot qualify for hedge accounting
under SFAS 133 whether effective or not, and must therefore be marked to market
through earnings. Time value of purchased options is the most common example of
such elements in instruments we use. Pre-tax earnings effects of such items are
shown in the following table as "Amounts excluded from the measure of
effectiveness."

|December 31 (In millions)                          |   | 2003 |   |   | 2002 |  
|-------------------------------------------------- | - | ---- | - | - | ---- | -
|                                                   |  
|CASH FLOW HEDGES                                   |   |      |   |   |      |  
|Ineffectiveness                                    | $ | (19  | ) | $ | (24  | )
|Amounts excluded from the measure of effectiveness |   | –    |   |   | –    |  
|FAIR VALUE HEDGES                                  |   |      |   |   |      |  
|Ineffectiveness                                    |   | –    |   |   | 3    |  
|Amounts excluded from the measure of effectiveness |   | –    |   |   | 3    |  
|                                                   |  
|                                                   |   |      |   |   |      |  

Counterparty credit risk

The risk that counterparties to derivative contracts will
default and not make payments to us according to the terms of the agreements is
counterparty credit risk. We manage counterparty credit risk on an individual
counterparty basis, which means that we net exposures on transactions by
counterparty where legal right of offset exists to determine the amount of
exposure to each counterparty. When a counterparty exceeds credit exposure
limits (see table below), as measured by current market value of the derivative
contract, no additional transactions are permitted to be executed until the
exposure with that counterparty is reduced to an amount that is within the
established limits. Swaps are required to be executed under master agreements
containing mutual credit downgrade provisions that provide the ability to
require assignment or termination in the event either party is downgraded below
A3 or A-.

To further mitigate credit risk, in certain cases we have
entered into collateral arrangements that provide us with the right to hold
collateral when the current market value of derivative contracts exceeds an
exposure threshold. Under these arrangements, we may receive U.S. Treasury and
other highly-rated securities or cash to secure our exposure to counterparties;
such collateral is available to us in the event that a counterparty defaults.
From an economic standpoint, we evaluate credit risk exposures and compliance
with credit exposure limits net of such collateral. If the downgrade provisions
had been triggered at December 31, 2003, we could have been required to disburse
up to $3.8 billion and could have claimed $2.4 billion from counterparties
(including $1.3 billion of collateral that has been pledged to us).

Fair values of our derivative assets and liabilities
represent the replacement value of existing derivatives at market prices and can
change significantly from period to period based on, among other factors, market
movements and changes in our positions. At December 31, 2003 and 2002, gross
fair value gains amounted to $5.5 billion and $5.0 billion, respectively. At
December 31, 2003 and 2002, gross fair value losses amounted to $6.9 billion and
$7.1 billion, respectively.

The following tables illustrate our policy relating to
exposure limits to counterparties.

COUNTERPARTY CREDIT CRITERIA

|                                             | Credit rating |    
|-------------------------------------------- | ------------- | ---
|                                             |               |    
|                                             | Moody's       |    
|                                            
|Foreign exchange forwards less than one year | P-1           |    
|Other derivatives less than one year         | Aa3           | (a)
|All derivatives between one and five years   | Aa3           | (a)
|All derivatives greater than five years      | Aaa           | (a)
|                                            
|                                             |               |    

(a)

EXPOSURE LIMITS

|               | Exposure              
|-------------- | ----------------------
|               |                       
|(In millions)  | Less than
    one year
|              
|Minimum rating |                       
|Aaa/AAA        | $150                  
|Aa3/AA-        | 150                   
|A3/A-          | 150                   
|              
|               |                       



105         GE 2003 ANNUAL REPORT

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FINANCIAL INSTRUMENTS

|                                                                 | 2003                |  | 2002                          |  
|---------------------------------------------------------------- | ------------------- |  | ----------------------------- | -
|                                                                 |                     |  | Assets
    (liabilities)      |  
|                                                                 |                     |  |                               |  
|December 31 (In millions)                                        | Notional
    amount |  | Carrying
    amount
    (net) |  
|                                                                 |                    
|GE                                                               |                     |  |                               |  
|Investments and notes receivable                                 | $       (a)         |  | $      645                    |  
|Borrowings(b)(c)                                                 | (a)                 |  | (10,943                       | )
|GECS                                                             |                     |  |                               |  
|Assets                                                           |                     |  |                               |  
|Time sales and loans                                             | (a)                 |  | 165,384                       |  
|Other commercial and residential mortgages                       | (a)                 |  | 8,759                         |  
|Consolidated, liquidating securitization 
           entities(d) | (a)                 |  | 26,463                        |  
|Other financial instruments                                      | (a)                 |  | 2,701                         |  
|Liabilities                                                      |                     |  |                               |  
|Borrowings(b)(c)                                                 | (a)                 |  | (295,528                      | )
|Investment contract benefits                                     | (a)                 |  | (34,224                       | )
|Insurance–financial guarantees 
           and credit life(e)    | 171,338             |  | (3,935                        | )
|Consolidated, liquidating securitization 
           entities(d) | (a)                 |  | (25,721                       | )
|Other firm commitments                                           |                     |  |                               |  
|Ordinary course of business lending 
            commitments(f)  |                     |  |                               |  
|Fixed rate                                                       | 2,158               |  | –                             |  
|Variable rate                                                    | 8,923               |  | –                             |  
|Unused revolving credit lines                                    |                     |  |                               |  
|Commercial                                                       |                     |  |                               |  
|Fixed rate                                                       | 3,396               |  | –                             |  
|Variable rate                                                    | 23,167              |  | –                             |  
|Consumer–principally credit cards                                |                     |  |                               |  
|Fixed rate                                                       | 111,392             |  | –                             |  
|Variable rate                                                    | 121,806             |  | –                             |  
|                                                                 |                    
|                                                                 |                     |  |                               |  

(a)

Assets and liabilities that are reflected in the accompanying
financial statements at fair value are not included in the above disclosures;
such items include cash and equivalents, investment securities, separate
accounts and derivative financial instruments. Other assets and
liabilities–those not carried at fair value–are discussed below. Apart from
certain of our borrowings and certain marketable securities, few of the
instruments discussed below are actively traded and their fair values must often
be determined using models. Although we have made every effort to represent
accurate fair values in this section, it would be unusual if the estimates could
actually have been realized at December 31, 2003 or 2002.

A description of how we estimate fair values follows.

Time sales and loans

Based on quoted market prices, recent transactions and/or
discounted future cash flows, using rates at which similar loans would have been
made to similar borrowers.

Borrowings

Based on discounted future cash flows using current market rates
which are comparable to market quotes.

Investment contract benefits

Based on expected future cash flows, discounted at currently
offered discount rates for immediate annuity contracts or cash surrender values
for single premium deferred annuities.

All other instruments

Based on comparable market transactions, discounted future cash
flows, quoted market prices, and/or estimates of the cost to terminate or
otherwise settle obligations.



106        GE 2003 ANNUAL REPORT

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 29

SECURITIZATION ENTITIES

We securitize financial assets in the ordinary course of
business to improve shareowner returns. The securitization transactions we
engage in are similar to those used by many financial institutions. Beyond
improving returns, these securitization transactions serve as funding sources
for a variety of diversified lending and securities transactions. Historically,
we have used both supported and third-party entities to execute securitization
transactions funded in the commercial paper and term bond markets.

The following table represents assets in securitization
entities both consolidated and off-balance sheet.

|December 31 (In millions)                             |   | 2003   |  |   | 2002   | 
|----------------------------------------------------- | - | ------ |  | - | ------ | 
|                                                      |  
|Receivables secured by:                               |   |        |  |   |        | 
|Equipment                                             | $ | 15,616 |  | $ | 13,926 | 
|Commercial real estate                                |   | 16,713 |  |   | 14,168 | 
|Other assets                                          |   | 9,114  |  |   | 12,000 | 
|Credit card receivables                               |   | 8,581  |  |   | 11,292 | 
|GE trade receivables                                  |   | 3,249  |  |   | 2,841  | 
|Other trade receivables                               |   | –      |  |   | 693    | 
|                                                      |  
|Total securitized assets                              | $ | 53,273 |  | $ | 54,920 | 
|                                                      |  
|On-balance sheet assets in securitization entities(a) | $ | 26,463 |  | $ | –      | 
|Off-balance sheet(b)(c)                               |   |        |  |   |        | 
|Supported entities                                    |   | 5,759  |  |   | 42,222 | 
|Other                                                 |   | 21,051 |  |   | 12,698 | 
|                                                      |  
|Total securitized assets                              | $ | 53,273 |  | $ | 54,920 | 
|                                                      |  
|                                                      |   |        |  |   |        | 

(a)

Securitized assets that are on-balance sheet were consolidated
on July 1, 2003, upon adoption of FIN 46, Consolidation of Variable Interest
Entities. Although we do not control these entities, consolidation was required
because we provided a majority of the credit and liquidity support for their
activities. A majority of these entities were established to issue asset-backed
securities, using assets that were sold by us and by third parties. These
entities differ from others included in our consolidated statements because the
assets they hold are legally isolated and are unavailable to us under any
circumstances. Use of the assets is restricted by terms of governing documents,
and their liabilities are not our legal obligations. Repayment of their
liabilities depends primarily on cash flows generated by their assets. Because
we have ceased transferring assets to these entities, balances will decrease as
the assets repay. Given their unique nature the entities are classified in
separate financial statement captions, "Consolidated, liquidating securitization
entities."

We continue to engage in off-balance sheet securitization
transactions with third-party entities and to use public market, term
securitizations. Further information about these activities is provided on page
108.

On-balance sheet arrangements

The following tables summarize the revenues, expenses, assets,
liabilities and cash flows associated with consolidated securitization entities.

|(In millions)                    |   | 2003 | 
|-------------------------------- | - | ---- | 
|                                 |  
|REVENUES(a)                      |   |      | 
|Interest on time sales and loans | $ | 513  | 
|Financing leases                 |   | 129  | 
|Other                            |   | 53   | 
|                                 |  
|Total                            | $ | 695  | 
|                                 |  
|EXPENSES(a)                      |   |      | 
|Interest                         | $ | 393  | 
|Costs and expenses(b)            |   | 114  | 
|                                 |  
|Total                            | $ | 507  | 
|                                 |  
|                                 |   |      | 

(a)

|December 31 (In millions)   |   | 2003   | 
|--------------------------- | - | ------ | 
|                            |  
|ASSETS                      |   |        | 
|Cash                        | $ | 684    | 
|Debt securities             |   | 1,566  | 
|Financing receivables(a)(b) |   | 21,877 | 
|Other                       |   | 2,336  | 
|                            |  
|Total                       | $ | 26,463 | 
|                            |  
|LIABILITIES                 |   |        | 
|Short-term borrowings(c)    | $ | 22,842 | 
|Long-term notes payable(d)  |   | 1,948  | 
|Other liabilities           |   | 517    | 
|Minority interest           |   | 414    | 
|                            |  
|Total                       | $ | 25,721 | 
|                            |  
|                            |   |        | 

(a)



107         GE 2003 ANNUAL REPORT

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The portfolio of financing receivables consists of loans and
financing lease receivables secured by equipment, commercial real estate and
other assets; credit card receivables; and trade receivables. Examples of these
assets include loans and leases on manufacturing and transportation equipment,
loans on commercial property, commercial loans, and balances of high credit
quality accounts from sales of a broad range of products and services to a
diversified customer base. Under terms of credit and liquidity support
agreements with these entities, when predefined triggers are met related to
asset credit quality or a put is exercised by beneficial interest holders, we
may be required to repurchase financing receivables. Upon such repurchases, the
underlying receivable is classified as "Financing receivables" (disclosed in
note 12).

"Financing receivables" includes $3,827 million of direct
financing leases, an analysis of which follows.

|December 31 (In millions)                              |   | 2003  |  
|------------------------------------------------------ | - | ----- | -
|                                                       |  
|DIRECT FINANCING LEASES                                |   |       |  
|Total minimum lease payments receivable                | $ | 4,192 |  
|Estimated unguaranteed residual value of leased assets |   | 14    |  
|Less deferred income                                   |   | (379  | )
|                                                       |  
|Investment in financing leases                         | $ | 3,827 |  
|                                                       |  
|                                                       |   |       |  

A schedule of changes in the financing receivables balance since
we adopted FIN 46 follows.

|(In millions)                            |   | 2003   |  
|---------------------------------------- | - | ------ | -
|                                         |  
|Balance at July 1                        | $ | 31,395 |  
|Net collections                          |   | (9,150 | )
|Net write-offs                           |   | (42    | )
|Credit and liquidity support repurchases |   | (54    | )
|All other                                |   | (272   | )
|                                         |  
|Balance at December 31                   | $ | 21,877 |  
|                                         |  
|                                         |   |        |  

Although we expect actual maturities to differ from contractual
maturities, the following table summarizes the contractual maturities of
financing receivables in our consolidated securitization entities.

CONTRACTUAL MATURITIES

|(In millions)  |   | Total time sales
    and loans |  |   | Net rentals
    receivable | 
|-------------- | - | ------------------------------ |  | - | -------------------------- | 
|               |  
|Due in         |   |                                |  |   |                            | 
|2004           | $ | 4,810                          |  | $ | 1,329                      | 
|2005           |   | 1,317                          |  |   | 1,001                      | 
|2006           |   | 1,325                          |  |   | 636                        | 
|2007           |   | 1,104                          |  |   | 330                        | 
|2008           |   | 965                            |  |   | 130                        | 
|2009 and later |   | 8,529                          |  |   | 766                        | 
|               |  
|Total          | $ | 18,050                         |  | $ | 4,192                      | 
|               |  
|               |   |                                |  |   |                            | 





|(In millions)                      |   | 2003     |  
|---------------------------------- | - | -------- | -
|                                   |  
|CASH FLOWS–INVESTING ACTIVITIES(a) |   |          |  
|Net collections                    | $ | 9,150    |  
|Other                              |   | 225      |  
|                                   |  
|Total                              | $ | 9,375    |  
|                                   |  
|CASH FLOWS–FINANCING ACTIVITIES(a) |   |          |  
|Newly issued debt                  | $ | 157,593  |  
|Repayments and other reductions    |   | (167,354 | )
|                                   |  
|Total                              | $ | (9,761   | )
|                                   |  
|                                   |   |          |  

(a)

Derivatives included in consolidated securitization entities
consist principally of pay fixed, receive variable interest rate swaps. These
swaps are designated, and effective, as hedges of fixed rate assets (fair value
hedges) or variable rate liabilities (cash flow hedges). Risk management
objectives are consistent with those described in note 28. Ineffectiveness
recognized on fair value hedges was zero; ineffectiveness recognized on cash
flow hedges was insignificant. No amounts were excluded from the measure of
ineffectiveness of either fair value or cash flow hedges.

Off-balance sheet arrangements

As discussed on page 107, assets in off-balance sheet
securitization entities amounted to $26.8 billion and $54.9 billion at December
31, 2003 and 2002, respectively.

Additional information about securitization transactions
 follows.

|(In millions)                                                                          |   | 2003   |   |   | 2002   |   |   | 2001  |  
|-------------------------------------------------------------------------------------- | - | ------ | - | - | ------ | - | - | ----- | -
|                                                                                       |  
|Gross gains                                                                            | $ | 1,394  |   | $ | 1,796  |   | $ | 2,193 |  
|Reduction of retained interest in revolving facilities, 
         before replenishment |   | (1,160 | ) |   | (1,029 | ) |   | (866  | )
|                                                                                       |  
|Net                                                                                    | $ | 234    |   | $ | 767    |   | $ | 1,327 |  
|                                                                                       |  
|                                                                                       |   |        |   |   |        |   |   |       |  

Amounts recognized in our financial statements related to sales
to off-balance sheet securitization entities are as follows:

|December 31 (In millions) |   | 2003  |   |   | 2002  |  
|------------------------- | - | ----- | - | - | ----- | -
|                          |  
|Retained interests        | $ | 2,663 |   | $ | 3,283 |  
|Servicing assets(a)       |   | 150   |   |   | 340   |  
|Recourse liability        |   | (75   | ) |   | (261  | )
|                          |  
|Total                     | $ | 2,738 |   | $ | 3,362 |  
|                          |  
|                          |   |       |   |   |       |  

(a)

108         GE 2003 ANNUAL REPORT

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- RETAINED INTERESTS. When we securitize receivables, we determine fair
  value based on discounted cash flow models that incorporate, among other
  things, assumptions including loan pool credit losses, prepayment speeds and
  discount rates. These assumptions are based on our experience, market trends
  and anticipated performance related to the particular assets securitized.
  Subsequent to recording retained interests, we review recorded values
  quarterly in the same manner and using current assumptions. We recognize
  impairments when carrying amounts exceed current fair values.
- SERVICING ASSETS. Following a securitization transaction, we retain
  responsibility for servicing the receivables, and are therefore entitled to an
  ongoing fee based on the outstanding principal balances of the receivables.
  Servicing assets are  primarily associated with residential mortgage loans.
  Their value is subject to credit, prepayment and interest rate risk.
- RECOURSE LIABILITY. Certain transactions require credit  support
  agreements. As a result, we provide for expected credit losses under these
  agreements and such amounts approximate fair value.

The following table summarizes data related to securitization
sales that we completed during 2003.

|(In millions)                                           |   | Equipment |   |   | Commercial
    real estate |   |   | Other
    assets |   |   | Credit card
    receivables |  
|------------------------------------------------------- | - | --------- | - | - | -------------------------- | - | - | ---------------- | - | - | --------------------------- | -
|                                                        |  
|Cash proceeds from securitization                       | $ | 5,416     |   | $ | 3,082                      |   | $ | 2,009            |   |   | N/A                         |  
|Proceeds from collections reinvested in new receivables |   | N/A       |   |   | N/A                        |   | $ | 14,047           |   | $ | 11,453                      |  
|Weighted average lives (in months)                      |   | 29        |   |   | 72                         |   |   | 106              |   |   | 7                           |  
|ASSUMPTIONS AS OF SALE DATE(a)                          |   |           |   |   |                            |   |   |                  |   |   |                             |  
|Discount rate                                           |   | 6.6       | % |   | 11.5                       | % |   | 6.4              | % |   | 11.2                        | %
|Prepayment rate                                         |   | 10.1      | % |   | 10.8                       | % |   | 4.6              | % |   | 15.0                        | %
|Estimate of credit losses                               |   | 1.6       | % |   | 1.6                        | % |   | 0.2              | % |   | 10.8                        | %
|                                                        |  

(a)

Key assumptions used in measuring the fair value of retained
interests in securitizations and the sensitivity of the current fair value of
residual cash flows to changes in those assumptions are noted in the following
table. These assumptions may differ from those in the previous table as these
relate to all outstanding retained interests as of December 31, 2003.

|(In millions)                                |   | Equipment |   |   | Commercial
    real estate |   |   | Other
    assets |   |   | Credit card
    receivables |   | 
|-------------------------------------------- | - | --------- | - | - | -------------------------- | - | - | ---------------- | - | - | --------------------------- | - | 
|                                             |   |          
|DISCOUNT RATE(a)                             |   | 6.5       | % |   | 10.7                       | % |   | 7.7              | % |   | 10.9                        | % | 
|Effect of:                                   |   |           |   |   |                            |   |   |                  |   |   |                             |   | 
|10% Adverse change                           | $ | (10       | ) | $ | (14                        | ) | $ | (30              | ) | $ | (8                          | ) | 
|20% Adverse change                           |   | (20       | ) |   | (27                        | ) |   | (57              | ) |   | (25                         | ) | 
|                                             |   |          
|PREPAYMENT RATE(a)                           |   | 11.0      | % |   | 4.1                        | % |   | 1.0              | % |   | 15.4                        | % | 
|Effect of:                                   |   |           |   |   |                            |   |   |                  |   |   |                             |   | 
|10% Adverse change                           | $ | (5        | ) | $ | (1                         | ) | $ | (7               | ) | $ | (33                         | ) | 
|20% Adverse change                           |   | (11       | ) |   | (3                         | ) |   | (14              | ) |   | (62                         | ) | 
|                                             |   |          
|ESTIMATE OF CREDIT LOSSES(a)                 |   | 2.0       | % |   | 1.9                        | % |   | 0.1              | % |   | 9.9                         | % | 
|Effect of:                                   |   |           |   |   |                            |   |   |                  |   |   |                             |   | 
|10% Adverse change                           | $ | (2        | ) | $ | (8                         | ) | $ | (2               | ) | $ | (46                         | ) | 
|20% Adverse change                           |   | (3        | ) |   | (16                        | ) |   | (4               | ) |   | (91                         | ) | 
|Remaining weighted average lives (in months) |   | 43        |   |   | 112                        |   |   | 64               |   |   | 7                           |   | 
|Net credit losses                            | $ | 5         |   | $ | –                          |   | $ | 14               |   | $ | 443                         |   | 
|Delinquencies                                |   | 52        |   |   | 52                         |   |   | 4                |   |   | 139                         |   | 
|                                             |   |          
|                                             |   |           |   |   |                            |   |   |                  |   |   |                             |   | 

(a)

GUARANTEE AND REIMBURSEMENT CONTRACTS. We provide protection to
certain counterparties of interest rate swaps entered into by
securitization-related entities related to changes in the relationship between
commercial paper interest rates and the timing and amount of the payment
streams. These arrangements provide protection for the life of the assets held
by the SPE but generally amortize in proportion to the decline in underlying
asset principal balances. The notional amount of such support is $0.3 billion;
fair value of the related assets was $1 million at year-end 2003.



109         GE 2003 ANNUAL REPORT

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 30

COMMITMENTS AND GUARANTEES

Commitments

In our Aircraft Engines business, we have committed to provide
financial assistance on future sales of aircraft equipped with our engines,
totaling $1.2 billion at year-end 2003. In addition, our Commercial Finance
business had placed multiple-year orders for various Boeing, Airbus and other
aircraft with list prices approximating $13.5 billion at year-end 2003.

At year-end 2003, we were committed under the following
guarantee arrangements beyond those provided on behalf of SPEs (see note 29):

- LIQUIDITY SUPPORT. Liquidity support provided to holders of certain
  variable rate bonds issued by municipalities amounted to $3.8 billion at
  December 31, 2003. If holders elect to sell supported bonds that cannot be
  remarketed, we are obligated to repurchase them at par. If called upon, our
  position would be secured by the repurchased bonds. While we hold any such
  bonds, we would receive interest payments from the municipalities at a rate
  that is in excess of the stated rate on the bond. To date, we have not been
  required to perform under such arrangements. In addition, we are currently not
  providing any new liquidity facilities and will continue to reassess the
  decision in the future. The current liquidity facilities discussed above will
  remain in effect in accordance with their original terms.
- CREDIT SUPPORT. We have provided $6.3 billion of credit  support on behalf
  of certain customers or associated  companies, predominantly joint ventures
  and partnerships, using arrangements such as standby letters of credit and
   performance guarantees. These arrangements enable our customers and
  associated companies to execute transactions or obtain desired financing
  arrangements with third parties. Should the customer or associated company
  fail to perform under the terms of the transaction or financing arrangement,
  we would be required to perform on their behalf. Under most such arrangements,
  our guarantee is secured, usually by the asset being purchased or financed but
  possibly by total assets of the customer or associated company. The length of
  these credit support arrangements parallels the length of the related
  financing arrangements or transactions. The liability for such credit support
  was $85 million at December 31, 2003.
- INDEMNIFICATION AGREEMENTS. These are agreements that require us to fund
  up to $1.2 billion under residual value guarantees on a variety of leased
  equipment and $0.2 billion of other indemnification commitments arising from
  sales  of businesses or assets. Under most of our residual value guarantees,
  our commitment is secured by the leased asset at termination of the lease. The
  liability for indemnification agreements was $66 million at December 31, 2003.
- CONTINGENT CONSIDERATION. These are agreements to provide additional
  consideration in a business combination to the seller if contractually
  specified conditions related to the acquired entity are achieved. At December
  31, 2003, we had recognized liabilities for estimated payments amounting to
  $96 million of our exposure of $0.4 billion.

At year-end 2003, we had $8,084 million of commitments to
acquire broadcast material and the rights to broadcast television programs,
including U.S. television rights to future Olympic Games, and commitments under
long-term television station affiliation agreements that require payments
through 2012.

Our guarantees are provided in the ordinary course of
business. We underwrite these guarantees considering economic, liquidity and
credit risk of the counterparty. We believe that the likelihood is remote that
any such arrangements could have a significant adverse effect on our financial
position, results of operations or liquidity. We record liabilities, as
disclosed above, for such guarantees based on our best estimate of probable
losses, which considers amounts recoverable under recourse provisions. For
example, at year-end 2003, the total fair value of aircraft securing our airline
industry guarantees exceeded the guaranteed amounts, net of the associated
allowance for losses.

Product warranties

We provide for estimated product warranty expenses when we sell
the related products. Because warranty estimates are forecasts that are based on
the best available information–mostly historical claims experience–claims costs
may differ from amounts provided. An analysis of changes in the liability for
product warranties follows.

|(In millions)           |   | 2003  |   |   | 2002  |   |   | 2001 |  
|----------------------- | - | ----- | - | - | ----- | - | - | ---- | -
|                        |  
|Balance at January 1    | $ | 1,304 |   | $ | 968   |   | $ | 767  |  
|Current year provisions |   | 751   |   |   | 918   |   |   | 841  |  
|Expenditures(a)         |   | (749  | ) |   | (694  | ) |   | (658 | )
|Other changes(b)        |   | 131   |   |   | 112   |   |   | 18   |  
|                        |  
|Balance at December 31  | $ | 1,437 |   | $ | 1,304 |   | $ | 968  |  
|                        |  
|                        |   |       |   |   |       |   |   |      |  

(a)



110         GE 2003 ANNUAL REPORT

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 31

QUARTERLY INFORMATION (UNAUDITED)

|                                                               | First quarter |        |   | Second quarter |        | Third quarter |   | Fourth quarter | 
|-------------------------------------------------------------- | ------------- | ------ | - | -------------- | ------ | ------------- | - | -------------- | 
|                                                               |               |        |   |                |        |               |   |                | 
|(Dollar amounts in millions;
    per-share amounts in dollars) |               | 2003   |   |                | 2002   |               |   | 2003           | 
|                                                               |              
|CONSOLIDATED OPERATIONS                                        |               |        |   |                |        |               |   |                | 
|Earnings before accounting changes                             | $             | 3,214  |   | $              | 3,518  |               | $ | 3,794          | 
|Cumulative effect of accounting changes                        |               | (215   | ) |                | (1,015 | )             |   | –              | 
|                                                               |              
|Net earnings                                                   | $             | 2,999  |   | $              | 2,503  |               | $ | 3,794          | 
|Per-share amounts before accounting changes                    |               |        |   |                |        |               |   |                | 
|Diluted earnings per share                                     | $             | 0.32   |   | $              | 0.35   |               | $ | 0.38           | 
|Basic earnings per share                                       |               | 0.32   |   |                | 0.35   |               |   | 0.38           | 
|Per-share amounts after accounting changes                     |               |        |   |                |        |               |   |                | 
|Diluted earnings per share                                     |               | 0.30   |   |                | 0.25   |               |   | 0.38           | 
|Basic earnings per share                                       |               | 0.30   |   |                | 0.25   |               |   | 0.38           | 
|                                                               |              
|SELECTED DATA                                                  |               |        |   |                |        |               |   |                | 
|GE                                                             |               |        |   |                |        |               |   |                | 
|Sales of goods and services                                    | $             | 15,758 |   | $              | 16,748 |               | $ | 17,640         | 
|Gross profit from sales                                        |               | 4,836  |   |                | 5,067  |               |   | 5,590          | 
|GECS                                                           |               |        |   |                |        |               |   |                | 
|Total revenues                                                 |               | 14,867 |   |                | 14,024 |               |   | 15,887         | 
|Earnings before accounting changes                             |               | 1,670  |   |                | 1,657  |               |   | 1,602          | 
|                                                               |              
|                                                               |               |        |   |                |        |               |   |                | 

For GE, gross profit from sales is sales of goods and services
less costs of goods and services sold.

Fourth quarter earnings in 2002 included an after-tax
charge of $1,386 million ($0.14 per share) to record adverse development at
Insurance.

Earnings-per-share amounts for each quarter are required to
be computed independently. As a result, their sum does not equal the total year
basic earnings per share after accounting changes in 2003.

NOTE 32

SUBSEQUENT EVENTS

We announced in November 2003 our intent for an initial public
offering (IPO) of a new company, Genworth Financial, Inc. (Genworth), comprising
most of our life and mortgage insurance businesses. We plan to sell
approximately one-third of Genworth's equity in the IPO, and we expect (subject
to market conditions) to reduce our ownership over the next three years as
Genworth transitions to full independence. We commenced the IPO process in
January 2004 and expect to complete the IPO in the first half of the year,
subject to market conditions and receipt of various regulatory approvals.

On January 14, 2004, Commercial Finance acquired most of
the commercial lending business of Transamerica Finance Corporation. This
acquisition of approximately $8.5 billion in managed assets expands our
distribution finance business and enhances our leasing and commercial loan
financing in equipment, real estate and international structured finance.



111         GE 2003 ANNUAL REPORT

---

OUR BUSINESSES

A description of operating segments for General Electric Company
and consolidated affiliates as of December 31, 2003, and the basis for
presentation in this report, follows.

Aircraft Engines

Jet engines and replacement parts and repair and maintenance
services for all categories of commercial aircraft (short/medium, intermediate
and long-range); for a wide variety of military aircraft, including fighters,
bombers, tankers and helicopters; and for executive and commuter aircraft.
Products and services are sold worldwide to airframe manufacturers, airlines and
government agencies. Also includes aircraft engine derivatives used as marine
propulsion and industrial power sources; the latter is also reported in Power
Systems.

Commercial Finance

Loans, financing and operating leases, and other financial
services for customers, including manufacturers, distributors and end-users, for
a variety of equipment and major capital assets including industrial facilities
and equipment, energy-related facilities, commercial and residential real estate
loans and investments, vehicles, aircraft, and equipment used in construction,
manufacturing, data processing and office applications, electronics and
telecommunications, and healthcare.

Consumer Finance

Card receivables, installment loans, auto loans and leases, and
residential mortgages for customers on a global basis.

Consumer Products

Major appliances and related services for products such as
refrigerators, freezers, electric and gas ranges, cooktops, dishwashers, clothes
washers and dryers, microwave ovens, room air conditioners and residential water
system products. Distributed to both retail outlets and direct to consumers,
mainly for the replacement market, and to building contractors and distributors
for new installations. Lighting products include a wide variety of lamps,
lighting fixtures and wiring devices. Products and services are sold in North
America and in global markets under various GE and private-label brands.

Equipment Management

Rentals, leases, sales, asset management services and loans for
portfolios of commercial and transportation equipment, including tractors,
trailers, auto fleets, railroad rolling stock, intermodal shipping containers
and modular space units.

Industrial Products and Systems

Electrical distribution and control equipment (including power
delivery and control products such as transformers, meters, relays, capacitors
and arresters); measurement and sensing equipment (products and subsystems for
sensing temperatures, humidity and pressure); security equipment and systems
(including card access systems, video and sensor monitoring equipment and
integrated facility monitoring systems); electric motors and related products; a
broad range of electrical and electronic industrial automation products
(including drive systems); installation, engineering and repair services, which
includes management and technical expertise for large projects such as process
control systems; and GE Supply, a network of electrical supply houses. Markets
are extremely diverse. Products and services are sold to commercial and
industrial end-users, including utilities; original equipment manufacturers;
electrical distributors; retail outlets; railways; and transit authorities.
Increasingly, products and services are developed for and sold in global
markets.

Insurance

U.S. and international multiple-line property and casualty
reinsurance, certain directly written specialty insurance and life reinsurance,
consumer investment, insurance and retirement services, private mortgage
insurance and, before its sale in the fourth quarter of 2003, financial guaranty
insurance, principally on municipal bonds and asset-backed securities.

Medical Systems

Medical imaging systems such as magnetic resonance (MR) and
computed tomography (CT) scanners, x-ray, nuclear imaging and ultrasound, as
well as diagnostic cardiology and patient monitoring devices; related services,
including equipment monitoring and repair, computerized data management and
customer productivity services. Products and services are sold worldwide to
hospitals and medical facilities.

Plastics

High-performance engineered plastics used in applications  such
as automobiles and housings for computers and other  business equipment, and ABS
resins. Products are sold worldwide to a diverse customer base consisting mainly
of manufacturers.

NBC

Principal businesses are the furnishing of U.S. network
television services to more than 230 affiliated stations, production of
television programs, operation of 29 VHF and UHF television broadcasting
stations, operation of four cable/satellite networks around the world, and
investment and programming activities in the Internet, multimedia and cable
television.



112         GE 2003 ANNUAL REPORT

---

Power Systems

Power plant products and services, including design,
installation, operation and maintenance services sold into global markets. Gas
turbines, steam turbines, generators and related services including total asset
optimization solutions and equipment upgrades are sold to power generation and
other industrial customers. Renewable energy solutions including wind turbines
and hydro. Advanced turbomachinery products and related services for the oil and
gas market, also including total pipeline integrity solutions. Substation
automation and network solutions sold to power transmission and distribution
customers. Also includes portable and rental power plants, nuclear reactors,
fuel and nuclear support services.

Specialty Materials

Chemical water treatment programs; process additives; and fused
quartz and silicone products. Products and services are sold worldwide to a
diverse customer base consisting mainly of manufacturers.

Transportation Systems

Transportation systems products and maintenance services
including diesel and electric locomotives, transit propulsion equipment,
motorized wheels for off-highway vehicles, and railway signaling communications
systems.

All Other GECS

GECS activities and businesses that we have chosen not to
allocate to one of the four GECS segments, including IT Solutions, GE Equity,
the consolidation of certain entities in our financial statements as a result of
our July 1, 2003, adoption of FIN 46; Auto Financial Services; and the U.S. Auto
and Home business, which was sold in the third quarter of 2003.



113        GE 2003 ANNUAL REPORT

---

GLOSSARY

ADVERSE OR FAVORABLE DEVELOPMENT An adjustment to increase
(adverse development) or reduce (favorable development) the provision for
estimated ultimate insurance losses in a year following the year in which the
loss occurred.

BACKLOG Unfilled customer orders for products and product
services (12 months for product services).

BORROWING Financial liability (short or long-term) that obliges
us to repay cash or another financial asset to another entity.

CASH EQUIVALENTS Highly liquid debt instruments with maturities
of less than three months, such as commercial paper. Typically included with
cash for reporting purposes, unless designated as available for sale and
included with investment securities.

CASH FLOW HEDGES Qualifying derivative instruments that we use
to protect ourselves against exposure to volatility in future cash flows. The
exposure may be associated with an existing asset or liability, or with a
forecasted transaction. See "Hedge."

COMMERCIAL PAPER Unsecured, unregistered promise to repay
borrowed funds in a specified period ranging from overnight to 270 days.

CUSTOMER SERVICE AGREEMENTS (also referred to as "product
services agreements") Contractual commitments, with multiple-year terms, to
provide specified services for products in our industrial installed base–for
example, monitoring, maintenance, overhaul and spare parts for a gas
turbine/generator set installed in a customer's power plant.

DERIVATIVE INSTRUMENT A financial instrument or contract with
another party (counterparty) that is structured to meet any of a variety of
financial objectives, including those related to fluctuations in interest rates,
currency exchange rates and commodity prices. Options, forwards and swaps are
the most common derivative instruments we employ. See "Hedge."

DIRECT WRITTEN PREMIUMS Amounts charged to insureds in exchange
for coverages provided in accordance with the terms of an insurance/reinsurance
contract.

EARNED PREMIUMS Portion of the premium, net of any amount ceded,
pertaining to the segment of the policy period for which insurance coverage has
been provided.

EFFECTIVE TAX RATE Provision for income taxes as a percentage of
earnings before income taxes and accounting changes. Does not represent cash
paid for income taxes in the current accounting period.

EQUIPMENT LEASED TO OTHERS Rental equipment we own that is
available to rent and is stated at cost less accumulated depreciation.

FAIR VALUE HEDGE Qualifying derivative instruments that we use
to eliminate the risk of changes in the fair value of assets, liabilities or
certain types of firm commitments. Changes in the fair values of derivative
instruments that are designated and effective as fair value hedges are recorded
in earnings, but are offset by corresponding changes in the fair values of the
hedged items. See "Hedge."

FINANCIAL LEVERAGE The relationship of debt to equity. Expressed
for financial services businesses as borrowings divided by equity. Expressed for
industrial businesses as borrowings divided by total capital.

FINANCING RECEIVABLES Investment in contractual loans and leases
due from customers (not investment securities).

FORWARD CONTRACT Fixed price contract for purchase or sale of a
specified quantity of a commodity, security, currency or other financial
instrument with delivery and settlement at a specified future date. Commonly
used as a hedging tool. See "Hedge."

GOODWILL The premium paid for acquisition of a business.
Calculated as the purchase price less the fair value of net assets acquired (net
assets are identified tangible and intangible assets, less liabilities assumed).

GUARANTEED INVESTMENT CONTRACTS (GICs) Deposit-type products
that guarantee a minimum rate of return, which may be fixed or floating.

HEDGE A technique designed to eliminate risk. Often refers to
the use of derivative financial instruments to offset changes in interest rates,
currency exchange rates or commodity prices, although many business positions
are "naturally hedged"–for example, funding a U.S. fixed rate investment with
U.S. fixed rate borrowings is a natural interest rate hedge.

INSURANCE RECEIVABLES Receivables of our insurance businesses
associated with (1) reinsurance agreements in which those businesses legally
transferred (ceded) insurance losses (and related premiums) to reinsurers and
are entitled to recovery of those insurance losses; (2) premiums on insurance
and reinsurance contracts; (3) policy loans to policyholders of certain life
insurance contracts; and (4) premium funds on deposit with reinsurance customers
as collateral for our obligations as a reinsurer.

INTANGIBLE ASSET A non-financial asset lacking physical
substance, such as goodwill, patents, trademarks and licenses. Also includes
present value of future profits, which are anticipated net discounted cash flows
to be realized from certain in-force insurance, annuity and investment contracts
at the date we acquire a life insurance business.

INTEREST RATE SWAP Agreement under which two counterparties
agree to exchange one type of interest rate cash flow for another. In a typical
arrangement, one party periodically will pay a fixed amount of interest, in
exchange for which that party will receive variable payments computed using a
published index. See "Hedge."

INVESTMENT SECURITIES Generally, an instrument that provides an
ownership position in a corporation (a stock), a creditor relationship with a
corporation or governmental body (a bond), or rights to ownership such as those
represented by options, subscription rights and subscription warrants.



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MANAGED RECEIVABLES Total receivable amounts on which we
continue to perform billing and collection activities, including receivables
that have been sold with and without credit recourse.

MATCH FUNDING A risk control policy that provides funds for a
particular financial asset having the same currency, maturity and interest rate
characteristics as that asset. Match funding ensures that we maintain initial
financing spreads or margins for the life of a financial asset, and is executed
directly, by issuing debt, or synthetically, through a combination of debt and
derivative financial instruments. For example, when we lend at a fixed interest
rate in the U.S., we can borrow those U.S. dollars either at a fixed rate of
interest or at a floating rate executed concurrently with a pay-fixed interest
rate swap. See "Hedge."

MONETIZATION Sale of financial assets to a third party for cash.
For example, we sell certain loans, credit card receivables and trade
receivables to third-party financial buyers, typically providing at least some
credit protection and often agreeing to provide collection and processing
services for a fee. Monetization normally results in gains on interest-bearing
assets and losses on non-interest bearing assets.

NET REVENUES For our lending and leasing businesses, revenues
from services less interest and other financial charges.

OPERATING MARGIN Sales of goods and services less the sum of
cost of goods and services sold plus selling, general and administrative
expenses. Operating margin is often expressed as a percentage of sales–the
operating margin rate.

OPERATING PROFIT Earnings before interest and other financial
charges, income taxes and effects of accounting changes.

OPTION The right, not the obligation, to execute a transaction
at a designated price, generally involving equity interests, interest rates,
currencies or commodities. See "Hedge."

PREMIUM Rate that is charged under insurance/reinsurance
contracts.

PRESENT VALUE OF FUTURE PROFITS See "Intangible Asset."

PRODUCT SERVICES For purposes of the financial statement display
of sales and costs of sales on pages 70 and 71, "goods" is required by U.S.
Securities and Exchange Commission regulations to include all sales of tangible
products, and "services" must include all other sales, including broadcasting
and other services activities. We refer to sales of both spare parts (goods) and
related services as sales of "product services," which is an important part of
our operations.

PRODUCT SERVICES AGREEMENTS See "Customer Service Agreements."

PRODUCTIVITY The rate of increased output for a given level of
input, with both output and input measured in constant currency. A decline in
output for a given level of input is "negative" productivity.

PROGRESS COLLECTIONS Payments received from customers as
deposits before the associated work is performed or product is delivered.

REINSURANCE A form of insurance that insurance companies buy for
their own protection.

RETROCESSION AGREEMENT Contract to acquire third-party insurance
protection for reinsurance policies written. Retrocession is a risk mitigation
technique.

RETURN ON AVERAGE SHAREOWNERS' EQUITY Earnings before accounting
changes divided by average total equity (on an annual basis, calculated using a
five-point average).

RETURN ON AVERAGE TOTAL CAPITAL INVESTED Earnings before
accounting changes plus the sum of after-tax interest and other financial
charges and minority interest, divided by the sum of total equity, borrowings
and minority interest (on an annual basis, calculated using a five-point
average).

SECURITIZATION A process whereby loans or other receivables are
packaged, underwritten and sold to investors. In some instances, the assets sold
are first transferred to an unconsolidated SPE. These entities are structured to
be bankruptcy remote in order to isolate the credit risk of the assets from the
overall credit risk of the selling entity. Outside investors, usually
institutions, typically purchase a debt instrument issued by the SPE. Whether or
not credit risk associated with the securitized assets is retained by the seller
depends on the structure of the securitization. See "Monetization."

SEPARATE ACCOUNT Investments controlled by policyholders and
associated with identical amounts reported as insurance liabilities.

TURNOVER Broadly based on the number of times that working
capital is replaced during a year. Accounts receivable turnover is total sales
divided by the five-point average balance of customer receivables from sales of
goods and services (trade receivables). Inventory turnover is total sales
divided by a five-point average balance of inventories. See "Working Capital."

UNEARNED PREMIUMS Portion of the premium received, net of any
amount ceded, that relates to future coverage periods.

UNPAID CLAIMS AND CLAIMS ADJUSTMENT EXPENSES Claims reserves for
events that have occurred, including both reported and incurred-but-not-reported
(IBNR) reserves, and the expenses of settling such claims.

VARIABLE INTEREST ENTITY Entity defined by Financial Accounting
Standards Board Interpretation No. 46, and that must be consolidated by its
primary beneficiary. A variable interest entity has one or both of the following
characteristics: (1) its equity at risk is not sufficient to permit the entity
to finance its activities without additional subordinated financial support from
other parties, or (2) as a group, the equity investors lack one or more of the
following characteristics: (a) direct/indirect ability to make decisions, (b)
obligation to absorb expected losses, or (c) right to receive expected residual
returns.

WORKING CAPITAL Sum of receivables from the sales of goods and
services, plus inventories, less trade accounts payables and progress
collections.

115         GE 2003 ANNUAL REPORT