<PAGE>

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION                
                             WASHINGTON, D.C. 20549                             

                                  -------------                                 
                                    FORM 10-K                                   
                                  -------------                                 


            |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE            
                         SECURITIES EXCHANGE ACT OF 1934                        

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998                  

                                       OR                                       

          | | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE          
                         SECURITIES EXCHANGE ACT OF 1934                        

                  FOR THE TRANSITION PERIOD FROM _____ TO _____                 

                           ---------------------------                          
                         COMMISSION FILE NUMBER 0-14804                         
                           ---------------------------                          

                     GENERAL ELECTRIC CAPITAL SERVICES, INC.                    
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

           DELAWARE                                           06-1109503        
(State or other jurisdiction of                            (I.R.S. Employer     
  incorporation or organization)                          Identification No.)   

     260 LONG RIDGE ROAD,                                                       
    STAMFORD, CONNECTICUT            06927                (203) 357-4000        
   (Address of principal          (Zip Code)         (Registrant's telephone    
     executive offices)                            number, including area code) 

                           ---------------------------                          

                         SECURITIES REGISTERED PURSUANT
                          TO SECTION 12(b) OF THE ACT:

                                                         NAME OF EACH
    TITLE OF EACH CLASS                          EXCHANGE ON WHICH REGISTERED   
  -----------------------                      -------------------------------- 
7 1/2% GUARANTEED SUBORDINATED                      NEW YORK STOCK EXCHANGE     
  NOTES DUE AUGUST 21, 2035

                         SECURITIES REGISTERED PURSUANT                         
                          TO SECTION 12(g) OF THE ACT:                          

                               TITLE OF EACH CLASS                              
                             -----------------------                            
                    COMMON STOCK, PAR VALUE $10,000 PER SHARE                   

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes |X| No | |                               

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|                                                                  

At March 24, 1999,  101 shares of voting common stock,  which  constitute all of
the outstanding common equity, with a par value of $10,000 were outstanding.

Aggregate market value of the outstanding common equity held by nonaffiliates of
the registrant at March 24, 1999. None.

                       DOCUMENTS INCORPORATED BY REFERENCE

The consolidated  financial statements of General Electric Company, set forth in
the Annual  Report on Form 10-K of General  Electric  Company for the year ended
December 31, 1998 are incorporated by reference into Part IV hereof.

Item 1.  Business - Property and Casualty  Reserves for Unpaid  Claims and Claim
Expenses,  set forth in the  Annual  Report on Form 10-K of GE Global  Insurance
Holding  Corporation  for the year ended  December 31, 1998 is  incorporated  by
reference into Part I hereof.

REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION I(1)(a) AND (b)
OF FORM 10-K AND IS THEREFORE FILING THIS FORM 10-K WITH THE REDUCED  DISCLOSURE
FORMAT.

<PAGE>

                                TABLE OF CONTENTS

                                                                         PAGE   
                                                                       -------- 
PART I

     Item 1.   Business .............................................      1
     Item 2.   Properties ...........................................     11
     Item 3.   Legal Proceedings ....................................     11
     Item 4.   Submission of Matters to a Vote of Security Holders ..     11

PART II

     Item 5.   Market for the Registrant's Common Equity and
                Related Stockholder Matters .........................     12
     Item 6.   Selected Financial Data ..............................     12
     Item 7.   Management's Discussion and Analysis of
                Results of Operations ...............................     12
     Item 7A.  Quantitative and Qualitative Disclosures
                About Market Risk ...................................     21
     Item 8.   Financial Statements and Supplementary Data ..........     22
     Item 9.   Changes in and Disagreements with Accountants
                on Accounting and Financial Disclosure ..............     47

PART III

     Item 10.  Directors and Executive Officers of the Registrant ...     47
     Item 11.  Executive Compensation ...............................     47
     Item 12.  Security Ownership of Certain Beneficial Owners
                and Management ......................................     47
     Item 13.  Certain Relationships and Related Transactions .......     47

PART IV

     Item 14.  Exhibits, Financial Statement Schedules, and Reports
                on Form 8-K .........................................     48




<PAGE>

                                     PART I

ITEM 1.   BUSINESS.

GENERAL ELECTRIC CAPITAL SERVICES, INC.

General Electric Capital Services, Inc. (herein,  together with its consolidated
affiliates, called "GE Capital Services", "the Corporation" or "GECS" unless the
context  otherwise  requires) was incorporated in 1984 in the State of Delaware.
Until February 1993, the name of the Corporation was General Electric  Financial
Services,  Inc. All outstanding  common stock of GE Capital Services is owned by
General Electric Company, a New York corporation ("GE Company"). The business of
GE Capital Services consists of ownership of two principal  subsidiaries  which,
together  with their  affiliates,  constitute GE Company's  principal  financial
services  businesses.  GE Capital Services is the sole owner of the common stock
of General Electric  Capital  Corporation ("GE Capital" or "GECC") and GE Global
Insurance Holding Corporation ("GE Global Insurance" or "GIH").

GE Capital Services'  principal  executive offices are located at 260 Long Ridge
Road, Stamford, Connecticut 06927 (Telephone number (203) 357-4000).

GENERAL ELECTRIC CAPITAL CORPORATION

GE  Capital  was  incorporated  in 1943  in the  State  of New  York  under  the
provisions  of the New York Banking Law  relating to  investment  companies,  as
successor to General Electric Contracts  Corporation,  which was formed in 1932.
The capital  stock of GE Capital was  contributed  to GE Capital  Services by GE
Company in June 1984.  Until  November  1987,  the name of the  corporation  was
General  Electric  Credit  Corporation.  The  business of GE Capital  originally
related principally to financing the distribution and sale of consumer and other
products of GE  Company.  Currently,  however,  the types and brands of products
financed and the services offered are significantly  more diversified.  Very few
of the products financed by GE Capital are manufactured by GE Company.

GE Capital operates in five operating  segments that are described below.  These
operations  are  subject  to  a  variety  of  regulations  in  their  respective
jurisdictions.

Services of GE Capital  are  offered  primarily  in the United  States,  Canada,
Europe and the Pacific  Basin.  GE  Capital's  principal  executive  offices are
located at 260 Long Ridge Road,  Stamford,  Connecticut  06927.  At December 31,
1998, GE Capital and affiliates employed approximately 82,600 persons.

GE GLOBAL INSURANCE HOLDING CORPORATION

GE Global  Insurance,  together with its affiliates,  writes  substantially  all
lines of reinsurance  and certain lines of property and casualty  insurance.  GE
Global  Insurance  has  two  principal   subsidiaries,   Employers   Reinsurance
Corporation and Kemper  Reinsurance  Company.  These  affiliates,  together with
their direct and indirect  subsidiaries,  reinsure  property and casualty  risks
written by more than 1,000  insurers  around the world.  They also write certain
specialty  lines of insurance on a direct  basis,  principally  excess  workers'
compensation for self-insurers,  medical malpractice coverage for physicians and
dentists, errors and omissions coverage for insurance agents and brokers, excess
indemnity for  self-insurers  of medical  benefits,  and libel and allied torts.
Other property and casualty  affiliates write excess and surplus lines insurance
and provide reinsurance brokerage services.  The life reinsurance affiliates are
engaged in the reinsurance of life insurance products, including term, whole and
universal life, annuities,  group long-term health products and the provision of
financial reinsurance to life insurers.

During 1998, GE Global  Insurance,  either  directly or through its  affiliates,
acquired  three major property and casualty  reinsurance / insurance  businesses
which  strengthen its global  presence in the Fortune 1000  commercial  property
markets, the broker-serviced markets and the healthcare product lines.

Insurance  and  reinsurance  operations  are  subject to  regulation  by various
insurance regulatory agencies.


                                       1
<PAGE>

GE Global  Insurance and its affiliates  conduct  business  throughout the world
using a network of local offices.  The world headquarters of GE Global Insurance
is located at 5200 Metcalf Avenue,  Overland Park, Kansas 66201. At December 31,
1998, GE Global Insurance and affiliates employed approximately 4,300 persons.

Item 1.  Business - Property and Casualty  Reserves for Unpaid  Claims and Claim
Expenses,  set forth in the  Annual  Report on Form 10-K of GE Global  Insurance
Holding  Corporation  for the year ended December 31, 1998, is  incorporated  by
reference hereto.

OPERATING SEGMENTS

The  Corporation  provides a wide variety of financing,  asset  management,  and
insurance products and services which are organized into the following operating
segments:

    o        Consumer  Services -  private-label  and bank  credit  card  loans,
             personal  loans,  time sales and  revolving  credit  and  inventory
             financing  for  retail   merchants,   auto  leasing  and  inventory
             financing,  mortgage servicing,  and consumer savings and insurance
             services.

    o        Equipment  Management - leases,  loans,  sales and asset management
             services for portfolios of commercial and transportation equipment,
             including  aircraft,  trailers,  auto fleets,  modular space units,
             railroad rolling stock, data processing equipment,  containers used
             on ocean-going vessels, and satellites.

    o        Mid-Market  Financing - loans,  financing and operating leases, and
             other    services   for    middle-market    customers,    including
             manufacturers,  distributors  and  end  users,  for  a  variety  of
             equipment  that  includes  vehicles,   corporate   aircraft,   data
             processing  equipment,   medical  and  diagnostic  equipment,   and
             equipment used in construction, manufacturing, office applications,
             electronics and telecommunications activities.

    o        Specialized  Financing  - loans  and  financing  leases  for  major
             capital assets,  including industrial facilities and equipment, and
             energy-related  facilities;  commercial and residential real estate
             loans and  investments;  and loans to and investments in public and
             private entities in diverse industries.

    o        Specialty Insurance - U.S. and international multiple-line property
             and  casualty  reinsurance;   certain  directly  written  specialty
             insurance  and  life  reinsurance;  financial  guaranty  insurance,
             principally  on  municipal  bonds and  structured  finance  issues;
             private  mortgage   insurance;   and  creditor  insurance  covering
             international customer loan repayments.

Refer  to  Item  7,   "Management's   Discussion  and  Analysis  of  Results  of
Operations,"  in  this  Annual  Report  on  Form  10-K  for  discussion  of  the
Corporation's  Portfolio Quality.  A description of the Corporation's  principal
businesses by operating segment follows.

CONSUMER SERVICES

GE Financial Assurance

GE Financial  Assurance ("GEFA") provides consumers financial security solutions
by selling a wide variety of  insurance,  investment  and  retirement  products,
primarily  in the  United  States  and  Japan.  These  products  help  consumers
accumulate wealth,  transfer wealth, and protect their lifestyles and assets and
are sold through a family of regulated insurance and annuity companies.

GEFA's  principal  product lines are annuities  (deferred and immediate;  either
fixed or  variable),  life  insurance  (universal,  term,  ordinary  and group),
guaranteed  investment  contracts,   mutual  funds,  long-term  care  insurance,
supplemental  accident  and  health  insurance,  personal  lines  of  automobile
insurance  and  credit   insurance.   The  distribution  of  these  products  is
accomplished  through  four  distribution  methods:   intermediaries  (brokerage
general agents,  banks,  securities brokerage firms,  personal producing general
agents and specialized  brokers),  career or dedicated  sales forces,  marketing
through businesses and affinity groups and direct marketing.


                                       2
<PAGE>

GEFA's principal  operating companies include General Electric Capital Assurance
Company,  First Colony Life  Insurance  Company,  GE Life and Annuity  Assurance
Company  (formerly  The Life  Insurance  Company  of  Virginia),  Colonial  Penn
Insurance  Company,  Union  Fidelity  Life  Insurance  Company,  GE Edison  Life
Insurance  Company,  established in Japan in 1998, and GE Capital Life Assurance
of New York.

GEFA headquarters are in Richmond, Virginia.

Auto Financial Services

GE Capital  Auto  Financial  Services  ("AFS")  is a full  service  provider  of
automobile  financing for automobile dealers,  manufacturers and their customers
in North America, and, to a lesser extent, Asia.

In the United States, AFS is one of the leading independent auto lessors for new
and used lease  financing  and, to a much  lesser  degree,  sub-prime  and prime
retail  financing to customers.  AFS also provides  private-label  financing for
American Isuzu Motors, Inc. and participates in a private-label purchase program
with  Volvo of North  America.  In  addition,  AFS  offers  inventory  financing
programs  and direct  loans to segments of the  automotive  industry,  including
dealers and finance companies.

AFS' Asian  activities  include  affiliates in Taiwan,  Hong Kong,  Thailand and
Japan. AFS also maintains additional presence in Asia through equity investments
in Indonesia, Taiwan, Singapore, Malaysia, Korea, and India.

AFS headquarters are in Barrington, Illinois.

Auto Financial Services Europe

GE  Capital  Auto  Financial   Services  Europe  ("AFS  Europe")  is  a  leading
independent  provider of automobile financing products to automobile dealers and
their customers in Europe. Products include hire purchase, finance leases, loans
and insurance premium financing.

AFS Europe has a  significant  presence in 13 countries  throughout  Western and
Central Europe including the United Kingdom, Ireland,  Portugal,  France, Spain,
Italy, Sweden, Denmark, Poland, the Czech  Republic,  Hungary,  Switzerland  and
Austria.

AFS Europe headquarters are in Dublin, Ireland.

GE Card Services

GE Card Services  ("CS")  provides  sales  financing  services to North American
retailers in a broad range of consumer  industries.  Details of financing  plans
differ, but include customized private-label credit card programs with retailers
and inventory financing programs with manufacturers, distributors and retailers.

CS provides  financing  directly to customers  of  retailers  or  purchases  the
retailers'  customer  receivables.  Most  of the  retailers  sell a  variety  of
products of various  manufacturers  on a time sales  basis.  The terms for these
financing plans differ  according to the size of contract and credit standing of
the  customer.  CS generally  maintains a security  interest in the  merchandise
financed.  Financing is provided to consumers  under  contractual  arrangements,
both  with and  without  recourse  to  retailers.  CS' wide  range of  financial
services  includes  application  processing,   sales  authorization,   statement
billings,  customer  services and  collection  services.  CS provides  inventory
financing  for retailers  primarily in the  appliance  and consumer  electronics
industries.  CS maintains a security interest in the inventory and retailers are
obliged to maintain insurance coverage for the merchandise financed.

CS also  provides  and  services  MasterCard(R)  and  Visa(R)  credit  card loan
products issued to retail  customers  throughout the United States.  These loans
originate   through  loan  portfolio   acquisitions,   direct  mail   campaigns,
private-label   credit  card  loan   conversions,   telemarketing   efforts  and
point-of-sale applications. CS also issues and services the GE Capital Corporate
Card product,  providing  payment and information  systems which help medium and
large-sized  companies reduce travel costs,  and the GE Capital  Purchasing Card
product,  which helps customers streamline their purchasing and accounts payable
processes.

                                       3
<PAGE>

CS sold  approximately $2 billion of its  MasterCard(R)  and Visa(R) credit card
loan portfolio in 1998 and intends to limit its future loan origination  efforts
to  portfolios  that it  retains.  In  connection  with the 1998  sale,  General
Electric has agreed to permit a third party to use its  tradename in  connection
with the offering of general-purpose credit cards in the United States.

CS has a  noncontrolling  investment  in the  common  stock of  Montgomery  Ward
Holding  Corp.  ("MWHC"),  which,  together  with its  wholly-owned  subsidiary,
Montgomery Ward & Co.,  Incorporated ("MWC"), is engaged in retail merchandising
and direct response marketing,  the latter conducted primarily through Signature
Financial/Marketing,   Inc.  ("Signature"),  which  markets  consumer  club  and
insurance  products.  CS also  provides  financing  to  customers  of  MWHC  and
affiliates.  As discussed on page 20 and in note 3 to the consolidated financial
statements,  MWHC,  MWC and certain of their  affiliates  (excluding  Signature)
filed a bankruptcy  petition for reorganization in 1997 and have announced plans
to emerge from bankruptcy protection in 1999.

CS headquarters are in Stamford, Connecticut.

Global Consumer Finance

GE Capital  Global  Consumer  Finance  ("GCF") is a leading  provider  of credit
services to non-U.S.  retailers and consumers. GCF provides private-label credit
cards and proprietary  credit  services to retailers in Europe,  Asia, and, to a
lesser extent, South America as well as offering a variety of direct-to-consumer
credit programs such as consumer loans,  bankcards and credit  insurance.  GCF's
wide range of  proprietary  financial  services  includes  private-label  credit
cards,  credit  promotion and  accounting  services,  billing (in the retailer's
name) and customer credit and collection services.

During 1998, GCF expanded its global  presence  through  acquisitions  including
Agrobanka in the Czech Republic,  Prokredit Ltd. in Switzerland, and Koei Credit
and Lake Finance in Japan. In addition, GCF launched a bankcard joint venture in
India and a retail financing joint venture in Brazil.

GCF provides  financing to consumers  through  operations in the United Kingdom,
Austria,  France,  Ireland,  Germany, The Netherlands,  Italy, Spain,  Portugal,
Poland,  Switzerland,  the Czech Republic,  Japan,  Thailand,  Hong Kong, China,
Brazil and Australia and joint ventures in Indonesia, India and Brazil.

GCF headquarters are in Stamford, Connecticut.

Mortgage Services

GE Capital Mortgage Services,  Inc. ("GECMSI"),  a wholly-owned  affiliate of GE
Capital  Mortgage   Corporation,   is  engaged  primarily  in  the  business  of
originating,  purchasing,  selling  and  servicing  residential  mortgage  loans
collateralized by one-to-four-family homes located throughout the United States.
GECMSI obtains  servicing through the origination and purchase of mortgage loans
and  servicing  rights,  and  primarily  packages  the loans it  originates  and
purchases into  mortgage-backed  securities which it sells to investors.  GECMSI
also originates and services home equity loans.

GECMSI headquarters are in Cherry Hill, New Jersey.

EQUIPMENT MANAGEMENT

Aviation Services

GE Capital Aviation Services ("GECAS") is a global commercial aviation financial
services  business  that offers a broad range of financial  products to airlines
and  aircraft  operators,  owners,  lenders and  investors.  Financial  products
include  financing  leases,  operating  leases,  and  tax-advantaged  and  other
incentive-based financing. GECAS also provides asset management,  marketing, and
technical support services to aircraft owners, lenders and investors.


                                       4
<PAGE>

GECAS has firm  orders  and  options  for more than 250 new  Boeing  and  Airbus
aircraft with deliveries  scheduled  through 2006. GECAS current fleet comprises
850  owned  and  managed  aircraft  leased  to more  than  175  customers  in 58
countries.

During  1998,  GECAS  acquired a  commercial  aviation  training  business  from
Raytheon Company.  The training  facility,  located at London's Gatwick airport,
operates a wide  range of  full-flight  motion  simulators  to train  commercial
pilots and serves more than 100 airlines.

GECAS  headquarters  are in  Stamford,  Connecticut,  with  regional  offices in
Shannon,  Ireland; Miami, Florida; Vienna, Austria; Beijing and Hong Kong, China
and Singapore.

Fleet Services

GE Capital  Fleet  Services  ("GECFS")  is one of the  leading  corporate  fleet
management companies with operations in North America,  Europe,  Australia,  New
Zealand, Brazil and Japan with approximately 950,000 cars and trucks under lease
and service  management.  GECFS offers  finance and operating  leases to several
thousand  customers with an average lease term of 36 months. The primary product
in North  America is a Terminal  Rental  Adjustment  Clause (TRAC) lease through
which the customer assumes the residual risk - that is, risk that the book value
will be greater than market value at lease  termination.  In Europe, the primary
product is a closed-end  lease in which GECFS assumes residual risk. In addition
to the services  directly  associated with the lease,  GECFS offers  value-added
fleet management  services  designed to reduce customers' total fleet management
costs. These services include,  among others,  maintenance  management programs,
accident services, national account purchasing programs, fuel programs and title
and  licensing  services.  GECFS  customer base is  diversified  with respect to
industry and geography and includes many Fortune 500 companies.

In 1998, GECFS expanded its fleet management services with acquisitions of fleet
logistics  businesses in the United  Kingdom,  The  Netherlands,  Brazil and New
Zealand.

GECFS headquarters are in Eden Prairie, Minnesota.

Information Technology Solutions

GE  Capital  Information  Technology  Solutions  ("IT  Solutions")  is a leading
worldwide  provider  of a broad array of  information  technology  products  and
services,  including  full life  cycle  services  that  provide  customers  with
cost-effective  control and management of their  information  systems.  Products
offered include desktop personal computers, client server systems, UNIX systems,
local and wide area network  hardware,  and software.  Services  offered include
network design, network support, asset management, help desk, disaster recovery,
enterprise  management and financial  services.  IT Solutions serves commercial,
educational and  governmental  customers in over 20 countries.  During 1998, the
company expanded its presence through acquisitions in the United States, France,
Canada, and Portugal.

IT Solutions headquarters are in Newport, Kentucky.

Transport International Pool

Transport  International  Pool ("TIP") is one of the global  leaders in renting,
leasing,  selling and financing  transportation  equipment.  TIP's fleet of over
260,000 dry freight,  refrigerated and double vans, flatbeds, intermodal assets,
and  specialized  trailers is available for rent,  lease or purchase at over 240
locations in the United States,  Europe,  Canada,  and Mexico.  TIP's commercial
vehicle fleet of over 25,000 units is available for rent,  lease, or purchase in
the United  Kingdom.  TIP also  finances new and used  trailers and buys trailer
fleets.  During 1998, TIP acquired the operating  assets of Trailer Leasing Co.,
Inc.,  a trailer  rental and  leasing  company in the  United  States.  TIP also
acquired a majority  interest in Bay Cities  Leasing LLC, a United States entity
predominately doing business as a lessor of intermodal equipment. TIP's customer
base comprises trucking companies,  railroads, shipping lines, manufacturers and
retailers.


                                       5
<PAGE>

TIP operates a European  service  center in  Amsterdam,  The  Netherlands  and a
commercial vehicle operations and administrative center in Manchester,  England.
TIP headquarters are in Devon, Pennsylvania.

GE SeaCo/GE Capital Container Finance Corporation

In May  1998,  GE  Capital  and Sea  Containers  Ltd.  formed  GE SeaCo SRL ("GE
SeaCo"),  a joint venture which operates the combined marine container fleets of
Genstar Container Corporation ("Genstar") and Sea Containers. GE SeaCo is one of
the world's largest lessors of marine shipping  containers with a combined fleet
of  over   1,100,000  TEU   ("twenty-foot   equivalent   units")  of  dry-cargo,
refrigerated and specialized containers for global cargo transport.  Lessees are
primarily shipping lines which lease on a long-term or master lease basis.

Concurrent with the formation of the joint venture, GE Capital Container Finance
Corporation  ("GECCF")  was  created  to  service  the  existing  finance  lease
portfolio formerly run by Genstar, and to provide traditional finance leases and
structured finance products to the global marine container industry.

GE SeaCo  headquarters  are in London,  England.  GECCF  headquarters are in San
Francisco, California.

Penske Truck Leasing

GE  Capital is a limited  partner  in Penske  Truck  Leasing  ("Penske"),  which
operates the second largest  full-service  truck leasing business and one of the
largest  commercial and consumer  truck rental  businesses in the United States.
Penske operates  through a national  network of  full-service  truck leasing and
rental  facilities.  At December  31,  1998,  Penske had a fleet of about 78,000
tractors,  trucks and  trailers in its leasing  and rental  fleets and  provided
contract  maintenance  programs  or other  support  services  for  about  32,000
additional vehicles.

Penske also provides  dedicated  logistics  operations  support  which  combines
company-employed  drivers  with  its  full-service  lease  vehicles  to  provide
dedicated  contract carriage services.  In addition,  Penske offers supply chain
services such as distribution  consulting,  warehouse management and information
systems support.

Penske headquarters are in Reading, Pennsylvania.

GE American Communications

GE  American  Communications  ("GE  Americom")  is a leading  satellite  service
supplier to a diverse array of  customers,  including the broadcast and cable TV
industries,  broadcast radio, business information and integrated communications
services  for  government  and  commercial  customers.  GE Americom  operates 13
communications  satellites and maintains a supporting network of earth stations,
central terminal offices, and telemetry, tracking and control facilities.

GE Americom headquarters are in Princeton, New Jersey.

Railcar Services

GE Capital  Railcar  Services  ("GERSCO") is one of the leading  railcar leasing
companies  in North  America,  with a fleet of  186,000  railcars  in its  total
portfolio.  Serving  Class  1  railroads,  short-line  railroads,  and  shippers
throughout  North  America,  GERSCO offers one of the most diverse fleets in the
industry, and a variety of lease options.

GERSCO  also owns and  operates  a network of  railcar  repair  and  maintenance
facilities  located  throughout  North America.  The repair  facilities  offer a
variety of services,  ranging from light  maintenance to heavy repair of damaged
railcars. The company also provides railcar management, administration and other
services.

In  addition,  GERSCO is a  pan-European  provider of rail  transport  services,
offering  a broad  range of  railcar  equipment  and  rail-related  services  to
railroads, shippers and other transport providers.

European sales offices are in England, France, Germany, Italy and Sweden. GERSCO
headquarters are in Chicago, Illinois.


                                       6
<PAGE>

Modular Space

GE Capital  Modular  Space  ("GECMS")  provides  commercial  mobile and  modular
structures  for rental,  lease and sale from over 100  facilities  in the United
States,   Europe,   Canada  and  Mexico.  The  primary  markets  served  include
construction,  education, healthcare,  financial, commercial,  institutional and
government. GECMS products are available as custom mobile and modular buildings,
designed to customer  specifications,  or are available  through the GECMS stock
fleet of approximately 120,000 mobile and modular units.

During 1998,  GECMS  continued its European  growth  through the  acquisition of
certain units of the modular  structure  business of MVS GmbH. This  acquisition
doubled the size of the European fleet to approximately 50,000 units.

GECMS has offices in North America and Europe.  GECMS world  headquarters are in
Malvern, Pennsylvania; its European headquarters are in Antwerp, Belgium.

MID-MARKET FINANCING

Commercial Equipment Financing

GE  Capital  Commercial  Equipment  Financing  ("CEF")  offers  a broad  line of
financial  products  including  leases  and  loans to  middle-market  customers,
including  manufacturers,  distributors,  dealers  and  end-users,  as  well  as
municipal financing.  Products are either held for CEF's own account or brokered
to third parties.

Generally,  transactions  range in size from $50 thousand to $50  million,  with
financing  terms from 36 to 180 months.  CEF also maintains an asset  management
operation that both redeploys off-lease equipment and monitors asset values. The
portfolio  includes  loans and leases  for  vehicles,  manufacturing  equipment,
corporate aircraft, construction equipment, medical diagnostic equipment, office
equipment, telecommunications equipment and electronics.

During 1998, CEF expanded through  acquisitions  including:  Simuflite  Training
International,  Inc., a provider of advanced  training to pilots and maintenance
professionals operating  turbine-powered  aircraft in corporate,  government and
military  service,   located  in  Dallas,  Texas;  Barcom  plc,  a  provider  of
construction  fleet  management  services  to the  mining and  quarrying,  civil
engineering,   housing  and  industrial  sectors,   located  in  Wellingborough,
Northampton,  United  Kingdom;  and MetLife Capital  Corporation,  a provider of
secured financing for middle-market businesses, located in Bellevue, Washington.

CEF operates from offices  throughout  the United States,  Puerto Rico,  Canada,
Mexico,  Europe and Asia and through joint ventures in Indonesia and China.  CEF
headquarters are in Danbury, Connecticut.

Vendor Financial Services

GE Capital Vendor Financial Services ("VFS") provides financing services to over
90 equipment  manufacturers and more than 3,500 dealers in North America, Europe
and Asia. Customers include major U.S. and foreign manufacturers in a variety of
industries  including  information  technology,  office  equipment,  healthcare,
telecommunications,  energy and  industrial  equipment.  VFS  establishes  sales
financing in two ways - by forming captive  partnerships with manufacturers that
do not have them, and by outsourcing  captives from  manufacturers  that do. VFS
offers  industry-specific  knowledge,  leading  edge  technology,   leasing  and
equipment  expertise,  and global  capabilities.  In  addition,  VFS provides an
expanding  array of related  financial  services to  customers  including  trade
payables financing.

In 1998, VFS acquired Colonial Pacific Leasing Corporation, the market leader in
indirect broker small-ticket  leasing.  In addition,  VFS sold Digital Financial
Services (the financing captive for Digital Equipment Corporation.)

VFS has sales offices throughout the United States,  Canada,  Europe,  Asia, and
Australia. VFS headquarters are in Danbury, Connecticut.


                                       7
<PAGE>

European Equipment Finance

GE  Capital  European  Equipment  Finance  ("EEF")  is one of  Europe's  leading
diversified  equipment leasing  businesses,  offering  financial  solutions on a
single-country or pan-European basis. Customers include  manufacturers,  vendors
and  end-users  in  industries  such  as  office  imaging,  materials  handling,
corporate  aircraft,  information  technology,   broadcasting,   machine  tools,
telecommunications  and  transportation.  Products and services  include  loans,
leases,  off-balance  sheet  financing,  master  lease  coordination  and  other
services,  such as helping end-users increase purchasing power through financing
options and helping manufacturers and vendors offer leasing programs.

During 1998, EEF expanded  through  acquisitions  that included WTB Westdeutsche
Kreditbank GmbH and its subsidiary WTB Leasing GmbH, leading German providers of
equipment financing and leasing products and services, and the equipment finance
operation of ABN AMRO, a leading  provider of equipment  financing  solutions in
Sweden.

EEF  operates  from  offices  in the United  Kingdom,  Italy,  France,  Germany,
Belgium,  Ireland,  Portugal,  Central  Europe  and the  Nordic  countries.  EEF
headquarters are in Hounslow, England.

SPECIALIZED FINANCING

Real Estate

GE Capital  Real Estate  ("Real  Estate")  provides  funds for the  acquisition,
refinancing  and  renovation  of a wide  range  of  commercial  and  residential
properties  located  throughout the United States,  and, to a lesser extent,  in
Canada,  Mexico,  Europe,  and the Far East.  Real  Estate also  provides  asset
management  services  to real estate  investors  and  selected  services to real
estate owners.

Lending  is  a  major  portion  of  Real  Estate's   business  in  the  form  of
intermediate-term  senior or subordinated fixed and floating-rate  loans secured
by existing  income-producing  commercial  properties such as office  buildings,
rental apartments,  shopping centers,  industrial buildings,  mobile home parks,
hotels and  warehouses.  Loans  range in amount from  single-property  mortgages
typically  not less than $5  million  to  multi-property  portfolios  of several
hundred million dollars. Approximately 90% of all loans are senior mortgages.

Real Estate  purchases and provides  restructuring  financing for  portfolios of
real estate,  mortgage loans, limited  partnerships,  and tax-exempt bonds. Real
Estate's  business  also  includes the  origination  and  securitization  of low
leverage  real estate  loans,  which are  intended to be held less than one year
before outplacement. To a lesser degree, Real Estate provides equity capital for
real estate partnerships  through the holding of limited  partnership  interests
and receives preferred returns; typically such investments range from $2 million
to $10 million.

Real Estate also offers a variety of real estate management  services to outside
investors, institutions,  corporations, investment banks, and others through its
real  estate  services   subsidiaries.   Asset   management   services   include
acquisitions and dispositions,  strategic asset management, asset restructuring,
and debt and equity management.  Real Estate also provides  investment  products
and advisory and asset  management  services to pension fund clients  through GE
Capital Investment Advisors,  its registered investment advisor, as well as loan
administration  and servicing through GE Capital Asset Management.  In addition,
Real Estate  offers  owners of  multi-family  housing  ways to reduce  costs and
enhance value in properties by offering buying  services (e.g.,  for appliances,
roofing).

Real  Estate has offices  throughout  the United  States,  as well as in Canada,
Mexico,  Australia,  Japan, Sweden,  France and the United Kingdom.  Real Estate
headquarters are in Stamford, Connecticut.

Structured Finance Group

GE Capital  Structured  Finance Group  ("SFG")  provides  specialized  financial
products   and   services  to  clients  in  the   commercial   and   industrial,
communications, energy, and transportation sectors, worldwide.

SFG  combines  industry  and  technical  expertise  with  significant  financial
capabilities  to deliver a full range of  sophisticated  financial  services and
products.  Services include project finance  (construction and term),  corporate


                                       8
<PAGE>

finance,  acquisition finance and arrangement and placement  services.  Products
include  a  variety  of debt  and  equity  instruments,  as  well as  structured
transactions, including leasing and partnerships.

SFG has regional offices in the United States, Australia, Brazil, Canada, China,
Hong Kong, Mexico,  Singapore,  and the United Kingdom.  SFG headquarters are in
Stamford, Connecticut.

Commercial Finance

GE Capital Commercial Finance ("CF") is a leading provider of revolving and term
debt and equity to finance acquisitions,  business expansion, bank refinancings,
recapitalizations  and other  special  situations.  Products  also include asset
securitization  facilities,  capital  expenditure  lines and  bankruptcy-related
facilities.  Transactions  typically range in size from under $5 million to over
$200 million.

CF's  clients  are  owners,  managers  and  buyers of both  public  and  private
companies,  principally manufacturers,  distributors,  retailers and diversified
service  providers  in the  healthcare,  retail and  communications  industries.
Through its Merchant Banking Group, CF provides senior debt,  subordinated  debt
and bridge financing to buyout and private equity firms,  and co-invests  equity
with buying groups or invests directly on a select basis.

CF has  lending  operations  in 25 cities,  including  international  offices in
Toronto,  Mexico City, and London, and also has significant factoring operations
in France,  Germany, the United Kingdom and Italy serving European companies and
U.S. exporters. CF headquarters are in Stamford, Connecticut.

GE Equity

GE  Equity  (formerly  Equity  Capital  Group)  purchases  equity   investments,
primarily convertible preferred and common stock investments including,  in some
cases,  stock warrants  convertible into equity  ownership.  GE Equity's primary
objective is long-term  capital  appreciation.  Investments  include the retail,
financial  services,  healthcare,  food and  beverage,  cable  and  broadcasting
industries.

The portfolio is geographically  diversified with investments located throughout
the United States, as well as in Latin America, Europe and Asia.

GE Equity headquarters are in Stamford, Connecticut.

SPECIALTY INSURANCE

In addition to GE Global Insurance Holding  Corporation  (discussed above), GECS
principal specialty insurance businesses are as follows.

Financial Guaranty Insurance

FGIC Holdings  ("FGIC"),  through its subsidiary,  Financial  Guaranty Insurance
Company ("Financial Guaranty"),  is an insurer of municipal bonds, including new
issues,  bonds traded in the secondary  market and bonds held in unit investment
trusts and mutual funds.  Financial  Guaranty also  guarantees  certain  taxable
structured  debt.  The  guaranteed  principal,  after  reinsurance,  amounted to
approximately  $131  billion at  December  31,  1998.  Approximately  86% of the
business written to date by Financial Guaranty is municipal bond insurance.

FGIC  subsidiaries  provide a variety of services to state and local governments
and agencies,  liquidity  facilities in  variable-rate  transactions,  municipal
investment products and other services.

FGIC headquarters are in New York, New York.

Mortgage Insurance

GE Capital Mortgage  Insurance is engaged  principally in providing  residential
mortgage  guaranty  insurance.  Operating  in 25  field  locations,  GE  Capital
Mortgage   Insurance  is  licensed in 50 states,  the District  of  Columbia and


                                       9
<PAGE>

the Virgin Islands.  At December 31, 1998, GE Capital Mortgage Insurance was the
mortgage  insurance  carrier for over 1,480,000  residential  homes,  with total
insurance  in force  aggregating  approximately  $153  billion and total risk in
force  aggregating  approximately  $42  billion.  When a claim is  received,  GE
Capital  Mortgage  Insurance  proceeds  by  either  paying  up  to a  guaranteed
percentage  based  on  the  specified  coverage,  or  paying  the  mortgage  and
delinquent interest, taking title to the property and arranging for its sale. GE
Capital  Mortgage  Insurance also provides  mortgage  guaranty  insurance in the
United Kingdom, Canada, and Australia.

GE Capital Mortgage Insurance headquarters are in Raleigh, North Carolina.

GE Insurance Holdings

GE Insurance Holdings (formerly  Consolidated  Financial Insurance) is a leading
specialty  insurer with operations in 13 European  countries,  Australia and the
Philippines.  GE  Insurance  Holdings is one of the leading  payment  protection
insurers in the United  Kingdom  and Europe.  Payment  protection  insurance  is
designed  to  protect  customers'  loan  repayment  obligations  in the event of
unemployment,  disability or death.  The product is sold alongside most forms of
consumer credit through banks, building societies and finance houses.

GE Insurance  Holdings also provides an extensive  range of personal  investment
products,  including pension and purchased life annuities, home income plans and
investment bonds through a network of over 6,000 independent  financial advisors
and a direct sales force, in the United Kingdom.

In addition, GE Insurance Holdings sells insurance  administration  services for
extended  product  warranty  insurance and pet  insurance,  provides  travel and
personal accident insurance,  and offers the management of uninsured loss claims
on behalf of victims of traffic accidents.

GE Insurance Holdings headquarters are in London, England.

REGULATIONS AND COMPETITION

The  Corporation's  activities  are  subject to a variety  of federal  and state
regulations including, at the federal level, the Consumer Credit Protection Act,
the Equal Credit  Opportunity Act and certain  regulations issued by the Federal
Trade  Commission.  A majority of states have  ceilings on rates  chargeable  to
customers in retail time sales  transactions,  installment  loans and  revolving
credit  financing.  Common  carrier  services  of GE  Americom  are  subject  to
regulation by the Federal Communications  Commission.  Insurance and reinsurance
operations are subject to regulation by various state  insurance  commissions or
foreign regulatory authorities,  as applicable. The Corporation's  international
operations are subject to regulation in their respective jurisdictions. To date,
compliance with such  regulations  has not had a material  adverse effect on the
Corporation's financial position or results of operations.

The  businesses in which the  Corporation  engages are highly  competitive.  The
Corporation  is  subject  to   competition   from  various  types  of  financial
institutions, including banks, thrifts, investment banks, broker-dealers, credit
unions,  leasing  companies,   consumer  loan  companies,   independent  finance
companies,  finance  companies  associated  with  manufacturers,  insurance  and
reinsurance companies.


                                       10
<PAGE>

ITEM 2.   PROPERTIES.

GE Capital Services and its  subsidiaries  conduct their businesses from various
facilities, most of which are leased.


ITEM 3.   LEGAL PROCEEDINGS.

The Corporation is not involved in any material pending legal proceedings.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

                                     Omitted

















                                       11
<PAGE>

                                     PART II

ITEM 5.   MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
          STOCKHOLDER MATTERS.

See note 13 to the consolidated  financial  statements.  The common stock of the
Corporation is owned entirely by GE Company and, therefore,  there is no trading
market in such stock.


ITEM 6.   SELECTED FINANCIAL DATA.

The following  selected  financial data should be read in  conjunction  with the
financial statements of GE Capital Services and consolidated  affiliates and the
related Notes to Consolidated Financial Statements.

<TABLE>
<CAPTION>

                                                                          YEAR ENDED DECEMBER 31               
                                                       --------------------------------------------------------
(Dollar amounts in millions)                              1998        1997        1996        1995        1994 
                                                       --------    --------    --------    --------    --------
<S>                                                    <C>         <C>         <C>         <C>         <C>     
Revenues ...........................................   $ 48,694    $ 39,931    $ 32,713    $ 26,492    $ 19,875

Earnings from continuing operations ................      3,796       3,256       2,817       2,415       2,085
Loss from discontinued operations <F1> .............       --          --          --          --        (1,189)
Net earnings .......................................      3,796       3,256       2,817       2,415         896

Return on common equity <F2> <F3> ..................      23.46%      22.59%      22.24%      21.98%      20.14%
GECS ratio of earnings to fixed charges <F4> .......       1.55        1.56        1.55        1.53        1.65
GECC ratio of earnings to fixed charges ............       1.50        1.48        1.53        1.51        1.63
GECC ratio of debt to equity .......................       7.86        7.45        7.84        7.59        8.43

Financing receivables - net ........................   $121,566    $103,799    $ 99,714    $ 93,272    $ 76,357

Total assets of continuing operations ..............    303,297     255,408     227,419     185,729     144,967

Short-term borrowings ..............................    113,162      95,274      77,945      62,808      57,087
Long-term senior notes .............................     58,042      44,993      46,680      47,794      33,615
Long-term subordinated notes .......................        996         996         996         996         697
Minority interest ..................................      3,459       3,113       2,530       2,522       1,465
Equity .............................................     19,727      17,239      14,276      12,774       9,380

Insurance premiums written for the year ............     11,865       9,396       8,185       6,158       3,962

<FN>
<F1>   In 1994,  the  Corporation terminated  the operations of  Kidder, Peabody
       Group Inc.
<F2>   Equity  excludes  unrealized  gains and losses on  investment securities,
       net of tax.
<F3>   Return on common equity is  calculated  using  earnings  from  continuing
       operations.  Earnings are  adjusted for  preferred  stock  dividends  and
       equity excludes preferred stock.
<F4>   Ratio of earnings to fixed charges  is  calculated  using  earnings  from
       continuing operations.
</FN>
</TABLE>


ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS.

OVERVIEW

The  Corporation's  net earnings were $3.796 billion in 1998, up 17% from $3.256
billion in 1997,  which  increased  16% from 1996.  The  results  reflected  the
globalization and diversity of the Corporation's  businesses,  with double-digit
increases in each of its five segments in 1998.  The  improvement in earnings in
both 1998 and 1997 was largely  attributable  to the effects of continued  asset
growth,  principally  from  acquisitions of businesses and portfolios and higher
origination volume.


                                       12
<PAGE>


OPERATING RESULTS

TOTAL REVENUES increased 22% to $48.7 billion in 1998,  following a 22% increase
to  $39.9  billion  in  1997.   The  increases  in  both  years   reflected  the
contributions of businesses acquired as well as growth in core volume.

INTEREST  EXPENSE on  borrowings  in 1998 was $9.0  billion,  17% higher than in
1997,  which was 4% higher  than in 1996.  The  increases  in 1998 and 1997 were
caused by higher  average  borrowings  used to finance asset  growth,  partially
offset by the effects of lower average  interest rates.  The composite  interest
rate was 5.92% in 1998,  compared with 6.07% in 1997 and 6.24% in 1996. See page
17 for a discussion of interest rate risk management.

OPERATING  AND  ADMINISTRATIVE  expenses were $13.8 billion in 1998, an increase
from $11.4  billion in 1997 and $9.6 billion in 1996.  The increase in both 1998
and 1997  primarily  reflected  costs  associated  with acquired  businesses and
portfolios,  higher investment levels and increases in insurance commissions and
other costs that vary directly with increased revenues.

INSURANCE LOSSES AND POLICYHOLDER AND ANNUITY BENEFITS increased to $9.6 billion
in 1998, compared with $8.3 billion in 1997 and $6.7 billion in 1996, reflecting
effects of business  acquisitions  and growth in premium  volume  throughout the
period.

COST OF GOODS SOLD is associated with activities of the  Corporation's  computer
equipment distribution  businesses.  This cost amounted to $6.8 billion in 1998,
compared  with $4.1  billion in 1997 and $1.7 billion in 1996,  principally  the
result of acquisition-related growth.

PROVISION FOR LOSSES ON FINANCING RECEIVABLES increased to $1.6 billion in 1998,
compared  with $1.4 billion in 1997 and $1.0 billion in 1996.  These  provisions
principally related to private-label credit cards, bank credit cards, auto loans
and auto leases in the consumer services operations,  all of which are discussed
on pages 19-20 under Financing Receivables.  The increases principally reflected
higher  average  receivable  balances  and the effects of  delinquency  rates --
higher during 1997 and lower during 1998 -- consistent with industry experience.

DEPRECIATION  AND  AMORTIZATION  OF BUILDINGS  AND  EQUIPMENT  AND  EQUIPMENT ON
OPERATING  LEASES  increased  6% to $2.6  billion  in 1998,  compared  with $2.5
billion in 1997,  a 14% increase  over 1996.  The increase in both years was the
result of  additions to equipment  on  operating  leases,  primarily  reflecting
acquisitions  of vehicles and aircraft in 1998, and a shift in auto lease volume
from financing leases to operating leases and acquisitions of aircraft in 1997.

PROVISION  FOR INCOME TAXES was $1.4 billion in 1998 (an  effective  tax rate of
26.4%),  compared with $1.2 billion in 1997 (an effective tax rate of 26.4%) and
$1.2 billion in 1996 (an effective tax rate of 30.4%).  The higher provision for
income taxes in 1998 primarily  reflected  increased pre-tax earnings subject to
statutory  rates.  The  decreases  in the 1997  provision  for income  taxes and
effective tax rate were primarily  caused by increased tax credits and decreased
taxes on non-U.S. earnings.

Financing  spreads (the excess of yields over interest rates on borrowings) were
essentially flat in 1998, 1997 and 1996, reflecting slightly lower yields offset
by decreases in borrowing rates.

OPERATING SEGMENTS

At year-end  1998, the  Corporation  adopted  Statement of Financial  Accounting
Standards  ("SFAS") No. 131,  Disclosures  about  Segments of an Enterprise  and
Related Information,  which requires segment data to be measured and analyzed on
a basis that is consistent with how business  activities are reported internally
to management.  Previously  reported data have been restated as required by SFAS
No. 131. For additional  information,  see note 16 to the consolidated financial
statements.


                                       13
<PAGE>

Revenues and net earnings of the Corporation, by operating segment, for the past
three years are summarized and discussed below.

<TABLE>
<CAPTION>

(In millions)                                     1998        1997        1996 
                                               --------    --------    --------
<S>                                            <C>         <C>         <C>     
REVENUES
Consumer Services ..........................   $ 15,948    $ 13,550    $ 11,109
Equipment Management .......................     14,869      11,326       7,725
Mid-Market Financing .......................      3,751       3,009       2,781
Specialized Financing ......................      3,368       2,828       2,944
Specialty Insurance ........................     10,594       8,836       8,185
All other ..................................        164         382         (31)
                                               --------    --------    --------
Total revenues .............................   $ 48,694    $ 39,931    $ 32,713
                                               ========    ========    ========

NET EARNINGS
Consumer Services ..........................   $    797    $    544    $    791
Equipment Management .......................        806         708         603
Mid-Market Financing .......................        478         391         362
Specialized Financing ......................        745         593         563
Specialty Insurance ........................      1,166         973         852
All other ..................................       (196)         47        (354)
                                               --------    --------    --------
Total net earnings .........................   $  3,796    $  3,256    $  2,817
                                               ========    ========    ========
</TABLE>

Consumer Services revenues increased 18% in 1998 and 22% in 1997. This growth --
largely  acquisition  related -- was led by higher premium and investment income
at GE Financial Assurance,  the consumer savings and insurance business of GECS.
Asset  growth  in  several  of  the  other  consumer  services  businesses  also
contributed  to the  increase  in  1998.  Net  earnings  increased  47% in 1998,
following a 31%  decrease in 1997.  Comparisons  of  revenues  and net  earnings
throughout the period were affected by the operating  results of Montgomery Ward
Holding  Corp.,  which  are  discussed  on page 20.  Net  earnings  in 1998 also
reflected acquisition and core volume growth, led by the Global Consumer Finance
and GE Financial Assurance businesses.  Overall gains on asset sales,  including
securitizations,  were higher in 1997 than in 1998;  gains in 1998  included the
sale of certain bankcard assets. Net earnings in 1997 were affected by increased
automobile  residual  losses,  partially  offset by acquisition and core growth,
principally  at GE  Financial  Assurance.  A  higher  provision  for  losses  on
financing  receivables  also  affected  earnings  in both  years,  as  discussed
previously.

Equipment  Management  revenues  grew 31% in 1998,  following a 47%  increase in
1997,  primarily as a result of  acquisitions  by IT Solutions  and, to a lesser
extent,  asset  growth.  Net  earnings  increased  14% in 1998,  following a 17%
increase  in 1997.  Increases  in both years  reflected  higher  volumes in most
businesses  resulting from origination growth and acquisitions of businesses and
portfolios,  with those effects in 1998 partially offset by lower earnings at IT
Solutions  and  Modular  Space,  primarily  the  result  of lower  pricing  from
competitive market conditions and higher operating expenses.

Mid-Market  Financing  revenues  increased  25% in  1998,  compared  with  an 8%
increase in 1997. Net earnings for these  businesses grew 22% and 8% in 1998 and
1997, respectively.  Asset growth resulting from higher volumes and acquisitions
of businesses  and portfolios was the most  significant  contributing  factor in
both years.  Revenues and net earnings were also  favorably  affected in 1998 by
the disposition of certain assets.

Specialized  Financing revenues rose 19% and net earnings increased 26% in 1998.
The  increase in revenues  reflected  asset  growth and a higher  level of asset
gains,  while the increase in net earnings included those factors as well as the
effects of certain tax-advantaged transactions and higher levels of tax credits.
Revenues decreased 4% in 1997, primarily as a result of lower investment levels.
Net  earnings  increased 5% in 1997  reflecting  asset gains and lower levels of
asset write-offs.

Specialty  Insurance  revenues  and net  earnings  both  increased  20% in 1998,
following 8% revenue  growth and 14% net earnings  growth in 1997. The increases
in  both  years  resulted   from   increased   premium  and  investment   income


                                       14
<PAGE>

associated with  origination  volume,  acquisitions  and continued growth in the
investment portfolios, as well as a higher level of realized gains on investment
securities.  Net earnings in both years were also favorably affected by improved
conditions in the Mortgage  Insurance  business,  the result of  improvements in
loss experience.

Within GE Global  Insurance,  the  principal  subsidiary  of which is  Employers
Reinsurance  Corporation,  net premiums earned increased in 1998, primarily as a
result of core and acquisition growth in both the property and casualty and life
businesses.  GE Global  Insurance  property  and casualty  underwriting  results
improved in 1998,  reflecting a general reduction in incurred losses caused by a
decline in both the frequency and overall  severity of claims,  partially offset
by the effects of hurricane and other  weather-related  catastrophe  losses.  GE
Global Insurance net premiums earned on U.S.  business  increased in 1997 -- the
result of strong growth in the life  reinsurance  business -- while net premiums
earned on  European  business  declined,  reflecting  the  effects  of  currency
translation and market conditions. Property and casualty underwriting results at
GE Global Insurance  decreased in 1997,  reflecting  increased  underwriting and
operating expenses and adverse European market  conditions,  offset by growth in
the life reinsurance business.

All other revenues and net earnings in 1997 included asset gains, the largest of
which  was $284  million  (net of tax)  from a  transaction  that  included  the
reduction of the GECS investment in the common stock of Paine Webber Group Inc.

INTERNATIONAL OPERATIONS

The  Corporation's  international  operations  include  its  operations  located
outside  the  United  States  and  certain  of its  operations  that  cannot  be
meaningfully associated with specific geographic areas (for example,  commercial
aircraft and shipping containers used on ocean-going vessels). The Corporation's
international revenues were $18.2 billion in 1998, an increase of 33% from $13.7
billion in 1997.  International  assets grew 36%, from $79.2 billion at year-end
1997  to $107.8 billion at the end of 1998.  Revenues in Europe increased 38% in
1998,  reflecting  a mix  of  acquisition  and  core  growth  across  all of the
Corporation's  segments.  At the same time,  revenues in the Pacific  Basin grew
51%,  principally in Japan,  and  principally as a result of consumer  financing
acquisitions  by Global  Consumer  Finance  and the  acquisition  of Toho Mutual
Life's  infrastructure and sales force by GE Financial Assurance.  International
revenues  from the  Americas  (North  and South  America,  except  for the U.S.)
increased  21% in 1998,  largely as a result of  acquisitions and core growth in
Canada  and  Latin  America.  The  increase  in  international  assets  occurred
primarily in Europe and the Pacific Basin  (principally  Japan)  reflecting  the
same factors discussed above. Overall, these increases reflect the Corporation's
continued expansion as a global provider of a wide range of services.

The  Corporation's  activities  span all global regions and primarily  encompass
leasing of aircraft  and  providing  certain  financial  services  within  these
regional  economies.  As such,  when  certain  countries  or regions such as the
Pacific Basin and Latin America experience  currency and/or economic stress, the
Corporation  may have increased  exposure to certain risks but also may have new
profit  opportunities.  Increased  risks  include,  among other  things,  higher
receivables  delinquencies  and bad debts,  delays or  cancellation of sales and
orders  principally related to aircraft-related 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  financial  services  activities  through
purchases of companies or assets at reduced prices and lower U.S. debt financing
costs. Thus, while the Corporation's  global activities warrant close monitoring
and significant  management attention,  regional economic disruptions had only a
modest adverse effect on the overall financial  position,  results of operations
and liquidity  of the  Corporation  in 1998,  and there is little  change in the
outlook for 1999.

CAPITAL RESOURCES AND LIQUIDITY

STATEMENT OF FINANCIAL POSITION

INVESTMENT   SECURITIES  for  each  of  the  past  two  years  comprised  mainly
investment-grade  debt securities held by the Corporation's  specialty insurance
and annuity and investment businesses in support of obligations to policyholders
and annuitants. The increase of $8.1 billion during 1998 was principally related
to  acquisitions  and  investment  of  premiums  received.  A  breakdown  of the
investment  securities  portfolio  is  provided  in  note 2 to the  consolidated
financial statements.


                                       15
<PAGE>

INVENTORIES  were $744  million and $786  million at December 31, 1998 and 1997,
respectively.  The  decrease  in 1998  primarily  reflected  improved  inventory
management in the computer equipment distribution businesses.

FINANCING RECEIVABLES were $121.6 billion at year-end 1998, net of allowance for
doubtful  accounts,  up $17.8 billion over 1997. These receivables are discussed
on pages 19-20 and in notes 3 and 4 to the consolidated financial statements.

OTHER  RECEIVABLES were $26.0 billion and $18.3 billion at December 31, 1998 and
1997,  respectively.  Of the 1998  increase,  $3.6 billion was  attributable  to
acquisitions and the remainder resulted from core growth.

EQUIPMENT ON OPERATING  LEASES was $20.9  billion at December 31, 1998,  up $2.3
billion from 1997.  Details by category of investment  can be found in note 6 to
the  consolidated  financial  statements.  Additions  to  equipment on operating
leases,  including  business  acquisitions,  were $7.2 billion during 1998 ($6.8
billion  during  1997),  primarily  reflecting   acquisitions  of  vehicles  and
aircraft.

INTANGIBLE  ASSETS were $13.6 billion at year-end 1998, up from $10.3 billion at
year-end 1997. The $3.3 billion increase in intangible  assets related primarily
to goodwill from  acquisitions,  the largest of which were the consumer  finance
business of Lake Corporation ("Lake") in Japan and MetLife Capital in the United
States.

OTHER ASSETS totaled $35.5 billion at year-end 1998, compared with $25.7 billion
at the end of 1997. The $9.9 billion increase related  principally to additional
investments in associated  companies,  increases in assets  acquired for resale,
primarily residential mortgages, and increases in "separate accounts," which are
investments  controlled  by  policyholders  and are  associated  with  identical
amounts reported as insurance liabilities.

INSURANCE  LIABILITIES,  RESERVES  AND ANNUITY  BENEFITS  were $77.3  billion at
year-end  1998,  $10.0 billion  higher than in 1997.  The increase was primarily
attributable  to  acquisitions  and  the  increase  in  separate  accounts.  For
additional  information on these  liabilities,  see note 11 to the  consolidated
financial statements.

BORROWINGS  were $172.2 billion at December 31, 1998, of which $113.2 billion is
due in 1999 and $59.0 billion is due in subsequent years.  Comparable amounts at
the end of 1997 were $141.3 billion total, $95.3 billion due within one year and
$46.0 billion due thereafter.  The  Corporation's  composite  interest rates are
discussed on page 13. A large  portion of the  Corporation's  borrowings  ($87.0
billion and $71.2 billion at the end of 1998 and 1997,  respectively) was issued
in active commercial paper markets that management  believes will continue to be
a reliable source of short-term  financing.  Most of this  commercial  paper was
issued by GE  Capital.  The average  remaining  terms and  interest  rates of GE
Capital  commercial  paper  were 45 days and 5.35% at the end of 1998,  compared
with 44 days  and  5.83%  at the end of 1997.  The GE  Capital  ratio of debt to
equity was 7.86 to 1 at the end of 1998 and 7.45 to 1 at the end of 1997.

GE Company has  committed  to  contribute  capital to GE Capital in the event of
either a decrease below a specified level in the ratio of GE Capital's  earnings
to fixed charges, or a failure to maintain a specified  debt-to-equity  ratio in
the event certain GE Capital  preferred  stock is redeemed.  GE Company also has
guaranteed  the  Corporation's  subordinated  debt  with a face  amount  of $1.0
billion at December 31, 1998 and 1997.  Management  believes the likelihood that
GE Company will be required to contribute  capital under either the  commitments
or the guarantees is remote.

STATEMENT OF CASH FLOWS

One of the  Corporation's  primary  sources  of  cash  is  financing  activities
involving  the  continued  rollover of  short-term  borrowings  and  appropriate
addition of borrowings  with a reasonable  balance of maturities.  Over the past
three years,  the  Corporation's  borrowings  with maturities of 90 days or less
have  increased  by  $40.9  billion.  New  borrowings  of $85.2  billion  having
maturities  longer  than 90 days were added  during  those  years,  while  $78.4
billion of such  longer-term  borrowings  were  retired.  The  Corporation  also
generated $26.9 billion of cash from continuing  operating activities during the
last three years.


                                       16
<PAGE>

The Corporation's principal use of cash has been investing in assets to grow its
businesses.  Of the $69.6  billion that the  Corporation  invested in continuing
operations  over the past three years,  $10.5  billion was used for additions to
financing  receivables;  $18.5  billion  was used to  invest  in new  equipment,
principally for lease to others;  and $25.4 billion was used for acquisitions of
new businesses, the largest of which were MetLife Capital and Lake in 1998.

With the  financial  flexibility  that  comes  with  excellent  credit  ratings,
management believes the Corporation should be well positioned to meet the global
needs of its customers for capital and to continue growing its diversified asset
base.

INTEREST RATE AND CURRENCY RISK MANAGEMENT

In normal  operations,  the  Corporation  must deal with  effects  of changes in
interest rates and currency exchange rates. The following discussion presents an
overview of how such changes are managed and a view of their potential  effects.
A related discussion of recent developments in the global economy is provided on
page 15.

The Corporation uses various financial  instruments,  particularly interest rate
and currency swaps, but also futures,  options and currency forwards,  to manage
risks.  The Corporation is exclusively an end user of these  instruments,  which
are commonly referred to as derivatives.  The Corporation does not engage in any
trading,  market-making  or  other  speculative  activities  in  the  derivative
markets.  More detailed information  regarding these financial  instruments,  as
well as the  strategies  and policies for their use, is contained in notes 1, 10
and 20 to the consolidated financial statements.

The  Corporation  manages its exposure to changes in interest rates, in part, by
funding its assets with an  appropriate  mix of fixed and variable rate debt and
its exposure to currency  fluctuations  principally  by funding  local  currency
denominated  assets  with debt  denominated  in those same  currencies.  It uses
interest  rate swaps,  currency  swaps  (including  non-U.S.  currency and cross
currency  interest rate swaps) and currency  forwards to achieve lower borrowing
costs.  Substantially all of these derivatives have been designated as modifying
interest rates and/or currencies associated with specific debt instruments.

These financial  instruments allow the Corporation to lower its cost of funds by
substituting  credit  risk for  interest  rate and  currency  risks.  Since  the
Corporation's  principal use of such swaps is to optimize funding costs, changes
in interest rates and exchange rates  underlying  swaps would not be expected to
have a material  impact on the  Corporation's  financial  position or results of
operations.   The   Corporation   conducts  almost  all  activities  with  these
instruments in the over-the-counter markets.

The  Corporation  is exposed  to  prepayment  risk in  certain  of its  business
activities, such as in its mortgage servicing and annuities activities. In order
to hedge those exposures,  the Corporation uses swaps, futures, and option-based
financial  instruments.  These  instruments  generally  behave  based on  limits
("caps",  "floors" or "collars") on interest rate movement. These swaps, futures
and option-based  instruments are governed by the credit risk policies described
below and are transacted in either exchange-traded or over-the-counter markets.

In addition,  as part of its ongoing  customer  activities,  the Corporation may
enter into swaps that are integrated with investments in, loans to or guarantees
of the  obligations  of particular  customers  and do not involve  assumption of
third-party  credit risk beyond the risk previously  approved by the Corporation
with respect to such investments, loans or guarantees. Such integrated swaps are
evaluated and monitored like their associated investments,  loans or guarantees,
and are not therefore  subject to the same credit criteria that would apply to a
stand-alone swap. All other swaps,  forward contracts and other derivatives have
been designated as hedges of non-U.S. net investments or other assets.

Established  practices require that derivative  financial  instruments relate to
specific  asset,  liability  or equity  transactions  or to currency  exposures.
Substantially  all treasury actions are centrally  executed by the Corporation's
Treasury  Department,  which  maintains  controls on all  exposures,  adheres to
stringent  counterparty  credit  standards  and  actively  monitors  marketplace
exposures.

Given  the ways in which the  Corporation  uses  swaps,  purchased  options  and
forwards,  the principal risk is credit risk - risk that  counterparties will be
financially   unable  to  make  payments  in  accordance  with  the  agreements.
Associated  market risk is  meaningful  only as it relates to how changes in the
market      value       affect       credit      exposure      to     individual


                                       17
<PAGE>

counterparties.  Except as noted above for positions  that are  integrated  into
financings, all swaps, purchased options and forwards are carried out within the
following credit policy constraints.

     o   Once a counterparty  reaches a credit exposure limit (see table below),
         no additional  transactions  are permitted until the exposure with that
         counterparty  is  reduced to an amount  that is within the  established
         limit. Open contracts remain in force.

<TABLE>
<CAPTION>
         COUNTERPARTY CREDIT CRITERIA                      CREDIT RATING        
                                                      -----------------------   
                                                                   STANDARD &   
                                                        MOODY'S      POOR'S     
                                                      ----------   ----------   
          <S>                                         <C>          <C>          
          Term of transaction
            Between one and five years ...........       Aa3           AA-
            Greater than five years ..............       Aaa           AAA
          Credit exposure limits
            Up to $50 million ....................       Aa3           AA-
            Up to $75 million ....................       Aaa           AAA
</TABLE>

     o   All swaps  are executed under master swap 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-.

More credit latitude is permitted for  transactions  having original  maturities
shorter than one year because of their lower risk.

The  conversion of interest rate and currency risk into credit risk results in a
need to monitor  counterparty  credit risk  actively.  At December 31, 1998, the
notional amount of long-term  derivatives for which the  counterparty  was rated
below  Aa3/AA- was $3.1  billion.  These amounts are primarily the result of (1)
counterparty downgrades,  (2) transactions executed prior to the adoption of the
Corporation's  current  counterparty  credit  standards,  and  (3)  transactions
relating to acquired assets or businesses.

Following is an analysis of credit risk exposures for the last three years.
<TABLE>
<CAPTION>

   PERCENTAGE OF NOTIONAL DERIVATIVE EXPOSURE BY COUNTERPARTY CREDIT RATING     
--------------------------------------------------------------------------------
MOODY'S/STANDARD & POOR'S                          1998        1997        1996 
-------------------------                       --------    --------    --------
<S>                                                  <C>         <C>         <C>
Aaa/AAA ....................................          65%         75%         79%
Aa/AA ......................................          33%         20%         16%
A/A and below ..............................           2%          5%          5%
</TABLE>

The optimal funding strategy is sometimes  achieved by using multiple swaps. For
example,  to obtain fixed rate U.S. dollar  funding,  several  alternatives  are
generally  available.  One alternative is a swap of non-U.S.  dollar denominated
fixed rate debt into U.S.  dollars.  The synthetic U.S. dollar  denominated debt
would be effectively  created by taking the following  steps:  (1) issuing fixed
rate, non-U.S.  currency  denominated debt, (2) entering into a swap under which
fixed rate non-U.S.  currency denominated interest will be received and floating
rate non-U.S.  currency denominated interest will be paid, and (3) entering into
a swap under which floating rate non-U.S.  currency  principal and interest will
be received and fixed rate U.S. dollar  denominated  principal and interest will
be paid. The end result is, in every important  respect,  fixed rate U.S. dollar
denominated financing with an element of controlled credit risk. The Corporation
uses multiple swaps only as part of such transactions.

The  interplay  of  the  Corporation's  credit  risk  policy  with  its  funding
activities is seen in the following example, in which the Corporation is assumed
to have been offered three  alternatives  for funding  five-year fixed rate U.S.
dollar assets with five-year fixed rate U.S. dollar debt.


                                       18
<PAGE>

<TABLE>
<CAPTION>
                                                     SPREAD OVER                
                                                         U.S.                   
                                                    TREASURIES IN               
                                                     BASIS POINTS  COUNTERPARTY 
                                                    -------------  ------------ 
<S>                                                       <C>           <C>     
1.   Fixed rate five-year medium term note .....          +65           --      
2.   U.S. dollar commercial paper swapped into
      five-year U.S. dollar fixed rate funding .          +40           A       
3.   Swiss franc fixed rate debt swapped into
      five-year U.S. dollar fixed rate funding .          +35           B       
</TABLE>

Counterparty A is a major  brokerage  house with a Aaa/AAA rated swap subsidiary
and a current  exposure to the  Corporation of $39 million.  Counterparty B is a
Aa2/AA rated insurance company with a current exposure of $50 million.

In this  hypothetical  case, the  Corporation  would have chosen  alternative 2.
Alternative 1 is unacceptably costly.  Although alternative 3 would have yielded
a lower  immediate cost of funds,  the additional  credit risk of Counterparty B
would have exceeded the Corporation's risk management limits.

The U.S. Securities and Exchange  Commission requires that registrants  disclose
information  about  potential  effects of changes in interest rates and currency
exchange. Although the rules offer alternatives for presenting this information,
none of the  alternatives is without  limitations.  The following  discussion is
based on  so-called  "shock-tests,"  which model  effects of  interest  rate and
currency shifts on the reporting  company.  Shock tests, while probably the most
meaningful analysis permitted, are constrained by several factors, including the
necessity to conduct the  analysis  based on a single point in time and by their
inability to include the complex market reactions that normally would arise from
the market  shifts  modeled.  While the  following  results  of shock  tests for
interest  rates and  currencies  may have some limited use as  benchmarks,  they
should not be viewed as forecasts.

     o One  means  of   assessing   exposure  to  interest   rate  changes is  a
       duration-based analysis that measures the potential  loss in net earnings
       resulting from a  hypothetical increase  in  interest  rates of 100 basis
       points across all maturities (sometimes  referred to as a "parallel shift
       in the yield curve").  Under this model, it is estimated  that,  all else
       constant, such an increase, including repricing effects in the securities
       portfolio, would reduce the 1999 net earnings of the Corporation based on
       year-end  1998   positions  by  approximately  $111 million.    Based  on
       conditions at year-end  1997, the effect on 1998 net  earnings of such an
       increase  in  interest  rates  was  estimated  to  be  approximately $112
       million.

     o One means of assessing exposure to changes in currency  exchange rates is
       to  model  effects on  reported earnings  using a  sensitivity  analysis.
       Year-end  1998  consolidated  currency  exposures,   including  financial
       instruments designated and effective as hedges, were analyzed to identify
       Corporation  assets  and  liabilities  denominated  in  other  than their
       relevant functional  currency.  Net unhedged  exposures in each  currency
       were  then remeasured  assuming  a 10%  decrease  (substantially  greater
       decreases for  hyperinflationary  currencies) in currency  exchange rates
       compared with the U.S. dollar.  Under this model,  it is estimated  that,
       all else constant, such a decrease would  reduce the 1999 net earnings of
       the  Corporation  based on  year-end 1998 positions  by  an insignificant
       amount.

PORTFOLIO QUALITY

FINANCING  RECEIVABLES are the largest GECS asset and one of its primary sources
of revenues.  The  portfolio  of financing  receivables,  before  allowance  for
losses,  increased to $124.9  billion at the end of 1998 from $106.6  billion at
the end of 1997,  principally  reflecting  acquisition  growth  and  origination
volume  that  were  partially  offset  by  securitizations  and  other  sales of
receivables.  The related  allowance  for losses at the end of 1998  amounted to
$3.3 billion ($2.8 billion at the end of 1997) and, in management's judgment, is
appropriate given the risk profile of the portfolio.


                                       19
<PAGE>

A  discussion  of the quality of certain  elements of the  financing  receivable
portfolio follows.  "Nonearning"  receivables are those that are 90 days or more
delinquent  (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. The following discussion of the nonearning
and  reduced-earning  receivable balances and write-off amounts excludes amounts
related to Montgomery  Ward Holding Corp. and  affiliates,  which are separately
discussed below.

CONSUMER FINANCING RECEIVABLES  at  year-end 1998  and  1997 are  shown  in  the
following table:

<TABLE>
<CAPTION>
(In millions)                                                 1998        1997 
                                                           --------    --------
<S>                                                        <C>         <C>     
Credit card and personal loans .........................   $ 28,064    $ 25,773
Auto loans .............................................      9,496       8,973
Auto financing leases ..................................     14,063      13,346
                                                           --------    --------
  Total consumer financing receivables .................   $ 51,623    $ 48,092
                                                           ========    ========

Nonearning .............................................   $  1,250    $  1,049
 - As a percentage of total ............................        2.4%        2.2%
Receivable write-offs for the year .....................   $  1,357    $  1,298
</TABLE>

The increase in credit card and personal loan portfolios primarily resulted from
acquisition growth and origination  volume,  partially offset by securitizations
and  other  sales  of  receivables.  Both  the auto  loan  and  financing  lease
portfolios  increased primarily as a result of acquisition growth;  however, the
increase in auto  financing  leases was  partially  offset by  decreases in U.S.
lease volume. A substantial amount of the nonearning  consumer  receivables were
private-label  credit  card  loans that were  subject  to  various  loss-sharing
agreements that provide full or partial  recourse to the  originating  retailer.
Increased write-offs of consumer receivables were primarily  attributable to the
impact of higher average receivable balances.

OTHER  FINANCING  RECEIVABLES,  totaling  $73.3  billion at December  31,  1998,
consisted  of a diverse  commercial,  industrial  and  equipment  loan and lease
portfolio.  This portfolio  increased $14.8 billion during 1998,  reflecting the
combination of acquisition growth and increased  origination  volume,  partially
offset  by  sales  of  receivables.   Related  nonearning  and   reduced-earning
receivables  were $354 million at year-end  1998,  compared with $353 million at
year-end 1997.

As discussed in note 3 to the consolidated financial statements, Montgomery Ward
Holding Corp.  ("MWHC") filed a bankruptcy  petition for reorganization in 1997.
GECS  after-tax  share of the losses of MWHC and  affiliates  was $49 million in
1998  and  $380  million  in  1997.  The  Corporation's  investment  in MWHC and
affiliates  at year-end  was $622  million in 1998 and $795  million in 1997 (of
which $578 million and $617 million, respectively,  were classified as financing
receivables).  Subsequent  to  the  filing  of  the  petition,  the  Corporation
committed to provide MWHC up to $1.0 billion in debtor-in-possession  financing,
a majority  of which has been  syndicated:  the  Corporation's  loans under this
facility at December 31, 1998 were approximately $56 million. GECS also provides
revolving  credit card financing  directly to customers of MWHC and  affiliates;
such  receivables  totaled $3.4 billion at December  31,  1998,  including  $1.6
billion that had been sold with  recourse.  The  obligations  of customers  with
respect to these  receivables  are not  affected by the  bankruptcy  filing.  On
February  1,  1999,  MWHC  announced  that it plans to  emerge  from  bankruptcy
protection in mid-1999 as a result of an agreement  reached with the  creditors'
committee.

GECS loans and leases to  commercial  airlines  amounted to $10.2 billion at the
end of 1998, up from $9.0 billion at the end of 1997. GECS  commercial  aircraft
positions also included financial  guarantees,  funding commitments and aircraft
orders as discussed in note 6 to the consolidated financial statements.

ENTERING 1999,  management  believes that continued  vigilant  attention to risk
management and controllership and a strong focus on Six Sigma quality - complete
satisfaction  of  customer  needs -  position  it to deal  effectively  with the
increasing competition in an ever-changing economy.


                                       20
<PAGE>

YEAR 2000

Year 2000 will test the capability of business processes to function  correctly.
The  Corporation  has  undertaken a global  effort to identify and mitigate Year
2000 issues in its information  systems,  products and services,  facilities and
suppliers, as well as to assess the extent to which Year 2000 issues will affect
its   customers.   Each   business  has  a  Year  2000  leader  who  oversees  a
multifunctional  remediation  project  team responsible for applying a Six Sigma
quality  approach in four phases:  (1)  define/measure-  identify and  inventory
possible  sources of Year 2000  issues;  (2) analyze-  determine  the nature and
extent of Year 2000 issues and develop  project  plans to address  those issues;
(3) improve-  execute  project plans and perform a majority of the testing;  and
(4)  control- complete  testing,  continue  monitoring  readiness  and  complete
necessary  contingency  plans. The progress of this program is monitored at each
business, and Company-wide reviews with senior management are conducted monthly.
The first three  phases of the program  have been  completed  for a  substantial
majority of  mission-critical  activities.  Management  plans to have nearly all
significant  information  systems,  products and services and facilities through
the control phase of the program by mid-1999.

The  scope  of the  global  Year  2000  effort  encompasses  many  thousands  of
applications  and computer  programs;  products  and  services;  facilities  and
facilities-related  equipment;  suppliers and customers. Business operations are
also  affected  by the Year  2000  readiness  of  customers  and  infrastructure
suppliers in areas such as utilities,  communications,  transportation and other
services.  In this  environment,  there will likely be instances of failure that
could cause disruptions in business processes for the Corporation's  businesses,
affect their customers'  ability to repay amounts owed or result in an increased
level of insurance  claims  activity.  The likelihood and effects of failures in
the  customer  base,  infrastructure  systems and in the supply  chain cannot be
estimated.  However,  with  respect  to  operations  under its  direct  control,
management  does not expect,  in view of its Year 2000  program  efforts and the
diversity of its businesses,  suppliers and customers,  that occurrences of Year
2000 failures  will have a material  adverse  effect on the financial  position,
results of operations or liquidity of the Corporation.

Including  amounts  attributable  to  recent   acquisitions,   total  Year  2000
remediation expenditures are expected to be approximately $269 million, of which
65% was spent by the end of 1998. Substantially all of the remainder is expected
to be spent in 1999. Most of these costs are not likely to be incremental costs,
but rather will represent the redeployment of existing resources. The activities
involved in the Year 2000 effort  necessarily  involve estimates and projections
of activities and resources that will be required in the future. These estimates
and projections could change as work progresses.

NEW ACCOUNTING STANDARDS

New  accounting  standards  issued in 1998 are  described  below.  Statement  of
Financial  Accounting  Standards  ("SFAS") No. 133,  Accounting  for  Derivative
Instruments and Hedging Activities, requires that, upon adoption, all derivative
instruments   (including  certain  derivative   instruments  embedded  in  other
contracts) be recognized in the balance sheet at fair value, and that changes in
such fair values be recognized in earnings unless specific  hedging criteria are
met.  Changes in the values of derivatives that meet these hedging criteria will
ultimately  offset  related  earnings  effects of the hedged  items;  effects of
certain  changes in fair value are  recorded in equity  pending  recognition  in
earnings.  The  Corporation  will adopt the  Statement  on January 1, 2000.  The
impact of adoption will be determined by several factors, including the specific
hedging instruments in place and their relationships to hedged items, as well as
market  conditions.  Management  has not estimated the effects of adoption as it
believes  that such  determination  will not be  meaningful  until closer to the
adoption  date.  Statement of Position  ("SOP") 98-5,  Reporting on the Costs of
Start-Up  Activities,  provides  guidance on accounting  for start-up  costs and
organization  costs,  which must be  expensed  as  incurred.  The SOP,  which is
consistent with the Corporation's  previous  accounting policy, is effective for
financial statements beginning January 1, 1999.


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Information  about  potential  effects of changes in interest rates and currency
exchange on the Corporation is discussed on pages 17-19.


                                       21
<PAGE>

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.


                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors
General Electric Capital Services, Inc.:

We have  audited  the  consolidated  financial  statements  of General  Electric
Capital  Services,  Inc. and  consolidated  affiliates  as listed in Item 14. In
connection with our audits of the  consolidated  financial  statements,  we also
have  audited the  financial  statement  schedules  as listed in Item 14.  These
consolidated  financial  statements  and financial  statement  schedules are the
responsibility of the Corporation's management. Our responsibility is to express
an opinion on these consolidated  financial  statements and financial  statement
schedules based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable 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 consolidated  financial statements referred to above present
fairly,  in all material  respects,  the financial  position of General Electric
Capital  Services,  Inc. and  consolidated  affiliates  at December 31, 1998 and
1997,  and the results of their  operations and their cash flows for each of the
years in the  three-year  period ended  December 31, 1998,  in  conformity  with
generally  accepted  accounting  principles.  Also in our  opinion,  the related
financial  statement  schedules,  when  considered  in  relation  to  the  basic
consolidated  financial  statements  taken as a whole,  present  fairly,  in all
material respects, the information set forth therein.



/s/ KPMG LLP

Stamford, Connecticut
February 12, 1999






                                       22
<PAGE>

<TABLE>
<CAPTION>
       GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATED AFFILIATES

                              STATEMENT OF EARNINGS


For the years ended December 31 (In millions)                                     1998        1997        1996 
                                                                               --------    --------    --------
<S>                                                                            <C>         <C>         <C>     
REVENUES
Time sales, loan and other income ..........................................   $ 14,682    $ 12,211    $ 11,310
Operating lease rentals ....................................................      5,402       4,819       4,341
Financing leases ...........................................................      4,267       3,499       3,485
Investment income ..........................................................      5,617       5,512       3,506
Premium and commission income of insurance affiliates (Note 11) ............     11,352       9,268       8,145
Sales of goods .............................................................      7,374       4,622       1,926
                                                                               --------    --------    --------
   Total revenues ..........................................................     48,694      39,931      32,713
                                                                               --------    --------    --------
EXPENSES
Interest ...................................................................      8,966       7,649       7,326
Operating and administrative (Note 14) .....................................     13,810      11,433       9,591
Insurance losses and policyholder and annuity benefits (Note 11) ...........      9,608       8,278       6,678
Cost of goods sold .........................................................      6,777       4,147       1,720
Provision for losses on financing receivables (Note 4) .....................      1,609       1,421       1,033
Depreciation and amortization of buildings and equipment and
 equipment on operating leases (Notes 6 & 7) ...............................      2,616       2,460       2,150
Minority interest in net earnings of consolidated affiliates ...............        148         121         167
                                                                               --------    --------    --------
   Total expenses ..........................................................     43,534      35,509      28,665
                                                                               --------    --------    --------
Earnings before income taxes ...............................................      5,160       4,422       4,048
Provision for income taxes (Note 15) .......................................     (1,364)     (1,166)     (1,231)
                                                                               --------    --------    --------
NET EARNINGS ...............................................................   $  3,796    $  3,256    $  2,817
                                                                               ========    ========    ========
</TABLE>

<TABLE>
<CAPTION>
                  STATEMENT OF CHANGES IN SHARE OWNERS' EQUITY
 
(In millions)                                                                     1998        1997        1996 
                                                                               --------    --------    --------
<S>                                                                            <C>         <C>         <C>     
CHANGES IN SHARE OWNERS' EQUITY
Balance at January 1 .......................................................   $ 17,239    $ 14,276    $ 12,774
                                                                               --------    --------    --------
Dividends and other transactions with share owners (Note 13) ...............     (1,519)     (1,648)       (979)
                                                                               --------    --------    --------
Changes other than transactions with share owners:
 Increases attributable to net earnings ....................................      3,796       3,256       2,817
 Unrealized gains (losses) on investment securities -  net  (Note 13) ......        241       1,467        (321)
 Currency translation adjustments (Note 13) ................................        (30)       (112)        (15)
                                                                               --------    --------    --------
   Total changes other than transactions with share owners .................      4,007       4,611       2,481
                                                                               --------    --------    --------
Balance at December 31 .....................................................   $ 19,727    $ 17,239    $ 14,276
                                                                               ========    ========    ========
</TABLE>




See Notes to Consolidated Financial Statements.


                                       23
<PAGE>

<TABLE>
<CAPTION>
       GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATED AFFILIATES

                         STATEMENT OF FINANCIAL POSITION


At December 31 (In millions)                                                                  1998        1997 
                                                                                           --------    --------
<S>                                                                                        <C>         <C>     
ASSETS
Cash and equivalents ...................................................................   $  3,342    $  4,904
Investment securities (Note 2) .........................................................     78,458      70,356
Financing receivables (Note 3):
  Time sales and loans, net of deferred income .........................................     77,283      64,832
  Investment in financing leases, net of deferred income ...............................     47,571      41,769
                                                                                           --------    --------
                                                                                            124,854     106,601
  Allowance for losses on financing receivables (Note 4) ...............................     (3,288)     (2,802)
                                                                                           --------    --------
    Financing receivables - net ........................................................    121,566     103,799
Other receivables -  net (Note 5) ......................................................     25,973      18,332
Inventories ............................................................................        744         786
Equipment on operating leases (at cost), less accumulated amortization of $7,021
 and $6,126 (Note 6) ...................................................................     20,941      18,689
Buildings and equipment (at cost), less accumulated depreciation of $1,733 and
 $1,478 (Note 7) .......................................................................      3,095       2,509
Intangible assets -  net (Note 8) ......................................................     13,639      10,366
Other assets (Note 9) ..................................................................     35,539      25,667
                                                                                           --------    --------
  TOTAL ASSETS .........................................................................   $303,297    $255,408
                                                                                           ========    ========

LIABILITIES AND SHARE OWNERS' EQUITY
Short-term borrowings (Note 10) ........................................................   $113,162    $ 95,274
Long-term borrowings (Note 10) .........................................................     59,038      45,989
                                                                                           --------    --------
  Total borrowings .....................................................................    172,200     141,263
Accounts payable .......................................................................      8,815       6,490
Insurance liabilities, reserves and annuity benefits (Note 11) .........................     77,259      67,270
Other liabilities ......................................................................     12,247      11,067
Deferred income taxes (Note 15) ........................................................      9,590       8,966
                                                                                           --------    --------
  Total liabilities ....................................................................    280,111     235,056
                                                                                           --------    --------
Minority interest in equity of consolidated affiliates (Note 12) .......................      3,459       3,113
                                                                                           --------    --------
Cumulative preferred stock, $10,000 par value (80,000 shares authorized; 51,000
 shares issued and held primarily by  consolidated  affiliates at December 31, 1998
 and 1997) .............................................................................         10          10
Common stock, $10,000 par value (101 shares authorized and outstanding) ................          1           1
Additional paid-in capital .............................................................      2,480       2,327
Retained earnings ......................................................................     15,075      12,951
Accumulated unrealized gains on investment securities -  net <F1> ......................      2,376       2,135
Accumulated foreign currency translation adjustments <F1> ..............................       (215)       (185)
                                                                                           --------    --------
  Total share owners' equity (Note 13) .................................................     19,727      17,239
                                                                                           --------    --------
  TOTAL LIABILITIES AND SHARE OWNERS' EQUITY ...........................................   $303,297    $255,408
                                                                                           ========    ========
<FN>
<F1> The sum of  accumulated  unrealized  gains  on  investment  securities  and
     accumulated   foreign   currency   translation    adjustments   constitutes
     "Accumulated  nonowner  changes other than  earnings," as shown in Note 13,
     and  was  $2,161 million  and $1,950  million  at  year-end  1998 and 1997,
     respectively.
</FN>
</TABLE>

See Notes to Consolidated Financial Statements.


                                       24
<PAGE>

<TABLE>
<CAPTION>
       GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATED AFFILIATES

                             STATEMENT OF CASH FLOWS


For the years ended December 31 (In millions)                                     1998        1997        1996 
                                                                               --------    --------    --------
<S>                                                                            <C>         <C>         <C>     
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings ...............................................................   $  3,796    $  3,256    $  2,817
Adjustments to reconcile net earnings to cash provided from
 operating activities:
   Provision for losses on financing receivables ...........................      1,609       1,421       1,033
   Increase in insurance liabilities, reserves and annuity benefits ........      3,670       1,669       1,491
   Decrease (increase) in inventories ......................................         81        (244)        (58)
   Increase in deferred income taxes .......................................        549         798       1,077
   Depreciation and amortization of buildings and equipment and
    equipment on operating leases ..........................................      2,616       2,460       2,150
   Amortization of goodwill and other intangibles ..........................        952         780         655
   Increase (decrease) in accounts payable .................................      1,673         (64)        318
   Other - net .............................................................     (3,991)     (3,851)        284
                                                                               --------    --------    --------
  Cash from operating activities ...........................................     10,955       6,225       9,767
                                                                               --------    --------    --------

CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in financing receivables (Note 19) ............................     (6,301)     (1,898)     (2,278)
Buildings and equipment and equipment on operating leases
  - additions ..............................................................     (6,935)     (6,197)     (5,371)
  - dispositions ...........................................................      4,037       2,212       1,333
Payments for principal businesses purchased, net of cash acquired ..........    (17,155)     (3,820)     (4,394)
All other investing activities (Note 19) ...................................    (11,078)     (5,646)     (6,090)
                                                                               --------    --------    --------
  Cash used for investing activities .......................................    (37,432)    (15,349)    (16,800)
                                                                               --------    --------    --------

CASH FLOWS FROM FINANCING ACTIVITIES
Net change in borrowings (maturities of 90 days or less) ...................     16,288      13,594      11,026
Newly issued debt (maturities longer than 90 days) (Note 19) ...............     41,440      20,825      22,901
Repayments and other reductions (maturities longer than 90 days) (Note 19) .    (31,027)    (22,757)    (24,656)
Dividends paid .............................................................     (1,672)     (1,653)       (981)
All other financing activities (Note 19) ...................................       (114)        785          28
                                                                               --------    --------    --------
  Cash from financing activities ...........................................     24,915      10,794       8,318
                                                                               --------    --------    --------

INCREASE (DECREASE) IN CASH AND EQUIVALENTS DURING THE YEAR ................     (1,562)      1,670       1,285
CASH AND EQUIVALENTS AT BEGINNING OF YEAR ..................................      4,904       3,234       1,949
                                                                               --------    --------    --------
CASH AND EQUIVALENTS AT END OF YEAR ........................................   $  3,342    $  4,904    $  3,234
                                                                               ========    ========    ========
</TABLE>

See Notes to Consolidated Financial Statements.



                                       25
<PAGE>

       GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATED AFFILIATES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CONSOLIDATION - General Electric Capital Services,  Inc. ("the Parent") owns all
of the common stock of General Electric  Capital  Corporation ("GE Capital") and
GE Global Insurance Holding Corporation ("GE Global Insurance"). All outstanding
common stock of the Parent is owned by General  Electric Company ("GE Company").
The  consolidated  financial  statements  represent  the adding  together of the
Parent and all of its  majority-owned and controlled  affiliates  ("consolidated
affiliates"),  including GE Capital and GE Global Insurance (collectively called
"the Corporation").

All significant  transactions among the Corporation and consolidated  affiliates
have been eliminated.  Other associated companies,  generally companies that are
20% to 50% owned and over which the  Corporation,  directly or  indirectly,  has
significant  influence,   are  included  in  other  assets  and  valued  at  the
appropriate share of equity plus loans and advances.  Certain prior-year amounts
have been reclassified to conform to the current year presentation.

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

METHODS OF RECORDING  REVENUES  FROM  SERVICES  (EARNED  INCOME) - Income on all
loans is  recognized  on the  interest  method.  Accrual of  interest  income is
suspended at the earlier of the time at which  collection of an account  becomes
doubtful or the account becomes 90 days delinquent.  Interest income on impaired
loans is recognized  either as cash is collected or on a cost recovery  basis as
conditions warrant.

Financing  lease  income is recorded on the  interest  method so as 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.

Operating lease income is recognized on a straight-line  basis over the terms of
the underlying leases.

Origination,  commitment  and other  nonrefundable  fees related to fundings are
deferred and recorded in earned income on the interest  method.  Commitment fees
related to loans not expected to be funded and line-of-credit  fees are deferred
and recorded in earned income on a straight-line  basis over the period to which
the fees  relate.  Syndication  fees are  recorded in earned  income at the time
related services are performed unless significant contingencies exist.

Premium income from insurance activities is discussed under insurance accounting
policies.

SALES OF GOODS - A sale is recorded when title passes to the customer.

CASH AND EQUIVALENTS - Certificates  and other time deposits are treated as cash
equivalents.

RECOGNITION OF LOSSES ON FINANCING  RECEIVABLES  AND INVESTMENTS - The allowance
for losses on small-balance  receivables is determined  principally on the basis
of actual  experience during the preceding three years.  Further  allowances are
provided to reflect  management's  judgment of additional  probable losses.  For
other  receivables,  principally the larger loans and leases,  the allowance for
losses is determined primarily on the basis of management's  judgment of the net
probable losses, including specific allowances for known troubled accounts.

All accounts or portions  thereof  deemed to be  uncollectible  or to require an
excessive  collection  cost  are  written  off  to  the  allowance  for  losses.
Small-balance accounts generally are written off when 6 to 12 months delinquent,
although  any such  balance  judged to be  uncollectible,  such as an account in
bankruptcy,   is  written  down  immediately  to  estimated   realizable  value.
Large-balance accounts are reviewed at least quarterly,  and those accounts with
amounts  that are  judged to be  uncollectible  are  written  down to  estimated
realizable value.


                                       26
<PAGE>

When  collateral is  repossessed  in  satisfaction  of a loan, the receivable is
written down against the allowance for losses to estimated fair value less costs
to sell,  transferred to other assets and  subsequently  carried at the lower of
cost or estimated fair value less costs to sell. This accounting method has been
employed principally for specialized financing transactions.

INVESTMENT SECURITIES - Investments in debt and marketable equity securities are
reported at fair value.  Substantially all investment  securities are designated
as available for sale, with unrealized gains and losses included in equity,  net
of applicable taxes and other adjustments. Unrealized losses that are other than
temporary are  recognized in earnings.  Realized  gains and losses are accounted
for on the specific identification method.

INVENTORIES  - The  Corporation's  inventories  consist  primarily  of  finished
products  held for  sale.  All  inventories  are  stated at the lower of cost or
realizable values. Cost is primarily determined on a first-in, first-out basis.

EQUIPMENT  ON  OPERATING  LEASES -  Equipment  is  amortized,  principally  on a
straight-line basis, to estimated residual value over the lease term or over the
estimated economic life of the equipment.

BUILDINGS AND EQUIPMENT - Depreciation is recorded on either a  sum-of-the-years
digits formula or a straight-line basis over the lives of the assets.

INTANGIBLE  ASSETS - Goodwill is amortized over its estimated  period of benefit
on a  straight-line  basis;  other  intangible  assets,  including  internal-use
software,  are amortized on appropriate  bases over their  estimated  lives.  No
amortization period exceeds 40 years.  Goodwill in excess of associated expected
operating  cash flows is  considered  to be impaired and is written down to fair
value,  which is  determined  based on either  discounted  future  cash flows or
appraised values, depending on the nature of the assets.

INTEREST  RATE AND  CURRENCY  RISK  MANAGEMENT  - As a  matter  of  policy,  the
Corporation does not engage in derivatives trading, derivatives market-making or
other speculative  activities.  The Corporation uses swaps primarily to optimize
funding  costs.  To a lesser degree,  and in combination  with options and limit
contracts,   the   Corporation   uses  swaps  to   stabilize   cash  flows  from
mortgage-related assets.

Interest rate and currency  swaps that modify  borrowings or designated  assets,
including  swaps  associated  with forecasted  commercial  paper  renewals,  are
accounted for on an accrual basis. The Corporation  requires all other swaps, as
well as futures,  options and currency forwards,  to be designated and accounted
for as  hedges  of  specific  assets,  liabilities  or  committed  transactions;
resulting payments and receipts are recognized contemporaneously with effects of
hedged  transactions.  A payment or receipt arising from early termination of an
effective  hedge is accounted  for as an  adjustment  to the basis of the hedged
transaction.

Instruments  used as hedges must be effective  at reducing  the risk  associated
with  the  exposure  being  hedged  and  must be  designated  as a hedge  at the
inception  of the  contract.  Accordingly,  changes  in  market  values of hedge
instruments  must  be  highly  correlated  with  changes  in  market  values  of
underlying  hedged items both at inception of the hedge and over the life of the
hedge  contract.  As a matter of  policy,  any  derivative  that is  either  not
designated as a hedge,  or is so  designated  but is  ineffective,  is marked to
market and recognized in operations immediately.

INSURANCE ACCOUNTING POLICIES - Accounting policies for insurance businesses are
as follows.

PREMIUM INCOME. Insurance premiums are reported as earned income as follows:

   o For  short-duration  insurance contracts  (including property and casualty,
     accident  and health,  and  financial  guaranty  insurance),  premiums  are
     reported as earned income, generally on a pro rata basis, over the terms of
     the related agreements.  For retrospectively  rated reinsurance  contracts,
     premium  adjustments  are  recorded  based  on  estimated  losses  and loss
     expenses, taking into consideration both case and incurred-but-not-reported
     reserves.

   o For  traditional  long-duration  insurance  contracts  (including  term and
     whole life contracts and annuities  payable for the life of the annuitant),
     premiums are reported as earned income when due.


                                       27
<PAGE>

   o For  investment  contracts and universal life contracts,  premiums received
     are reported as liabilities,  not as revenues. Universal life contracts are
     long-duration  insurance  contracts  with  terms  that  are not  fixed  and
     guaranteed;  for these  contracts,  revenues are recognized 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,  revenues  are  recognized  on the  associated  investments  and
     amounts credited to policyholder accounts are charged to expense.

DEFERRED  POLICY  ACQUISITION  COSTS.  Costs  that vary  with and are  primarily
related to the acquisition of new and renewal insurance and investment contracts
are deferred and amortized over the respective policy terms. For  short-duration
contracts,  acquisition  costs  consist  primarily  of  commissions,   brokerage
expenses and premium taxes. For long-duration  insurance contracts,  these costs
consist  primarily 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.

   o For short-duration  insurance contracts, these costs are amortized pro rata
     over the contract periods in which the related premiums are earned.

   o For  traditional  long-duration  insurance  contracts,   these   costs  are
     amortized  over the  respective  contract  periods in  proportion to either
     anticipated  premium income or, in the case of  limited-payment  contracts,
     estimated benefit payments.

   o For  investment  contracts  and universal life  contracts,  these costs are
     amortized on the basis of anticipated gross profits.

Periodically, deferred policy acquisition costs are reviewed for recoverability;
anticipated investment income is considered in recoverability evaluations.

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  enterprises is
recorded  as the  present  value of future  profits  and is  amortized  over the
respective  policy  terms in a manner  similar to  deferred  policy  acquisition
costs.  Unamortized  balances are adjusted to reflect experience and impairment,
if any.


                                       28
<PAGE>

NOTE 2.        INVESTMENT SECURITIES

A summary of investment securities follows:
<TABLE>
<CAPTION>

                                                                                 GROSS       GROSS             
                                                                  AMORTIZED   UNREALIZED  UNREALIZED  ESTIMATED
(In millions)                                                        COST        GAINS      LOSSES   FAIR VALUE
                                                                   --------    --------    --------    --------
<S>                                                                <C>         <C>         <C>         <C>     
DECEMBER 31, 1998

Debt securities:
 U.S. corporate ................................................   $ 27,888    $  1,293    $   (325)   $ 28,856
 State and municipal ...........................................     12,483         727          (8)     13,202
 Mortgage-backed ...............................................     11,641         413        (109)     11,945
 Corporate - non-U.S. ..........................................      8,692         409         (90)      9,011
 Government - non-U.S. .........................................      5,415         258          (9)      5,664
 U.S. government and federal agency ............................      2,706         207          (7)      2,906
Equity securities ..............................................      5,651       1,415        (192)      6,874
                                                                   --------    --------    --------    --------
                                                                   $ 74,476    $  4,722    $   (740)   $ 78,458
                                                                   ========    ========    ========    ========
DECEMBER 31, 1997

Debt securities:
 U.S. corporate ................................................   $ 24,580    $  1,028    $    (53)   $ 25,555
 State and municipal ...........................................     10,780         636          (2)     11,414
 Mortgage-backed ...............................................     12,074         341         (30)     12,385
 Corporate - non-U.S. ..........................................      7,683         310         (12)      7,981
 Government - non-U.S. .........................................      3,714         150          (3)      3,861
 U.S. government and federal agency ............................      2,413         103          (4)      2,512
Equity securities ..............................................      5,414       1,336        (102)      6,648
                                                                   --------    --------    --------    --------
                                                                   $ 66,658    $  3,904    $   (206)   $ 70,356
                                                                   ========    ========    ========    ========
</TABLE>

The  majority  of  mortgage-backed  securities  shown  in the  table  above  are
collateralized by U.S. residential mortgages.

At December 31, 1998,  contractual  maturities  of debt  securities,  other than
mortgage-backed securities, were as follows:

<TABLE>
<CAPTION>
                                                                                          AMORTIZED   ESTIMATED
(In millions)                                                                                COST    FAIR VALUE
                                                                                           --------    --------
<S>                                                                                        <C>         <C>     
Due in:
 1999 ..................................................................................   $  5,370    $  5,574
 2000-2003 .............................................................................     14,145      14,497
 2004-2008 .............................................................................     13,068      13,538
 2009 and later ........................................................................     24,601      26,030
</TABLE>

It is expected that actual  maturities will differ from  contractual  maturities
because borrowers have the right to call or prepay certain obligations. Proceeds
from  sales of  investment  securities  in 1998 were  $16,659  million  ($14,728
million in 1997 and $11,868  million in 1996).  Gross realized gains were $1,126
million  in 1998  ($1,018  million  in 1997 and $638  million  in  1996).  Gross
realized losses were $303 million in 1998 ($173 million in 1997 and $190 million
in 1996).


                                       29
<PAGE>


NOTE 3.        FINANCING RECEIVABLES

Financing receivables at December 31, 1998 and 1997, are shown below.

<TABLE>
<CAPTION>
(In millions)                                                                                 1998        1997 
                                                                                           --------    --------
<S>                                                                                        <C>         <C>     
Time sales and loans:
 Consumer Services .....................................................................   $ 44,680    $ 42,270
 Mid-Market Financing ..................................................................     20,240      11,401
 Specialized Financing .................................................................     16,811      13,974
 Equipment Management ..................................................................      1,066         469
 Specialty Insurance ...................................................................        103         202
                                                                                           --------    --------
                                                                                             82,900      68,316
Deferred income ........................................................................     (5,617)     (3,484)
                                                                                           --------    --------
   Time sales and loans - net of deferred income .......................................     77,283      64,832
                                                                                           --------    --------
Investment in financing leases:
 Direct financing leases ...............................................................     43,730      38,616
 Leveraged leases ......................................................................      3,841       3,153
                                                                                           --------    --------
   Investment in financing leases ......................................................     47,571      41,769
                                                                                           --------    --------
                                                                                            124,854     106,601
Less allowance for losses (Note 4) .....................................................     (3,288)     (2,802)
                                                                                           --------    --------
                                                                                           $121,566    $103,799
                                                                                           ========    ========
</TABLE>

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.  At year-end 1998 and 1997,
specialized  financing and consumer  services loans included $12,980 million and
$10,503 million, respectively, for commercial real estate loans. Note 6 contains
information on commercial airline loans and leases.

At  December  31,  1998,  contractual  maturities  for time sales and loans were
$31,014 million in 1999; $14,865 million in 2000; $9,448 million in 2001; $6,675
million  in 2002;  $5,465  million  in 2003 and  $15,433  million  thereafter  -
aggregating $82,900 million.  Experience has shown that a substantial portion of
receivables  will  be paid  prior  to  contractual  maturity.  Accordingly,  the
maturities of time sales and loans are not to be regarded as forecasts of future
cash collections.

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.

As the sole  owner of assets  under  direct  financing  leases and as the equity
participant  in  leveraged  leases,  the  Corporation  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.  The
Corporation generally is 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. The Corporation 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 Corporation's share of rentals receivable on leveraged
leases is subordinate to the share of other  participants who also have security
interests in the leased equipment.


                                       30
<PAGE>

The  Corporation's  net investment in financing  leases at December 31, 1998 and
1997, is shown below.

<TABLE>
<CAPTION>
                                                   TOTAL                  DIRECT                               
                                             FINANCING LEASES        FINANCING LEASES        LEVERAGED LEASES  
                                           --------------------    --------------------    --------------------
(In millions)                                 1998        1997        1998        1997        1998        1997 
                                           --------    --------    --------    --------    --------    --------
<S>                                        <C>         <C>         <C>         <C>         <C>         <C>     
Total minimum lease payments receivable    $ 66,528    $ 58,543    $ 47,451    $ 42,901    $ 19,077    $ 15,642
Less principal and interest on 
 third-party nonrecourse debt ..........    (15,176)    (12,097)       --          --       (15,176)    (12,097)
                                           --------    --------    --------    --------    --------    --------
  Net rentals receivable ...............     51,352      46,446      47,451      42,901       3,901       3,545
Estimated unguaranteed residual value
 of leased assets ......................      6,826       5,591       5,011       4,244       1,815       1,347
Less deferred income ...................    (10,607)    (10,268)     (8,732)     (8,529)     (1,875)     (1,739)
                                           --------    --------    --------    --------    --------    --------
  Investment in financing leases .......     47,571      41,769      43,730      38,616       3,841       3,153

Less:  Allowance for losses ............       (619)       (656)       (519)       (575)       (100)        (81)
       Deferred taxes arising from
        financing leases ...............     (8,593)     (7,909)     (5,147)     (4,671)     (3,446)     (3,238)
                                           --------    --------    --------    --------    --------    --------
Net investment in financing leases .....   $ 38,359    $ 33,204    $ 38,064    $ 33,370    $    295    $   (166)
                                           ========    ========    ========    ========    ========    ========
</TABLE>

At December 31, 1998,  contractual  maturities for net rentals  receivable under
financing leases were $14,093 million in 1999;  $12,087 million in 2000;  $8,947
million  in 2001;  $4,362  million  in 2002;  $2,759  million in 2003 and $9,104
million thereafter - aggregating  $51,352 million. As with time sales and loans,
experience has shown that a portion of these  receivables  will be paid prior to
contractual  maturity,  and these amounts should not be regarded as forecasts of
future cash flows.

The  Corporation  has  a  noncontrolling  investment  in  the  common  stock  of
Montgomery  Ward Holding  Corp.  ("MWHC")  which,  together  with certain of its
affiliates,  filed a bankruptcy  petition for  reorganization  in 1997. Loans to
MWHC,  which are considered  impaired (as defined below),  were $578 million and
$617 million at year-end 1998 and 1997, respectively. These amounts are excluded
from the nonearning and reduced earning  receivable and impaired loan discussion
below. The Corporation also provides revolving credit card financing directly to
customers  of MWHC and  affiliates;  such  receivables  totaled  $3.4 billion at
December 31, 1998, including $1.6 billion that had been sold with recourse.  The
obligations of customers with respect to these  receivables  are not affected by
the bankruptcy filing.

Nonearning  consumer  receivables  were  $1,250  million  and $1,049  million at
December 31, 1998 and 1997,  respectively,  a  substantial  amount of which were
U.S. private-label credit card loans subject to various loss-sharing  agreements
that provide full or partial  recourse to the originating  retailer.  Nonearning
and  reduced-earning  receivables  other  than  consumer  receivables  were $354
million and $353 million at year-end 1998 and 1997, respectively.

"Impaired"  loans are defined by generally  accepted  accounting  principles  as
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.  That
definition   excludes,   among  other   things,   leases  or  large   groups  of
smaller-balance  homogenous  loans,  and therefore  applies  principally  to the
Corporation's commercial loans.


                                       31
<PAGE>

An analysis of impaired loans at December 31, 1998 and 1997 is shown below.

<TABLE>
<CAPTION>
(In millions)                                                                                 1998        1997 
                                                                                           --------    --------
<S>                                                                                        <C>         <C>     
Loans requiring allowance for losses ...................................................   $    346    $    339
Loans expected to be fully recoverable .................................................        158         167
                                                                                           --------    --------
                                                                                           $    504    $    506
                                                                                           ========    ========

Allowance for losses ...................................................................   $    109    $    170
Average investment during year .........................................................        512         647
Interest income earned while impaired <F1> .............................................         39          32

<FN>
<F1>  Principally on the cash basis.
</FN>
</TABLE>


NOTE 4.        ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES

<TABLE>
<CAPTION>

(In millions)                                                                     1998        1997        1996 
                                                                               --------    --------    --------
<S>                <C>                                                         <C>         <C>         <C>     
Balance at January 1 .......................................................   $  2,802    $  2,693    $  2,519
Provisions charged to operations ...........................................      1,609       1,421       1,033
Net transfers primarily related to companies acquired or sold ..............        388         127         139
Amounts written off - net ..................................................     (1,511)     (1,439)       (998)
                                                                               --------    --------    --------
Balance at December 31 .....................................................   $  3,288    $  2,802    $  2,693
                                                                               ========    ========    ========
</TABLE>


NOTE 5.        OTHER RECEIVABLES

At year-end 1998 and 1997,  this account  included  reinsurance  recoverables of
$6,124  million and $5,027 million and  insurance-related  receivables of $7,109
million and $4,932 million, respectively.  Premium receivables, funds on deposit
with reinsurers and policy loans are included in insurance-related  receivables.
Also in other  receivables are trade  receivables,  accrued  investment  income,
operating lease receivables and a variety of sundry items.


NOTE 6.        EQUIPMENT ON OPERATING LEASES

Equipment on operating leases by type of equipment and accumulated  amortization
at December 31, 1998 and 1997, are shown below.

<TABLE>
<CAPTION>
(In millions)                                                                                 1998        1997 
                                                                                           --------    --------
<S>                                                                                        <C>         <C>     
Original cost
 Vehicles ..............................................................................   $  9,825    $  9,144
 Aircraft ..............................................................................      9,321       7,686
 Railroad rolling stock ................................................................      2,804       2,367
 Marine shipping containers ............................................................      2,565       2,774
 Other .................................................................................      3,447       2,844
                                                                                           --------    --------
                                                                                             27,962      24,815
Accumulated amortization ...............................................................     (7,021)     (6,126)
                                                                                           --------    --------
                                                                                           $ 20,941    $ 18,689
                                                                                           ========    ========
</TABLE>

Amortization of equipment on operating leases was $2,185 million, $2,102 million
and $1,848 million in 1998, 1997 and 1996,  respectively.  Noncancelable  future
rentals  due  from   customers   for  equipment  on  operating  leases  at year-


                                       32
<PAGE>

end 1998 totaled $12,808 million and are due as follows: $3,377 million in 1999;
$2,540 million  in 2000;  $1,841 million in 2001;  $1,318 million in 2002;  $897
million in 2003 and $2,835 million thereafter.

The Corporation acts as a lender and lessor to the commercial  airline industry.
At December 31, 1998 and 1997,  the balance of such loans,  leases and equipment
leased to others was  $10,170  million  and  $8,980  million,  respectively.  In
addition,  at December 31, 1998, the Corporation had issued financial guarantees
and funding  commitments  of $74 million ($123 million at year-end 1997) and had
placed  multiyear orders for various Boeing and Airbus aircraft with list prices
of approximately $9.4 billion ($6.2 billion at year-end 1997).


NOTE 7.        BUILDINGS AND EQUIPMENT

Buildings and  equipment  include  office  buildings,  satellite  communications
equipment, data processing equipment,  vehicles, furniture and office equipment.
Depreciation  expense was $431  million in 1998,  $358  million in 1997 and $302
million in 1996.


NOTE 8.        INTANGIBLE ASSETS

Intangible assets at December 31, 1998 and 1997, are shown in the table below.

<TABLE>
<CAPTION>
(In millions)                                                                                 1998        1997 
                                                                                           --------    --------
<S>                                                                                        <C>         <C>     
Goodwill ...............................................................................   $ 11,469    $  8,090
Present value of future profits ("PVFP") ...............................................      1,618       1,824
Other intangibles ......................................................................        552         452
                                                                                           --------    --------
                                                                                           $ 13,639    $ 10,366
                                                                                           ========    ========
</TABLE>

The Corporation's intangible assets are shown net of accumulated amortization of
$3,396 million at December 31, 1998, and $2,615 million at December 31, 1997.

PVFP  amortization,  which is on an  accelerated  basis and net of interest,  is
projected to range from 15% to 8% of the year-end 1998  unamortized  balance for
each of the next five years.


NOTE 9.        OTHER ASSETS

Other assets at December 31, 1998 and 1997, are shown in the table below.

<TABLE>
<CAPTION>
(In millions)                                                                                 1998        1997 
                                                                                           --------    --------
<S>                                                                                        <C>         <C>     
Investments:
 Assets acquired for resale ............................................................   $  6,167    $  4,403
 Investments in and advances to associated companies ...................................      7,670       4,695
 Real estate ventures ..................................................................      3,131       2,326
 Other .................................................................................      3,473       2,452
                                                                                           --------    --------
                                                                                             20,441      13,876
Separate accounts ......................................................................      6,563       4,926
Servicing assets .......................................................................      1,625       1,713
Deferred insurance acquisition costs ...................................................      3,326       2,521
Other ..................................................................................      3,584       2,631
                                                                                           --------    --------
                                                                                           $ 35,539    $ 25,667
                                                                                           ========    ========
</TABLE>

Separate  accounts  represent  investments  controlled by policyholders  and are
associated with identical amounts reported as insurance liabilities in note 11.


                                       33
<PAGE>

NOTE 10.       BORROWINGS

Total  short-term  borrowings  at December  31, 1998 and 1997,  consisted of the
following:

<TABLE>
<CAPTION>
                                                                            1998                    1997        
                                                                   --------------------    -------------------- 
                                                                               AVERAGE                 AVERAGE  
(Dollars in millions)                                               AMOUNT     RATE <F1>    AMOUNT     RATE <F1>
                                                                   --------    --------    --------    -------- 
<S>                                                                <C>          <C>         <C>        <C>      

Commercial paper - U.S. ........................................   $ 83,044        5.38%   $ 67,355        5.93%
Commercial paper - non-U.S. ....................................      3,953        4.80       3,879        4.18 
Current portion of long-term debt ..............................     14,645        5.66      15,101        6.30 
Other ..........................................................     11,520                   8,939             
                                                                   --------                --------
                                                                   $113,162                $ 95,274
                                                                   ========                ========

Total long-term borrowings at December 31, 1998 and 1997, were as follows:

                                                                     1998                                      
                                                                    AVERAGE                                    
                                                                     RATE                                      
(Dollars in millions)                                                <F1>      MATURITIES     1998        1997 
                                                                   --------    ----------  --------    --------
Senior notes ...................................................       6.07%    2000-2055  $ 58,042    $ 44,993
Subordinated notes <F2> ........................................       7.88     2006-2035       996         996
                                                                                           --------    --------
                                                                                           $ 59,038    $ 45,989
                                                                                           ========    ========
<FN>
<F1>   Based on  year-end balances and  local currency interest rates, including
       the  effects  of  interest  rate  and  currency swaps,  if any,  directly
       associated with the original debt issuance.
<F2>   Guaranteed by GE Company.
</FN>
</TABLE>

Borrowings  of the  Corporation  are  addressed  below from two  perspectives  -
liquidity and interest rate management.  Additional information about borrowings
and associated swaps can be found in note 20.

LIQUIDITY requirements of the Corporation are principally met through the credit
markets.  Maturities  of  long-term  borrowings  during  the  next  five  years,
including  the current  portion of long-term  debt,  at December 31, 1998,  were
$14,645  million  in 1999;  $13,889  million in 2000;  $10,925  million in 2001;
$7,059 million in 2002 and $4,794 million in 2003.

At December 31, 1998, the Corporation held committed lines of credit aggregating
$26.7  billion  with 133 banks,  including  $11.8  billion of  revolving  credit
agreements  pursuant  to which it has the  right to  borrow  funds  for  periods
exceeding  one year.  A total of $1.5  billion of GE  Capital's  credit lines is
available for use by GE Company.  Also, at December 31, 1998,  substantially all
of the  approximately  $4.0 billion of GE Company's  credit lines were available
for use by the  Corporation.  During 1998,  amounts drawn under these lines were
not significant.  The Corporation compensates banks for credit facilities in the
form of fees, which were insignificant in each of the past three years.

INTEREST  RATES  ARE  MANAGED  by the  Corporation  in light of the  anticipated
behavior,  including prepayment  behavior,  of assets in which debt proceeds are
invested.  A variety of instruments,  including interest rate and currency swaps
and  currency  forwards,  are  employed to achieve  management's  interest  rate
objectives. Effective interest rates are lower under these "synthetic" positions
than could have been achieved by issuing debt directly.


                                       34
<PAGE>

The following table shows the Corporation's  borrowing positions at December 31,
1998 and 1997, considering the effects of swaps.

<TABLE>
<CAPTION>
(In millions)                                                                                 1998        1997 
                                                                                           --------    --------
<S>                                                                                        <C>         <C>     
EFFECTIVE BORROWINGS (INCLUDING SWAPS)
Short-term .............................................................................   $ 72,143    $ 56,961
                                                                                           ========    ========
Long-term (including current portion)
 Fixed rate <F1> .......................................................................   $ 74,226    $ 59,329
 Floating rate .........................................................................     25,831      24,973
                                                                                           --------    --------
Total long-term ........................................................................   $100,057    $ 84,302
                                                                                           ========    ========

<FN>
<F1> Includes  the  notional  amount of  long-term   interest  rate  swaps  that
     effectively  convert the floating-rate  nature of short-term  borrowings to
     fixed rates of interest.
</FN>
</TABLE>

At December 31, 1998,  interest rate swap  maturities  ranged from 1999 to 2048,
and average  interest rates for  fixed-rate  borrowings  (including  "synthetic"
fixed-rate borrowings) were 6.03% (6.32% at year-end 1997).


NOTE 11.       INSURANCE LIABILITIES, RESERVES AND ANNUITY BENEFITS

Insurance  liabilities,  reserves and annuity  benefits at December 31, 1998 and
1997, are shown below.

<TABLE>
<CAPTION>
(In millions)                                                                                 1998        1997 
                                                                                           --------    --------
<S>                                                                                        <C>         <C>     
Investment contracts and universal life benefits .......................................   $ 29,266    $ 28,266
Life insurance benefits and other <F1> .................................................     16,104      14,356
Unpaid claims and claims adjustment expenses <F2> ......................................     19,611      14,654
Unearned premiums ......................................................................      5,715       5,068
Separate accounts (see note 9) .........................................................      6,563       4,926
                                                                                           --------    --------
                                                                                           $ 77,259    $ 67,270
                                                                                           ========    ========

<FN>
<F1> Life  insurance  benefits are  accounted for mainly by a  net-level-premium
     method using estimated yields generally ranging from 5% to 9% in  both 1998
     and 1997.
<F2> Principally  property and  casualty  reserves;   includes  amounts for both
     reported   and  incurred-but-not-reported  claims,  reduced by  anticipated
     salvage and  subrogation recoveries.  Estimates of liabilities are reviewed
     and updated  continually,   with changes in estimated  losses  reflected in
     operations.
</FN>
</TABLE>

When the Corporation cedes insurance to third parties, it is not relieved of its
primary  obligation to policyholders.  Losses on ceded risks give rise to claims
for recovery; allowances are established for such receivables from reinsurers.

The insurance liability for unpaid claims and claims adjustment expenses related
to  policies  that may  cover  environmental,  asbestos  and  Year  2000-related
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, particularly with respect to Year
2000-related exposures,  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.


                                       35
<PAGE>

A summary of activity  affecting  unpaid claims and claims  adjustment  expenses
follows.

<TABLE>
<CAPTION>
(In millions)                                                                     1998        1997        1996 
                                                                               --------    --------    --------
<S>                <C>                                                         <C>         <C>         <C>     
Balance at January 1 - gross ...............................................   $ 14,654    $ 13,184    $ 12,662
Less reinsurance recoverables ..............................................     (2,246)     (1,822)     (1,853)
                                                                               --------    --------    --------
Balance at January 1 - net .................................................     12,408      11,362      10,809
Claims and expenses incurred:
 Current year ..............................................................      6,330       4,494       4,087
 Prior years ...............................................................       (162)        146         104
Claims and expenses paid:
 Current year ..............................................................     (2,400)     (1,780)     (1,357)
 Prior years ...............................................................     (3,692)     (2,816)     (2,373)
Claim reserves related to acquired companies ...............................      3,476       1,360         309
Other ......................................................................        168        (358)       (217)
                                                                               --------    --------    --------
Balance at December 31 - net ...............................................     16,128      12,408      11,362
Add reinsurance recoverables ...............................................      3,483       2,246       1,822
                                                                               --------    --------    --------
Balance at December 31 - gross .............................................   $ 19,611    $ 14,654    $ 13,184
                                                                               ========    ========    ========
</TABLE>

Prior-year  claims  and  expenses  incurred  in  the  preceding  table  resulted
principally  from settling  claims  established  in earlier  accident  years for
amounts that differed from expectations.

Financial  guarantees  and credit life risk of insurance  affiliates at December
31, 1998 and 1997, are summarized below.

<TABLE>
<CAPTION>
(In millions)                                                                                 1998        1997 
                                                                                           --------    --------
<S>                                                                                        <C>         <C>     
Guarantees, principally on municipal bonds and structured finance issues ...............   $171,020    $144,647
Mortgage insurance risk in force .......................................................     43,941      46,245
Credit life insurance risk in force ....................................................     31,018      26,593
Less reinsurance .......................................................................    (37,205)    (33,528)
                                                                                           --------    --------
                                                                                           $208,774    $183,957
                                                                                           ========    ========
</TABLE>

The effects of  reinsurance  on premiums  written and premiums  and  commissions
earned were as follows for the past three years.

<TABLE>
<CAPTION>

                                                   PREMIUMS WRITTEN             PREMIUMS AND COMMISSIONS EARNED
                                           --------------------------------    --------------------------------
(In millions)                                 1998        1997        1996        1998        1997        1996 
                                           --------    --------    --------    --------    --------    --------
<S>                                        <C>         <C>         <C>         <C>         <C>         <C>     
Direct .................................   $  6,237    $  5,206    $  3,926    $  6,063    $  5,138    $  3,850
Assumed ................................      7,470       5,501       5,455       7,151       5,386       5,353
Ceded ..................................     (1,842)     (1,311)     (1,196)     (1,862)     (1,256)     (1,058)
                                           --------    --------    --------    --------    --------    --------
Net ....................................   $ 11,865    $  9,396    $  8,185    $ 11,352    $  9,268    $  8,145
                                           ========    ========    ========    ========    ========    ========
</TABLE>

Reinsurance  recoveries  recognized  as a  reduction  of  insurance  losses  and
policyholder and annuity benefits  amounted to $1,594 million,  $903 million and
$937 million for the years ended December 31, 1998, 1997 and 1996, respectively.


                                       36
<PAGE>

NOTE 12.       MINORITY INTEREST

Minority interest in equity of consolidated  affiliates includes preferred stock
issued by GE Capital and by a subsidiary of GE Capital. The preferred stock pays
cumulative  dividends  at variable  rates.  The  liquidation  preference  of the
preferred shares at December 31, 1998 and 1997, is summarized below.

<TABLE>
<CAPTION>
(In millions)                                                                                 1998        1997 
                                                                                           --------    --------
<S>                                                                                        <C>         <C>     
GE Capital .............................................................................   $  2,300    $  2,230
GE Capital subsidiary ..................................................................        860         660
</TABLE>

Dividend rates on the preferred  stock ranged from 3.9% to 5.2% during 1998, and
from 3.8% to 5.2% during 1997 and 1996.


NOTE 13.       EQUITY

Changes in equity for each of the last three years were as follows:

<TABLE>
<CAPTION>
                                                                                         ACCUMULATED           
                                                                                           NONOWNER            
                                                                                            CHANGES            
                                         CUMULATIVE               ADDITIONAL                 OTHER             
                                          PREFERRED     COMMON     PAID-IN     RETAINED      THAN              
(In millions)                                STOCK       STOCK     CAPITAL     EARNINGS    EARNINGS      TOTAL 
                                           --------    --------    --------    --------    --------    --------
<S>                <C>                     <C>         <C>         <C>         <C>         <C>         <C>     
Balance at January 1, 1996 .............   $     10    $      1    $  2,314    $  9,518    $    931    $ 12,774
Capital contributions ..................       --          --             2        --          --             2
Net unrealized losses on
 investment securities <F1> ............       --          --          --          --          (321)       (321)
Currency translation adjustments <F2> ..       --          --          --          --           (15)        (15)
Net earnings ...........................       --          --          --         2,817        --         2,817
Dividends declared:
 Common stock ..........................       --          --          --          (980)       --          (980)
 Preferred stock .......................       --          --          --            (1)       --            (1)
                                           --------    --------    --------    --------    --------    --------
Balance at December 31, 1996 ...........         10           1       2,316      11,354         595      14,276

Capital contributions ..................       --          --            11        --          --            11
Net unrealized gains on
 investment securities <F1> ............       --          --          --          --         1,467       1,467
Currency translation adjustments <F2> ..       --          --          --          --          (112)       (112)
Net earnings ...........................       --          --          --         3,256        --         3,256
Dividends declared:
 Common stock ..........................       --          --          --        (1,658)       --        (1,658)
 Preferred stock .......................       --          --          --            (1)       --            (1)
                                           --------    --------    --------    --------    --------    --------
Balance at December 31, 1997 ...........         10           1       2,327      12,951       1,950      17,239

Capital contributions ..................       --          --           153        --          --           153
Net unrealized gains on
 investment securities <F1> ............       --          --          --          --           775         775
Currency translation adjustments <F2> ..       --          --          --          --           (30)        (30)
Reclassification adjustments <F3> ......       --          --          --          --          (534)       (534)
Net earnings ...........................       --          --          --         3,796        --         3,796
Dividends declared:
 Common stock ..........................       --          --          --        (1,671)       --        (1,671)
 Preferred stock .......................       --          --          --            (1)       --            (1)
                                           --------    --------    --------    --------    --------    --------
Balance at December 31, 1998 ...........   $     10    $      1    $  2,480    $ 15,075    $  2,161    $ 19,727
                                           ========    ========    ========    ========    ========    ========

<FN>
<F1> Presented net  of deferred  taxes of $432 million, $860 million  and ($204)
     million in 1998, 1997 and 1996, respectively.
<F2> Presented  net of  deferred  taxes of ($13) million, ($58) million and ($9)
     million in 1998, 1997 and 1996, respectively.
<F3> Presented net of deferred taxes of ($293) million.
</FN>
</TABLE>


                                       37
<PAGE>

General Electric Capital Services,  Inc.'s outstanding  preferred stock amounted
to $510  million at December  31,  1998,  all of which was held by  consolidated
affiliates  with  the  exception  of $10  million  of such  shares,  which  were
dividended  to GE  Company in 1994.  All other  equity is owned  entirely  by GE
Company.

Changes in fair value of available-for-sale investment securities are reflected,
net of applicable taxes and other adjustments,  in equity. The changes from year
to year were primarily attributable to the effects of changes in year-end market
interest rates on the fair value of the securities.

At December 31, 1998 and 1997,  the aggregate  statutory  capital and surplus of
the insurance businesses totaled $14.4 billion and $12.4 billion,  respectively.
Accounting practices  prescribed by statutory  authorities are used in preparing
statutory statements.


NOTE 14.       OPERATING AND ADMINISTRATIVE EXPENSES

Employees and retirees of the Corporation are covered under a number of pension,
health and life insurance  plans.  The principal  pension plan is the GE Company
Pension Plan, a defined  benefit plan,  while  employees of certain  affiliates,
including GE Global Insurance, are covered under separate plans. The Corporation
provides health and life insurance benefits to certain of its retired employees,
principally  through GE  Company's  benefit  program,  as well as through  plans
sponsored by GE Global  Insurance and other  affiliates.  The annual cost to the
Corporation of providing these benefits is not material.

Rental expense relating to equipment the Corporation  leases from others for the
purposes of subleasing  was $439 million in 1998,  $392 million in 1997 and $269
million in 1996.  Other rental expense was $450 million in 1998, $342 million in
1997 and $278  million in 1996,  principally  for the rental of office space and
data processing equipment. Minimum future rental commitments under noncancelable
leases at December  31, 1998,  are $720  million in 1999;  $636 million in 2000;
$582  million in 2001;  $519  million in 2002;  $468  million in 2003 and $2,243
million  thereafter.  The  Corporation,  as a  lessee,  has  no  material  lease
agreements classified as capital leases.

Amortization of deferred  insurance  acquisition  costs charged to operations in
1998,  1997 and 1996 was $1,940  million,  $1,554  million  and $1,671  million,
respectively.


NOTE 15.       INCOME TAXES

The provision for income taxes is summarized in the following table.

<TABLE>
<CAPTION>
(In millions)                                                                     1998        1997        1996 
                                                                               --------    --------    --------
<S>                                                                            <C>         <C>         <C>     
Estimated amounts payable ..................................................   $    815    $    368    $    164
Deferred tax expense from temporary differences ............................        549         798       1,067
                                                                               --------    --------    --------
                                                                               $  1,364    $  1,166    $  1,231
                                                                               ========    ========    ========
</TABLE>

GE Company files a  consolidated  U.S.  federal income tax return which includes
the  Corporation.  The provision for estimated taxes payable includes the effect
of the Corporation on the consolidated return.

Estimated amounts payable includes amounts applicable to non-U.S.  jurisdictions
of $813  million,  $636  million  and  $614  million  in 1998,  1997  and  1996,
respectively.

Deferred income tax balances reflect the impact 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.


                                       38
<PAGE>

Except  for  certain   earnings  that  the   Corporation   intends  to  reinvest
indefinitely,  provision has been made for the estimated U.S. federal income tax
liabilities  applicable to  undistributed  earnings of affiliates and associated
companies.  It is not  practicable  to  determine  the U.S.  federal  income tax
liability,  if any, that would be payable if such  earnings were not  reinvested
indefinitely.

U.S. income before taxes was $3.4 billion in 1998, $2.8 billion in 1997 and $2.6
billion in 1996. The  corresponding  amounts for non-U.S.  based operations were
$1.8 billion in 1998, $1.6 billion in 1997 and $1.5 billion in 1996.


A  reconciliation  of the U.S.  federal  statutory rate to the actual income tax
rate follows.

<TABLE>
<CAPTION>
                                                                                  1998        1997        1996 
                                                                               --------    --------    --------
<S>                                                                                <C>         <C>         <C>  
Statutory U.S. federal income tax rate .....................................       35.0%       35.0%       35.0%
Increase (reduction) in rate resulting from:
 Amortization of goodwill ..................................................        1.0         1.1         1.2
 Tax-exempt income .........................................................       (4.7)       (4.9)       (5.4)
 Foreign Sales Corporation tax benefits ....................................       (0.6)       (0.5)       (0.3)
 Dividends received, not fully taxable .....................................       (1.0)       (0.9)       (1.1)
 Fuels credits .............................................................       (1.8)       (1.6)       (0.8)
 Other - net ...............................................................       (1.5)       (1.8)        1.8
                                                                               --------    --------    --------
Actual income tax rate .....................................................       26.4%       26.4%       30.4%
                                                                               ========    ========    ========
</TABLE>

Principal  components of the net deferred tax liability balances at December 31,
1998 and 1997, were as follows:

<TABLE>
<CAPTION>
(In millions)                                                                                 1998        1997 
                                                                                           --------    --------
<S>                                                                                        <C>         <C>     
Assets:
 Allowance for losses ..................................................................   $  1,386    $  1,372
 Insurance reserves ....................................................................      1,022       1,000
 AMT credit carryforwards ..............................................................        903         354
 Other .................................................................................      1,994       1,594
                                                                                           --------    --------
Total deferred tax assets ..............................................................      5,305       4,320
                                                                                           --------    --------
Liabilities:
 Financing leases ......................................................................      8,593       7,909
 Operating leases ......................................................................      2,419       2,156
 Net unrealized gains on securities ....................................................      1,369       1,264
 Other .................................................................................      2,514       1,957
                                                                                           --------    --------
Total deferred tax liabilities .........................................................     14,895      13,286
                                                                                           --------    --------
Net deferred tax liability .............................................................   $  9,590    $  8,966
                                                                                           ========    ========
</TABLE>


NOTE 16.       OPERATING SEGMENT DATA

At year-end  1998, the  Corporation  adopted  Statement of Financial  Accounting
Standards  ("SFAS") No. 131,  Disclosures  about  Segments of an Enterprise  and
Related Information,  which requires segment data to be measured and analyzed on
a basis that is consistent with how business  activities are reported internally
for  management.  Prior period amounts have been restated in accordance with the
requirements  of the new  standard.  The  Corporation's  operating  segments are
organized based on the nature of products and services  provided.  A description
of the operating  segments can be found in Item 1. Business.,  under the heading
Operating Segments,  on page 2 of this report. The accounting policies for these
segments are the same as those described for the consolidated entity.

The Corporation evaluates the performance of its operating segments primarily on
the  basis of net  earnings.  Details  of total  revenues  and net  earnings  by
operating segment are provided in Item 7.  Management's  Discussion and Analysis



                                       39
<PAGE>

of Results of Operations.  Operating Segments,  in the tables on page 14 of this
report.  Other specific  information  is provided  below in accordance  with the
requirements  of SFAS 131 because  they are  included as a component  of overall
segment net earnings or total assets.

<TABLE>
<CAPTION>
(In millions)                              DEPRECIATION AND AMORTIZATION <F1>     PROVISION FOR INCOME TAXES   
                                           --------------------------------    --------------------------------
For the years ended December 31               1998        1997        1996        1998        1997        1996 
                                           --------    --------    --------    --------    --------    --------
<S>                                        <C>         <C>         <C>         <C>         <C>         <C>     
Consumer Services ......................   $    961    $    897    $    571    $    442    $    229    $    428
Equipment Management ...................      1,890       1,690       1,643         257         353         298
Mid-Market Financing ...................        405         398         400         239         198         174
Specialized Financing ..................         56          51          42          47         171         155
Specialty Insurance ....................        165         140         135         359         251         233
All other ..............................         91          64          14          20         (36)        (57)
                                           --------    --------    --------    --------    --------    --------
  Total ................................   $  3,568    $  3,240    $  2,805    $  1,364    $  1,166    $  1,231
                                           ========    ========    ========    ========    ========    ========

                                          TIME SALES, LOAN, INVESTMENT AND
                                                     OTHER INCOME <F2>                  INTEREST EXPENSE
                                           --------------------------------    --------------------------------
For the years ended December 31               1998        1997        1996        1998        1997        1996 
                                           --------    --------    --------    --------    --------    --------
Consumer Services ......................   $ 10,668    $  9,586    $  8,051    $  3,601    $  3,226    $  3,004
Equipment Management ...................      2,288       2,032       1,446       1,486       1,296       1,204
Mid-Market Financing ...................      1,719       1,160       1,065       1,674       1,276       1,172
Specialized Financing ..................      2,712       2,250       2,497       1,552       1,437       1,491
Specialty Insurance ....................      2,769       2,198       1,790         704         586         475
All other ..............................        143         497         (33)        (51)       (172)        (20)
                                           --------    --------    --------    --------    --------    --------
  Total ................................   $ 20,299    $ 17,723    $ 14,816    $  8,966    $  7,649    $  7,326
                                           ========    ========    ========    ========    ========    ========

                                                                                 PROPERTY, PLANT AND EQUIPMENT 
                                                                                ADDITIONS (INCLUDING EQUIPMENT 
                                                         ASSETS                       LEASED TO OTHERS) <F3>   
                                                     At December 31             For the years ended December 31
                                           --------------------------------    --------------------------------
                                              1998        1997        1996        1998        1997        1996 
                                           --------    --------    --------    --------    --------    --------
Consumer Services <F4> .................   $130,868    $117,410    $104,701    $  2,218    $  1,863    $  1,675
Equipment Management <F5> ..............     38,301      33,771      28,849       4,408       4,314       3,264
Mid-Market Financing ...................     41,802      29,315      25,991       1,316         978         696
Specialized Financing <F5> .............     36,906      28,959      28,236          88          36          36
Specialty Insurance ....................     54,649      45,359      40,005          53          65          42
All other ..............................        771         594        (363)         27          64          49
                                           --------    --------    --------    --------    --------    --------
  Total ................................   $303,297    $255,408    $227,419    $  8,110    $  7,320    $  5,762
                                           ========    ========    ========    ========    ========    ========

<FN>
<F1> Includes amortization of goodwill and other intangibles.
<F2> Principally interest income.
<F3> Additions  to property,  plant and equipment (including equipment leased to
     others) include amounts relating to principal businesses purchased.
<F4> In  1997, the  Corporation  recorded  its share of Montgomery  Ward Holding
     Corp.  ("MWHC")  losses  of  $380  million  (after tax),  by  reducing  its
     investments in MWHC,   resulting  in the writing off of its  investment  in
     MWHC common and preferred stock.
<F5> Total assets of the Equipment Management and Specialized Financing segments
     at  December   31,   1998,   include   investments   in  and   advances  to
     non-consolidated   affiliates  of  $2,937   million  and  $4,765   million,
     respectively,   which  contributed  approximately  $173  million  and  $295
     million,  respectively,  to  segment  pre-tax  income  for the  year  ended
     December 31, 1998.
</FN>
</TABLE>


                                       40
<PAGE>

NOTE 17.       QUARTERLY FINANCIAL DATA (UNAUDITED)

Summarized quarterly financial data were as follows:

<TABLE>
<CAPTION>
                                                                       FIRST QUARTER          SECOND QUARTER   
                                                                   --------------------    --------------------
(In millions)                                                         1998        1997        1998        1997 
                                                                   --------    --------    --------    --------
<S>                                                                <C>         <C>         <C>         <C>     
Revenues .......................................................   $ 11,151    $  9,544    $ 11,801    $  9,317
                                                                   --------    --------    --------    --------
Expenses:
 Interest ......................................................      2,025       1,783       2,187       1,862
 Operating and administrative and cost of goods sold ...........      4,640       3,524       4,949       3,380
 Insurance losses and policyholder and annuity benefits ........      2,213       2,244       2,400       2,012
 Provision for losses on financing receivables .................        332         312         409         337
 Depreciation and amortization of buildings and equipment and
  equipment on operating leases ................................        656         570         604         567
 Minority interest in net earnings of consolidated affiliates ..         33          30          33          21
                                                                   --------    --------    --------    --------
Earnings before income taxes ...................................      1,252       1,081       1,219       1,138
Provision for income taxes .....................................       (371)       (327)       (286)       (340)
                                                                   --------    --------    --------    --------
Net earnings ...................................................   $    881    $    754    $    933    $    798
                                                                   ========    ========    ========    ========

                                                                       THIRD QUARTER          FOURTH QUARTER   
                                                                   --------------------    --------------------
                                                                      1998        1997        1998        1997 
                                                                   --------    --------    --------    --------
Revenues .......................................................   $ 12,016    $ 10,182    $ 13,726    $ 10,888
                                                                   --------    --------    --------    --------
Expenses:
 Interest ......................................................      2,188       1,919       2,566       2,085
 Operating and administrative and cost of goods sold ...........      4,992       4,022       6,006       4,654
 Insurance losses and policyholder and annuity benefits ........      2,239       1,980       2,756       2,042
 Provision for losses on financing receivables .................        306         371         562         401
 Depreciation and amortization of buildings and equipment and
  equipment on operating leases ................................        669         628         687         695
 Minority interest in net earnings of consolidated affiliates ..         38          33          44          37
                                                                   --------    --------    --------    --------
Earnings before income taxes ...................................      1,584       1,229       1,105         974
Provision for income taxes .....................................       (502)       (291)       (205)       (208)
                                                                   --------    --------    --------    --------
Net earnings ...................................................   $  1,082    $    938    $    900    $    766
                                                                   ========    ========    ========    ========
</TABLE>


NOTE 18.       RESTRICTED NET ASSETS OF AFFILIATES

Certain  of  the  Corporation's  consolidated  affiliates  are  restricted  from
remitting  funds to the Parent 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 year-end  1998,  net assets of the
Corporation's  regulated  affiliates  amounted to $25.1 billion,  of which $21.9
billion was restricted.


NOTE 19.       SUPPLEMENTAL CASH FLOWS INFORMATION

"Other - net  operating  activities"  in the  Statement  of Cash Flows  consists
principally of adjustments to other liabilities, 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 such
as amortization of goodwill and intangibles.

The Statement of Cash Flows excludes  certain noncash  transactions  that had no
significant effect on the investing or financing activities of the Corporation.




                                       41
<PAGE>

Certain supplemental information related to the Corporation's cash flows were as
follows for the past three years.

<TABLE>
<CAPTION>
(In millions)                                                                     1998        1997        1996 
                                                                               --------    --------    --------
<S>                                                                            <C>         <C>         <C>     
FINANCING RECEIVABLES
Increase in loans to customers .............................................   $(76,142)   $(55,689)   $(49,890)
Principal collections from customers - loans ...............................     65,573      50,679      49,923
Investment in equipment for financing leases ...............................    (20,299)    (16,420)    (14,427)
Principal collections from customers - financing leases ....................     15,467      13,796      11,158
Net change in credit card receivables ......................................     (4,705)     (4,186)     (3,068)
Sales of financing receivables .............................................     13,805       9,922       4,026
                                                                               --------    --------    --------
                                                                               $ (6,301)   $ (1,898)   $ (2,278)
                                                                               ========    ========    ========

ALL OTHER INVESTING ACTIVITIES
Purchases of securities by insurance and annuity businesses ................   $(23,897)   $(19,274)   $(15,925)
Dispositions and maturities of securities by insurance and
 annuity businesses ........................................................     20,639      17,280      14,018
Proceeds from principal business dispositions ..............................       --           241        --
Other ......................................................................     (7,820)     (3,893)     (4,183)
                                                                               --------    --------    --------
                                                                               $(11,078)   $ (5,646)   $ (6,090)
                                                                               ========    ========    ========

NEWLY ISSUED DEBT HAVING MATURITIES LONGER THAN 90 DAYS
Short-term (91 to 365 days) ................................................   $  5,881    $  3,502    $  5,061
Long-term (longer than one year) ...........................................     33,453      15,566      17,245
Proceeds - nonrecourse, leveraged lease debt ...............................      2,106       1,757         595
                                                                               --------    --------    --------
                                                                               $ 41,440    $ 20,825    $ 22,901
                                                                               ========    ========    ========

REPAYMENTS AND OTHER REDUCTIONS OF DEBT HAVING MATURITIES LONGER
THAN 90 DAYS
Short-term (91 to 365 days) ................................................   $(25,901)   $(21,320)   $(23,355)
Long-term (longer than one year) ...........................................     (4,739)     (1,150)     (1,025)
Principal payments - nonrecourse, leveraged lease debt .....................       (387)       (287)       (276)
                                                                               --------    --------    --------
                                                                               $(31,027)   $(22,757)   $(24,656)
                                                                               ========    ========    ========

ALL OTHER FINANCING ACTIVITIES
Proceeds from sales of investment contracts ................................   $  5,149    $  4,717    $  2,561
Preferred stock issued by consolidated affiliates ..........................        270         605         155
Redemption of investment contracts .........................................     (5,533)     (4,537)     (2,688)
                                                                               --------    --------    --------
                                                                               $   (114)   $    785    $     28
                                                                               ========    ========    ========

CASH PAID DURING THE YEAR FOR:
Interest ...................................................................   $ (8,677)   $ (7,797)   $ (7,463)
Income taxes ...............................................................       (947)       (341)       (106)
</TABLE>

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


                                       42
<PAGE>

"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. In conjunction with the acquisitions,  liabilities were assumed as
follows:

<TABLE>
<CAPTION>
(In millions)                                                                     1998        1997        1996 
                                                                               --------    --------    --------
<S>                                                                            <C>         <C>         <C>     
Fair value of assets acquired ..............................................   $ 29,498    $ 15,190    $ 27,352
Cash paid ..................................................................    (18,405)     (4,736)     (4,849)
                                                                               --------    --------    --------
Liabilities assumed ........................................................   $ 11,093    $ 10,454    $ 22,503
                                                                               ========    ========    ========
</TABLE>


NOTE 20.       ADDITIONAL INFORMATION ABOUT FINANCIAL INSTRUMENTS

This note contains  estimated  fair values of certain  financial  instruments to
which the Corporation is a party.  Apart from the  Corporation's  own borrowings
and certain  marketable  securities,  relatively  few of these  instruments  are
actively traded. Thus, fair values must often be determined by using one or more
models that indicate value based on estimates of quantifiable characteristics as
of a particular date. Because this undertaking is, by its nature,  difficult and
highly judgmental,  for a limited number of instruments,  alternative  valuation
techniques may have produced  disclosed  values  different from those that could
have been realized at December 31, 1998 or 1997. Assets and liabilities that, as
a matter of  accounting  policy,  are  reflected in the  accompanying  financial
statements  at fair value are not included in the  following  disclosures;  such
items include cash and equivalents, investment securities and separate accounts.

A description of how values are estimated follows.

BORROWINGS. Based on quoted market prices or market comparables.  Fair values of
interest rate and currency swaps on borrowings are based on quoted market prices
and include the effects of counterparty creditworthiness.

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.

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.

FINANCIAL  GUARANTEES AND CREDIT LIFE.  Based on future cash flows,  considering
expected renewal premiums,  claims, refunds and servicing costs, discounted at a
market rate.

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



                                       43
<PAGE>


Information  about financial  instruments that were not carried at fair value at
December 31, 1998 and 1997, is shown below.

<TABLE>
<CAPTION>

                                                                                       1998                    
                                                                   --------------------------------------------
                                                                                     ASSETS (LIABILITIES)      
                                                                              ---------------------------------
                                                                             CARRYING      ESTIMATED FAIR VALUE
                                                                    NOTIONAL    AMOUNT     --------------------
(In millions)                                                        AMOUNT      (NET)        HIGH        LOW  
                                                                   --------------------    --------------------
<S>                                                                <C>         <C>         <C>         <C>     
Assets
 Time sales and loans ..........................................   $    <F1>   $ 74,616    $ 75,474    $ 74,293
 Integrated interest rate swaps ................................     14,135          16        (102)       (102)
 Purchased options .............................................     11,195         146         158         158
 Mortgage-related positions
  Mortgage purchase commitments ................................      1,983        --            15          15
  Mortgage sale commitments ....................................      3,276        --            (9)         (9)
  Mortgages held for sale ......................................        <F1>      4,405       4,457       4,457
  Options, including "floors" ..................................     21,433          91         181         181
  Interest rate swaps and futures ..............................      6,662        --            49          49
 Other cash financial instruments ..............................       <F1>       3,205       3,433       3,231

Liabilities
 Borrowings and related instruments
  Borrowings <F2> <F3> .........................................        <F1>   (172,200)   (174,492)   (174,492)
  Interest rate swaps ..........................................     46,325        --        (1,449)     (1,449)
  Currency swaps ...............................................     29,645        --           252         252
  Currency forwards ............................................     23,409        --          (389)       (389)
 Investment contract benefits ..................................        <F1>    (23,893)    (23,799)    (23,799)
 Insurance - financial guarantees and credit life ..............    208,774      (3,135)     (3,339)     (3,446)
 Credit and liquidity support - securitizations ................     21,703         (29)        (29)        (29)
 Performance guarantees - principally letters of credit ........      2,684        --          --          --   
 Other .........................................................      2,888      (1,921)     (1,190)     (1,190)

Other firm commitments
 Currency forwards .............................................      5,072        --           (52)        (52)
 Currency swaps ................................................        915          72          72          72
 Ordinary course of business lending commitments ...............      9,839        --           (12)        (12)
 Unused revolving credit lines
  Commercial ...................................................      6,401        --          --          --   
  Consumer - principally credit cards ..........................    132,475        --          --          --   


                                                                                       1997                    
                                                                   --------------------------------------------
                                                                                     ASSETS (LIABILITIES)      
                                                                              ---------------------------------
                                                                              CARRYING     ESTIMATED FAIR VALUE
                                                                    NOTIONAL    AMOUNT     --------------------
                                                                     AMOUNT      (NET)        HIGH        LOW  
                                                                   --------------------    --------------------
Assets
 Time sales and loans ..........................................   $    <F1>   $ 62,712    $ 63,105    $ 61,171
 Integrated interest rate swaps ................................     12,323          19        (125)       (125)
 Purchased options .............................................      1,992          64          39          39
 Mortgage-related positions
  Mortgage purchase commitments ................................      2,082        --            11          11
  Mortgage sale commitments ....................................      2,540        --            (9)         (9)
  Mortgages held for sale ......................................        <F1>      2,378       2,379       2,379
  Options, including "floors" ..................................     30,347          51         141         141
  Interest rate swaps and futures ..............................      3,681        --            23          23
 Other cash financial instruments ..............................        <F1>      2,242       2,592       2,349

Liabilities 
 Borrowings and related instruments
  Borrowings <F2> <F3> .........................................        <F1>   (141,263)   (141,828)   (141,828)
  Interest rate swaps ..........................................     42,531        --          (250)       (250)
  Currency swaps ...............................................     23,382        --        (1,249)     (1,249)
  Currency forwards ............................................     15,550        --           371         371
 Investment contract benefits ..................................        <F1>    (23,045)    (22,885)    (22,885)
 Insurance - financial guarantees and credit life ..............    183,957      (2,897)     (2,992)     (3,127)
 Credit and liquidity support - securitizations ................     13,634         (46)        (46)        (46)
 Performance guarantees - principally letters of credit ........      2,699         (34)       --           (67)
 Other .........................................................      3,147      (1,134)     (1,282)     (1,303)

Other firm commitments
 Currency forwards .............................................      1,744        --            11          11
 Currency swaps ................................................      1,073         192         192         192
 Ordinary course of business lending commitments ...............      7,891        --           (62)        (62)
 Unused revolving credit lines
  Commercial ...................................................      4,850        --          --          --   
  Consumer - principally credit cards ..........................    134,123        --          --          --   

<FN>
<F1> Not applicable.
<F2> Includes effects of interest rate and currency swaps, which also are listed
     separately.
<F3> See note 10.
</FN>
</TABLE>


Additional  information about certain  financial  instruments in the above table
follows.


                                       44
<PAGE>

CURRENCY  FORWARDS  AND  OPTIONS  are  employed  by the  Corporation  to  manage
exposures  to changes in currency  exchange  rates  associated  with  commercial
purchase and sale  transactions and to optimize  borrowing costs as discussed in
note  10.  These  financial  instruments  generally  are  used to fix the  local
currency cost of purchased  goods or services or selling  prices  denominated in
currencies other than the functional  currency.  Currency  exposures that result
from net  investments  in affiliates  are managed  principally by funding assets
denominated in local currency with debt denominated in those same currencies. In
certain  circumstances,  net  investment  exposures are managed  using  currency
forwards and currency swaps.

OPTIONS AND INSTRUMENTS  CONTAINING  OPTION FEATURES that behave based on limits
("caps",  "floors" or "collars") on interest rate movement are used primarily to
hedge prepayment risk in certain of the Corporation's business activities,  such
as mortgage servicing and annuities.

SWAPS OF INTEREST RATES AND  CURRENCIES are used by the  Corporation to optimize
borrowing costs for a particular  funding strategy (see note 10).  Interest rate
and currency swaps,  along with purchased  options and futures,  are used by the
Corporation  to  establish  specific  hedges of  mortgage-related  assets and to
manage net investment exposures.  Credit risk of these positions is evaluated by
management  under the credit  criteria  discussed  below. As part of its ongoing
customer activities,  the Corporation also enters into swaps that are integrated
into  investments  in, loans to or guarantees of the  obligations  of particular
customers and do not involve  assumption of  third-party  credit risk beyond the
risk previously  approved by the Corporation  with respect to such  investments,
loans or  guarantees.  Such  integrated  swaps are evaluated and monitored  like
their associated investments, loans or guarantees, and are not therefore subject
to the same credit criteria that would apply to a stand-alone position.

COUNTERPARTY  CREDIT RISK - risk that  counterparties will be financially unable
to make  payments  according to the terms of the  agreements - is the  principal
risk associated with swaps,  purchased options and forwards.  Gross market value
of probable  future  receipts is one way to measure this risk, but is meaningful
only in the context of net credit  exposure  to  individual  counterparties.  At
December 31, 1998 and 1997,  this gross market risk amounted to $2.3 billion and
$2.0 billion,  respectively.  Aggregate  fair values that  represent  associated
probable future obligations,  normally associated with a right of offset against
probable future receipts,  amounted to $3.6 billion and $2.9 billion at December
31, 1998 and 1997, respectively.

Except as noted above for positions that are  integrated  into  financings,  all
swaps,  purchased  options and  forwards  are  carried out within the  following
credit policy constraints.

     o   Once a  counterparty exceeds a credit exposure limit (see table below),
         no additional  transactions  are permitted until the exposure with that
         counterparty  is  reduced to an amount  that is within the  established
         limit. Open contracts remain in force.

<TABLE>
<CAPTION>
         COUNTERPARTY CREDIT CRITERIA                      CREDIT RATING        
                                                      -----------------------   
                                                                   STANDARD &   
                                                        MOODY'S      POOR'S     
                                                      ----------   ----------   
          <S>                                         <C>          <C>          
          Term of transaction
            Between one and five years ...........       Aa3           AA-
            Greater than five years ..............       Aaa           AAA
          Credit exposure limits
            Up to $50 million ....................       Aa3           AA-
            Up to $75 million ....................       Aaa           AAA
</TABLE>

     o   All swaps  are executed under master swap 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-.

More credit latitude is permitted for  transactions  having original  maturities
shorter than one year because of their lower risk.


                                       45
<PAGE>

NOTE 21.       GEOGRAPHIC SEGMENT INFORMATION

The table below  presents data by geographic  region.  Revenues  shown below are
classified according to their country of origin.

<TABLE>
<CAPTION>

                                                      REVENUES                         LONG-LIVED ASSETS       
                                            For the years ended December 31              At December 31        
                                           --------------------------------    --------------------------------
(In millions)                                 1998        1997        1996        1998        1997        1996 
                                           --------    --------    --------    --------    --------    --------
<S>                                        <C>         <C>         <C>         <C>         <C>         <C>     
United States ..........................   $ 30,498    $ 26,188    $ 21,105    $ 10,476    $  9,714    $  7,896
Europe .................................     13,072       9,490       7,891       3,614       2,727       2,005
Pacific Basin ..........................      1,418         940         693         625         270         157
Global <F1> ............................      1,682       1,669       1,651       8,160       7,543       7,094
Other <F2> .............................      2,024       1,644       1,373       1,161         944         811
                                           --------    --------    --------    --------    --------    --------
  Total ................................   $ 48,694    $ 39,931    $ 32,713    $ 24,036    $ 21,198    $ 17,963
                                           ========    ========    ========    ========    ========    ========

<FN>
<F1> Includes  operations  that cannot  meaningfully be associated with specific
     geographic areas (for example,  commercial aircraft and shipping containers
     used on ocean-going vessels).
<F2> Principally the Americas other than the United States.
</FN>
</TABLE>






                                       46
<PAGE>

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
          AND FINANCIAL DISCLOSURE.

                                 Not applicable



                                    PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

                                     Omitted


ITEM 11.  EXECUTIVE COMPENSATION.

                                     Omitted


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

                                     Omitted


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

                                     Omitted




                                       47
<PAGE>

                                     PART IV


ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a)  1.   FINANCIAL STATEMENTS
          Included in Part II of this report:
            Independent Auditors' Report
            Statement of Earnings for each of the years in the three-year period
             ended December 31, 1998
            Statement of Changes in Share Owners' Equity for  each of  the years
             in  the three-year period ended December 31, 1998
            Statement of Financial Position at December 31, 1998 and 1997
            Statement  of Cash  Flows for  each of the  years in the  three-year
             period ended  December 31, 1998
            Notes to  Consolidated  Financial Statements

          Incorporated by reference:
            The   consolidated   financial   statements  of   General   Electric
            Company,  set  forth in  the Annual  Report on  Form 10-K of General
            Electric  Company (S.E.C.  File  No. 001-00035) for  the  year ended
            December  31, 1998  (pages F-1 through F-44) and  Exhibit 12  (Ratio
            of Earnings to Fixed Charges) of General Electric Company.

(a)  2.   FINANCIAL STATEMENT SCHEDULES

          Schedule I.   Condensed financial information of registrant.

          Schedule  V.  Supplemental   information  concerning   property   and
                        casualty insurance operations.

          All   other   schedules  are   omitted   because  of  the  absence  of
          conditions  under  which  they  are  required or because the  required
          information is shown in  the financial statements  or  notes  thereto.

(a)  3.   EXHIBIT INDEX

          The  exhibits  listed below,  as  part of Form 10-K,  are  numbered in
          conformity  with the numbering used  in Item 601 of  Regulation S-K of
          the Securities and Exchange Commission.








                                       48
<PAGE>

EXHIBIT NUMBER                         DESCRIPTION                              
--------------                         -----------                              
    3 (i)      A  complete  copy of the  Certificate  of  Incorporation  of  the
               Corporation as last amended  on  February 10, 1993, and currently
               in effect.  (Incorporated  by  reference  to Exhibit 3(i) of  the
               Corporation's  Form 10-K Report for the  year ended  December 31,
               1993).

    3 (ii)     A  complete  copy  of  the By-Laws  of  the  Corporation  as last
               amended on June 30, 1994, and currently in effect.  (Incorporated
               by  reference  to Exhibit  3(ii) of  the  Corporation's Form 10-K
               Report for the year ended December 31, 1994).

    4 (a)      Agreement to furnish to the  Securities  and Exchange  Commission
               upon request a copy of instruments defining the rights of holders
               of certain long-term debt of  the registrant and all subsidiaries
               for which consolidated or unconsolidated financial statements are
               required to be filed.

    12 (a)     Computation of ratio of earnings to fixed charges.

    12 (b)     Computation  of ratio of earnings  to combined fixed  charges and
               preferred stock dividends.

    23 (ii)    Consent of KPMG LLP.

    24         Power of Attorney.

    27         Financial Data Schedule (filed electronically herewith).

    99 (a)     Income  Maintenance  Agreement  dated  March  28, 1991,   between
               General   Electric   Company   and   General   Electric   Capital
               Corporation.  (Incorporated  by reference to Exhibit  28  of  the
               Corporation's  Form  10-K Report  for the year ended December 31,
               1992).

    99 (b)     The  consolidated   financial  statements  of  General   Electric
               Company,  set forth in the Annual  Report on Form 10-K of General
               Electric  Company (S.E.C.  File No. 001-00035) for the year ended
               December  31,  1998,  (pages F-1  through  F-44) and   Exhibit 12
               (Ratio of Earnings to Fixed Charges) of General Electric Company.

    99 (c)     Item 1. Business -  Property  and  Casualty  Reserves for  Unpaid
               Claims and Claim  Expenses, set forth  in  the  Annual  Report on
               Form 10-K of GE Global Insurance Holding Corporation (S.E.C. File
               No.  0-27394) for  the   year  ended  December 31, 1998  (Pages 5
               through 10).

    99 (d)     Letter,  dated  February 4, 1999,  from  Dennis  D. Dammerman  of
               General Electric Company to Denis J. Nayden of  General  Electric
               Capital Corporation pursuant  to which  General Electric  Company
               agrees to provide additional equity to General  Electric  Capital
               Corporation   in  conjunction   with   certain    redemptions  by
               General Electric Capital Corporation of  shares of  its  Variable
               Cumulative  Preferred   Stock.   (Incorporated   by reference  to
               Exhibit  99 (g) to General Electric  Capital Corporation's  Post-
               Effective Amendment  No. 1 to Registration Statement on Form S-3,
               File No. 333-59707).

    (b)        REPORTS ON FORM 8-K

               None.


                                       49
<PAGE>

<TABLE>
<CAPTION>
       GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATED AFFILIATES

           SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                     GENERAL ELECTRIC CAPITAL SERVICES, INC.

              CONDENSED STATEMENT OF CURRENT AND RETAINED EARNINGS



For the years ended December 31 (In millions)                                     1998        1997        1996 
                                                                               --------    --------    --------
<S>                                                                            <C>         <C>         <C>     
REVENUES ...................................................................   $      1    $    237    $   --  
                                                                               --------    --------    --------
EXPENSES:
  Interest .................................................................        306         289         211
  Operating and administrative .............................................        234         445         372
                                                                               --------    --------    --------
Loss before income taxes and equity in earnings of affiliates ..............       (539)       (497)       (583)
Income tax benefit .........................................................        143         175         161
Equity in earnings of affiliates ...........................................      4,192       3,578       3,239
                                                                               --------    --------    --------

NET EARNINGS ...............................................................      3,796       3,256       2,817
Dividends paid .............................................................     (1,672)     (1,659)       (981)
Retained earnings at January 1 .............................................     12,951      11,354       9,518
                                                                               --------    --------    --------
RETAINED EARNINGS AT DECEMBER 31 ...........................................   $ 15,075    $ 12,951    $ 11,354
                                                                               ========    ========    ========
</TABLE>





See Notes to Condensed Financial Statements.





                                       50
<PAGE>

<TABLE>
<CAPTION>
       GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATED AFFILIATES

    SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT - (CONTINUED)

                     GENERAL ELECTRIC CAPITAL SERVICES, INC.

                    CONDENSED STATEMENT OF FINANCIAL POSITION


At December 31 (In millions)                                                                  1998        1997 
                                                                                           --------    --------
<S>                                                                                        <C>         <C>     
ASSETS
Cash and equivalents ...................................................................   $   --      $   --  
Receivables - net ......................................................................        308         208
Investment in and advances to affiliates ...............................................     26,611      21,877
                                                                                           --------    --------
  TOTAL ASSETS .........................................................................   $ 26,919    $ 22,085
                                                                                           ========    ========
LIABILITIES AND EQUITY
Short-term borrowings ..................................................................   $  6,018    $  3,575
Long-term borrowings ...................................................................        299         299
Accounts payable .......................................................................         72          34
Other liabilities ......................................................................        303         438
                                                                                           --------    --------
  Total liabilities ....................................................................      6,692       4,346
                                                                                           --------    --------
Cumulative preferred stock, $10,000 par value (80,000 shares authorized; 51,000
 shares issued and held primarily by affiliates at December 31, 1998 and 1997) .........        510         510
Common stock, $10,000 par value (101 shares authorized and outstanding) ................          1           1
Additional paid-in capital .............................................................      2,480       2,327
Retained earnings ......................................................................     15,075      12,951
Accumulated unrealized gains on investment securities held by affiliates - net <F1> ....      2,376       2,135
Accumulated foreign currency translation adjustments <F1> ..............................       (215)       (185)
                                                                                           --------    --------
  Total equity .........................................................................     20,227      17,739
                                                                                           --------    --------
  TOTAL LIABILITIES AND EQUITY .........................................................   $ 26,919    $ 22,085
                                                                                           ========    ========

<FN>
<F1> The sum of  accumulated  unrealized  gains  on  investment  securities held
     by affiliates and accumulated   foreign   currency  translation adjustments
     constitutes "Accumulated  nonowner  changes other than  earnings," and  was
     $2,161 million and $1,950 million at  year-end 1998 and 1997, respectively.
</FN>
</TABLE>


See Notes to Condensed Financial Statements.





                                       51
<PAGE>

<TABLE>
<CAPTION>
       GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATED AFFILIATES

    SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT - (CONTINUED)

                     GENERAL ELECTRIC CAPITAL SERVICES, INC.

                        CONDENSED STATEMENT OF CASH FLOWS



For the years end December 31 (In millions)                                       1998        1997        1996 
                                                                               --------    --------    --------
<S>                                                                            <C>         <C>         <C>     
CASH FROM OPERATING ACTIVITIES .............................................   $    669    $  1,414    $    510
                                                                               --------    --------    --------
CASH FLOWS FROM INVESTING ACTIVITIES
Change in investment and advances to affiliates ............................     (1,339)         59          79
Net change in investment securities ........................................       --          --            70
Net change in receivables ..................................................       (101)        (44)       (114)
                                                                               --------    --------    --------
  Cash from (used for) investing activities ................................     (1,440)         15          35
                                                                               --------    --------    --------

CASH FLOWS FROM FINANCING ACTIVITIES
Net change in borrowings (less than 90-day maturities) .....................      2,443         223         416
Newly issued debt - long-term subordinated .................................       --          --          --
Dividends paid .............................................................     (1,672)     (1,659)       (981)
                                                                               --------    --------    --------
  Cash from (used for) for financing activities ............................        771      (1,436)       (565)
                                                                               --------    --------    --------

DECREASE IN CASH AND EQUIVALENTS DURING THE YEAR ...........................       --            (7)        (20)
CASH AND EQUIVALENTS AT BEGINNING OF YEAR ..................................       --             7          27
                                                                               --------    --------    --------
CASH AND EQUIVALENTS AT END OF YEAR ........................................   $   --      $   --      $      7
                                                                               ========    ========    ========
</TABLE>


See Notes to Condensed Financial Statements.




                                       52
<PAGE>

       GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATED AFFILIATES

    SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT - (CONCLUDED)

                     GENERAL ELECTRIC CAPITAL SERVICES, INC.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS



INCOME TAXES

General  Electric  Company files a consolidated  U.S.  federal income tax return
which includes General Electric Capital Services,  Inc. ("GE Capital Services").
Income  tax  benefit   includes  the  effect  of  GE  Capital  Services  on  the
consolidated return.


DIVIDENDS FROM AFFILIATES

In 1998 and 1997,  GE Capital  Services  received  dividends of $363 million and
$315 million,  respectively,  from GE Global Insurance  Holding  Corporation and
$798 million and $1,468 million,  respectively,  from General  Electric  Capital
Corporation ("GE Capital").






                                       53
<PAGE>

<TABLE>
<CAPTION>
       GENERAL ELECTRIC CAPITAL SERVICES, INC. AND CONSOLIDATED AFFILIATES

                SCHEDULE V - SUPPLEMENTAL INFORMATION CONCERNING
                   PROPERTY AND CASUALTY INSURANCE OPERATIONS

                                  (in millions)



                   AT DECEMBER 31                                             YEAR ENDED DECEMBER 31
       ----------------------------------------    --------------------------------------------------------------------------------
                           DISCOUNT
                           DEDUCTED
                             FROM 
                LIABILITY  LIABILITY                                        CLAIMS AND CLAIMS                                      
               FOR UNPAID FOR UNPAID                                       ADJUSTMENT EXPENSES   AMORTIZATION                      
     DEFERRED  CLAIMS AND CLAIMS AND                EARNED                 INCURRED RELATED TO:  OF DEFERRED  PAID CLAIMS          
       POLICY      CLAIMS    CLAIMS                PREMIUMS       NET      --------------------     POLICY    AND CLAIMS           
  ACQUISITION  ADJUSTMENT ADJUSTMENT   UNEARNED      AND      INVESTMENT    CURRENT      PRIOR   ACQUISITION  ADJUSTMENT   PREMIUMS
        COSTS    EXPENSES  EXPENSES    PREMIUMS  COMMISSIONS    INCOME       YEAR        YEARS       COSTS     EXPENSES     WRITTEN
       ------    --------    ------    --------    --------    --------    --------    --------    --------    --------    --------
<S>    <C>       <C>         <C>       <C>         <C>         <C>         <C>         <C>         <C>         <C>         <C>     
1998   $1,079    $ 18,396    $  354    $  4,293    $  7,183    $  1,327    $  4,508    $   (186)   $  1,635    $  4,641    $  7,490
       ======    ========    ======    ========    ========    ========    ========    ========    ========    ========    ========

1997   $  853    $ 13,672    $  347    $  3,653    $  5,702    $  1,185    $  3,355    $    124    $  1,365    $  3,505    $  5,645
       ======    ========    ======    ========    ========    ========    ========    ========    ========    ========    ========

1996   $  817    $ 12,266    $  397    $  3,345    $  5,671    $  1,162    $  3,619    $     90    $  1,087    $  3,266    $  5,761
       ======    ========    ======    ========    ========    ========    ========    ========    ========    ========    ========
</TABLE>






                                       54
<PAGE>


                                                                    EXHIBIT 4(a)



                                                                  March 25, 1999


Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C.  20549


Subject:   General  Electric Capital  Services, Inc.  Annual Report on Form 10-K
           for the fiscal year ended December 31, 1998 - File No. 0-14804


Dear Sirs:

Neither General Electric Capital Services,  Inc. (the  "Corporation") nor any of
its  subsidiaries  has  outstanding any instrument with respect to its long-term
debt that is not  registered  or filed with the  Commission  and under which the
total  amount of  securities  authorized  exceeds 10% of the total assets of the
registrant and its  subsidiaries  on a consolidated  basis.  In accordance  with
paragraph (b) (4) (iii) of Item 601 of Regulation S-K (17 CFR  ss.229.601),  the
Corporation hereby agrees to furnish to the Securities and Exchange  Commission,
upon request,  a copy of each instrument  which defines the rights of holders of
such long-term debt.

                                    Very truly yours,

                                    GENERAL ELECTRIC CAPITAL SERVICES, INC.


                                    By:  /s/  J.A. Parke
                                         ----------------------------------
                                         J.A. Parke,
                                         Senior Vice President, Finance





                                       55
<PAGE>

                                                                  EXHIBIT 12 (a)
<TABLE>
<CAPTION>
                     GENERAL ELECTRIC CAPITAL SERVICES, INC.
                           AND CONSOLIDATED AFFILIATES

                COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES


                                                                          YEARS ENDED DECEMBER 31
                                                       --------------------------------------------------------
(Dollar amounts in millions)                              1998        1997        1996        1995        1994 
                                                       --------    --------    --------    --------    --------
<S>                                                    <C>         <C>         <C>         <C>         <C>     
Earnings from continuing operations ................   $  3,796    $  3,256    $  2,817    $  2,415    $  2,085
Provision for income taxes .........................      1,364       1,166       1,231       1,105         864
Minority interest ..................................        148         121         167         140         139
                                                       --------    --------    --------    --------    --------
Earnings before income taxes and minority interest .      5,308       4,543       4,215       3,660       3,088
                                                       --------    --------    --------    --------    --------
Fixed charges:
 Interest ..........................................      9,122       7,762       7,402       6,731       4,598
 One-third of rentals ..............................        296         245         182         175         156
                                                       --------    --------    --------    --------    --------
Total fixed charges ................................      9,418       8,007       7,584       6,906       4,754
                                                       --------    --------    --------    --------    --------
Less interest capitalized, net of amortization .....         88          52          41          21           9
                                                       --------    --------    --------    --------    --------
Earnings before income taxes and minority
 interest, plus fixed charges ......................   $ 14,638    $ 12,498    $ 11,758    $ 10,545    $  7,833
                                                       ========    ========    ========    ========    ========
Ratio of earnings to fixed charges .................       1.55        1.56        1.55        1.53        1.65
                                                       ========    ========    ========    ========    ========
</TABLE>





                                       56
<PAGE>

                                                                  EXHIBIT 12 (b)
<TABLE>
<CAPTION>

                     GENERAL ELECTRIC CAPITAL SERVICES, INC.
                           AND CONSOLIDATED AFFILIATES

           COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
                          AND PREFERRED STOCK DIVIDENDS


                                                                          YEARS ENDED DECEMBER 31
                                                       --------------------------------------------------------
(Dollar amounts in millions)                              1998        1997        1996        1995        1994 
                                                       --------    --------    --------    --------    --------
<S>                                                    <C>         <C>         <C>         <C>         <C>     
Earnings from continuing operations ................   $  3,796    $  3,256    $  2,817    $  2,415    $  2,085
Provision for income taxes .........................      1,364       1,166       1,231       1,105         864
Minority interest ..................................        148         121         167         140         139
                                                       --------    --------    --------    --------    --------
Earnings before income taxes and minority interest .      5,308       4,543       4,215       3,660       3,088
                                                       --------    --------    --------    --------    --------
Fixed charges:
 Interest ..........................................      9,122       7,762       7,402       6,731       4,598
 One-third of rentals ..............................        296         245         182         175         156
                                                       --------    --------    --------    --------    --------
Total fixed charges ................................      9,418       8,007       7,584       6,906       4,754
                                                       --------    --------    --------    --------    --------
Less interest capitalized, net of amortization .....         88          52          41          21           9
                                                       --------    --------    --------    --------    --------
Earnings before income taxes and minority
 interest, plus fixed charges ......................   $ 14,638    $ 12,498    $ 11,758    $ 10,545    $  7,833
                                                       ========    ========    ========    ========    ========

Preferred stock dividend requirements ..............   $      1    $      1    $      1    $      1    $      1

Ratio of earnings from continuing operations
 before provisions for income taxes to earnings
 from continuing operations ........................       1.36        1.36        1.44        1.46        1.41
                                                       --------    --------    --------    --------    --------
Preferred stock dividend factor on pre-tax basis ...          1           1           1           1           1
Fixed charges ......................................      9,418       8,007       7,584       6,906       4,754
                                                       --------    --------    --------    --------    --------
Total fixed charges and preferred stock dividend
 requirements ......................................   $  9,419    $  8,008    $  7,585    $  6,907    $  4,755
                                                       ========    ========    ========    ========    ========
Ratio of earnings to combined fixed charges and
 preferred stock dividends .........................       1.55        1.56        1.55        1.53        1.65
                                                       ========    ========    ========    ========    ========
</TABLE>





                                       57
<PAGE>

                                                                 EXHIBIT 23 (ii)


To the Board of Directors
General Electric Capital Services, Inc.:


We consent to  incorporation  by reference in the  Registration  Statement  (No.
33-7348) on Form S-3 of General Electric Capital  Services,  Inc., of our report
dated  February 12,  1999,  relating to the  statement of financial  position of
General  Electric  Capital  Services,  Inc. and  consolidated  affiliates  as of
December 31, 1998 and 1997, and the related  statements of earnings,  changes in
share  owners'  equity  and cash  flows for each of the years in the  three-year
period ended December 31, 1998, and related  schedules,  which report appears in
the December  31, 1998 annual  report on Form 10-K of General  Electric  Capital
Services, Inc.



/s/ KPMG LLP

Stamford, Connecticut
March 25, 1999







                                       58
<PAGE>

                                                                      EXHIBIT 24


                                POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS,  that each of the  undersigned,  being directors
and/or  officers  of  General  Electric  Capital  Services,   Inc.,  a  Delaware
corporation  (the  "Corporation"),  hereby  constitutes  and appoints  Dennis D.
Dammerman,  James A. Parke,  Joan C. Amble and Nancy E. Barton and each of them,
his true and lawful  attorney-in-fact and agent, with full power of substitution
and  resubstitution,  for him and in his  name,  place  and stead in any and all
capacities, to sign one or more Annual Reports for the Corporation's fiscal year
ended December 31, 1998, on Form 10-K under the Securities Exchange Act of 1934,
as amended,  or such other form as such  attorney-in-fact  may deem necessary or
desirable, any amendments thereto, and all additional amendments thereto in such
form as they or any one of them  may  approve,  and to file  the  same  with all
exhibits thereto and other documents in connection therewith with the Securities
and Exchange Commission,  granting unto said  attorneys-in-fact  and agents, and
each of them,  full power and authority to do and perform each and every act and
thing  requisite  and necessary to be done to the end that such Annual Report or
Annual  Reports  shall  comply  with the  Securities  Exchange  Act of 1934,  as
amended, and the applicable Rules and Regulations of the Securities and Exchange
Commission  adopted or issued pursuant thereto,  as fully and to all intents and
purposes as he might or could do in person,  hereby ratifying and confirming all
that  said  attorneys-in-fact  and  agents,  or  any of  them  or  their  or his
substitute  or  resubstitute,  may  lawfully  do or cause  to be done by  virtue
hereof.

IN WITNESS WHEREOF,  each of the undersigned has hereunto set his hand this 25th
day of March, 1999.



/s/ Dennis D. Dammerman                          /s/ James A. Parke            
-----------------------------                    ------------------------------
Dennis D. Dammerman,                             James A. Parke,               
Chairman of the Board                            Senior Vice President, Finance
and Chief Executive Officer                      (Principal Financial Officer) 
(Principal Executive Officer)



                          /s/ Joan C. Amble             
                          ------------------------------
                          Joan C. Amble,                
                          Vice President and Controller 
                          (Principal Accounting Officer)




                                                                   (Page 1 of 2)



                                       59
<PAGE>


/s/ Kaj Ahlmann                                    /s/ Robert L. Nardelli
-----------------------------                      -----------------------------
Kaj Ahlmann,                                       Robert L. Nardelli,
Director                                           Director


/s/ Nigel D.T. Andrews                             /s/ Denis J. Nayden          
-----------------------------                      -----------------------------
Nigel D.T. Andrews,                                Denis J. Nayden,             
Director                                           Director                     


/s/ James R. Bunt                                  /s/ Michael A. Neal
-----------------------------                      -----------------------------
James R. Bunt,                                     Michael A. Neal,
Director                                           Director


/s/ David M. Cote                                  /s/ John M. Samuels
-----------------------------                      -----------------------------
David M. Cote,                                     John M. Samuels,
Director                                           Director


/s/ Benjamin W. Heineman, Jr.                      /s/ Keith S. Sherin
-----------------------------                      -----------------------------
Benjamin W. Heineman, Jr.,                         Keith S. Sherin,
Director                                           Director


/s/ Jeffrey R. Immelt                                                           
-----------------------------                      -----------------------------
Jeffrey R. Immelt,                                 Edward D. Stewart,
Director                                           Director


/s/ W. James McNerney, Jr.                         /s/ John F. Welch, Jr.
-----------------------------                      -----------------------------
W. James McNerney, Jr.,                            John F. Welch, Jr.,
Director                                           Director


/s/ John H. Myers
-----------------------------
John H. Myers,
Director



A MAJORITY OF THE BOARD OF DIRECTORS



                                                                   (Page 2 of 2)

                                       60
<PAGE>

                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                         GENERAL ELECTRIC CAPITAL SERVICES, INC.

March 25, 1999                           By: /s/ Dennis D. Dammerman
                                             -----------------------------------
                                                    (Dennis D. Dammerman)
                                                    Chairman of the Board

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities and on the date indicated.

        Signature                    Title                         Date         
        ---------                    -----                         ----         
/s/ Dennis D. Dammerman    Chairman of the Board              March 25, 1999    
------------------------   and Chief Executive Officer                          
 (Dennis D. Dammerman)     (Principal Executive Officer)                        


/s/ James A. Parke         Senior Vice President, Finance     March 25, 1999    
------------------------   (Principal Financial Officer)                        
   (James A. Parke)                                                             


/s/ Joan C. Amble          Vice President and Controller      March 25, 1999
------------------------   (Principal Accounting Officer)                       
   (Joan C. Amble)                                                              



KAJ AHLMANN*                             Director
NIGEL D.T. ANDREWS*                      Director
JAMES R. BUNT*                           Director
DAVID M. COTE*                           Director
BENJAMIN W. HEINEMAN, JR.*               Director
JEFFREY R. IMMELT*                       Director
W. JAMES McNERNEY, JR.*                  Director
JOHN H. MYERS*                           Director
ROBERT L. NARDELLI*                      Director
DENIS J. NAYDEN*                         Director
MICHAEL A. NEAL*                         Director
JOHN M. SAMUELS*                         Director
KEITH S. SHERIN*                         Director
JOHN F. WELCH, JR.*                      Director


A MAJORITY OF THE BOARD OF DIRECTORS

*By:  /s/ Joan C. Amble                                       March 25, 1999
      --------------------------
         (Joan C. Amble)
        Attorney-in-fact



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