-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Kx1zhC+kszBS7eERk6icRes/Vl2YCGoqHi7aLuXRQkZwaodNRadVBXFSNtLfjTdr iln0oL/GFIC4xfoqYWFD1Q== 0000040554-99-000031.txt : 19990330 0000040554-99-000031.hdr.sgml : 19990330 ACCESSION NUMBER: 0000040554-99-000031 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENERAL ELECTRIC CAPITAL CORP CENTRAL INDEX KEY: 0000040554 STANDARD INDUSTRIAL CLASSIFICATION: PERSONAL CREDIT INSTITUTIONS [6141] IRS NUMBER: 131500700 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-22265 FILM NUMBER: 99576687 BUSINESS ADDRESS: STREET 1: 260 LONG RIDGE RD CITY: STAMFORD STATE: CT ZIP: 06927 BUSINESS PHONE: 2033574000 MAIL ADDRESS: STREET 1: 260 LONG RIDGE ROAD CITY: STAMFORD STATE: CT ZIP: 06927 FORMER COMPANY: FORMER CONFORMED NAME: GENERAL ELECTRIC CREDIT CORP DATE OF NAME CHANGE: 19871216 10-K405 1 FORM 10-K 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 1-6461 ------------------------ GENERAL ELECTRIC CAPITAL CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) NEW YORK 13-1500700 (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 7/8% GUARANTEED SUBORDINATED NEW YORK STOCK EXCHANGE NOTES DUE DECEMBER 1, 2006 SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE. 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, 3,837,825 shares of voting common stock, which constitute all of the outstanding common equity, with a par value of $200 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. 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. 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 .............. 46 PART III Item 10. Directors and Executive Officers of the Registrant ... 46 Item 11. Executive Compensation ............................... 46 Item 12. Security Ownership of Certain Beneficial Owners and Management ...................................... 46 Item 13. Certain Relationships and Related Transactions ....... 46 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ......................................... 47 PART I ITEM 1. BUSINESS. GENERAL General Electric Capital Corporation (herein, together with its consolidated affiliates, called "the Corporation" or "GE Capital" unless the context otherwise requires) 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. Until November 1987, the name of the Corporation was General Electric Credit Corporation. All outstanding common stock of the Corporation is owned by General Electric Capital Services, Inc. ("GE Capital Services"), formerly General Electric Financial Services, Inc., the common stock of which is in turn wholly owned by General Electric Company ("GE Company"). The business of the Corporation 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 the Corporation are offered primarily in the United States, Canada, Europe and the Pacific Basin. The Corporation's principal executive offices are located at 260 Long Ridge Road, Stamford, Connecticut 06927 (Telephone number (203) 357-4000). At December 31, 1998, the Corporation employed approximately 82,600 persons. The Corporation's principal assets are classified as time sales and loans, investment in financing leases, equipment on operating leases and investment securities. The following table presents, by operating segment, these principal financing products which, together with other assets, constitute the Corporation's total assets at December 31, 1998 and 1997. 1
TOTAL ASSETS BY OPERATING SEGMENT (In millions) 1998 -------------------------------------------------------------------- NET TIME INVESTMENT SALES AND NET IN ALLOWANCE LOANS, INVESTMENT EQUIPMENT FOR LOSSES NET OF IN ON AND ALL DEFERRED FINANCING OPERATING INVESTMENT OTHER TOTAL INCOME LEASES LEASES SECURITIES ASSETS ASSETS -------- -------- -------- -------- -------- -------- CONSUMER SERVICES GE Financial Assurance ................ $ 3,025 $ -- $ -- $ 37,972 $ 16,070 $ 57,067 Auto Financial Services ............... 2,946 10,496 1,913 5 781 16,141 Auto Financial Services Europe ........ 6,550 1,349 11 60 1,758 9,728 GE Card Services ...................... 9,907 -- -- 80 2,529 12,516 Global Consumer Finance ............... 17,587 1,695 -- 462 4,483 24,227 Mortgage Services ..................... 343 -- -- 594 6,070 7,007 Other ................................. 2,215 608 189 537 626 4,175 -------- -------- -------- -------- -------- -------- Total ............................... 42,573 14,148 2,113 39,710 32,317 130,861 EQUIPMENT MANAGEMENT Aviation Services ..................... 459 3,210 6,499 118 1,294 11,580 Fleet Services ........................ 89 3,254 1,722 -- 1,227 6,292 Information Technology Solutions ...... -- 197 31 -- 3,908 4,136 Transport International Pool .......... 75 20 3,418 -- 1,458 4,971 GE SeaCo/GE Capital Container Finance Corporation .................. 24 235 1,608 27 163 2,057 Penske Truck Leasing .................. -- -- -- 30 2,559 2,589 GE American Communications ............ 160 -- -- -- 2,007 2,167 Railcar Services ...................... -- 426 1,908 -- 124 2,458 Modular Space ......................... 42 81 1,021 -- 508 1,652 Other ................................. -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- Total ............................... 849 7,423 16,207 175 13,248 37,902 MID-MARKET FINANCING Commercial Equipment Financing ........ 13,412 10,039 1,784 110 1,329 26,674 Vendor Financial Services ............. 1,998 3,867 236 1 894 6,996 European Equipment Finance ............ 620 5,556 20 -- 653 6,849 Other ................................. 1,035 87 3 16 108 1,249 -------- -------- -------- -------- -------- -------- Total ............................... 17,065 19,549 2,043 127 2,984 41,768 SPECIALIZED FINANCING Real Estate ........................... 7,200 1,563 -- 163 5,940 14,866 Structured Finance Group .............. 1,899 4,910 506 932 1,580 9,827 Commercial Finance .................... 6,983 14 -- 56 1,685 8,738 GE Equity ............................. 49 -- -- 43 1,445 1,537 Other ................................. 73 -- -- 742 24 839 -------- -------- -------- -------- -------- -------- Total ............................... 16,204 6,487 506 1,936 10,674 35,807 SPECIALTY INSURANCE .................... 103 -- -- 14,470 4,782 19,355 ALL OTHER .............................. -- (71) 72 857 2,499 3,357 -------- -------- -------- -------- -------- -------- TOTAL ............................... $ 76,794 $ 47,536 $ 20,941 $ 57,275 $ 66,504 $269,050 ======== ======== ======== ======== ======== ======== 1997 -------------------------------------------------------------------- NET TIME INVESTMENT SALES AND NET IN ALLOWANCE LOANS, INVESTMENT EQUIPMENT FOR LOSSES NET OF IN ON AND ALL DEFERRED FINANCING OPERATING INVESTMENT OTHER TOTAL INCOME LEASES LEASES SECURITIES ASSETS ASSETS -------- -------- -------- -------- -------- -------- CONSUMER SERVICES GE Financial Assurance ................ $ 2,724 $ -- $ -- $ 35,690 $ 13,213 $ 51,627 Auto Financial Services ............... 2,543 10,681 2,795 4 689 16,712 Auto Financial Services Europe ........ 4,875 1,417 -- 55 1,863 8,210 GE Card Services ...................... 17,146 -- -- 40 1,192 18,378 Global Consumer Finance ............... 10,922 1,053 (9) 55 1,051 13,072 Mortgage Services ..................... 764 -- -- 689 4,443 5,896 Other ................................. 1,555 560 157 715 528 3,515 -------- -------- -------- -------- -------- -------- Total ............................... 40,529 13,711 2,943 37,248 22,979 117,410 EQUIPMENT MANAGEMENT Aviation Services ..................... 257 3,162 5,559 374 813 10,165 Fleet Services ........................ 1 3,033 1,444 -- 1,147 5,625 Information Technology Solutions ...... 22 172 24 -- 3,620 3,838 Transport International Pool .......... 31 62 2,396 -- 1,165 3,654 GE SeaCo/GE Capital Container Finance Corporation .................. -- 330 1,971 -- 250 2,551 Penske Truck Leasing .................. -- -- -- 30 2,127 2,157 GE American Communications ............ -- -- -- -- 1,531 1,531 Railcar Services ...................... -- 270 1,595 -- 147 2,012 Modular Space ......................... 16 82 797 -- 452 1,347 Other ................................. -- 24 163 -- 336 523 -------- -------- -------- -------- -------- -------- Total ............................... 327 7,135 13,949 404 11,588 33,403 MID-MARKET FINANCING Commercial Equipment Financing ........ 7,112 8,145 1,085 64 703 17,109 Vendor Financial Services ............. 1,395 3,310 239 2 636 5,582 European Equipment Finance ............ 377 4,349 15 -- 537 5,278 Other ................................. 1,127 89 3 16 111 1,346 -------- -------- -------- -------- -------- -------- Total ............................... 10,011 15,893 1,342 82 1,987 29,315 SPECIALIZED FINANCING Real Estate ........................... 7,930 42 -- 303 4,639 12,914 Structured Finance Group .............. 1,334 5,049 532 1,412 1,299 9,626 Commercial Finance .................... 4,411 15 -- 173 379 4,978 GE Equity ............................. 53 -- -- 35 1,005 1,093 Other ................................. 35 -- -- 152 12 199 -------- -------- -------- -------- -------- -------- Total ............................... 13,763 5,106 532 2,075 7,334 28,810 SPECIALTY INSURANCE .................... 202 -- -- 12,583 4,975 17,760 ALL OTHER .............................. -- (76) (77) 711 1,521 2,079 -------- -------- -------- -------- -------- -------- TOTAL ............................... $ 64,832 $ 41,769 $ 18,689 $ 53,103 $ 50,384 $228,777 ======== ======== ======== ======== ======== ========
2 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 - 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. 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. 3 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. 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 4 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. 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. 5 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. 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. 6 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. 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. 7 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. 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. 8 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 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 9 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 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 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 10 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. ITEM 2. PROPERTIES. The Corporation conducts its business 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 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 Capital Services 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 and consolidated affiliates and the related Notes to Consolidated Financial Statements.
YEAR ENDED DECEMBER 31 -------------------------------------------------------- (Dollar amounts in millions) 1998 1997 1996 1995 1994 -------- -------- -------- -------- -------- Revenues ........................................... $ 41,405 $ 33,404 $ 26,570 $ 21,179 $ 16,923 Net earnings ....................................... 3,374 2,729 2,632 2,261 1,918 Return on common equity .................. 20.33% 18.62% 20.18% 19.89% 19.59% Ratio of earnings to fixed charges ................. 1.50 1.48 1.53 1.51 1.63 Ratio of earnings to combined fixed charges and preferred stock dividends ..................... 1.48 1.46 1.51 1.49 1.62 Ratio of debt to equity ............................ 7.86 7.45 7.84 7.59 8.43 Financing receivables - net ........................ $121,058 $103,799 $ 99,714 $ 93,272 $ 76,357 Total assets ....................................... 269,050 228,777 200,816 160,825 130,904 Short-term borrowings .............................. 107,419 91,680 74,971 59,264 54,579 Long-term senior notes ............................. 57,486 44,437 46,124 47,794 33,615 Long-term subordinated notes ....................... 697 697 697 697 697 Minority interest .................................. 1,137 860 679 703 615 Equity ............................................. 21,069 18,373 15,526 14,202 10,540 Equity excludes unrealized gains and losses on investment securities, net of tax. Earnings are adjusted for preferred stock dividends and equity excludes preferred stock.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS. OVERVIEW The Corporation's net earnings were $3.374 billion in 1998, which, after payment of dividends on its variable cumulative preferred stock, resulted in a contribution of $3.277 billion to GE Capital Services' 1998 net earnings, an increase of 24% over 1997. The Corporation's net earnings for 1997 were $2.729 billion, which, after payment of dividends on its variable cumulative preferred stock, resulted in a contribution of $2.651 billion to GE Capital Services' 1997 net earnings, an increase of 4% over 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. 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 1997 were also affected by increased automobile residual losses. These matters were partially offset in 1997 by the effects of higher asset gains, including securitizations. 12 OPERATING RESULTS TOTAL REVENUES increased 24% to $41.4 billion in 1998, following a 26% increase to $33.4 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 $8.6 billion, 18% 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 5.90% in 1998, compared with 6.05% in 1997 and 6.24% in 1996. See page 16 for a discussion of interest rate risk management. OPERATING AND ADMINISTRATIVE expenses were $11.7 billion in 1998, an increase from $9.5 billion in 1997 and $7.6 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 costs that vary directly with increased revenues. INSURANCE LOSSES AND POLICYHOLDER AND ANNUITY BENEFITS increased to $5.5 billion in 1998, compared with $4.8 billion in 1997 and $3.2 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 $2.4 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 $1.2 billion in 1998 (an effective tax rate of 26.0%), compared with $1.0 billion in 1997 (an effective tax rate of 26.8%) and $1.2 billion in 1996 (an effective tax rate of 30.8%). 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 Revenues and net earnings of the Corporation, by operating segment, for the past three years are summarized and discussed below.
(In millions) 1998 1997 1996 -------- -------- -------- REVENUES Consumer Services .......................................................... $ 15,939 $ 13,549 $ 11,108 Equipment Management ....................................................... 14,821 11,280 7,682 Mid-Market Financing ....................................................... 3,751 3,009 2,781 Specialized Financing ...................................................... 3,300 2,770 2,935 Specialty Insurance ........................................................ 3,437 2,838 2,084 All other .................................................................. 157 (42) (20) -------- -------- -------- Total revenues ............................................................. $ 41,405 $ 33,404 $ 26,570 ======== ======== ======== NET EARNINGS Consumer Services .......................................................... $ 797 $ 546 $ 795 Equipment Management ....................................................... 806 708 603 Mid-Market Financing ....................................................... 478 391 362 Specialized Financing ...................................................... 740 591 566 Specialty Insurance ........................................................ 479 396 310 All other .................................................................. 74 97 (4) -------- -------- -------- Total net earnings ......................................................... $ 3,374 $ 2,729 $ 2,632 ======== ======== ========
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 the Corporation. Asset growth in several of the other consumer services businesses also contributed to the increase in 1998. Net earnings increased 46% 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 25% 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 6% in 1997, primarily as a result of lower investment levels. Net earnings increased 4% in 1997, reflecting asset gains and lower levels of asset write-offs. Specialty Insurance revenues increased 21% in 1998, following a 36% increase in 1997. The increases in both years primarily resulted from increased investment income the result of continued growth in the investment portfolios, as well as a higher level of realized gains on investment securities. The increases also reflected the 1997 contribution of 14 assets of Consolidated Insurance Group, a component of Consolidated Financial Insurance, from GE Capital Services to the Corporation. Net earnings increased 21% in 1998 and 28% in 1997, primarily reflecting improved conditions in the Mortgage Insurance business, the result of improvements in loss experience, and increased investment income. 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 $14.9 billion in 1998, an increase of 39% from $10.7 billion in 1997. International assets grew 38%, from $68.5 billion at year-end 1997 to $94.6 billion at the end of 1998. Revenues in Europe increased 52% 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 $4.2 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. 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 $121.1 billion at year-end 1998, net of allowance for doubtful accounts, up $17.3 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 $17.8 billion and $11.9 billion at December 31, 1998 and 1997, respectively. Of the 1998 increase, $2.1 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. 15 INTANGIBLE ASSETS were $12.0 billion at year-end 1998, up from $9.5 billion at year-end 1997. The $2.6 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 $33.2 billion at year-end 1998, compared with $24.0 billion at the end of 1997. The $9.2 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 $54.4 billion at year-end 1998, $4.2 billion higher than in 1997. The increase was primarily attributable to the increase in separate accounts and acquisitions. For additional information on these liabilities, see note 11 to the consolidated financial statements. BORROWINGS were $165.6 billion at December 31, 1998, of which $107.4 billion is due in 1999 and $58.2 billion is due in subsequent years. Comparable amounts at the end of 1997 were $136.8 billion total, $91.7 billion due within one year and $45.1 billion due thereafter. The Corporation's composite interest rates are discussed on page 13. A large portion of the Corporation's borrowings ($81.0 billion and $67.6 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. The average remaining terms and interest rates of the Corporation's 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 Corporation's 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 $700 million 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 $38.1 billion. New borrowings of $84.6 billion having maturities longer than 90 days were added during those years, while $77.8 billion of such longer-term borrowings were retired. The Corporation also generated $27.2 billion of cash from continuing operating activities during the last three years. The Corporation's principal use of cash has been investing in assets to grow its businesses. Of the $67.8 billion that the Corporation invested in continuing operations over the past three years, $10.3 billion was used for additions to financing receivables; $18.5 billion was used to invest in new equipment, principally for lease to others; and $24.2 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 16 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 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. 17 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.
COUNTERPARTY CREDIT CRITERIA CREDIT RATING ----------------------- STANDARD & MOODY'S POOR'S ---------- ---------- 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
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.
PERCENTAGE OF NOTIONAL DERIVATIVE EXPOSURE BY COUNTERPARTY CREDIT RATING - ------------------------------------------------------------------------------- MOODY'S/STANDARD & POOR'S 1998 1997 1996 - ------------------------- -------- -------- -------- Aaa/AAA .................................... 66% 75% 78% Aa/AA ...................................... 32% 20% 17% A/A and below .............................. 2% 5% 5%
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
SPREAD OVER U.S. TREASURIES IN BASIS POINTS COUNTERPARTY ------------- ------------ 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
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 $95 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 $100 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 asset of the Corporation and one of its primary sources of revenues. The portfolio of financing receivables, before allowance for losses, increased to $124.3 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. 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- 19 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:
(In millions) 1998 1997 -------- -------- 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
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 $72.7 billion at December 31, 1998, consisted of a diverse commercial, industrial and equipment loan and lease portfolio. This portfolio increased $14.2 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. The Corporation's 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. 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. 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. The Corporation's 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. The Corporation's 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. 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 20 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 $265 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 16-19. 21 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. INDEPENDENT AUDITORS' REPORT To the Board of Directors General Electric Capital Corporation: We have audited the consolidated financial statements of General Electric Capital Corporation 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 schedule listed in Item 14. These consolidated financial statements and the financial statement schedule are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these consolidated financial statements and the financial statement schedule 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 Corporation 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 schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. /s/ KPMG LLP Stamford, Connecticut February 12, 1999 22
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES STATEMENT OF EARNINGS For the years ended December 31 (In millions) 1998 1997 1996 -------- -------- -------- REVENUES Time sales, loan and other income .......................................... $ 14,518 $ 11,877 $ 11,305 Operating lease rentals .................................................... 5,402 4,819 4,341 Financing leases ........................................................... 4,267 3,499 3,485 Investment income .......................................................... 4,184 4,071 2,377 Premium and commission income of insurance affiliates (Note 11) ............ 5,660 4,516 3,136 Sales of goods ............................................................. 7,374 4,622 1,926 -------- -------- -------- Total revenues ........................................................... 41,405 33,404 26,570 -------- -------- -------- EXPENSES Interest ................................................................... 8,618 7,330 7,042 Operating and administrative (Note 14) ..................................... 11,663 9,472 7,565 Insurance losses and policyholder and annuity benefits (Note 11) ........... 5,544 4,825 3,183 Cost of goods sold ......................................................... 6,777 4,147 1,720 Provision for losses on financing receivables (Note 4) ..................... 1,601 1,421 1,033 Depreciation and amortization of buildings and equipment and equipment on operating leases (Notes 6 & 7) ............................... 2,594 2,443 2,137 Minority interest in net earnings of consolidated affiliates ............... 49 40 86 -------- -------- -------- Total expenses ........................................................... 36,846 29,678 22,766 -------- -------- -------- Earnings before income taxes ............................................... 4,559 3,726 3,804 Provision for income taxes (Note 15) ....................................... (1,185) (997) (1,172) -------- -------- -------- NET EARNINGS ............................................................... $ 3,374 $ 2,729 $ 2,632 ======== ======== ========
STATEMENT OF CHANGES IN SHARE OWNERS' EQUITY (In millions) 1998 1997 1996 -------- -------- -------- CHANGES IN SHARE OWNERS' EQUITY Balance at January 1 ....................................................... $ 18,373 $ 15,526 $ 14,202 -------- -------- -------- Dividends and other transactions with share owners (Note 13) ............... (706) (826) (889) -------- -------- -------- Changes other than transactions with share owners: Increases attributable to net earnings .................................... 3,374 2,729 2,632 Unrealized gains (losses) on investment securities - net (Note 13) ........ 22 996 (394) Currency translation adjustments (Note 13) ................................ 6 (52) (25) -------- -------- -------- Total changes other than transactions with share owners .................. 3,402 3,673 2,213 -------- -------- -------- Balance at December 31 ..................................................... $ 21,069 $ 18,373 $ 15,526 ======== ======== ========
See Notes to Consolidated Financial Statements. 23
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES STATEMENT OF FINANCIAL POSITION At December 31 (In millions) 1998 1997 -------- -------- ASSETS Cash and equivalents ................................................................... $ 3,080 $ 4,648 Investment securities (Note 2) ......................................................... 57,275 53,103 Financing receivables (Note 3): Time sales and loans, net of deferred income ......................................... 76,794 64,832 Investment in financing leases, net of deferred income ............................... 47,536 41,769 -------- -------- 124,330 106,601 Allowance for losses on financing receivables (Note 4) ............................... (3,272) (2,802) -------- -------- Financing receivables - net ........................................................ 121,058 103,799 Other receivables - net (Note 5) ....................................................... 17,837 11,925 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 $1,654 and $1,421 (Note 7) ....................................................................... 2,876 2,335 Intangible assets - net (Note 8) ....................................................... 12,033 9,459 Other assets (Note 9) .................................................................. 33,206 24,033 -------- -------- TOTAL ASSETS ......................................................................... $269,050 $228,777 ======== ======== LIABILITIES AND SHARE OWNERS' EQUITY Short-term borrowings (Note 10) ........................................................ $107,419 $ 91,680 Long-term borrowings (Note 10) ......................................................... 58,183 45,134 -------- -------- Total borrowings ..................................................................... 165,602 136,814 Accounts payable ....................................................................... 7,974 6,003 Insurance liabilities, reserves and annuity benefits (Note 11) ........................ 54,435 50,248 Other liabilities ...................................................................... 9,934 8,312 Deferred income taxes (Note 15) ........................................................ 8,899 8,167 -------- -------- Total liabilities .................................................................... 246,844 209,544 -------- -------- Minority interest in equity of consolidated affiliates (Note 12) ....................... 1,137 860 -------- -------- Variable cumulative preferred stock, $100 par value, liquidation preference $100,000 per share (28,000 and 23,000 shares authorized, 23,000 and 22,300 shares outstanding, at December 31, 1998 and 1997, respectively) ...................... 2 2 Common stock, $200 par value (3,866,000 shares authorized and 3,837,825 shares outstanding at December 31, 1998 and 1997, respectively) .............................. 768 768 Additional paid-in capital ............................................................. 4,933 4,744 Retained earnings ...................................................................... 14,340 11,861 Accumulated unrealized gains on investment securities - net ....................... 1,167 1,145 Accumulated foreign currency translation adjustments .............................. (141) (147) -------- -------- Total share owners' equity (Note 13) ................................................. 21,069 18,373 -------- -------- TOTAL LIABILITIES AND SHARE OWNERS' EQUITY ........................................... $269,050 $228,777 ======== ======== 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 $1,026 million and $998 million at year-end 1998 and 1997, respectively.
See Notes to Consolidated Financial Statements. 24
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES STATEMENT OF CASH FLOWS For the years ended December 31 (In millions) 1998 1997 1996 -------- -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Net earnings ............................................................... $ 3,374 $ 2,729 $ 2,632 Adjustments to reconcile net earnings to cash provided from operating activities: Provision for losses on financing receivables ............................ 1,601 1,421 1,033 Increase in insurance liabilities, reserves and annuity benefits ......... 2,466 1,825 1,373 Decrease (increase) in inventories ....................................... 81 (244) (58) Increase in deferred income taxes ........................................ 601 588 1,025 Depreciation and amortization of buildings and equipment and equipment on operating leases ........................................... 2,594 2,443 2,137 Amortization of goodwill and other intangibles ........................... 858 695 561 Increase in accounts payable ............................................. 1,491 138 422 Other - net .............................................................. (1,392) (3,477) 292 -------- -------- -------- Cash from operating activities ............................................ 11,674 6,118 9,417 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Net increase in financing receivables (Note 19) ............................ (6,117) (1,898) (2,278) Buildings and equipment and equipment on operating leases - additions ............................................................... (6,942) (6,160) (5,348) - dispositions ............................................................ 4,027 2,209 1,326 Payments for principal businesses purchased, net of cash acquired .......... (15,959) (3,820) (4,385) All other investing activities (Note 19) ................................... (11,877) (5,163) (5,405) -------- -------- -------- Cash used for investing activities ........................................ (36,868) (14,832) (16,090) -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Net change in borrowings (maturities of 90 days or less) ................... 14,160 12,964 10,996 Newly issued debt (maturities longer than 90 days) (Note 19) ............... 41,440 20,825 22,345 Repayments and other reductions (maturities longer than 90 days) (Note 19) (31,027) (22,757) (24,056) Dividends paid ............................................................. (895) (1,540) (891) Issuance of variable cumulative preferred stock in excess of par value ..... 70 430 -- Issuance of variable cumulative preferred stock by consolidated affiliate .. 200 175 125 All other financing activities (Note 19) ................................... (322) 191 (88) -------- -------- -------- Cash from financing activities ............................................ 23,626 10,288 8,431 -------- -------- -------- INCREASE (DECREASE) IN CASH AND EQUIVALENTS DURING THE YEAR ................ (1,568) 1,574 1,758 CASH AND EQUIVALENTS AT BEGINNING OF YEAR .................................. 4,648 3,074 1,316 -------- -------- -------- CASH AND EQUIVALENTS AT END OF YEAR ........................................ $ 3,080 $ 4,648 $ 3,074 ======== ======== ========
See Notes to Consolidated Financial Statements. 25 GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONSOLIDATION - The consolidated financial statements represent the adding together of General Electric Capital Corporation ("the Parent") and all of its majority-owned and controlled affiliates ("consolidated affiliates"), (collectively called "the Corporation"). All outstanding common stock of the Parent is owned by General Electric Capital Services, Inc. ("GE Capital Services"), all of whose common stock is owned by General Electric Company ("GE Company"). All significant transactions among the Parent 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 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. 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, 27 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 making 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 NOTE 2. INVESTMENT SECURITIES A summary of investment securities follows:
GROSS GROSS AMORTIZED UNREALIZED UNREALIZED ESTIMATED (In millions) COST GAINS LOSSES FAIR VALUE -------- -------- -------- -------- DECEMBER 31, 1998 Debt securities: U.S. corporate ................................................ $ 24,858 $ 1,194 $ (306) $ 25,746 State and municipal ........................................... 6,295 336 (6) 6,625 Mortgage-backed ............................................... 8,877 319 (99) 9,097 Corporate - non-U.S. .......................................... 6,429 311 (84) 6,656 Government - non-U.S. ......................................... 2,538 41 (7) 2,572 U.S. government and federal agency ............................ 1,543 187 (4) 1,726 Equity securities .............................................. 4,652 321 (120) 4,853 -------- -------- -------- -------- $ 55,192 $ 2,709 $ (626) $ 57,275 ======== ======== ======== ======== DECEMBER 31, 1997 Debt securities: U.S. corporate ................................................ $ 22,308 $ 972 $ (49) $ 23,231 State and municipal ........................................... 5,235 290 (l) 5,524 Mortgage-backed ............................................... 9,777 255 (27) 10,005 Corporate - non-U.S. .......................................... 5,953 258 (6) 6,205 Government - non-U.S. ......................................... 1,257 30 -- 1,287 U.S. government and federal agency ............................ 1,838 86 (3) 1,921 Equity securities .............................................. 4,617 367 (54) 4,930 -------- -------- -------- -------- $ 50,985 $ 2,258 $ (140) $ 53,103 ======== ======== ======== ========
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:
AMORTIZED ESTIMATED (In millions) COST FAIR VALUE -------- -------- Due in: 1999 .................................................................................. $ 4,212 $ 4,411 2000-2003 ............................................................................. 10,390 10,605 2004-2008 ............................................................................. 8,012 8,242 2009 and later ........................................................................ 19,049 20,067
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 $11,092 million ($8,485 million in 1997 and $5,375 million in 1996). Gross realized gains were $589 million in 1998 ($618 million in 1997 and $321 million in 1996). Gross realized losses were $198 million in 1998 ($81 million in 1997 and $96 million in 1996). 29 NOTE 3. FINANCING RECEIVABLES Financing receivables at December 31, 1998 and 1997, are shown below.
(In millions) 1998 1997 -------- -------- Time sales and loans: Consumer Services ..................................................................... $ 44,680 $ 42,270 Mid-Market Financing .................................................................. 20,240 11,401 Specialized Financing ................................................................. 16,320 13,974 Equipment Management .................................................................. 1,066 469 Specialty Insurance ................................................................... 103 202 -------- -------- 82,409 68,316 Deferred income ........................................................................ (5,615) (3,484) -------- -------- Time sales and loans - net of deferred income ........................................ 76,794 64,832 -------- -------- Investment in financing leases: Direct financing leases ............................................................... 43,695 38,616 Leveraged leases ...................................................................... 3,841 3,153 -------- -------- Investment in financing leases ....................................................... 47,536 41,769 -------- -------- 124,330 106,601 Less allowance for losses (Note 4) ..................................................... (3,272) (2,802) -------- -------- $121,058 $103,799 ======== ========
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 $12,858 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 $30,643 million in 1999; $14,807 million in 2000; $9,448 million in 2001; $6,675 million in 2002; $5,465 million in 2003 and $15,371 million thereafter - aggregating $82,409 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 The Corporation's net investment in financing leases at December 31, 1998 and 1997, is shown below.
TOTAL DIRECT FINANCING LEASES FINANCING LEASES LEVERAGED LEASES -------------------- -------------------- -------------------- (In millions) 1998 1997 1998 1997 1998 1997 -------- -------- -------- -------- -------- -------- Total minimum lease payments receivable $ 66,513 $ 58,543 $ 47,436 $ 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 ............... 51,337 46,446 47,436 42,901 3,901 3,545 Estimated unguaranteed residual value of leased assets ..................... 6,806 5,591 4,991 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 ....... 47,536 41,769 43,695 38,616 3,841 3,153 Less: Allowance for losses ............ (619) (656) (519) (575) (100) (81) Deferred taxes arising from financing leases ............... (8,583) (7,909) (5,137) (4,671) (3,446) (3,238) -------- -------- -------- -------- -------- -------- Net investment in financing leases ..... $ 38,334 $ 33,204 $ 38,039 $ 33,370 $ 295 $ (166) ======== ======== ======== ======== ======== ========
At December 31, 1998, contractual maturities for net rentals receivable under financing leases were $14,088 million in 1999; $12,083 million in 2000; $8,944 million in 2001; $4,360 million in 2002; $2,758 million in 2003 and $9,104 million thereafter - aggregating $51,337 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. An analysis of impaired loans at December 31, 1998 and 1997 is shown below.
(In millions) 1998 1997 -------- -------- Loans requiring allowance for losses ................................................... $ 343 $ 339 Loans expected to be fully recoverable ................................................. 158 167 -------- -------- $ 501 $ 506 ======== ======== Allowance for losses ................................................................... $ 109 $ 170 Average investment during year ......................................................... 512 647 Interest income earned while impaired ............................................. 39 32 Principally on the cash basis.
31 NOTE 4. ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES
(In millions) 1998 1997 1996 -------- -------- -------- Balance at January 1 ....................................................... $ 2,802 $ 2,693 $ 2,519 Provisions charged to operations ........................................... 1,601 1,421 1,033 Net transfers primarily related to companies acquired or sold .............. 377 127 139 Amounts written off - net .................................................. (1,508) (1,439) (998) -------- -------- -------- Balance at December 31 ..................................................... $ 3,272 $ 2,802 $ 2,693 ======== ======== ========
NOTE 5. OTHER RECEIVABLES At year-end 1998 and 1997, this account included reinsurance recoverables of $2,188 million and $2,206 million and insurance-related receivables of $2,627 million and $1,830 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.
(In millions) 1998 1997 -------- -------- 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 ======== ========
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-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). 32 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 $409 million in 1998, $341 million in 1997 and $289 million in 1996. NOTE 8. INTANGIBLE ASSETS Intangible assets at December 31, 1998 and 1997, are shown in the table below.
(In millions) 1998 1997 -------- -------- Goodwill ............................................................................... $ 10,143 $ 7,368 Present value of future profits ("PVFP") ............................................... 1,479 1,671 Other intangibles ...................................................................... 411 420 -------- -------- $ 12,033 $ 9,459 ======== ========
The Corporation's intangible assets are shown net of accumulated amortization of $2,763 million at December 31, 1998, and $2,098 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.
(In millions) 1998 1997 -------- -------- Investments: Assets acquired for resale ............................................................ $ 6,164 $ 4,403 Investments in and advances to associated companies ................................... 7,495 4,626 Real estate ventures .................................................................. 3,131 2,326 Other ................................................................................. 2,935 1,986 -------- -------- 19,725 13,341 Separate accounts ...................................................................... 6,476 4,851 Servicing assets ....................................................................... 1,606 1,710 Deferred insurance acquisition costs ................................................... 2,115 1,671 Other .................................................................................. 3,284 2,460 -------- -------- $ 33,206 $ 24,033 ======== ========
Separate accounts represent investments controlled by policyholders and are associated with identical amounts reported as insurance liabilities in note 11. 33 NOTE 10. BORROWINGS Total short-term borrowings at December 31, 1998 and 1997, consisted of the following:
1998 1997 -------------------- -------------------- AVERAGE AVERAGE (Dollars in millions) AMOUNT RATE AMOUNT RATE -------- -------- -------- -------- Commercial paper - U.S. ........................................ $ 77,076 5.38% $ 63,819 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 .......................................................... 11,745 8,881 -------- -------- $107,419 $ 91,680 ======== ======== Total long-term borrowings at December 31, 1998 and 1997, were as follows: 1998 AVERAGE RATE (Dollars in millions) MATURITIES 1998 1997 -------- -------- -------- -------- Senior notes ................................................... 6.04% 2000-2055 $ 57,486 $ 44,437 Subordinated notes ........................................ 8.04 2006-2012 697 697 -------- -------- $ 58,183 $ 45,134 ======== ======== 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. Guaranteed by GE Company.
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 $3.4 billion and $1.5 billion of these credit lines were also available for use by GE Capital Services and GE Company, respectively. 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 or GE Capital Services. 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 The following table shows the Corporation's borrowing positions at December 31, 1998 and 1997, considering the effects of swaps.
(In millions) 1998 1997 -------- -------- EFFECTIVE BORROWINGS (INCLUDING SWAPS) Short-term ............................................................................. $ 68,001 $ 53,366 ======== ======== Long-term (including current portion) Fixed rate ....................................................................... $ 71,770 $ 58,474 Floating rate ......................................................................... 25,831 24,974 -------- -------- Total long-term ........................................................................ $ 97,601 $ 83,448 ======== ======== 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.
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 6.01% (6.29% 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.
(In millions) 1998 1997 -------- -------- Investment contracts and universal life benefits ....................................... $ 26,995 $ 25,961 Life insurance benefits and other ................................................. 13,725 11,967 Unpaid claims and claims adjustment expenses ...................................... 3,721 3,670 Unearned premiums ...................................................................... 3,518 3,799 Separate accounts (see note 9) ......................................................... 6,476 4,851 -------- -------- $ 54,435 $ 50,248 ======== ======== 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. 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.
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. 35 A summary of activity affecting unpaid claims and claims adjustment expenses follows.
(In millions) 1998 1997 1996 -------- -------- -------- Balance at January 1 - gross ............................................... $ 3,670 $ 1,907 $ 1,432 Less reinsurance recoverables .............................................. (438) (117) (76) -------- -------- -------- Balance at January 1 - net ................................................. 3,232 1,790 1,356 Claims and expenses incurred: Current year .............................................................. 2,469 1,989 1,230 Prior years ............................................................... (184) 61 29 Claims and expenses paid: Current year .............................................................. (1,222) (1,144) (541) Prior years ............................................................... (1,176) (902) (614) Claim reserves related to acquired companies ............................... 6 1,360 309 Other ...................................................................... 18 78 21 -------- -------- -------- Balance at December 31 - net ............................................... 3,143 3,232 1,790 Add reinsurance recoverables ............................................... 578 438 117 -------- -------- -------- Balance at December 31 - gross ............................................. $ 3,721 $ 3,670 $ 1,907 ======== ======== ========
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.
(In millions) 1998 1997 -------- -------- Guarantees, principally on municipal bonds and structured finance issues ............... $166,576 $140,077 Mortgage insurance risk in force ....................................................... 43,939 46,243 Credit life insurance risk in force .................................................... 31,018 26,593 Less reinsurance ....................................................................... (37,184) (33,503) -------- -------- $204,349 $179,410 ======== ========
The effects of reinsurance on premiums written and premiums and commissions earned were as follows for the past three years.
PREMIUMS WRITTEN PREMIUMS AND COMMISSIONS EARNED -------------------------------- -------------------------------- (In millions) 1998 1997 1996 1998 1997 1996 -------- -------- -------- -------- -------- -------- Direct ................................. $ 5,696 $ 4,541 $ 3,175 $ 5,547 $ 4,500 $ 3,126 Assumed ................................ 817 502 534 885 479 380 Ceded .................................. (698) (493) (493) (772) (463) (370) -------- -------- -------- -------- -------- -------- Net .................................... $ 5,815 $ 4,550 $ 3,216 $ 5,660 $ 4,516 $ 3,136 ======== ======== ======== ======== ======== ========
Reinsurance recoveries recognized as a reduction of insurance losses and policyholder and annuity benefits amounted to $396 million, $334 million and $286 million for the years ended December 31, 1998, 1997 and 1996, respectively. 36 NOTE 12. MINORITY INTEREST Minority interest in equity of consolidated affiliates includes preferred stock issued by a subsidiary with a liquidation preference value of $860 million and $660 million as of December 31, 1998 and 1997, respectively. Dividend rates on the preferred stock ranged from 3.9% to 4.6% during 1998, from 3.8% to 4.5% during 1997, and from 3.8% to 4.3% during 1996. NOTE 13. EQUITY Changes in equity for each of the last three years were as follows:
ACCUMULATED NONOWNER VARIABLE CHANGES CUMULATIVE ADDITIONAL OTHER PREFERRED COMMON PAID-IN RETAINED THAN (In millions) STOCK STOCK CAPITAL EARNINGS EARNINGS TOTAL -------- -------- -------- -------- -------- -------- Balance at January 1, 1996 ............. $ 2 $ 768 $ 4,022 $ 8,937 $ 473 $ 14,202 Capital contributions .................. -- -- 2 -- -- 2 Net unrealized losses on investment securities ............ -- -- -- -- (394) (394) Currency translation adjustments .. -- -- -- -- (25) (25) Net earnings ........................... -- -- -- 2,632 -- 2,632 Dividends declared: Common stock .......................... -- -- -- (815) -- (815) Preferred stock ....................... -- -- -- (76) -- (76) -------- -------- -------- -------- -------- -------- Balance at December 31, 1996 ........... 2 768 4,024 10,678 54 15,526 Capital contributions .................. -- -- 290 -- -- 290 Preferred stock issued ................. -- -- 430 -- -- 430 Net unrealized gains on investment securities ............ -- -- -- -- 996 996 Currency translation adjustments .. -- -- -- -- (52) (52) Net earnings ........................... -- -- -- 2,729 -- 2,729 Dividends declared: Common stock .......................... -- -- -- (1,468) -- (1,468) Preferred stock ....................... -- -- -- (78) -- (78) -------- -------- -------- -------- -------- -------- Balance at December 31, 1997 ........... 2 768 4,744 11,861 998 18,373 Capital contributions .................. -- -- 119 -- -- 119 Preferred stock issued ................. -- -- 70 -- -- 70 Net unrealized gains on investment securities ............ -- -- -- -- 276 276 Currency translation adjustments .. -- -- -- -- 6 6 Reclassification adjustments ...... -- -- -- -- (254) (254) Net earnings ........................... -- -- -- 3,374 -- 3,374 Dividends declared: Common stock .......................... -- -- -- (798) -- (798) Preferred stock ....................... -- -- -- (97) -- (97) -------- -------- -------- -------- -------- -------- Balance at December 31, 1998 ........... $ 2 $ 768 $ 4,933 $ 14,340 $ 1,026 $ 21,069 ======== ======== ======== ======== ======== ======== Presented net of deferred taxes of $139 million, $663 million and ($265) million in 1998, 1997 and 1996, respectively. Presented net of deferred taxes of $5 million, ($36) million and ($16) million in 1998, 1997 and 1996, respectively. Presented net of deferred taxes of ($141) million.
All common stock is owned by GE Capital Services, all of the common stock of which is in turn wholly owned by GE Company. 37 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. During 1998 and 1997, the Corporation issued 700 and 4,300 additional shares of its variable cumulative preferred stock, respectively. 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. During 1998, the Corporation authorized 750,000 shares of preferred stock, $.01 par value, none of which was issued or outstanding at December 31, 1998. At December 31, 1998 and 1997, the aggregate statutory capital and surplus of the insurance businesses totaled $9.4 billion and $7.8 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 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. 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 $429 million in 1998, $327 million in 1997 and $263 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 $700 million in 1999; $617 million in 2000; $566 million in 2001; $510 million in 2002; $461 million in 2003 and $2,222 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 $863 million, $543 million and $365 million, respectively. NOTE 15. INCOME TAXES The provision for income taxes is summarized in the following table.
(In millions) 1998 1997 1996 -------- -------- -------- Estimated amounts payable .................................................. $ 584 $ 409 $ 157 Deferred tax expense from temporary differences ............................ 601 588 1,015 -------- -------- -------- $ 1,185 $ 997 $ 1,172 ======== ======== ========
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 $699 million, $573 million and $485 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 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 $3.2 billion in 1998, and $2.4 billion in 1997 and $2.7 billion in 1996. The corresponding amounts for non-U.S. based operations were $1.3 billion in 1998 and 1997 and $1.1 billion in 1996. A reconciliation of the U.S. federal statutory rate to the actual income tax rate follows.
1998 1997 1996 -------- -------- -------- 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 1.0 Tax-exempt income ......................................................... (3.2) (3.2) (3.0) Foreign Sales Corporation tax benefits .................................... (0.7) (0.6) (0.4) Dividends received, not fully taxable ..................................... (1.8) (1.8) (1.7) Fuels credits ............................................................. (2.0) (1.9) (0.9) Other - net ............................................................... (2.3) (1.8) 0.8 -------- -------- -------- Actual income tax rate ..................................................... 26.0% 26.8% 30.8% ======== ======== ========
Principal components of the net deferred tax liability balances at December 31, 1998 and 1997, were as follows:
(In millions) 1998 1997 -------- -------- Assets: Allowance for losses .................................................................. $ 1,359 $ 1,360 Insurance reserves .................................................................... 1,012 1,243 AMT credit carryforwards .............................................................. 903 354 Other ................................................................................. 1,897 2,100 -------- -------- Total deferred tax assets .............................................................. 5,171 5,057 -------- -------- Liabilities: Financing leases ...................................................................... 8,583 7,909 Operating leases ...................................................................... 2,417 2,156 Net unrealized gains on securities .................................................... 655 657 Other ................................................................................. 2,415 2,502 -------- -------- Total deferred tax liabilities ......................................................... 14,070 13,224 -------- -------- Net deferred tax liability ............................................................. $ 8,899 $ 8,167 ======== ========
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 3 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 of Results of Operations. Operating Segments, in the tables on page 14 of this report. 39 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.
(In millions) DEPRECIATION AND AMORTIZATION PROVISION FOR INCOME TAXES -------------------------------- -------------------------------- For the years ended December 31 1998 1997 1996 1998 1997 1996 -------- -------- -------- -------- -------- -------- Consumer Services ...................... $ 961 $ 897 $ 569 $ 442 $ 230 $ 430 Equipment Management ................... 1,890 1,690 1,643 257 353 298 Mid-Market Financing ................... 405 398 400 239 198 174 Specialized Financing .................. 51 50 41 41 170 157 Specialty Insurance .................... 53 40 30 103 40 39 All other .............................. 92 63 15 103 6 74 -------- -------- -------- -------- -------- -------- Total ................................ $ 3,452 $ 3,138 $ 2,698 $ 1,185 $ 997 $ 1,172 ======== ======== ======== ======== ======== ======== TIME SALES, LOAN, INVESTMENT AND OTHER INCOME INTEREST EXPENSE -------------------------------- -------------------------------- For the years ended December 31 1998 1997 1996 1998 1997 1996 -------- -------- -------- -------- -------- -------- Consumer Services ...................... $ 10,661 $ 9,585 $ 8,051 $ 3,601 $ 3,225 $ 3,003 Equipment Management ................... 2,241 1,985 1,403 1,486 1,296 1,204 Mid-Market Financing ................... 1,719 1,160 1,065 1,674 1,276 1,172 Specialized Financing .................. 2,645 2,192 2,487 1,541 1,436 1,491 Specialty Insurance .................... 1,301 953 696 538 427 327 All other .............................. 135 73 (20) (222) (330) (155) -------- -------- -------- -------- -------- -------- Total ................................ $ 18,702 $ 15,948 $ 13,682 $ 8,618 $ 7,330 $ 7,042 ======== ======== ======== ======== ======== ======== PROPERTY, PLANT AND EQUIPMENT ADDITIONS (INCLUDING EQUIPMENT ASSETS LEASED TO OTHERS) At December 31 For the years ended December 31 -------------------------------- -------------------------------- 1998 1997 1996 1998 1997 1996 -------- -------- -------- -------- -------- -------- Consumer Services ................. $130,861 $117,410 $104,695 $ 2,218 $ 1,863 $ 1,675 Equipment Management .............. 37,902 33,403 28,521 4,408 4,314 3,264 Mid-Market Financing ................... 41,768 29,315 25,991 1,316 978 696 Specialized Financing ............. 35,807 28,810 28,197 88 36 36 Specialty Insurance .................... 19,355 17,760 11,770 22 31 21 All other .............................. 3,357 2,079 1,642 25 64 48 -------- -------- -------- -------- -------- -------- Total ................................ $269,050 $228,777 $200,816 $ 8,077 $ 7,286 $ 5,740 ======== ======== ======== ======== ======== ======== Includes amortization of goodwill and other intangibles. Principally interest income. Additions to property, plant and equipment (including equipment leased to others) include amounts relating to principal businesses purchased. 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. 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.
40 NOTE 17. QUARTERLY FINANCIAL DATA (UNAUDITED) Summarized quarterly financial data were as follows:
FIRST QUARTER SECOND QUARTER -------------------- -------------------- (In millions) 1998 1997 1998 1997 -------- -------- -------- -------- Revenues ....................................................... $ 9,501 $ 7,773 $ 9,984 $ 7,658 -------- -------- -------- -------- Expenses: Interest ...................................................... 1,948 1,711 2,105 1,780 Operating and administrative and cost of goods sold ........... 4,113 3,025 4,447 2,855 Insurance losses and policyholder and annuity benefits ........ 1,342 1,149 1,367 1,106 Provision for losses on financing receivables ................. 332 312 408 337 Depreciation and amortization of buildings and equipment and equipment on operating leases ................................ 652 565 598 563 Minority interest in net earnings of consolidated affiliates .. 11 13 10 1 -------- -------- -------- -------- Earnings before income taxes ................................... 1,103 998 1,049 1,016 Provision for income taxes ..................................... (323) (301) (236) (298) -------- -------- -------- -------- Net earnings ................................................... $ 780 $ 697 $ 813 $ 718 ======== ======== ======== ======== THIRD QUARTER FOURTH QUARTER -------------------- -------------------- 1998 1997 1998 1997 -------- -------- -------- -------- Revenues ....................................................... $ 10,335 $ 8,377 $ 11,585 $ 9,596 -------- -------- -------- -------- Expenses: Interest ...................................................... 2,076 1,832 2,489 2,007 Operating and administrative and cost of goods sold ........... 4,498 3,567 5,382 4,172 Insurance losses and policyholder and annuity benefits ........ 1,418 1,227 1,417 1,343 Provision for losses on financing receivables ................. 304 371 557 401 Depreciation and amortization of buildings and equipment and equipment on operating leases ................................ 663 623 681 692 Minority interest in net earnings of consolidated affiliates .. 14 13 14 13 -------- -------- -------- -------- Earnings before income taxes ................................... 1,362 744 1,045 968 Provision for income taxes ..................................... (432) (176) (194) (222) -------- -------- -------- -------- Net earnings ................................................... $ 930 $ 568 $ 851 $ 746 ======== ======== ======== ========
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 $18.1 billion, of which $15.0 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 Certain supplemental information related to the Corporation's cash flows were as follows for the past three years.
(In millions) 1998 1997 1996 -------- -------- -------- FINANCING RECEIVABLES Increase in loans to customers ............................................. $(73,827) $(55,689) $(49,890) Principal collections from customers - loans ............................... 63,407 50,679 49,923 Investment in equipment for financing leases ............................... (20,298) (16,420) (14,427) Principal collections from customers - financing leases .................... 15,501 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 -------- -------- -------- $ (6,117) $ (1,898) $ (2,278) ======== ======== ======== ALL OTHER INVESTING ACTIVITIES Purchases of securities by insurance and annuity businesses ................ $(17,728) $(11,700) $ (8,244) Dispositions and maturities of securities by insurance and annuity businesses ........................................................ 14,231 10,261 6,736 Proceeds from principal business dispositions .............................. -- 241 -- Other ...................................................................... (8,380) (3,965) (3,897) -------- -------- -------- $(11,877) $ (5,163) $ (5,405) ======== ======== ======== 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 16,689 Proceeds - nonrecourse, leveraged lease debt ............................... 2,106 1,757 595 -------- -------- -------- $ 41,440 $ 20,825 $ 22,345 ======== ======== ======== REPAYMENTS AND OTHER REDUCTIONS OF DEBT HAVING MATURITIES LONGER THAN 90 DAYS Short-term (91 to 365 days) ................................................ $(25,901) $(21,320) $(22,755) 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) $(24,056) ======== ======== ======== ALL OTHER FINANCING ACTIVITIES Proceeds from sales of investment contracts ................................ $ 4,914 $ 4,462 $ 2,341 Redemption of investment contracts ......................................... (5,355) (4,453) (2,429) Capital contributions from parent company .................................. 119 182 -- -------- -------- -------- $ (322) $ 191 $ (88) ======== ======== ======== CASH PAID DURING THE YEAR FOR: Interest ................................................................... $ (8,324) $ (7,471) $ (7,166) Income taxes ............................................................... (883) (502) (87)
Changes in operating assets and liabilities are net of acquisitions and dispositions of businesses. 42 "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:
(In millions) 1998 1997 1996 -------- -------- -------- Fair value of assets acquired .............................................. $ 23,431 $ 15,190 $ 27,341 Cash paid .................................................................. (16,986) (4,736) (4,839) -------- -------- -------- Liabilities assumed ........................................................ $ 6,445 $ 10,454 $ 22,502 ======== ======== ========
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 Information about financial instruments that were not carried at fair value at December 31, 1998 and 1997, is shown below.
1998 -------------------------------------------- ASSETS (LIABILITIES) --------------------------------- CARRYING ESTIMATED FAIR VALUE NOTIONAL AMOUNT -------------------- (In millions) AMOUNT (NET) HIGH LOW -------------------- -------------------- Assets Time sales and loans .......................................... $ $ 74,141 $ 75,000 $ 73,820 Integrated interest rate swaps ................................ 13,217 16 (96) (96) Purchased options ............................................. 11,180 136 120 120 Mortgage-related positions Mortgage purchase commitments ................................ 1,983 -- 15 15 Mortgage sale commitments .................................... 3,276 -- (9) (9) Mortgages held for sale ...................................... 4,402 4,454 4,454 Options, including "floors" .................................. 21,406 87 176 176 Interest rate swaps and futures .............................. 6,662 -- 49 49 Other cash financial instruments .............................. 3,089 3,317 3,115 Liabilities Borrowings and related instruments Borrowings ......................................... (165,602) (167,814) (167,814) Interest rate swaps .......................................... 44,718 -- (1,275) (1,275) Currency swaps ............................................... 29,645 -- 252 252 Currency forwards ............................................ 22,864 -- (392) (392) Investment contract benefits .................................. (22,609) (22,529) (22,529) Insurance - financial guarantees and credit life .............. 204,349 (3,091) (3,298) (3,390) Credit and liquidity support - securitizations ................ 17,471 (29) (29) (29) Performance guarantees - principally letters of credit ........ 2,340 -- -- -- Other ......................................................... 2,888 (1,921) (1,190) (1,190) Other firm commitments Currency forwards ............................................. 5,072 -- (52) (52) 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 .......................................... $ $ 62,712 $ 63,105 $ 61,171 Integrated interest rate swaps ................................ 11,378 19 (128) (128) Purchased options ............................................. 1,979 54 9 9 Mortgage-related positions Mortgage purchase commitments ................................ 2,082 -- 11 11 Mortgage sale commitments .................................... 2,540 -- (9) (9) Mortgages held for sale ...................................... 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 .............................. 2,242 2,592 2,349 Liabilities Borrowings and related instruments Borrowings ......................................... (136,814) (137,360) (137,360) Interest rate swaps .......................................... 40,880 -- (170) (170) Currency swaps ............................................... 23,382 -- (1,249) (1,249) Currency forwards ............................................ 14,483 -- 367 367 Investment contract benefits .................................. (21,703) (21,556) (21,556) Insurance - financial guarantees and credit life .............. 179,410 (2,837) (2,936) (3,052) Credit and liquidity support - securitizations ................ 10,008 (46) (46) (46) Performance guarantees - principally letters of credit ........ 2,553 (34) -- (67) Other ......................................................... 3,288 (1,134) (1,282) (1,303) Other firm commitments Currency forwards ............................................. 1,744 -- 11 11 Ordinary course of business lending commitments ............... 7,891 -- (62) (62) Unused revolving credit lines Commercial ................................................... 4,850 -- -- -- Consumer - principally credit cards .......................... 134,123 -- -- -- Not applicable. Includes effects of interest rate and currency swaps, which also are listed separately. See note 10.
Additional information about certain financial instruments in the above table follows. 44 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 $2.2 billion and $1.9 billion, respectively. Aggregate fair values that represent associated probable future obligations, normally associated with a right of offset against probable future receipts, amounted to $3.4 billion and $2.8 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 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.
COUNTERPARTY CREDIT CRITERIA CREDIT RATING ----------------------- STANDARD & MOODY'S POOR'S ---------- ---------- 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
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 NOTE 21. GEOGRAPHIC SEGMENT INFORMATION The table below presents data by geographic region. Revenues shown below are classified according to their country of origin.
REVENUES LONG-LIVED ASSETS For the years ended December 31 At December 31 -------------------------------- -------------------------------- (In millions) 1998 1997 1996 1998 1997 1996 -------- -------- -------- -------- -------- -------- United States .......................... $ 26,538 $ 22,737 $ 18,424 $ 10,389 $ 9,666 $ 7,854 Europe ................................. 9,743 6,414 4,429 3,482 2,601 1,865 Pacific Basin .......................... 1,418 940 693 625 270 157 Global ............................ 1,682 1,669 1,651 8,160 7,543 7,094 Other ............................. 2,024 1,644 1,373 1,161 944 811 -------- -------- -------- -------- -------- -------- Total ................................ $ 41,405 $ 33,404 $ 26,570 $ 23,817 $ 21,024 $ 17,781 ======== ======== ======== ======== ======== ======== Includes operations that cannot meaningfully be associated with specific geographic areas (for example, commercial aircraft and shipping containers used on ocean-going vessels). Principally the Americas other than the United States.
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 46 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. 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. 47 EXHIBIT NUMBER DESCRIPTION - ---------- ----------- 3(i) A complete copy of the Organization Certificate of the Corporation as last amended as of February 16, 1999 and currently in effect, consisting of the following: (a) the Organization Certificate of the Corporation as in effect immediately prior to the filing of the Certificate of Amendment as of April 21, 1995 (Incorporated by reference to Exhibit 3(i) to the Corporation's Form 10-K Report for the year ended December 31, 1993); (b) a Certificate of Amendment filed in the Office of the Superintendent of Banks of the State of New York (the "Office of the Superintendent") as of April 21, 1995 (Incorporated by reference to Exhibit 4(b) to the Corporation's Registration Statement on Form S-3, File No. 33-58771; (c) a Certificate of Amendment filed in the Office of the Superintendent as of May 11, 1995 (Incorporated by reference to Exhibit 4(c) to the Corporation's Registration Statement on form S-3, File No. 33-61257); (d) a Certificate of Amendment filed in the Office of the Superintendent as of June 28, 1995 (Incorporated by reference to Exhibit 4(d) to the Corporation's Registration Statement on Form S-3, File No. 33-61257); (e) a Certificate of Amendment filed in the Office of the Superintendent as of July 17, 1995 (Incorporated by reference to Exhibit 4(e) to the Corporation's Registration Statement on Form S-3, File No. 33-61257); (f) a Certificate of Amendment filed in the Office of the Superintendent as of November 1, 1995 (Incorporated by reference to Exhibit 3(i) to the Corporation's Form 10-K Report for the year ended December 31, 1995); (g) a Certificate of Amendment filed in the Office of the Superintendent as of September 27, 1996 (Incorporated by reference to Exhibit 4(g) to the Corporation's Registration Statement on Form S-3, File No. 333-13195); (h) a Certificate of Amendment filed in the Office of the Superintendent as of December 9, 1997 (Incorporated by reference to Exhibit 4(g) to the Corporation's Post-Effective Amendment No. 1 to Registration Statement on Form S-3, File No. 333-13195); (i) a Certificate of Amendment filed in the Office of the Superintendent as of December 19, 1997 (Incorporated by reference to Exhibit 4(h) to the Corporation's Post-Effective Amendment No. 1 to Registration Statement on Form S-3, File No. 333-13195); (j) a Certificate of Amendment filed in the Office of the Superintendent as of February 17, 1998 (Incorporated by reference to Exhibit 4(i) to the Corporation's Post-Effective Amendment No. 1 to Registration Statement on Form S-3, File No. 333- 13195); (k) a Certificate of Amendment filed in the Office of the Superintendent as of June 24, 1998 (incorporated by reference to Exhibit 4(l) to the Corporation's Post-Effective Amendment No. 2 to Registration Statement on Form S-3, file number 333-59707); (l) a Certificate of Amendment filed in the Office of the Superintendent as of July 23, 1998 (incorporated by reference to Exhibit 4(k) to the Corporation's Post-Effective Amendment No. 1 to Registration Statement on Form S-3, file number 333-59707); and (m) a Certificate of Amendment filed in the Office of the Superintendent as of February 16, 1999 (incorporated by reference to Exhibit 4(m) to the Corporation's Post-Effective Amendment No. 2 to Registration Statement on Form S-3, file number 333-59707). 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) Amended and Restated Fiscal and Paying Agency Agreement, dated as of July 2, 1996, among the Corporation, General Electric Capital Australia Limited, General Electric Capital Canada Inc. and The Chase Manhattan Bank (National Association), London Branch. 4(b) Amendment No. 1, dated as of December 8, 1997, to the Amended and Restated Fiscal and Paying Agency Agreement dated as of July 2, 1996, among the Corporation, General Electric Capital Australia (ACN 008 562 534), Australian Retail Financial Network (ACN 008 583 588), General Electric Capital Canada Inc., General Electric Capital Canada Retailer Financial Services Company and The Chase Manhattan Bank, London Branch. 4(c) Form of Euro Medium-Term Note and Debt Security - Temporary Global Fixed Rate Bearer Note. 4(d) Form of Euro Medium-Term Note and Debt Security - Permanent Global Fixed Rate Bearer Note. 48 4(e) Form of Euro Medium-Term Note and Debt Security - Temporary Global Floating Rate Bearer Note. 4(f) Form of Euro Medium-Term Note and Debt Security - Permanent Global Floating Rate Bearer Note. 4(g) 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 the Corporation. (Incorporated by reference to Exhibit 28(a) 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) 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 the 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
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT GENERAL ELECTRIC CAPITAL CORPORATION CONDENSED STATEMENT OF CURRENT AND RETAINED EARNINGS For the years ended December 31 (In millions) 1998 1997 1996 -------- -------- -------- REVENUES ................................................................... $ 5,310 $ 4,867 $ 6,631 -------- -------- -------- EXPENSES: Interest, net of allocations .............................................. 5,444 3,548 3,871 Operating and administrative .............................................. 1,988 1,765 1,573 Provision for losses on financing receivables ............................. (125) 4 65 Depreciation and amortization ............................................. 443 345 255 -------- -------- -------- 7,750 5,662 5,764 -------- -------- -------- Earnings (loss) before income taxes and equity in earnings of affiliates ... (2,440) (795) 867 Income tax (provision) benefit ............................................. 1,008 439 (218) Equity in earnings of affiliates ........................................... 4,806 3,085 1,983 -------- -------- -------- NET EARNINGS ............................................................... 3,374 2,729 2,632 Dividends paid ............................................................. (895) (1,546) (891) Retained earnings at January 1 ............................................. 11,861 10,678 8,937 -------- -------- -------- RETAINED EARNINGS AT DECEMBER 31 ........................................... $ 14,340 $ 11,861 $ 10,678 ======== ======== ========
See Notes to Condensed Financial Statements. 50
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT - (CONTINUED) GENERAL ELECTRIC CAPITAL CORPORATION CONDENSED STATEMENT OF FINANCIAL POSITION At December 31 (In millions) 1998 1997 -------- -------- ASSETS Cash and equivalents ................................................................... $ 15 $ 249 Investment securities .................................................................. 3,758 3,916 Financing receivables: Time sales and loans .................................................................. 21,546 19,509 Investment in financing leases ........................................................ 12,525 11,817 -------- -------- 34,071 31,326 Allowance for losses on financing receivables ......................................... (642) (786) -------- -------- Financing receivables - net ......................................................... 33,429 30,540 Investments in and advances to affiliates .............................................. 118,299 95,578 Equipment on operating leases (at cost), less accumulated amortization of $906 and $726 .............................................................................. 3,666 3,477 Other assets ........................................................................... 10,314 6,240 -------- -------- TOTAL ASSETS ........................................................................ $169,481 $140,000 ======== ======== LIABILITIES AND EQUITY Short-term borrowings .................................................................. $ 93,670 $ 79,755 Long-term borrowings ................................................................... 47,135 35,189 Other liabilities ...................................................................... 4,982 3,938 Deferred income taxes .................................................................. 2,625 2,745 -------- -------- Total liabilities ................................................................... 148,412 121,627 -------- -------- Capital stock .......................................................................... 770 770 Additional paid-in capital ............................................................. 4,933 4,744 Retained earnings ...................................................................... 14,340 11,861 Accumulated unrealized gains on investment securities - net ....................... 1,167 1,145 Accumulated foreign currency translation adjustments .............................. (141) (147) -------- -------- Total equity ........................................................................ 21,069 18,373 -------- -------- TOTAL LIABILITIES AND EQUITY ........................................................ $169,481 $140,000 ======== ======== The sum of accumulated unrealized gains on investment securities and accumulated foreign currency translation adjustments constitutes "Accumulated nonowner changes other than earnings," and was $1,026 million and $998 million at year-end 1998 and 1997, respectively.
See Notes to Condensed Financial Statements. 51
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT - (CONTINUED) GENERAL ELECTRIC CAPITAL CORPORATION CONDENSED STATEMENT OF CASH FLOWS For the years end December 31 (In millions) 1998 1997 1996 -------- -------- -------- CASH FROM (USED FOR) OPERATING ACTIVITIES .................................. $ (628) $ (872) $ 1,243 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Increase in loans to customers ............................................. (49,265) (42,575) (40,381) Principal collections from customers - loans ............................... 46,902 42,486 44,447 Investment in assets on financing leases ................................... (5,915) (4,589) (2,206) Principal collections from customers - financing leases .................... 3,207 2,665 2,127 Net change in credit card receivables ...................................... (709) 1,805 (269) Buildings, equipment and equipment on operating leases - additions .............................................................. (421) (900) (1,111) - dispositions ........................................................... 445 350 335 Payments for principal businesses purchased, net of cash acquired .......... (15,959) (4,736) (4,839) Proceeds from principal business dispositions .............................. -- 209 -- Change in investment in and advances to affiliates ........................ (1,956) (5,290) (6,436) Other - net ................................................................ (2,372) 1,348 (1,863) -------- -------- -------- Cash used for investing activities ...................................... (26,043) (9,227) (10,196) -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Net change in borrowings (less than 90-day maturities) ..................... 14,263 15,537 13,249 Newly issued debt - short-term (91-365 days) ............................................... 5,881 4,066 5,061 - long-term senior ....................................................... 25,381 9,700 11,065 Proceeds - non-recourse, leveraged lease debt .............................. 1,422 1,043 219 Repayments and other reductions - short-term ............................................................. (16,553) (18,379) (18,846) - long-term senior ....................................................... (3,109) (787) (583) Principal payments - non-recourse, leveraged lease debt .................... (142) (107) (130) Dividends paid ............................................................. (895) (1,540) (891) Contributions to additional paid-in capital ................................ 119 182 -- Issuance of preferred stock in excess of par ............................... 70 430 -- -------- -------- -------- Cash from financing activities .......................................... 26,437 10,145 9,144 -------- -------- -------- INCREASE (DECREASE) IN CASH AND EQUIVALENTS DURING THE YEAR ................ (234) 46 191 CASH AND EQUIVALENTS AT BEGINNING OF YEAR .................................. 249 203 12 -------- -------- -------- CASH AND EQUIVALENTS AT END OF YEAR ........................................ $ 15 $ 249 $ 203 ======== ======== ========
See Notes to Condensed Financial Statements. 52 GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT - (CONCLUDED) GENERAL ELECTRIC CAPITAL CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS BORROWINGS Total long-term borrowings at December 31, 1998 and 1997 are shown below.
1998 AVERAGE RATE (Dollars in millions) MATURITIES 1998 1997 -------- -------- -------- -------- Senior notes ................................................... 6.20% 2000-2055 $ 46,438 $ 34,492 Subordinated notes ......................................... 8.04 2006-2012 697 697 -------- -------- $ 47,135 $ 35,189 ======== ======== Includes the effects of associated interest rate and currency swaps. Guaranteed by General Electric Company.
At December 31, 1998, long-term borrowing maturities during the next five years, including the current portion of long-term notes payable, are $11,671 million in 1999, $10,722 million in 2000, $9,225 million in 2001, $5,767 million in 2002, and $4,295 million in 2003. INTEREST RATES ARE MANAGED by General Electric Capital Corporation ("GE Capital") 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. 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 6.16% (6.32% at year end 1997). Interest expense on the Condensed Statement of Current and Retained Earnings is net of interest income on loans and advances to majority owned affiliates of $2,050 million, $2,971 million and $2,332 million for 1998, 1997 and 1996, respectively. INCOME TAXES General Electric Company files a consolidated U.S. federal income tax return which includes GE Capital. Income tax (provision) benefit includes the effect of GE Capital on the consolidated return. 53 EXHIBIT 4(g) March 25, 1999 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Subject: General Electric Capital Corporation Annual Report on Form 10-K for the fiscal year ended December 31, 1998 - File No. 1-6461 Dear Sirs: Neither General Electric Capital Corporation (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 CORPORATION By: /s/ J.A. Parke -------------------------------- J.A. Parke, Senior Vice President, Finance 54 EXHIBIT 12 (a)
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES YEARS ENDED DECEMBER 31 -------------------------------------------------------- (Dollar amounts in millions) 1998 1997 1996 1995 1994 -------- -------- -------- -------- -------- Net earnings ....................................... $ 3,374 $ 2,729 $ 2,632 $ 2,261 $ 1,918 Provision for income taxes ......................... 1,185 997 1,172 1,071 896 Minority interest .................................. 49 40 86 81 109 -------- -------- -------- -------- -------- Earnings before income taxes and minority interest . 4,608 3,766 3,890 3,413 2,923 -------- -------- -------- -------- -------- Fixed charges: Interest .......................................... 8,772 7,440 7,114 6,520 4,464 One-third of rentals .............................. 289 240 177 170 153 -------- -------- -------- -------- -------- Total fixed charges ................................ 9,061 7,680 7,291 6,690 4,617 -------- -------- -------- -------- -------- Less interest capitalized, net of amortization ..... 88 52 41 21 9 -------- -------- -------- -------- -------- Earnings before income taxes and minority interest plus fixed charges ....................... $ 13,581 $ 11,394 $ 11,140 $ 10,082 $ 7,531 ======== ======== ======== ======== ======== Ratio of earnings to fixed charges ................. 1.50 1.48 1.53 1.51 1.63 ======== ======== ======== ======== ========
55 EXHIBIT 12 (b)
GENERAL ELECTRIC CAPITAL CORPORATION 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 -------- -------- -------- -------- -------- Net earnings ....................................... $ 3,374 $ 2,729 $ 2,632 $ 2,261 $ 1,918 Provision for income taxes ......................... 1,185 997 1,172 1,071 896 Minority interest .................................. 49 40 86 81 109 -------- -------- -------- -------- -------- Earnings before income taxes and minority interest . 4,608 3,766 3,890 3,413 2,923 -------- -------- -------- -------- -------- Fixed charges: Interest .......................................... 8,772 7,440 7,114 6,520 4,464 One-third of rentals .............................. 289 240 177 170 153 -------- -------- -------- -------- -------- Total fixed charges ................................ 9,061 7,680 7,291 6,690 4,617 -------- -------- -------- -------- -------- Less interest capitalized, net of amortization ..... 88 52 41 21 9 -------- -------- -------- -------- -------- Earnings before income taxes and minority interest plus fixed charges ....................... $ 13,581 $ 11,394 $ 11,140 $ 10,082 $ 7,531 ======== ======== ======== ======== ======== Preferred stock dividend requirements .............. $ 97 $ 78 $ 76 $ 57 $ 30 Ratio of earnings before provision for income taxes to net earnings ............................. 1.35 1.37 1.45 1.47 1.47 -------- -------- -------- -------- -------- Preferred stock dividend factor on pre-tax basis ... 131 107 110 84 44 Fixed charges ...................................... 9,061 7,680 7,291 6,690 4,617 -------- -------- -------- -------- -------- Total fixed charges and preferred stock dividend requirements ...................................... $ 9,192 $ 7,787 $ 7,401 $ 6,774 $ 4,661 ======== ======== ======== ======== ======== Ratio of earnings to combined fixed charges and preferred stock dividends ........................ 1.48 1.46 1.51 1.49 1.62 ======== ======== ======== ======== ========
56 EXHIBIT 23 (ii) To the Board of Directors General Electric Capital Corporation: We consent to incorporation by reference in the Registration Statements (Nos. 33-43420, 33-51793, 333-22265, 333-59707 and 333-59977) on Form S-3 of General Electric Capital Corporation, and in the Registration Statement (No. 33-39596) on Form S-3 jointly filed by General Electric Capital Corporation and General Electric Company, of our report dated February 12, 1999, relating to the statement of financial position of General Electric Capital Corporation 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 the related schedule, which report appears in the December 31, 1998 annual report on Form 10-K of General Electric Capital Corporation. /s/ KPMG LLP Stamford, Connecticut March 25, 1999 57 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 Corporation, a New York corporation (the "Corporation"), hereby constitutes and appoints Denis J. Nayden, 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 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/ Denis J. Nayden /s/ James A. Parke - ----------------------------- ----------------------------- Denis J. Nayden, James A. Parke, Director, President Director and Senior Vice and Chief Executive Officer President, Finance (Principal Executive Officer) (Principal Financial Officer) /s/ Joan C. Amble ----------------------------- Joan C. Amble, Vice President and Controller (Principal Accounting Officer) (Page 1 of 2) 58 /s/ Nigel D.T. Andrews /s/ John H. Myers - ----------------------------- ----------------------------- Nigel D.T. Andrews, John H. Myers, Director Director /s/ Nancy E. Barton /s/ Robert L. Nardelli - ----------------------------- ----------------------------- Nancy E. Barton, Robert L. Nardelli, 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/ Dennis D. Dammerman /s/ Keith S. Sherin - ----------------------------- ----------------------------- Dennis D. Dammerman, Keith S. Sherin, Director Director /s/ Benjamin W. Heineman, Jr. - ----------------------------- ----------------------------- Benjamin W. Heineman, Jr., Edward D. Stewart, Director Director /s/ Jeffrey R. Immelt /s/ John F. Welch, Jr. - ----------------------------- ----------------------------- Jeffrey R. Immelt, John F. Welch, Jr., Director Director /s/ W. James McNerney, Jr. - ----------------------------- W. James McNerney, Jr., Director A MAJORITY OF THE BOARD OF DIRECTORS (Page 2 of 2) 59 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 CORPORATION March 25, 1999 By: /s/ Denis J. Nayden --------------------------------- (Denis J. Nayden) President and Chief Executive Officer 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/ Denis J. Nayden Director, President and March 25, 1999 - ---------------------- Chief Executive Officer (Denis J. Nayden) (Principal Executive Officer) /s/ James A. Parke Director and March 25, 1999 - ---------------------- Senior Vice President, Finance (James A. Parke) (Principal Financial Officer) /s/ Joan C. Amble Vice President and Controller March 25, 1999 - ---------------------- (Principal Accounting Officer) (Joan C. Amble) NIGEL D.T. ANDREWS* Director NANCY E. BARTON* Director JAMES R. BUNT* Director DAVID M. COTE* Director DENNIS D. DAMMERMAN* Director BENJAMIN W. HEINEMAN, JR.* Director JEFFREY R. IMMELT* Director W. JAMES McNERNEY, JR.* Director JOHN H. MYERS* Director ROBERT L. NARDELLI* 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 60 EX-4.A 2 EMTM AMENDED AND RESTATED FISCAL AND PAYING AGENCY AGREEMENT among GENERAL ELECTRIC CAPITAL CORPORATION, GE CAPITAL AUSTRALIA LIMITED, GENERAL ELECTRIC CAPITAL CANADA INC. and THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION) LONDON BRANCH Euro Medium-Term Notes and Other Debt Securities Due 9 Months or more from Date of Issue ------------------------------------------ Dated as of July 2, 1996 ------------------------------------------ TABLE OF CONTENTS -----------------
Page 1. Appointment of Fiscal and Paying Agent 1 -------------------------------------- 2. Notes Issuable in Series 1 ------------------------ 3. Execution and Authentication of Notes; Date and Denomination of Notes 5 --------------------------------------------------------------------- 4. Exchange and Registration of Transfer of Notes 9 ---------------------------------------------- 5. Payments of Principal, Premium and Interest; Paying Agents 11 ---------------------------------------------------------- 6. Redemption; Sinking Funds; Repayment at the Option of the Holder 15 ---------------------------------------------------------------- 7. Mutilated, Destroyed, Stolen or Lost Notes 19 ------------------------------------------ 8. Events of Default 20 ----------------- 9. Additional Payments; Tax Redemption 24 ----------------------------------- 10. Covenant of the Issuers and the Guarantor 32 ----------------------------------------- 11. Obligations of the Fiscal and Paying Agent 32 ------------------------------------------ 12. Maintenance and Resignation of Fiscal and Paying Agent 35 ------------------------------------------------------ 13. Paying Agency 36 ------------- 14. Merger, Consolidation, Sale or Conveyance 37 ----------------------------------------- 15. Meetings of Holders of the Notes 38 -------------------------------- 16. Consent of Holders 41 ------------------ 17. Stamp Taxes 41 ----------- 18. Modifications and Amendments 42 ---------------------------- 19. Notices to Parties 43 ------------------ 20. Notices to and by Holders of the Notes 44 --------------------------------------
21. Business Day 45 ------------ 22. Central Bank Reporting Requirements 45 ----------------------------------- 23. Governing Law 46 ------------- 24. Consent to Service 46 ------------------ 25. Counterparts 46 ------------ 26. Inspection of Agreement 46 ----------------------- 27. Descriptive Headings 46 -------------------- 28. Provisions Binding on Successors 46 -------------------------------- 29. Official Acts by Successor Corporation 47 -------------------------------------- 30. Severability 47 ------------
AMENDED AND RESTATED FISCAL AND PAYING AGENCY AGREEMENT, dated as of July 2, 1996 between GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation ("GE Capital"), GE Capital Australia Limited (ACN 008 562 534), a company organized under the laws of the Australian Capital Territory ("GEC Australia") and General Electric Capital Canada Inc., a Canadian corporation ("GEC Canada") (each an "Issuer" and together the "Issuers") and THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), LONDON BRANCH, as Fiscal and Paying Agent (the "Agreement"). Pursuant to the Amended and Restated Euro MTN Distribution Agreement dated as of July 2, 1996, among the Issuers (including GE Capital in its capacity as Guarantor of Notes issued by GEC Australia or GEC Canada) and the agents named therein (the "Agents") (as amended from time to time, the "Distribution Agreement"), each Issuer has agreed to issue from time to time its Euro Medium-Term Notes ("Medium Term Notes") and other debt securities ("Other Debt Securities") having maturities from 9 months or more from date of issue (collectively, Medium Term Notes and Other Debt Securities are referred to herein as the "Notes"). The Guarantor has agreed to guarantee Notes issued pursuant to this Agreement by GEC Australia or GEC Canada in the form of the guarantee attached hereto as Exhibit D-1 (the "Guarantee"). Administrative procedures, which have been agreed to by the Issuers (including GE Capital in its capacity as Guarantor of Notes issued by GEC Australia or GEC Canada) and the Agents as of the date hereof, are attached as Exhibit A hereto (such procedures, as amended from time to time pursuant to the Distribution Agreement, are hereinafter referred to as the "Administrative Procedures"). 1. Appointment of Fiscal and Paying Agent. Each Issuer and (in -------------------------------------- the case of Notes issued by GEC Australia or GEC Canada) the Guarantor hereby appoint The Chase Manhattan Bank (National Association), acting through its London Branch located at Woolgate House, Coleman Street, London EC2P 2HD, England, as the fiscal agent and as the principal paying agent (in such capacities and including any successor Fiscal and Paying Agent appointed hereunder, the "Fiscal and Paying Agent") in respect of the Notes, upon the terms and subject to the conditions stated herein and in the Notes certified from time to time pursuant to Section 2 hereof. The Fiscal and Paying Agent hereby accepts such appointment and agrees, upon such terms and subject to such conditions, to perform its obligations under this Agreement, the Notes certified from time to time pursuant to Section 2 hereof and the Administrative Procedures. 2. Notes Issuable in Series. (a) Each Issuer may issue Notes ------------------------- hereunder in one or more series of Notes, each series (a "Series") having identical terms but for authentication date and public offering price; provided -------- that a Series of Notes may comprise Notes in bearer form ("Bearer Notes") and Notes in registered form ("Registered Notes"). Each such Series may contain one or more tranches of Notes, each such tranche (a "Tranche") having identical terms, including authentication date and public offering price; provided that a -------- Tranche of Notes may comprise Bearer Notes and Registered Notes. (b) Notes issued hereunder shall be issued pursuant to authority granted by the Board of Directors of the relevant Issuer and (in the case of Notes issued by GEC Australia or GEC Canada) the Guarantor or any duly authorized committee thereof and shall be in such form as shall be certified to the Fiscal and Paying Agent from time to time by any one authorized person, as specified in Section 3(a) hereof. (c) Prior to the issue of the first Tranche of Notes of a Series hereunder, the relevant Issuer and (in the case of Notes issued by GEC Australia or GEC Canada) the Guarantor shall advise the Fiscal and Paying Agent in writing of the following terms which shall be applicable to such Series of Notes (each such set of written instructions shall be provided by such persons as are designated by an Issuer Authorized Representative (as defined in Section 3(a)) from time to time in an incumbency certificate delivered to the Fiscal and Paying Agent and shall hereinafter be referred to as a "Corporate Order"): (1) the title of the Series (which shall distinguish the Notes of such Series from all other Notes), including identifying whether such series will be issued as Medium Term Notes or Other Debt Securities; (2) any limit upon the aggregate principal amount of the Notes of such Series which may be authenticated and delivered under this Agreement (except for Notes authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Notes of the Series pursuant to Sections 3, 4, 6 and 7); (3) the date or dates on which the principal of and premium, if any, on the Notes of the Series are payable; (4) the rate or rates, or the method of determination thereof, at which the Notes of the Series shall bear interest, if any, the date or dates from which such interest shall accrue, the interest payment dates on which such interest shall be payable and, in the case of any Registered Note, if other than as set forth in Section 3, the record dates for the determination of holders to whom interest is payable; (5) the place or places where the principal of, and premium, if any, and interest on Notes of the Series shall be payable; (6) the currency in which the Notes of such Series is denominated, which may include U.S. dollars, any foreign currency or any composite of two or more currencies (the "Specified Currency"); (7) the currency or currencies in which payments on the Notes of such Series are payable, if other than the Specified Currency; (8) the price or prices at which, the period or periods within which and the terms and conditions upon which the Notes of such Series may be redeemed, in whole or in part, at the option of the relevant Issuer, pursuant to any sinking fund or otherwise; (9) the obligation, if any, of the relevant Issuer or the Guarantor to redeem, purchase or repay the Notes of such Series pursuant to any right to do so contained in the Notes or pursuant to sinking fund or analogous provisions or at the option of a holder thereof and the price or prices at which and the period or periods within which and the terms and conditions upon which the Notes of such Series shall be redeemed, purchase or repaid, in whole or in part, pursuant to such obligation; (10) the denominations in which the Notes of such Series shall be issuable, if other than (a) in the case of Registered Notes, 10,000 units of the Specified Currency and integral multiples of 1,000 units of the Specified Currency in excess thereof, or (b) in the case of all Bearer Notes in definitive form, 1,000, 10,000 and 100,000 units of the Specified Currency, or (c) in the case of Bearer Notes in global form, any integral multiple of 1,000 units of the Specified Currency; (11) if other than the principal amount thereof, the portion of the principal amount of the Notes of such Series which shall be payable upon declaration of acceleration of the maturity thereof pursuant to Section 8; (12) if other than the Specified Currency, the coin or currency in which payment of the principal of, premium, if any, or interest on the Notes of such Series shall be payable; (13) if the principal of, premium, if any, or interest on the Notes of such Series are to be payable, at the election of the relevant Issuer or the Guarantor or a holder thereof, in a coin or currency other than the Specified Currency, the period or periods within which, and the terms and conditions upon which, such election may be made; (14) if the amount of payments of principal of, premium, if any, and interest on the Notes of such Series may be determined with reference to an index based on a coin or currency other than the Specified Currency, the manner in which such amounts shall be determined; (15) if other than as provided in Sections 3, 4 and 5 hereof, whether the Notes of such Series will be issuable as Registered Notes or Bearer Notes (with or without coupons), or any combination of the foregoing, any restriction applicable to the offer, sale or delivery of Bearer Notes or the payment of interest thereon and the terms upon which Bearer Notes of any Series may be exchanged for Registered Notes of such Series, except that the Notes of such Series shall only be issuable as Bearer Notes unless otherwise provided in such Corporate Order; (16) any Events of Default with respect to the Notes of such Series, if not set forth herein; (17) if other than those named herein, any other depositaries, authenticating or paying agents, transfer agents or registrars or any other agents with respect to such Series; (18) the stock exchanges, if any, on which the Notes will be listed and related information; (19) any applicable restrictions on the transfer of any of the Notes of such Series; and (20) any other terms of the Series (which terms shall not be inconsistent with the provisions of this Agreement). All Notes of any one Series and coupons, if any, appertaining thereto, shall be substantially identical except as to denomination and except as may otherwise be provided in or pursuant to such Corporate Order. The Notes and the coupons, if any, appertaining thereto shall be in substantially such form as shall be established pursuant to a resolution of the Board of Directors of the relevant Issuer and the Guarantor, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Agreement, and may have such legends or endorsements placed thereon as the officers executing the same may approve (execution thereof to be conclusive evidence of such approval) and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with the directions of Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the Euroclear System (the "Euroclear Operator") or Cedel Bank, societe anonyme ("Cedel Bank") or any successors thereto or with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which such Notes may be listed, or to conform to usage. (d) An additional Tranche of the same Series may be issued subsequent to the original issue date of any Notes of such Series (hereinafter called "Additional Notes") following the receipt by the Fiscal and Paying Agent of a Corporate Order pertaining to such Tranche, which Corporate Order will identify the Series to which such Tranche belongs and the issue date and aggregate principal amount of the Notes of such Tranche. Any such Additional Notes shall be issued initially as provided in Section 3. In the event Additional Notes are issued prior to the Exchange Date (as hereinafter defined) for a temporary global Bearer Note representing a prior Tranche of Notes of the same Series, the Exchange Date for such prior Tranche of Notes may be extended to a date not less than 40 days after the issue date of such Additional Notes; provided however, in no event shall the Exchange Date for any Tranche of Notes - -------- ------- be extended to a date more than 160 days after their issue date. Additional Notes, together with each prior and subsequent Tranche of Notes of the same Series, shall constitute one and the same Series of Notes for all purposes under this Agreement. 3. Execution and Authentication of Notes; Date and ----------------------------------------------- Denomination of Notes. (a) Execution, delivery and safekeeping of Notes. The - --------------------- -------------------------------------------- Notes and, if applicable, coupons appertaining thereto in the form certified to the Fiscal and Paying Agent pursuant to the provisions of Section 2(b) shall each be executed on behalf of the GEC Capital or GEC Australia by any one of GE Capital's Chairman of the Board, its President, its Senior Vice President, Finance, its Senior Vice President-Corporate Treasury and Global Funding Operation, or by a duly authorized attorney-in-fact, and on behalf of GEC Canada by any one of GEC Canada's members of its Board of Directors, a Vice-President or an Assistant Vice President (each an "Issuer Authorized Representative"). Such signatures may be the manual or facsimile signatures of any person who, at the time of such execution, holds any such office or of a duly authorized attorney-in-fact. Any signature in facsimile may be imprinted or otherwise reproduced on the Notes or the coupons. Each definitive Note shall have imprinted thereon a facsimile of the corporate seal of the relevant Issuer attested by the Secretary or any Assistant Secretary of such Issuer. In case any authorized officer of such Issuer or attorney-in-fact who shall have signed any Note or coupon shall cease to hold such office or be such attorney-in-fact before the Note so signed (or the Note to which the coupon so signed is attached) shall be authenticated and delivered by the Fiscal and Paying Agent or disposed of by such Issuer, such Note or coupon nevertheless may be authenticated and delivered or disposed of as though the person who signed such Note or coupon had not ceased to hold such office or be such attorney-in-fact; and any Note or coupon may be signed on behalf of such Issuer by any person who, as at the actual date of the execution of such Note or coupon, shall hold such office or be an attorney-in-fact, although at the date of the execution and delivery of this Agreement any such person did not hold such office or was not an attorney-in-fact. The relevant Issuer will furnish the Fiscal and Paying Agent with an adequate supply of Notes having attached thereto appropriate coupons, if any, in the forms approved in accordance with Section 2(b) of this Agreement, bearing consecutive control numbers. Such Notes shall have been executed by an Issuer Authorized Representative and attested by the Secretary or an Assistant Secretary of such Issuer in accordance with this Section. The Fiscal and Paying Agent or its designated agent will hold such blank Notes in safekeeping in accordance with its customary practice and shall issue such Notes in the order of the control numbers imprinted thereon. The Fiscal and Paying Agent will permit the relevant Issuer and its agents, at all reasonable times and upon reasonable notice, to examine the Notes and all books, records and other materials and information of the Fiscal and Paying Agent relating thereto. (b) Execution of Guarantee. The Guarantee endorsed on Notes ---------------------- issued by GEC Australia or GEC Canada shall be executed on behalf of the Guarantor by any one of its Chairman of the Board, its President, its Senior Vice President, Finance, its Senior Vice President-Corporate Treasury and Global Funding Operation, or by a duly authorized attorney-in-fact. Such signatures may be the manual or facsimile signatures of any person who, at the time of such execution, holds any such office or of a duly authorized attorney-in-fact. Any signature in facsimile may be imprinted or otherwise reproduced on the Guarantee endorsed on such Notes. Each Guarantee endorsed on each definitive Note shall have imprinted thereon a facsimile of the corporate seal of the Guarantor. In case any authorized officer of the Guarantor or attorney-in-fact who shall have signed any Guarantee shall cease to hold such office or be such attorney-in-fact before the Note endorsed with the Guarantee so signed shall be authenticated and delivered by the Fiscal and Paying Agent or disposed of by the relevant Issuer, such Note or coupon nevertheless may be authenticated and delivered or disposed of as though the person who signed such Guarantee endorsed on such Note had not ceased to hold such office or be such attorney-in-fact; and any Guarantee may be signed on behalf of the Guarantor by any person who, as at the actual date of the execution of such Guarantee, shall hold such office or be an attorney-in-fact, although at the date of the execution and delivery of this Agreement any such person did not hold such office or was not an attorney-in-fact. (c) Authentication of temporary global Notes. Unless otherwise ---------------------------------------- specified in the applicable Corporate Order or by the relevant Agent or Agents, each Tranche of Notes, including any Tranche of Additional Notes issued prior to the Exchange Date for a prior Tranche of Notes of the same Series, shall initially be issued in the form of a single temporary global Note in bearer form. The temporary global Bearer Notes shall be authenticated by the Fiscal and Paying Agent or by a duly authorized officer or attorney-in-fact of the Fiscal and Paying Agent, upon the same conditions, in substantially the same manner and with the same effect as the definitive Notes, and shall be deposited with a common depositary (the "Depositary") for the accounts of the Euroclear Operator and Cedel Bank or any other recognized or agreed clearing system for credit to the respective securities clearance accounts of the relevant Agents (or to such other accounts as they may have directed) maintained with the Euroclear Operator or with Cedel Bank. For purposes of this Agreement "Exchange Date" for any Series of Notes shall mean the first Business Day that is at least 40 days after the issue date of such Series; provided that in the event a Tranche of Additional Notes of the same Series is issued prior to the Exchange Date of a prior Tranche of such Series (as such Exchange Date may have been extended pursuant to this sentence), such Exchange Date shall be extended (or further extended, as the case may be) to a date not earlier than 40 days after the issue date of such subsequent Tranche; provided however, in no event shall the -------- ------- Exchange Date for any Tranche of Notes be extended to a date more than 160 days after their issue date. No such exchange will be made on a day that is not a business day in the city of London, England, but shall instead be made on the next succeeding day that is a business day in the city of London, England. (d) Exchange of temporary global Notes; certification ------------------------------------------------- requirements. On or up to 10 days prior to the Exchange Date for any Series of - ------------ Notes held in temporary global form, the beneficial owners of such temporary global Note shall deliver to the Euroclear Operator or Cedel Bank, as the case may be, a certificate substantially in the form set forth in Exhibit B-1 hereto, copies of which certificate shall be available at the offices of the Euroclear Operator and Cedel Bank, the Fiscal and Paying Agent and each other paying agent of the relevant Issuer and (in the case of Notes issued by GEC Australia or GEC Canada) the Guarantor. On or after the Exchange Date for any Series of Notes, upon the request of the Depositary, acting on behalf of the Euroclear Operator and Cedel Bank, acting in turn on behalf of such beneficial owners, the Fiscal and Paying Agent shall authenticate a permanent global Note in bearer form or (if specified in the applicable Corporate Order) definitive Bearer Notes and/or definitive Registered Notes in the amounts requested in an aggregate principal amount equal to the aggregate principal amount of the temporary global Note beneficially owned by such owners, but only upon delivery by the Euroclear Operator and/or Cedel Bank, acting on behalf of such owners, to the Fiscal and Paying Agent or its duly authorized attorney-in-fact of a certificate or certificates substantially in the form set forth in Exhibit B-2 hereto. Such permanent global Note, if any, shall be authenticated by the Fiscal and Paying Agent or by a duly authorized officer or attorney-in-fact of the Fiscal and Paying Agent, upon the same conditions, in substantially the same manner and with the same effect as the definitive Notes, and shall be deposited with the Depositary for the accounts of the Euroclear Operator and Cedel Bank for credit to the respective accounts of such beneficial owners. Upon any such exchange of all or a portion of a temporary global Note for a permanent global Note or definitive Notes, such temporary global Note shall be endorsed by the Fiscal and Paying Agent or its duly authorized attorney-in-fact to reflect the reduction of its principal amount by an amount equal to the aggregate principal amount of such permanent global Note or definitive Notes as to which certification has been provided as set forth in the preceding paragraph. (e) Exchange of permanent global Note; certification ------------------------------------------------ requirements. Beneficial owners of Notes desiring to exchange their interests in - ------------ any permanent global Bearer Note for definitive Notes in bearer form or (if the relevant Corporate Order so allows) for definitive Notes in registered form shall instruct the Euroclear Operator or Cedel Bank to request such exchange on their behalf and shall deliver to the Euroclear Operator or Cedel Bank, as the case may be, a certificate substantially in the form set forth in Exhibit C-1 hereto, copies of which certificate shall be available at the offices of the Euroclear Operator and Cedel Bank, the Fiscal and Paying Agent and each other paying agent of the relevant Issuer and (in the case of Notes issued by GEC Australia or GEC Canada) the Guarantor. Upon the request of the Depositary, acting on behalf of the Euroclear Operator and Cedel Bank, acting in turn on behalf of such beneficial owners, the Fiscal and Paying Agent shall, upon 30- days' written notice, authenticate and deliver outside the United States, Australia and Canada (except in compliance with the securities laws of Canada and the provinces and territories thereof) to or for the account of such beneficial owners, definitive Notes in an aggregate principal amount equal to the aggregate principal amount of such permanent global Bearer Note, but only upon delivery by the Euroclear Operator or Cedel Bank, acting on behalf of such owners, to the Fiscal and Paying Agent or its duly authorized attorney- in-fact of a certificate or certificates substantially in the form set forth in Exhibit C-2 hereto. All expenses incurred as a result of any such exchange shall be paid by the relevant Issuer or (in the case of Notes issued by GEC Australia or GEC Canada) the Guarantor. Notwithstanding anything to the contrary contained in this subsection 3(e), the Fiscal Agent shall not be required to exchange the entire aggregate principal amount of a permanent global Bearer Note for definitive Bearer Notes in the event beneficial owners of less than the entire aggregate principal amount of the permanent global Bearer Note have requested definitive Bearer Notes, provided the operating rules and regulations of the clearance system then in effect would permit less than the entire aggregate principal amount of the permanent global Bearer Note to be so exchanged. Each permanent global Note shall in all respects be entitled to the same benefits under this Agreement as definitive Notes authenticated and delivered hereunder. Any certification referred to in Section 3(c) or (d) above which is delivered to the Fiscal and Paying Agent by the Euroclear Operator or by Cedel Bank, as the case may be, may be relied upon by the Fiscal and Paying Agent as conclusive evidence that the corresponding certification or certifications of the beneficial owner or owners have been delivered to the Euroclear Operator or to Cedel Bank, as the case may be, pursuant to the terms of this Agreement and the terms of the Notes. (f) Authentication of Registered Notes. If so specified in the ---------------------------------- applicable Corporate Order, Notes of any Series may be issued in fully registered form. Such Corporate Order will specify whether Registered Notes of such Series may be issued in exchange for Bearer Notes of such Series and whether the Notes of such Series may initially be issued in permanent global or definitive form. Registered Notes shall be authenticated by the Fiscal and Paying Agent or by a duly authorized officer or attorney-in-fact of the Fiscal and Paying Agent and, in the case of permanent global Registered Notes, deposited with the Depositary for the accounts of the Euroclear Operator and Cedel Bank for credit to the respective securities clearance accounts of the relevant Agents (or to such other accounts as they may have directed) maintained with the Euroclear Operator or with Cedel Bank or the Depositary Trust Company in New York City for credit to the respective accounts of the relevant Agents (or to such other accounts as they may have directed) maintained with the Depositary Trust Company or such other clearance and settlement organization as is specified in the applicable Corporate Order. 4. Exchange and Registration of Transfer of Notes. (a) ---------------------------------------------- Exchange of Registered Notes. Registered Notes of any Series may be exchanged - ---------------------------- for a like aggregate principal amount of Registered Notes of the same Series of other authorized denominations. Bearer Notes will not be issuable in exchange for Registered Notes. If so provided in the relevant Corporate Order, Bearer Notes of any Series (with all unmatured coupons, if any, and all matured coupons, if any, then in default, attached thereto) will be exchangeable (upon the terms, set forth in Section 3) for Registered Notes of the same Series of any authorized denominations and in an equal aggregate principal amount. Bearer Notes surrendered in exchange for Registered Notes after the close of business on (i) any record date with respect to any regular payment of interest and before the opening of business at such office on the relevant interest payment date, or (ii) any record date to be established for the payment of defaulted interest and before the opening of business on the related proposed date for payment of defaulted interest, shall be surrendered without the coupon relating to such date for payment of interest. Notes to be exchanged pursuant to the preceding two paragraphs shall be surrendered, at the option of the holders thereof, either at the office or agency designated and maintained by the relevant Issuer and (in the case of Notes issued by GEC Australia or GEC Canada) the Guarantor for such purpose in accordance with the provisions of Section 5 or at any of such other offices or agencies as may be designated and maintained by such Issuer and the Guarantor for such purpose in accordance with the provisions of Section 5, and such Issuer shall execute and register, the Guarantor shall cause the Guarantee to be endorsed thereon and the Fiscal and Paying Agent shall authenticate and deliver in exchange therefor the Note or Notes which the Noteholder making the exchange shall be entitled to receive. The term "Noteholder," "holder of Notes," or other similar terms, shall mean, (a) with respect to any Registered Note, the person in whose name at the time such Registered Note is registered on the books of the relevant Issuer kept for that purpose in accordance with the terms hereof, or (b) with respect to any Bearer Note, the bearer thereof. Each person designated by the relevant Issuer pursuant to the provisions of Section 5 as a person authorized to register and register transfer of the Notes is sometimes herein referred to as a "Registrar." In no event shall such Issuer designate more than one Registrar for each Series of Registered Notes. No person shall at any time be designated as or act as a Registrar unless such person is at such time empowered under applicable law to act as such and duly registered to act as such under and to the extent required by applicable law and regulations. (b) Transfers of Registered Notes. Each Registrar shall keep, ----------------------------- at each such office or agency, a register for each Series of Notes (for which it has been appointed Registrar) issuable in registered form (the registers of all Registrars being herein sometimes collectively referred to as the "Register") in which, subject to such reasonable regulations as it may prescribe, the Registrar shall register Registered Notes and shall register the transfer of Registered Notes as herein provided. The Register shall be in written form or in any other form capable of being converted into written form within a reasonable time. At all reasonable times the Register shall be open for inspection by the relevant Issuer, the Guarantor, the Fiscal and Paying Agent and any Registrar. Upon due presentment for registration of transfer of any Registered Note of any Series at any designated office or agency, such Issuer shall execute, the Guarantor shall (in the case of Notes issued by GEC Australia or GEC Canada) cause the Guarantee to be endorsed thereon, the Registrar shall register and the Fiscal and Paying Agent shall authenticate and deliver in the name of the transferee or transferees a new Registered Note or Registered Notes of the same Series for an equal aggregate principal amount. Registration or registration of transfer of any Registered Note by any Registrar in the Register maintained by such Registrar, and delivery of such Registered Note, duly authenticated, shall be deemed to complete the registration or registration of transfer of such Registered Note. All Registered Notes presented for registration of transfer or for exchange, redemption, repayment or payment shall (if so required by the relevant Issuer, the Guarantor or the Registrar) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer or exchange in form satisfactory to such Issuer, the Guarantor and the Registrar duly executed by, the holder or his attorney duly authorized in writing. If so specified in the applicable Corporate Order, the transfer of some or all of the Registered Notes of any Series may be subject to the restrictions set forth therein. If so specified in such Corporate Order, the Registrar for such Notes shall not register the transfer of any such Notes absent compliance with such restrictions. (c) Exchange and transfer of Bearer Notes. Bearer Notes in ------------------------------------- definitive form of any Series will be exchangeable for Bearer Notes in definitive form of the same Series in other authorized denominations, in an equal aggregate principal amount. Bearer Notes to be so exchanged shall be surrendered, at the option of the holders thereof, at the office of any Paying Agent appointed by the relevant Issuer and (in the case of Notes issued by GEC Australia or GEC Canada) the Guarantor to perform such service in accordance with the provisions of Section 5, and such Issuer shall execute, the Guarantor shall cause the Guarantee to be endorsed thereon and such Paying Agent shall authenticate and deliver in exchange therefor the Bearer Note or Notes which the Noteholder making the exchange shall be entitled to receive. Bearer Notes and any coupons appertaining thereto will be transferable by delivery. (d) Repository of master list of holders of Registered Notes. -------------------------------------------------------- The relevant Issuer will at all times designate one person (who may be such Issuer and who need not be the Registrar of any Series) to act as repository of a master list of names and addresses of the holders of the Registered Notes. The Fiscal and Paying Agent shall act as such repository unless and until some other person is, by written notice from such Issuer to the Fiscal and Paying Agent and each Registrar, designated by such Issuer to act as such. Such Issuer shall cause each Registrar to furnish to such repository, on a current basis, such information as to all registrations of transfer and exchanges effected by such Registrar, as may be necessary to enable such repository to maintain such master list on as current a basis as is practicable. (e) Miscellaneous. Except as provided in Section 3(d), no ------------- service charge shall be made for any exchange or registration of transfer of Notes, but the relevant Issuer and (in the case of Notes issued by GEC Australia or GE Canada) the Guarantor may require payment of a sum sufficient to cover any transfer taxes governmental charge that may be imposed in connection therewith. The relevant Issuer shall not be required (i) to issue, register the transfer of or exchange Notes to be redeemed for a period of fifteen calendar days preceding the first publication of the relevant notice of redemption, or if Registered Notes are outstanding and there is no publication, the mailing of the relevant notice of redemption, or (ii) to register the transfer of or exchange any Registered Notes selected for redemption, in whole or in part, except the unredeemed portion of any such Registered Notes being redeemed in part, or (iii) to exchange any Bearer Notes selected for redemption, except that such Bearer Notes may be exchanged for Registered Notes of like tenor, provided that such Registered Notes shall be simultaneously surrendered for redemption or (iv) to register transfer of or exchange any Notes surrendered for optional repayment, in whole or in part. Notwithstanding anything herein or in the terms of any Notes to the contrary, none of the relevant Issuer, the Fiscal and Paying Agent or any agent of such Issuer or the Fiscal and Paying Agent shall be required to exchange any Bearer Note for a Registered Note if such exchange would result in adverse income tax consequences to such Issuer (such as, for example, the inability of such Issuer to deduct from its income, as computed for income tax purposes, the interest payable on the Bearer Notes) under (i) then applicable United States Federal income tax laws, (ii) then applicable income tax legislation in Australia (in the case of Notes issued by GEC Australia), or (iii) the Income Tax Act (Canada) (or any successor or similar legislation) and similar Canadian provincial tax legislation (in the case of Notes issued by GEC Canada). 5. Payments of Principal, Premium and Interest; Paying Agents. ---------------------------------------------------------- (a) Payment generally. In order to provide for the payment of the principal of, ----------------- premium and interest on each Series of Notes as the same shall become due and payable on any payment date, the relevant Issuer hereby agrees to pay to the Fiscal and Paying Agent at the place and in the manner specified below or to such account or at such offices of any paying agent outside of the United States and (in the case of Notes issued by GEC Australia) outside of Australia as the Fiscal and Paying Agent shall specify in writing to such Issuer and (in the case of Notes issued by GEC Australia or GEC Canada) the Guarantor, such writing to be delivered not less than five calendar days prior to the payment date, in such currency or currency units as shall be required to make the payment due on such payment date, on each interest payment date and on the maturity date of such Series of Notes or any date fixed for redemption or acceleration of such Series of Notes (in each case determined in accordance with the terms of such Notes), in immediately available funds available on such interest payment, maturity, redemption or acceleration date, as the case may be, in an aggregate amount which (together with any funds then held by the Fiscal and Paying Agent and available for the purpose) shall be sufficient to pay the entire amount of the principal of, premium and interest on such Series of Notes (including Additional Amounts (as defined below), if any, becoming due on such interest payment, maturity, redemption or acceleration date), and the Fiscal and Paying Agent shall hold such amount in trust and apply it to the payment of any such principal, premium or interest on such interest payment, maturity, redemption or acceleration date. Nothing contained herein shall be construed to require the Fiscal and Paying Agent or any other paying agent to make any payment to the holder of a Note until funds have been received from the relevant Issuer pursuant to this Section. (b) Payments on temporary global Notes; certification ------------------------------------------------- requirements. Beneficial owners of any temporary global Note may receive - ------------ interest payments prior to the Exchange Date of such temporary global Note; provided such beneficial owners deliver a certificate or certificates to the - -------- Euroclear Operator or Cedel Bank substantially in the form set forth in Exhibit B-1 and instruct the Euroclear Operator or Cedel Bank, as the case may be, to request such interest payment on their behalf. Upon the request of the Depositary, acting on behalf of the Euroclear Operator and Cedel Bank, acting in turn on behalf of beneficial owners of Notes, the Fiscal and Paying Agent shall make payments of interest to the beneficial owners of interests in temporary global Notes, but only upon delivery by the Euroclear Operator or Cedel Bank, acting on behalf of such owners, to the Fiscal and Paying Agent or its duly authorized attorney-in-fact of a certificate or certificates substantially in the form set forth in Exhibit B-2 hereto. In the event of redemption or acceleration of all or any part of any temporary global Note prior to its Exchange Date, beneficial owners will be entitled to receive payment on or after the date fixed for such redemption or on which such acceleration occurs upon compliance by such beneficial owners and the Euroclear Operator and Cedel Bank, as applicable, with the provisions of the preceding paragraph of this Section. (c) Payments on Registered Notes. The person in whose name any ---------------------------- Registered Note of a particular Series is registered at the close of business or on any Record Date (as hereinafter defined) with respect to any interest payment date for such Series shall be entitled to receive the interest payable on such interest payment date notwithstanding the cancellation of such Registered Note upon any registration of transfer or exchange subsequent to the Record Date and prior to such interest payment date; provided however, that (i) if and to the -------- ------- extent that the relevant Issuer shall default in the payment of the interest on such interest payment date, such defaulted interest shall be paid to the persons in whose names outstanding Registered Notes of such Series are registered on a subsequent Record Date established by notice given by mail by or on behalf of such Issuer to the holders of such Registered Notes not less than 15 calendar days preceding such subsequent Record Date, such Record Date to be not less than five calendar days preceding the date or payment of such defaulted interest and (ii) interest payable at maturity, redemption or repayment of such Registered Note shall be payable to the person to whom principal shall be payable. The term "Record Date" as used in this Section with respect to any regular interest payment date, shall mean the fifteenth calendar day preceding such interest payment date, whether or not such fifteenth calendar day shall be a Business Day (as defined in Section 21). Interest on Registered Notes may at the option of the relevant Issuer be paid by check mailed to the persons entitled thereto at their respective addresses as such appear in the Register, or, at the option of any holder of $5,000,000 (or the equivalent thereof in more of more foreign or composite currencies) or more aggregate principal amount of Registered Notes of any Series and subject to applicable laws and regulations, be made by transfer to an account denominated in the currency in which such payment is to be made, maintained by such holder, if appropriate wire transfer instructions have been received by such Issuer or its agent not less than 10 calendar days prior to the applicable interest payment date. (d) Payments on Bearer Notes. Payments on Bearer Notes or the ------------------------ coupons appertaining thereto will, upon presentation of such Notes or coupons at a designated office outside of the United States, at the holder's option and subject to applicable laws and regulations, be made by check or wire transfer to an account denominated in the Specified Currency (unless otherwise provided in the applicable Corporate Order) in which such payment is to be made, maintained by such holder with a bank outside the United States and (in the case of Notes issued by GEC Australia) outside Australia, if appropriate wire transfer instructions have been received by the relevant Issuer or its agent not less than 10 calendar days prior to the applicable interest payment date. The relevant Issuer will maintain one or more offices or agencies in a city or cities located outside the United States and (in the case of Notes issued by GEC within Australia) outside Australia (including any city in which such an agency is required to be maintained under the rules of any stock exchange on which any of the Notes are listed) where any Bearer Notes issued hereunder and coupons, if any, appertaining thereto may be presented for payment. No payment on any Bearer Note or coupon will be made upon presentation of such Bearer Note or coupon at an agency of the relevant Issuer or the Guarantor within the United States or (in the case of Notes issued by GEC Australia) within Australia nor will any payment be made by transfer to an account in, or by check mailed to an address in, the United States or (in the case of Notes issued by GEC Australia) in Australia unless pursuant to applicable United States or Australian laws and regulations then in effect such payment can be made without adverse tax consequences to such Issuer. Notwithstanding the foregoing, (a) payments in U.S. dollars on Bearer Notes and coupons appertaining thereto may be made at an agency of such Issuer maintained in the Borough of Manhattan, The City of New York if such payment in U.S. dollars at each agency maintained by such Issuer outside the United States for payment on such Bearer Notes is illegal or effectively precluded by exchange controls or other similar restrictions, and (b) payments in Canadian dollars on Bearer Notes and Coupons appertaining thereto may be made at an agency of such Issuer maintained in the City of Toronto if such payment in Canadian dollars at each agency maintained by such Issuer outside Canada for payment on such Bearer Notes is illegal or effectively precluded by exchange controls or similar restrictions. (e) Place of payment. As long as any Registered Notes remain ---------------- outstanding hereunder, the relevant Issuer will designate and maintain in London, England an office or agency where such Registered Notes may be presented for payment, and where such Notes may be presented for registration of transfer and for exchange as in this Agreement provided. The relevant Issuer may from time to time designate one or more additional offices or agencies where Notes and any coupons appertaining thereto may be presented for payment, where Notes may be presented for exchange as provided in this Agreement and where Registered Notes may be presented for registration of transfer as in this Agreement provided, and such Issuer may from time to time rescind any such designation, as such Issuer may deem desirable or expedient; provided, however, that no such designation or rescission shall in -------- ------- any manner relieve such Issuer of its obligation to maintain the agencies provided for in this Section. Such Issuer will give to the Fiscal and Paying Agent prompt written notice of any such designation or rescission thereof. The relevant Issuer will give to the Fiscal and Paying Agent written notice of the location of each such office or agency and of any change of location thereof. In case such Issuer shall fail to give such notice of the location or of any change in the location thereof, presentations and demands may be made and notices may be served at the principal office of the Fiscal and Paying Agent in London, England. The relevant Issuer and (in the case of Notes issued by GEC Australia or GEC Canada) the Guarantor hereby initially designates the offices of The Chase Manhattan Bank (National Association), London Branch as the office or agency where Registered Notes may be presented for payment, for registration of transfer and for exchange as in this Agreement provided and where notices and demands to or upon such Issuer and the Guarantor in respect of the Bearer Notes or of this Agreement may be served. Such principal office is also designated as repository pursuant to Section 4 for the master list of the names and addresses of the holders of Registered Notes. (f) Payments by the Guarantor. If GEC Australia or GEC Canada ------------------------- shall fail to provide for the amounts payable on any Notes issued by GEC Australia or GEC Canada, as the case may be, or coupons appertaining thereto, if any, the Guarantor shall, subject to its right to avail itself of defenses under all relevant laws for the prescription of actions in respect of such Notes and coupons appertaining thereto, forthwith upon receipt of notice of such failure from the Fiscal and Paying Agent (who shall give such notice forthwith upon such failure) deliver or cause to be delivered to the Fiscal and Paying Agent the amount thereof (to the extent that the same has not then been delivered by GEC Australia or GEC Canada, as the case may be), which amount shall be held and applied in payment of such amounts by the Fiscal Agent and Paying Agent in all respects as if received from the relevant Issuer under this Agreement. (g) Taxes; foreign exchange clearance. The Fiscal Agent hereby --------------------------------- agrees to use its best efforts to obtain, prior to any payment date on the Notes, any tax or foreign exchange clearance or other authorization required under the laws of the United States or Australia (in the case of Notes issued by GEC Australia) or Canada or any province or territory thereof (in the case of Notes issued by GEC Canada) or any applicable foreign country or other authority with respect to the payment to be made on the Notes on such date. 6. Redemption; Sinking Funds; Repayment at the Option of the --------------------------------------------------------- Holder. (a) The provisions of this Section shall be applicable, as the case may - ------ be, (i) to any Notes which are redeemable or subject to repayment at the option of the holder before their maturity and (ii) to any sinking fund for the retirement of any Notes, in either case except as otherwise specified as contemplated by Section 2 for any Series of Notes. The minimum amount of any sinking fund payment provided for by the terms of any Notes is herein referred to as a "mandatory sinking fund payment," and any payment in excess of such minimum amount provided for by the terms of such Notes is herein referred to as an "optional sinking fund payment." In case the relevant Issuer shall desire to exercise any right to redeem all, or, as the case may be, any part of, the Notes of any Series in accordance with their terms, it shall fix a date for redemption. Notice of redemption to the holders of Registered Notes to be redeemed in whole or in part at the option of such Issuer shall be given by mailing notice of such redemption by first class mail, postage prepaid, at least 30 days and not more than 60 days prior to the date fixed for redemption to such holders at their last addresses as they shall appear in the Register. Notice of redemption to holders of Bearer Notes shall be published in a leading daily newspaper in the English language of general circulation in London, England and, if the Series of Notes to be redeemed is listed on the Luxembourg Stock Exchange and such Exchange so requires, in a daily newspaper of general circulation in Luxembourg or, if publication in either London or Luxembourg is not practical, elsewhere in Western Europe. The term "daily newspaper" shall mean a newspaper customarily published on each business day in morning editions, whether or not it shall be published in Saturday, Sunday or holiday editions. Such notice is expected to be published in the Financial Times and (if such Series of Notes is listed on the --------------- Luxembourg Stock Exchange) the Luxemburger Wort and shall be published at least ---------------- once a week for three successive weeks prior to the date fixed for redemption, the first such publication to be not less than 30 days nor more than 60 days prior to the date fixed for redemption. If by reason of the temporary or permanent suspension of publication of any newspaper or by reason of any other cause, it shall be impossible to make publication of such notice in a daily newspaper as herein provided, then such publication or other notice in lieu thereof as shall be made by the Fiscal and Paying Agent shall constitute sufficient publication of such notice, if such publication or other notice shall, so far as may be possible, approximate the terms and conditions of the publication in lieu of which it is given. The Fiscal and Paying Agent shall promptly furnish to the relevant Issuer and to each other paying agent of such Issuer a copy of each notice of redemption so published. Any notice if given in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the holder receives such notice. In any case, failure to give notice or any defect in the notice to the holder of any Note of a Series designated for redemption in whole or in part shall not affect the validity of the proceedings for the redemption of any other Note of such Series. Each such notice of redemption shall specify the date fixed for redemption, the redemption price at which the Notes of such Series are to be redeemed, the place or places of payment, that payment will be made upon presentation and surrender of such Notes and, in the case of Notes issued with coupons, of all coupons appertaining thereto maturing after the date fixed for redemption, that any interest accrued to the date fixed for redemption will be paid as specified in said notice, and that on and after said date any interest thereon or on the portions thereof to be redeemed will cease to accrue. If less than all the Notes of a Series are to be redeemed the notice of redemption shall specify the number or numbers of the Notes to be redeemed. In case any Note is to be redeemed in part only, the notice of redemption shall state the portion of the principal amount thereof to be redeemed and shall state that on and after the date fixed for redemption, upon surrender of such Note, a new Note or Notes of the same Series in principal amount equal to the unredeemed portion thereof, together with any unmatured coupons appertaining thereto, will be issued. On or prior to the redemption date specified in the notice of redemption given as provided in this Section, the relevant Issuer will deposit with the Fiscal and Paying Agent or with one or more paying agents an amount of money sufficient to redeem on the redemption date all the Notes or portions thereof so called for redemption, together with accrued interest to the date fixed for redemption. If less than all the Notes of a Series are to be redeemed such Issuer will give the Fiscal and Paying Agent notice not less than 60 days prior to the redemption date as to the aggregate principal amount of Notes of such Series to be redeemed and the Fiscal and Paying Agent shall select or cause to be selected, in such manner as in its sole discretion it shall deem appropriate and fair, the Notes or portions thereof to be redeemed. Notes of a Series may be redeemed in part only in multiples of the smallest authorized denomination of that Series. (b) If notice of redemption has been given as provided in this Section, the Notes or portions of Notes of the Series with respect to which such notice has been given shall become due and payable on the date and at the place or places stated in such notice at the applicable redemption price together with any interest accrued to the date fixed for redemption, and on and after said date (unless the relevant Issuer shall default in the payment of Notes or portions of such Notes, together with any interest accrued to said date) any interest on the Notes or portions of Notes of such Series so called for redemption shall cease to accrue, and the unmatured coupons, if any, appertaining thereto shall be void. On presentation and surrender of such Notes at a place of payment in said notice specified, together with all coupons, if any, appertaining thereto maturing after the date fixed for redemption, the said Notes or the specified portions thereof shall be paid and redeemed by the relevant Issuer at the applicable redemption price, together with any interest accrued thereon to the date fixed for redemption; provided, however, that ----------------- payment of interest becoming due on the date fixed for redemption shall be payable in the case of Notes with coupons attached thereto, to the holders of the coupons for such interest upon surrender thereof, and in the case of Registered Notes, to the persons to whom the principal thereof shall be payable. If any Note issued with coupons is surrendered for redemption and is not accompanied by all appurtenant coupons maturing after the date fixed for redemption, the surrender of such missing coupon or coupons may be waived by the relevant Issuer and the Fiscal and Paying Agent, if there be furnished to each of them such security or indemnity as they may require to save each of them harmless. Upon presentation of any Note redeemed in part only, the relevant Issuer shall execute and the Fiscal and Paying Agent shall authenticate and deliver to the holder thereof, at the expense of such Issuer, a new Note or Notes of the same Series, of authorized denominations, together with all unmatured coupons, if any, appertaining thereto, in aggregate principal amount equal to the unredeemed portion of the Note so presented. In lieu of making all or any part of any mandatory sinking fund payment with respect to any Notes in cash the relevant Issuer may at its option (a) deliver to the Fiscal and Paying Agent Notes, together with all unmatured coupons, if any, appertaining thereto, of the same Series theretofore purchased or otherwise acquired by such Issuer, or (b) receive credit for the principal amount of Notes of the same Series which have been redeemed either at the election of such Issuer pursuant to the terms of such Notes or through the application of permitted optional sinking fund payments pursuant to the terms of such Notes; provided that such Notes have not previously been so credited. Such -------- Notes shall be received and credited for such purpose by the Fiscal and Paying Agent at the redemption price specified in such Notes for redemption through operation of the sinking fund and the amount of such mandatory sinking fund payment shall be reduced accordingly. Not less than 60 days prior to each sinking fund payment date for any Notes, the relevant Issuer will deliver to the Fiscal and Paying Agent a certificate signed by an Issuer Authorized Representative specifying the amount of the next ensuing sinking fund payment for such Notes pursuant to the terms thereof, the portion thereof, if any, which is to be satisfied by payment of cash (which cash may be deposited with the Fiscal and Paying Agent or with one or more paying agents) and the portion thereof, if any, which is to be satisfied by delivering and crediting Notes of the same Series pursuant to this Section (which Notes, if not theretofore delivered, will accompany such certificate) and whether such Issuer intends to exercise its right to make a permitted optional sinking fund payment with respect to such Notes. Such certificate shall also state that no Event of Default (as defined in Section 8 below) has occurred and is continuing with respect to such Notes. Such certificate shall be irrevocable and upon its delivery the relevant Issuer shall be obligated to make the cash payment or payments therein referred to, if any, on or before the next succeeding sinking fund payment date. In the case of the failure of the relevant Issuer to deliver such certificate (or to deliver the Notes specified in this paragraph), the sinking fund payment due on the next succeeding sinking fund payment date for such Notes shall be paid entirely in cash and shall be sufficient to redeem the principal amount of such Notes subject to a mandatory sinking fund payment without the option to deliver or credit Notes as provided in this Section and without the right to make any optional sinking fund payment, if any, with respect to such Notes. Any sinking fund payment or payments (mandatory or optional) made in cash plus any unused balance of any preceding sinking fund payments made in cash which shall equal or exceed 100,000 units of the Specified Currency with respect to the particular Series (or a lesser sum if the relevant Issuer shall so request or determine) with respect to any Notes shall be applied by the Fiscal and Paying Agent on the sinking fund payment date on which such payment is made (or, if such payment is made before a sinking fund payment date, on the next sinking fund payment date following the date of such payment) to the redemption of such Notes at the redemption price specified in such Notes for operation of the sinking fund together with accrued interest, if any, to the date fixed for redemption. Any sinking fund moneys not so applied or allocated by the Fiscal and Paying Agent to the redemption of Notes shall be added to the next cash sinking fund payment received by the Fiscal and Paying Agent for such Notes and, together with such payment (or such amount so segregated) shall be applied in accordance with the provisions of this Section. Any and all sinking fund moneys with respect to any Notes held by the Fiscal and Paying Agent on the last sinking fund payment date with respect to such Notes and not held for the payment or redemption of particular Notes of such Series shall be applied by the Fiscal and Paying Agent, together with other moneys, if necessary, to be deposited (or segregated) sufficient for the purpose, to the payment of the principal of the Notes of that Series at maturity. The Fiscal and Paying Agent shall select or cause to be selected the Notes to be redeemed upon such sinking fund payment date in the manner specified in the last paragraph of subsection (a) and the relevant Issuer shall cause notice of the redemption thereof to be given in the manner provided in subsection (b) except that the notice of redemption shall also state that the Notes are being redeemed by operation of the sinking fund. Such notice having been duly given, the redemption of such Notes shall be made upon any Series of Notes the terms and in the manner stated in subsection (b). On or before each sinking fund payment date, the relevant Issuer shall pay to the Fiscal and Paying Agent in cash a sum equal to any interest accrued to the date fixed for redemption of Notes or portions thereof to be redeemed on such sinking fund payment date pursuant to this Section. Neither the Fiscal and Paying Agent nor the relevant Issuer shall redeem any Notes of any Series with sinking fund moneys or give any notice of redemption of such Notes by operation of the sinking fund for such Series during the continuance of a default in payment of interest, if any, on such Notes or of any Event of Default (other than an Event of Default occurring as a consequence of this paragraph) with respect to Notes of such Series, except that if the notice of redemption of any such Notes shall theretofore have been given in accordance with the provisions hereof, the Fiscal and Paying Agent shall redeem such Notes if cash sufficient for that purpose shall be deposited with the Fiscal and Paying Agent for that purpose in accordance with the terms of this Section. Except as aforesaid, any moneys in the sinking fund for Notes of such Series at the time when any such default or Event of Default shall occur and any moneys thereafter paid into such sinking fund shall, during the continuance of such default or Event of Default, be held as security for the payment of such Notes; provided, however, that in case such default or Event of -------- ------- Default shall have been cured or waived as provided herein, such moneys shall thereafter be applied on the next sinking fund payment date for Notes of such Series on which such moneys may be applied pursuant to the provisions of this Section. (c) Any Series of Notes may be made, by provision contained in or established pursuant to a Corporate Order pursuant to Section 2(c) hereof, subject to repayment, in whole or in part, at the option of the holder on a date or dates specified prior to maturity, at a price equal to 100% of the principal amount thereof, together with accrued interest to but excluding the date of repayment, on such notice as may be required, provided, however, that the holder of a Note of such Series may only elect partial repayment in an amount that will result in the portion of such Note that will remain outstanding after such repayment constituting an authorized denomination, or combination thereof, of Notes of such Series. 7. Mutilated, Destroyed, Stolen or Lost Notes. (a) The Fiscal ------------------------------------------ and Paying Agent is hereby authorized to authenticate and deliver from time to time Notes of any Series, with all unmatured coupons attached, in exchange for or in lieu of Notes of such Series which become mutilated, defaced, destroyed, stolen or lost or Notes of such Series to which mutilated, defaced, destroyed, stolen or lost coupons appertain. In every case the applicant for a substituted Note of such Series or coupon appertaining thereto shall furnish to the relevant Issuer, the Guarantor (in the case of Notes issued by GEC Australia or GEC Canada) and to the Fiscal and Paying Agent such security or indemnity as may be required by them to save each of them harmless, and, in every case of destruction, loss or theft, the applicant shall also furnish to such Issuer, the Guarantor and to the Fiscal and Paying Agent evidence to their satisfaction of the destruction, loss or theft of such Note or coupon and of the ownership thereof. Each Note authenticated and delivered in exchange for or in lieu of any such Note shall carry all the rights to interest accrued and unpaid and to accrue which were carried by such Note and shall have attached thereto coupons such that neither gain nor loss in interest shall result from such exchange or substitution. Upon the issuance of any substituted Note or coupon, the relevant Issuer may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses connected therewith. In case any Note or coupon which has matured or is about to mature shall become mutilated or be destroyed, lost or stolen, the relevant Issuer may, instead of issuing a substituted Note, pay or authorized the payment of the same (without surrender thereof except in the case of a mutilated Note or coupon) if the applicant for such payment shall furnish to such Issuer, the Guarantor and to the Fiscal and Paying Agent such security or indemnity as may be required by them to save each of them harmless and, in case of destruction, loss or theft, evidence satisfactory to such Issuer, the Guarantor and the Fiscal and Paying Agent of the destruction, loss or theft of such Note or coupon and the ownership thereof. (b) All Notes and coupons surrendered for payment, redemption, repayment, exchange or registration of transfer or for credit against any sinking fund shall be delivered to, or to the order of, the Fiscal and Paying Agent for cancellation. The Fiscal and Paying Agent shall cancel and destroy, or procure the cancellation and destruction of, all such Notes and coupons and shall deliver a certificate of destruction to the relevant Issuer and (in the case of Notes issued by GEC Australia or GEC Canada) the Guarantor. In the case of any global Note initially issued in temporary global form, which shall be destroyed by the Fiscal and Paying Agent upon exchange in full, the certificate of destruction shall state that a certification in the form required pursuant to the terms of such global Note was received with respect to each portion thereof exchanged for an interest in a Note in permanent global form or in definitive form. 8. Events of Default. The term "Events of Default" whenever ----------------- used herein with respect to Notes of any Series means any one of the following events and such other events as may be established with respect to the Notes of such Series as contemplated by Section 2 hereof, continued for the period of time, if any, and after the giving of notice, if any, designated in this Agreement or as may be established with respect to such Notes as contemplated by Section 2 hereof, as the case may be, unless it is either inapplicable or is specifically deleted or modified in the applicable Corporate Order under which such Series of Notes is issued, as the case may be, as contemplated by Section 2: (i) default in the payment of any installment of interest (including U.S. Additional Amounts, Australian Additional Amounts (in the case of Notes issued by GEC Australia) and Canadian Additional Amounts (in the case of Notes issued by GEC Canada)) upon any Note of such Series as and when the same shall become due and payable, and continuance of such default for a period of 30 days; or (ii) default in the payment of the principal of, or premium, if any, on any Note of such Series as and when the same shall become due and payable whether at maturity, upon redemption, by declaration, repayment or otherwise; or (iii) default in the making or satisfaction of any sinking fund payment or analogous obligation as and when the same shall become due and payable by the terms of any Notes of such Series; or (iv) failure on the part of the relevant Issuer and (in the case of Notes issued by GEC Australia or GEC Canada) the Guarantor duly to observe or perform any other of the covenants or agreements on the part of such Issuer or the Guarantor in respect of the Notes of such Series contained in such Notes or this Agreement (other than a covenant or agreement in respect of the Notes of such Series a default in whose observance or performance is elsewhere in this Section specifically dealt with) continued for a period of 60 days after the date on which written notice of such failure, requiring such Issuer or the Guarantor to remedy the same, shall have been given to such Issuer, the Guarantor and the Fiscal and Paying Agent by the holders of at least twenty-five percent in aggregate principal amount of the Notes of such Series at the time outstanding; or (v) an event of default with respect to any other Series of Notes issued or hereafter issued pursuant to this Agreement or as defined in any indenture or instrument evidencing or under which GE Capital has at the date of this Agreement or shall hereafter have outstanding any indebtedness for borrowed money shall happen and be continuing and such other Series of Notes or such indebtedness, as the case may be, shall have been accelerated so that the same shall be or become due and payable prior to the date on which the same would otherwise have become due and payable, and such acceleration shall not be rescinded or annulled within ten calendar days after written notice thereof shall have been given to the relevant Issuer, the Guarantor and the Fiscal and Paying Agent by the holders of at least twenty-five percent in aggregate principal amount of the Notes of such Series at the time outstanding; provided, however, that if such event of default -------- ------- with respect to such other Series of Notes or under such indenture or instrument, as the case may be, shall be remedied or cured by GE Capital, or waived by the holders of such other Series of Notes or of such indebtedness, as the case may be, then the Event of Default hereunder by reason thereof shall be deemed likewise to have been thereupon remedied, cured or waived without further action upon the part of either the Fiscal and Paying Agent or any of the Noteholders of such Series; or (vi) in the case of Notes issued by GEC Australia, an event of default with respect to any other Series of Notes issued or hereafter issued by GEC Australia pursuant to this Agreement or as defined in any indenture or instrument evidencing or under which GEC Australia has at the date of this Agreement or shall hereafter have outstanding any indebtedness for borrowed money in the aggregate principal amount of at least A$10,000,000 (or the equivalent thereof in one or more foreign or composite currencies) shall happen and be continuing and such other Series of Notes or such indebtedness, as the case may be, shall have been accelerated so that the same shall be or become due and payable prior to the date on which the same would otherwise have become due and payable, and such acceleration shall not be rescinded or annulled within ten calendar days after written notice thereof shall have been given to GEC Australia, the Guarantor and the Fiscal and Paying Agent by the holders of at least twenty-five percent in aggregate principal amount of the Notes of such Series at the time outstanding; provided, -------- however, that if such event of default with respect to such other ------- Series of Notes or under such indenture or instrument, as the case may be, shall be remedied or cured by GEC Australia or the Guarantor, or waived by the holders of such other Series of Notes or of such indebtedness, as the case may be, then the Event of Default hereunder by reason thereof shall be deemed likewise to have been thereupon remedied, cured or waived without further action upon the part of either the Fiscal and Paying Agent or any of the Noteholders of such Series; or (vii) in the case of Notes issued by GEC Canada, an event of default with respect to any other Series of Notes issued or hereafter issued by GEC Canada pursuant to this Agreement or as defined in any indenture or instrument evidencing or under which GEC Canada has at the date of this Agreement or shall hereafter have outstanding any indebtedness for borrowed money in the aggregate principal amount of at least Cdn.$10,000,000 (or the equivalent thereof in one or more foreign or composite currencies) shall happen and be continuing and such other Series of Notes or such indebtedness, as the case may be, shall have been accelerated so that the same shall be or become due and payable prior to the date on which the same would otherwise have become due and payable, and such acceleration shall not be rescinded or annulled within ten calendar days after written notice thereof shall have been given to GEC Canada, the Guarantor and the Fiscal and Paying Agent by the holders of at least twenty-five percent in aggregate principal amount of the Notes of such Series at the time outstanding; provided, -------- however, that if such event of default with respect to such other ------- Series of Notes or under such indenture or instrument, as the case may be, shall be remedied or cured by GEC Canada or the Guarantor, or waived by the holders of such other Series of Notes or of such indebtedness, as the case may be, then the Event of Default hereunder by reason thereof shall be deemed likewise to have been thereupon remedied, cured or waived without further action upon the part of either the Fiscal and Paying Agent or any of the Noteholders of such Series; or (viii) a decree or order by a court having jurisdiction in the premises shall have been entered adjudging GE Capital a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization of GE Capital under the United States Federal Bankruptcy Code or any other similar applicable United States Federal or State law, and such decree and order shall have continued undischarged and unstayed for a period of 60 days; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver or liquidator or trustee or assignee (or other similar official) in bankruptcy or insolvency of GE Capital or of all or substantially all of its property, or for the winding up or liquidation of its affairs, shall have been entered, and such decree and order shall have continued undischarged and unstayed for a period of 60 days; or (ix) GE Capital shall institute proceedings to be adjudicated a voluntary bankrupt, or shall consent to the filing of a bankruptcy proceeding against it, or shall file a petition or answer or consent seeking reorganization under the United States Federal Bankruptcy Code or any other similar applicable United States Federal or State law, or shall consent to the filing of any such petition, or shall consent to the appointment of a receiver or liquidator or trustee or assignee (or other similar official) in bankruptcy or insolvency of it or of its property, or shall make an assignment for the benefit or creditors, or shall admit in writing its inability to pays its debts generally as they become due; or (x) GEC Australia (in the case of Notes issued by GEC Australia) shall be declared bankrupt, or a liquidator, a receiver, manager, receiver and manager, administrator or any other officer with similar powers shall be appointed with respect to GEC Australia or all or substantially all of the property of GEC Australia, and, in all such cases, continues both undischarged and unstayed for a period of 90 days; or (xi) an order shall be made or an effective resolution be passed for the winding-up or liquidation or dissolution of GEC Canada (in the case of Notes issued by GEC Canada) by operation of law, except in the course of carrying out, or pursuant to, a reconstruction, reorganization, consolidation, merger, amalgamation, transfer, sale, conveyance, lease or other disposition contemplated in or permitted under this Agreement; or (xii) GEC Canada (in the case of Notes issued by GEC Canada) shall make a general assignment for the benefit of its creditors or a proposal under applicable bankruptcy legislation, or if an effective resolution be passed by GEC Canada to give effect to any of the foregoing; or (xiii) GEC Canada (in the case of Notes issued by GEC Canada) shall be declared bankrupt, or if a custodian or sequestrator or a receiver and manager or any other officer with similar powers shall be appointed of GEC Canada or of all or substantially all of the property of GEC Canada, and, in all such cases, such continues both undischarged and unstayed for a period of 90 days; or (xiv) any other Event of Default provided in the applicable Corporate Order under which such Series of Notes is issued as contemplated by Section 2. If an Event of Default with respect to Notes of any Series at the time outstanding occurs and is continuing, then and in each and every case, unless the principal of the Notes of such Series shall have already become due and payable, each Note of such Series shall, at the option of and upon written notice to the relevant Issuer, the Guarantor and the Fiscal and Paying Agent by the then holder thereof, mature and become due and payable upon the date that such written notice is received by such Issuer, the Guarantor and the Fiscal and Paying Agent at a price equal to 100% of the principal amount thereof (or, if such Note provides for an amount less than the principal amount thereof to be due and payable upon redemption or a declaration of acceleration of the maturity thereof pursuant to this Section (hereinafter an "Original Issue Discount Note"), such portion of the principal amount as may be specified in the terms of such Note), together with accrued interest to such date, upon presentation and surrender of such Note and all coupons appertaining thereto maturing after such date, unless prior to such date all Events of Default in respect of all such Notes of such Series shall have been cured. 9. Additional Payments; Tax Redemption. (a) U.S. Additional ----------------------------------- --------------- Amounts. The relevant Issuer or (in the case of Notes issued by GEC Australia or - ------- GEC Canada) the Guarantor will, subject to certain exceptions and limitations set forth below, pay such additional amounts (the "U.S. Additional Amounts" and, together with the Australian Additional Amounts and the Canadian Additional Amounts (as such terms are hereinafter defined), the "Additional Amounts") to the holder of any Note of any Series or of any interest coupon appertaining thereto who is a United States Alien (as defined below) as may be necessary in order that every net payment of the principal of, premium and interest, including original issue discount, on such Note and any other amounts payable on such Note, after withholding for or on account of any present or future tax, assessment or other governmental charge imposed upon or as a result of such payment by the United States (or any political subdivision or taxing authority thereof or therein), will not be less than the amount provided for in such Note or coupon to be then due and payable. However, the relevant Issuer or the Guarantor, as the case may be, will not be required to make any payment of U.S. Additional Amounts to any such holder for or on account of: (i) any such tax, assessment or other governmental charge which would not have been so imposed but for (1) the existence of any present or former connection between such holder (or between a fiduciary, settlor, beneficiary, member or shareholder of such holder, if such holder is an estate, a trust, a partnership or a corporation) and the United States, including, without limitation, such holder (or such fiduciary, settlor, beneficiary, member or shareholder) being or having been a citizen or resident thereof or being or having been engaged in a trade or business or present therein or having, or having had, a permanent establishment therein or (2) the presentation by the holder of any such Note or coupon for payment on a date more than 15 calendar days after the date on which such payment became due and payable or the date on which payment thereof is duly provided for, whichever occurs later; (ii) any estate, inheritance, gift, sales, transfer or personal property tax or any similar tax, assessment or governmental charge; (iii) any tax, assessment or other governmental charge imposed by reason of such holder's past or present status as a personal holding company or foreign personal holding company or controlled foreign corporation or passive foreign investment company with respect to the United States or as a corporation which accumulates earnings to avoid United States federal income tax or as a private foundation or other tax-exempt organization; (iv) any tax, assessment or other governmental charge which is payable otherwise than by withholding from payments on or in respect of any Note; (v) any tax, assessment or other governmental charge required to be withheld by any paying agent from any payment of principal of, premium or interest on, any Note, if such payment can be made without such withholding by any other paying agent in a city in Western Europe; (vi) any tax, assessment or other governmental charge which would not have been imposed but for the failure to comply with certification, information or other reporting requirements concerning the nationality, residence or identity of the holder or beneficial owner of such Note, if such compliance is required by statute or by regulation of the United States or of any political subdivision or taxing authority thereof or therein as a precondition to relief or exemption from such tax, assessment or other governmental charge; (vii) any tax, assessment or other governmental charge imposed by reason of such holder's past or present status as the actual or constructive owner of 10% or more of the total combined voting power of all classes of stock entitled to vote of the relevant Issuer or of the Guarantor or as a direct or indirect subsidiary of the relevant Issuer or of the Guarantor; or (viii) any combination of items (i), (ii), (iii), (iv), (v), (vi) or (vii); nor shall U.S. Additional Amounts be paid with respect to any payment on any such Note to a United States Alien who is a fiduciary or partnership or other than the sole beneficial owner of such payment to the extent such payment would be required by the laws of the United States (or any political subdivision thereof) to be included in the income, for tax purposes, of a beneficiary or settlor with respect to such fiduciary or a member of such partnership or a beneficial owner who would not have been entitled to the U.S. Additional Amounts had such beneficiary, settlor, member or beneficial owner been the holder of such Note. The term "United States Alien" means any person who, for United States federal income tax purposes, is a foreign corporation, a non-resident alien individual, a non-resident alien fiduciary of a foreign estate or trust, or a foreign partnership, one or more of the members of which is a foreign corporation, a non-resident alien individual or a non-resident alien fiduciary of a foreign estate or trust. (b) Australian Additional Amounts. All payments of principal ----------------------------- and interest in respect of Notes issued by GEC Australia and any interest coupons appertaining thereto will be made without withholding of or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or on behalf of the Commonwealth of Australia or any political subdivision thereof or any authority or agency therein or thereof having power to tax unless the withholding or deduction of such taxes, duties, assessments or charges is required by law or the application, administration or interpretation thereof. In the event that such withholding or deduction is so required, GEC Australia or the Guarantor (if the Guarantor is required to make payments under the Guarantee) shall pay (subject to GEC Australia's right of redemption referred to above in Section 6 - "Redemption; Sinking Funds; Repayment at the Option of the Holder") such additional amounts (the "Australian Additional Amounts") as may be necessary in order that the net amounts received by the holders of Notes and coupons appertaining thereto after such withholding or deduction shall equal the respective amounts of principal and interest which otherwise would have been received by them in respect of the Notes or coupons, as the case may be, in the absence of such withholding or deduction, except that no Australian Additional Amounts shall be payable with respect to any Note or coupon presented for payment: (a) by or on behalf of a holder who is subject to such taxes, duties, assessments or governmental charges by reason of his being resident or deemed to be resident in Australia or otherwise than merely by the holding or use or deemed holding or use outside Australia or ownership as a non-resident of Australia of such Notes or coupons; or (b) by or on behalf of a holder who is a resident of Australia where no additional amount would have been required to be paid had a tax file number been quoted to GEC Australia in respect of the relevant Note before the due date for payment in respect of the relevant Note ("resident" and "tax file number" having the same meaning for this purpose as they have in the Income Tax Assessment Act 1936 (as amended) of Australia); or (c) by or on behalf of a holder who is subject to such taxes, duties, assessments or government charges which would not have been so imposed but for the presentation by the holder of any such Note or coupon for payment on a date more than 15 days after the date on which such payment became due and payable or the date on which payment thereof is duly provided for, whichever occurs later. (c) Canadian Additional Amounts. All payments of principal and --------------------------- interest in respect of Notes issued by GEC Canada and any interest coupons appertaining thereto will be made without withholding of or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or on behalf of the Government of Canada or any province or territory or political subdivision thereof or any authority or agency therein or thereof having power to tax unless the withholding or deduction of such taxes, duties, assessments or charges is required by law or the application, administration or interpretation thereof. In the event that such withholding or deduction is so required, GEC Canada or the Guarantor (if the Guarantor is required to make payments under the Guarantee) shall pay (subject to GEC Canada's right of redemption referred to above in Section 6 - "Redemption; Sinking Funds; Repayment at the Option of the Holder") such additional amounts (the "Canadian Additional Amounts") as may be necessary in order that the net amounts received by the holders of Notes and coupons appertaining thereto after such withholding or deduction shall equal the respective amounts of principal and interest which otherwise would have been received by them in respect of such Notes or coupons, as the case may be, in the absence of such withholding or deduction, except that no Canadian Additional Amounts shall be payable with respect to any such Note or coupon presented for payment: (a) by or on behalf of a holder who is subject to such taxes, duties, assessments or charges otherwise than merely by the holding or use or deemed holding or use outside Canada or ownership as a non-resident of Canada of such Note or coupon; or (b) by or on behalf of a holder in respect of whom such taxes, duties, assessments or charges are required to be withheld or deducted by reason of the holder being a person with whom GEC Canada is not dealing at arm's length (within the meaning of the Income Tax Act (Canada)); or (c) more than 15 days after the Relevant Date (as defined below), except to the extent that the holder thereof would have been entitled to such Canadian Additional Amounts on presenting such Note or coupon for payment on the last day of such period of 15 days. The term "Relevant Date" means the later of (i) the date on which payment in respect of the relevant Note or Coupon becomes due and payable; and (ii) if the full amount of the moneys payable on such date has not been received by the Fiscal and Paying Agent on or prior to such date, the date on which the full amount of such moneys having been so received, notice of such receipt is duly published in accordance with the terms set out under Section 19 - - "Notices to Parties" below. (d) Tax Redemption. All Notes of the same Series may be -------------- redeemed in whole but not in part, at the option of the relevant Issuer at any time prior to maturity, upon the giving of a notice of redemption, at a redemption price (except as otherwise specified herein or in the applicable Corporate Order) equal to 100% of the principal amount thereof, together with accrued interest to the date fixed for redemption, or, in the case of Original Issue Discount Notes, at 100% of the portion of the face amount thereof that has accreted to the date of redemption, if the relevant Issuer or (in the case of Notes issued by GEC Australia or GEC Canada) the Guarantor determines that, as a result of any change in or amendment to the laws (or any regulations or ruling promulgated thereunder) of the United States or of any political subdivision or taxing authority thereof or therein affecting taxation, or any change in official position regarding the application or interpretation of such laws, regulations or ruling, which change or amendment becomes effective on or after the date of issuance of the first Tranche of Notes of such Series (if sold on an agency basis) or the date on which an Agent acting as principal agreed to purchase such Tranche of Notes, the relevant Issuer or the Guarantor, as the case may be, has or will become obligated to pay U.S. Additional Amounts with respect to such Notes as described under Section 9(a) hereof. Prior to the giving of any notice of redemption pursuant to this paragraph, the relevant Issuer shall deliver to the Fiscal and Paying Agent, (i) a certificate stating that the relevant Issuer is entitled to effect such redemption and setting forth a statement of facts showing that the conditions precedent to the right of such Issuer to so redeem have occurred (the date on which such certificate is delivered to the Fiscal and Paying Agent is herein called the"Redemption Determination Date"), and (ii) an opinion of counsel satisfactory to the Fiscal Agent to such effect based on such statement of facts; provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the relevant Issuer or the Guarantor, as the case may be, would be obligated to pay such U.S. Additional Amounts if a payment in respect of such Notes were then due. Notice of redemption will be given not less than 30 nor more than 60 days prior to the date fixed for redemption, which date and the applicable redemption price will be specified in the notice. If any date fixed for redemption is a date prior to the Exchange Date for a temporary global Bearer Note, payment on such redemption date will be made subject to receipt of a certificate substantially in the form set forth in Exhibit B-1, delivery of which is a condition to payment of such Notes. (e) Tax Redemption: Notes Issued by GEC Australia. All Notes --------------------------------------------- of the same Series issued by GEC Australia may be redeemed, at the option of GEC Australia, in whole but not in part, at any time prior to maturity, upon the giving of a notice of redemption as described under Section 9(d) hereof, at a redemption price (except as otherwise specified herein or in the applicable Corporate Order) equal to 100% of the principal amount thereof, together with accrued interest to the date fixed for redemption, or, in the case of Original Issue Discount Notes, at 100% of the portion of the face amount thereof that has accreted to the date of redemption, if (i) a certificate under Section 128F(4) of the Income Tax Assessment Act 1936 (as amended) of Australia (a "128F Certificate") with respect to the payment of interest on such Notes is required for an exemption to Australian withholding tax and such certificate is not issued or any application by GEC Australia for such a 128F Certificate is denied with the result that on the occasion of the next payment due in respect of such Notes GEC Australia or the Guarantor, as the case may be, would be required to pay Australian Additional Amounts with respect to such Notes as described under Section 9(b) hereof or (ii) GEC Australia or the Guarantor, as the case may be, determines that, as a result of any change in or amendment to the laws (or any regulations or rulings promulgated thereunder) of Australia or of any political subdivision or taxing authority thereof or therein affecting taxation, or any change in official position regarding the application or interpretation of such laws, regulations or rulings, including any change effected by guidance in any form from an official source, which change or amendment becomes effective on or after the date of issuance of the first Tranche of Notes of such Series (if sold on an agency basis) or the date on which an Agent acting as principal agrees to purchase such Tranche of Notes, GEC Australia or the Guarantor, as the case may be, has or will become obligated to pay Australian Additional Amounts with respect to the Notes as described under Section 9(b) hereof. Prior to the giving of any notice of redemption pursuant to this paragraph, GEC Australia or the Guarantor, as the case may be, shall deliver to the Fiscal Agent (i) a certificate stating that GEC Australia is entitled to effect such redemption and setting forth a statement of facts showing that the conditions precedent to the right of GEC Australia to so redeem have occurred and (ii) an opinion of counsel satisfactory to the Fiscal Agent to such effect based on such statement of facts; provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which GEC Australia or the Guarantor, as the case may be, would be obligated to pay such Australian Additional Amounts if a payment in respect of such Notes were then due. (f) Tax Redemption: Notes Issued by GEC Canada. All Notes of ------------------------------------------ the same Series issued by GEC Canada may be redeemed, at the option of GEC Canada, in whole but not in part, at any time prior to maturity, upon the giving of a notice of redemption as described under Section 9(d) hereof, at a redemption price (except as otherwise specified herein or in the applicable Corporate Order) equal to 100% of the principal amount thereof, together with accrued interest to the date fixed for redemption, or, in the case of Original Issue Discount Notes, at 100% of the portion of the face amount thereof that has accreted to the date of redemption, if GEC Canada or the Guarantor, as the case may be, determines that, as a result of any change in or amendment to the laws (or any regulations or rulings promulgated thereunder) of Canada or of any province or territory or political subdivision thereof or any authority or agency therein or thereof having power to tax, or any change in official position regarding the application or interpretation of such laws, regulations or rulings, including any change effected by guidance in any form from an official source, which change or amendment becomes effective on or after the date of issuance of the first Tranche of Notes of such Series (if sold on an agency basis) or the date on which an Agent acting as principal agreed to purchase such Tranche of Notes, GEC Canada or the Guarantor, as the case may be, has or will become obligated to pay Canadian Additional Amounts with respect to the Notes as described under Section 9(c) hereof. Prior to the giving of any notice of redemption pursuant to this paragraph, GEC Canada or the Guarantor, as the case may be, shall deliver to the Fiscal Agent (i) a certificate stating that GEC Canada is entitled to effect such redemption and setting forth a statement of facts showing that the conditions precedent to the right of GEC Canada to so redeem have occurred and (ii) an opinion of counsel satisfactory to the Fiscal Agent to such effect based on such statement of facts; provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which GEC Canada or the Guarantor, as the case may be, would be obligated to pay such Canadian Additional Amounts if a payment in respect of such Notes were then due. (g) Special Tax Redemption of Bearer Notes. If the relevant -------------------------------------- Issuer or (in the case of Notes issued by GEC Australia or GEC Canada) the Guarantor shall determine that any payment made outside the United States by such Issuer, the Guarantor (if the Guarantor is required to make payments under the relevant Guarantee) or any Paying Agent of principal or interest due in respect of any Bearer Notes of any Series would, under any present or future laws or regulations of the United States, be subject to any certification, identification or other information reporting requirement of any kind, the effect of which requirement is the disclosure to such Issuer, the Guarantor, any Paying Agent or any governmental authority of the nationality, residence or identity of a beneficial owner of such Bearer Note or coupon who is a United States Alien (other than such a requirement (a) which would not be applicable to a payment made by such Issuer, the Guarantor or any Paying Agent (i) directly to the beneficial owner or (ii) to a custodian, nominee or other agent of the beneficial owner, or (b) which can be satisfied by such custodian, nominee or other agent certifying to the effect that such beneficial owner is a United States Alien, provided that in each case referred to in clauses (a)(ii) and (b) payment by such custodian, nominee or agent to such beneficial owner is not otherwise subject to any such requirement), the relevant Issuer shall (in the case of Notes issued by GE Capital or GEC Australia) or may (in the case of Notes issued by GEC Canada) redeem the Bearer Notes of such Series, in whole, at a redemption price equal to 100% of the principal amount thereof, together with accrued interest to the date fixed for redemption, or, in the case of Original Issue Discount Notes, at 100% of the portion of the face amount thereof that has accreted to the date of redemption, or, at the election of such Issuer or the Guarantor, if the conditions of the next paragraph are satisfied, pay the additional amounts specified in such paragraph. The relevant Issuer or the Guarantor, as the case may be, shall make such determination and election as soon as practicable and publish prompt notice thereof (the "Determination Notice") stating the effective date of such certification, identification or other information reporting requirements, whether such Issuer will redeem the Bearer Notes of such Series, or whether such Issuer or the Guarantor, as the case may be, has elected to pay the U.S. Additional Amounts specified in the next paragraph, and (if applicable) the last date by which the redemption of the Bearer Notes of such Series must take place, as provided in the next succeeding sentence. If the relevant Issuer redeems the Bearer Notes of such Series, such redemption shall take place on such date, not later than one year after the publication of the Determination Notice, as the relevant Issuer or the Guarantor, as the case may be, shall elect by notice to the Fiscal and Paying Agent at least 60 days prior to the date fixed for redemption. Notice of such redemption of the Bearer Notes of such Series will be given to the holders of such Bearer Notes not more than 60 nor less than 30 days prior to the date fixed for redemption. Such redemption notice shall include a statement as to the last date by which the Bearer Notes of such Series to be redeemed may be exchanged for Registered Notes. Notwithstanding the foregoing, the relevant Issuer shall not so redeem such Bearer Notes if such Issuer or the Guarantor shall subsequently determine, not less than 30 days prior to the date fixed for redemption, that subsequent payments would not be subject to any such requirement, in which case such Issuer or the Guarantor shall publish prompt notice of such determination and any earlier redemption notice shall be revoked and of no further effect. The right of the holders of Bearer Notes called for redemption pursuant to this paragraph to exchange such Bearer Notes for Registered Notes will terminate at the close of business of the Principal Paying Agent on the fifteenth day prior to the date fixed for redemption, and no further exchanges of such Series of Bearer Notes for Registered Notes shall be permitted. If and so long as the certification, identification or other information reporting requirements referred to above in the preceding paragraph would be fully satisfied by payment of a backup withholding tax or similar charge, the relevant Issuer or the Guarantor, as the case may be, may elect to pay as U.S. Additional Amounts such amounts as may be necessary so that every net payment made outside the United States following the effective date of such requirements by such Issuer, the Guarantor or any Paying Agent of principal or interest, including original issue discount, due in respect of any Bearer Note or any coupon of which the beneficial owner is a United States Alien (but without any requirement that the nationality residence of identity of such beneficial owner be disclosed to such Issuer, the Guarantor, any Paying Agent or any governmental authority, with respect to the payment of such additional amounts), after deduction or withholding for or on account of such backup withholding tax or similar charge (other than a backup withholding tax or similar charge which (i) would not be applicable in the circumstances referred to in the third parenthetical clause of the first sentence of the preceding paragraph, or (ii) is imposed as a result of presentation of such Bearer Note or coupon for payment more than 15 days after the date on which such payment becomes due and payable or on which payment thereof is duly provided for, whichever occurs later), will not be less than the amount provided for in such Bearer Note or coupon to be then due and payable. In the event the relevant Issuer or the Guarantor, as the case may be, elects to pay any U.S. Additional Amounts pursuant to this paragraph, such Issuer shall have the right to redeem the Bearer Notes of such Series in whole at any time pursuant to the applicable provisions of the preceding paragraph and the redemption price of such Bearer Notes shall not be reduced for applicable withholding taxes. If such Issuer or the Guarantor, as the case may be, elects to pay U.S. Additional Amounts pursuant to this paragraph and the condition specified in the first sentence of this paragraph should no longer be satisfied, then such Issuer shall (in the case of Notes issued by GE Capital or GEC Australia) or may (in the case of Notes issued by GEC Canada) redeem the Bearer Notes of such Series in whole, pursuant to the applicable provisions of the preceding paragraph. 10. Covenant of the Issuers and the Guarantor. (a) Each Issuer ----------------------------------------- and (in the case of Notes issued by GEC Australia or GEC Canada) the Guarantor covenant and agree for the benefit of all Notes issued hereunder that they will duly and punctually pay or cause to be paid the principal of, premium, if any, and interest, if any, on all such Notes (together with any Additional Amounts) at the places, at the respective times and in the manner provided in such Notes, in the coupons, if any appertaining thereto, and in this Agreement. The interest on Notes issued with coupons (together with any Additional Amounts) shall be payable only upon presentation and surrender of the several coupons for such interest installments as are evidenced thereby as they severally mature. If any temporary Bearer Note provides that interest thereon may be paid while such Note is in temporary form, the interest on any such temporary Bearer Note (together with any Additional Amounts) shall be paid, as to the installments of interest only upon presentation and surrender thereof, and, as to the other installments of interest, if any, only upon presentation of such Notes for notation thereon of the payment of such interest, in each case subject to the restrictions set forth in Section 5. 11. Obligations of the Fiscal and Paying Agent. The Fiscal and ------------------------------------------ Paying Agent accepts its obligations set forth herein and in the Notes upon the terms and conditions hereof and thereof, including the following, to all of which each Issuer and (in the case of Notes issued by GEC Australia or GEC Canada) the Guarantor agree and to all of which the rights of the holders from time to time of the Notes of each Series shall be subject: (a) The Fiscal and Paying Agent shall be entitled to the compensation to be agreed upon with the relevant Issuer and the Guarantor for all services rendered by it, and such Issuer and the Guarantor agree promptly to pay such compensation and to reimburse the Fiscal and Paying Agent for its reasonable out-of-pocket expenses (including fees and expenses of counsel) incurred by it in connection with the services rendered by it hereunder. The relevant Issuer and the Guarantor also agree to indemnify the Fiscal and Paying Agent and each paying agent of such Issuer and the Guarantor for, and to hold each of them harmless against, any loss, liability or expense incurred without negligence or bad faith on their part arising out of or in connection with their acting as Fiscal and Paying Agent or paying agent of such Issuer and the Guarantor hereunder. The obligations of such Issuer and the Guarantor under this subsection (a) shall survive the payment of the Notes and the resignation or removal of the Fiscal and Paying Agent and each paying agent of such Issuer and the Guarantor, as the case may be. (b) In acting under this Agreement and in connection with the Notes, the Fiscal and Paying Agent and each paying agent of the relevant Issuer and the Guarantor are acting solely as agents of such Issuer and the Guarantor and do not assume any obligation towards or relationship of agency or trust for or with any of the beneficial owners or holders of the Notes except that all funds held by the Fiscal and Paying Agent or any other paying agent of such Issuer and the Guarantor for the payment of the principal of, premium and interest on (and Additional Amounts, if any, with respect to) the Notes shall be held in trust by them and applied as set forth herein and in the Notes, but need not be segregated from other funds held by them, except as required by law; provided that moneys paid by the relevant Issuer or -------- the Guarantor to the Fiscal and Paying Agent or any other paying agent of such Issuer or the Guarantor for the payment of the principal of, premium and interest on (and Additional Amounts, if any, with respect to) any of the Notes and remaining unclaimed at the end of three years after the date on which such principal, premium or interest (or Additional Amounts, if any) shall have become due and payable shall be repaid to the relevant Issuer or the Guarantor, as the case may be, as provided and in the manner set forth in Section 5, whereupon the aforesaid trust shall terminate and all liability of the Fiscal and Paying Agent or any other paying agent of the relevant Issuer and the Guarantor to such Issuer and the Guarantor with respect to such moneys shall cease. (c) The Fiscal and Paying Agent may consult with counsel and any advice or written opinion of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such advice or opinion. (d) The Fiscal and Paying Agent and each paying agent of the relevant Issuer and the Guarantor shall be protected and shall incur no liability for or in respect of any action taken or omitted to be taken or thing suffered by them in reliance upon any Note, coupon, notice, direction, consent, certificate, affidavit, statement or other paper or document reasonably believed by them to be genuine and to have been presented or signed by the proper party or parties. (e) The Fiscal and Paying Agent or any paying agent of the relevant Issuer or the Guarantor may, in its individual capacity or any other capacity, become the owner of, or acquire any interest in, any Notes or other obligations of such Issuer or the Guarantor with the same rights that it would have if it were not the Fiscal and Paying Agent or such paying agent of such Issuer or the Guarantor, and may engage or be interested in any financial or other transaction with such Issuer or the Guarantor and may act on, or as depositary, trustee or agent for, any committee or body of beneficial owners or holders of Notes or other obligations of such Issuer or the Guarantor as freely as if it were not the Fiscal and Paying Agent or such paying agent of such Issuer or the Guarantor. (f) Neither the Fiscal and Paying Agent nor any other paying agent of the relevant Issuer or the Guarantor shall be under any liability for interest on any moneys received by it pursuant to any of the provisions of this Agreement or the Notes. (g) The recitals contained herein and in the Notes (except in the Fiscal and Paying Agent's certificate of authentication) shall be taken as the statements of the relevant Issuer and the Guarantor, and the Fiscal and Paying Agent assumes no responsibility for the correctness of the same. The Fiscal and Paying Agent does not make any representation as to the validity or sufficiency of this Agreement or the Notes. Neither the Fiscal and Paying Agent nor any paying agent of the relevant Issuer and the Guarantor shall be accountable for the use or application by such Issuer of any of the Notes or the proceeds thereof. (h) The Fiscal and Paying Agent and each paying agent of the relevant Issuer and the Guarantor shall be obligated to perform such duties and only such duties as are herein and in the Notes specifically set forth, and no implied duties or obligations shall be read into this Agreement or the Notes against the Fiscal and Paying Agent or any such paying agent. The Fiscal and Paying Agent shall not be under any obligation to take any action hereunder which may tend to involve it in any expense or liability, the payment of which within a reasonable time is not, in its reasonable opinion, assured to it. (i) Unless otherwise specifically provided herein or in the Notes, any order, certificate, notice, request, direction or other communication from the relevant Issuer or the Guarantor made or given under any provision of this Agreement shall be sufficient if signed by the President, any Senior Vice President or Vice President, the Secretary or any Assistant Secretary or any duly authorized attorney-in-fact of the relevant Issuer or the Guarantor, as the case may be. 12. Maintenance and Resignation of Fiscal and Paying Agent. ------------------------------------------------------ (a) The relevant Issuer and (in the case of Notes issued by GEC Australia or GEC Canada) the Guarantor agree, for the benefit of the beneficial owners from time to time of the Notes, that, until all of the Notes and coupons are no longer outstanding or until moneys for the payment of all of the principal of, premium and interest on all outstanding Notes (and Additional Amounts, if any) shall have been made available at the principal office of the Fiscal and Paying Agent, and shall have been returned to the relevant Issuer or (in the case of Notes issued by GEC Australia or GEC Canada) the Guarantor as provided in Section 11(b), whichever occurs earlier, there shall at all times be a Fiscal and Paying Agent hereunder. The Fiscal and Paying Agent shall at all times maintain a place of business in, or in lieu thereof maintain an agent for service of process located in, London, England. (b) The Fiscal and Paying Agent may at any time resign by giving written notice of its resignation mailed to the relevant Issuer and the Guarantor specifying the date on which its resignation shall become effective; provided that such date shall be at least 90 days after the date on which such - -------- notice is given unless such Issuer and the Guarantor agree to accept less notice. Upon receiving such notice of resignation, the relevant Issuer and the Guarantor shall promptly appoint a successor fiscal and paying agent, qualified as aforesaid, by written instrument in duplicate signed on behalf of such Issuer and the Guarantor, one copy of which shall be delivered to the resigning Fiscal and Paying Agent and one copy to the successor fiscal and paying agent. Such resignation shall become effective upon the earlier of (i) the effective date of such resignation or (ii) the acceptance of appointment by the successor fiscal and paying agent as provided in subsection (c). The relevant Issuer and the Guarantor may, at any time and for any reason, and shall, upon any event set forth in the next succeeding sentence, remove the Fiscal and Paying Agent and appoint a successor fiscal and paying agent, qualified as aforesaid, by written instrument in duplicate signed on behalf of such Issuer and the Guarantor, one copy of which shall be delivered to the Fiscal and Paying Agent being removed and one copy to the successor fiscal and paying agent. The Fiscal and Paying Agent shall be removed as aforesaid if it shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Fiscal and Paying Agent or of its property shall be appointed, or any public officer shall take charge or control of it or of its property or affairs for the purpose of rehabilitation, conservation or liquidation. Any removal of the Fiscal and Paying Agent and any appointment of a successor fiscal and paying agent shall become effective upon acceptance of appointment by the successor fiscal and paying agent as provided in subsection (c). Upon its resignation or removal, the Fiscal and Paying Agent shall be entitled to the payment by the relevant Issuer or the Guarantor of its compensation for the services rendered hereunder and to the reimbursement of all reasonable out-of-pocket expenses incurred in connection with the services rendered by it hereunder (including any resignation expenses of the Fiscal and Paying Agent and fees and expenses of counsel). (c) Any successor fiscal and paying agent appointed as provided in subsection (b) shall execute and deliver to its predecessor and to the relevant Issuer and the Guarantor an instrument accepting such appointment hereunder, and thereupon such successor fiscal and paying agent, without any further act, deed or conveyance, shall become vested with all the rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as Fiscal and Paying Agent hereunder, and such predecessor, upon payment of its compensation and out-of-pocket expenses then unpaid, shall pay over to such successor agent all moneys or other property at the time held by it hereunder. (d) Any corporation or bank into which the Fiscal and Paying Agent may be merged or converted, or with which the Fiscal and Paying Agent may be consolidated, or any corporation or bank resulting from any merger, conversion or consolidation to which the Fiscal and Paying Agent shall be a party, or any corporation or bank succeeding to the fiscal agency business of the Fiscal and Paying Agent shall be the successor to the Fiscal and Paying Agent hereunder (provided that such corporation or bank shall be qualified as aforesaid) without the execution or filing of any paper or any further act on the part of any of the parties hereto. 13. Paying Agency. Each Issuer and (in the case of Notes ------------- issued by GEC Australia or GEC Canada) the Guarantor hereby initially appoints Chase Manhattan Bank Luxembourg S.A. as its paying agent for the Notes outside the United States (a "Paying Agent"). In addition, each Issuer and the Guarantor initially appoints Chase Manhattan Bank AG as its Paying Agent for Notes denominated or payable in Deutsche Marks. Each Issuer and the Guarantor shall cause each Paying Agent appointed by such Issuer and the Guarantor to execute and deliver to the Fiscal and Paying Agent an instrument in which such agent shall agree with the Fiscal and Paying Agent, subject to the provisions of this Section, (1) that it will hold all sums held by it as such agent for the payment of the principal of, premium, if any, or interest, if any, on such Notes (whether such sums have been paid to it by the Issuer or the Guarantor or by any other obligor on such Notes) in trust for the benefit of the holders of such Notes, or the coupons appertaining thereto, if any; (2) that it will give the Fiscal and Paying Agent notice of any failure by any such Issuer or the Guarantor (or by any other obligor on such Notes) to make any payment of the principal of, premium, if any, or interest, if any, on such Notes when the same shall be due and payable; and (3) that at any time during the continuance of any failure by any such Issuer or the Guarantor (or by any other obligor on such Notes) specified in the preceding paragraph (2), such paying agent will, upon the written request of the Fiscal and Paying Agent, forthwith pay to the Fiscal and Paying Agent all sums so held in trust by it. The Fiscal and Paying Agent shall arrange with all such paying agencies for the payment, from funds furnished by each Issuer and the Guarantor to the Fiscal and Paying Agent pursuant to this Agreement, of the principal of, premium and interest on the Notes (and Additional Amounts, if any, with respect to the Notes). 14. Merger, Consolidation, Sale or Conveyance. (a) Each Issuer ----------------------------------------- and (in the case of Notes issued by GEC Australia and GEC Canada) the Guarantor covenant that they will not merge or consolidate with any other corporation or sell, convey, transfer or otherwise dispose of all or substantially all of their respective assets to any corporation, unless (i) either such Issuer or the Guarantor, as the case may be, shall be the continuing corporation, or the successor corporation (if other than such Issuer or the Guarantor) shall be (a) with respect to GE Capital, a corporation organized and existing under the laws of the United States of America or a state thereof, (b) with respect to GEC Australia, a corporation incorporated under the laws of Australia and (c) with respect to GEC Canada, a corporation incorporated under the laws of Canada or any province of territory thereof, and such corporation shall expressly assume the due and punctual payment of the principal of, and premium, if any, and interest, if any, on all the Notes and coupons, if any, according to their tenor, and the due and punctual performance and observance of all of the covenants and conditions of this Agreement and the Notes to be performed by such Issuer or the Guarantor, as the case may be, executed and delivered to the Fiscal and Paying Agent by such corporation, and (ii) such Issuer or the Guarantor or such successor corporation, as the case may be, shall not, immediately after such merger or consolidation, or such sale, conveyance, transfer or other disposition, be in default in the performance of any such covenants or conditions. (b) In case of any such consolidation, merger, sale, conveyance (other than by way of lease), transfer or other disposition, and upon any such assumption by the successor corporation, such successor corporation shall succeed to and be substituted for the relevant Issuer or the Guarantor, as the case may be, with the same effect as if it had been named herein as such Issuer or the Guarantor, and such Issuer or the Guarantor shall be relieved of any further obligation under this Agreement and under the Notes and coupons, if any, and may be dissolved, wound up and liquidated at any time thereafter. Such successor corporation thereupon may cause to be signed, and may issue either in its own name or in the name of the relevant Issuer or the Guarantor, as the case may be, any or all of the Notes issuable hereunder together with any coupons appertaining thereto which theretofore shall not have been signed by such Issuer or the Guarantor and delivered to the Fiscal and Paying Agent; and, upon the order of such successor corporation, instead of such Issuer or the Guarantor and subject to all the terms, conditions and limitations in this Agreement prescribed, the Fiscal and Paying Agent shall authenticate and shall deliver any Notes together with any coupons appertaining thereto which previously shall have been signed and delivered to the Fiscal and Paying Agent for that purpose. All Notes appertaining thereto shall in all respects have the same legal rank and benefit under this Agreement as the Notes theretofore or thereafter issued in accordance with the terms of this Agreement as though all or such Notes had been issued at the date of the execution hereof. In case of any such consolidation, merger, sale, conveyance, transfer or other disposition, such changes in phraseology and form (but not in substance) may be made in the Notes and coupons thereafter to be issued as may be appropriate. 15. Meetings of Holders of the Notes. (a) Each Issuer or (in -------------------------------- the case of Notes issued by GEC Australia or GEC Canada) the Guarantor may at any time call a meeting of the holders of the Notes of any or all Series, such meeting to be held at such time and at such place as such Issuer or the Guarantor shall determine, for the purpose of obtaining a waiver of or an amendment to any provision of this Agreement or the Notes of any Series (to the extent permitted in Section 18 hereof). For purposes of this Section, "holders of a global Bearer Note" shall be those persons shown on the records of the Euroclear Operator or Cedel Bank as having interests in such global Bearer Note credited to their respective securities clearance accounts on the date on which notice of the meeting is given. Notice of any meeting of Noteholders, setting forth the time and place of such meeting and in general terms the action proposed to be taken at such meeting, shall be (i) if any Bearer Notes of a Series affected are then outstanding, published prior to the date fixed for the meeting at least once a week for three successive weeks in a daily newspaper in the English language of general circulation in London, England and if the Notes of such Series are listed on the Luxembourg Stock Exchange and such Exchange so requires, in a daily newspaper (as defined in Section 6(a) hereof) of general circulation in Luxembourg or, if publication in either London or Luxembourg is not practical, elsewhere in Western Europe and (ii) if any Registered Notes of a Series affected are then outstanding, mailed to the holders of then outstanding Registered Notes of each Series affected at their addresses as they shall appear on the books of the Registrar. The first publication or mailing of notice, in the case of Registered Notes, shall be made not less than 20 nor more than 180 days prior to the date fixed for such meeting. Such publication is expected to be made in the Financial Times and (if --------------- such Series of Notes is listed on the Luxembourg Stock Exchange) the Luxemburger ----------- Wort. To be entitled to vote at any meeting of holders of Notes a person shall - ---- be (i) a holder of one of more Notes of the relevant Series with respect to which such meeting is being held or (ii) a person appointed by an instrument in writing as proxy by the holder of one or more such Notes. The only persons who shall be entitled to be present or to speak at any meeting of the holders of the Notes of any Series shall be the persons entitled to vote at such meeting and their counsel and any representatives of the relevant Issuer, the Guarantor and their counsel. (b) The persons entitled to vote a majority in principal amount of the Notes of the relevant Series at the time outstanding shall constitute a quorum for the purpose of obtaining any such waiver or amendment. No business shall be transacted in the absence of a quorum, unless a quorum is present when the meeting is called to order. In the absence of a quorum within 30 minutes of the time appointed for any such meeting, the meeting shall be adjourned for a period of not less than 10 calendar days as determined by the chairman of the meeting. In the absence of a quorum within 30 minutes of the time appointed for any such adjourned meeting, such adjourned meeting shall be further adjourned for a period of not less than 10 calendar days as determined by the chairman of the meeting. Notice of the reconvening of any adjourned meeting shall be given as provided above except that such notice need be published only once, but must be mailed or published not less than five days prior to the date on which the meeting is scheduled to be reconvened. Subject to the foregoing, at the reconvening of any meeting further adjourned for lack of a quorum, the persons entitled to vote 25% in principal amount of the Notes of the relevant Series at the time outstanding shall constitute a quorum for the taking of any action set forth in the notice of the original meeting. Notice of the reconvening of an adjourned meeting shall state expressly the percentage of the aggregate principal amount of the outstanding Notes of the relevant Series which shall constitute a quorum. (c) At a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid, any resolution with respect to such waiver or amendment shall be effectively passed and decided if passed and decided by the favorable vote of persons entitled to vote the lesser of (i) a majority in the principal amount of the Notes of the relevant Series then outstanding or (ii) 75% in principal amount of such Notes represented and voting at the meeting. Any Noteholder who has executed an instrument in writing appointing a person as proxy shall be deemed to be present for the purposes of determining a quorum and be deemed to have voted; provided that such Noteholder shall be considered as present and voting only with respect to the matters covered by such instrument in writing (which may include authorization to vote on any other matters as may come before the meeting). Any resolution passed or decision taken at any meeting of Noteholders duly held in accordance with this Section shall be conclusive and binding on all the Noteholders of the relevant Series whether or not present or represented at the meeting. (d) The holding of definitive Bearer Notes of the relevant Series for purposes of this Section shall be proved by the production of such Notes or by a certificate executed by any trust company, bank, banker or recognized securities dealer satisfactory to the relevant Issuer and the Guarantor, wherever situated, if such certificate shall be deemed by such Issuer and the Guarantor to be satisfactory. Each such certificate shall be dated and shall state that on the date thereof a Note of the relevant Series bearing a specified identifying number was deposited with or exhibited to such trust company, bank, banker or recognized securities dealer by the person named in such certificate. Any such certificate may be issued in respect of one or more such Bearer Notes specified therein. The holding of an interest in any global Bearer Note of the relevant Series shall be proved by a certificate of the Euroclear Operator or Cedel Bank. The holding by the person named in any such certificate of any such Bearer Note or interest in a global Bearer Note specified therein shall be presumed to continue for a period of one year from the date of such certificate unless at the time of any determination of such holding (i) another certificate bearing a later date issued in respect of the same Bearer Note or interest in a global Bearer Note shall be produced, (ii) such Bearer Note specified in such certificate shall be produced by some other person or (iii) such Bearer Note specified in such certificate shall have ceased to be outstanding. The appointment of any proxy shall be proved by having the signature of the person executing the proxy witnessed or guaranteed by any bank, banker, trust company or New York Stock Exchange member firm satisfactory to the relevant Issuer and the Guarantor. (e) Each Issuer and the Guarantor shall appoint a temporary chairman of the meeting. A permanent chairman and a permanent secretary of the meeting shall be elected by vote of the holders of a majority in principal amount of the Notes of the relevant Series represented at the meeting. At any meeting each Noteholder of the relevant Series or proxy shall be entitled to one vote for each 1,000 U.S. dollars (or the equivalent thereof in any foreign or composite currency) of principal amount (in the case of Original Issue Discount Notes of the relevant Series, such principal amount thereof that would be due and payable as of the date of such meeting upon a declaration of acceleration of the maturity thereof pursuant to Section 8) of such Notes held or represented by such Noteholder or proxy; provided, however, that no vote shall be cast or -------- ------- counted at any meeting in respect of any Note of the relevant Series challenged as not outstanding and ruled by the chairman of the meeting to be not outstanding. The chairman of the meeting shall have no right to vote except as a Noteholder or proxy. Any meeting of Noteholders duly called at which a quorum is present may be adjourned from time to time, and the meeting may be held as so adjourned without further notice. (f) The vote upon any resolution submitted to any meeting of Noteholders shall be by written ballot on which shall be subscribed the signatures of such Noteholders or proxies and on which shall be inscribed the principal amount (in the case of Original Issue Discount Notes of the relevant Series, such principal amount thereof that would be due and payable as of the date of such vote upon a declaration of acceleration of the maturity thereof pursuant to Section 8) and the identifying number or numbers of the Notes of such Series held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in duplicate of all votes cast at the meeting. A record in duplicate of the proceedings of each meeting of Noteholders shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was published as provided above. The record will show the principal amount of the Notes (in the case of Original Issue Discount Notes, such principal amount thereof that would be due and payable as of the date of such vote upon a declaration of acceleration of the maturity thereof pursuant to Section 8) voting in favor of or against any resolution. The record shall be signed and verified by the permanent chairman and secretary of the meeting and one of the duplicates shall be delivered to the relevant Issuer or the Guarantor and the other to the Fiscal and Paying Agent to be preserved by the Fiscal and Paying Agent, the latter to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated. 16. Consent of Holders. (a) Any authorization, direction, ------------------ notice, consent, waiver, amendment or other action provided by the provisions of this Agreement or the Notes of any Series to be given or taken by holders (which term as used in this Section shall mean with respect to any global Bearer Note those persons shown on the records of the Euroclear Operator or Cedel Bank as having interests in such global Bearer Note credited to their respective securities clearance accounts) of Notes of such Series may be embodied in and evidenced by one or more instruments of substantially similar tenor, listing the serial number of the Note or Notes of such Series in respect of which each such instrument is submitted, signed by the requisite number of such holders in person or by their agent duly appointed in writing; and, except as herein or therein expressly provided, any such instrument shall become irrevocable when delivered, and such action shall become effective when such instrument signed by such holders is delivered to the Fiscal and Paying Agent or other paying agency of the relevant Issuer and (in the case of Notes issued by GEC Australia or GEC Canada) the Guarantor. Proof of execution of any such instrument or of a writing appointing any such agent by the holder of any such Note shall be sufficient for any such purpose of this Agreement or such Notes and conclusive in favor of (i) the Fiscal and Paying Agent or other paying agency of such Issuer and the Guarantor and (ii) such Issuer and the Guarantor if made in the manner provided in this Section. (b) The fact and date of execution of any such instrument and the fact that any person is the holder of the Note or Notes of any Series of which the serial numbers are listed in such instrument may be proved by the certificate of a financial institution of recognized standing to such effect, or in any other manner which the relevant Issuer and the Guarantor deem sufficient. (c) Any authorization, direction, notice, consent, waiver or other action by the holder of any Note shall bind every future holder of such Note in respect of anything done, omitted or suffered to be done in reliance thereon, whether or not notation of such action is made upon such Note. 17. Stamp Taxes. The relevant Issuer or the Guarantor will pay ----------- all stamp or other documentary taxes or duties, if any, to which the execution or delivery of this Agreement or the issuance of the Notes of any Series or any coupons appertaining thereto may be subject. 18. Modifications and Amendments. (a) This Agreement may be ---------------------------- amended by the parties hereto, without the consent of the holder (which term as used in this Section shall mean with respect to any global Bearer Note those persons shown on the records of the Euroclear Operator or Cedel Bank as having interests in such global Bearer Note credited to their respective securities clearance accounts) of any Note, for the purposes of (i) providing for the issuance of Notes pursuant to Section 2 hereof; (ii) curing any ambiguity or correcting or supplementing any provision contained herein which may be defective or inconsistent with any other provision contained herein; (iii) adding to the covenants of the relevant Issuer or (in the case of Notes issued by GEC Australia or GEC Canada) the Guarantor for the protection of the holders of all or any Series of the Notes; (iv) effecting any assumption of the relevant Issuer's or the Guarantor's obligations hereunder and under the Notes or the Guarantee by a successor corporation pursuant to Section 14(a) of this Agreement; (v) evidencing and providing for the acceptance of appointment hereunder by a successor Fiscal and Paying Agent with respect to the Notes of one or more Series; or (vi) amending this Agreement in any other manner which the parties may mutually deem necessary or desirable and which shall not adversely affect the interests of the holders of the Notes of any Series outstanding on the date of such amendment. Nothing in the Fiscal Agency Agreement prevents the Issuers, the Guarantor and the Fiscal Agent from amending the Fiscal Agency Agreement in such a manner as to only have a prospective effect on Notes issued on or after the date of such amendment. (b) Modifications and amendments to this Agreement or the Notes of any Series or the Guarantee may also be made, and future compliance therewith or past Event of Default by the relevant Issuer or the Guarantor may be waived, by holders of not less than a majority in aggregate principal amount of the Notes of such Series (or, in each case, such lesser amount as shall have acted at a meeting of holders of such Notes, pursuant to Section 15 of this Agreement); provided, however, that -------- ------- no such modification or amendment to this Agreement or the Notes may, without the consent of the holders of each such Note of such Series affected thereby, (i) change the stated maturity of the principal of any such Note of such Series or extend the time for payment of interest thereon; (ii) change the amount of the principal of an Original Issue Discount Note of such Series that would be due and payable upon an acceleration of the maturity thereof; (iii) reduce the amount of interest payable thereon or the amount payable thereon in the event of redemption or acceleration; (iv) change the currency of payment of principal of or any other amounts payable on any such Note; (v) impair the right to institute suit for the enforcement of any such payment on or with respect to any such Note or the Guarantee; (vi) reduce the above-stated percentage of the principal amount of Notes of such Series the consent of whose holders is necessary to modify or amend this Agreement or the Notes of such Series or reduce the percentage of Note of such Series required for the taking of action or the quorum required at any such meeting of holders of Notes of such Series; or (vii) modify the foregoing requirements to reduce the percentage of outstanding Notes of such Series necessary to waive any future compliance or past default. (c) Any such modification or amendments will be conclusive and binding on all holders of Notes of the relevant Series and on all future holders of such Notes, whether or not they have consented to such modifications or amendments and whether or not notation of such modifications or amendments is made upon the Notes of such Series. 19. Notices to Parties. All notices hereunder to the parties ------------------ hereto shall be deemed to have been given when sent by certified or registered mail, postage prepaid, or by facsimile transmission, addressed to any party hereto as follows: Address ------- GE Capital General Electric Capital Corporation 260 Long Ridge Road Stamford, Connecticut 06927 U.S.A. Attention: Senior Vice President-Corporate Treasury and Global Funding Operation Facsimile: 203-357-4975 Telephone: 203-357-4000 GEC Australia GE Capital Australia Limited 88 Walker Street North Sydney NSW 2060 Australia Attention: Robert Johnston Facsimile: 612-954-1870 Telephone: 612-900-4300 in each case with a copy to GE Capital in its capacity as Guarantor delivered in accordance with this Section 19; GEC Canada General Electric Capital Canada Inc. 2300 Meadowvale Boulevard Mississauga, Ontario Canada L5N 5P9 Attention: Vice President and Counsel Facsimile: 905-858-5456 Telephone: 905-858-5100 in each case with a copy to GE Capital in its capacity as Guarantor delivered in accordance with this Section 19; Fiscal and Paying Agent The Chase Manhattan Bank (National Association), London Branch Woolgate House, Coleman Street London EC2P 2HD, England Attention: Manager, Corporate Trust Operations Facsimile: 011-44-1202-347-945 Telephone: 011-44-1202-347-432 or at any other address of which either of the foregoing shall have notified the other in writing. Any notice, direction, request or demand by any holder of Notes or coupons to or upon the Fiscal and Paying Agent shall be deemed to have been sufficiently given or made, for all purposes, if given or made in writing at the principal London office of the Fiscal and Paying Agent, addressed to the attention of its corporate trust office. 20. Notices to and by Holders of the Notes. Each Issuer and -------------------------------------- (in the case of Notes issued by GEC Australia or GEC Canada) the Guarantor will give notice promptly to the holders of the Notes of the termination of appointment of any paying agent of such Issuer and the Guarantor. Such notice shall be published in a daily newspaper in the English language of general circulation in London, England, and if the Series of Notes is listed on the Luxembourg Stock Exchange and such Exchange so requires, in a daily newspaper of general circulation in Luxembourg or, if publication in either London or Luxembourg is not practical, elsewhere in Western Europe. Such publication is expected to be made in the Financial Times and (if such Series is listed on the --------------- Luxembourg Stock Exchange) the Luxemburger Wort. Any notice to the holders of ---------------- Notes by publication shall be deemed to have been given on the date of such publication, or if published in newspapers on different dates, on the date of the first such publication. Notice to holders of any Notes denominated in French francs or denominated in another currency or currencies that are linked, directly or indirectly to French francs and that are listed on the Paris Bourse will be given by publication in a French language daily newspaper of general circulation in Paris (which is expected to be La Tribune Desfosses) and such notice will -------------------- comply with the applicable rules of the Paris Bourse. Notice to holders of any Notes denominated in Dutch guilder that are listed on the Amsterdam Stock Exchange will be given by publication in a leading daily newspaper in the English language of general circulation in Amsterdam and London. So long as such Notes are listed on the Amsterdam Stock Exchange and the rules of such Exchange so require, such notice shall also be published in the Official Price List ("Officiele Prijscourant"). If publication in London or Amsterdam, as the case may be, is not practical, such publication shall be made elsewhere in Western Europe. Such publication is expected to be made in the Financial Times in London and the Het Financieele Dagblad in Amsterdam. Such notices will be deemed to have been given on the date of such publication or if published in such newspapers on different dates, on the date of the first such publication. So long as no definitive Notes are in issue in respect of a particular Series, there may, so long as the global Note(s) for such Series is or are held in its or their entirety on behalf of Euroclear and Cedel Bank, and the Notes for such Series are not listed on the Luxembourg Stock Exchange or the Paris Bourse, as the case may be, (or if so listed, for as long as the Luxembourg Stock Exchange or the Paris Bourse, as the case may be, so permits), be substituted for such publication in such newspaper(s) the delivery of the relevant notice to Euroclear and Cedel Bank for communication by them to the holders of the Notes. Any such notice shall be deemed to have been given to the holders of the Notes on the seventh day after the day on which the said notice was given to Euroclear and Cedel Bank. Notices to be given by a Noteholder shall be in writing and given by lodging the same, together with the relative Note or Notes, with the Agent. Whilst any Notes are represented by a global Note, such notice may be given by a Noteholder to the Agent via Euroclear and/or Cedel Bank, as the case may be, in such manner as the Agent and Euroclear and/or Cedel Bank may approve for this purpose. 21. Business Day. For the purposes of this Agreement, ------------ "Business Day" shall mean, unless otherwise specified with respect to a particular Series of Notes, any day other than a Saturday or Sunday or any other day on which banking institutions are generally authorized or obligated by law or regulation to close in (i) the principal financial center of the country in which the relevant Issuer is incorporated, (ii) the principal financial center of the country of the currency in which the Notes are denominated, (iii) the place at which payment on such Note or coupon is to be made and (iv) London, England; provided, however, that with respect to Notes denominated in ECUs, such day is not a day that is a non-ECU clearing day as determined by the ECU Banking Association in Paris, France. For purposes of this definition, the principal financial center of the United States is New York, the principal financial center of Australia is Sydney and the principal financial center of Canada is Toronto, Ontario. 22. Central Bank Reporting Requirements. In addition to its ----------------------------------- other duties set forth in this Agreement, the Fiscal and Paying Agent is hereby designated as the relevant Issuer's and (in the case of Notes issued by GEC Australia or GEC Canada) the Guarantor's agent for the purpose of complying with notification, reporting or other applicable requirements of the various central banks or similar monetary authorities regulating Notes issued in Specified Currencies other than U.S. dollars. Without limiting the generality of the foregoing, at the date hereof such duties shall include the information reporting requirements of (i) the Japanese Ministry of Finance with respect to any Series of Notes where the Specified Currency is Japanese Yen, (ii) the German Bundesbank with respect to any Series of Notes where the Specified Currency is Deutschemarks, and (iii) the Bank of England with respect to any Series of Notes where the Specified Currency is Pounds Sterling. 23. Governing Law. THIS AGREEMENT, THE NOTES AND ANY COUPONS ------------- APPERTAINING THERETO SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, U.S.A. 24. Consent to Service. Each Issuer and (in the case of Notes ------------------ issued by GEC Australia or GEC Canada) the Guarantor has designated the Senior Vice President-Corporate Treasury and Global Funding Operation of each Issuer and the Guarantor as authorized agent for service of process in any legal action or proceeding arising out of or relating to the Fiscal Agency Agreement, the Notes or the Guarantees brought in any federal or state court in the Borough of Manhattan, the City of New York, State of New York and irrevocably submit to the non-exclusive jurisdiction of such courts for such purposes (and only for such purposes) as long as there are any outstanding Notes. 25. Counterparts. This Agreement may be signed in any number ------------ of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. Such counterparts shall together constitute but one and the same instrument. 26. Inspection of Agreement. A copy of this Agreement shall be ----------------------- made available by the Fiscal and Paying Agent for inspection at all reasonable times at its office as stated in Section 19 and at the offices of the paying agents specified in the Notes. 27. Descriptive Headings. The descriptive headings in this -------------------- Agreement are for convenience of reference only and shall not define or limit the provisions of this Agreement. 28. Provisions Binding on Successors. All the covenants, -------------------------------- stipulations, promises and agreements in this Agreement contained by the relevant Issuer and (in the case of Notes issued by GEC Australia or GEC Canada) the Guarantor shall bind its successors and assigns whether so expressed or not. 29. Official Acts by Successor Corporation. Any act or -------------------------------------- proceeding by any provision of this Agreement authorized or required to be done or performed by any board, committee or officer of the relevant Issuer or (in the case of Notes issued by GEC Australia or GEC Canada) the Guarantor shall and may be done and performed with like force and effect by the like board, committee or officer of any corporation that shall at the time be the lawful sole successor of such Issuer or the Guarantor. 30. Severability. In case any provision in this Agreement or ------------ in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provision shall not in any way be affected or impaired thereby. IN WITNESS WHEREOF, the parties hereto, including GE Capital in its capacity both as Issuer and as Guarantor of Notes to be issued by GEC Australia or GEC Canada, have caused this Agreement to be duly executed as of the day and year first above written. GENERAL ELECTRIC CAPITAL CORPORATION By:/s/ Jeffrey S. Werner --------------------------------------------- Senior Vice President-Corporate Treasury and Global Funding Operation Attest: /s/ Scott Cameron - ------------------------ Assistant Secretary GE CAPITAL AUSTRALIA LIMITED By: /s/ Jeffrey S. Werner --------------------------------------------- Authorized Signatory GENERAL ELECTRIC CAPITAL CANADA INC. By: /s/ Jeffrey S. Werner --------------------------------------------- Authorized Signatory THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), LONDON BRANCH, as Fiscal and Paying Agent By: /s/ Chris Knowles ---------------------------- Title: Second Vice President EXHIBIT A GENERAL ELECTRIC CAPITAL CORPORATION GE CAPITAL AUSTRALIA LIMITED GENERAL ELECTRIC CAPITAL CANADA INC. EURO MEDIUM-TERM NOTES AND OTHER DEBT SECURITIES ADMINISTRATIVE PROCEDURES JULY 2, 1996 The Euro Medium-Term Notes and other debt securities (the "Notes") are to be offered on a continuous basis by each of General Electric Capital Corporation ("GE Capital"), GE Capital Australia Limited ("GEC Australia") and General Electric Capital Canada Inc. ("GEC Canada") (each an "Issuer" and together the "Issuers"). Notes issued by GEC Australia or GEC Canada will be unconditionally and irrevocably guaranteed by GE Capital (the "Guarantor"). Each of Barclays de Zoete Wedd Limited, CS First Boston Limited, Goldman Sachs International, Merrill Lynch International, PaineWebber International (U.K.) Ltd., Swiss Bank Corporation, UBS Limited, CS First Boston - - Effectenbank Aktiengesellschaft, Goldman Sachs & Co. oHG, Merrill Lynch Bank AG, Schweizerische Bankgesellschaft (Deutschland) AG and Schweizerischer Bankverein (Deutschland) AG (each an "Agent") has agreed to solicit offers to purchase the Notes. The Notes may be issued in registered form without coupons ("Registered Notes"), in bearer form with or without coupons ("Bearer Notes"), or in any combination of any such registered or bearer forms. Bearer Notes initially will be represented by Temporary Global Notes and subsequently by Permanent Global Notes or individual definitive Bearer Notes or Registered Notes. The Notes are being sold pursuant to an amended and restated Euro MTN Distribution Agreement dated as of July 2, 1996 (the "Distribution Agreement") between each Issuer (including GE Capital in its capacity as Guarantor of Notes issued by GEC Australia or GEC Canada) and the Agents. In the Distribution Agreement, each Agent has agreed to use its best efforts to solicit purchases of the Notes. Each Agent, as principal, may purchase Notes for its own account and if it does so, the relevant Issuer, the Guarantor and such Agent will enter into a terms agreement, as contemplated by the Distribution Agreement. Each Issuer and the Guarantor has reserved the right in the Distribution Agreement from time to time to appoint one or more additional firms either to solicit purchases of Notes from the relevant Issuer by others or to purchase Notes directly from the relevant Issuer as principal for resale to others, and any reference herein to "Agent" shall include each such additional firm. The Notes will be issued under an Amended and Restated Fiscal and Paying Agency Agreement dated as of July 2, 1996, between each Issuer (including GE Capital in its capacity as Guarantor of Notes issued by GEC Australia or GEC Canada) and The Chase Manhattan Bank (National Association), London Branch, as fiscal agent (in such capacity, the "Fiscal Agent") and principal paying agent (in such capacity, the "Principal Paying Agent"), as supplemented from time to time (the "Fiscal Agency Agreement"). Unless otherwise specified with respect to a particular series of Notes, The Chase Manhattan Bank (National Association), London Branch, will also act as the authenticating agent (the "Authenticating Agent") for the Notes and will be the Registrar for the Registered Notes and will perform the duties specified herein and in the Fiscal Agency Agreement. The Chase Manhattan Bank (National Association), London Branch, will also act as Calculation Agent with respect to the Notes unless a different Calculation Agent is appointed by an Issuer or the Guarantor with respect to a specific series of Notes. If the relevant Issuer issues any Notes denominated in Hong Kong dollars, the Principal Paying Agent will act through one of its branches or agencies located outside of Hong Kong and will request of the Euroclear Operator and Cedel Bank (each as defined below) that the common depositary act through an office outside of Hong Kong, or as may otherwise be required by applicable laws or regulations. Each Issuer has appointed Kredietbank S.A. Luxembourgeoise in Luxembourg as listing agent (the "Listing Agent") for each series of Notes that is listed on the Luxembourg Stock Exchange. Series of Notes may be issued that will not be listed on any stock exchange. As used herein, the term "series of Notes" shall refer to all Notes having identical terms but for authentication date and public offering price, and the term "tranche of Notes" shall refer to all Notes having identical terms, including authentication date and public offering price. Notes will bear interest at a fixed rate (the "Fixed Rate Notes"), which may be zero in the case of certain original issue discount notes (the "OID Notes"), or at floating rates (the "Floating Rate Notes"). The Notes will be issued in U.S. dollars or other currencies, including composite currencies such as the European Currency Unit (the "Specified Currency"). Each Bearer Note initially will be represented by a temporary global Note (each, a "Temporary Global Note") delivered to a common depositary located outside the United States (the "Depositary") for Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear System (the "Euroclear Operator") and Cedel Bank, societe anonyme ("Cedel Bank") and subsequently by a permanent global Note (each, a "Permanent Global Note") and/or one or more definitive Bearer Notes (each, a "Definitive Bearer Note") or, under certain circumstances, for definitive Registered Notes. The Notes are described in an Offering Circular prepared by each Issuer (including GE Capital in its capacity as Guarantor of Notes issued by GEC Australia or GEC Canada) which may be amended from time to time (the "Offering Circular"). The terms of each tranche of Notes issued under the Fiscal Agency Agreement will be described in a supplement to the Offering Circular (each such supplement hereinafter referred to as a "Pricing Supplement"). The term "Offering Circular" is used herein to describe the Offering Circular together with the applicable Pricing Supplement unless the context otherwise required. In case of any conflict between these Administrative Procedures and either the Distribution Agreement or the Fiscal Agency Agreement, the terms of the Distribution Agreement or the Fiscal Agency Agreement, respectively, shall govern. Terms used but not defined herein shall have the meanings assigned to them in the Distribution Agreement. ADMINISTRATIVE PROCEDURES Issuance: Bearer Notes. Each Bearer ------------ Note will be dated and issued as of the date of authentication by the Fiscal Agent. Each Note will bear an original issue date, which will be (i) with respect to a Temporary Global Note (or any portion thereof), the date of its original issue as specified in such Temporary Global Note or (ii) with respect to any Permanent Global Note or Definitive Bearer Note (or portion thereof) issued subsequently upon transfer or exchange of a Bearer Note or in lieu of a destroyed, lost or stolen Bearer Note, the original issue date of the predecessor Bearer Note, regardless of the date of authentication of such subsequently issued Bearer Note. Registered Notes. Except as described below, ---------------- each Registered Note will be dated and issued as of the date of its authentication by the Authenticating Agent. Each Registered Note will bear an original issue date, which will be (i) with respect to an original Registered Note (or any portion thereof), its original issuance date (which will be the settlement date), (ii) with respect to any Registered Note (or portion thereof) issued subsequently upon transfer or exchange of a Registered Note or in lieu of a destroyed, lost or stolen Registered Note, the original issuance date of the predecessor Registered Note, regardless of the date of authentication of such subsequently issued Registered Note and (iii) with respect to any Registered Note (or portion thereof) issued in exchange for an interest in a Permanent Global Note, the last date on which interest was paid on such Permanent Global Note or any predecessor Note. Registration: Registered Notes will be issued only in fully registered form without coupons. Guarantee: Each Note issued by GEC Australia or GEC Canada will have the Guarantee of the Guarantor endorsed thereon. Transfers and Exchanges: Bearer Notes. Transfers ------------ of interests in a Temporary or Permanent Global Note will be made by the Euroclear Operator or Cedel Bank in accordance with its customary operating procedures. Title to definitive Bearer Notes and coupons will pass by physical delivery. The bearer of each coupon, whether or not attached to a definitive Bearer Note, shall be subject to and bound by all the provisions contained in the definitive Bearer Note to which such coupon relates. The bearer of any definitive Bearer Note and any coupon may, to the fullest extent permitted by applicable law, be treated at all times, by all persons and for all purposes as the absolute owner of such definitive Bearer Note or coupon, as the case may be, regardless of any notice of ownership, theft or loss or of any writing thereon. Bearer Notes may be exchanged, if so provided in the applicable Pricing Supplement, for Registered Notes. Registered Notes. A Registered Note may be ---------------- presented for transfer or exchange at the corporate trust office of the Registrar or any Transfer Agent appointed under the Fiscal Agency Agreement. Registered Notes will be exchangeable for other Registered Notes having identical terms but different denominations without service charge. Registered Notes will not be exchangeable for Bearer Notes. Maturities: Each Note will mature on a date from nine months to 60 years from its date of issue; provided, however, Notes -------- ------- denominated in Specified Currencies other than US dollars may be subject to restrictions on maturities as provided for in the Distribution Agreement or as otherwise may be required by regulations of the applicable central bank or similar monetary authority of the country issuing the Specified Currency. Specified Currency: The currency denomination with respect to any Note and the payment of interest and the repayment of principal with respect to any such Note shall be as set forth therein and in the applicable Pricing Supplement. Denominations: Unless otherwise provided in the applicable Pricing Supplement, the following denominations shall apply: (a) Definitive Bearer Notes. ----------------------- Definitive Bearer Notes will be issued in denominations of 100,000 units, 10,000 units or 1,000 units of the Specified Currency indicated on the face of such Note; (b) Global Bearer Notes. Global ------------------- Bearer Notes will be issued in denominations of 1,000 units of the Specified Currency indicated on the face thereof and integral multiples thereof; (c) Registered Notes. Registered ---------------- Notes will be issued in denominations of 10,000 units of the Specified Currency indicated on the face of such Note or an integral multiple of 1,000 units of such Specified Currency in excess thereof; provided, however, Notes denominated -------- ------- in Specified Currencies other than US Dollars may be subject to denomination restrictions as set forth in the Distribution Agreement or as otherwise may be required by regulations of the applicable central bank or similar monetary authority of the country issuing the Specified Currency. Global Notes and Definitive Bearer and Registered Notes: Until the 40th day following the date of issuance of any tranche of Bearer Notes or such other date as may be required to comply with the terms of Regulation S ("Regulation S") under the U.S. Securities Act of 1933, as amended, as described in the Distribution Agreement (the "Exchange Date"), and until Final Certification (as defined below) in accordance with TEFRA D as described in the Distribution Agreement, such tranche of Bearer Notes will be represented by one or more Temporary Global Notes in bearer form without interest coupons. The relevant Issuer shall execute, and upon the instructions of the relevant Issuer the Authenticating Agent shall complete and authenticate, such Temporary Global Note upon the same conditions and in substantially the same manner, and with the same effect, as an individual definitive Bearer Note. On or prior to the settlement date (which will normally be the original issue date) with respect to such Notes, the Authenticating Agent shall deposit the Temporary Global Note with the Depositary in the manner specified below under "Settlement Procedures; Bearer Notes". The interest of each beneficial owner of Bearer Notes represented by such Temporary Global Note will be credited to the appropriate account with Cedel Bank or the Euroclear Operator, as specified below under "Interest -- General; Bearer Notes". On or after the Exchange Date and provided that Final Certification (as described below) has occurred, the interest of the beneficial owners of the Notes represented by the Temporary Global Note shall be cancelled and such interests shall thereafter be represented by a Permanent Global Note or Definitive Bearer Notes or, if provided in the applicable Pricing Supplement, by definitive Registered Notes. The interest of each beneficial owner of Bearer Notes represented by a Permanent Global Note will be credited to the appropriate account with Cedel Bank or the Euroclear Operator. The beneficial owner of an interest in a Permanent Global Note may, at any time, upon 30 days' written notice to the Fiscal Agent as provided in the Fiscal Agency Agreement given by such beneficial owner through either Cedel Bank or the Euroclear Operator, as the case may be, exchange its beneficial interest in such Permanent Global Note for one or more Definitive Bearer Notes (or, if provided in the applicable Pricing Supplement, a Registered Note) equal in aggregate principal amount to such beneficial interest. Upon receipt by the Fiscal Agent of an initial request to exchange an interest in a Permanent Global Note for a Definitive Bearer Note or Notes, all other interests in such Permanent Global Note shall, so long as the Euroclear Operator and Cedel Bank shall so require, be exchanged for Definitive Bearer Notes. Such exchange shall occur at no expense to the beneficial owners as soon as practicable after the receipt of the initial request for Definitive Bearer Notes. After such exchange has occurred, all remaining interests in the temporary global Bearer Note will be exchangeable only for definitive Bearer Notes or (if so provided in the applicable Pricing Supplement) for definitive Registered Notes. In all events, Bearer Notes will be delivered by the Fiscal Agent only outside the United States. Final Certification: Final Certification with respect to a Temporary Global Note shall mean the delivery by the Euroclear Operator or Cedel Bank, as the case may be, to the Fiscal Agent of a signed certificate (a "Clearance System Certificate") in substantially the form set forth in Exhibit B-1 to the Fiscal Agency Agreement with respect to the Notes being exchanged, dated no earlier than the Exchange Date for such Notes, to the effect that the Euroclear Operator or Cedel Bank, as the case may be, has received certificates ("Certificates of Non- U.S. Beneficial Ownership") in the form substantially set forth in Exhibit B-2 to the Fiscal Agency Agreement with respect to each of such Notes, which Certificates of Non-U.S. Beneficial Ownership shall be dated no earlier than ten days before the Exchange Date and shall be delivered by the account holders appearing on its records as entitled to such Notes. Interest: The following is a summary of terms of the Notes with respect to interest and is for informational purposes only; the terms of each Note as described in the Pricing Supplement and the Offering Circular shall govern in the case of any conflict with the provisions set forth below. Terms used but not defined herein shall have the meanings assigned to them in the Offering Circular. General: Bearer Notes. Interest on --------------------- each Bearer Note will accrue from and including the original issue date of such Note for the first interest period and from and including the most recent date to which interest has been paid for all subsequent interest periods. Each payment of interest on a Bearer Note will include interest accrued from and including the next preceding Interest Payment Date in respect of which interest has been paid (or from and including the date of issue, if no interest has been paid) to but excluding the Interest Payment Date; provided, however, -------- ------- that in the case of Floating Rate Notes on which the interest rate is reset daily or weekly, each interest payment will include interest accrued from and including the date of issue or from but excluding the fifteenth calendar day preceding the next preceding Interest Payment Date (whether or not such fifteenth calendar day is a Business Day), unless otherwise specified in the applicable Pricing Supplement; and provided, further, that interest in -------- ------- respect of any Interest Payment Date on any interest in a Temporary Global Note for which Final Certification has not been made shall not be paid until the occurrence of the earlier of (1) Final Certification with respect to such interest in such Temporary Global Note and (2) in the case of an Interest Payment Date occurring between the original issue date and the Exchange Date, delivery by the Euroclear Operator or Cedel Bank, as the case may be, to the Fiscal Agent of a Clearing System Certificate dated no earlier than such Interest Payment Date to the effect that the Euroclear Operator or Cedel Bank, as the case may be, has received Certificates of Non-U.S. Beneficial Ownership with respect to such interests in the Temporary Global Note, which Certificates of Non-U.S. Beneficial Ownership shall have been dated no earlier than ten days before such Interest Payment Date and shall be signed by the account holders appearing on its records as entitled to such Notes. Fixed Rate Bearer Notes. Unless ----------------------- otherwise specified in the applicable Pricing Supplement, interest payments on Fixed Rate Bearer Notes will be made semi-annually on March 15 and September 15 of each year and at maturity or upon any earlier redemption or repayment. Floating Rate Bearer Notes. Interest -------------------------- payments will be made on Floating Rate Bearer Notes monthly, quarterly, semi-annually or annually. Except as provided below or as specified in the applicable Pricing Supplement, interest will be payable, in the case of Floating Rate Bearer Notes with a daily, weekly or monthly Interest Reset Date, on the third Wednesday of each month or on the third Wednesday of March, June, September and December, as specified pursuant to Settlement Procedure "A" below; in the case of Notes with a quarterly Interest Reset Date, on the third Wednesday of March, June, September and December of each year; in the case of Notes with a semi-annual Interest Reset Date, on the third Wednesday of the two months specified pursuant to Settlement Procedure "A" below and in the case of Notes with an annual Interest Reset Date, on the third Wednesday of the month specified pursuant to Settlement Procedure "A" below and, in each case, on the Maturity Date. If any such Interest Payment Date is not a Business Day, the provisions set forth under "Payments of Principal and Interest -- Bearer Notes" shall apply. General: Registered Notes. Interest ------------------------- on each Registered Note will accrue from and including the original issue date of such Note for the first interest period and from and including the most recent date to which interest has been paid for all subsequent interest periods. Each payment of interest on a Registered Note will include interest accrued from and including the next preceding Interest Payment Date in respect of which interest has been paid (or from and including the date of issue, if no interest has been paid) to but excluding the Interest Payment Date, provided, however, -------- ------- that in the case of Floating Rate Notes which reset daily or weekly, interest payments will include interest from and including the date of issue or from but excluding the last Regular Record Date to which interest has been paid, as the case may be, through and including the Regular Record Date next preceding the Interest Payment Date, unless otherwise specified in the applicable Pricing Supplement; and provided, further, that at the -------- ------- Maturity Date, the interest payable will include interest accrued to but excluding the Maturity Date. Fixed Rate Registered Notes. Unless --------------------------- otherwise specified in the applicable Pricing Supplement, interest payments on Fixed Rate Registered Notes will be made semi-annually on March 15 and September 15 of each year and at the Maturity Date; provided, however, -------- ------- that in the case of Registered Fixed Rate Notes issued between a Regular Record Date and an Interest Payment Date, the first interest payment will be made on the Interest Payment Date following the next succeeding Regular Record Date. Floating Rate ------------- Registered Notes. Interest payments ---------------- will be made on Floating Rate Registered Notes monthly, quarterly, semiannually or annually. Except as provided below or as specified in the applicable Pricing Supplement, interest will be payable, in the case of Floating Rate Registered Notes with a daily, weekly or monthly Interest Reset Date, on the third Wednesday of each month or on the third Wednesday of March, June, September and December, as specified pursuant to settlement procedure "AA" below; in the case of Notes with a quarterly Interest Reset Date, on the third Wednesday of March, June, September and December of each year; in the case of Notes with a semi-annual Interest Reset Date, on the third Wednesday of the two months specified pursuant to Settlement Procedure "AA" below; and in the case of Notes with an annual Interest Reset Date, on the third Wednesday of the month specified pursuant to Settlement Procedure "AA" below and, in each case, on the Maturity Date; provided, however, -------- ------- that in the case of Registered Floating Rate Notes issued between a Regular Record Date and an Interest Payment Date, the first interest payment will be made on the Interest Payment Date following the next succeeding Record Date. If any such Interest Payment Date is not a Business Day, the provisions set forth under "Payments of Principal and Interest -- Registered Notes" shall apply. Disclosure under Interest In the case of Notes issued by GEC Act (Canada) Canada, whenever it is necessary to compute any amount of interest in respect of the Notes for a period of less than a full year, such interest shall be calculated on the basis of a 360-day year consisting of 12 months of 30 days each. For purposes only of disclosure under the Interest Act (Canada), the yearly rate of interest to which interest so calculated is equivalent is the interest rate set forth herein multiplied by a fraction the numerator of which is the number of days in the calendar year in which the same is to be ascertained and the denominator of which is 360. Calculation of The following is a summary of terms Interest: of the Notes with respect to the calculation of interest and is for informational purposes only; the terms of each Note as described in the Pricing Supplement and the Offering Circular shall govern in the case of any conflict with the provisions set forth below. Terms used but not defined herein shall have the meanings assigned to them in the Offering Circular. Fixed Rate Notes. Unless otherwise ---------------- specified in the applicable Pricing Supplement, interest on Fixed Rate Notes (including interest for partial periods) will be calculated on the basis of a 360-day year of twelve 30-day months. Floating-Rate Notes. Interest rates ------------------- on Floating Rate Notes will be determined as set forth in the Offering Circular and the applicable Pricing Supplement. Interest on Floating Rate Notes will be calculated on the basis of actual days elapsed and a year of 360 days except that in the case of Treasury Rate Notes, interest will be calculated on the basis of the actual number of days in the year. Payments of The following is a summary of terms Principal and Interest: of the Notes with respect to the payment of principal and interest and is for informational purposes only; the terms of each Note (as described in the Pricing Supplement and the Offering Circular) and the Fiscal Agency Agreement shall govern in the case of any conflict with the provisions set forth below. Terms used but not defined herein shall have the meanings assigned to them in the Fiscal Agency Agreement. Bearer Notes. Except as otherwise ------------ provided in the Bearer Notes, payment of the principal amount of each Bearer Note at the Maturity Date thereof will be made only upon presentation and surrender of such Bearer Note to the Principal Paying Agent or any Paying Agent outside the United States. Such payment, together with payment of interest due at the Maturity Date of such Note, will be made in funds available for immediate use by the Principal Paying Agent or such Paying Agent and in turn by the holder of such Note. Bearer Notes presented to the Principal Paying Agent or a Paying Agent at the Maturity Date for payment will be cancelled or destroyed by such paying agent and delivered to the relevant Issuer with a certificate of cancellation or destruction, as applicable. All interest payments on a Bearer Note (other than interest due at the Maturity Date) will be made by check drawn on the Principal Paying Agent (or another person appointed by the Principal Paying Agent) and delivered to an address outside the United States by the Principal Paying Agent to the person entitled thereto or by wire transfer of immediately available to an account maintained by the payee with a bank located outside the United States. Except as specified in "Interest -- General; Bearer Notes" above, interest on a Temporary Global Note or Permanent Global Note shall be payable to the beneficial owner thereof through credit to the account of such owner or of the custodian bank of such owner with Cedel Bank or the Euroclear Operator. Except as otherwise provided in the Bearer Notes, interest on a definitive Bearer Note shall be payable to the holder of the appropriate coupon appertaining thereto only upon presentation and surrender of such coupon at the office of the Principal Paying Agent or any other Paying Agent outside the United States. If any Interest Payment Date or the Maturity Date or redemption or repayment date of a Fixed Rate Bearer Note is not a Business Day, the payment due on such day shall be made on the next succeeding Business Day and no interest shall accrue on such payment for the period from and after such Interest Payment Date or Maturity Date, as the case may be. If any Interest Payment Date or the Maturity Date for any Floating Rate Bearer Note would fall on a day that is not a Business Day with respect to such Note, such Interest Payment Date or Maturity Date will be the following day that is a Business Day with respect to such Note, except that, in the case of a Bearer LIBOR Note, if such Business Day is in the next succeeding calendar month, such Interest Payment Date or Maturity Date, as the case may be, shall be the immediately preceding day that is a Business Day with respect to such Bearer LIBOR Note. Registered Notes. Except as ---------------- otherwise provided in a Registered Note, the Principal Paying Agent will pay the principal amount of each Registered Note at the Maturity Date upon presentation and surrender of such Note to its offices. Such payment, together with payment of interest due at the Maturity Date of such Note, will be made in funds available for immediate use by the Principal Paying Agent and in turn by the holder of such Note. Registered Notes presented to the Principal Paying Agent at the Maturity Date for payment will be cancelled or destroyed and delivered to the relevant Issuer with a certificate of cancellation or destruction, as applicable. All interest payments on a Registered Note (other than interest due at the Maturity Date) will be made by check drawn on the Principal Paying Agent (or another person appointed by the Principal Paying Agent) and mailed by the Principal Paying Agent to the person entitled thereto as provided in such Note and the Fiscal Agency Agreement or by wire transfer of immediately available funds. Following each Regular Record Date, the Principal Paying Agent will furnish the relevant Issuer with a list of interest payments to be made on the following Interest Payment Date for each Registered Note and in total for all Registered Notes. Interest at the Maturity Date will be payable to the person to whom the payment of principal is payable. The Principal Paying Agent will provide monthly to the relevant Issuer lists of principal and interest, to the extent ascertainable, to be paid on Registered Notes maturing or to be redeemed in the next month. The Principal Paying Agent will be responsible for withholding taxes on interest paid on Registered Notes as required by applicable law. If any Interest Payment Date or the Maturity Date of a Fixed Rate Registered Note is not a Business Day, the payment due on such day shall be made on the next succeeding Business Day and no interest shall accrue on such payment for the period from and after such Interest Payment Date or Maturity Date, as the case may be. If any Interest Payment Date or the Maturity Date for any Floating Rate Registered Note would fall on a day that is not a Business Day with respect to such Note, such Interest Payment Date or Maturity Date will be the following day that is a Business Day with respect to such Note, except that, in the case of a Registered LIBOR Note, if such Business Day is in the next succeeding calendar month, such Interest Payment Date shall be the immediately preceding day that is a Business Day with respect to such Registered LIBOR Note. Preparation of If any offer to purchase a tranche Pricing Supplement: of Notes is accepted by or on behalf of the relevant Issuer, the relevant Issuer and (in the case of Notes issued by GEC Australia or GEC Canada) the Guarantor will prepare a pricing supplement (a "Pricing Supplement") reflecting the terms of such tranche of Note and will deliver the number of copies of such Pricing Supplement to the relevant Agent as such Agent shall request as soon as practicable, but in no event later than 5 Business Days following the date such offer to purchase Notes is accepted. The relevant Agent will cause such Pricing Supplement together with the Offering Circular to be delivered to each purchaser of such tranche of Note. In addition, the relevant Issuer shall forward the Pricing Supplement to the Fiscal Agent as soon as it becomes available but in no event later than the issue date. In each instance that a Pricing Supplement is prepared, the Agents receiving such Pricing Supplement will affix the Pricing Supplement to the Offering Circular prior to their use. Outdated Pricing Supplements, and the Offering Circular to which they are attached (other than those retained for files), will be destroyed. Settlement: The receipt by the relevant Issuer of immediately available funds in exchange for the delivery of an authenticated Temporary Global Note to the Depositary in the manner described in "Settlement Procedures; Bearer Notes" below or an authenticated Registered Note delivered to the relevant Agent and such Agent's delivery of such Note against receipt of immediately available funds shall constitute "settlement" with respect to such Note. All orders accepted by the relevant Issuer will be settled on such date as the relevant Issuer and the purchaser shall agree upon. Settlement Procedures; Settlement Procedures with regard to each Bearer Notes: Note sold by each Issuer to or through an Agent shall be as follows: A. The relevant Agent will advise the relevant Issuer by telephone that such Note is initially a Bearer Note and of the following settlement information: 1. Principal amount. 2. Maturity Date. 3. In the case of a Fixed Rate Bearer Note, the Interest Rate, the frequency of interest payments, and whether such Note is an Amortizing Note and, if so, the amortization schedule, or, in the case of a Floating Rate Bearer Note, the Initial Interest Rate (if known at such time), Interest Payment Dates, Interest Payment Period, Calculation Agent, Base Rate, Index Maturity, Interest Reset Period, Interest Reset Dates, Spread or Spread Multiplier (if any), Minimum Interest Rate (if any), Maximum Interest Rate (if any) and the Alternate Rate Event Spread (if any). 4. Redemption or repayment provisions, if any. 5. Settlement date and time. 6. Issue Price. 7. Denominations. 8. Specified Currency. 9. Agent's commission, if any, determined as provided in the Distribution Agreement. 10. Agent's account number at Cedel Bank or the Euroclear Operator. 11. Whether the Note is issued with more than a de minimis amount of discount. 12. Whether the Note is an Indexed Note, and if it is an Indexed Note, the Indexed Currency, the Currency Base Rate and the Determination Agent. 13. Whether the Note is a Dual Currency Note, and if it is a Dual Currency Note, the Face Amount Currency, the Optional Payment Currency, the Designated Exchange Rate, the Option Election Dates and the Option Value Calculation Agent. 14. If applicable, wire transfer instructions including name of banking institution where transfer is to be made and account number. 15. Whether such Note is to be listed on the Luxembourg Stock Exchange. 16. Any other applicable terms. B. The relevant Issuer will advise the Fiscal Agent by telephone or electronic transmission confirmed in writing at any time on the sale date of the information set forth in Settlement Procedure A above and shall give the Fiscal Agent written instructions to issue a Temporary Global Note (substantially in the form set out in Appendix 1). The relevant Issuer will send a copy of such instructions to the relevant Agent or Agents. The Fiscal Agent shall telephone each of the Euroclear Operator or Cedel Bank with a request for a security code for each tranche agreed to be issued, which security code or codes will be notified by the Fiscal Agent to the relevant Issuer and the relevant Agent or Agents. The relevant Issuer and (in the case of Notes issued by GEC Australia or GEC Canada) the Guarantor shall prepare and cause to be delivered to the Fiscal Agent a Pricing Supplement to the Offering Circular describing the terms of the particular tranche of Notes. C. In accordance with the written instructions and the applicable Pricing Supplement, the Fiscal Agent shall prepare and authenticate a Temporary Global Note for each tranche which the relevant Issuer has agreed to sell, the settlement for which tranche is to occur on the settlement date. The Temporary Global Note will then be delivered to the Depositary. The Fiscal Agent will also give instructions to the Euroclear Operator or Cedel Bank to credit the Notes represented by such Temporary Global Notes delivered to such Depositary to the Fiscal Agent's distribution account at the Euroclear Operator or Cedel Bank, as the case may be. The Fiscal Agent will instruct the Euroclear Operator or Cedel Bank to debit, on the settlement date, from the distribution account of the Fiscal Agent the number of Notes of each Tranche with respect to which the relevant Agent has solicited an offer to purchase and to credit, on the settlement date, such Notes to the account of such Agent with the Euroclear Operator or Cedel Bank against payment of the issue price of such Notes. Each relevant Agent shall give corresponding instructions to the Euroclear Operator or Cedel Bank. D. The Euroclear Operator and Cedel Bank shall debit and credit accounts in accordance with instructions received by them. The Fiscal Agent shall pay the relevant Issuer the aggregate net proceeds received by it in immediately available funds via a transfer of funds to the account of the relevant Issuer with a bank selected by such Issuer notified to the Fiscal Agent from time to time in writing. Settlement Procedures For sales by each Issuer of Timetable; Bearer Notes: Bearer Notes to or through an Agent, Bearer Settlement Procedures "A" through "D" above shall be completed on or before the respective times set forth below: Settlement Procedure; Bearer Notes Time ------------ ---- A 12:00 P.M. (NYC time) three days before settlement date B 9:00 A.M. (London time) two days before settlement date C 3:45 P.M. (London time) on day before settlement date D 5:00 P.M. (NYC time) on settlement date Settlement Procedures; Registered Notes: Settlement Procedures with regard to each Note sold by each Issuer to or through an Agent shall be as follows: AA. The relevant Agent will advise the relevant Issuer by telephone that such Note is a Registered Note and of the following settlement information: 1. Name in which such Note is to be registered ("Registered Owner"). 2. Address of the Registered Owner and address for payment of principal and interest. 3. Taxpayer identification number of the Registered Owner (if available); if a taxpayer identification number is not available, the Agent shall request that the purchasers of the Notes prepare the applicable form required by the United States Internal Revenue Code of 1986, as amended (the "Code") and cause such form to be delivered to the Fiscal and Paying Agent on or prior to the settlement date. 4. Principal amount. 5. Maturity Date. 6. In the case of a Fixed Rate Registered Note, the Interest Rate, the frequency of interest payments and whether such Note is an Amortizing Note and, if so, the amortization schedule, or, in the case of a Floating Rate Registered Note, the Initial Interest Rate (if known at such time), Interest Payment Dates, Interest Payment Period, Calculation Agent, Base Rate, Index Maturity, Interest Reset Period, Interest Reset Dates, Spread or Spread Multiplier (if any), Minimum Interest Rate (if any), Maximum Interest Rate (if any) and the Alternate Rate Event Spread (if any). 7. Redemption or repayment provisions, if any. 8. Settlement date and time. 9. Issue Price. 10. Denominations. 11. Specified Currency. 12. Agent's commission, if any, determined as provided in the Distribution Agreement. 13. Whether the Note is issued with more than a de minimis amount of discount. 14. Whether the Note is an Indexed Note, and if it is an Indexed Note, the Indexed Currency, the Currency Base Rate and the Determination Agent. 15. Whether the Note is a Dual Currency Note, and if it is a Dual Currency Note, the Face Amount Currency, the Optional Payment Currency, the Designated Exchange Rate, the Option Election Dates and the Option Value Calculation Agent. 16. If applicable, wire transfer instructions, including name of banking institution where transfer is to be made and account number. 17. Whether such Note is to be listed on the Luxembourg Stock Exchange. 18. Any other applicable terms. BB. The relevant Issuer will advise the Fiscal Agent by telephone or electronic transmission (confirmed in writing at any time on the sale date) of the information set forth in Settlement Procedure "AA" above. CC. The relevant Issuer will have delivered to the Authenticating Agent an executed Note. The Authenticating Agent will complete such Note and authenticate such Note and deliver it through the Fiscal Agent (with the confirmation) to the relevant Agent, and such Agent will acknowledge receipt of the Note. Such delivery will be made only against such acknowledgment of receipt and evidence that instructions have been given by such Agent for payment to the account of the relevant Issuer, in funds available for immediate use, of an amount equal to the price of such Note less such Agent's commission, if any; provided however, the -------- ------- relevant Issuer and the Fiscal Agent may agree on different delivery procedures for definitive Registered Notes denominated in Specified Currencies other than U.S. dollars. In the event that the instructions given by such Agent for payment to the account of such Issuer are revoked, such Issuer will as promptly as possible wire transfer to the account of such Agent an amount of immediately available funds equal to the amount of such payment made. The Principal Paying Agent shall pay the relevant Issuer the aggregate net proceeds received by it in immediately available funds via a transfer of funds to the account of the relevant Issuer maintained at a bank selected by such Issuer notified to the Principal Paying Agent from time to time in writing. DD. Unless the relevant Agent purchased such Note for its own account, such Agent will deliver such Note (with confirmation) to the customer against payment in immediately payable funds. Such Agent will obtain the acknowledgment of receipt of such Note. If the relevant Agent purchased such Note for its own account, such Agent will accept delivery of such Note against payment in immediately available funds, and will deliver an acknowledgement of receipt of such Note. EE. Periodically, the Fiscal Agent will send to the relevant Issuer a statement setting forth the principal amount of the Registered Notes outstanding as of that date under the Fiscal Agency Agreement and setting forth a brief description of any sales of which such Issuer has advised the Fiscal Agent but which have not yet been settled. Settlement Procedures For sales by the relevant Timetable; Registered Issuer of Registered Notes to or through an Agent, Notes: Procedures "AA" through "DD" set forth above shall be completed on or before the respective times (London Time) set forth below: Settlement Procedure; Registered Notes Time ----- ---- Failure to Settle: Bearer Notes. If any ------------ Agent shall have advanced its own funds for payment against subsequent receipt of funds from the purchaser and if a purchaser shall fail to make payment for a Note, such Agent will promptly notify the relevant Issuer, the Fiscal Agent, the Principal Paying Agent, the Depositary and the Euroclear Operator and Cedel Bank by telephone, promptly confirmed in writing (but no later than the next Business Day). In such event, the relevant Issuer shall promptly instruct the Fiscal Agent to cancel the purchaser's interest in the appropriate Temporary Global Note representing such Note. Upon (i) confirmation from the Fiscal Agent in writing (which may be given by telex or telecopy) that the Fiscal Agent has cancelled such purchaser's interest in such Temporary Global Note and upon (ii) confirmation from such Agent in writing (which may be given by telex or telecopy) that such Agent has not received payment from the purchaser, the relevant Issuer will promptly pay to such Agent an amount in immediately available funds equal to the amount previously paid by such Agent in respect of such Bearer Note. Such payment will be made on the settlement date, if possible, and in any event not later than 12 noon (New York City time) on the Business Day following the settlement date. The Fiscal Agent and the Depositary will make or cause to be made such revisions to such Temporary Global Note as are necessary to reflect the cancellation of such portion of such Temporary Global Note. If a purchaser shall fail to make payment for the Note for any reason other than the failure of such Agent to provide the necessary information to the relevant Issuer as described above for settlement or to provide a confirmation to the purchaser within a reasonable period of time as described above, and if such Agent shall have otherwise complied with its obligations hereunder and in the Distribution Agreement, the relevant Issuer will reimburse such Agent on an equitable basis for such Agent's loss of the use of funds during the period when they were credited to account of such Issuer or the Fiscal Agent. Immediately upon such cancellation, the Fiscal Agent will make appropriate entries in its records to reflect the fact that a settlement did not occur with respect to such Note. Registered Notes. If a purchaser ---------------- fails to accept delivery of and make payment for any Registered Note, the relevant Agent will notify the relevant Issuer and the Fiscal Agent by telephone and return such Note to the Fiscal Agent. Upon receipt of such notice, the relevant Issuer will immediately wire transfer to the account of such Agent an amount equal to the amount previously credited thereto in respect of such Note. Such wire transfer will be made on the settlement date, if possible, and in any event not later than the Business Day following the settlement date. If a purchaser shall fail to make payment for the Note for any reason other than the failure of such Agent to provide the necessary information to the relevant Issuer as described above for settlement or to provide a confirmation to the purchaser within a reasonable period of time as described above, and if such Agent shall have otherwise complied with its obligations hereunder and in the Distribution Agreement, then the relevant Issuer will reimburse such Agent or the Principal Paying Agent, as appropriate, on an equitable basis for its loss of the use of the funds during the period when they were credited to the account of such Issuer. Immediately upon receipt of the Registered Note in respect of which such failure occurred, the Principal Paying Agent will mark such Note "cancelled," make appropriate entries in the Principal Paying Agent's records and send such Note to the relevant Issuer. Notice of Issuance to The Listing Agent will provide information Luxembourg Stock with respect to each tranche of Notes to Exchange: be listed on the Luxembourg Stock Exchange to such Exchange and will advise the relevant Issuer and the relevant Agent in writing as to the effectiveness of the listing of such Notes by the close of business on the related settlement date. To the extent required by the Luxembourg Stock Exchange, the Agents will provide the Listing Agent with secondary market information regarding any tranche of Notes listed on the Luxembourg Stock Exchange and the Listing Agent will provide such information to the Luxembourg Stock Exchange. Listing: The Listing Agent will, on a regular basis, provide the Luxembourg Stock Exchange with such information as such Exchange may require regarding any tranches of Notes that are listed on such Exchange and are issued and outstanding. APPENDIX 1 ---------- FORM OF NOTICE TO THE PRINCIPAL PAYING AGENT -------------------------------------------- To: The Chase Manhattan Bank (National Association) London Office Attention: Manager, Corporate Trust Operations Re: Amended and Restated Euro MTN Distribution Agreement dated as of July 2, 1996 Terms defined in the Administrative Procedures relating to the above-referenced Euro MTN Distribution Agreement have the same meanings therein. We hereby confirm our telephone instruction to prepare, complete, authenticate and issue a Temporary Global Note in accordance with the terms of the Fiscal Agency Agreement, the Administrative Procedures and the Pricing Supplement and to give instructions to the Euroclear Operator and/or Cedel Bank in order for you to: * Credit account of [Name of Agent] with [Euroclear/Cedel Bank]** with the following Bearer Notes: * Separate instructions are to be sent in respect of each offer accepted by the relevant Issuer. Repeat this information (numbering consecutively if Bearer Notes of more than one Tranche are to be issued to an Agent. ** Delete as appropriate. [FORM OF CERTIFICATE TO BE GIVEN BY AN ACCOUNT HOLDER OF THE EUROCLEAR OPERATOR AND CEDEL BANK] EXHIBIT B-1 ----------- CERTIFICATE [General Electric Capital Corporation] [GE Capital Australia Limited] [General Electric Capital Canada Inc.] Euro Medium-Term Notes or Other Debt Securities [Unconditionally Guaranteed as to Payment of Principal and Interest by General Electric Capital Corporation] Represented by Temporary Global Note No. __. This is to certify that as of the date hereof, and except as set forth below, the above-captioned Notes held by you for our account [(A) are beneficially owned by persons that are not residents of Canada, except residents of Canada to whom the principal amount of Notes so beneficially owned has been sold and who acquired the same in compliance with the securities laws of Canada or of the applicable province or territory thereof; and (B)] (i) are owned by person(s) that are not citizens or residents of the United States, domestic partnerships, domestic corporations or any estate or trust the income of which is subject to United States Federal income taxation regardless of its source ("United States person(s)"), (ii) are owned by United States person(s) that (a) are foreign branches of United States financial institutions (as defined in U.S. Treasury Regulations Section 1.165-12(c)(1)(v)) ("financial institutions") purchasing for their own account or for resale, or (b) acquired the Notes through foreign branches of United States financial institutions and who hold the Notes through such United States financial institutions on the date hereof (and in either case (a) or (b), each such United States financial institution hereby agrees, on its own behalf or through its agent, that you may advise the Issuer or the Issuer's agent that it will comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as amended, and the regulations thereunder), or (iii) are owned by United States or foreign financial institution(s) for purposes of resale during the restricted period (as defined in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and in addition if the owner of the Notes is a United States or foreign financial institution described in clause (iii) above (whether or not also described in clause (i) or (ii)) such financial institution has not acquired the Notes for purposes of resale directly or indirectly to a United States person or to a person within the United States or its possessions. As used herein, "United States" means the United States of America (including the States and the District of Columbia) and its "possessions" including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands. We undertake to advise you promptly by tested telex on or prior to the date on which you intend to submit your certification relating to the Notes held by you for our account in EXHIBIT B-1 ----------- Page 2 accordance with your Operating Procedures if any applicable statement herein is not correct on such date, and in the absence of any such notification it may be assumed that this certification applies as of such date. This certification excepts and does not relate to $ _____ of such interest in the above Notes in respect of which we are not able to certify and as to which we understand exchange and delivery of definitive Notes (or, if relevant, exercise of any rights or collection of any interest) cannot be made until we do so certify. We understand that this certification is required in connection with [certain securities laws of Canada and] certain tax laws and, if applicable, certain securities laws of the United States. In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certification is or would be relevant, we irrevocably authorize you to produce this certification to any interested party in such proceedings. Dated: _______________, 19 [To be dated no earlier than the 10th day before [insert date of Interest Payment Date prior to Exchange Date] [insert date of redemption or acceleration prior to Exchange Date] [insert Exchange Date]] [Name of Account Holder] By: (Authorized Signatory) Name: Title: [FORM OF CERTIFICATE TO BE GIVEN BY THE EUROCLEAR OPERATOR AND CEDEL BANK] EXHIBIT B-2 ----------- CERTIFICATE [General Electric Capital Corporation] [GE Capital Australia Limited] [General Electric Capital Canada Inc.] Euro Medium-Term Notes or Other Debt Securities [Unconditionally Guaranteed as to Payment of Principal and Interest by General Electric Capital Corporation] Represented by Temporary Global Note No. ____. This is to certify that, based solely on certifications we have received in writing, by tested telex or by electronic transmission from member organizations appearing in our records as persons being entitled to a portion of the principal amount set forth below (our "Member Organizations") substantially to the effect set forth in Exhibit B-1 to the Fiscal and Paying Agency Agreement, as of the date hereof, ___________ principal amount of the above- captioned Notes [(A) is beneficially owned by persons that are not residents of Canada, except residents of Canada to whom the principal amount of Notes so beneficially owned has been sold and who acquired the same in compliance with the securities laws of Canada or of the applicable province or territory thereof; and (B)](i) is owned by persons that are not citizens or residents of the United States, domestic partnerships, domestic corporations or any estate or trust the income of which is subject to United States Federal income taxation regardless of its source ("United States persons"), (ii) is owned by United States persons that (a) are foreign branches of United States financial institutions (as defined in U.S. Treasury Regulations Section 1.165-12(c)(1)(v) ("financial institutions") purchasing for their own account or for resale, or (b) acquired the Notes through foreign branches of United States financial institutions and who hold the Notes through such United States financial institutions on the date hereof (and in either case (a) or (b), each such United States financial institution has agreed, on its own behalf or through its agent, that we may advise the Issuer or the Issuer's agent that it will comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as amended, and the regulations thereunder), or (iii) is owned by United States or foreign financial institutions for purposes of resale during the restricted period (as defined in U.S. Treasury Regulations Section 1.163- 5(c)(2)(i)(D)(7), and to the further effect that United States or foreign financial institutions described in clause (iii) above (whether or not also described in clause (i) or (ii)) have certified that they have not acquired the Notes for purposes of resale directly or indirectly to a United States person or to a person within the United States or its possessions. EXHIBIT B-2 ----------- Page 2 As used herein, "United States" means the United States of America (including the States and the District of Columbia) and its "possessions" including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands. We further certify (i) that we are not making available herewith for exchange any portion of the temporary global Note excepted as set forth herein and (ii) that as of the date hereof we have not received any notification from any of our Member Organizations to the effect that the statements made by such Member Organizations with respect to any portion of the part submitted herewith are no longer true and cannot be relied upon as the date hereof. We understand that this certification is required in connection with [certain securities laws of Canada and] certain tax laws and, if applicable, certain securities laws of the United States. In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certification is or would be relevant, we irrevocably authorize you to produce this certification to any interested party in such proceedings. Dated: , 19 [To be dated no earlier than [insert date of Interest Payment Date prior to Exchange Date] [insert date of redemption or acceleration prior to Exchange Date] [insert Exchange Date]] [MORGAN GUARANTY TRUST COMPANY OF NEW YORK, BRUSSELS OFFICE, as Operator of the Euroclear System] [CEDEL BANK, SOCIETE ANONYME ] By: [FORM OF CERTIFICATE TO BE GIVEN BY AN ACCOUNT HOLDER OF THE EUROCLEAR OPERATOR AND CEDEL BANK] EXHIBIT C-1 ----------- CERTIFICATE [General Electric Capital Corporation] [GE Capital Australia Limited] [General Electric Capital Canada Inc.] Euro Medium-Term Notes or Other Debt Securities [Unconditionally guaranteed as to Payment of Principal and Interest by General Electric Capital Corporation] Represented by Permanent Global Note No. __. This is to certify that as of the date hereof, and except as set forth below, the above-captioned Notes held by you for our account (i) are owned by person(s) requesting definitive [Registered/Bearer] Notes in exchange for their interests in the above-referenced permanent Global Note and (ii) such persons desire to exchange _____ principal amount of the above-captioned Notes for definitive [Registered/Bearer] Notes. We undertake to advise you promptly by tested telex on or prior to the date on which you intend to submit your certification relating to the Notes held by you for our account in accordance with your Operating Procedures if any applicable statement herein is not correct on such date, and in the absence of any such notification it may be assumed that this certification applies as of such date. This certification excepts and does not relate to $ ____ of such interest in the above Notes in respect of which we do not desire to exchange for definitive Notes. Dated: _______________, 19 [Name of Account Holder] By: (Authorized Signatory) Name: Title: [FORM OF CERTIFICATE TO BE GIVEN BY THE EUROCLEAR OPERATOR AND CEDEL BANK] EXHIBIT C-2 ----------- CERTIFICATE [General Electric Capital Corporation] [GE Capital Australia Limited] [General Electric Capital Canada Inc.] Euro Medium-Term Notes or Other Debt Securities [Unconditionally Guaranteed as to Payment of Principal and Interest by General Electric Capital Corporation] Represented by Permanent Global Note No. ____. This is to certify that, based solely on certifications we have received in writing, by tested telex or by electronic transmission from member organizations appearing in our records as persons being entitled to a portion of the principal amount set forth below (our "Member Organizations") substantially to the effect set forth in Exhibit C-1 to the Fiscal and Paying Agency Agreement relating to such Notes, as of the date hereof, ________ principal amount of the above-captioned Notes (i) is owned by person(s) requesting definitive [Registered/Bearer] Notes in exchange for their interests in the above- referenced permanent Global Note and (ii) such persons desire to exchange ______ principal amount of the above-captioned Notes for definitive [Registered/Bearer] Notes. We further certify (i) that we are making available herewith for exchange all interests in the permanent global Note and (ii) that as of the date hereof we have not received any notification from any of our Member Organizations to the effect that the statements made by such Member Organizations with respect to any portion of the permanent global Note submitted herewith are no longer true and cannot be relied upon as the date hereof. Dated: ______________, 19 [MORGAN GUARANTY TRUST COMPANY OF NEW YORK, BRUSSELS OFFICE, as Operator of the Euroclear System] [CEDEL BANK, SOCIETE ANONYME] By: [FORM OF GUARANTEE TO BE ENDORSED ON NOTES] EXHIBIT D-1 ----------- 1. FOR VALUE RECEIVED, GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation (the "Guarantor"), hereby unconditionally and irrevocably guarantees to the holder of the Note upon which this guarantee is endorsed the due and punctual payment of any and all amounts required to be paid upon said Note according to its terms, when, where and as the same shall become due and payable, whether on an interest payment date, at maturity, upon redemption or purchase or otherwise, in accordance with the terms thereof. Terms and expressions defined in the Fiscal and Paying Agency Agreement dated as of July 2, 1996, as it may be amended or supplemented from time to time, among General Electric Capital Corporation, GE Capital Australia Limited, General Electric Capital Canada Inc. and The Chase Manhattan Bank (National Association), London Branch, (the "Fiscal Agency Agreement") and the Notes shall have the same meanings herein, except as otherwise defined herein or unless there is something in the subject matter or context inconsistent therewith. 2. (a) In case of failure by [GE Capital Australia Limited] [General Electric Capital Canada Inc.] or its successors or assigns (the "Issuer") punctually to pay any such amount, the Guarantor hereby agrees to cause such payment to be made punctually when, where and as the same shall become due and payable, whether at maturity, upon redemption or otherwise, and as if such payment were made by the Issuer. The Guarantor hereby agrees that its obligations hereunder shall be unconditional, irrespective of the validity, legality or enforceability of the Note, the absence of any action to enforce the same, the waiver or consent by the holder of the Note with respect to any provisions thereof, the recovery of any judgment against the Issuer or any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. (b) The Guarantor shall be subrogated to all rights of the holder of the Note against the Issuer in respect of any amounts paid by the Guarantor pursuant to the provisions of this Guarantee; provided that the Guarantor shall not be entitled to enforce or receive any payment arising out of, or based upon, such right of subrogation until all amounts due on or to become due on or in respect of all of the Notes shall have been paid in full or duly provided for. (c) The Guarantor hereby waives notice of acceptance of this Guarantee and also waives notice of nonpayment of any and all amounts payable or in respect of said Note or any part thereof. (d) This Guarantee is unsecured and ranks equally with all other unsecured and unsubordinated obligations of the Guarantor. 3. (a) The Guarantor will not merge or consolidate with any other corporation or sell, convey, transfer or otherwise dispose of all or substantially all of its properties to any other corporation, unless (i) either the Guarantor shall be the continuing corporation or the successor corporation (if other than the Guarantor) (the "successor corporation") shall be a corporation organized under the laws of the United States of America or of a state thereof and such successor corporation shall expressly assume the due and punctual payments of all amounts due under this Guarantee and the due and punctual performance of all of the covenants and obligations of the Guarantor under this Guarantee endorsed on all the Notes, by supplemental agreement satisfactory to the Fiscal and Paying Agent executed and delivered to such Fiscal and Paying Agent by the successor corporation and the Guarantor and (ii) the Guarantor or such successor corporation, as the case may be, shall not, immediately after such merger or consolidation, or such sale, conveyance, transfer or other disposition, be in default in the performance of any such covenant or obligation. (b) Upon any such merger or consolidation, sale, conveyance, transfer or other disposition, such successor corporation shall succeed to and be substituted for, and may exercise every right and power of and shall be subject to all the obligations of, the Guarantor under this Guarantee, with the same effect as if such successor corporation had been named as the Guarantor herein, and the Guarantor shall be released from its liability as Guarantor under this Guarantee and under the Fiscal Agency Agreement. 4. The Guarantor hereby certifies and warrants that all acts, conditions and things required to be done and performed and to have happened precedent to the creation and issuance of this Guarantee, and to constitute the same the legal, valid and binding obligation of the Guarantor enforceable in accordance with its terms, except that enforcement may be limited by bankruptcy, insolvency, liquidation, reorganization and other laws of general application relating to or affecting the rights of creditors or by general principles of equity, including the limitation that specific performance, being an equitable remedy, is discretionary and may not be ordered, have been done and performed and have happened in due and strict compliance with all applicable laws. 5. This Guarantee shall be construed in accordance with and governed by the laws of the State of New York, United States of America. 6. This Guarantee is dated the date of the Note upon which it is endorsed. IN WITNESS WHEREOF, the Guarantor has caused this Guarantee to be duly executed. GENERAL ELECTRIC CAPITAL CORPORATION By:___________________________ EX-4.B 3 AMENDMENT TO EMTN AMENDMENT NO. 1 to the AMENDED AND RESTATED FISCAL AND PAYING AGENCY AGREEMENT dated as of July 2, 1996 GENERAL ELECTRIC CAPITAL CORPORATION GE CAPITAL AUSTRALIA (ACN 008 562 534) AUSTRALIAN RETAIL FINANCIAL NETWORK (ACN 008 583 588) GENERAL ELECTRIC CAPITAL CANADA INC. GE CAPITAL CANADA RETAILER FINANCIAL SERVICES COMPANY THE CHASE MANHATTAN BANK, LONDON BRANCH AMENDMENT NO. 1, dated as of December 8, 1997, to the Amended and Restated Fiscal and Paying Agency Agreement dated as of July 2, 1996 (as so amended, the "Agreement") among General Electric Capital Corporation ("GE Capital") and the other parties thereto. Unless otherwise defined herein, all capitalized terms used herein shall have the meanings assigned to them in the Agreement. WHEREAS, as of the date hereof, GE Capital and the other parties hereto desire to amend the Agreement to add the below-named institutions as additional Issuers under the Euro MTN Program. NOW, THEREFORE, the parties hereto agree as follows: 1. Amendment to Cover Page of the Agreement. The list of Issuers set ---------------------------------------- forth on the cover page of the Agreement is hereby amended to add the following: AUSTRALIAN RETAIL FINANCIAL NETWORK (ACN 008 583 588) GE CAPITAL CANADA RETAILER FINANCIAL SERVICES COMPANY 2. Amendment to Introduction Paragraphs of the Agreement. ----------------------------------------------------- (a) The first paragraph on page 1 of the Agreement is hereby amended to include Australian Retail Financial Network, a company organized under the laws of the Australian Capital Territory ("ARFN") and GE Capital Canada Retailer Financial Services Company, a Canadian corporation ("GEC Canada RFS") in the definitions of "Issuer" and "Issuers". (b) The second paragraph on page 1 of the Agreement is amended to read, in its entirety, as follows: "Pursuant to the Amended and Restated Euro MTN Distribution Agreement dated as of July 2, 1996, among the Issuers (including GE Capital in its capacity as Guarantor of Notes issued by GEC Australia, ARFN, GEC Canada or GEC Canada RFS) and the agents named therein (the "Agents") (as amended from time to time, the "Distribution Agreement"), each Issuer has agreed to issue from time to time its Euro Medium-Term Notes ("Medium Term Notes") and other debt securities ("Other Debt Securities") having maturities from 9 months or more from date of issue (collectively, Medium Term Notes and Other Debt Securities are referred to herein as the "Notes"). The Guarantor has agreed to guarantee Notes issued pursuant to this Agreement by GEC Australia, ARFN, GEC Canada or GEC Canada RFS in the form of the guarantee attached hereto as Exhibit D-1 (the "Guarantee"). Administrative procedures, which have been agreed to by the Issuers (including GE Capital in its capacity as Guarantor of Notes issued by GEC Australia, ARFN, GEC Canada or GEC Canada RFS) and the Agents as of the date hereof, are attached as Exhibit A hereto (such procedures, as amended from time to time pursuant to the Distribution Agreement, are hereinafter referred to as the "Administrative Procedures")." 3. Amendment to References to GEC Capital's Subsidiaries. Except as ----------------------------------------------------- specified in Sections 1, 2, 5, 6, 7, 9, 10, and 11 herein, references in the Agreement to GEC Australia will be amended to add a reference to ARFN. Except as specified in Sections 1, 2, 5, 6, 7, 9, 10, and 11 herein, references in the Agreement to GEC Canada will be amended to add a reference to GEC Canada RFS. For example, the phrase "(in the case of Notes issued by GEC Australia or GEC Canada)" will be amended to read "(in the case of Notes issued by GEC Australia, ARFN, GEC Canada or GEC Canada RFS)", the phrase "(in the case of Notes issued by GEC Australia)" will be amended to read "(in the case of Notes issued by either GEC Australia or ARFN)", the phrase "(in the case of Notes issued by GEC Canada)" will be amended to read "(in the case of Notes issued by either GEC Canada or GEC Canada RFS)". 4. Amendment to References to The Chase Manhattan Bank. (a) References in the Agreement and in all the Exhibits thereto to "The Chase Manhattan Bank (National Association), London Branch" will be amended to delete "(National Association)". (b) Reference to the location of The Chase Manhattan Bank, London Branch in Section 1 of the Agreement is hereby amended to read "Trinity Tower, 9 Thomas More Street, London E1 9YT, England". 2 5. Amendment to Section 3 of Agreement. The first sentence of Section ----------------------------------- 3(a) is hereby amended by deleting the "and" at the beginning of the last clause thereof and by adding the following immediately prior to the parenthetical at the end thereof: ", on behalf of GEC Canada RFS by any one of GEC Canada RFS's members of its Board of Directors, a Vice-President or an Assistant Vice President, and on behalf of ARFN by any one of ARFN's members of its Board of Directors, a Vice-President or an Assistant Vice President ." 6. Amendment to Section 8 of the Agreement. --------------------------------------- (a) Sections 8 is hereby amended to add new clauses (xv) and (xvi) which shall be identical in all respects to clauses (vi) and (x) respectively, except that references to GEC Australia contained in clauses (vi) and (x) shall be changed so that in clauses (xv) and (xvi) such reference shall be to ARFN. (b) Sections 8 is hereby amended to add new clauses (xvii), (xviii), (xix) and (xx) which shall be identical in all respects to clauses (vii), (xi), (xii) and (xiii) respectively, except that references to GEC Canada contained in clauses (vii), (xi), (xii) and (xiii) shall be changed so that in clauses (xvii), (xviii), (xix) and (xx) such reference shall be to GEC Canada RFS. 7. Amendment to Section 9 of the Agreement. --------------------------------------- (a) Sections 9(b) and (e) shall be amended in their entirety in order to apply to Notes issued by ARFN, as well as to GEC Australia, and when applied in the case of ARFN, references in Sections 9(b) and (e) shall be amended to refer to ARFN, and when applied in the case of GEC Australia, references in Sections 9(b) and (e) shall be amended to refer to GEC Australia. (b) Sections 9(c) and (f) shall be amended in their entirety in order to apply to Notes issued by GEC Canada RFS, as well as to GEC Canada, and when applied in the case of GEC Canada RFS, references in 3 Sections 9(c) and (f) shall be amended to refer to GEC Canada RFS, and when applied in the case of GEC Canada, references in Sections 9(c) and (f) shall be amended to refer to GEC Canada. 8. Amendment to Section 19 of the Agreement. ---------------------------------------- (a) Section 19 of the Agreement is hereby amended by adding the following: Australian Retail Financial Network (ACN 008 583 588) Address: 258 Queensberry Street, Carlton 3053, Australia Phone: 613 9277-6522 Fax: 613 9277-6584 Attention: Lyn Boxall GE Capital Canada Retailer Financial Services Company Address: c/o 2300 Meadowvale Blvd., Mississauga, Ontario L5N 5P9 Phone: 905-858-6571 Fax: 905-858-5456 Attention: Leslie Battrick, Assistant Secretary (In each case with a copy to the Guarantor at 201 High Ridge Road, Stamford, CT 06897 Attention: Senior Vice President - Corporate Treasury and Global Funding Operation) (b) The address of the Fiscal and Paying Agent is hereby amended as follows: The Chase Manhattan Bank, London Branch Address: Trinity Tower, 9 Thomas More Street, London E1 9YT, England Phone: 011 44 1202 347430 Fax: 011 44 1202 347438 Attention: Manager, Global Trust Services Operations 9. Amendment to Exhibit A Administrative Procedures. Exhibit A of the ------------------------------------------------ Agreement is hereby amended by the amendments thereto contained in Section 9 of Amendment No. 1, dated as of December 8, 1997, to the Amended and Restated Euro MTN Distribution Agreement, dated as of July 2, 1996. 4 10. Amendment to Exhibits B-1, B-2, C-1 and C-2 Forms of Certificate to ------------------------------------------------------------------- be Given by an Account Holder of the Euroclear Operator and Cedel Bank and Forms - -------------------------------------------------------------------------------- of Certificate to be Given by the Euroclear Operator and Cedel Bank. The title - ------------------------------------------------------------------- caption on the covers of the certificates is hereby amended to add the following before "Euro Medium-Term Notes or Other Debt Securities": [Australian Retail Financial Network (ACN 008 583 588)] [GE Capital Canada Retailer Financial Services Company] 11. Amendment to Exhibit D-1 Form of Guarantee to be Endorsed on Notes. ------------------------------------------------------------------ (a) The second sentence of paragraph 1 is amended to read in its entirety as follows: "Terms and expressions defined in the Fiscal and Paying Agency Agreement dated as of July 2, 1996, as it may be amended or supplemented from time to time, among General Electric Capital Corporation, GE Capital Australia, Australian Retail Financial Network, General Electric Capital Canada Inc., GE Capital Retailer Financial Services Company and The Chase Manhattan Bank, London Branch, (the "Fiscal Agency Agreement") and said Notes shall have the same meanings herein, except as otherwise defined herein or unless there is something in the subject matter or context inconsistent therewith." (b) The first sentence of paragraph 2(a) is amended to read in its entirety as follows: "In case of failure by [GE Capital Australia] [General Electric Capital Canada inc.] [Australian Retailer Financial Network (ACN 008 583 588)] [GE Capital Canada Retailer Financial Services Company] or its successors or assigns (the "Company") punctually to pay any such amount, the Guarantor hereby agrees to cause such payment to be made punctually when, where and as the same shall be come due and payable, whether at maturity, upon redemption or otherwise, and as if such payment were made by the Company." (c) References to "the Issuer" are hereby deleted and replaced with references to "the Company". 5 12. Governing Law. This Amendment No. 1 to the Agreement shall be -------------- governed by the laws of the State of New York applicable to agreements made and to be performed in such State. 13. Miscellaneous. All provisions of this Amendment No. 1 shall be ------------- deemed to be incorporated in, and made part of, the Agreement, and the Agreement, as amended and supplemented by this Amendment No. 1, shall be read, taken and construed as one and the same instrument. This Amendment No. 1 may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original. 6 IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1 as of the date first written above. GENERAL ELECTRIC CAPITAL CORPORATION By /S/ -------------------------------------------------------- Name: Jeffrey S. Werner Title: Senior Vice President - Corporate Treasury and Global Funding Operation GE CAPITAL AUSTRALIA By /S/ -------------------------------------------------------- Name: Jeffrey S. Werner Title: Authorized Signatory AUSTRALIAN RETAIL FINANCIAL NETWORK By /S/ -------------------------------------------------------- Name: Jeffrey S. Werner Title: Authorized Signatory GENERAL ELECTRIC CAPITAL CANADA INC. By /S/ -------------------------------------------------------- Name: Jeffrey S. Werner Title: Senior Vice President - Corporate Treasury and Global Funding Operation GE CAPITAL CANADA RETAILER FINANCIAL SERVICES COMPANY By /S/ -------------------------------------------------------- Name: Jeffrey S. Werner Title: Senior Vice President - Corporate Treasury and Global Funding Operation 7 THE CHASE MANHATTAN BANK, LONDON BRANCH as Fiscal and Paying Agent By /S/ ------------------------------------------------------- Name: Chris Knowles Title: Vice President EX-4.C 4 TEMPORARY GLOBAL FIXED (form effective July 2, 1996) [FORM OF [EMTN]/1/ [DEBT SECURITY]/2/ TEMP. GLOBAL FIXED RATE BEARER NOTE] Temporary Global Fixed Rate Bearer Note BEARER BEARER - ---------------------- /1/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are applicable, or if the Note is denominated in a currency other than pounds sterling. /2/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are not applicable. 2 No. TGFX [ ]/1/ [ ]/2/ [EURO MEDIUM-TERM NOTE ISSUED IN ACCORDANCE WITH REGULATIONS MADE UNDER SECTION 4 OF THE BANKING ACT 1987. GENERAL ELECTRIC CAPITAL CORPORATION IS NOT AN AUTHORIZED INSTITUTION UNDER THE BANKING ACT 1987. REPAYMENT OF THE PRINCIPAL AND THE PAYMENT OF ANY INTEREST OR PREMIUM IN CONNECTION WITH THIS NOTE HAS NOT BEEN GUARANTEED.]/3/ THIS SECURITY IS A TEMPORARY GLOBAL BEARER NOTE, WITHOUT COUPONS, EXCHANGEABLE FOR AN INTEREST IN A PERMANENT GLOBAL BEARER NOTE, WITHOUT COUPONS, REPRESENTING (AND EXCHANGEABLE FOR) DEFINITIVE BEARER NOTES OR IF SO PROVIDED HEREIN REGISTERED NOTES. IF SO PROVIDED HEREIN, THIS GLOBAL NOTE MAY ALSO BE EXCHANGED DIRECTLY FOR DEFINITIVE BEARER NOTES OR DEFINITIVE REGISTERED NOTES. THE RIGHTS ATTACHING TO THIS NOTE AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE ARE AS SPECIFIED IN THE FISCAL AGENCY AGREEMENT (AS DEFINED HEREIN). ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR AN INTEREST IN A PERMANENT GLOBAL BEARER NOTE OR FOR DEFINITIVE NOTES, THIS GLOBAL NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. - ------------------------- /1/ Insert Principal Amount. /2/ Insert Optional Payment Amount if the Note has a dual-currency feature. /3/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are applicable. 3 GENERAL ELECTRIC CAPITAL CORPORATION [EURO MEDIUM-TERM NOTE]/1/ [DEBT SECURITY]/2/ (Fixed Rate) SERIES: PRIVATE INITIAL REDEMPTION SPECIFIED (FACE DETERMINATION COMMON DATE: AMOUNT) CURRENCY: AGENT: CODE: INITIAL REDEMPTION OPTIONAL PAYMENT APPLICABILITY OF ISIN: PERCENTAGE: CURRENCY: MODIFIED PAYMENT UPON ACCELERATION OR REDEMPTION: ORIGINAL ISSUE APPLICABILITY OF DESIGNATED EXCHANGE DATE: ANNUAL REDEMPTION RATE: If yes, state Issue Price and PERCENTAGE each redemption date and REDUCTION: redemption price: MATURITY DATE: OPTION VALUE CALCULATION AGENT: If yes, state Annual Percentage INTEREST RATE: Reduction: DENOMINATIONS OF DEFINITIVE NOTES (if not INDEXED CURRENCY: as set forth herein): INTEREST OPTIONAL REPAYMENT PAYMENT DATE(S): CURRENCY BASE RATE: TAX REDEMPTION DATE: PERIOD: INTEREST ACCRUAL AVAILABILITY OF DATE: REGISTERED NOTES: INTEREST PAYMENT IF THIS NOTE IS DATE(S): OPTION ELECTION DATES: EXCHANGEABLE DIRECTLY FOR DEFINITIVE NOTES, INDICATE FORM(S) OF DEFINITIVE NOTES:
General Electric Capital Corporation, a New York corporation (together with its successors and assigns, the "Company"), for value received, hereby promises to pay to each of Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the Euroclear System (the "Euroclear Operator"), and Cedel Bank, societe anonyme ("Cedel Bank"), or any other recognized or agreed clearing system, with respect to that portion of this Note held for its account, the principal sum (or Face Amount, if the Note has a dual-currency or index feature) specified in Schedule A hereto, on the Maturity Date specified above (except to the extent redeemed or repaid prior to the Maturity Date) and to pay interest thereon at the Interest Rate per annum specified above from the Original Issue Date specified above until the principal hereof is paid or duly made available for payment (except as provided below), in arrears monthly, quarterly, semiannually or annually as specified above as the Interest - --------------------- /1/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are applicable, or if the Note is denominated in a currency other than pounds sterling. /2/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are not applicable. 4 Payment Period on each Interest Payment Date (as specified above), commencing with the first Interest Payment Date next succeeding the Original Issue Date specified above, and on the Maturity Date (or any redemption or repayment date). Interest on this Note will accrue from the most recent Interest Payment Date to which interest has been paid or duly provided for, or, if no interest has been paid or duly provided for, from the Original Issue Date, until the principal hereof has been paid or duly made available for payment, in each case, upon Certification. Upon the payment of interest on this Note, the Fiscal and Paying Agent (as defined below) shall cause Schedule A of this Note to be endorsed to reflect such payment of interest and the amount of interest so paid shall be noted. No payments on this Note will be made at any office or agency maintained by the Company in the United States for the payment of principal of, premium, if any, and interest, if any, on this Note, nor will any such payment be made by mail to an address in the United States or by transfer to an account maintained by the holder of this Note with a bank in the United States. Notwithstanding the foregoing, if this Note is payable in U.S. dollars and if payment in U.S. dollars of the full amount payable on this Note at the offices of all paying agencies outside the United States would be illegal or effectively precluded as a result of exchange controls or similar restrictions, payment on this Note will be made by a paying agency in the United States, if such paying agency, under applicable law and regulations, would be able to make such payment. This Note is issued in bearer form and represents a portion of a duly authorized issue of [Euro Medium-Term Notes]/1/ [Debt Securities]/2/ of the Series specified above, issued under an amended and restated fiscal and paying agency agreement, dated as of July 2, 1996 among the Company, GE Capital Australia Limited, General Electric Capital Canada Inc. and The Chase Manhattan Bank (National Association), London Branch, as fiscal agent and as principal paying agent (in such capacities, the "Fiscal and Paying Agent") (as amended and supplemented from time to time, the "Fiscal Agency Agreement"). The Notes are issuable in bearer form (the "Bearer Notes"), with interest coupons attached (except in the case of Bearer Notes in global form), and (if so provided above) are also issuable in fully registered form, without coupons (the "Registered Notes" and, together with the Bearer Notes, the "Notes"). Unless otherwise specified above, the definitive Bearer Notes, with interest coupons attached, are issuable in the denominations of 1,000 units, 10,000 units or 100,000 units of the Specified Currency indicated on the face hereof and the definitive Registered Notes are issuable in denominations of 100,000 units of the Specified Currency indicated on the face hereof or any integral multiple of 1,000 units of such Specified Currency in excess thereof. [The Company has complied, as at the Issue Date of this temporary global Note, with its obligations under the listing rules made by the London Stock Exchange Limited (the "London Stock Exchange") pursuant to Section 142(6) of the Financial Services Act 1986 in respect of its debt securities that have been admitted to the Official List of the London Stock Exchange and since the last publication in compliance with such rules of information about the Company, the Company, having made all reasonable enquiries, has not become aware of any change in circumstances that could reasonably be regarded as significantly and adversely affecting its ability to meet its obligations in respect of the Notes represented by this temporary global Note as they fall due.]/3/ - ------------------- /1/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are applicable. /2/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are applicable, or if the Note is denominated in a currency other than pounds sterling. /3/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are not applicable. 5 Except as otherwise provided herein, this Note is governed by the terms and conditions of the Permanent Global Fixed Rate Bearer Note (the"Permanent Global Fixed Rate Bearer Note") (or if so specified above, the definitive Fixed Rate Bearer Notes or definitive Fixed Rate Registered Notes) to be issued in exchange for this Note, which terms and conditions are hereby incorporated by reference herein mutatis mutandis and shall be binding on the Company and the holder ------- -------- hereof as if fully set forth herein. This Note is exchangeable in whole or from time to time in part for (i) an interest (equal to the principal amount of the Bearer Notes being exchanged theretofore represented by this Note) in a single Permanent Global Fixed Rate Bearer Note or (ii) if so specified above, an equal principal amount of definitive Fixed Rate Bearer Notes and/or definitive Fixed Rate Registered Notes upon request of the Euroclear Operator or Cedel Bank, acting on behalf of the owner of a beneficial interest in the Note, to the Fiscal and Paying Agent only on or after the Exchange Date upon Certification to the effect that the Notes to be issued upon such exchange are not being acquired by or on behalf of a United States Person or, if a United States Person has a beneficial interest in the Notes, that such person is (i) a Qualifying Foreign Branch purchasing for its own account or for resale, (ii) a United States Person who acquires the Notes through a Qualifying Foreign Branch and who holds the obligation through such financial institution on the date of Certification, or (iii) a financial institution who acquires the Notes for purposes of resale during the Restricted Period other than for purposes of resale directly or indirectly to a United States Person or to a person within the United States. Upon exchange of any portion of this Note for a Permanent Global Fixed Rate Bearer Note (or definitive Fixed Rate Bearer Notes and/or definitive Fixed Rate Registered Notes), the Fiscal and Paying Agent shall cause Schedule A of this Note to be endorsed to reflect the reduction of its principal amount by an amount equal to the aggregate principal amount being so exchanged. Except as otherwise provided herein, until exchanged for a Permanent Global Fixed Rate Bearer Note (or definitive Fixed Rate Bearer Notes and/or definitive Fixed Rate Registered Notes), this Note shall in all respects be entitled to the same benefits under the Fiscal Agency Agreement as a duly authenticated and delivered definitive Note. If this Note is subject to a tax redemption or if all or any portion of the principal hereof is accelerated, each as described in the Fiscal Agency Agreement, payment of the amount due upon any such redemption or acceleration shall be subject to receipt of Certification. Unless the certificate of authentication hereon has been executed by the Fiscal and Paying Agent by manual signature, this Note shall not be entitled to any benefit under the Fiscal Agency Agreement or be valid or obligatory for any purpose. As used herein: (a) the term "Certification" means a certificate substantially in the form of Exhibit B-2 hereto delivered by the Euroclear Operator or Cedel Bank, as the case may be, which certificate is based on a certificate substantially in the form of Exhibit B-1 hereto provided to it by its account holders; (b) the term "Qualifying Foreign Branch" means a branch of a United States financial institution, as defined in United States Treasury Regulations Section 1.165-12(c)(1)(v), located outside the United States that is purchasing for its own account or for resale and that has agreed, as a condition of purchase, to comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the United States Internal Revenue Code of 1986, as amended and the regulations thereunder; 6 (c) the term "Restricted Period" with respect to each issuance means the period which begins on the earlier of the date on which the Company receives the proceeds of the sale of this Note with respect to its issuance or the first date on which this Note is offered to persons other than the Agents, and which ends 40 days after the date on which the Company receives the proceeds of the sale of this Note; provided that if this Note is held as part of an unsold allotment or -------- subscription, any offer or sale of this Note shall be deemed to be during the Restricted Period; (d) the term "United States" means the United States of America (including the States and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction; (e) the term "United States Person" means (i) a citizen or resident of the United States, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States or (iii) an estate or trust the income of which is subject to United States federal income taxation regardless of its source; and (f) all other terms used in this Note which are defined in the Fiscal Agency Agreement and not otherwise defined herein shall have the meanings assigned to them in the Fiscal Agency Agreement. 7 IN WITNESS WHEREOF, the Company has caused this Note to be duly executed under its corporate seal. DATED: GENERAL ELECTRIC CAPITAL CORPORATION [SEAL] By:_______________________________ Title: Attest: By:________________________ Title CERTIFICATE OF AUTHENTICATION This is one of the Notes referred to in the within-mentioned Fiscal Agency Agreement. THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as Fiscal and Paying Agent By:_______________________ Authorized Officer SCHEDULE A ---------- SCHEDULE OF EXCHANGES --------------------- The Initial Principal Amount of this Note is _____________. The following payments of interest and exchanges of a part of this Note for an interest in a single Permanent Global Fixed Rate Bearer Note (or if so specified above, for definitive Notes) have been made:
==================================================================================================================== Date Payment of Principal (Face)/1/ Remaining Notation made by of Exchange or Interest Amount Principal (Face)/1/ or on behalf of Interest Payment Exchanged for Amount Fiscal and Paying Permanent Global Outstanding Agent Bearer Notes or Following Such Definitive Notes Exchange - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------
- -------------------------- /1/ To be used instead of "Principal" if the Note has a dual-currency or index feature. [FORM OF CERTIFICATE TO BE GIVEN BY AN ACCOUNT HOLDER OF THE EUROCLEAR OPERATOR AND CEDEL BANK] EXHIBIT B-1 ----------- CERTIFICATE ------------------------------------------------- General Electric Capital Corporation [Euro Medium-Term Notes]/1/ [Debt Securities]/2/ Represented by Temporary Global Note No. __. This is to certify that as of the date hereof, and except as set forth below, the above-captioned Notes held by you for our account (i) are owned by person(s) that are not citizens or residents of the United States, domestic partnerships, domestic corporations or any estate or trust the income of which is subject to United States Federal income taxation regardless of its source ("United States person(s)"), (ii) are owned by United States person(s) that (a) are foreign branches of United States financial institutions (as defined in U.S. Treasury Regulations Section 1.165-12(c)(1)(v)) ("financial institutions") purchasing for their own account or for resale, or (b) acquired the Notes through foreign branches of United States financial institutions and who hold the Notes through such United States financial institutions on the date hereof (and in either case (a) or (b), each such United States financial institution hereby agrees, on its own behalf or through its agent, that you may advise the Issuer or the Issuer's agent that it will comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as amended, and the regulations thereunder), or (iii) are owned by United States or foreign financial institution(s) for purposes of resale during the restricted period (as defined in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and in addition if the owner of the Notes is a United States or foreign financial institution described in clause (iii) above (whether or not also described in clause (i) or (ii)) such financial institution has not acquired the Notes for purposes of resale directly or indirectly to a United States person or to a person within the United States or its possessions. As used herein, "United States" means the United States of America (including the States and the District of Columbia) and its "possessions" including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands. We undertake to advise you promptly by tested telex on or prior to the date on which you intend to submit your certification relating to the Notes held by you for our account in accordance with your Operating Procedures if any applicable statement herein is not correct on such date, and in the absence of any such notification it may be assumed that this certification applies as of such date. - --------------------- /1/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are applicable, or if the Note is denominated in a currency other than pounds sterling. /2/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are not applicable. EXHIBIT B-1 ----------- Page 2 This certification excepts and does not relate to $________ of such interest in the above Notes in respect of which we are not able to certify and as to which we understand exchange and delivery of definitive Notes (or, if relevant, exercise of any rights or collection of any interest) cannot be made until we do so certify. We understand that this certification is required in connection with certain tax laws and, if applicable, certain securities laws of the United States. In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certification is or would be relevant, we irrevocably authorize you to produce this certification to any interested party in such proceedings. Dated: _______________, 19__ [To be dated no earlier than the 10th day before [insert date of Interest Payment Date prior to Exchange Date] [insert date of redemption or acceleration prior to Exchange Date] [insert Exchange Date]] [Name of Account Holder] By:______________________ (Authorized Signatory) Name: Title: [FORM OF CERTIFICATE TO BE GIVEN BY THE EUROCLEAR OPERATOR AND CEDEL BANK] EXHIBIT B-2 ----------- CERTIFICATE ---------------------------------------- General Electric Capital Corporation [Euro Medium-Term Notes]/1/ [Debt Securities]/2/ Represented by Temporary Global Note No. ____. This is to certify that, based solely on certifications we have received in writing, by tested telex or by electronic transmission from member organizations appearing in our records as persons being entitled to a portion of the principal amount set forth below (our "Member Organizations") substantially to the effect set forth in Exhibit B-1 to the Fiscal and Paying Agency Agreement, as of the date hereof, _____________ principal amount of the above-captioned Notes (i) is owned by persons that are not citizens or residents of the United States, domestic partnerships, domestic corporations or any estate or trust the income of which is subject to United States Federal income taxation regardless of its source ("United States persons"), (ii) is owned by United States persons that (a) are foreign branches of United States financial institutions (as defined in U.S. Treasury Regulations Section 1.165-12(c)(1)(v) ("financial institutions") purchasing for their own account or for resale, or (b) acquired the Notes through foreign branches of United States financial institutions and who hold the Notes through such United States financial institutions on the date hereof (and in either case (a) or (b), each such United States financial institution has agreed, on its own behalf or through its agent, that we may advise the Issuer or the Issuer's agent that it will comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as amended, and the regulations thereunder), or (iii) is owned by United States or foreign financial institutions for purposes of resale during the restricted period (as defined in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7), and to the further effect that United States or foreign financial institutions described in clause (iii) above (whether or not also described in clause (i) or (ii)) have certified that they have not acquired the Notes for purposes of resale directly or indirectly to a United States person or to a person within the United States or its possessions. As used herein, "United States" means the United States of America (including the States and the District of Columbia) and its "possessions" including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands. - ------------------------ /1/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are applicable, or if the Note is denominated in a currency other than pounds sterling. /2/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are not applicable. EXHIBIT B-2 ----------- Page 2 We further certify (i) that we are not making available herewith for exchange any portion of the temporary global Note excepted as set forth herein and (ii) that as of the date hereof we have not received any notification from any of our Member Organizations to the effect that the statements made by such Member Organizations with respect to any portion of the part submitted herewith are no longer true and cannot be relied upon as the date hereof. We understand that this certification is required in connection with certain tax laws and, if applicable, certain securities laws of the United States. In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certification is or would be relevant, we irrevocably authorize you to produce this certification to any interested party in such proceedings. Dated: __________________, 19__ [To be dated no earlier than [insert date of Interest Payment Date prior to Exchange Date] [insert date of redemption or acceleration prior to Exchange Date] [insert Exchange Date]] [MORGAN GUARANTY TRUST COMPANY OF NEW YORK, BRUSSELS OFFICE, as Operator of the Euroclear System] [CEDEL BANK, SOCIETE ANONYME] By:__________________________ EX-4.D 5 PERMANENT GLOBAL FIXED Page 1 (Form effective July 2, 1996) FORM OF [EMTN]/1/ [DEBT SECURITY]/2/ PERMANENT GLOBAL FIXED RATE BEARER NOTE BEARER BEARER No. PGFX [ ]/3/ [ ]/4/ [EURO MEDIUM-TERM NOTE ISSUED IN ACCORDANCE WITH REGULATIONS MADE UNDER SECTION 4 OF THE BANKING ACT 1987. GENERAL ELECTRIC CAPITAL CORPORATION IS NOT AN AUTHORIZED INSTITUTION UNDER THE BANKING ACT 1987. REPAYMENT OF THE PRINCIPAL AND THE PAYMENT OF ANY INTEREST OR PREMIUM IN CONNECTION WITH THIS NOTE HAS NOT BEEN GUARANTEED.]/5/ THIS SECURITY IS A PERMANENT GLOBAL BEARER NOTE, WITHOUT COUPONS, EXCHANGEABLE FOR THE RIGHTS ATTACHING TO THIS NOTE AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR DEFINITIVE BEARER NOTES OR IF SO PROVIDED HEREIN REGISTERED NOTES ARE AS SPECIFIED IN THE FISCAL AGENCY AGREEMENT (AS DEFINED BELOW). ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR DEFINITIVE BEARER NOTES OR IF SO PROVIDED HEREIN REGISTERED NOTES, THIS GLOBAL NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. - ------------------------------- /1/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are applicable, or if the Note is denominated in a currency other than pounds sterling. /2/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are not applicable. /3/ Insert Principal Amount. /4/ Insert Optional Payment Amount if the Note has dual-currency feature. /5/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are applicable. Page 2 GENERAL ELECTRIC CAPITAL CORPORATION [EURO MEDIUM-TERM NOTE]/6/ [DEBT SECURITY]/7/ (Fixed Rate) SERIES:
COMMON CODE: INITIAL REDEMPTION DATE: SPECIFIED (FACE AMOUNT) CURRENCY: DETERMINATION AGENT: ISIN: INITIAL REDEMPTION PERCENTAGE: OPTIONAL PAYMENT CURRENCY: APPLICABILITY OF MODIFIED PAYMENT UPON ACCELERATION OR REDEMPTION: ORIGINAL ISSUE DATE: APPLICABILITY OF ANNUAL REDEMPTION DESIGNATED EXCHANGE RATE: If yes, state Issue Price PERCENTAGE REDUCTION: and each redemption date and redemption price: MATURITY DATE: If yes, state Annual Percentage OPTION VALUE CALCULATION AGENT: Reduction: DENOMINATIONS OF DEFINITIVE NOTES (if not as set forth herein): INTEREST RATE: OPTIONAL REPAYMENT DATE(S): INDEXED CURRENCY: INTEREST PAYMENT PERIOD: INTEREST ACCRUAL DATE: CURRENCY BASE RATE: ADDENDUM Attached: [ ] Yes INTEREST PAYMENT DATE(S): AVAILABILITY OF [ ] No OPTION ELECTION DATES: REGISTERED NOTES: TAX REDEMPTION DATE:
General Electric Capital Corporation, a New York corporation (together with its successors and assigns, the "Company"), for value received, hereby promises to pay to the holder hereof upon surrender hereof, the principal sum (or Face Amount, if the Note has a dual-currency or index feature) specified in Schedule A hereto on the Maturity Date specified above (except to the extent redeemed or repaid prior to the Maturity Date) and to pay interest thereon to the bearer at the Interest Rate per annum specified above from the Original Issue Date specified above until the principal hereof is paid or duly made available for payment (except as provided below), in arrears monthly, quarterly, semiannually or annually as specified above as the Interest Payment Period on each Interest Payment Date (as specified above), commencing with the first Interest Payment Date next succeeding the Original Issue Date specified above, and on the Maturity Date (or any redemption or repayment date); provided, -------- however, that each of Morgan Guaranty Trust Company of New York, Brussels - ------- Office, as operator of - ---------------------- /6/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are applicable, or if the Note is denominated in a currency other than pounds sterling. /7/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are not applicable. Page 3 the Euroclear System, and Cedel Bank, societe anonyme ("Cedel Bank"), or any other recognized or agreed clearing system, shall be deemed a holder of this Note with respect to the portion hereof held for its respective account; and provided further, however, that if the Original Issue Date occurs between a date - -------- ------- ------- that is 15 days prior to the next succeeding Interest Payment Date and such Interest Payment Date, interest payments will commence on the second Interest Payment Date succeeding the Original Issue Date to the holder of this Note on such second Interest Payment Date. Payment of the principal of this Note and any premium due at the Maturity Date (or any redemption or repayment date) will be made in immediately available funds upon surrender of this Note at the office or agency of the Fiscal and Paying Agent or at the office or agency of such other paying agents outside the United States (this and certain other capitalized terms used herein are defined on the reverse of this Note) as the Company may determine maintained for that purpose (a "Paying Agent"). Interest on this Note will accrue from the most recent Interest Payment Date to which interest has been paid or duly provided for, or, if no interest has been paid or duly provided for, from the Original Issue Date, until the principal hereof has been paid or duly made available for payment (except as provided below). The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date, will be paid to the holder of this Note at the office or agency of the Fiscal and Paying Agent or at the office of any Paying Agent and the Fiscal and Paying Agent shall cause Schedule A of this Note to be endorsed to reflect such payment of interest and the amount of interest so paid will be noted. If the Specified Currency is other than U.S. dollars, then, except as provided on the reverse hereof, payment of the principal of and premium, if any, and interest on this Note will be made in such Specified Currency either by a check drawn on a bank in London, Luxembourg or a city in the country of such Specified Currency or by wire transfer of immediately available funds if appropriate wire transfer instructions in writing have been received by the Fiscal and Paying Agent or any Paying Agent not less than 10 days prior to the applicable Interest Payment Date. If the Specified Currency indicated on the face hereof is U.S. dollars, any payment of the principal of and premium, if any, and interest on this Note will be made, subject to applicable laws and regulations, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts either by a check drawn on a bank in The City of New York mailed to an address outside the United States furnished by the holder or by wire transfer of immediately available funds to an account maintained by the holder of this Note with a bank located outside the United States if appropriate wire transfer instructions have been received by the Fiscal and Paying Agent or any Paying Agent not less than 10 days prior to the applicable payment date. Notwithstanding the foregoing, in the event that payment in U.S. dollars of the full amount payable on this Note at the offices of all Paying Agents would be illegal or effectively precluded as a result of exchange controls or similar restrictions, payment on this Note will be made by a paying agency in the United States, if such paying agency, under applicable law and regulations, would be able to make such payment. This Note is issued in the principal amount set forth on the face hereof, but the total aggregate principal amount of the Series to which this Note belongs is unlimited. The Company has the right, without the consent of the holder of any Note or coupon appertaining thereto, to issue additional Notes which form part of the Series to which this Note belongs. Page 4 Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Page 5 Unless the certificate of authentication hereon has been executed by the Fiscal and Paying Agent by manual signature, this Note shall not be entitled to any benefit under the Fiscal Agency Agreement, as defined on the reverse hereof, or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this Note to be duly executed under its corporate seal. DATED: GENERAL ELECTRIC CAPITAL CORPORATION [SEAL] By:_________________________________________ Title: Attest: By:________________________________ Title: CERTIFICATE OF AUTHENTICATION This is one of the Notes referred to in the within-mentioned Fiscal Agency Agreement. THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as Fiscal and Paying Agent By:________________________________________ Authorized Officer Page 6 [Form of Reverse of Note] This Note is one of a duly authorized issue of [Euro Medium-Term Notes]/8/ [Debt Securities]/9/ of the Series specified on the face hereof, having maturities of nine months or more from the date of issue (the "Notes") of the Company. The Notes are issuable under an amended and restated fiscal and paying agency agreement, dated as of July 2, 1996 among the Company, GE Capital Australia Limited, General Electric Capital Canada Inc. and The Chase Manhattan Bank (National Association), London Branch, as fiscal agent and as principal paying agent (in such capacities, the "Fiscal and Paying Agent") (as amended and supplemented from time to time, the "Fiscal Agency Agreement") to which Fiscal Agency Agreement reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities of the Company and holders of the Notes and the terms upon which the Notes are, and are to be, authenticated and delivered. The Chase Manhattan Bank (National Association) at its office in London has been appointed the Exchange Rate Agent (the "Exchange Rate Agent", which term includes any successor exchange rate agent) with respect to the Notes. The terms of individual Notes may vary with respect to interest rates, interest rate formulas, issue dates, maturity dates, or otherwise, all as provided in the Fiscal Agency Agreement. To the extent not inconsistent herewith, the terms of the Fiscal Agency Agreement are hereby incorporated by reference herein. [The Company has complied, as at the Issue Date of this permanent global Note, with its obligations under the listing rules made by the London Stock Exchange Limited (the "London Stock Exchange") pursuant to Section 142(6) of the Financial Services Act 1986 in respect of its debt securities that have been admitted to the Official List of the London Stock Exchange and, since the last publication in compliance with such rules of information about the Company, the Company, having made all reasonable enquiries, has not become aware of any change in circumstances that could reasonably be regarded as significantly and adversely affecting its ability to meet its obligations in respect of the Notes represented by this permanent global Note as they fall due.]/10/ This Note will not be subject to any sinking fund and will not be redeemable or subject to repayment at the option of the holder prior to maturity, except as provided below. Unless otherwise indicated on the face of this Note, this Note shall not be subject to repayment at the option of the holder prior to the Maturity Date. If so indicated on the face of this Note, this Note may be subject to repayment at the option of the holder on the Optional Repayment Date or Dates specified on the face hereof on the terms set forth herein. On any Optional Repayment Date, this Note will be repayable in whole or in part in increments of 1,000 units of the Specified Currency indicated on the face hereof (provided that any remaining principal amount hereof shall not be less than the minimum authorized denomination hereof) at the option of the holder hereof at a price equal to 100% - ---------------------- /8/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are applicable, or if the Note is denominated in a currency other than pounds sterling. /9/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are not applicable. /10/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are applicable. Page 7 of the principal amount to be repaid, together with interest hereon payable to the date of repayment. For this Note to be repaid in whole or in part at the option of the holder hereof, the Company must receive at the corporate trust office of the Fiscal and Paying Agent in the City of London, at least 30 days but not more than 60 days prior to the repayment, (i) this Note with the form entitled "Option to Elect Repayment" on the reverse hereof duly completed or (ii) a telegram, facsimile transmission or a letter from a commercial bank or trust company in Western Europe which must set forth the principal amount of this Note, the principal amount of this Note to be repaid, the certificate number or a description of the tenor and terms of this Note, a statement that the option to elect repayment is being exercised thereby and a guarantee that this Note to be repaid, together with the duly completed form entitled "Option to Elect Repayment" on the reverse hereof, will be received by the Fiscal and Paying Agent not later than the fifth Business Day after the date of such telegram, facsimile transmission or letter; provided, however, that such -------- ------- telegram, facsimile transmission or letter from a commercial bank or trust company in Western Europe shall only be effective if in such case, this Note and form duly completed are received by the Fiscal and Paying Agent by such fifth Business Day. Exercise of such repayment option by the holder hereof shall be irrevocable. In the event of repayment of this Note in part only, a new Note or Notes for the amount of the unpaid portion hereof shall be issued in the name of the holder hereof upon cancellation hereof, but only in an authorized denomination. Interest payments on this Note will include interest accrued to but excluding the Interest Payment Dates or the Maturity Date (or earlier redemption or repayment date), as the case may be. Interest payments for this Note, unless otherwise specified on the face hereof, will be computed and paid on the basis of a 360-day year of twelve 30-day months. In the case where the Interest Payment Date or the Maturity Date (or any redemption or repayment date) does not fall on a Business Day, payment of interest, premium, if any, or principal otherwise payable on such date need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date or on the Maturity Date (or any redemption or repayment date), and no interest shall accrue for the period from and after the Interest Payment Date or the Maturity Date (or any redemption or repayment date) to such next succeeding Business Day. This Note is unsecured and ranks pari passu with all other unsecured and ---- ----- unsubordinated indebtedness of the Company. This Note is issuable in bearer form (the "Bearer Notes"), without interest coupons attached, and is exchangeable upon 30 days' written notice to the Fiscal and Paying Agent, in whole or from time to time in part, for (i) Bearer Notes, with interest coupons attached, in the denominations of 1,000 units, 10,000 units or 100,000 units of the Specified Currency indicated on the face hereof (unless otherwise specified on the face hereof) or (ii) (if so specified on the face hereof) Notes in fully registered form, without coupons ("Registered Notes"), in denominations of 100,000 units of the Specified Currency indicated on the face hereof or any integral multiple of 1,000 units of such Specified Currency in excess thereof (unless otherwise specified on the face hereof) at the office of the Fiscal and Paying Agent, upon the request of Morgan Guaranty Trust Company of New York, Brussels office, as the Euroclear Operator or Cedel Bank, acting on behalf of the owners of beneficial interests in the Note, and upon Certification to the effect set forth in Exhibits B-1 and B-2 attached hereto and upon compliance with the other procedures set forth in the Fiscal Agency Agreement; provided, however, that no such exchange may occur during a -------- ------- period beginning at the opening of business 15 Page 8 days before the day of the first publication of a notice of redemption and ending on the relevant redemption date. All expenses incurred as a result of any such exchange shall be paid by the Company. Notwithstanding anything to the contrary contained in this paragraph, the Fiscal and Paying Agent shall not be required to exchange the entire aggregate principal amount of a permanent global Bearer Note for definitive Bearer Notes in the event beneficial owners of less than the entire aggregate principal amount of the permanent global Bearer Note have requested definitive Bearer Notes, provided the operating rules and regulations of the clearance system then in effect would permit less than the entire aggregate principal amount of the permanent global Bearer Note to be so exchanged. Upon exchange of any portion of this Note for a definitive Bearer Note or definitive Bearer Notes, or a definitive Registered Note or definitive Registered Notes, the Fiscal and Paying Agent shall cause Schedule A of this Note to be endorsed to reflect the reduction of its principal amount by an amount equal to the aggregate principal amount of such definitive Bearer Note or Bearer Notes, or such definitive Registered Note or Registered Notes, whereupon the principal amount hereof shall be reduced for all purposes by the amount so exchanged and noted. The date of surrender of any Note delivered upon any exchange or transfer of Notes shall be such that no gain or loss of interest results from such exchange or transfer. This Note may be transferred by delivery; provided, however, that this Note -------- ------- may be transferred only to a common depositary outside the United States for the Euroclear Operator or Cedel Bank, or to a nominee of such a depositary. In case any Note shall at any time become mutilated, destroyed, lost or stolen, or is apparently destroyed, lost or stolen, and such Note or evidence of the loss, theft or destruction thereof (together with the indemnity hereinafter referred to and such other documents or proof as may be required in the premises) shall be delivered to the Fiscal and Paying Agent, a new Note of like tenor will be issued by the Company in exchange for the Note so mutilated or defaced, or in lieu of the Note so destroyed or lost or stolen, but, in the case of any destroyed or lost or stolen Note only upon receipt of evidence satisfactory to the Fiscal and Paying Agent and the Company that such Note was destroyed or lost or stolen and, if required, upon receipt also of an indemnity satisfactory to each of them. All expenses and reasonable charges associated with procuring such indemnity and with the preparation, authentication and delivery of a new Note shall be borne by the owner of the Note mutilated, defaced, destroyed, lost or stolen. The Fiscal Agency Agreement provides that if an Event of Default (as defined in the Fiscal Agency Agreement) with respect to the Series of which this Note forms a part, shall have occurred and be continuing, the holder hereof, by notice in writing to the Company and to the Fiscal and Paying Agent, may declare the principal of this Note and the interest accrued hereon to be due and payable immediately. If the face hereof indicates that this Note is subject to "Modified Payment upon Acceleration or Redemption", then (i) if the principal hereof is declared to be due and payable as described in the preceding paragraph, the amount of principal due and payable with respect to this Note shall be limited to the sum of the Issue Price specified on the face hereof plus the Amortized Amount, (ii) for the purpose of any vote of noteholders taken pursuant to the Fiscal Agency Agreement prior to the acceleration of payment of this Note, the principal amount hereof shall equal the amount that would be due and payable hereon, calculated as set forth in clause (i) above, if this Note were declared to be due and payable on the date of any such vote and (iii) for the purpose of any vote of noteholders taken Page 9 pursuant to the Fiscal Agency Agreement following the acceleration of payment of this Note, the principal amount hereof shall equal the amount of principal due and payable with respect to this Note, calculated as set forth in clause (i) above. Notes of the Series of which this Note forms a part may be redeemed, at the option of the Company, as a whole but not in part, at any time prior to maturity, upon the giving of a notice of redemption as described below, at a redemption price equal to 100% of the principal amount thereof (except that if this Note is subject to "Modified Payment upon Acceleration or Redemption", such redemption price would be limited to the sum of the Issue Price plus the Amortized Amount), together with accrued interest to the date fixed for redemption, if the Company determines that, as a result of any change in or amendment to the laws (or any regulations or rulings promulgated thereunder) of the United States or of any political subdivision or taxing authority thereof or therein affecting taxation, or any change in official position regarding the application or interpretation of such laws, regulations or rulings, which change or amendment becomes effective on or after the Tax Redemption Date specified on the face hereof, the Company has or will become obligated to pay Additional Amounts (as defined below) with respect to the Notes as described below. Prior to the giving of any notice of redemption pursuant to this paragraph, the Company shall deliver to the Fiscal and Paying Agent (i) a certificate stating that the Company is entitled to effect such redemption and setting forth a statement of facts showing that the conditions precedent to the right of the Company to so redeem have occurred, and (ii) an opinion of counsel satisfactory to the Fiscal and Paying Agent to such effect based on such statement of facts; provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Company would be obligated to pay such Additional Amounts if a payment in respect of the Notes were then due. Notice of redemption will be given not less than 30 nor more than 60 days prior to the date fixed for redemption, which date and the applicable redemption price will be specified in the notice. Such notice will be given in accordance with "Notices" as defined below. If the Company shall determine that any payment made outside the United States by the Company or any Paying Agent of principal or interest[, including original issue discount,]/11/ due in respect of any Bearer Notes of the Series of which this Note forms a part would, under any present or future laws or regulations of the United States, be subject to any certification, identification or other information reporting requirement of any kind, the effect of which requirement is the disclosure to the Company, any Paying Agent or any governmental authority of the nationality, residence or identity of a beneficial owner of such Bearer Note or interest coupon who is a United States Alien (other than such a requirement (a) which would not be applicable to a payment made by the Company or any one of its Paying Agents (i) directly to the beneficial owner or (ii) to a custodian, nominee or other agent of the beneficial owner, or (b) which can be satisfied by such custodian, nominee or other agent certifying to the effect that such beneficial owner is a United States Alien, provided that in each case referred to in clauses (a)(ii) and (b) payment by such custodian, nominee or agent to such beneficial owner is not otherwise subject to any such requirement), the Company shall redeem the Bearer Notes, in whole, at a redemption price equal to 100% of the principal amount thereof (except that if this Note is subject to "Modified Payment upon Acceleration or Redemption", such redemption price would be limited to the sum of the Issue Price plus the Amortized Amount), together with accrued interest to the date fixed for - ------------------ /11/ Include if Notes are original issue discount Notes. Page 10 redemption, or, at the election of the Company if the conditions of the next succeeding paragraph are satisfied, pay the additional amounts specified in such paragraph. The Company shall make such determination and election as soon as practicable and publish prompt notice thereof (the "Determination Notice") stating the effective date of such certification, identification or other information reporting requirements, whether the Company will redeem the Bearer Notes of such Series, or whether the Company has elected to pay the Additional Amounts specified in the next succeeding paragraph, and (if applicable) the last date by which the redemption of the Bearer Notes must take place, as provided in the next succeeding sentence. If the Company redeems the Bearer Notes, such redemption shall take place on such date, not later than one year after the publication of the Determination Notice, as the Company shall elect by notice to the Fiscal and Paying Agent at least 60 days prior to the date fixed for redemption. Notice of such redemption of the Bearer Notes will be given to the holders of the Bearer Notes not more than 60 nor less than 30 days prior to the date fixed for redemption. Such redemption notice shall include a statement as to the last date by which the Bearer Notes to be redeemed may be exchanged for Registered Notes. Notwithstanding the foregoing, the Company shall not so redeem the Bearer Notes if the Company shall subsequently determine, not less than 30 days prior to the date fixed for redemption, that subsequent payments would not be subject to any such requirement, in which case the Company shall publish prompt notice of such determination and any earlier redemption notice shall be revoked and of no further effect. The right of any of the holders of Bearer Notes called for redemption pursuant to this paragraph to exchange such Bearer Notes for Registered Notes will terminate at the close of business of the Fiscal and Paying Agent on the fifteenth day prior to the date fixed for redemption, and no further exchanges of such Series of Bearer Notes for Registered Notes shall be permitted. If and so long as the certification, identification or other information reporting requirements referred to in the preceding paragraph would be fully satisfied by payment of a backup withholding tax or similar charge, the Company may elect to pay as Additional Amounts such amounts as may be necessary so that every net payment made outside the United States following the effective date of such requirements by the Company or any Paying Agent of principal or interest[, including original issue discount,]/12/ due in respect of any Bearer Note or any interest coupon of which the beneficial owner is a United States Alien (but without any requirement that the nationality, residence or identity of such beneficial owner be disclosed to the Company, any Paying Agent or any governmental authority, with respect to the payment of such additional amounts), after deduction or withholding for or on account of such backup withholding tax or similar charge (other than a backup withholding tax or similar charge which (i) would not be applicable in the circumstances referred to in the second parenthetical clause of the first sentence of the preceding paragraph, or (ii) is imposed as a result of the presentation of such Bearer Note or interest coupon for payment more than 15 calendar days after the date on which such payment becomes due and payable or on which payment thereof is duly provided for, whichever occurs later), will not be less than the amount provided for in such Bearer Note or interest coupon to be then due and payable. In the event the Company elects to pay any Additional Amounts pursuant to this paragraph, the Company shall have the right to redeem the Bearer Notes of such Series in whole at any time pursuant to the applicable provisions of the immediately preceding paragraph and the redemption price of such Bearer Notes shall not be reduced for applicable withholding taxes. If the Company elects to pay Additional Amounts pursuant to this paragraph and the condition specified in the first sentence of this paragraph should no longer be satisfied, then the Company shall redeem the Bearer Notes of such Series in whole, pursuant to the applicable provisions of the immediately preceding paragraph. - --------------------- /12/ Include if Notes are original issue discount Notes. Page 11 The Company will, subject to certain exceptions and limitations set forth below, pay such additional amounts (the "Additional Amounts") to the holder of any Note or of any coupon, if any, who is a United States Alien as may be necessary in order that every net payment of the principal of, premium and interest, including original issue discount, on such Note and any other amounts payable on such Note, after withholding for or on account of any present or future tax, assessment or governmental charge imposed upon or as a result of such payment by the United States (or any political subdivision or taxing authority thereof or therein), will not be less than the amount provided for in such Note or coupon, if any, to be then due and payable. However, the Company will not be required to make any payment of Additional Amounts to any such holder for or on account of: (a) any such tax, assessment or other governmental charge which would not have been so imposed but for (i) the existence of any present or former connection between such holder (or between a fiduciary, settlor, beneficiary, member or shareholder of such holder, if such holder is an estate, a trust, a partnership or a corporation) and the United States, including, without limitation, such holder (or such fiduciary, settlor, beneficiary, member or shareholder) being or having been a citizen or resident thereof or being or having been engaged in a trade or business or present therein or having, or having had, a permanent establishment therein or (ii) the presentation by the holder of any such Note or coupon, if any, for payment on a date more than 15 calendar days after the date on which such payment became due and payable or on the date on which payment thereof is duly provided for, whichever occurs later; (b) any estate, inheritance, gift, sales, transfer or personal property tax or any similar tax, assessment or governmental charge; (c) any tax, assessment or other governmental charge imposed by reason of such holder's past or present status as a personal holding company or foreign personal holding company or controlled foreign corporation or passive foreign investment company with respect to the United States or as a corporation which accumulates earnings to avoid United States federal income tax or as a private foundation or other tax- exempt organization; (d) any tax, assessment or other governmental charge which is payable otherwise than by withholding from payments on or in respect of any Note; (e) any tax, assessment or other governmental charge required to be withheld by any Paying Agent from any payment of principal of, or interest on, any Note, if such payment can be made without such withholding by any other Paying Agent in a city in Western Europe; (f) any tax, assessment or other governmental charge which would not have been imposed but for the failure to comply with certification, information or other reporting requirements concerning the nationality, residence or identity of the holder or beneficial owner of such Note, if such compliance is required by statute or by regulation of the United States or of any political subdivision or taxing authority thereof Page 12 or therein as a precondition to relief or exemption from such tax, assessment or other governmental charge; (g) any tax, assessment or other governmental charge imposed by reason of such holder's past or present status as the actual or constructive owner of 10% or more of the total combined voting power of all classes of stock entitled to vote of the Company or as a direct or indirect subsidiary of the Company; or (h) any combination of items (a), (b), (c), (d), (e), (f) or (g); nor shall Additional Amounts be paid with respect to any payment on a Note to a United States Alien who is a fiduciary or partnership or other than the sole beneficial owner of such payment to the extent such payment would be required by the laws of the United States (or any political subdivision thereof) to be included in the income, for tax purposes, of a beneficiary or settlor with respect to such fiduciary or a member of such partnership or a beneficial owner who would not have been entitled to the Additional Amounts had such beneficiary, settlor, member or beneficial owner been the holder of such Note. The Fiscal Agency Agreement provides that the Company will not merge or consolidate with any other corporation or sell, convey, transfer or otherwise dispose of all or substantially all of its properties to any other corporation, unless (i) either the Company shall be the continuing corporation or the successor corporation (if other than the Company) (the "successor corporation") shall be a corporation organized under the laws of the United States of America or of a state thereof and such successor corporation shall expressly assume the due and punctual payments of all amounts due under this Note and the due and punctual performance of all of the covenants and obligations of the Company under this Note by supplemental agreement satisfactory to the Fiscal and Paying Agent executed and delivered to such Fiscal and Paying Agent by the successor corporation and the Company and (ii) the Company or such successor corporation, as the case may be, shall not, immediately after such merger or consolidation, or such sale, conveyance, transfer or other disposition, be in default in the performance of any such covenant or obligation. Upon any such merger or consolidation, sale, conveyance, transfer or other disposition, such successor corporation shall succeed to and be substituted for, and may exercise every right and power of and shall be subject to all the obligations of, the Company under this Note, with the same effect as if such successor corporation had been named as the Company herein, and the Company shall be released from its liability under this Note and under the Fiscal Agency Agreement. The Fiscal Agency Agreement permits the Company, when authorized by resolution of the Board of Directors, and the Fiscal and Paying Agent, with the consent of the holders of not less than a majority in aggregate principal amount of the Notes of the Series of which this Note forms a part, to modify or amend the Fiscal Agency Agreement or such Notes; provided, however, that no such -------- ------- modification or amendment may, without the consent of the holders of each such Note affected thereby, (i) change the stated maturity of the principal of any such Note or extend the time for payment of interest thereon; (ii) change the amount of the principal of an Original Issue Discount Note of such Series that would be due and payable upon an acceleration of the maturity thereof; (iii) reduce the amount of interest payable thereon or the amount payable thereon in the event of redemption or acceleration; (iv) change the currency of payment of principal of or any other amounts payable on any such Note; (v) impair the right to institute suit for the enforcement of any such payment on or with Page 13 respect to any such Note; (vi) reduce the above-stated percentage of the principal amount of Notes of such Series the consent of whose holders is necessary to modify or amend the Fiscal Agency Agreement or the Notes of such Series or reduce the percentage of the Notes of such Series required for the taking of action or the quorum required at any such meeting of holders of Notes of such Series; or (vii) modify the foregoing requirements to reduce the percentage of outstanding Notes of such Series necessary to waive any future compliance or past default. Purchasers are required to pay for the Notes in the currency specified in the applicable Pricing Supplement. Payment of principal, premium, if any, and interest, if any, on each Note will be made in immediately available funds in the Specified Currency unless otherwise specified in the applicable Pricing Supplement and except as provided below. Payments of principal, premium, if any, and interest, if any, on any Note denominated in a Specified Currency other than U.S. dollars and ECU shall be made in U.S. dollars if, on any payment date, such Specified Currency (a) is unavailable due to imposition of exchange controls or other circumstances beyond the Company's control or (b) is no longer used by the government of the country issuing such currency or for the settlement of transactions by public institutions in that country or within the international banking community. Such payments shall be made in U.S. dollars on such payment date and on all subsequent payment dates until such Specified Currency is again available or so used as determined by the Company. Amounts so payable on any such date in such Specified Currency shall be converted into U.S. dollars at a rate determined by the Exchange Rate Agent on the basis of the most recently available Market Exchange Rate or as otherwise indicated in the applicable Pricing Supplement. The Exchange Rate Agent at the date of the Fiscal Agency Agreement is The Chase Manhattan Bank (National Association). Any payment required to be made on Notes denominated in a Specified Currency other than U.S. dollars and ECU that is instead made in U.S. dollars under the circumstances described above will not constitute a default of any obligation of the relevant Issuer under such Notes. The "Market Exchange Rate" with respect to any currency other than U.S. dollars means, for any day, the noon dollar buying rate in The City of New York on such day for cable transfers of such currency as published by the Federal Reserve Bank of New York, or, if such rate is not published for such day, the equivalent rate as determined by the Exchange Rate Agent. The provisions of the two preceding paragraphs shall not apply in the event of the introduction in the country issuing any Specified Currency other than ECU of the Euro pursuant to European Monetary Union. All references herein or in any Pricing Supplement to "Euro" shall be to the new single European currency to be introduced pursuant to European Monetary Union, and all references to "European Monetary Union" shall be to the third stage thereof. In this situation, payments of principal, premium, if any, and interest, if any, on any Note denominated in any such Specified Currency shall be effected in Euro at such time as is required by, and otherwise in conformity with, legally applicable measures adopted with reference to European Monetary Union. [Payments of principal, premium, if any, and interest, if any, on any Note denominated in ECU shall be made in U.S. dollars or a component currency of ECU if, on or prior to any payment date, the ECU is not used as the unit of account of the European Community ("EC") or if major banks in all member countries of the EC shall have ceased to provide ECU accounts. Such payments shall be made Page 14 in U.S. dollars on such payment date and on all subsequent payment dates until ECU is again so used or such bank accounts are again provided, as determined by the Company. Payments of principal, premium, if any, and interest, if any, on any Note denominated in ECU shall be made in U.S. dollars if, on any payment date, ECU is unavailable due to the imposition of exchange controls or other circumstances beyond the Company's control. Such payments shall be made in U.S. dollars on such payment date and on all subsequent payment dates until ECU is again available as determined by the Company. All payments made with respect to Notes denominated in ECU that are instead made in U.S. dollars or a component currency of the ECU pursuant to the provisions of the two preceding paragraphs shall be made in accordance with the provisions set forth below. Any payment required to be made on Notes denominated in ECU that is instead made in U.S. dollars or a component currency of ECU under the circumstances described above will not constitute a default of any obligation of the Company under such Notes. The provisions of the three preceding paragraphs shall not apply in the event of European Monetary Union. In this situation, payments of principal, premium, if any, and interest, if any, on any Note denominated in ECU shall be effected in Euro at such time as is required by, and otherwise in conformity with, legally applicable measures adopted with reference to European Monetary Union. The following provisions relate to Notes denominated in ECU until such time as European Monetary Union occurs. All references to "ECU" refer to the ECU that is from time to time used as the unit of account of the EC. Should any change to the composition of the ECU be adopted by the EC prior to the date of European Monetary Union, principal, premium, if any, and interest, if any, on Notes denominated in ECU shall continue to be payable in ECU without adjustment to the timing or amount of any such payment. With respect to each due date for the payment of principal of, premium, if any, or interest on, Notes denominated in ECU, if, on or prior to such date, any of the events described in the fourth and fifth preceding paragraphs shall have occurred which would require the Company to pay in either U.S. dollars or a component currency of the ECU, the Company or its agent shall (in the case of an agent, without liability on its part but after consultation with the Company and having regard to the availability to the Company of the relevant currency) choose a substitute currency (the "Chosen Currency"), which shall be a component currency of the ECU or U.S. dollars, in which all payments to be calculated by reference to or made in ECU due on or after such date with respect to the Notes shall be made. Notice of the Chosen Currency so selected shall be given to holders of Registered Notes by mail, and shall be given to holders of Bearer Notes by publication, in each case as set forth in "Notices" as defined below. The amount of each payment calculated with reference to or made in such Chosen Currency shall be computed on the basis of the equivalent of the ECU in that currency, determined as described below, as of the fourth business day in Luxembourg prior to the date on which such payment is due. On or about the first business day in Luxembourg following the day on which any of the events described in the fifth and sixth preceding paragraphs shall have occurred which would require the Company to pay in either U.S. dollars or a component currency of the ECU, the Company or its agent shall (in the case of an agent, without liability on its part but after consultation with the Company and having regard to the availability to the Company of the relevant currency) choose a Chosen Currency in Page 15 which all payments to be calculated by reference to or made in ECU with respect to Notes having a due date prior thereto but not yet presented for payment are to be made. The amount of each payment calculated with reference to or made in such Chosen Currency shall be computed on the basis of the equivalent of the ECU in that currency, determined as described below, as of such first business day. The equivalent of the ECU in the relevant Chosen Currency as of any date (the "Day of Valuation") shall be determined by the Exchange Rate Agent on the following basis. The amounts and components composing the ECU for this purpose (the "Components") shall be the amounts and components which composed the ECU as of the last date on which the ECU was used as the unit of account of the EC. The equivalent of the ECU in the Chosen Currency shall be calculated by, first, aggregating the U.S. dollar equivalents of the Components; and then, in the case of a Chosen Currency other than U.S. dollars, using the rate used for determining the U.S. dollar equivalents of the Components in the Chosen Currency as set forth below, calculating the equivalent in the Chosen Currency of such aggregate amount in U.S. dollars. The U.S. dollar equivalent of each of the Components shall be middle spot delivery quotations (or the average thereof, if more than one bank is consulted), as determined by the Exchange Rate Agent to be prevailing at 2:30 p.m., Luxembourg time, on the Day of Valuation, as obtained by the Exchange Rate Agent from one or more major banks, as selected by the Company or its agent, in the country of issue of the component currency in question. If for any reason no direct quotations are available for a Component as of a Day of Valuation from any of the banks selected for this purpose, in computing the U.S. dollar equivalent of such Component, the Exchange Rate Agent shall (except as provided below) use the most recent direct quotations for such Component obtained by it or on its behalf, provided that such quotations were prevailing in the country of issue not more than two Business Days before such Day of Valuation. If such most recent quotations were so prevailing in the country of issue more than two Business Days before such Day of Valuation, the Exchange Rate Agent shall determine the U.S. dollar equivalent of such Component on the basis of cross rates derived from the middle spot delivery quotations for such component currency and for the delivery quotations for such component currency and for the U.S. dollar prevailing at 2:30 p.m. Luxembourg time on such Day of Valuation, as obtained by, or on behalf of, the Exchange Rate Agent from one or more major banks, as selected by the Company or its agent, in a country other than the country of issue of such component currency. Notwithstanding the foregoing, the Exchange Rate Agent shall determine the U.S. dollar equivalent of such Component on the basis of such cross rates if the Company or its agent judges that the equivalent so calculated is more representative than the U.S. dollar equivalent calculated as provided in the first sentence of this paragraph. Unless otherwise specified by the Company or its agent, if there is more than one market for dealing in any component currency by reason of foreign exchange regulations or for any other reason, the market to be referred to in respect of such currency shall be that upon which a non-resident issuer of notes denominated in such currency would purchase such currency in order to make payments in respect of such notes.]/13/ - --------------------- /13/ Include all of the above provisions relating to ECU only if Note is denominated in ECU. Page 16 All determinations made by the Company or its agent shall be at such person's sole discretion and shall, in the absence of manifest error, be conclusive for all purposes and binding on the Company and all holders of Notes. So long as this Note or the Coupons shall be outstanding, the Company will cause to be maintained an office or agency for the payment of the principal of and premium, if any, and interest on this Note as herein provided in London, England, [and in Luxembourg]/14/ [and in Paris, France]/15/ and an office or agency in London for the transfer and exchange as aforesaid of the Notes. The Company may designate other agencies for the payment of said principal, premium and interest at such place or places outside the United States (subject to applicable laws and regulations) as the Company may decide. So long as there shall be any such agency, the Company shall keep the Fiscal and Paying Agent advised of the names and locations of such agencies, if any are so designated. With respect to moneys paid by the Company and held by the Fiscal and Paying Agent or any Paying Agent for the payment of the principal of or interest or premium, if any, on any Note that remain unclaimed at the end of three years after such principal, interest or premium shall have become due and payable (whether at maturity or upon call for redemption or otherwise), (i) the Fiscal and Paying Agent or such Paying Agent shall notify the holders of such Notes that such moneys shall be repaid to the Company and any person claiming such moneys shall thereafter look only to the Company for payment thereof and (ii) such moneys shall be so repaid to the Company. Upon such repayment all liability of the Fiscal and Paying Agent or such Paying Agent with respect to such moneys shall thereupon cease, without, however, limiting in any way any obligation that the Company may have to pay the principal of or interest or premium, if any, on this Note as the same shall become due. No provision of this Note or of the Fiscal Agency Agreement shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, premium, if any, and interest on this Note at the time, place, and rate, and in the coin or currency, herein and in the Fiscal Agency Agreement prescribed unless otherwise agreed between the Company and the holder of this Note. No recourse shall be had for the payment of the principal of, or premium, if any, or the interest on this Note, for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Fiscal Agency Agreement or any fiscal agency agreement supplemental thereto, against any incorporator, shareholder, officer or director, as such, past, present or future, of the Company or of any successor corporation, either directly or through the Company or any successor corporation, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released. This Note and the Coupons shall for all purposes be governed by, and construed in accordance with, the laws of the State of New York. - ------------------ /14/ Include if Note is listed on Luxembourg Stock Exchange. /15/ Include if Note is denominated in French Francs and listed on Paris Bourse. Page 17 As used herein: (a) the term "Amortized Amount" is the original issue discount amortized from the Original Issue Date of the predecessor global Note to the date of redemption or declaration, as the case may be, which amortization shall be calculated using the "constant yield method" (computed in accordance with the rules under the Internal Revenue Code of 1986, as amended, and the regulations thereunder, in effect on the date of redemption or declaration, as the case may be); (b) the term "Business Day" means, unless otherwise specified in the applicable Pricing Supplement, any day other than a Saturday or Sunday or any other day on which banking institutions are generally authorized or obligated by law or regulation to close in (i) the principal financial center of the country in which the Company is incorporated, (ii) the principal financial center of the country of the currency in which the Notes are denominated, (iii) the place at which payment on such Note or coupon is to be made and (iv) London, England[; provided, however, that with respect to Notes denominated in ECUs, such day is not a day that is a non-ECU clearing day as determined by the ECU Banking Association in Paris, France]/16/. For purposes of this definition, the principal financial center of the United States is New York; (c) the term "Notices" refers to: (1) notices to holders of the Notes to be given by publication in a daily newspaper in the English language of general circulation in London and, if the Series of which this Note forms a part is listed on the Luxembourg Stock Exchange and such Exchange so requires, in a daily newspaper in Luxembourg or, if publication in either London or Luxembourg is not practical, elsewhere in Western Europe. Such publication is expected to be made in the Financial Times --------------- and (if such Series is listed on the Luxembourg Stock Exchange) the Luxemburger Wort. Such notices will be deemed to have been given on ---------------- the date of such publication, or if published in such newspapers on different dates, on the date of the first such publication; (2) notices to holders of any Notes denominated in French francs or denominated in another currency or currencies that are linked, directly or indirectly to French francs and that are listed on the Paris Bourse, to be given by publication in a French language daily newspaper of general circulation in Paris (which is expected to be La Tribune Desfosses). Such notices will comply with the applicable -------------------- rules of the Paris Bourse; and (3) notices to holders of any Notes denominated in Dutch guilder that are listed on the Amsterdam Stock Exchange to be given by publication in a leading daily newspaper in the English language of general circulation in Amsterdam and London and if such Notes are listed on the Amsterdam Stock Exchange and such Exchange so - -------------------- /16/ Include only if Note is denominated in ECU. Page 18 requires, also published in the Official Price List ("Officiele Prijscourant"). If publication in London or Amsterdam, as the case may be, is not practical, such publication shall be made elsewhere in Western Europe. Such publication is expected to be made in the Financial Times in London and the Het Financieele Dagblad in Amsterdam. Such notices will be deemed to have been given on the date of such publication or if published in such newspapers on different dates, on the date of the first such publication; (d) the term "United States" means the United States of America (including the States and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction; (e) the term "United States Alien" means any person who, for United States federal income tax purposes, is a foreign corporation, a non- resident alien individual, a nonresident alien fiduciary of a foreign estate or trust, or a foreign partnership, one or more of the members of which is a foreign corporation, a non-resident alien individual or a non- resident alien fiduciary of a foreign estate or trust; (f) the term "Certification" means a certificate substantially in the form of Exhibit B-2 hereto delivered by the Euroclear Operator or Cedel Bank, as the case may be, which certificate is based on a certificate substantially in the form of Exhibit B-1 hereto provided to it by its account holders; and (g) all other terms used in this Note which are defined in the Fiscal Agency Agreement and not otherwise defined herein shall have the meanings assigned to them in the Fiscal Agency Agreement. Page 19 OPTION TO ELECT REPAYMENT The undersigned hereby irrevocably request(s) the Issuer to repay the within Note (or portion thereof specified below) pursuant to its terms at a price equal to the principal amount thereof, together with interest to the Optional Repayment Date, to the undersigned, at ______________________ (Please print or typewrite name and address of the undersigned). If less than the entire principal amount of the within Note is to be repaid, specify the portion thereof (which shall be increments of 1,000 units of the Specified Currency indicated on the face hereof) which the holder elects to have repaid: ____________________; and specify the denomination or denominations (which shall not be less than the minimum authorized denomination) of the Notes to be issued to the holder for the portion of the within Note not being repaid (in the absence of any such specification, one such Note will be issued for the portion not being repaid): ___________________________. Date: __________________________ NOTICE: The signature on this Option to Elect Repayment must correspond with the name as written upon the face of the within instrument in every particular without alteration or enlargement. [FORM OF CERTIFICATE TO BE GIVEN BY AN ACCOUNT HOLDER OF THE EUROCLEAR OPERATOR AND CEDEL BANK] EXHIBIT B-1 ----------- CERTIFICATE --------------------------- General Electric Capital Corporation [Euro Medium-Term Notes]/17/ [Debt Securities]/18/ Represented by Permanent Global Note No. __. This is to certify that as of the date hereof, and except as set forth below, the above-captioned Notes held by you for our account (i) are owned by person(s) requesting definitive [Registered/Bearer] Notes in exchange for their interests in the above-referenced permanent global Note and (ii) such persons desire to exchange _____ principal amount of the above-captioned Notes for definitive [Registered/Bearer] Notes. We undertake to advise you promptly by tested telex on or prior to the date on which you intend to submit your certification relating to the Notes held by you for our account in accordance with your Operating Procedures if any applicable statement herein is not correct on such date, and in the absence of any such notification it may be assumed that this certification applies as of such date. This certification excepts and does not relate to $________ of such interest in the above Notes in respect of which we do not desire to exchange for definitive Notes. Dated: _______________, 19__ [Name of Account Holder] - ---------------------- /17/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are applicable, or if the Note is denominated in a currency other than pounds sterling. /18/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are not applicable. By:__________________________________ (Authorized Signatory) Name: Title: [FORM OF CERTIFICATE TO BE GIVEN BY THE EUROCLEAR OPERATOR AND CEDEL BANK] EXHIBIT B-2 ----------- CERTIFICATE ----------------------- General Electric Capital Corporation [Euro Medium-Term Notes]/19/ [Debt Securities]/20/ Represented by Permanent Global Note No. ____. This is to certify that, based solely on certifications we have received in writing, by tested telex or by electronic transmission from member organizations appearing in our records as persons being entitled to a portion of the principal amount set forth below (our "Member Organizations") substantially to the effect set forth in Exhibit C-1 to the Fiscal and Paying Agency Agreement relating to such Notes, as of the date hereof, _____________ principal amount of the above- captioned Notes (i) is owned by person(s) requesting definitive [Registered/Bearer] Notes in exchange for their interests in the above- referenced permanent global Note and (ii) such persons desire to exchange ______ principal amount of the above-captioned Notes for definitive [Registered/Bearer] Notes. - ----------------------- /19/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are applicable, or if the Note is denominated in a currency other than pounds sterling. /20/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are not applicable. EXHIBIT B-2 ----------- Page 2 We further certify (i) that we are not making available herewith for exchange all interests in the permanent global Note excepted as set forth herein and (ii) that as of the date hereof we have not received any notification from any of our Member Organizations to the effect that the statements made by such Member Organizations with respect to any portion of the permanent global Note submitted herewith are no longer true and cannot be relied upon as the date hereof. Dated: __________________, 19__ [MORGAN GUARANTY TRUST COMPANY OF NEW YORK, BRUSSELS OFFICE, as Operator of the Euroclear System] [CEDEL BANK, SOCIETE ANONYME] By:______________________________________________ EX-4.E 6 TEMPORARY GLOBAL FLOATING 1 (Form effective July 2, 1996)[PRIVATE] FORM OF [EMTN]/1/ [DEBT SECURITY]/2/ TEMP. GLOBAL FLOATING RATE BEARER NOTE] Temporary Global Floating Rate Bearer Note BEARER BEARER No. TGFL [ ]/3/ [ ]/4/ [EURO MEDIUM-TERM NOTE ISSUED IN ACCORDANCE WITH REGULATIONS MADE UNDER SECTION 4 OF THE BANKING ACT 1987. GENERAL ELECTRIC CAPITAL CORPORATION IS NOT AN AUTHORIZED INSTITUTION UNDER THE BANKING ACT 1987. REPAYMENT OF THE PRINCIPAL AND THE PAYMENT OF ANY INTEREST OR PREMIUM IN CONNECTION WITH THIS NOTE HAS NOT BEEN GUARANTEED.]/5/ THIS SECURITY IS A TEMPORARY GLOBAL BEARER NOTE, WITHOUT COUPONS, EXCHANGEABLE FOR AN INTEREST IN A PERMANENT GLOBAL BEARER NOTE, WITHOUT COUPONS, REPRESENTING (AND EXCHANGEABLE FOR) DEFINITIVE BEARER NOTES OR IF SO PROVIDED HEREIN REGISTERED NOTES. IF SO PROVIDED HEREIN, THIS GLOBAL NOTE MAY ALSO BE EXCHANGED DIRECTLY FOR DEFINITIVE BEARER NOTES OR DEFINITIVE REGISTERED NOTES. THE RIGHTS ATTACHING TO THIS NOTE AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE ARE AS SPECIFIED IN THE FISCAL AGENCY AGREEMENT (AS DEFINED HEREIN). ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR AN INTEREST IN A PERMANENT GLOBAL BEARER NOTE OR FOR DEFINITIVE NOTES, THIS GLOBAL NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. - ------------------------- /1/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are applicable, or if the Note is denominated in a currency other than pounds sterling. /2/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are not applicable. /3/ Insert Principal Amount. /4/ Insert Optional Payment Amount if the Note has a dual-currency feature. /5/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are applicable. 2 GENERAL ELECTRIC CAPITAL CORPORATION [EURO MEDIUM-TERM NOTE]/1/ [DEBT SECURITY]/2/ (Floating Rate) SERIES: COMMON MINIMUM INTEREST RATE: INTEREST RESET PERIOD: INITIAL REDEMPTION CODE: DATE: INDEX MATURITY: INTEREST RESET DATES: INITIAL REDEMPTION ISIN: PERCENTAGE: OPTION ELECTION DATES: APPLICABILITY OF ORIGINAL ISSUE DATE: MODIFIED PAYMENT UPON APPLICABILITY OF ACCELERATION OR ANNUAL REDEMPTION REDEMPTION: PERCENTAGE REDUCTION: OPTIONAL PAYMENT MATURITY DATE: CURRENCY: If yes, state Issue Price and each If yes, state Annual redemption date and redemption Percentage Reduction: SPECIFIED (FACE AMOUNT) DESIGNATED EXCHANGE price: CURRENCY: RATE: INTEREST PAYMENT OPTION VALUE INDEXED CURRENCY: OPTIONAL REPAYMENT DATE(S): CALCULATION AGENT: DATE(S): CURRENCY BASE RATE: DENOMINATIONS OF SPREAD (PLUS OR MINUS): DEFINITIVE NOTES (if not INTEREST RATE BASIS: DETERMINATION AGENT: as set forth herein): AVAILABILITY OF TAX REDEMPTION DATE: REGISTERED NOTES: ALTERNATE RATE EVENT INITIAL INTEREST RATE: SPREAD: INITIAL ACCRUAL DATE: SPREAD MULTIPLIER: IF THIS NOTE IS EXCHANGEABLE DIRECTLY FOR DEFINITIVE NOTES, MAXIMUM INTEREST INTEREST PAYMENT INDICATE FORM(S) OF DEFINITIVE RATE: PERIOD: NOTES:
- --------------------------- /1/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are applicable, or if the Note is denominated in a currency other than pounds sterling. /2/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are not applicable. 3 CALCULATION AGENT: IF INTEREST RATE BASIS IS LIBOR: INDEX CURRENCY:_________________ DESIGNATED LIBOR PAGE: [ ] Reuters Page: ____________ [ ] Telerate Page: __________ INTEREST CALCULATION: DAY COUNT CONVENTION [ ] Regular Floating Rate Note [ ] Actual/360 for the period [ ] Floating Rate/Fixed Rate from to Fixed Rate Commencement Date: [ ] Actual/Actual to the period Fixed Interest Rate: from to [ ] Inverse Floating Rate Note Fixed Interest Rate: ADDENDUM ATTACHED: [ ] Yes [ ] No OTHER PROVISIONS: General Electric Capital Corporation, a New York corporation (together with its successors and assigns, the "Company"), for value received, hereby promises to pay to each of Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the Euroclear System (the "Euroclear Operator"), and Cedel Bank, societe anonyme ("Cedel Bank"), or any other recognized or agreed clearing system, with respect to that portion of this Note held for its account, the principal sum (or Face Amount, if the Note has a dual-currency or index feature) specified in Schedule A hereto, on the Maturity Date specified above (except to the extent redeemed or repaid prior to the Maturity Date) and to pay interest thereon at the Interest Rate per annum specified above from the Original Issue Date specified above until the principal hereof is paid or duly made available for payment (except as provided below), in arrears monthly, quarterly, semiannually or annually as specified above as the Interest Payment Period on each Interest Payment Date (as specified above), commencing with the first Interest Payment Date next succeeding the Original Issue Date specified above, and on the Maturity Date (or any redemption or repayment date). Interest on this Note will accrue from the most recent Interest Payment Date to which interest has been paid or duly provided for, or, if no interest has been paid or duly provided for, from the Original Issue Date, until the principal hereof has been paid or duly made available for payment, in each case, upon Certification. Upon the payment of interest on this Note, the Fiscal and Paying Agent (as defined below) shall cause Schedule A of this Note to be endorsed to reflect such payment of interest and the amount of interest so paid shall be noted. No payments on this Note will be made at any office or agency maintained by the Company in the United States for the payment of principal of, premium, if any, and interest, if any, on this Note, nor will any such payment be made by mail to an address in the United States or by transfer to an account maintained by the holder of this Note with a bank in the United States. Notwithstanding the foregoing, if this Note is payable in U.S. dollars and if payment in U.S. dollars of the full amount payable on this Note at the offices of all paying agencies outside the United States would be illegal or effectively precluded as a result of exchange controls or similar restrictions, payment on this Note will be made by a paying agency in the United States, if such paying agency, under applicable law and regulations, would be able to make such payment. 4 This Note is issued in bearer form and represents a portion of a duly authorized issue of [Euro Medium-Term Notes]/1/ [Debt Securities]/2/ of the Series specified above, issued under an amended and restated fiscal and paying agency agreement, dated as of July 2, 1996 among the Company, GE Capital Australia Limited, General Electric Capital Canada Inc. and The Chase Manhattan Bank (National Association), London Branch, as fiscal agent and as principal paying agent (in such capacities, the "Fiscal and Paying Agent") (as amended and supplemented from time to time, the "Fiscal Agency Agreement"). The Notes are issuable in bearer form (the "Bearer Notes"), with interest coupons attached (except in the case of Bearer Notes in global form), and (if so provided above) are also issuable in fully registered form, without coupons (the "Registered Notes" and, together with the Bearer Notes, the "Notes"). Unless otherwise specified above, the definitive Bearer Notes, with interest coupons attached, are issuable in the denominations of 1,000 units, 10,000 units or 100,000 units of the Specified Currency indicated on the face hereof and the definitive Registered Notes are issuable in denominations of 100,000 units of the Specified Currency indicated on the face hereof or any integral multiple of 1,000 units of such Specified Currency in excess thereof. [The Company has complied, as at the Issue Date of this temporary global Note, with its obligations under the listing rules made by the London Stock Exchange Limited (the "London Stock Exchange") pursuant to Section 142(6) of the Financial Services Act 1986 in respect of its debt securities that have been admitted to the Official List of the London Stock Exchange and since the last publication in compliance with such rules of information about the Company, the Company, having made all reasonable enquiries, has not become aware of any change in circumstances that could reasonably be regarded as significantly and adversely affecting its ability to meet its obligations in respect of the Notes represented by this temporary global Note as they fall due.]/3/ Except as otherwise provided herein, this Note is governed by the terms and conditions of the Permanent Global Floating Rate Bearer Note (the"Permanent Global Floating Rate Bearer Note") (or if so specified above, the definitive Floating Rate Bearer Notes or definitive Floating Rate Registered Notes) to be issued in exchange for this Note, which terms and conditions are hereby incorporated by reference herein mutatis mutandis and shall be binding on ------- -------- the Company and the holder hereof as if fully set forth herein. This Note is exchangeable in whole or from time to time in part for (i) an interest (equal to the principal amount of the Bearer Notes being exchanged theretofore represented by this Note) in a single Permanent Global Floating Rate Bearer Note or (ii) if so specified above, an equal principal amount of definitive Floating Rate Bearer Notes and/or definitive Floating Rate Registered Notes upon request of the Euroclear Operator or Cedel Bank, acting on behalf of the owner of a beneficial interest in the Note, to the Fiscal and Paying Agent only on or after the Exchange Date upon Certification to the effect that the Notes to be issued upon such exchange are not being acquired by or on behalf of a United States Person or, if a United States Person has a beneficial interest in the Notes, that such person is (i) a Qualifying Foreign Branch purchasing for its own account or for resale, (ii) a United States - ------------------------- /1/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are applicable, or if the Note is denominated in a currency other than pounds sterling. /2/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are not applicable. /3/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are applicable. 5 Person who acquires the Notes through a Qualifying Foreign Branch and who holds the obligation through such financial institution on the date of Certification, or (iii) a financial institution who acquires the Notes for purposes of resale during the Restricted Period other than for purposes of resale directly or indirectly to a United States Person or to a person within the United States. Upon exchange of any portion of this Note for a Permanent Global Floating Rate Bearer Note (or definitive Floating Rate Bearer Notes and/or definitive Floating Rate Registered Notes), the Fiscal and Paying Agent shall cause Schedule A of this Note to be endorsed to reflect the reduction of its principal amount by an amount equal to the aggregate principal amount being so exchanged. Except as otherwise provided herein, until exchanged for a Permanent Global Floating Rate Bearer Note (or definitive Floating Rate Bearer Notes and/or definitive Floating Rate Registered Notes), this Note shall in all respects be entitled to the same benefits under the Fiscal Agency Agreement as a duly authenticated and delivered definitive Note. If this Note is subject to a tax redemption or if all or any portion of the principal hereof is accelerated, each as described in the Fiscal Agency Agreement, payment of the amount due upon any such redemption or acceleration shall be subject to receipt of Certification. Unless the certificate of authentication hereon has been executed by the Fiscal and Paying Agent by manual signature, this Note shall not be entitled to any benefit under the Fiscal Agency Agreement or be valid or obligatory for any purpose. As used herein: (a) the term "Business Day" means, unless otherwise specified in the applicable Pricing Supplement, any day other than a Saturday or Sunday or any other day on which banking institutions are generally authorized or obligated by law or regulation to close in (i) the principal financial center of the country in which the Company is incorporated, (ii) the principal financial center of the country of the currency in which the Notes are denominated, (iii) the place at which payment on such Note or coupon is to be made and (iv) London, England[; provided, however, that with respect to Notes denominated in ECUs, such day is not a day that is a non-ECU clearing day as determined by the ECU Banking Association in Paris, France]/1/. For purposes of this definition, the principal financial center of the United States is New York; (b) the term "Certification" means a certificate substantially in the form of Exhibit B-2 hereto delivered by the Euroclear Operator or Cedel Bank, as the case may be, which certificate is based on a certificate substantially in the form of Exhibit B-1 hereto provided to it by its account holders; (c) the term "Qualifying Foreign Branch" means a branch of a United States financial institution, as defined in United States Treasury Regulations Section 1.165-12(c)(1)(v), located outside the United States that is purchasing for its own account or for resale and that has agreed, as a condition of purchase, to comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the United States Internal Revenue Code of 1986, as amended and the regulations thereunder; - ------------------------ /1/ Include only if Note is denominated in ECU. 6 (d) the term "Restricted Period" with respect to each issuance means the period which begins on the earlier of the date on which the Company receives the proceeds of the sale of this Note with respect to its issuance or the first date on which this Note is offered to persons other than the Agents, and which ends 40 days after the date on which the Company receives the proceeds of the sale of this Note; provided that if this Note is held as part of an unsold -------- allotment or subscription, any offer or sale of this Note shall be deemed to be during the Restricted Period; (e) the term "United States" means the United States of America (including the States and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction; (f) the term "United States Person" means (i) a citizen or resident of the United States, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States or (iii) an estate or trust the income of which is subject to United States federal income taxation regardless of its source; and (g) all other terms used in this Note which are defined in the Fiscal Agency Agreement and not otherwise defined herein shall have the meanings assigned to them in the Fiscal Agency Agreement. IN WITNESS WHEREOF, the Company has caused this Note to be duly executed under its corporate seal. DATED: GENERAL ELECTRIC CAPITAL CORPORATION [SEAL] By:______________________________ Title: Attest: By:_________________________ Title CERTIFICATE OF AUTHENTICATION This is one of the Notes referred to in the within-mentioned Fiscal Agency Agreement. THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as Fiscal and Paying Agent By:_____________________________ Authorized Officer SCHEDULE A ---------- SCHEDULE OF EXCHANGES --------------------- The Initial Principal Amount of this Note is _____________. The following payments of interest and exchanges of a part of this Note for an interest in a single Permanent Global Floating Rate Bearer Note (or if so specified above, for definitive Notes) have been made:
============================================================================================================= Date Payment of Principal (Face)/1/ Remaining Notation made by of Exchange or Interest Amount Principal (Face)1 or on behalf of Interest Payment Exchanged for Amount Fiscal and Paying Permanent Global Outstanding Agent Bearer Notes or Following Such Definitive Notes Exchange - ------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------
/1/ To be used instead of "Principal" if the Note has a dual-currency or index feature. [FORM OF CERTIFICATE TO BE GIVEN BY AN ACCOUNT ---------------------------------------------- HOLDER OF THE EUROCLEAR OPERATOR AND CEDEL BANK] ------------------------------------------------ EXHIBIT B-1 ----------- CERTIFICATE ------------------------------------------ General Electric Capital Corporation [Euro Medium-Term Notes]/1/ [Debt Securities]/1/ Represented by Temporary Global Note No. __. This is to certify that as of the date hereof, and except as set forth below, the above-captioned Notes held by you for our account (i) are owned by person(s) that are not citizens or residents of the United States, domestic partnerships, domestic corporations or any estate or trust the income of which is subject to United States Federal income taxation regardless of its source ("United States person(s)"), (ii) are owned by United States person(s) that (a) are foreign branches of United States financial institutions (as defined in U.S. Treasury Regulations Section 1.165-12(c)(1)(v)) ("financial institutions") purchasing for their own account or for resale, or (b) acquired the Notes through foreign branches of United States financial institutions and who hold the Notes through such United States financial institutions on the date hereof (and in either case (a) or (b), each such United States financial institution hereby agrees, on its own behalf or through its agent, that you may advise the Issuer or the Issuer's agent that it will comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as amended, and the regulations thereunder), or (iii) are owned by United States or foreign financial institution(s) for purposes of resale during the restricted period (as defined in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)), and in addition if the owner of the Notes is a United States or foreign financial institution described in clause (iii) above (whether or not also described in clause (i) or (ii)) such financial institution has not acquired the Notes for purposes of resale directly or indirectly to a United States person or to a person within the United States or its possessions. As used herein, "United States" means the United States of America (including the States and the District of Columbia) and its "possessions" including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands. - ----------------------- /1/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are applicable, or if the Note is denominated in a currency other than pounds sterling. /2/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are not applicable. We undertake to advise you promptly by tested telex on or prior to the date on which you intend to submit your certification relating to the Notes held by you for our account in accordance with your Operating Procedures if any applicable statement herein is not correct on such date, and in the absence of any such notification it may be assumed that this certification applies as of such date. EXHIBIT B-1 ----------- Page 2 This certification excepts and does not relate to $________ of such interest in the above Notes in respect of which we are not able to certify and as to which we understand exchange and delivery of definitive Notes (or, if relevant, exercise of any rights or collection of any interest) cannot be made until we do so certify. We understand that this certification is required in connection with certain tax laws and, if applicable, certain securities laws of the United States. In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certification is or would be relevant, we irrevocably authorize you to produce this certification to any interested party in such proceedings. Dated: _______________, 19__ [To be dated no earlier than the 10th day before [insert date of Interest Payment Date prior to Exchange Date] [insert date of redemption or acceleration prior to Exchange Date] [insert Exchange Date]] [Name of Account Holder] By:__________________________________ (Authorized Signatory) Name: Title: [FORM OF CERTIFICATE TO BE GIVEN BY THE EUROCLEAR OPERATOR AND CEDEL BANK] EXHIBIT B-2 ----------- CERTIFICATE ---------------------------------------- General Electric Capital Corporation [Euro Medium-Term Notes]/1/ [Debt Securities]/2/ Represented by Temporary Global Note No. ____. This is to certify that, based solely on certifications we have received in writing, by tested telex or by electronic transmission from member organizations appearing in our records as persons being entitled to a portion of the principal amount set forth below (our "Member Organizations") substantially to the effect set forth in Exhibit B-1 to the Fiscal and Paying Agency Agreement, as of the date hereof, _____________ principal amount of the above-captioned Notes (i) is owned by persons that are not citizens or residents of the United States, domestic partnerships, domestic corporations or any estate or trust the income of which is subject to United States Federal income taxation regardless of its source ("United States persons"), (ii) is owned by United States persons that (a) are foreign branches of United States financial institutions (as defined in U.S. Treasury Regulations Section 1.165-12(c)(1)(v) ("financial institutions") purchasing for their own account or for resale, or (b) acquired the Notes through foreign branches of United States financial institutions and who hold the Notes through such United States financial institutions on the date hereof (and in either case (a) or (b), each such United States financial institution has agreed, on its own behalf or through its agent, that we may advise the Issuer or the Issuer's agent that it will comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as amended, and the regulations thereunder), or (iii) is owned by United States or foreign financial institutions for purposes of resale during the restricted period (as defined in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7), and to the further effect that United States or foreign financial institutions described in clause (iii) above (whether or not also described in clause (i) or (ii)) have certified that they have not acquired the Notes for purposes of resale directly or indirectly to a United States person or to a person within the United States or its possessions. - --------------------------- /1/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are applicable, or if the Note is denominated in a currency other than pounds sterling. /2/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are not applicable. As used herein, "United States" means the United States of America (including the States and the District of Columbia) and its "possessions" including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands. EXHIBIT B-2 ----------- Page 2 We further certify (i) that we are not making available herewith for exchange any portion of the temporary global Note excepted as set forth herein and (ii) that as of the date hereof we have not received any notification from any of our Member Organizations to the effect that the statements made by such Member Organizations with respect to any portion of the part submitted herewith are no longer true and cannot be relied upon as the date hereof. We understand that this certification is required in connection with certain tax laws and, if applicable, certain securities laws of the United States. In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certification is or would be relevant, we irrevocably authorize you to produce this certification to any interested party in such proceedings. Dated: __________________, 19__ [To be dated no earlier than [insert date of Interest Payment Date prior to Exchange Date] [insert date of redemption or acceleration prior to Exchange Date] [insert Exchange Date]] [MORGAN GUARANTY TRUST COMPANY OF NEW YORK, BRUSSELS OFFICE, as Operator of the Euroclear System] [CEDEL BANK, SOCIETE ANONYME] By:___________________________ EX-4.F 7 PERMANENT GLOBAL FLOATING Page 1 (Form effective July 2, 1996) FORM OF [EMTN]/1/ [DEBT SECURITY]/2/ PERMANENT GLOBAL FLOATING RATE BEARER NOTE BEARER BEARER No. PGFL [ ]/3/ [ ]/4/ [EURO MEDIUM-TERM NOTE ISSUED IN ACCORDANCE WITH REGULATIONS MADE UNDER SECTION 4 OF THE BANKING ACT 1987. GENERAL ELECTRIC CAPITAL CORPORATION IS NOT AN AUTHORIZED INSTITUTION UNDER THE BANKING ACT 1987. REPAYMENT OF THE PRINCIPAL AND THE PAYMENT OF ANY INTEREST OR PREMIUM IN CONNECTION WITH THIS NOTE HAS NOT BEEN GUARANTEED.]/5/ THIS SECURITY IS A PERMANENT GLOBAL BEARER NOTE, WITHOUT COUPONS, EXCHANGEABLE FOR THE RIGHTS ATTACHING TO THIS NOTE AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR DEFINITIVE BEARER NOTES OR IF SO PROVIDED HEREIN REGISTERED NOTES ARE AS SPECIFIED IN THE FISCAL AGENCY AGREEMENT (AS DEFINED BELOW). ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR DEFINITIVE BEARER NOTES OR IF SO PROVIDED HEREIN REGISTERED NOTES, THIS GLOBAL NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. - ---------------------- /1/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are applicable, or if the Note is denominated in a currency other than pounds sterling. /2/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are not applicable. /3/ Insert Principal Amount. /4/ Insert Optional Payment Amount if the Note has dual-currency feature. /5/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are applicable. Page 2 GENERAL ELECTRIC CAPITAL CORPORATION [EURO MEDIUM-TERM NOTE]/6/ [DEBT SECURITY]/7/ (Floating Rate) SERIES:
COMMON CODE: MINIMUM INTEREST RATE: INTEREST RESET PERIOD: INITIAL REDEMPTION DATE: ISIN: INDEX MATURITY: INTEREST RESET DATES: INITIAL REDEMPTION PERCENTAGE: ORIGINAL ISSUE DATE: OPTION ELECTION DATES: APPLICABILITY OF MODIFIED PAYMENT APPLICABILITY OF ANNUAL UPON ACCELERATION OR REDEMPTION: REDEMPTION PERCENTAGE REDUCTION: MATURITY DATE: OPTIONAL PAYMENT CURRENCY: If yes, state Issue Price and each If yes, state Annual redemption date and redemption Percentage Reduction: price: SPECIFIED (FACE AMOUNT) CURRENCY: DESIGNATED EXCHANGE RATE: OPTIONAL REPAYMENT DATE(S): INDEXED CURRENCY: INTEREST PAYMENT DATE(S): OPTION VALUE CALCULATION AGENT: DENOMINATIONS OF DEFINITIVE NOTES CURRENCY BASE RATE: (if not as set forth herein): INTEREST RATE BASIS: SPREAD (PLUS OR MINUS): DETERMINATION AGENT: TAX REDEMPTION DATE: INITIAL INTEREST RATE: ALTERNATE RATE EVENT SPREAD: AVAILABILITY OF REGISTERED NOTES: INTEREST ACCRUAL DATE: SPREAD MULTIPLIER: MAXIMUM INTEREST RATE: INTEREST PAYMENT PERIOD:
- -------------------- /6/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are applicable, or if the Note is denominated in a currency other than pounds sterling. /7/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are not applicable. Page 3 CALCULATION AGENT: IF INTEREST RATE BASIS IS LIBOR: INDEX CURRENCY:_________________ DESIGNATED LIBOR PAGE: [ ] Reuters Page: ____________ [ ] Telerate Page: __________ INTEREST CALCULATION: DAY COUNT CONVENTION [ ] Regular Floating Rate Note [ ] Actual/360 for the period [ ] Floating Rate/Fixed Rate from to Fixed Rate Commencement Date: [ ] Actual/Actual to the period Fixed Interest Rate: from to [ ] Inverse Floating Rate Note Fixed Interest Rate: ADDENDUM ATTACHED: [ ] Yes [ ] No OTHER PROVISIONS: General Electric Capital Corporation, a New York corporation (together with its successors and assigns, the "Company"), for value received, hereby promises to pay to the holder hereof upon surrender hereof, the principal sum (or Face Amount, if the Note has a dual-currency or index feature) specified in Schedule A hereto on the Maturity Date specified above (except to the extent redeemed or repaid prior to the Maturity Date) and to pay interest thereon to the bearer at the interest rate per annum calculated in accordance with the terms hereof from the Original Issue Date specified above until the principal hereof is paid or duly made available for payment (except as provided below), in arrears monthly, quarterly, semiannually or annually as specified above as the Interest Payment Period on each Interest Payment Date (as specified above), commencing with the first Interest Payment Date next succeeding the Original Issue Date specified above, and on the Maturity Date (or any redemption or repayment date); provided, however, that each of Morgan Guaranty Trust Company -------- ------- of New York, Brussels Office, as operator of the Euroclear System, and Cedel Bank, societe anonyme ("Cedel Bank"), or any other recognized or agreed clearing system, shall be deemed a holder of this Note with respect to the portion hereof held for its respective account; and provided further, however, that if the -------- ------- ------- Original Issue Date occurs between a date that is 15 days prior to the next succeeding Interest Payment Date and such Interest Payment Date, interest payments will commence on the second Interest Payment Date succeeding the Original Issue Date to the holder of this Note on such second Interest Payment Date. Payment of the principal of this Note and any premium due at the Maturity Date (or any redemption or repayment date) will be made in immediately available funds upon surrender of this Note at the office or agency of the Fiscal and Paying Agent or at the office or agency of such other paying agents outside the United States (this and certain other capitalized terms used herein are defined on the reverse of this Note) as the Company may determine maintained for that purpose (a "Paying Agent"). Interest on this Note will accrue from the most recent Interest Payment Date to which interest has been paid or duly provided for, or, if no interest has been paid or duly provided for, from the Original Issue Date, until the principal hereof has been paid or duly made available for payment (except as provided below). The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date, will be paid to the holder of this Note at the office or agency of the Fiscal and Paying Agent or at the office of any Paying Agent and the Fiscal and Paying Agent shall cause Schedule A of Page 4 this Note to be endorsed to reflect such payment of interest and the amount of interest so paid will be noted. If the Specified Currency is other than U.S. dollars, then, except as provided on the reverse hereof, payment of the principal of and premium, if any, and interest on this Note will be made in such Specified Currency either by a check drawn on a bank in London, Luxembourg or a city in the country of such Specified Currency or by wire transfer of immediately available funds if appropriate wire transfer instructions in writing have been received by the Fiscal and Paying Agent or any Paying Agent not less than 10 days prior to the applicable Interest Payment Date. If the Specified Currency indicated on the face hereof is U.S. dollars, any payment of the principal of and premium, if any, and interest on this Note will be made, subject to applicable laws and regulations, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts either by a check drawn on a bank in The City of New York mailed to an address outside the United States furnished by the holder or by wire transfer of immediately available funds to an account maintained by the holder of this Note with a bank located outside the United States if appropriate wire transfer instructions have been received by the Fiscal and Paying Agent or any Paying Agent not less than 10 days prior to the applicable payment date. Notwithstanding the foregoing, in the event that payment in U.S. dollars of the full amount payable on this Note at the offices of all Paying Agents would be illegal or effectively precluded as a result of exchange controls or similar restrictions, payment on this Note will be made by a paying agency in the United States, if such paying agency, under applicable law and regulations, would be able to make such payment. This Note is issued in the principal amount set forth on the face hereof, but the total aggregate principal amount of the Series to which this Note belongs is unlimited. The Company has the right, without the consent of the holder of any Note or coupon appertaining thereto, to issue additional Notes which form part of the Series to which this Note belongs. Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Page 5 Unless the certificate of authentication hereon has been executed by the Fiscal and Paying Agent by manual signature, this Note shall not be entitled to any benefit under the Fiscal Agency Agreement, as defined on the reverse hereof, or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this Note to be duly executed under its corporate seal. DATED: GENERAL ELECTRIC CAPITAL CORPORATION [SEAL] By:________________________________________ Title: Attest: By:________________________________ Title: CERTIFICATE OF AUTHENTICATION This is one of the Notes referred to in the within-mentioned Fiscal Agency Agreement. THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as Fiscal and Paying Agent By:________________________________________ Authorized Officer Page 6 [Form of Reverse of Note] This Note is one of a duly authorized issue of [Euro Medium-Term Notes]/8/ [Debt Securities]/9/ of the Series specified on the face hereof, having maturities of nine months or more from the date of issue (the "Notes") of the Company. The Notes are issuable under an amended and restated fiscal and paying agency agreement, dated as of July 2, 1996 among the Company, GE Capital Australia Limited, General Electric Capital Canada Inc. and The Chase Manhattan Bank (National Association), London Branch, as fiscal agent and as principal paying agent (in such capacities, the "Fiscal and Paying Agent") (as amended and supplemented from time to time, the "Fiscal Agency Agreement") to which Fiscal Agency Agreement reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities of the Company and holders of the Notes and the terms upon which the Notes are, and are to be, authenticated and delivered. The Chase Manhattan Bank (National Association) at its office in London has been appointed the Exchange Rate Agent (the "Exchange Rate Agent", which term includes any successor exchange rate agent) with respect to the Notes. The terms of individual Notes may vary with respect to interest rates, interest rate formulas, issue dates, maturity dates, or otherwise, all as provided in the Fiscal Agency Agreement. To the extent not inconsistent herewith, the terms of the Fiscal Agency Agreement are hereby incorporated by reference herein. [The Company has complied, as at the Issue Date of this permanent global Note, with its obligations under the listing rules made by the London Stock Exchange Limited (the "London Stock Exchange") pursuant to Section 142(6) of the Financial Services Act 1986 in respect of its debt securities that have been admitted to the Official List of the London Stock Exchange and, since the last publication in compliance with such rules of information about the Company, the Company, having made all reasonable enquiries, has not become aware of any change in circumstances that could reasonably be regarded as significantly and adversely affecting its ability to meet its obligations in respect of the Notes represented by this permanent global Note as they fall due.]/10/ This Note will not be subject to any sinking fund and will not be redeemable or subject to repayment at the option of the holder prior to maturity, except as provided below. Unless otherwise indicated on the face of this Note, this Note shall not be subject to repayment at the option of the holder prior to the Maturity Date. If so indicated on the face of this Note, this Note may be subject to repayment at the option of the holder on the Optional Repayment Date or Dates specified on the face hereof on the terms set forth herein. On any Optional Repayment Date, this Note will be repayable in whole or in part in increments of 1,000 units of the Specified Currency indicated on the face hereof (provided that any remaining principal amount hereof shall not be less than the minimum authorized denomination hereof) at the option of the holder hereof at a price equal to 100% of the principal amount to be repaid, together with interest hereon payable to the date of repayment. - -------------------------- /8/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are applicable. /9/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are applicable, or if the Note is denominated in a currency other than pounds sterling. /10/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are not applicable. Page 7 For this Note to be repaid in whole or in part at the option of the holder hereof, the Company must receive at the corporate trust office of the Fiscal and Paying Agent in the City of London, at least 30 days but not more than 60 days prior to the repayment, (i) this Note with the form entitled "Option to Elect Repayment" on the reverse hereof duly completed or (ii) a telegram, facsimile transmission or a letter from a commercial bank or trust company in Western Europe which must set forth the principal amount of this Note, the principal amount of this Note to be repaid, the certificate number or a description of the tenor and terms of this Note, a statement that the option to elect repayment is being exercised thereby and a guarantee that this Note to be repaid, together with the duly completed form entitled "Option to Elect Repayment" on the reverse hereof, will be received by the Fiscal and Paying Agent not later than the fifth Business Day after the date of such telegram, facsimile transmission or letter; provided, however, that such telegram, facsimile transmission or letter from a - -------- ------- commercial bank or trust company in Western Europe shall only be effective if in such case, this Note and form duly completed are received by the Fiscal and Paying Agent by such fifth Business Day. Exercise of such repayment option by the holder hereof shall be irrevocable. In the event of repayment of this Note in part only, a new Note or Notes for the amount of the unpaid portion hereof shall be issued in the name of the holder hereof upon cancellation hereof, but only in an authorized denomination. This Note will bear interest at the rate determined as follows: 1. If this Note is designated as a Regular Floating Rate Note on the face hereof, then, except as described below, this Note shall bear interest at the rate determined by reference to the applicable Interest Rate Basis shown on the face hereof (i) plus or minus the applicable Spread, if any, and/or (ii) multiplied by the applicable Spread Multiplier, if any, specified and applied in the manner described on the face hereof. Commencing on the first Interest Reset Date (the "Initial Interest Reset Date"), the rate at which interest on this Note is payable shall be reset as of each Interest Reset Date specified on the face hereof; provided, -------- however, that (i) the interest rate in effect for the period from the ------- Original Issue Date to the Initial Interest Reset Date will be the Initial Interest Rate, and (ii) unless otherwise specified on the face hereof, the interest rate in effect hereon for the ten calendar days immediately prior to a Maturity Date shall be that in effect on the tenth calendar day preceding such Maturity Date. 2. If this Note is designated as a Floating Rate/Fixed Rate Note on the face hereof, then, except as described below, this Note shall initially bear interest at the rate determined by reference to the applicable Interest Rate Basis shown on the face hereof (i) plus or minus the applicable Spread, if any, and/or (ii) multiplied by the applicable Spread Multiplier, if any, specified and applied in the manner described on the face hereof. Commencing on the Initial Interest Reset Date, the rate at which interest on this Note is payable shall be reset as of each Interest Reset Date specified on the face hereof; provided, however, that -------- ------- (i) the interest rate in effect for the period from the Original Issue Date to the Initial Interest Reset Date will be the Initial Interest Rate; (ii) unless otherwise specified on the face hereof, the interest rate in effect hereon for the ten calendar days immediately prior to the Fixed Rate Commencement Date shall be that in effect on the tenth calendar day preceding the Fixed Rate Commencement Date; and (iii) the interest rate in effect commencing on, and including, the Fixed Rate Commencement Date to the Maturity Date shall be the Fixed Interest Rate, if such a rate is specified on the face hereof, or if no such Fixed Interest Rate is Page 8 so specified, the interest rate in effect hereon on the day immediately preceding the Fixed Rate Commencement Date. 3. If this Note is designated as an Inverse Floating Rate Note on the face hereof, then, except as described below, this Note will bear interest equal to the Fixed Interest Rate indicated on the face hereof minus the rate determined by reference to the applicable Interest Rate Basis shown on the face hereof (i) plus or minus the applicable Spread, if any, and/or (ii) multiplied by the applicable Spread Multiplier, if any, specified and applied in the manner described on the face hereof; provided, -------- however, that the interest rate hereon will not be less than zero. ------- Commencing on the Initial Interest Reset Date, the rate at which interest on this Note is payable shall be reset as of each Interest Reset Date specified on the face hereof; provided, however, that (i) the interest rate -------- ------- in effect for the period from the Original Issue Date to the Initial Interest Reset Date will be the Initial Interest Rate, and (ii) unless otherwise specified on the face hereof, the interest rate in effect hereon for the ten calendar days immediately prior to a Maturity Date shall be that in effect on the tenth calendar day preceding such Maturity Date. 4. Notwithstanding the foregoing, if this Note is designated above as having an Addendum attached, the Note shall bear interest in accordance with the terms described in such Addendum. Except as provided above, the interest rate in effect on each day shall be (a) if such day is an Interest Reset Date, the interest rate determined on the Interest Determination Date (as defined below) immediately preceding such Interest Reset Date or (b) if such day is not an Interest Reset Date, the interest rate determined on the Interest Determination Date immediately preceding the next preceding Interest Reset Date. Each Interest Rate Basis shall be the rate determined in accordance with the applicable provision below. If any Interest Reset Date (which term includes the term Initial Interest Reset Date unless the context otherwise requires) would otherwise be a day that is not a Business Day, such Interest Reset Date shall be postponed to the next succeeding day that is a Business Day, except that if an Interest Rate Basis specified on the face hereof is LIBOR, PIBOR or AIBOR and such next Business Day falls in the next succeeding calendar month, such Interest Reset Date shall be the next preceding Business Day. Unless otherwise specified on the face hereof, the Interest Determination Date pertaining to an Interest Reset Date for Notes bearing interest calculated by reference to the CD Rate, Commercial Paper Rate, Federal Funds Rate and Prime Rate will be the second Business Day next preceding such Interest Reset Date. The Interest Determination Date with respect to the Eleventh District Cost of Funds Rate will be the last working day of the month immediately preceding each Interest Reset Date on which the Federal Home Loan Bank of San Francisco (the "FHLB of San Francisco") publishes the Index (as defined below). Unless otherwise specified on the face hereof, the Interest Determination Date pertaining to an Interest Reset Date for Notes bearing interest calculated by reference to LIBOR shall be the second London Banking Day (as defined below) preceding such Interest Reset Date. The Interest Determination Date with respect to PIBOR and AIBOR Notes will be as specified below under "Determination of PIBOR" and "Determination of AIBOR", respectively. The Interest Determination Date pertaining to an Interest Reset Date for Notes bearing interest calculated by reference to the Treasury Rate shall be the day of the week in which such Interest Reset Date falls on which Treasury Page 9 bills normally would be auctioned; provided, however, that if an auction is held -------- ------- on the Friday of the week preceding such Interest Reset Date, the related Interest Determination Date shall be such preceding Friday; and provided, -------- further, that if an auction shall fall on any Interest Reset Date, then the - ------- Interest Reset Date shall instead be the first Business Day following the date of such auction. "London Banking Day" means any day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) in London, England. The "Calculation Date" pertaining to any Interest Determination Date will be the earlier of (i) the tenth calendar day after such Interest Determination Date or, if such day is not a Business Day, the next succeeding Business Day or (ii) the Business Day preceding the applicable Interest Payment Date or Maturity Date, as the case may be. With respect to each Series of French Franc Notes listed on the Paris Bourse, the Calculation Agent will notify The Paris Bourse of the interest rate, the interest amount, the interest period and the Interest Payment Date related to each Interest Reset Date as soon as such information is available. Determination of CD Rate. If the Interest Rate Basis specified on the face ------------------------ hereof is the CD Rate, the CD Rate with respect to this Note shall be determined on each Interest Determination Date and shall be the rate on such date for negotiable certificates of deposit having the Index Maturity specified on the face hereof as published by the Board of Governors of the Federal Reserve System in "Statistical Release H.15(519), Selected Interest Rates," or any successor publication ("H.15(519)"), under the heading "CDs (Secondary Market)," or, if not so published by 3:00 p.m., New York City time, on the Calculation Date pertaining to such Interest Determination Date, the CD Rate will be the rate on such Interest Determination Date for negotiable certificates of deposit of the Index Maturity specified on the face hereof as published by the Federal Reserve Bank of New York in its daily statistical release "Composite 3:30 P.M. Quotations for U.S. Government Securities" or any successor publication ("Composite Quotations") under the heading "Certificates of Deposit." If such rate is not yet published in either H.15(519) or the Composite Quotations by 3:00 P.M., New York City time, on such Calculation Date pertaining to such Interest Determination Date, then the CD Rate on such Interest Determination Date will be calculated by the Calculation Agent referred to on the face hereof and will be the arithmetic mean of the secondary market offered rates as of 10:00 a.m., New York City time, on such Interest Determination Date, for negotiable certificates of deposit of major United States money market banks with a remaining maturity closest to the Index Maturity specified on the face hereof in an amount that is representative for a single transaction in that market at that time as quoted by three leading nonbank dealers in negotiable U.S. dollar certificates of deposit in The City of New York selected by the Calculation Agent; provided, however, that if the dealers selected as aforesaid -------- ------- by the Calculation Agent are not quoting as mentioned in this sentence, the CD Rate with respect to such Interest Determination Date shall be the CD Rate as in effect on such Interest Determination Date. Determination of Commercial Paper Rate. If the Interest Rate Basis -------------------------------------- specified on the face hereof is the Commercial Paper Rate, the Commercial Paper Rate with respect to this Note shall be determined on each Interest Determination Date and shall be the Money Market Yield (as defined herein) of the rate on such date for commercial paper having the Index Maturity specified on the face hereof, as such rate shall be published in H.15(519) under the heading "Commercial Paper," or if not so published prior to 3:00 p.m., New York City time, on the Calculation Date pertaining to such Interest Determination Date, the Commercial Paper Rate shall be the Money Market Yield of the rate on such Interest Determination Date for commercial paper of the Index Maturity specified on the face hereof as published in Composite Page 10 Quotations under the heading "Commercial Paper" (with an Index Maturity of one month or three months being deemed to be equivalent to an Index Maturity of 30 days or 90 days, respectively). If such rate is not yet available in either H.15(519) or Composite Quotations by 3:00 p.m., New York City time, on such Calculation Date, then the Commercial Paper Rate on such Interest Determination Date shall be calculated by the Calculation Agent and shall be the Money Market Yield of the arithmetic mean of the offered rates as of 11:00 a.m., New York City time, on such Interest Determination Date for commercial paper of the Index Maturity specified on the face hereof, placed for an industrial issuer whose bond rating is "AA," or the equivalent, from a nationally recognized rating agency, as quoted by three leading dealers in commercial paper in The City of New York selected by the Calculation Agent; provided, however, that if the -------- ------- dealers selected as aforesaid by the Calculation Agent are not quoting offered rates as set forth above, the Commercial Paper Rate with respect to such Interest Determination Date shall be the Commercial Paper Rate in effect on such Interest Determination Date. "Money Market Yield" shall be a yield (expressed as a percentage) calculated in accordance with the following formula: Money Market Yield = D x 360 -------------- x 100 360 - (D x M) where "D" refers to the applicable per annum rate for commercial paper quoted on a bank discount basis and expressed as a decimal and "M" refers to the actual number of days in the period for which interest is being calculated. Determination of Eleventh District Cost of Funds Rate. If the Interest ----------------------------------------------------- Rate Basis for this Note is the Eleventh District Cost of Funds Rate, as indicated above, the Eleventh District Cost of Funds Rate shall be determined on each applicable Interest Determination Date and shall be the rate equal to the monthly weighted average cost of funds for the calendar month preceding such Interest Determination Date as set forth under the caption "11th District" on Telerate Page 7058 as of 11:00 a.m., San Francisco time, on such Interest Determination Date. If such rate does not appear on Telerate Page 7058 on any such Interest Determination Date, the Eleventh District Cost of Funds Rate for such Interest Determination Date shall be the monthly weighted average cost of funds paid by member institutions of the Eleventh Federal Home Loan Bank District that was most recently announced (the "Index") by the FHLB of San Francisco as such cost of funds for the calendar month preceding the date of such announcement. If the FHLB of San Francisco fails to announce such rate for the calendar month next preceding such Interest Determination Date, then the Eleventh District Cost of Funds Rate for such Interest Determination Date will be the Eleventh District Cost of Funds Rate in effect on such Interest Determination Date. Determination of Federal Funds Rate. If the Interest Rate Basis specified ----------------------------------- on the face hereof is the Federal Funds Rate, the Federal Funds Rate with respect to this Note shall be determined on each Interest Determination Date and shall be the rate on such date for Federal Funds as published in H.15(519) under the heading "Federal Funds (Effective)," or, if not so published by 3:00 p.m., New York City time, on the Calculation Date pertaining to such Interest Determination Date, the Federal Funds Rate will be the rate on such Interest Determination Date as published in Composite Quotations under the heading "Federal Funds/Effective Rate." If such rate is not yet published in either H.15(519) or the Composite Quotations by 3:00 p.m., New York City time, on such Calculation Date, the Federal Funds Rate for such Interest Determination Date will be calculated by the Calculation Agent and will be Page 11 the arithmetic mean of the rates for the last transaction in overnight United States dollar Federal funds as of 9:00 a.m., New York City time, on such Interest Determination Date arranged by three leading brokers of Federal funds transactions in The City of New York selected by the Calculation Agent; provided, however, that if the brokers selected as aforesaid by the Calculation - -------- ------- Agent are not quoting as mentioned in this sentence, the Federal Funds Rate with respect to such Interest Determination Date shall be the Federal Funds Rate in effect on such Interest Determination Date. Determination of LIBOR. If the Interest Rate Basis specified on the face ---------------------- hereof is LIBOR, LIBOR with respect to this Note shall be determined on each Interest Determination Date as follows: (i) LIBOR will be either (a) if "LIBOR Telerate" is specified on the face hereof or if the face hereof does not specify a source for LIBOR, the rate for deposits in the London interbank market in the Index Currency (as defined below) having the Index Maturity designated on the face hereof commencing on the second Business Day immediately following such Interest Determination Date that appears on Telerate Page 3750 (or such other page as is specified on the face hereof) as of 11:00 a.m., London time, on such Interest Determination Date, or (b) if "LIBOR Reuters" is specified on the face hereof, the arithmetic mean of the offered rates (unless the specified Designated LIBOR Page (as defined below) by its terms provides only for a single rate, in which case such single rate shall be used) for deposits in the London interbank market in the Index Currency having the Index Maturity designated on the face hereof and commencing on the second Business Day immediately following such Interest Determination Date, that appear on the Designated LIBOR Page as of 11:00 a.m., London time, on such Interest Determination Date, if at least two such offered rates appear (unless, as aforesaid, only a single rate is required) on such Designated LIBOR Page. If fewer than two offered rates appear, or no rate appears, as applicable, LIBOR in respect of such Interest Determination Date will be determined as if the parties had specified the rate described in clause (ii) below. (ii) If fewer than two offered rates appear, or no rate appears, as the case may be, on the applicable Designated LIBOR Page as specified in clause (i) above, the Calculation Agent will request the principal London offices of each of four major reference banks in the London interbank market, as selected by the Calculation Agent, to provide the Calculation Agent with its offered quotation for deposits in the Index Currency for the period of the Index Maturity designated on the face hereof, commencing on the second Business Day immediately following such Interest Determination Date, to prime banks in the London interbank market at approximately 11:00 a.m., London time, on such Interest Determination Date and in a principal amount that is representative for a single transaction in such Index Currency in such market at such time. If at least two such quotations are provided, LIBOR determined on such Interest Determination Date will be the arithmetic mean of such quotations. If fewer than two quotations are provided, LIBOR determined on such Interest Determination Date will be the arithmetic mean of the rates quoted at approximately 11:00 a.m. (or such other time specified on the face hereof) in the applicable Principal Financial Center (as defined below), on such Interest Determination Date for loans in the Index Currency to leading European banks having the Index Maturity designated in the applicable Pricing Supplement and in a principal amount that is representative for a Page 12 single transaction in such Index Currency in such market at such time by three major banks in such Principal Financial Center selected by the Calculation Agent; provided, however, that if the banks so selected by the -------- ------- Calculation Agent are not quoting as mentioned in this sentence, LIBOR with --- respect to such Interest Determination Date will be LIBOR in effect on such Interest Determination Date. "Index Currency" means the currency (including composite currencies) -------------- specified on the face hereof as the currency with respect to which LIBOR shall be calculated. If no such currency is specified on the face hereof, the Index Currency shall be U.S. dollars. "Designated LIBOR Page" means the display on the Dow Jones Telerate Service --------------------- for the purpose of displaying the London interbank rates of major banks for the applicable Index Currency, unless "LIBOR Reuters" is designated on the face hereof, in which case the Designated LIBOR Page shall be the display on the Reuters Monitor Money Rates Service for the purpose of displaying the London interbank rates of major banks for the applicable Index Currency. Unless provided otherwise on the face hereof, "Principal Financial Center" will be the capital city of the country of the specified Index Currency, except that with respect to U.S. dollars, Deutschemarks, and ECUs, the Principal Financial Center shall be The City of New York, Frankfurt, and Luxembourg, respectively. Determination of PIBOR. If this Note is a part of a Series of French Franc ---------------------- Notes and the Interest Rate Basis specified on the face hereof is the Paris interbank offered rate ("PIBOR"), PIBOR shall be determined as follows: (i) On the first Paris Banking Day before the beginning of each Interest Reset Period (each, an "FF Interest Determination Date"), the Calculation Agent will obtain the rate as defined and calculated by the Association Francaise des Banques and Telerate, respectively, on or about --------------------------------- 11:00 a.m. (Paris time), on the relevant FF Interest Determination Date for deposits of the Designated Maturity in French francs in the Paris interbank market; such rate is shown on the page designated as "Page 20041" on the telerate information display service or such page as may replace such page on that service or such other service as may be designated by the Association Francaise des Banques as the information provider for the --------------------------------- purpose of displaying Paris interbank offered rates for French Franc deposits ("Telerate Page 20041"). (ii) If the rate provided for in (i) above has not been calculated by the Association Francaise des Banques and does not appear on --------------------------------- Telerate Page 20041, the Calculation Agent will request the principal Paris office of four major banks in the Paris interbank market, as selected by the Calculation Agent (the "Reference Banks") to provide the Calculation Agent with their offered quotations to prime banks for deposits in Paris of French Francs of the Designated Maturity as of 11:00 a.m. (Paris time) on the relevant FF Interest Determination Date; PIBOR applicable to such Interest Reset Period shall, subject as provided below, be the rate determined by the Calculation Agent to be the arithmetic mean (rounded, if necessary, up to the fifth decimal place) of such quotations (or such of them, being at least two, as are so provided), as determined by the Calculation Agent. Page 13 (iii) If fewer than two quotations are provided as requested, PIBOR shall be the arithmetic mean of the rates quoted by major banks in Paris selected by the Calculation Agent, at approximately 11:00 a.m., Paris time, on the related PIBOR Interest Determination Date for loans in French Francs to leading European banks for a period of the Designated Maturity commencing on the Interest Reset Date and in an amount that is representative for a single transaction in French Francs in such market at such time; provided, however, that if the banks so selected by the -------- ------- Calculation Agent are not quoting as mentioned in this subsection (iii), then PIBOR with respect to such Interest Reset Date will be PIBOR in effect on such Interest Reset Date. As used herein, the term "Paris Banking Day" means a day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) in Paris, France. Determination of AIBOR. If the Interest Rate Basis specified on the face ---------------------- hereof is the Amsterdam interbank offered rate ("AIBOR"), AIBOR with respect to this Note shall be determined as follows: "AIBOR" means, with respect to any Interest Reset Date, the rate for deposits in Dutch Guilders for the period of the Index Maturity which appears on the Reuters Screen AIBO Page (as defined below) (Euro AIBO column) as of 11:00 a.m., Amsterdam time, two Amsterdam Banking Days (as defined below) prior to such Interest Reset Date (each, an "AIBOR Interest Determination Date"). If such rate does not appear on the Reuters Screen AIBO Page, the rate for such Interest Reset Date will be the rate determined on the basis of the rates at which deposits in Dutch Guilders are offered by the AIBOR Reference Banks (as defined below) at approximately 11:00 a.m. on the related AIBOR Interest Determination Date, to prime banks in the Amsterdam interbank market for a period of six months commencing on the applicable Interest Reset Date and in an amount that is representative for a single transaction in such market at such time (such amount, a "Representative Amount"). The Calculation Agent will request the principal Amsterdam office of each of the AIBOR Reference Banks to provide a quotation of its rate. If at least two quotations are provided, the rate for such Interest Reset Date will be the arithmetic mean of the quotations. If fewer than two quotations are provided as requested, the rate for such Interest Reset Date will be the arithmetic mean of the rates quoted by major banks in Amsterdam, selected by the Calculation Agent, at approximately 11:00 a.m., Amsterdam time, on such Interest Reset Date for loans in Dutch Guilders to leading European banks for the period of the Index Maturity commencing on such Reset Date and in a representative Amount. "Amsterdam Banking Day" means any day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) in Amsterdam, The Netherlands. "AIBOR Reference banks" mean four major banks in the Amsterdam interbank market selected by the Calculation Agent. "Reuters Screen AIBO Page" means the page designated as "AIBO" on the Reuters Monitor Money Rates Service (or such other page as may replace that page on that service for the purpose of displaying rates comparable to the Amsterdam interbank offered rates.) Page 14 Determination of Prime Rate. If the Interest Rate Basis specified on the --------------------------- face hereof is the Prime Rate, the Prime Rate with respect to this Note shall be determined on each Interest Determination Date and shall be the rate on such date as published in H.15(519) under the heading "Bank Prime Loan", or if not so published by 3:00 p.m., New York City time, on the Calculation Date pertaining to such Interest Determination Date, the Prime Rate will be the arithmetic mean of the rates of interest publicly announced by each bank named on the Reuters Screen U.S. Prime 1 Page (as defined below) as such bank's prime rate or base lending rate as in effect for such Interest Determination Date as quoted on the Reuters Screen U.S. Prime 1 Page on such interest Determination Date, or, if fewer than four such rates appear on the Reuters Screen U.S. Prime 1 Page for such Interest Determination Date, the rate shall be the arithmetic mean of the prime rates quoted on the basis of actual number of days in the year divided by 360 as of the close of business on such Interest Determination Date by at least two of the three major money center banks in The City of New York selected by the Calculation Agent from which quotations are requested. For purposes of making the foregoing determination, each change in the prime rate or base lending rate of any bank so announced by such bank will be effective as of the effective date of the announcement or, if no effective date is specified, as of the date of the announcement. If fewer than two such quotations are provided, the Prime Rate will be calculated by the Calculation Agent and will be determined as the arithmetic mean on the basis of the prime rates or base lending rates quoted in The City of New York by two substitute banks or trust companies organized and doing business under the laws of the United States or any state thereof, each having total equity capital of at least $500 million and being subject to supervision or examination by a federal or state authority, selected by the Calculation Agent to quote such rate or rates; provided, -------- however, that if the banks or trust companies so selected by the Calculation - ------- Agent are not quoting as mentioned in this sentence, the Prime Rate with respect to such Interest Determination Date will be the Prime Rate in effect on such Interest Determination Date. Determination of Treasury Rate. If the Interest Rate Basis specified on ------------------------------ the face hereof is the Treasury Rate, the Treasury Rate with respect to this Note shall be determined on each Interest Determination Date and shall be the rate applicable to the most recent auction of direct obligations of the United States ("Treasury Bills") having the Index Maturity specified on the face hereof, as published in H.15(519) under the heading "Treasury Bills--auction average (investment)," or if not so published by 3:00 p.m., New York City time, on the Calculation Date pertaining to such Interest Determination Date, the auction average rate on such Interest Determination Date (expressed as a bond equivalent, on the basis of a year of 365 or 366 days, as applicable, and applied on a daily basis) as otherwise announced by the United States Department of the Treasury. In the event that the results of the auction of Treasury Bills having the Index Maturity specified on the face hereof are not published or reported as provided above by 3:00 p.m., New York City time, on such Calculation Date, or if no such auction is held in the five Business Days preceding such Interest Determination Date, then the Treasury Rate shall be calculated by the Calculation Agent and shall be a yield to maturity (expressed as a bond equivalent, on the basis of a year of 365 or 366 days, as applicable, and applied on a daily basis) of the arithmetic mean of the secondary market bid rates, as of approximately 3:30 p.m., New York City time, on such Interest Determination Date, of three leading primary United States government securities dealers selected by the Calculation Agent for the issue of Treasury Bills with a remaining maturity closest to the Index Maturity specified on the face hereof; provided, however, that if the dealers selected as aforesaid by the Calculation - -------- ------- Agent are not quoting bid rates as mentioned in this sentence, the Treasury Rate with respect to such Interest Determination Date will be the Treasury Rate in effect on such Interest Determination Date. Page 15 Notwithstanding the foregoing, the interest rate hereon shall not be greater than the Maximum Interest Rate, if any, or less than the Minimum Interest Rate, if any, specified on the face hereof. The Calculation Agent shall calculate the interest rate hereon in accordance with the foregoing on or before each Calculation Date. The interest rate on this Note will in no event be higher than the maximum rate permitted by New York law, as the same may be modified by United States Federal law of general application. At the request of the holder hereof, the Calculation Agent will provide to the holder hereof the interest rate hereon then in effect and, if determined, the interest rate that will become effective as of the next Interest Reset Date. Interest payments on this Note will equal the amount of interest accrued from and including the next preceding Interest Payment Date in respect of which interest has been paid (or from and including the date of issue of the predecessor global Note, if no interest has been paid) to but excluding the related Interest Payment Date; provided, however, that if the Interest Reset -------- ------- Period with respect to this Note is daily or weekly, each interest payment will include interest accrued from and including the date of issue of the predecessor global Note or from but excluding the fifteenth calendar day preceding the next preceding Interest Payment Date (whether or not such fifteenth calendar day is a Business Day) to which interest has been paid, as the case may be, through and including the fifteenth calendar day preceding the applicable Interest Payment Date (whether or not such fifteenth calendar day is a Business Day), unless otherwise specified on the face hereof; and provided, further, that the interest -------- ------- payment with respect to this Note made on the Maturity Date will include interest accrued to but excluding such Maturity Date. Accrued interest hereon shall be calculated by multiplying the face amount hereof by an accrued interest factor. Such accrued interest factor is computed by adding the interest factor calculated for each day from the date of issue of the predecessor global Note, or from the last day to which interest has been paid or duly provided for, to the date for which accrued interest is being calculated. Unless otherwise specified on the face hereof, the interest factor for each such day will be computed by dividing the interest rate applicable to such day by 360, if the Interest Rate Basis specified on the face hereof is the CD Rate, the Commercial Paper Rate, the Eleventh District Cost of Funds Rate, the Federal Funds Rate, LIBOR, PIBOR, AIBOR or the Prime Rate, or by the actual number of days in the year if the Interest Rate Basis specified on the face hereof is the Treasury Rate. All percentages resulting from any calculation will be to the nearest one hundred-thousandth of a percentage point, with five one millionths of a percentage point rounded upwards (e.g., 9.9876545% (or .09876545) would be ---- rounded to 9.87655% (or.0987655), and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward). In the case where the Interest Payment Date or the Maturity Date (or any redemption or repayment date) does not fall on a Business Day, payment of interest, premium, if any, or principal otherwise payable on such date need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date or on the Maturity Date (or any redemption or repayment date), and no interest shall accrue for the period from and after the Interest Payment Date or the Maturity Date (or any redemption or repayment date) to such next succeeding Business Day. Page 16 This Note is unsecured and ranks pari passu with all other unsecured and ---- ----- unsubordinated indebtedness of the Company. This Note is issuable in bearer form (the "Bearer Notes"), without interest coupons attached, and is exchangeable upon 30 days' written notice to the Fiscal and Paying Agent, in whole or from time to time in part, for (i) Bearer Notes, with interest coupons attached, in the denominations of 1,000 units, 10,000 units or 100,000 units of the Specified Currency indicated on the face hereof (unless otherwise specified on the face hereof) or (ii) (if so specified on the face hereof) Notes in fully registered form, without coupons ("Registered Notes"), in denominations of 100,000 units of the Specified Currency indicated on the face hereof or any integral multiple of 1,000 units of such Specified Currency in excess thereof (unless otherwise specified on the face hereof) at the office of the Fiscal and Paying Agent, upon the request of Morgan Guaranty Trust Company of New York, Brussels office, as the Euroclear Operator or Cedel Bank, acting on behalf of the owners of beneficial interests in the Note, and upon Certification to the effect set forth in Exhibits B-1 and B-2 attached hereto and upon compliance with the other procedures set forth in the Fiscal Agency Agreement; provided, however, that no such exchange may occur during a -------- ------- period beginning at the opening of business 15 days before the day of the first publication of a notice of redemption and ending on the relevant redemption date. All expenses incurred as a result of any such exchange shall be paid by the Company. Notwithstanding anything to the contrary contained in this paragraph, the Fiscal and Paying Agent shall not be required to exchange the entire aggregate principal amount of a permanent global Bearer Note for definitive Bearer Notes in the event beneficial owners of less than the entire aggregate principal amount of the permanent global Bearer Note have requested definitive Bearer Notes, provided the operating rules and regulations of the clearance system then in effect would permit less than the entire aggregate principal amount of the permanent global Bearer Note to be so exchanged. Upon exchange of any portion of this Note for a definitive Bearer Note or definitive Bearer Notes, or a definitive Registered Note or definitive Registered Notes, the Fiscal and Paying Agent shall cause Schedule A of this Note to be endorsed to reflect the reduction of its principal amount by an amount equal to the aggregate principal amount of such definitive Bearer Note or Bearer Notes, or such definitive Registered Note or Registered Notes, whereupon the principal amount hereof shall be reduced for all purposes by the amount so exchanged and noted. The date of surrender of any Note delivered upon any exchange or transfer of Notes shall be such that no gain or loss of interest results from such exchange or transfer. This Note may be transferred by delivery; provided, however, that this Note -------- ------- may be transferred only to a common depositary outside the United States for the Euroclear Operator or Cedel Bank, or to a nominee of such a depositary. In case any Note shall at any time become mutilated, destroyed, lost or stolen, or is apparently destroyed, lost or stolen, and such Note or evidence of the loss, theft or destruction thereof (together with the indemnity hereinafter referred to and such other documents or proof as may be required in the premises) shall be delivered to the Fiscal and Paying Agent, a new Note of like tenor will be issued by the Company in exchange for the Note so mutilated or defaced, or in lieu of the Note so destroyed or lost or stolen, but, in the case of any destroyed or lost or stolen Note only upon receipt of evidence satisfactory to the Fiscal and Paying Agent and the Company that such Note was destroyed or lost or stolen and, if required, upon receipt also of an indemnity satisfactory to each of them. All expenses and reasonable charges associated with procuring such indemnity and with the preparation, authen- Page 17 tication and delivery of a new Note shall be borne by the owner of the Note mutilated, defaced, destroyed, lost or stolen. The Fiscal Agency Agreement provides that if an Event of Default (as defined in the Fiscal Agency Agreement) with respect to the Series of which this Note forms a part, shall have occurred and be continuing, the holder hereof, by notice in writing to the Company and to the Fiscal and Paying Agent, may declare the principal of this Note and the interest accrued hereon to be due and payable immediately. If the face hereof indicates that this Note is subject to "Modified Payment upon Acceleration or Redemption", then (i) if the principal hereof is declared to be due and payable as described in the preceding paragraph, the amount of principal due and payable with respect to this Note shall be limited to the sum of the Issue Price specified on the face hereof plus the Amortized Amount, (ii) for the purpose of any vote of noteholders taken pursuant to the Fiscal Agency Agreement prior to the acceleration of payment of this Note, the principal amount hereof shall equal the amount that would be due and payable hereon, calculated as set forth in clause (i) above, if this Note were declared to be due and payable on the date of any such vote and (iii) for the purpose of any vote of noteholders taken pursuant to the Fiscal Agency Agreement following the acceleration of payment of this Note, the principal amount hereof shall equal the amount of principal due and payable with respect to this Note, calculated as set forth in clause (i) above. Notes of the Series of which this Note forms a part may be redeemed, at the option of the Company, as a whole but not in part, at any time prior to maturity, upon the giving of a notice of redemption as described below, at a redemption price equal to 100% of the principal amount thereof (except that if this Note is subject to "Modified Payment upon Acceleration or Redemption", such redemption price would be limited to the sum of the Issue Price plus the Amortized Amount), together with accrued interest to the date fixed for redemption, if the Company determines that, as a result of any change in or amendment to the laws (or any regulations or rulings promulgated thereunder) of the United States or of any political subdivision or taxing authority thereof or therein affecting taxation, or any change in official position regarding the application or interpretation of such laws, regulations or rulings, which change or amendment becomes effective on or after the Tax Redemption Date specified on the face hereof, the Company has or will become obligated to pay Additional Amounts (as defined below) with respect to the Notes as described below. Prior to the giving of any notice of redemption pursuant to this paragraph, the Company shall deliver to the Fiscal and Paying Agent (i) a certificate stating that the Company is entitled to effect such redemption and setting forth a statement of facts showing that the conditions precedent to the right of the Company to so redeem have occurred, and (ii) an opinion of counsel satisfactory to the Fiscal and Paying Agent to such effect based on such statement of facts; provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Company would be obligated to pay such Additional Amounts if a payment in respect of the Notes were then due. Notice of redemption will be given not less than 30 nor more than 60 days prior to the date fixed for redemption, which date and the applicable redemption price will be specified in the notice. Such notice will be given in accordance with "Notices" as defined below. Page 18 If the Company shall determine that any payment made outside the United States by the Company or any Paying Agent of principal or interest[, including original issue discount,]/11/ due in respect of any Bearer Notes of the Series of which this Note forms a part would, under any present or future laws or regulations of the United States, be subject to any certification, identification or other information reporting requirement of any kind, the effect of which requirement is the disclosure to the Company, any Paying Agent or any governmental authority of the nationality, residence or identity of a beneficial owner of such Bearer Note or interest coupon who is a United States Alien (other than such a requirement (a) which would not be applicable to a payment made by the Company or any one of its Paying Agents (i) directly to the beneficial owner or (ii) to a custodian, nominee or other agent of the beneficial owner, or (b) which can be satisfied by such custodian, nominee or other agent certifying to the effect that such beneficial owner is a United States Alien, provided that in each case referred to in clauses (a)(ii) and (b) payment by such custodian, nominee or agent to such beneficial owner is not otherwise subject to any such requirement), the Company shall redeem the Bearer Notes, in whole, at a redemption price equal to 100% of the principal amount thereof (except that if this Note is subject to "Modified Payment upon Acceleration or Redemption", such redemption price would be limited to the sum of the Issue Price plus the Amortized Amount), together with accrued interest to the date fixed for redemption, or, at the election of the Company if the conditions of the next succeeding paragraph are satisfied, pay the additional amounts specified in such paragraph. The Company shall make such determination and election as soon as practicable and publish prompt notice thereof (the "Determination Notice") stating the effective date of such certification, identification or other information reporting requirements, whether the Company will redeem the Bearer Notes of such Series, or whether the Company has elected to pay the Additional Amounts specified in the next succeeding paragraph, and (if applicable) the last date by which the redemption of the Bearer Notes must take place, as provided in the next succeeding sentence. If the Company redeems the Bearer Notes, such redemption shall take place on such date, not later than one year after the publication of the Determination Notice, as the Company shall elect by notice to the Fiscal and Paying Agent at least 60 days prior to the date fixed for redemption. Notice of such redemption of the Bearer Notes will be given to the holders of the Bearer Notes not more than 60 nor less than 30 days prior to the date fixed for redemption. Such redemption notice shall include a statement as to the last date by which the Bearer Notes to be redeemed may be exchanged for Registered Notes. Notwithstanding the foregoing, the Company shall not so redeem the Bearer Notes if the Company shall subsequently determine, not less than 30 days prior to the date fixed for redemption, that subsequent payments would not be subject to any such requirement, in which case the Company shall publish prompt notice of such determination and any earlier redemption notice shall be revoked and of no further effect. The right of any of the holders of Bearer Notes called for redemption pursuant to this paragraph to exchange such Bearer Notes for Registered Notes will terminate at the close of business of the Fiscal and Paying Agent on the fifteenth day prior to the date fixed for redemption, and no further exchanges of such Series of Bearer Notes for Registered Notes shall be permitted. If and so long as the certification, identification or other information reporting requirements referred to in the preceding paragraph would be fully satisfied by payment of a backup withholding tax or similar charge, the Company may elect to pay as Additional Amounts such amounts as may be necessary so that every net payment made outside the United States following the effective date of such requirements by the Company or any Paying Agent of principal or interest, including original issue - ----------------- /11/ Include if Notes are original issue discount Notes. Page 19 discount,/12/ due in respect of any Bearer Note or any interest coupon of which the beneficial owner is a United States Alien (but without any requirement that the nationality, residence or identity of such beneficial owner be disclosed to the Company, any Paying Agent or any governmental authority, with respect to the payment of such additional amounts), after deduction or withholding for or on account of such backup withholding tax or similar charge (other than a backup withholding tax or similar charge which (i) would not be applicable in the circumstances referred to in the second parenthetical clause of the first sentence of the preceding paragraph, or (ii) is imposed as a result of the presentation of such Bearer Note or interest coupon for payment more than 15 calendar days after the date on which such payment becomes due and payable or on which payment thereof is duly provided for, whichever occurs later), will not be less than the amount provided for in such Bearer Note or interest coupon to be then due and payable. In the event the Company elects to pay Additional Amounts pursuant to this paragraph, the Company shall have the right to redeem the Bearer Notes of such Series in whole at any time pursuant to the applicable provisions of the immediately preceding paragraph and the redemption price of such Bearer Notes shall not be reduced for applicable withholding taxes. If the Company elects to pay Additional Amounts pursuant to this paragraph and the condition specified in the first sentence of this paragraph should no longer be satisfied, then the Company shall redeem the Bearer Notes of such Series in whole, pursuant to the applicable provisions of the immediately preceding paragraph. The Company will, subject to certain exceptions and limitations set forth below, pay such additional amounts (the "Additional Amounts") to the holder of any Note or of any coupon, if any, who is a United States Alien as may be necessary in order that every net payment of the principal of, premium and interest, including original issue discount, on such Note and any other amounts payable on such Note, after withholding for or on account of any present or future tax, assessment or governmental charge imposed upon or as a result of such payment by the United States (or any political subdivision or taxing authority thereof or therein), will not be less than the amount provided for in such Note or coupon, if any, to be then due and payable. However, the Company will not be required to make any payment of Additional Amounts to any such holder for or on account of: (a) any such tax, assessment or other governmental charge which would not have been so imposed but for (i) the existence of any present or former connection between such holder (or between a fiduciary, settlor, beneficiary, member or shareholder of such holder, if such holder is an estate, a trust, a partnership or a corporation) and the United States, including, without limitation, such holder (or such fiduciary, settlor, beneficiary, member or shareholder) being or having been a citizen or resident thereof or being or having been engaged in a trade or business or present therein or having, or having had, a permanent establishment therein or (ii) the presentation by the holder of any such Note or coupon, if any, for payment on a date more than 15 calendar days after the date on which such payment became due and payable or on the date on which payment thereof is duly provided for, whichever occurs later; (b) any estate, inheritance, gift, sales, transfer or personal property tax or any similar tax, assessment or governmental charge; - -------------------- /12/ Include if Notes are original issue discount Notes. Page 20 (c) any tax, assessment or other governmental charge imposed by reason of such holder's past or present status as a personal holding company or foreign personal holding company or controlled foreign corporation or passive foreign investment company with respect to the United States or as a corporation which accumulates earnings to avoid United States federal income tax or as a private foundation or other tax- exempt organization; (d) any tax, assessment or other governmental charge which is payable otherwise than by withholding from payments on or in respect of any Note; (e) any tax, assessment or other governmental charge required to be withheld by any Paying Agent from any payment of principal of, or interest on, any Note, if such payment can be made without such withholding by any other Paying Agent in a city in Western Europe; (f) any tax, assessment or other governmental charge which would not have been imposed but for the failure to comply with certification, information or other reporting requirements concerning the nationality, residence or identity of the holder or beneficial owner of such Note, if such compliance is required by statute or by regulation of the United States or of any political subdivision or taxing authority thereof or therein as a precondition to relief or exemption from such tax, assessment or other governmental charge; (g) any tax, assessment or other governmental charge imposed by reason of such holder's past or present status as the actual or constructive owner of 10% or more of the total combined voting power of all classes of stock entitled to vote of the Company or as a direct or indirect subsidiary of the Company; or (h) any combination of items (a), (b), (c), (d), (e), (f) or (g); nor shall Additional Amounts be paid with respect to any payment on a Note to a United States Alien who is a fiduciary or partnership or other than the sole beneficial owner of such payment to the extent such payment would be required by the laws of the United States (or any political subdivision thereof) to be included in the income, for tax purposes, of a beneficiary or settlor with respect to such fiduciary or a member of such partnership or a beneficial owner who would not have been entitled to the Additional Amounts had such beneficiary, settlor, member or beneficial owner been the holder of such Note. The Fiscal Agency Agreement provides that the Company will not merge or consolidate with any other corporation or sell, convey, transfer or otherwise dispose of all or substantially all of its properties to any other corporation, unless (i) either the Company shall be the continuing corporation or the successor corporation (if other than the Company) (the "successor corporation") shall be a corporation organized under the laws of the United States of America or of a state thereof and such successor corporation shall expressly assume the due and punctual payments of all amounts due under this Note and the due and punctual performance of all of the covenants and obligations of the Company under this Note by supplemental agreement satisfactory to the Fiscal and Paying Agent executed and delivered to such Fiscal and Paying Agent by the successor corporation and the Company and (ii) the Page 21 Company or such successor corporation, as the case may be, shall not, immediately after such merger or consolidation, or such sale, conveyance, transfer or other disposition, be in default in the performance of any such covenant or obligation. Upon any such merger or consolidation, sale, conveyance, transfer or other disposition, such successor corporation shall succeed to and be substituted for, and may exercise every right and power of and shall be subject to all the obligations of, the Company under this Note, with the same effect as if such successor corporation had been named as the Company herein, and the Company shall be released from its liability under this Note and under the Fiscal Agency Agreement. The Fiscal Agency Agreement permits the Company, when authorized by resolution of the Board of Directors, and the Fiscal and Paying Agent, with the consent of the holders of not less than a majority in aggregate principal amount of the Notes of the Series of which this Note forms a part, to modify or amend the Fiscal Agency Agreement or such Notes; provided, however, that no such -------- ------- modification or amendment may, without the consent of the holders of each such Note affected thereby, (i) change the stated maturity of the principal of any such Note or extend the time for payment of interest thereon; (ii) change the amount of the principal of an Original Issue Discount Note of such Series that would be due and payable upon an acceleration of the maturity thereof; (iii) reduce the amount of interest payable thereon or the amount payable thereon in the event of redemption or acceleration; (iv) change the currency of payment of principal of or any other amounts payable on any such Note; (v) impair the right to institute suit for the enforcement of any such payment on or with respect to any such Note; (vi) reduce the above-stated percentage of the principal amount of Notes of such Series the consent of whose holders is necessary to modify or amend the Fiscal Agency Agreement or the Notes of such Series or reduce the percentage of the Notes of such Series required for the taking of action or the quorum required at any such meeting of holders of Notes of such Series; or (vii) modify the foregoing requirements to reduce the percentage of outstanding Notes of such Series necessary to waive any future compliance or past default. Purchasers are required to pay for the Notes in the currency specified in the applicable Pricing Supplement. Payment of principal, premium, if any, and interest, if any, on each Note will be made in immediately available funds in the Specified Currency unless otherwise specified in the applicable Pricing Supplement and except as provided below. Payments of principal, premium, if any, and interest, if any, on any Note denominated in a Specified Currency other than U.S. dollars and ECU shall be made in U.S. dollars if, on any payment date, such Specified Currency (a) is unavailable due to imposition of exchange controls or other circumstances beyond the Company's control or (b) is no longer used by the government of the country issuing such currency or for the settlement of transactions by public institutions in that country or within the international banking community. Such payments shall be made in U.S. dollars on such payment date and on all subsequent payment dates until such Specified Currency is again available or so used as determined by the Company. Amounts so payable on any such date in such Specified Currency shall be converted into U.S. dollars at a rate determined by the Exchange Rate Agent on the basis of the most recently available Market Exchange Rate or as otherwise indicated in the applicable Pricing Supplement. The Exchange Rate Agent at the date of the Fiscal Agency Agreement is The Chase Manhattan Bank (National Association). Any payment required to be made on Notes denominated in a Specified Currency other than U.S. dollars and ECU that is instead made in U.S. dollars under the circumstances described above Page 22 will not constitute a default of any obligation of the relevant Issuer under such Notes. The "Market Exchange Rate" with respect to any currency other than U.S. dollars means, for any day, the noon dollar buying rate in The City of New York on such day for cable transfers of such currency as published by the Federal Reserve Bank of New York, or, if such rate is not published for such day, the equivalent rate as determined by the Exchange Rate Agent. The provisions of the two preceding paragraphs shall not apply in the event of the introduction in the country issuing any Specified Currency other than ECU of the Euro pursuant to European Monetary Union. All references herein or in any Pricing Supplement to "Euro" shall be to the new single European currency to be introduced pursuant to European Monetary Union, and all references to "European Monetary Union" shall be to the third stage thereof. In this situation, payments of principal, premium, if any, and interest, if any, on any Note denominated in any such Specified Currency shall be effected in Euro at such time as is required by, and otherwise in conformity with, legally applicable measures adopted with reference to European Monetary Union. [Payments of principal, premium, if any, and interest, if any, on any Note denominated in ECU shall be made in U.S. dollars or a component currency of ECU if, on or prior to any payment date, the ECU is not used as the unit of account of the European Community ("EC") or if major banks in all member countries of the EC shall have ceased to provide ECU accounts. Such payments shall be made in U.S. dollars on such payment date and on all subsequent payment dates until ECU is again so used or such bank accounts are again provided, as determined by the Company. Payments of principal, premium, if any, and interest, if any, on any Note denominated in ECU shall be made in U.S. dollars if, on any payment date, ECU is unavailable due to the imposition of exchange controls or other circumstances beyond the Company's control. Such payments shall be made in U.S. dollars on such payment date and on all subsequent payment dates until ECU is again available as determined by the Company. All payments made with respect to Notes denominated in ECU that are instead made in U.S. dollars or a component currency of the ECU pursuant to the provisions of the two preceding paragraphs shall be made in accordance with the provisions set forth below. Any payment required to be made on Notes denominated in ECU that is instead made in U.S. dollars or a component currency of ECU under the circumstances described above will not constitute a default of any obligation of the Company under such Notes. The provisions of the three preceding paragraphs shall not apply in the event of European Monetary Union. In this situation, payments of principal, premium, if any, and interest, if any, on any Note denominated in ECU shall be effected in Euro at such time as is required by, and otherwise in conformity with, legally applicable measures adopted with reference to European Monetary Union. The following provisions relate to Notes denominated in ECU until such time as European Monetary Union occurs. All references to "ECU" refer to the ECU that is from time to time used as the unit of account of the EC. Should any change to the composition of the ECU be adopted by the EC prior to the date of European Monetary Union, principal, premium, if any, and interest, if any, on Notes denominated in ECU shall continue to be payable in ECU without adjustment to the timing or amount of any such payment. Page 23 With respect to each due date for the payment of principal of, premium, if any, or interest on, Notes denominated in ECU, if, on or prior to such date, any of the events described in the fourth and fifth preceding paragraphs shall have occurred which would require the Company to pay in either U.S. dollars or a component currency of the ECU, the Company or its agent shall (in the case of an agent, without liability on its part but after consultation with the Company and having regard to the availability to the Company of the relevant currency) choose a substitute currency (the "Chosen Currency"), which shall be a component currency of the ECU or U.S. dollars, in which all payments to be calculated by reference to or made in ECU due on or after such date with respect to the Notes shall be made. Notice of the Chosen Currency so selected shall be given to holders of Registered Notes by mail, and shall be given to holders of Bearer Notes by publication, in each case as set forth in "Notices" as defined below. The amount of each payment calculated with reference to or made in such Chosen Currency shall be computed on the basis of the equivalent of the ECU in that currency, determined as described below, as of the fourth business day in Luxembourg prior to the date on which such payment is due. On or about the first business day in Luxembourg following the day on which any of the events described in the fifth and sixth preceding paragraphs shall have occurred which would require the Company to pay in either U.S. dollars or a component currency of the ECU, the Company or its agent shall (in the case of an agent, without liability on its part but after consultation with the Company and having regard to the availability to the Company of the relevant currency) choose a Chosen Currency in which all payments to be calculated by reference to or made in ECU with respect to Notes having a due date prior thereto but not yet presented for payment are to be made. The amount of each payment calculated with reference to or made in such Chosen Currency shall be computed on the basis of the equivalent of the ECU in that currency, determined as described below, as of such first business day. The equivalent of the ECU in the relevant Chosen Currency as of any date (the "Day of Valuation") shall be determined by the Exchange Rate Agent on the following basis. The amounts and components composing the ECU for this purpose (the "Components") shall be the amounts and components which composed the ECU as of the last date on which the ECU was used as the unit of account of the EC. The equivalent of the ECU in the Chosen Currency shall be calculated by, first, aggregating the U.S. dollar equivalents of the Components; and then, in the case of a Chosen Currency other than U.S. dollars, using the rate used for determining the U.S. dollar equivalents of the Components in the Chosen Currency as set forth below, calculating the equivalent in the Chosen Currency of such aggregate amount in U.S. dollars. The U.S. dollar equivalent of each of the Components shall be middle spot delivery quotations (or the average thereof, if more than one bank is consulted), as determined by the Exchange Rate Agent to be prevailing at 2:30 p.m., Luxembourg time, on the Day of Valuation, as obtained by the Exchange Rate Agent from one or more major banks, as selected by the Company or its agent, in the country of issue of the component currency in question. If for any reason no direct quotations are available for a Component as of a Day of Valuation from any of the banks selected for this purpose, in computing the U.S. dollar equivalent of such Component, the Exchange Rate Agent shall (except as provided below) use the most recent direct quotations for such Component obtained by it or on its behalf, provided that such quotations were prevailing in the country of issue not more than two Business Days before such Day of Valuation. If such most recent quotations were so prevailing in the country of issue more than two Business Days before such Day of Valuation, the Exchange Rate Agent shall determine the U.S. dollar equivalent of Page 24 such Component on the basis of cross rates derived from the middle spot delivery quotations for such component currency and for the delivery quotations for such component currency and for the U.S. dollar prevailing at 2:30 p.m. Luxembourg time on such Day of Valuation, as obtained by, or on behalf of, the Exchange Rate Agent from one or more major banks, as selected by the Company or its agent, in a country other than the country of issue of such component currency. Notwithstanding the foregoing, the Exchange Rate Agent shall determine the U.S. dollar equivalent of such Component on the basis of such cross rates if the Company or its agent judges that the equivalent so calculated is more representative than the U.S. dollar equivalent calculated as provided in the first sentence of this paragraph. Unless otherwise specified by the Company or its agent, if there is more than one market for dealing in any component currency by reason of foreign exchange regulations or for any other reason, the market to be referred to in respect of such currency shall be that upon which a non-resident issuer of notes denominated in such currency would purchase such currency in order to make payments in respect of such notes.]/13/ All determinations made by the Company or its agent shall be at such person's sole discretion and shall, in the absence of manifest error, be conclusive for all purposes and binding on the Company and all holders of Notes. So long as this Note shall be outstanding, the Company will cause to be maintained an office or agency for the payment of the principal of and premium, if any, and interest on this Note as herein provided in London, England, [and in Luxembourg]/14/ [and in Paris, France]/15/ and an office or agency in London for the transfer and exchange as aforesaid of the Notes. The Company may designate other agencies for the payment of said principal, premium and interest at such place or places outside the United States (subject to applicable laws and regulations) as the Company may decide. So long as there shall be any such agency, the Company shall keep the Fiscal and Paying Agent advised of the names and locations of such agencies, if any are so designated. With respect to moneys paid by the Company and held by the Fiscal and Paying Agent or any Paying Agent for the payment of the principal of or interest or premium, if any, on any Note that remain unclaimed at the end of three years after such principal, interest or premium shall have become due and payable (whether at maturity or upon call for redemption or otherwise), (i) the Fiscal and Paying Agent or such Paying Agent shall notify the holders of such Notes that such moneys shall be repaid to the Company and any person claiming such moneys shall thereafter look only to the Company for payment thereof and (ii) such moneys shall be so repaid to the Company. Upon such repayment all liability of the Fiscal and Paying Agent or such Paying Agent with respect to such moneys shall thereupon cease, without, however, limiting in any way any obligation that the Company may have to pay the principal of or interest or premium, if any, on this Note as the same shall become due. - -------------------- /13/ Include all of the above provisions relating to ECU only if Note is denominated in ECU. /14/ Include if Note is listed on Luxembourg Stock Exchange. /15/ Include if Note is denominated in French Francs and listed on Paris Bourse. Page 25 No provision of this Note or of the Fiscal Agency Agreement shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, premium, if any, and interest on this Note at the time, place, and rate, and in the coin or currency, herein and in the Fiscal Agency Agreement prescribed unless otherwise agreed between the Company and the holder of this Note. No recourse shall be had for the payment of the principal of, or premium, if any, or the interest on this Note, for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Fiscal Agency Agreement or any fiscal agency agreement supplemental thereto, against any incorporator, shareholder, officer or director, as such, past, present or future, of the Company or of any successor corporation, either directly or through the Company or any successor corporation, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released. This Note shall for all purposes be governed by, and construed in accordance with, the laws of the State of New York. As used herein: (a) the term "Amortized Amount" is the original issue discount amortized from the Original Issue Date of the predecessor global Note to the date of redemption or declaration, as the case may be, which amortization shall be calculated using the "constant yield method" (computed in accordance with the rules under the Internal Revenue Code of 1986, as amended, and the regulations thereunder, in effect on the date of redemption or declaration, as the case may be); (b) the term "Business Day" means, unless otherwise specified in the applicable Pricing Supplement, any day other than a Saturday or Sunday or any other day on which banking institutions are generally authorized or obligated by law or regulation to close in (i) the principal financial center of the country in which the Company is incorporated, (ii) the principal financial center of the country of the currency in which the Notes are denominated, (iii) the place at which payment on such Note or coupon is to be made and (iv) London, England[; provided, however, that with respect to Notes denominated in ECUs, such day is not a day that is a non-ECU clearing day as determined by the ECU Banking Association in Paris, France]/16/. For purposes of this definition, the principal financial center of the United States is New York; (c) the term "Notices" refers to: (1) notices to holders of the Notes to be given by publication in a daily newspaper in the English language of general circulation in London and, if the Series of which this Note forms a part is listed on the Luxembourg Stock Exchange and such - --------------------- /16/ Include only if Note is denominated in ECU. Page 26 Exchange so requires, in a daily newspaper in Luxembourg or, if publication in either London or Luxembourg is not practical, elsewhere in Western Europe. Such publication is expected to be made in the Financial Times and (if such Series is listed on the Luxembourg Stock --------------- Exchange) the Luxemburger Wort. Such notices will be deemed to have ----------- ---- been given on the date of such publication, or if published in such newspapers on different dates, on the date of the first such publication; (2) notices to holders of any Notes denominated in French francs or denominated in another currency or currencies that are linked, directly or indirectly to French francs and that are listed on the Paris Bourse, to be given by publication in a French language daily newspaper of general circulation in Paris (which is expected to be La Tribune Desfosses). Such notices will comply with -------------------- the applicable rules of the Paris Bourse; and (3) notices to holders of any Notes denominated in Dutch guilder that are listed on the Amsterdam Stock Exchange to be given by publication in a leading daily newspaper in the English language of general circulation in Amsterdam and London and if such Notes are listed on the Amsterdam Stock Exchange and such Exchange so requires, also published in the Official Price List ("Officiele Prijscourant"). If publication in London or Amsterdam, as the case may be, is not practical, such publication shall be made elsewhere in Western Europe. Such publication is expected to be made in the Financial Times in London and the Het Financieele Dagblad in Amsterdam. Such notices will be deemed to have been given on the date of such publication or if published in such newspapers on different dates, on the date of the first such publication; (d) the term "United States" means the United States of America (including the States and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction; (e) the term "United States Alien" means any person who, for United States federal income tax purposes, is a foreign corporation, a non- resident alien individual, a nonresident alien fiduciary of a foreign estate or trust, or a foreign partnership, one or more of the members of which is a foreign corporation, a non-resident alien individual or a non- resident alien fiduciary of a foreign estate or trust; (f) the term "Certification" means a certificate substantially in the form of Exhibit B-2 hereto delivered by the Euroclear Operator or Cedel Bank, as the case may be, which certificate is based on a certificate substantially in the form of Exhibit B-1 hereto provided to it by its account holders; and (g) all other terms used in this Note which are defined in the Fiscal Agency Agreement and not otherwise defined herein shall have the meanings assigned to them in the Fiscal Agency Agreement. Page 27 OPTION TO ELECT REPAYMENT The undersigned hereby irrevocably request(s) the Issuer to repay the within Note (or portion thereof specified below) pursuant to its terms at a price equal to the principal amount thereof, together with interest to the Optional Repayment Date, to the undersigned, at ______________________ (Please print or typewrite name and address of the undersigned). If less than the entire principal amount of the within Note is to be repaid, specify the portion thereof (which shall be increments of 1,000 units of the Specified Currency indicated on the face hereof) which the holder elects to have repaid: ____________________; and specify the denomination or denominations (which shall not be less than the minimum authorized denomination) of the Notes to be issued to the holder for the portion of the within Note not being repaid (in the absence of any such specification, one such Note will be issued for the portion not being repaid): ___________________________. Date: __________________________ NOTICE: The signature on this Option to Elect Repayment must correspond with the name as written upon the face of the within instrument in every particular without alteration or enlargement. SCHEDULE A ---------- EXCHANGE FOR DEFINITIVE BEARER NOTES, DEFINITIVE REGISTERED NOTES AND FROM TEMPORARY GLOBAL NOTE The Initial Principal Amount of this Note is ________. The following payments of interest and exchanges of a part of this Permanent Global Fixed Rate Bearer Note for definitive Bearer Notes and Registered Notes, and from Temporary Global Notes have been made:
Principal Principal Remaining Principal (Face)/9/ (Face)/9/ Principal (Face)/9/ Amount Amount (Face)/9/ Notation Amount Exchanged Exchanged Amount Made by or Date of Exchanged For For Outstanding on behalf of Exchange or From Definitive Definitive Following Fiscal and Interest Payment of Temporary Bearer Registered Such Paying Payment Interest Global Notes Notes Notes Exchange Agent - ------------------------------------------------------------------------------------------------------ =======================================================================================================
__________________________ /9/ To be used if Note has dual-currency or index feature. [FORM OF CERTIFICATE TO BE GIVEN BY AN ACCOUNT HOLDER OF THE EUROCLEAR OPERATOR AND CEDEL BANK] EXHIBIT B-1 ----------- CERTIFICATE ------------------------ General Electric Capital Corporation [Euro Medium-Term Notes]/17/ [Debt Securities] /18/ Represented by Permanent Global Note No. __. This is to certify that as of the date hereof, and except as set forth below, the above-captioned Notes held by you for our account (i) are owned by person(s) requesting definitive [Registered/Bearer] Notes in exchange for their interests in the above-referenced permanent global Note and (ii) such persons desire to exchange _____ principal amount of the above-captioned Notes for definitive [Registered/Bearer] Notes. We undertake to advise you promptly by tested telex on or prior to the date on which you intend to submit your certification relating to the Notes held by you for our account in accordance with your Operating Procedures if any applicable statement herein is not correct on such date, and in the absence of any such notification it may be assumed that this certification applies as of such date. This certification excepts and does not relate to $________ of such interest in the above Notes in respect of which we do not desire to exchange for definitive Notes. Dated: _______________, 19__ [Name of Account Holder] By:__________________________________ (Authorized Signatory) Name: Title: - ------------------ /17/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are applicable, or if the Note is denominated in a currency other than pounds sterling. /18/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are not applicable. [FORM OF CERTIFICATE TO BE GIVEN BY THE EUROCLEAR OPERATOR AND CEDEL BANK] EXHIBIT B-2 ----------- CERTIFICATE ------------------------------- General Electric Capital Corporation [Euro Medium-Term Notes]/19/ [Debt Securities]/20/ Represented by Permanent Global Note No. ____. This is to certify that, based solely on certifications we have received in writing, by tested telex or by electronic transmission from member organizations appearing in our records as persons being entitled to a portion of the principal amount set forth below (our "Member Organizations") substantially to the effect set forth in Exhibit C-1 to the Fiscal and Paying Agency Agreement relating to such Notes, as of the date hereof, _____________ principal amount of the above- captioned Notes (i) is owned by person(s) requesting definitive [Registered/Bearer] Notes in exchange for their interests in the above- referenced permanent global Note and (ii) such persons desire to exchange ______ principal amount of the above-captioned Notes for definitive [Registered/Bearer] Notes. We further certify (i) that we are not making available herewith for exchange all interests in the permanent global Note excepted as set forth herein and (ii) that as of the date hereof we have not received any notification from any of our Member Organizations to the effect that the statements made by such Member Organizations with respect to any portion of the permanent global Note submitted herewith are no longer true and cannot be relied upon as the date hereof. Dated: __________________, 19__ [MORGAN GUARANTY TRUST COMPANY OF NEW YORK, BRUSSELS OFFICE, as Operator of the Euroclear System] [CEDEL BANK, SOCIETE ANONYME] By:___________________________________ - ------------------------- /19/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are applicable, or if the Note is denominated in a currency other than pounds sterling. /20/ To be inserted if the Note is denominated in pounds sterling and the Banking Act 1987 (Exempt Transactions) regulations are not applicable. EX-4.G 8 AGREEMENT TO FURNISH COPIES OF INSTRUMENTS TO SEC EXHIBIT 4(g) March 25, 1999 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Subject: General Electric Capital Corporation Annual Report on Form 10-K for the fiscal year ended December 31, 1998 - File No. 1-6461 Dear Sirs: Neither General Electric Capital Corporation (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 CORPORATION By: /s/ J.A. Parke -------------------------------- J.A. Parke, Senior Vice President, Finance EX-12.A 9 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12 (a)
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES YEARS ENDED DECEMBER 31 -------------------------------------------------------- (Dollar amounts in millions) 1998 1997 1996 1995 1994 -------- -------- -------- -------- -------- Net earnings ....................................... $ 3,374 $ 2,729 $ 2,632 $ 2,261 $ 1,918 Provision for income taxes ......................... 1,185 997 1,172 1,071 896 Minority interest .................................. 49 40 86 81 109 -------- -------- -------- -------- -------- Earnings before income taxes and minority interest . 4,608 3,766 3,890 3,413 2,923 -------- -------- -------- -------- -------- Fixed charges: Interest .......................................... 8,772 7,440 7,114 6,520 4,464 One-third of rentals .............................. 289 240 177 170 153 -------- -------- -------- -------- -------- Total fixed charges ................................ 9,061 7,680 7,291 6,690 4,617 -------- -------- -------- -------- -------- Less interest capitalized, net of amortization ..... 88 52 41 21 9 -------- -------- -------- -------- -------- Earnings before income taxes and minority interest plus fixed charges ....................... $ 13,581 $ 11,394 $ 11,140 $ 10,082 $ 7,531 ======== ======== ======== ======== ======== Ratio of earnings to fixed charges ................. 1.50 1.48 1.53 1.51 1.63 ======== ======== ======== ======== ========
EX-12.B 10 COMPUTATION OF RATIO OF EARNINGS TO CFC AND PSD EXHIBIT 12 (b)
GENERAL ELECTRIC CAPITAL CORPORATION 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 -------- -------- -------- -------- -------- Net earnings ....................................... $ 3,374 $ 2,729 $ 2,632 $ 2,261 $ 1,918 Provision for income taxes ......................... 1,185 997 1,172 1,071 896 Minority interest .................................. 49 40 86 81 109 -------- -------- -------- -------- -------- Earnings before income taxes and minority interest . 4,608 3,766 3,890 3,413 2,923 -------- -------- -------- -------- -------- Fixed charges: Interest .......................................... 8,772 7,440 7,114 6,520 4,464 One-third of rentals .............................. 289 240 177 170 153 -------- -------- -------- -------- -------- Total fixed charges ................................ 9,061 7,680 7,291 6,690 4,617 -------- -------- -------- -------- -------- Less interest capitalized, net of amortization ..... 88 52 41 21 9 -------- -------- -------- -------- -------- Earnings before income taxes and minority interest plus fixed charges ....................... $ 13,581 $ 11,394 $ 11,140 $ 10,082 $ 7,531 ======== ======== ======== ======== ======== Preferred stock dividend requirements .............. $ 97 $ 78 $ 76 $ 57 $ 30 Ratio of earnings before provision for income taxes to net earnings ............................. 1.35 1.37 1.45 1.47 1.47 -------- -------- -------- -------- -------- Preferred stock dividend factor on pre-tax basis ... 131 107 110 84 44 Fixed charges ...................................... 9,061 7,680 7,291 6,690 4,617 -------- -------- -------- -------- -------- Total fixed charges and preferred stock dividend requirements ...................................... $ 9,192 $ 7,787 $ 7,401 $ 6,774 $ 4,661 ======== ======== ======== ======== ======== Ratio of earnings to combined fixed charges and preferred stock dividends ........................ 1.48 1.46 1.51 1.49 1.62 ======== ======== ======== ======== ========
EX-23.II 11 CONSENT OF KPMG LLP EXHIBIT 23 (ii) To the Board of Directors General Electric Capital Corporation: We consent to incorporation by reference in the Registration Statements (Nos. 33-43420, 33-51793, 333-22265, 333-59707 and 333-59977) on Form S-3 of General Electric Capital Corporation, and in the Registration Statement (No. 33-39596) on Form S-3 jointly filed by General Electric Capital Corporation and General Electric Company, of our report dated February 12, 1999, relating to the statement of financial position of General Electric Capital Corporation 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 the related schedule, which report appears in the December 31, 1998 annual report on Form 10-K of General Electric Capital Corporation. /s/ KPMG LLP Stamford, Connecticut March 25, 1999 EX-24 12 POWER OF ATTORNEY 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 Corporation, a New York corporation (the "Corporation"), hereby constitutes and appoints Denis J. Nayden, 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 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/ Denis J. Nayden /s/ James A. Parke - ----------------------------- ----------------------------- Denis J. Nayden, James A. Parke, Director, President Director and Senior Vice and Chief Executive Officer President, Finance (Principal Executive Officer) (Principal Financial Officer) /s/ Joan C. Amble ----------------------------- Joan C. Amble, Vice President and Controller (Principal Accounting Officer) (Page 1 of 2) /s/ Nigel D.T. Andrews /s/ John H. Myers - ----------------------------- ----------------------------- Nigel D.T. Andrews, John H. Myers, Director Director /s/ Nancy E. Barton /s/ Robert L. Nardelli - ----------------------------- ----------------------------- Nancy E. Barton, Robert L. Nardelli, 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/ Dennis D. Dammerman /s/ Keith S. Sherin - ----------------------------- ----------------------------- Dennis D. Dammerman, Keith S. Sherin, Director Director /s/ Benjamin W. Heineman, Jr. - ----------------------------- ----------------------------- Benjamin W. Heineman, Jr., Edward D. Stewart, Director Director /s/ Jeffrey R. Immelt /s/ John F. Welch, Jr. - ----------------------------- ----------------------------- Jeffrey R. Immelt, John F. Welch, Jr., Director Director /s/ W. James McNerney, Jr. - ----------------------------- W. James McNerney, Jr., Director A MAJORITY OF THE BOARD OF DIRECTORS (Page 2 of 2) EX-27 13 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED DECEMBER 31, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 0000040554 GENERAL ELECTRIC CAPITAL CORPORATION 1,000,000 12-MOS DEC-31-1998 DEC-31-1998 3,080 57,275 124,330 3,272 744 0 32,492 8,675 269,050 0 58,183 0 2 768 20,299 269,050 7,374 41,405 6,777 0 11,663 1,601 8,618 4,559 1,185 3,374 0 0 0 3,374 0.00 0.00
EX-99.B 14 FINANCIAL STATEMENTS OF GENERAL ELECTRIC COMPANY F-1 ANNUAL REPORT PAGE 25 - --------------------- FINANCIAL SECTION CONTENTS 32 INDEPENDENT AUDITORS' REPORT AUDITED FINANCIAL STATEMENTS 26 Earnings 26 Changes in Share Owners' Equity 28 Financial Position 30 Cash Flows 48 Notes to Consolidated Financial Statements MANAGEMENT'S DISCUSSION 32 Financial Responsibility 33 Operations 33 Consolidated Operations 35 Segment Operations 40 International Operations 42 Financial Resources and Liquidity 46 Selected Financial Data [CHART HERE] CONSOLIDATED REVENUES - ----------------------------------------------------------------------------- (IN BILLIONS) 1994 1995 1996 1997 1998 - ----------------------------------------------------------------------------- $60.109 $70.028 $79.179 $90.840 $100.469 - ----------------------------------------------------------------------------- [CHART HERE] EARNINGS PER SHARE FROM CONTINUING OPERATIONS - ----------------------------------------------------------------------------- (IN DOLLARS) 1994 1995 1996 1997 1998 - ----------------------------------------------------------------------------- $1.71 $1.93 $2.16 $2.46 $2.80 - ----------------------------------------------------------------------------- [CHART HERE] DIVIDENDS DECLARED PER SHARE - ----------------------------------------------------------------------------- (IN DOLLARS) 1994 1995 1996 1997 1998 - ----------------------------------------------------------------------------- $0.745 $0.845 $0.95 $1.08 $1.25 - ----------------------------------------------------------------------------- F-2 ANNUAL REPORT PAGE 26 - --------------------- STATEMENT OF EARNINGS
General Electric Company and consolidated affiliates ---------------------------------- For the years ended December 31 (In millions; per-share amounts in dollars) 1998 1997 1996 - --------------------------------------------------------------------------------------------------- REVENUES Sales of goods $ 43,749 $ 40,675 $ 36,106 Sales of services 14,938 12,729 11,791 Other income (note 2) 649 2,300 638 Earnings of GECS -- -- -- GECS revenues from services (note 3) 41,133 35,136 30,644 ---------------------------------- Total revenues 100,469 90,840 79,179 ---------------------------------- COSTS AND EXPENSES (note 4) Cost of goods sold 31,772 30,889 26,298 Cost of services sold 10,508 9,199 8,293 Interest and other financial charges 9,753 8,384 7,904 Insurance losses and policyholder and annuity benefits 9,608 8,278 6,678 Provision for losses on financing receivables (note 7) 1,609 1,421 1,033 Other costs and expenses 23,477 21,250 17,898 Minority interest in net earnings of consolidated affiliates 265 240 269 ---------------------------------- Total costs and expenses 86,992 79,661 68,373 ---------------------------------- EARNINGS BEFORE INCOME TAXES 13,477 11,179 10,806 Provision for income taxes (note 8) (4,181) (2,976) (3,526) ---------------------------------- NET EARNINGS $ 9,296 $ 8,203 $ 7,280 =================================================================================================== PER-SHARE AMOUNTS (note 9) Diluted earnings per share $ 2.80 $ 2.46 $ 2.16 Basic earnings per share $ 2.84 $ 2.50 $ 2.20 - --------------------------------------------------------------------------------------------------- DIVIDENDS DECLARED PER SHARE $ 1.25 $ 1.08 $ 0.95 - ---------------------------------------------------------------------------------------------------
F-3 ANNUAL REPORT PAGE 27 - --------------------- STATEMENT OF EARNINGS (continued)
GE GECS For the years ended December 31 (In millions; ------------------------------ ------------------------------- per-share amounts in dollars) 1998 1997 1996 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------------------------ REVENUES Sales of goods $ 36,376 $ 36,059 $ 34,196 $ 7,374 $ 4,622 $ 1,926 Sales of services 15,170 12,893 11,923 -- -- -- Other income (note 2) 684 2,307 629 -- -- -- Earnings of GECS 3,796 3,256 2,817 -- -- -- GECS revenues from services (note 3) -- -- -- 41,320 35,309 30,787 ------------------------------- ------------------------------- Total revenues 56,026 54,515 49,565 48,694 39,931 32,713 ------------------------------- ------------------------------- COSTS AND EXPENSES (note 4) Cost of goods sold 24,996 26,747 24,594 6,777 4,147 1,720 Cost of services sold 10,740 9,363 8,425 -- -- -- Interest and other financial charges 883 797 595 8,966 7,649 7,326 Insurance losses and policyholder and annuity benefits -- -- -- 9,608 8,278 6,678 Provision for losses on financing receivables (note 7) -- -- -- 1,609 1,421 1,033 Other costs and expenses 7,177 7,476 6,274 16,426 13,893 11,741 Minority interest in net earnings of consolidated affiliates 117 119 102 148 121 167 ------------------------------- ------------------------------- Total costs and expenses 43,913 44,502 39,990 43,534 35,509 28,665 ------------------------------- ------------------------------- EARNINGS BEFORE INCOME TAXES 12,113 10,013 9,575 5,160 4,422 4,048 Provision for income taxes (note 8) (2,817) (1,810) (2,295) (1,364) (1,166) (1,231) ------------------------------- ------------------------------- NET EARNINGS $ 9,296 $ 8,203 $ 7,280 $ 3,796 $ 3,256 $ 2,817 ==================================================================================================================================== In the consolidating data on this page, "GE" means the basis of consolidation as described in note 1 to the consolidated financial statements; "GECS" means General Electric Capital Services, Inc. and all of its affiliates and associated companies. Transactions between GE and GECS have been eliminated from the "General Electric Company and consolidated affiliates" columns on page 26. 1997 restructuring and other special charges are included in the following GE captions: "Cost of goods sold" -- $1,364 million; "Cost of services sold" -- $250 million; and "Other costs and expenses" -- $708 million.
CONSOLIDATED STATEMENT OF CHANGES IN SHARE OWNERS' EQUITY
------------------------------- (In millions) 1998 1997 1996 - ------------------------------------------------------------------------------------------------------ CHANGES IN SHARE OWNERS' EQUITY Balance at January 1 $ 34,438 $ 31,125 $ 29,609 ------------------------------- Dividends and other transactions with share owners (note 25) (5,178) (5,615) (5,318) ------------------------------- Changes other than transactions with share owners Increases attributable to net earnings 9,296 8,203 7,280 Unrealized gains (losses) on investment securities-- net (note 25) 264 1,467 (329) Currency translation adjustments (note 25) 60 (742) (117) ------------------------------- Total changes other than transactions with share owners 9,620 8,928 6,834 ------------------------------- Balance at December 31 $ 38,880 $ 34,438 $ 31,125 ====================================================================================================== The notes to consolidated financial statements on pages 48-68 are an integral part of these statements.
F-4 ANNUAL REPORT PAGE 28 - --------------------- STATEMENT OF FINANCIAL POSITION
General Electric Company and consolidated affiliates --------------------------- At December 31 (In millions) 1998 1997 - ------------------------------------------------------------------------------------------- ASSETS Cash and equivalents $ 4,317 $ 5,861 Investment securities (note 10) 78,717 70,621 Current receivables (note 11) 8,224 8,924 Inventories (note 12) 6,049 5,895 Financing receivables (investments in time sales, loans and financing leases) -- net (notes 7 and 13) 121,566 103,799 Other GECS receivables (note 14) 24,789 17,655 Property, plant and equipment (including equipment leased to others) -- net (note 15) 35,730 32,316 Investment in GECS -- -- Intangible assets -- net (note 16) 23,635 19,121 All other assets (note 17) 52,908 39,820 --------------------------- TOTAL ASSETS $ 355,935 $ 304,012 =========================================================================================== LIABILITIES AND EQUITY Short-term borrowings (note 19) $ 115,378 $ 98,075 Accounts payable, principally trade accounts 12,502 10,407 Progress collections and price adjustments accrued 2,765 2,316 Dividends payable 1,146 979 All other GE current costs and expenses accrued (note 18) 9,788 8,891 Long-term borrowings (note 19) 59,663 46,603 Insurance liabilities, reserves and annuity benefits (note 20) 77,259 67,270 All other liabilities (note 21) 24,939 22,700 Deferred income taxes (note 22) 9,340 8,651 --------------------------- Total liabilities 312,780 265,892 --------------------------- Minority interest in equity of consolidated affiliates (note 23) 4,275 3,682 --------------------------- Accumulated unrealized gains on investment securities-- net (a) 2,402 2,138 Accumulated currency translation adjustments (a) (738) (798) Common stock (3,271,296,000 and 3,264,592,000 shares outstanding at year-end 1998 and 1997, respectively) 594 594 Other capital 6,808 4,434 Retained earnings 48,553 43,338 Less common stock held in treasury (18,739) (15,268) --------------------------- Total share owners' equity (notes 25 and 26) 38,880 34,438 --------------------------- TOTAL LIABILITIES AND EQUITY $ 355,935 $ 304,012 =========================================================================================== The notes to consolidated financial statements on pages 48-68 are an integral part of this statement. (a) The sum of accumulated unrealized gains on investment securities and accumulated currency translation adjustments constitutes "Accumulated nonowner changes other than earnings," as shown in note 25, and was $1,664 million and $1,340 million at year-end 1998 and 1997, respectively.
F-5 ANNUAL REPORT PAGE 29 - --------------------- STATEMENT OF FINANCIAL POSITION (continued)
GE GECS ------------------------ ---------------------- At December 31 (In millions) 1998 1997 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------------ ASSETS Cash and equivalents $ 1,175 $ 1,157 $ 3,342 $ 4,904 Investment securities (note 10) 259 265 78,458 70,356 Current receivables (note 11) 8,483 9,054 -- -- Inventories (note 12) 5,305 5,109 744 786 Financing receivables (investments in time sales, loans and financing leases) -- net (notes 7 and 13) -- -- 121,566 103,799 Other GECS receivables (note 14) -- -- 25,973 18,332 Property, plant and equipment (including equipment leased to others) -- net (note 15) 11,694 11,118 24,036 21,198 Investment in GECS 19,727 17,239 -- -- Intangible assets -- net (note 16) 9,996 8,755 13,639 10,366 All other assets (note 17) 18,031 14,729 35,539 25,667 ------------------------ ---------------------- TOTAL ASSETS $ 74,670 $ 67,426 $ 303,297 $ 255,408 ==================================================================================================================================== LIABILITIES AND EQUITY Short-term borrowings (note 19) $ 3,466 $ 3,629 $ 113,162 $ 95,274 Accounts payable, principally trade accounts 4,845 4,779 8,815 6,490 Progress collections and price adjustments accrued 2,765 2,316 -- -- Dividends payable 1,146 979 -- -- All other GE current costs and expenses accrued (note 18) 9,708 8,763 -- -- Long-term borrowings (note 19) 681 729 59,038 45,989 Insurance liabilities, reserves and annuity benefits (note 20) -- -- 77,259 67,270 All other liabilities (note 21) 12,613 11,539 12,247 11,067 Deferred income taxes (note 22) (250) (315) 9,590 8,966 ------------------------ ---------------------- Total liabilities 34,974 32,419 280,111 235,056 ------------------------ ---------------------- Minority interest in equity of consolidated affiliates (note 23) 816 569 3,459 3,113 ------------------------ ---------------------- Accumulated unrealized gains on investment securities -- net (a) 2,402 2,138 2,376 2,135 Accumulated currency translation adjustments (a) (738) (798) (215) (185) Common stock (3,271,296,000 and 3,264,592,000 shares outstanding at year-end 1998 and 1997, respectively) 594 594 1 1 Other capital 6,808 4,434 2,490 2,337 Retained earnings 48,553 43,338 15,075 12,951 Less common stock held in treasury (18,739) (15,268) -- -- ------------------------ ---------------------- Total share owners' equity (notes 25 and 26) 38,880 34,438 19,727 17,239 ------------------------ ---------------------- TOTAL LIABILITIES AND EQUITY $ 74,670 $ 67,426 $ 303,297 $ 255,408 ==================================================================================================================================== In the consolidating data on this page, "GE" means the basis of consolidation as described in note 1 to the consolidated financial statements; "GECS" means General Electric Capital Services, Inc. and all of its affiliates and associated companies. Transactions between GE and GECS have been eliminated from the "General Electric Company and consolidated affiliates" columns on page 28.
F-6 ANNUAL REPORT PAGE 30 - --------------------- STATEMENT OF CASH FLOWS
General Electric Company and consolidated affiliates --------------------------------- For the years ended December 31 (In millions) 1998 1997 1996 - --------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 9,296 $ 8,203 $ 7,280 Adjustments to reconcile net earnings to cash provided from operating activities Depreciation and amortization of property, plant and equipment 4,377 4,082 3,785 Amortization of goodwill and other intangibles 1,483 1,187 983 Earnings retained by GECS -- -- -- Deferred income taxes 1,143 284 1,145 Decrease in GE current receivables 649 250 118 Decrease (increase) in inventories 150 (386) (134) Increase (decrease) in accounts payable 1,576 200 641 Increase in insurance liabilities, reserves and annuity benefits 3,670 1,669 1,491 Provision for losses on financing receivables 1,609 1,421 1,033 All other operating activities (4,593) (2,670) 1,509 --------------------------------- CASH FROM OPERATING ACTIVITIES 19,360 14,240 17,851 --------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Additions to property, plant and equipment (8,982) (8,388) (7,760) Dispositions of property, plant and equipment 4,043 2,251 1,363 Net increase in GECS financing receivables (6,301) (1,898) (2,278) Payments for principal businesses purchased (18,610) (5,245) (5,516) All other investing activities (10,283) (4,995) (6,021) --------------------------------- CASH USED FOR INVESTING ACTIVITIES (40,133) (18,275) (20,212) --------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Net increase in borrowings (maturities of 90 days or less) 16,881 13,684 11,827 Newly issued debt (maturities longer than 90 days) 42,008 21,249 23,153 Repayments and other reductions (maturities longer than 90 days) (32,814) (23,787) (25,906) Net purchase of GE shares for treasury (2,819) (2,815) (2,323) Dividends paid to share owners (3,913) (3,411) (3,050) All other financing activities (114) 785 28 --------------------------------- CASH FROM (USED FOR) FINANCING ACTIVITIES 19,229 5,705 3,729 --------------------------------- INCREASE (DECREASE) IN CASH AND EQUIVALENTS DURING YEAR (1,544) 1,670 1,368 Cash and equivalents at beginning of year 5,861 4,191 2,823 --------------------------------- Cash and equivalents at end of year $ 4,317 $ 5,861 $ 4,191 ========================================================================================================= SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION Cash paid during the year for interest $ (9,297) $ (8,264) $ (7,874) Cash paid during the year for income taxes (2,098) (1,937) (1,392) ========================================================================================================= The notes to consolidated financial statements on pages 48-68 are an integral part of this statement.
F-7 ANNUAL REPORT PAGE 31 - --------------------- STATEMENT OF CASH FLOWS (continued)
GE GECS ----------------------------- ------------------------------- For the years ended December 31 (In millions) 1998 1997 1996 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 9,296 $ 8,203 $ 7,280 $ 3,796 $ 3,256 $ 2,817 Adjustments to reconcile net earnings to cash provided from operating activities Depreciation and amortization of property, plant and equipment 1,761 1,622 1,635 2,616 2,460 2,150 Amortization of goodwill and other intangibles 531 407 328 952 780 655 Earnings retained by GECS (2,124) (1,597) (1,836) -- -- -- Deferred income taxes 594 (514) 68 549 798 1,077 Decrease in GE current receivables 520 215 152 -- -- -- Decrease (increase) in inventories 69 (145) (76) 81 (244) (58) Increase (decrease) in accounts payable 199 237 197 1,673 (64) 318 Increase in insurance liabilities, reserves and annuity benefits -- -- -- 3,670 1,669 1,491 Provision for losses on financing receivables -- -- -- 1,609 1,421 1,033 All other operating activities (814) 889 1,319 (3,991) (3,851) 284 ----------------------------- ------------------------------- CASH FROM OPERATING ACTIVITIES 10,032 9,317 9,067 10,955 6,225 9,767 ----------------------------- ------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Additions to property, plant and equipment (2,047) (2,191) (2,389) (6,935) (6,197) (5,371) Dispositions of property, plant and equipment 6 39 30 4,037 2,212 1,333 Net increase in GECS financing receivables -- -- -- (6,301) (1,898) (2,278) Payments for principal businesses purchased (1,455) (1,425) (1,122) (17,155) (3,820) (4,394) All other investing activities 477 483 (106) (11,078) (5,646) (6,090) ----------------------------- ------------------------------- CASH USED FOR INVESTING ACTIVITIES (3,019) (3,094) (3,587) (37,432) (15,349) (16,800) ----------------------------- ------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Net increase in borrowings (maturities of 90 days or less) 1,015 809 974 16,288 13,594 11,026 Newly issued debt (maturities longer than 90 days) 509 424 252 41,440 20,825 22,901 Repayments and other reductions (maturities longer than 90 days) (1,787) (1,030) (1,250) (31,027) (22,757) (24,656) Net purchase of GE shares for treasury (2,819) (2,815) (2,323) -- -- -- Dividends paid to share owners (3,913) (3,411) (3,050) (1,672) (1,653) (981) All other financing activities -- -- -- (114) 785 28 ----------------------------- ------------------------------- CASH FROM (USED FOR) FINANCING ACTIVITIES (6,995) (6,023) (5,397) 24,915 10,794 8,318 ----------------------------- ------------------------------- INCREASE (DECREASE) IN CASH AND EQUIVALENTS DURING YEAR 18 200 83 (1,562) 1,670 1,285 Cash and equivalents at beginning of year 1,157 957 874 4,904 3,234 1,949 ----------------------------- ------------------------------- Cash and equivalents at end of year $ 1,175 $ 1,157 $ 957 $ 3,342 $ 4,904 $ 3,234 ==================================================================================================================================== SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION Cash paid during the year for interest $ (620) $ (467) $ (411) $ (8,677) $ (7,797) $ (7,463) Cash paid during the year for income taxes (1,151) (1,596) (1,286) (947) (341) (106) ==================================================================================================================================== In the consolidating data on this page, "GE" means the basis of consolidation as described in note 1 to the consolidated financial statements; "GECS" means General Electric Capital Services, Inc. and all of its affiliates and associated companies. Transactions between GE and GECS have been eliminated from the "General Electric Company and consolidated affiliates" columns on page 30.
F-8 ANNUAL REPORT PAGE 32 - --------------------- MANAGEMENT'S DISCUSSION OF FINANCIAL RESPONSIBILITY The financial data in this report, including the audited financial statements, have been prepared by management using the best available information and applying judgment. Accounting principles used in preparing the financial statements are those that are generally accepted in the United States. Management believes that a sound, dynamic system of internal financial controls that balances benefits and costs provides a vital ingredient for the Company's Six Sigma quality program as well as the best safeguard for Company assets. Professional financial managers are responsible for implementing and overseeing the financial control system, reporting on management's stewardship of the assets entrusted to it by share owners and maintaining accurate records. GE is dedicated to the highest standards of integrity, ethics and social responsibility. This dedication is reflected in written policy statements covering, among other subjects, environmental protection, potentially conflicting outside interests of employees, compliance with antitrust laws, proper business practices, and adherence to the highest standards of conduct and practices in transactions with the U.S. government. Management continually emphasizes to all employees that even the appearance of impropriety can erode public confidence in the Company. Ongoing education and communication programs and review activities, such as those conducted by the Company's Policy Compliance Review Board, are designed to create a strong compliance culture -- one that encourages employees to raise their policy questions and concerns and that prohibits retribution for doing so. KPMG LLP provides an objective, independent review of management's discharge of its obligations relating to the fairness of reporting of operating results and financial condition. Their report for 1998 appears below. The Audit Committee of the Board (consisting solely of Directors from outside GE) maintains an ongoing appraisal -- on behalf of share owners -- of the activities and independence of the Company's independent auditors, the activities of its internal audit staff, financial reporting process, internal financial controls and compliance with key Company policies. John F. Welch, Jr. Keith S. Sherin Chairman of the Board and Senior Vice President, Finance, and Chief Executive Officer Chief Financial Officer February 12, 1999 - -------------------------------------------------------------------------------- INDEPENDENT AUDITORS' REPORT TO SHARE OWNERS AND BOARD OF DIRECTORS OF GENERAL ELECTRIC COMPANY We have audited the financial statements of General Electric Company and consolidated affiliates as listed in Item 14 (a)1 on page 22. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the aforementioned financial statements present fairly, in all material respects, the financial position of General Electric Company 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. KPMG LLP Stamford, Connecticut February 12, 1999 F-9 ANNUAL REPORT PAGE 33 - --------------------- MANAGEMENT'S DISCUSSION OF OPERATIONS OVERVIEW General Electric Company's consolidated financial statements represent the combination of the Company's manufacturing and nonfinancial services businesses ("GE") and the accounts of General Electric Capital Services, Inc. ("GECS"). See note 1 to the consolidated financial statements, which explains how the various financial data are presented. Management's Discussion of Operations is presented in three parts: Consolidated Operations, Segment Operations and International Operations. CONSOLIDATED OPERATIONS GE achieved record revenues, earnings and cash generation in 1998. This year's performance again demonstrated the benefits of GE's continuing emphasis on growth in services, Six Sigma quality and globalization. Revenues, including acquisitions, rose to a record $100.5 billion in 1998, up 11% from 1997. This increase was primarily attributable to continued growth from global activities and product services. Revenues were $90.8 billion in 1997, a 15% increase from 1996 attributable primarily to increased global activities and higher sales of product services. Earnings increased to a record $9.296 billion, a 13% increase from $8.203 billion reported in 1997. Earnings per share increased to $2.80 during 1998, up 14% from the prior year's $2.46. Except as otherwise noted, earnings per share are presented on a diluted basis. Earnings in 1997 rose 13% from $7.280 billion reported in 1996. In 1997, earnings per share increased 14% from $2.16 per share in 1996. Growth rates in earnings per share exceeded growth rates in earnings as a result of the ongoing repurchase of shares under the six-year, $17 billion share repurchase plan initiated in December 1994. A consolidated statement of changes in share owners' equity is provided on page 26, summarizing information about movements in equity from transactions with share owners and other sources. Additional information about such changes is provided in note 25. 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. GE 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 GE's previous accounting policy, is effective for financial statements beginning January 1, 1999. DIVIDENDS DECLARED IN 1998 AMOUNTED TO $4.081 BILLION. Per-share dividends of $1.25 were up 16% from 1997, following a 14% increase from the preceding year. GE has rewarded its share owners with 23 consecutive years of dividend growth. The chart below illustrates that GE's dividend growth for the past five years has significantly outpaced dividend growth of companies in the Standard & Poor's 500 stock index. RETURN ON AVERAGE SHARE OWNERS' EQUITY reached 25.7% in 1998, up from 25.0% and 24.0% in 1997 and 1996, respectively. [CHART HERE] GE/S&P CUMULATIVE DIVIDEND GROWTH SINCE 1993 - ----------------------------------------------------------------------------- 1994 1995 1996 1997 1998 - ----------------------------------------------------------------------------- GE 14.09% 26.41% 40.24% 58.25% 83.53% S&P 500 4.77 9.62 18.44 23.21 28.78 - ----------------------------------------------------------------------------- F-10 ANNUAL REPORT PAGE 34 - --------------------- Except as otherwise noted, the analysis in the remainder of this section presents GE results with GECS on an equity basis. GE TOTAL REVENUES were $56.0 billion in 1998, compared with $54.5 billion in 1997 and $49.6 billion in 1996. o GE sales of goods and services were $51.5 billion in 1998, an increase of 5% from 1997, which in turn was 6% higher than in 1996. Volume was about 8% higher in 1998, including acquisitions, reflecting growth in most businesses during the year. While overall selling prices were down slightly in 1998, the effects of selling prices on sales in various businesses differed markedly. Revenues were also negatively affected by exchange rates for sales denominated in other than U.S. dollars. Volume in 1997 was about 9% higher than in 1996, with selling price and currency effects both slightly negative. For purposes of the required financial statement display of GE sales and costs of sales on pages 26 and 27, "goods" refers to tangible products, and "services" refers to all other sales, including broadcasting and information services activities. An increasingly important element of GE sales relates to product services, including both spare parts (goods) as well as repair services. Sales of product services were $12.6 billion in 1998, including acquisitions, a strong double-digit increase over 1997. Nearly all businesses reported increases in product services revenues, led by double-digit increases at Aircraft Engines, Transportation Systems and Power Systems. Operating margin from product services was approximately $2.8 billion, up from $2.5 billion in 1997. This improvement was primarily attributable to strong growth at Aircraft Engines and Power Systems. o GE other income, earned from a wide variety of sources, was $0.7 billion in 1998, $2.3 billion in 1997 and $0.6 billion in 1996. The decrease in other income in 1998 was primarily attributable to the lack of a current-year counterpart to the $1,538 million after-tax gain realized in 1997 from exchanging preferred stock in Lockheed Martin Corporation (Lockheed Martin) for the stock of a newly formed subsidiary as described in note 2. o Earnings of GECS were up 17% in 1998, following a 16% increase the year before. See page 37 for an analysis of these earnings. PRINCIPAL COSTS AND EXPENSES FOR GE are those classified as costs of goods and services sold, and selling, general and administrative expenses. The Six Sigma quality initiative is an important factor affecting GE's cost structure. The benefits of Six Sigma quality are reflected in both variable and base cost productivity (discussed on page 35) as well as in lower direct material costs. [CHART HERE] GE OPERATING MARGIN AS A PERCENTAGE OF SALES - ----------------------------------------------------------------------------- 1994 1995 1996 1997 1998 - ----------------------------------------------------------------------------- AS REPORTED 13.6% 14.4% 14.8% 11.0% 16.7% RESTRUCTURING AND OTHER SPECIAL CHARGES - - - 4.7 - --------------------------------------------------- OPERATING MARGIN BEFORE RESTRUCTURING AND OTHER SPECIAL CHARGES 13.6% 14.4% 14.8% 15.7% 16.7% - ----------------------------------------------------------------------------- Comparisons between 1998 and 1997 costs and expenses are affected by restructuring and other special charges amounting to $2,322 million recorded in the fourth quarter of 1997. Aggregate restructuring charges of $1,243 million covered certain costs of plans that will enhance GE's global competitiveness through rationalization of certain production, service and administration activities of its worldwide industrial businesses; among these charges were $577 million of special early retirement pension, health and life benefit costs, including a one-time voluntary early retirement program that was provided to the U.S. work force in the 1997 labor contracts. Also included in restructuring charges were other severance costs as well as certain costs of exiting affected properties, including site demolitions, asset write-offs and expected losses on subleases. Other special charges amounting to $1,079 million were also recorded in 1997, principally associated with strategic decisions to enhance the long-term competitiveness of certain industrial businesses and fourth-quarter developments arising from past activities at several current and former manufacturing sites not associated with any current business segments. Such special charges included $275 million to reflect higher estimated manufacturing costs to fill firm customer orders for an aircraft engine program and $261 million that related principally to gas turbine warranty costs and costs arising from renegotiation and resolution of certain disputes in the Power Systems business. As discussed on page 35, restructuring and other special charges are not allocated to segments for purposes of measuring segment profit. OPERATING MARGIN is sales of goods and services less the costs of goods and services sold, and selling, general and administrative expenses. GE operating margin reached a record 16.7% of sales in 1998, compared with 15.7% achieved in 1997 before the effects of restructuring and other special charges, and 14.8% in 1996. Including restructuring and other special charges, GE reported operating margin of 11.0% of sales in 1997. The improvement in ongoing operating margin in F-11 ANNUAL REPORT PAGE 35 - --------------------- 1998 was broad-based, with improvements in a majority of GE's businesses reflecting the increasing benefits from GE's product services and Six Sigma quality initiatives. TOTAL COST PRODUCTIVITY (sales in relation to costs, both on a constant dollar basis) has paralleled the significant improvement in GE's ongoing operating margin. Total cost productivity in 1998 was 4.4%, reflecting benefits from the Six Sigma quality initiative as well as higher volume. Three businesses -- Medical Systems, Power Systems and NBC -- achieved productivity in excess of 5%. Total cost productivity was 4.2% in 1997, reflecting Six Sigma benefits and the positive effects of higher volume. In 1997, three businesses -- Power Systems, NBC and Plastics -- reported productivity in excess of 5%. The total contribution of productivity in the last two years offset not only the negative effects of total cost inflation, but also the effects of selling price decreases. GE INTEREST AND OTHER FINANCIAL CHARGES in 1998 amounted to $883 million, compared with $797 million in 1997 and $595 million in 1996. Lower interest rates in 1998 and 1997 were more than offset by higher average levels of borrowings and other financing activities. INCOME TAXES on a consolidated basis were 31.0% of pretax earnings in 1998, compared with 26.6% in 1997 and 32.6% in 1996. The most significant factor explaining 1997's lower effective tax rate was the 4.8% decrease attributable to the realized gain on the tax-free exchange of Lockheed Martin Corporation preferred stock. A more detailed analysis of the differences between the U.S. federal statutory rate and the consolidated rate, as well as other information about income tax provisions, is provided in note 8. RETURN ON AVERAGE TOTAL CAPITAL INVESTED was 23.9% at year-end 1998, compared with 23.6% in 1997 and 22.2% in 1996. SEGMENT OPERATIONS REVENUES AND SEGMENT PROFIT FOR OPERATING SEGMENTS are shown on page 36. At year-end 1998, GE adopted 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. The most significant change from previous Annual Reports is that restructuring and other special charges are not included in the measure of segment profit. Previously reported data have been restated as required by SFAS No. 131. For additional information, including a description of the products and services included in each segment, see note 28. AIRCRAFT ENGINES achieved a 32% increase in revenues in 1998, following a 24% increase in 1997, on higher volume in commercial engines and product services, including acquisitions, in both years. Operating profit increased 30% in 1998, and 13% in 1997, largely as a result of strong growth in product services as well as good volume growth in commercial engines. In 1998, $1.6 billion of Aircraft Engines revenues were from sales to the U.S. government, an increase of $0.1 billion from 1997, which was $0.3 billion lower than in 1996. Aircraft Engines received orders of $10.8 billion in 1998, up $1.9 billion from 1997. The backlog at year-end 1998 was $9.7 billion ($9.5 billion at the end of 1997). Of the total, $7.5 billion related to products, about 52% of which was scheduled for delivery in 1999, and the remainder related to 1999 product services. APPLIANCES revenues were 3% lower than a year ago, reflecting primarily selling price decreases and, to a lesser extent, lower volume. Operating profit was 2% lower as the decreases in selling prices and volume more than offset productivity from Six Sigma. Revenues in 1997 were 4% higher than in 1996, reflecting primarily acquisition-related volume. Operating profit increased 3% in 1997, primarily as a result of productivity and higher volume, partially offset by lower selling prices. INDUSTRIAL PRODUCTS AND SYSTEMS revenues increased 2% in 1998, primarily as a result of volume increases at Transportation Systems and Industrial Systems that were partially offset by lower selling prices across most businesses in the segment. Operating profit increased 5%, reflecting productivity from Six Sigma and the improvement in volume, which more than offset the effects of selling price decreases. Revenues rose 6% in 1997 as improved volume more than offset weaker pricing across all businesses in the segment. Operating profit increased 13% in 1997, the result of Six Sigma-based productivity and volume improvements across the segment, which more than offset the effects of lower selling prices. Transportation Systems received orders of $2.4 billion in 1998, about the same as in 1997. The backlog at year-end 1998 was $2.3 billion ($2.0 billion at the end of 1997). Of the total, $2.1 billion related to products, about 83% of which was scheduled for shipment in 1999, and the remainder related to 1999 product services. NBC revenues increased 2% in 1998, reflecting higher revenues in NBC's owned-and-operated stations, including revenues from station acquisitions and growth in cable operations, the combination of which more than offset lower network revenues. Operating profit was 11% higher than a year ago as improved results in international, cable operations and owned-and-operated stations, as well as cost reductions across NBC, more than offset higher license fees for certain prime-time programs that were renewed. Revenues decreased 2% in 1997 as a strong advertising marketplace was more than offset by the absence of a 1997 counterpart to NBC's broadcast of the 1996 Summer Olympic Games. Operating profit increased 19% in 1997, reflecting improved prime-time pricing, strong F-12 ANNUAL REPORT PAGE 36 - --------------------- SUMMARY OF OPERATING SEGMENTS
General Electric Company and consolidated affiliates ------------------------------------------------------------------ For the years ended December 31 (In millions) 1998 1997 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------------------------ REVENUES GE Aircraft Engines $ 10,294 $ 7,799 $ 6,302 $ 6,098 $ 5,830 Appliances 5,619 5,801 5,586 5,137 5,204 Industrial Products and Systems 11,222 10,984 10,401 10,209 9,375 NBC 5,269 5,153 5,232 3,919 3,361 Plastics 6,633 6,695 6,509 6,647 5,681 Power Systems 8,466 7,915 7,643 6,962 6,357 Technical Products and Services 5,323 4,861 4,700 4,430 4,285 All Other 264 308 291 292 253 Eliminations (1,367) (1,176) (1,032) (1,082) (1,068) ------------------------------------------------------------------ Total GE segment revenues 51,723 48,340 45,632 42,612 39,278 Corporate items 507 2,919 1,116 1,154 1,135 GECS net earnings from continuing operations 3,796 3,256 2,817 2,415 2,085 ------------------------------------------------------------------ Total GE revenues 56,026 54,515 49,565 46,181 42,498 GECS segment revenues 48,694 39,931 32,713 26,492 19,875 Eliminations (4,251) (3,606) (3,099) (2,645) (2,264) ------------------------------------------------------------------ CONSOLIDATED REVENUES $ 100,469 $ 90,840 $ 79,179 $ 70,028 $ 60,109 ==================================================================================================================================== SEGMENT PROFIT GE Aircraft Engines $ 1,769 $ 1,366 $ 1,214 $ 1,135 $ 987 Appliances 755 771 748 682 704 Industrial Products and Systems 1,880 1,789 1,587 1,488 1,305 NBC 1,349 1,216 1,020 797 540 Plastics 1,584 1,500 1,443 1,435 981 Power Systems 1,306 1,203 1,124 782 1,354 Technical Products and Services 1,109 988 855 810 806 All Other 271 310 282 285 245 ------------------------------------------------------------------ Total GE operating profit 10,023 9,143 8,273 7,414 6,922 GECS net earnings from continuing operations 3,796 3,256 2,817 2,415 2,085 ------------------------------------------------------------------ Total segment profit 13,819 12,399 11,090 9,829 9,007 Corporate items and eliminations (823) (1,589) (920) (548) (800) GE interest and other financial charges (883) (797) (595) (649) (410) GE provision for income taxes (2,817) (1,810) (2,295) (2,059) (1,882) ------------------------------------------------------------------ CONSOLIDATED NET EARNINGS FROM CONTINUING OPERATIONS $ 9,296 $ 8,203 $ 7,280 $ 6,573 $ 5,915 ==================================================================================================================================== The notes to consolidated financial statements on pages 48-68 are an integral part of this statement. "GE" means the basis of consolidation as described in note 1 to the consolidated financial statements; "GECS" means General Electric Capital Services, Inc. and all of its affiliates and associated companies. Includes revenues of $944 million, $789 million, $796 million and $761 million in 1997, 1996, 1995 and 1994, respectively, from an appliance distribution affiliate that was deconsolidated in 1998. Also includes $1,538 million in 1997 from an exchange of preferred stock in Lockheed Martin Corporation for the stock of a newly formed subsidiary. Principally the elimination of GECS net earnings. Includes 1997 restructuring and other special charges of $2,322 million. Of the total, restructuring and other special charges that relate to activities of GE operating segments were as follows: Aircraft Engines -- $342 million, Appliances -- $330 million, Industrial Products and Systems -- $352 million, NBC -- $161 million, Plastics -- $63 million, Power Systems -- $437 million and Technical Products and Services -- $157 million. Also included in 1997 is $1,538 million associated with the Lockheed Martin Corporation transaction described in (F1) above.
F-13 ANNUAL REPORT PAGE 37 - --------------------- growth in both owned-and-operated stations and cable operations, and increased international distribution of programming, the combination of which more than offset the absence of a 1997 counterpart to the Olympics broadcast and higher license fees for certain prime-time programs that were renewed. PLASTICS revenues decreased 1% in 1998 as lower selling prices and adverse currency exchange rates offset slightly higher volume. Operating profit in 1998 improved by 6% as lower material costs and productivity from Six Sigma more than offset lower selling prices. Revenues grew 3% in 1997, reflecting an increase in volume that was largely offset by lower selling prices and adverse currency exchange rates. Operating profit increased 4% as Six Sigma-based productivity and higher volume more than offset lower selling prices. POWER SYSTEMS revenues increased 7% in 1998, reflecting primarily higher volume in product services, including acquisitions, which was partially offset by lower selling prices. Operating profit increased 9% in 1998 as growth in product services and productivity more than offset the effects of lower selling prices. Revenues in 1997 were 4% higher than in 1996, primarily as a result of higher volume in gas turbines and product services. Operating profit increased by 7%, the result of strong productivity and higher volume, which more than offset lower selling prices. Power Systems orders were $10.5 billion for 1998, an increase of more than 50% over 1997, reflecting strong U.S. market growth. The backlog of unfilled orders at year-end 1998 was $12.4 billion ($10.5 billion at the end of 1997). Of the total, $11.3 billion related to products, about 45% of which was scheduled for delivery in 1999, and the remainder related to 1999 product services. TECHNICAL PRODUCTS AND SERVICES revenues rose 10% in 1998, following a 3% increase in 1997. The improvement in revenues in both years was primarily attributable to growth at Medical Systems, the result of higher equipment volume and continued growth in product services, partially offset by lower selling prices across the segment. Operating profit increased 12% in 1998 as productivity from Six Sigma and volume increases, particularly at Medical Systems, more than offset lower selling prices. Operating profit increased 16% in 1997 as productivity and higher volume more than offset the effects of lower selling prices. Orders received by Medical Systems in 1998 were $4.8 billion, up $0.5 billion from 1997. The backlog of unfilled orders at year-end 1998 was $2.6 billion ($2.4 billion at the end of 1997). Of the total, $1.5 billion related to products, about 80% of which was scheduled for delivery in 1999, and the remainder related to 1999 product services. [CHART HERE] OPERATING PROFIT OF GE SEGMENTS - ----------------------------------------------------------------------------- (IN BILLIONS) 1994 1995 1996 1997 1998 - ----------------------------------------------------------------------------- $6.922 $7.414 $8.273 $9.143 $10.023 - ----------------------------------------------------------------------------- ALL OTHER GE revenues and operating profit consist primarily of residual royalty payments and other fees earned from licensing the use of GE technology to others. Effective January 1, 1999, GE transferred certain licenses and intellectual property pursuant to an agreement to sell the former RCA Consumer Electronics business. Details of licensing income derived from these assets is provided in note 2. GECS consists of 28 businesses that, for purposes of the analysis that follows, are grouped into five operating activities: consumer services, equipment management, mid-market financing, specialized financing and specialty insurance. GECS net earnings were $3.796 billion in 1998, up 17% from $3.256 billion in 1997, which increased 16% from 1996. Each operating activity achieved a double-digit earnings increase 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. o GECS 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. o GECS cost of goods sold is associated with activities of its 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. o GECS interest 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 F-14 ANNUAL REPORT PAGE 38 - --------------------- interest rate was 5.92% in 1998, compared with 6.07% in 1997 and 6.24% in 1996. See page 43 for a discussion of interest rate risk management. o GECS 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. o GECS 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 page 39 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. o GECS other costs and expenses were $16.4 billion in 1998, an increase from $13.9 billion in 1997 and $11.7 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. 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. Revenues and net earnings from operating activities within the GECS segment for the past three years are summarized and discussed below. ---------------------------------------- (In millions) 1998 1997 1996 ---------------------------------------- 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 ================================================================================ [CHART HERE] GECS REVENUES - ----------------------------------------------------------------------------- (IN BILLIONS) 1994 1995 1996 1997 1998 - ----------------------------------------------------------------------------- $19.875 $26.492 $32.713 $39.931 $48.694 - ----------------------------------------------------------------------------- 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 40. 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. F-15 ANNUAL REPORT PAGE 39 - --------------------- 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 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 GECS 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. [CHART HERE] GECS NET EARNINGS FROM CONTINUING OPERATIONS - ----------------------------------------------------------------------------- (IN BILLIONS) 1994 1995 1996 1997 1998 - ----------------------------------------------------------------------------- $2.085 $2.415 $2.817 $3.256 $3.796 - ----------------------------------------------------------------------------- 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. 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 on page 40. Consumer financing receivables at year-end 1998 and 1997 are shown in the following table. ----------------------- (In millions) 1998 1997 - -------------------------------------------------------------------------------- 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 percentage of total 2.4% 2.2% Receivable write-offs for the year $ 1,357 $ 1,298 ================================================================================ 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 F-16 ANNUAL REPORT PAGE 40 - --------------------- 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 13, Montgomery Ward Holding Corp. (MWHC) filed a bankruptcy petition for reorganization in 1997. The GECS after-tax share of the losses of MWHC and affiliates was $49 million in 1998 and $380 million in 1997. The GECS 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). 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 17. INTERNATIONAL OPERATIONS Estimated results of international activities include the results of GE and GECS operations located outside the United States, plus all U.S. exports. Certain GECS operations that cannot meaningfully be associated with specific geographic areas are classified as "other international" for this purpose. [CHART HERE] CONSOLIDATED INTERNATIONAL REVENUES - ----------------------------------------------------------------------------- (IN BILLIONS) 1994 1995 1996 1997 1998 - ----------------------------------------------------------------------------- INTERNATIONAL OPERATIONS $14.205 $20.768 $25.447 $29.328 $33.756 EXPORTS AND LICENSING INCOME 6.755 7.480 7.846 9.199 9.001 - ----------------------------------------------------------------------------- International revenues in 1998 were $42.8 billion (43% of consolidated revenues), compared with $38.5 billion in 1997 and $33.3 billion in 1996. The chart above depicts the growth in international revenues over the past five years. - -------------------------------------------------------------------------------- CONSOLIDATED INTERNATIONAL REVENUES ------------------------------- (In millions) 1998 1997 1996 - -------------------------------------------------------------------------------- Europe (a) $21,665 $18,166 $15,964 Pacific Basin 5,166 4,742 4,343 Americas 5,030 4,632 3,443 Other 1,895 1,788 1,697 ------------------------------- 33,756 29,328 25,447 RCA residual licensing income 250 287 265 Exports from the U.S. to external customers 8,751 8,912 7,581 ------------------------------- $42,757 $38,527 $33,293 ================================================================================ (a) Includes $944 million and $789 million in 1997 and 1996, respectively, from an appliance distribution affiliate that was deconsolidated in 1998. - -------------------------------------------------------------------------------- GE international revenues were $24.6 billion in 1998, an increase of $0.7 billion from the comparable figure in 1997, which was $2.9 billion higher than in 1996. Over the three-year period, international revenues were slightly less than half of total revenues. The increase in revenues during 1998 reflected sales growth in operations based outside the United States, partially offset by lower U.S. exports. European revenues were 11% higher in 1998, reflecting increases in both local operations and in exports to the region, with particularly strong growth at Aircraft Engines. As expected, Pacific Basin revenues were 6% lower in 1998, reflecting primarily a decrease in exports to the region. Further information about the activities of GE and GECS in Asia is provided on page 41. International revenues from the Americas (North and South America, except for the United States) increased 8%, primarily as a result of strong growth in exports, particularly at Transportation Systems and Power Systems, and slightly higher revenues from local operations. F-17 ANNUAL REPORT PAGE 41 - --------------------- [CHART HERE] CONSOLIDATED INTERNATTIONAL REVENUES BY REGION - ----------------------------------------------------------------------------- (IN BILLIONS) 1994 1995 1996 1997 1998 - ----------------------------------------------------------------------------- EUROPE $9.043 $14.062 $18.030 $20.634 $24.353 PACIFIC BASIN 5.976 7.183 7.573 7.981 8.058 AMERICAS 3.441 4.110 4.706 6.196 6.907 OTHER 2.500 2.893 2.984 3.716 3.439 - ----------------------------------------------------------------------------- GECS 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 GECS operating activities. 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 increased 21% in 1998, largely as a result of acquisitions and core growth in Canada and Latin America. Overall, these increases reflect the continued expansion of GECS as a global provider of a wide range of services. Consolidated international operating profit was $5.4 billion in 1998, compared with $5.1 billion in 1997 and $3.8 billion in 1996. International activities accounted for 36% of consolidated operating profit, about the same as in 1997 on a comparable basis. Additional information is provided in note 29. Total assets of international operations were $128.8 billion in 1998 (36% of consolidated assets), an increase of 32% over 1997, reflecting double-digit growth in both GE and GECS activities outside the United States. The increase reflected sharp growth in Asia, where current economic conditions continue to provide a favorable environment for strategic investments. GE and GECS also had strong asset growth in operations based in Europe and the Americas. The activities of GE and GECS span all global regions and primarily encompass manufacturing for local and export markets, import and sale of products produced in other regions, leasing of aircraft, sourcing for GE plants domiciled in other global regions and provision of financial services within these regional economies. As such, when certain countries such as Russia or regions such as the Pacific Basin and Latin America experience currency and/or economic stress, GE 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 power and aircraft-related equipment, higher local currency financing costs and a slowdown in established financial services activities. New profit opportunities include, among other things, lower costs of goods sourced from countries with weakened currencies, more opportunities for lower cost outsourcing, expansion of industrial and financial services activities through purchases of companies or assets at reduced prices and lower U.S. debt financing costs. Thus, while GE'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 GE and GECS in 1998, and there is little change in the outlook for 1999. As discussed previously, GE's international activities are diverse. Financial results of those activities reported in U.S. dollars are affected by currency exchange. A number of techniques are used to manage the effects of currency exchange, including selective borrowings in local currencies and selective hedging of significant cross-currency transactions. Principal currencies are the major European currencies, including the euro, as well as the Japanese yen and the Canadian dollar. [CHART HERE] TOTAL ASSETS OF INTERNATTIONAL OPERATIONS - ----------------------------------------------------------------------------- (IN BILLIONS) 1994 1995 1996 1997 1998 - ----------------------------------------------------------------------------- EUROPE $21.5869 $44.1072 $55.1956 $66.7401 $84.5179 PACIFIC BASIN 4.4908 6.4424 8.1245 8.8814 18.4266 AMERICAS 5.6118 6.5591 7.2265 8.6168 11.2481 OTHER 11.6541 12.2167 12.4287 13.3090 14.6307 - ----------------------------------------------------------------------------- F-18 ANNUAL REPORT PAGE 42 - --------------------- MANAGEMENT'S DISCUSSION OF FINANCIAL RESOURCES AND LIQUIDITY OVERVIEW This discussion of financial resources and liquidity addresses the Statement of Financial Position (page 28) and the Statement of Cash Flows (page 30). GECS is not a "captive finance company" or a vehicle for "off-balance-sheet financing" for GE. Only a small portion of GECS business is directly related to other GE operations. The fundamental differences between GE and GECS are reflected in the measurements commonly used by investors, rating agencies and financial analysts. These differences will become clearer in the discussion that follows with respect to the more significant items in the financial statements. STATEMENT OF FINANCIAL POSITION Because GE and GECS share certain significant elements of their Statements of Financial Position -- property, plant and equipment, and borrowings, for example - -- the following discussion addresses significant captions in the "consolidated" statement. Within the following discussions, however, distinction is drawn between GE and GECS activities in order to permit analysis of each individual statement. INVESTMENT SECURITIES for each of the past two years comprised mainly investment-grade debt securities held by the specialty insurance and annuity and investment businesses of GECS in support of obligations to policyholders and annuitants. GE investment securities were $259 million at year-end 1998, about the same as at the end of 1997. The increase of $8.1 billion at GECS during 1998 was principally related to acquisitions and investment of premiums received. A breakdown of the investment securities portfolio is provided in note 10. CURRENT RECEIVABLES for GE were $8.5 billion at the end of 1998, a decrease of $0.6 billion from year-end 1997, and included $5.4 billion due from customers at the end of 1998, which was $0.7 billion lower than the amount due at the end of 1997. As a measure of asset management, turnover of customer receivables from sales of goods and services was 8.8 in 1998, compared with 7.7 in 1997. Other current receivables are primarily amounts that did not originate from sales of GE goods or services, such as advances to suppliers in connection with large contracts. INVENTORIES for GE were $5.3 billion at December 31, 1998, up $0.2 billion from the end of 1997. GE inventory turnover improved to 8.3 in 1998, compared with 7.8 in 1997, reflecting continuing improvements in inventory management. Last-in, first-out (LIFO) revaluations decreased $87 million in 1998, compared with decreases of $119 million in 1997 and $128 million in 1996. Included in these changes were decreases of $29 million, $59 million and $58 million in 1998, 1997 and 1996, respectively, that resulted from lower LIFO inventory levels. There were net cost decreases in each of the last three years. [CHART HERE] GE INVENTORY TURNOVER - ----------------------------------------------------------------------------- 1994 1995 1996 1997 1998 - ----------------------------------------------------------------------------- 6.86 6.90 7.57 7.75 8.25 - ----------------------------------------------------------------------------- Inventories (at FIFO) and customer receivables from sales of goods or services are two key components of GE's working capital turnover measurement. Working capital turnover increased from 6.3 turns in 1996 to 7.4 and 9.2 turns in 1997 and 1998, respectively. Working capital also includes trade accounts payable and progress collections. GECS 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 of GECS 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 39 and 40 and in notes 7 and 13. OTHER RECEIVABLES of GECS 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. PROPERTY, PLANT AND EQUIPMENT (including equipment leased to others) was $35.7 billion at December 31, 1998, up $3.4 billion from 1997. GE property, plant and equipment consists of investments for its own productive use, whereas the largest element for GECS is in equipment provided to third parties on operating leases. Details by category of investment can be found in note 15. GE total expenditures for new plant and equipment during 1998 totaled $2.0 billion, down $0.2 billion from 1997. Total expenditures for the past five years were $10.2 billion, of which 38% was investment for growth through new capacity and product development; 32% was investment in productivity through new F-19 ANNUAL REPORT PAGE 43 - --------------------- equipment and process improvements; and 30% was investment for such other purposes as improvement of research and development facilities and safety and environmental protection. GECS additions to equipment leased to others, including business acquisitions, were $7.2 billion during 1998 ($6.8 billion during 1997), primarily reflecting acquisitions of vehicles and aircraft. INTANGIBLE ASSETS were $23.6 billion at year-end 1998, up from $19.1 billion at year-end 1997. GE intangibles increased to $10.0 billion from $8.8 billion at the end of 1997, principally as a result of goodwill from a number of acquisitions, the largest of which was the equipment services division of Stewart & Stevenson. The $3.3 billion increase in GECS intangibles also 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. ALL OTHER ASSETS totaled $52.9 billion at year-end 1998, an increase of $13.1 billion from the end of 1997. GE other assets increased $3.3 billion, principally reflecting an increase in the prepaid pension asset and investments in certain newly acquired affiliates that were not yet consolidated. The increase in GECS other assets of $9.9 billion 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. CONSOLIDATED BORROWINGS aggregated $175.0 billion at December 31, 1998, compared with $144.7 billion at the end of 1997. The major debt-rating agencies evaluate the financial condition of GE and of GE Capital (the major public borrowing entity of GECS) differently because of their distinct business characteristics. Using criteria appropriate to each and considering their combined strength, those major rating agencies continue to give the highest ratings to debt of both GE and GE Capital. [CHART HERE] GE WORKING CAPITAL TURNOVER - ----------------------------------------------------------------------------- 1994 1995 1996 1997 1998 - ----------------------------------------------------------------------------- 5.75 5.56 6.30 7.42 9.22 - ----------------------------------------------------------------------------- GE 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 also has guaranteed subordinated debt of GECS with a face amount of $1.0 billion at December 31, 1998 and 1997. Management believes the likelihood that GE will be required to contribute capital under either the commitments or the guarantees is remote. GE total borrowings were $4.1 billion at year-end 1998 ($3.4 billion short-term, $0.7 billion long-term), a decrease of $0.3 billion from year-end 1997. GE total debt at the end of 1998 equaled 9.5% of total capital, down from 11.1% at the end of 1997. GECS total 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. A large portion of GECS 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. INTEREST RATE AND CURRENCY RISK MANAGEMENT is important in the normal operations of both GE and GECS. The following discussion presents an overview of such management. A related discussion of recent developments in the global economy is provided on page 41. GE and GECS use various financial instruments, particularly interest rate and currency swaps, but also futures, options and currency forwards, to manage their respective interest rate and currency risks. GE and GECS are exclusively end users of these instruments, which are commonly referred to as derivatives; neither GE nor GECS engages in trading, market-making or other speculative activities in the derivatives markets. Established practices require that derivative financial instruments relate to specific asset, liability or equity transactions or to currency exposures. More detailed information about these financial instruments, as well as the strategies and policies for their use, is provided in notes 1, 19 and 30. The U.S. Securities and Exchange Commission requires that registrants include information about potential effects of changes in interest rates and currency exchange in their financial statements. Although the rules offer alternatives for presenting this information, none of the alternatives is F-20 ANNUAL REPORT PAGE 44 - --------------------- 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 GECS based on year-end 1998 positions by approximately $111 million; the pro forma effect for GE was approximately $17 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 for GECS. o As shown in the chart above right, the geographic distribution of GE and GECS operations is diverse. 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 GE and GECS 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 GE based on year-end 1998 positions by approximately $11 million; the pro forma effect for GECS was insignificant. Based on conditions at year-end 1997, the effect on 1998 net earnings of such a decrease in exchange rates was estimated to be approximately $10 million for GE. INSURANCE LIABILITIES, RESERVES AND ANNUITY BENEFITS were $77.3 billion, $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 20. [CHART HERE] CONSOLIDATED TOTAL ASSETS - ----------------------------------------------------------------------------- (IN BILLIONS) 1994 1995 1996 1997 1998 - ----------------------------------------------------------------------------- UNITED STATES $142.527 $158.710 $189.427 $206.465 $227.112 INTERNATIONAL 43.344 69.325 82.975 97.547 128.823 - ----------------------------------------------------------------------------- YEAR 2000 will test the capability of business processes to function correctly. GE and GECS have undertaken a global effort to identify and mitigate Year 2000 issues in their information systems, products, facilities and suppliers. 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 quarterly. 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 facilities through the control phase of the program by mid-1999. The scope of the global Year 2000 effort encompasses approximately 170,000 applications and computer programs; 8,000 types of installed-base products and services; up to 35,000 pieces of equipment in facilities; and 30,000 direct suppliers. 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 GE and GECS 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 F-21 ANNUAL REPORT PAGE 45 - --------------------- 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 GE or GECS. Including amounts attributable to recent acquisitions, total Year 2000 remediation expenditures are expected to be approximately $575 million, of which 60% 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. STATEMENT OF CASH FLOWS Because cash management activities of GE and GECS are separate and distinct, it is more useful to review their cash flows separately. GE CASH AND EQUIVALENTS aggregated $1.2 billion at the end of 1998, about the same as at year-end 1997. During 1998, GE generated a record $10.0 billion in cash from operating activities, an increase of $0.7 billion over 1997. The increase reflected improvements in earnings and working capital, including cash from monetization of receivables. The 1998 cash generation provided most of the resources needed to repurchase $3.6 billion of GE common stock under the share repurchase program, to pay $3.9 billion in dividends to share owners, to invest $2.0 billion in new plant and equipment and to make $1.5 billion in acquisitions. Operating activities are the principal source of GE's cash flows. Over the past three years, operating activities have provided more than $28 billion of cash. The principal application of this cash was distributions of approximately $21 billion to share owners, both through payment of dividends ($10.4 billion) and through the share repurchase program ($10.4 billion) described below. Other applications included investment in new plant and equipment ($6.6 billion) and acquisitions ($4.0 billion). The GE Board of Directors has authorized repurchase of $17 billion of common stock under the share repurchase program. This buyback will continue through the year 2000 at an annual rate of about $2 billion. Funds used for the share repurchase are expected to be generated largely from operating cash flow. [CHART HERE] GE CUMULATIVE CASH FLOWS SINCE 1993 - ----------------------------------------------------------------------------- (IN BILLIONS) 1994 1995 1996 1997 1998 - ----------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES $6.071 $12.136 $21.203 $30.520 $40.552 SHARES REPURCHASED 1.073 4.175 7.441 10.933 14.579 DIVIDENDS PAID 2.462 5.232 8.282 11.693 15.606 - ----------------------------------------------------------------------------- Based on past performance and current expectations, in combination with the financial flexibility that comes with a strong balance sheet and the highest credit ratings, management believes that GE is in a sound position to complete the share repurchase program, to grow dividends in line with earnings, and to continue making selective investments for long-term growth. Expenditures for new plant and equipment are expected to be about $2.0 billion in 1999, principally for productivity and growth. The expected level of expenditures was moderated by the Six Sigma quality program's success in freeing capacity. GECS CASH AND EQUIVALENTS aggregated $3.3 billion at the end of 1998, down from $4.9 billion at year-end 1997. One of the primary sources of cash for GECS 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, GECS 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. GECS also generated $26.9 billion from continuing operating activities. The principal use of cash by GECS has been investing in assets to grow its businesses. Of the $69.6 billion that GECS invested 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 that GECS should be well positioned to meet the global needs of its customers for capital and to continue providing GE share owners with good returns. F-22 ANNUAL REPORT PAGE 46 - --------------------- MANAGEMENT'S DISCUSSION OF SELECTED FINANCIAL DATA SELECTED FINANCIAL DATA summarizes on the following page some data frequently requested about General Electric Company. The data are divided into three sections: upper portion -- consolidated data; middle portion -- GE data that reflect various conventional measurements for such enterprises; and lower portion -- GECS data that reflect key information pertinent to financial services businesses. GE'S TOTAL RESEARCH AND DEVELOPMENT expenditures were $1,930 million in 1998, up slightly from 1997 and 1996. In 1998, expenditures from GE's own funds were $1,537 million, an increase of 4% over 1997, reflecting continuing research and development work related to new product, service and process technologies. Product technology efforts in 1998 included continuing development work on the next generation of gas turbines, further advances in state-of-the-art diagnostic imaging technologies, and development of more fuel-efficient, cost-effective aircraft engine designs. Services technologies include advances in diagnostic applications, including remote diagnostic capabilities related to repair and maintenance of medical equipment, aircraft engines, power generation equipment and locomotives. Process technologies -- vital to Six Sigma quality programs -- provided improved product quality and performance and increased capacity for manufacturing engineered materials. Expenditures from funds provided by customers (mainly the U.S. government) were $393 million in 1998, down $18 million from 1997. GE'S TOTAL BACKLOG of firm unfilled orders at the end of 1998 was $28.5 billion, compared with $26.4 billion at the end of 1997. Of the total, $23.9 billion related to products, about 56% of which was scheduled for delivery in 1999. Services orders are included in this reported backlog for only the succeeding 12 months; such backlog at the end of 1998 was $4.6 billion. Orders constituting this backlog may be canceled or deferred by customers, subject in certain cases to cancellation penalties. See Segment Operations beginning on page 35 for further discussion on unfilled orders of relatively long-cycle manufacturing businesses. REGARDING ENVIRONMENTAL MATTERS, GE's operations, like operations of other companies engaged in similar businesses, involve the use, disposal and cleanup of substances regulated under environmental protection laws. In 1998, GE expended about $81 million for capital projects related to the environment. The comparable amount in 1997 was $80 million. These amounts exclude expenditures for remediation actions, which are principally expensed and are discussed below. Capital expenditures for environmental purposes have included pollution control devices -- such as wastewater treatment plants, groundwater monitoring devices, air strippers or separators, and incinerators -- at new and existing facilities constructed or upgraded in the normal course of business. Consistent with policies stressing environmental responsibility, average annual capital expenditures other than for remediation projects are presently expected to be about $85 million over the next two years. This level is in line with existing levels for new or expanded programs to build facilities or modify manufacturing processes to minimize waste and reduce emissions. GE also is involved in a sizable number of remediation actions to clean up hazardous wastes as required by federal and state laws. Such statutes require that responsible parties fund remediation actions regardless of fault, legality of original disposal or ownership of a disposal site. Expenditures for site remediation actions amounted to approximately $127 million in 1998, compared with $84 million in 1997. It is presently expected that such remediation actions will require average annual expenditures in the range of $90 million to $170 million over the next two years. [CHART HERE] YEAR-END MARKET CAPITALIZATION - ----------------------------------------------------------------------------- (IN BILLIONS) 1994 1995 1996 1997 1998 - ----------------------------------------------------------------------------- $87.004 $119.989 $162.604 $239.539 $333.762 - ----------------------------------------------------------------------------- [CHART HERE] GE SHARE PRICE ACTIVITY - ------------------------------------------------------------------------------ (IN DOLLARS) 1994 1995 1996 1997 1998 - ------------------------------------------------------------------------------ HIGH $27 7/16 $36 9/16 $53 1/16 $76 9/16 $103 15/16 LOW 22 1/2 24 1/2 34 3/4 47 15/16 69 CLOSE 25 1/2 36 49 7/16 73 3/8 102 - ------------------------------------------------------------------------------ F-23 ANNUAL REPORT PAGE 47 - --------------------- SELECTED FINANCIAL DATA
------------------------------------------------------------------------ (Dollar amounts in millions; per-share amounts in dollars) 1998 1997 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------------------------ GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES Revenues $ 100,469 $ 90,840 $ 79,179 $ 70,028 $ 60,109 Earnings from continuing operations 9,296 8,203 7,280 6,573 5,915 Loss from discontinued operations -- -- -- -- (1,189) Net earnings 9,296 8,203 7,280 6,573 4,726 Dividends declared 4,081 3,535 3,138 2,838 2,546 Earned on average share owners' equity 25.7% 25.0% 24.0% 23.5% 18.1% Per share Earnings from continuing operations-- basic $ 2.84 $ 2.50 $ 2.20 $ 1.95 $ 1.73 Loss from discontinued operations -- -- -- -- (0.35) Net earnings-- basic 2.84 2.50 2.20 1.95 1.38 Net earnings-- diluted 2.80 2.46 2.16 1.93 1.37 Dividends declared 1.25 1.08 0.95 0.845 0.745 Stock price range 103 5/16-69 76 9/16- 53 1/16- 36 9/16- 27 7/16- 47 15/16 34 3/4 24 15/16 22 1/2 Year-end closing stock price 102 73 3/8 49 7/16 36 25 1/2 Total assets of continuing operations 355,935 304,012 272,402 228,035 185,871 Long-term borrowings 59,663 46,603 49,246 51,027 36,979 Shares outstanding-- average (in thousands) 3,268,998 3,274,692 3,307,394 3,367,624 3,417,476 Share owner accounts-- average 534,000 509,000 486,000 460,000 458,000 Employees at year end United States 163,000 165,000 155,000 150,000 156,000 Other countries 130,000 111,000 84,000 72,000 60,000 Discontinued operations (primarily U.S.) -- -- -- -- 5,000 ------------------------------------------------------------------------ Total employees 293,000 276,000 239,000 222,000 221,000 ==================================================================================================================================== GE DATA Short-term borrowings $ 3,466 $ 3,629 $ 2,339 $ 1,666 $ 906 Long-term borrowings 681 729 1,710 2,277 2,699 Minority interest 816 569 477 434 382 Share owners' equity 38,880 34,438 31,125 29,609 26,387 ------------------------------------------------------------------------ Total capital invested $ 43,843 $ 39,365 $ 35,651 $ 33,986 $ 30,374 ======================================================================== Return on average total capital invested 23.9% 23.6% 22.2% 21.3% 15.9% Borrowings as a percentage of total capital invested 9.5% 11.1% 11.4% 11.6% 11.9% Working capital (a) $ 5,038 $ 5,990 $ 6,598 $ 7,405 $ 6,552 Additions to property, plant and equipment 2,047 2,191 2,389 1,831 1,743 ==================================================================================================================================== GECS DATA 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 -- -- -- -- (1,189) Net earnings 3,796 3,256 2,817 2,415 896 Share owner's equity 19,727 17,239 14,276 12,774 9,380 Minority interest 3,459 3,113 2,530 2,522 1,465 Borrowings from others 172,200 141,263 125,621 111,598 91,399 Ratio of debt to equity at GE Capital 7.86:1 7.45:1 7.84:1 7.59:1 8.43:1 Total assets of continuing operations $ 303,297 $ 255,408 $ 227,419 $ 185,729 $ 144,967 Insurance premiums written 11,865 9,396 8,185 6,158 3,962 - ------------------------------------------------------------------------------------------------------------------------------------ Discontinued operations reflect the results of Kidder, Peabody, the discontinued GECS securities broker-dealer, in 1994. Transactions between GE and GECS have been eliminated from the consolidated information. (a) Working capital is defined as the sum of receivables from the sales of goods and services plus inventories less trade accounts payable and progress collections.
F-24 ANNUAL REPORT PAGE 48 - --------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONSOLIDATION. The consolidated financial statements represent the adding together of all affiliates -- companies that General Electric directly or indirectly controls. Results of associated companies -- generally companies that are 20% to 50% owned and over which GE, directly or indirectly, has significant influence -- are included in the financial statements on a "one-line" basis. FINANCIAL STATEMENT PRESENTATION. Financial data and related measurements are presented in the following categories. o GE. This represents the adding together of all affiliates other than General Electric Capital Services, Inc. (GECS), whose operations are presented on a one-line basis. o GECS. This affiliate owns all of the common stock of General Electric Capital Corporation (GE Capital) and GE Global Insurance Holding Corporation (GE Global Insurance). GE Capital, GE Global Insurance and their respective affiliates are consolidated in the GECS columns and constitute its business. o CONSOLIDATED. This represents the adding together of GE and GECS. The effects of transactions among related companies within and between each of the above-mentioned groups are eliminated. Transactions between GE and GECS are not material. Certain prior-year amounts have been reclassified to conform to the 1998 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. SALES OF GOODS AND SERVICES. A sale is recorded when title passes to the customer or when services are performed in accordance with contracts. GECS 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 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 GECS insurance accounting policies on page 49. DEPRECIATION AND AMORTIZATION. The cost of most of GE's manufacturing plant and equipment is depreciated using an accelerated method based primarily on a sum-of-the-years digits formula. The cost of GECS equipment leased to others on operating leases 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. Depreciation of property and equipment used by GECS is recorded on either a sum-of-the-years digits formula or a straight-line basis over the lives of the assets. 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 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. When collateral is repossessed in satisfaction of a loan, the receivable is written down against the allowance for losses to estimated fair value of the asset 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. F-25 ANNUAL REPORT PAGE 49 - --------------------- CASH AND EQUIVALENTS. Debt securities with original maturities of three months or less are included in cash equivalents unless designated as available for sale and classified as investment securities. INVESTMENT SECURITIES. 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 share owners' 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. All inventories are stated at the lower of cost or realizable values. Cost for virtually all of GE's U.S. inventories is determined on a last-in, first-out (LIFO) basis. Cost of other GE inventories is primarily determined on a first-in, first-out (FIFO) basis. GECS inventories consist primarily of finished products held for sale. Cost is primarily determined on a FIFO basis. 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 asset. INTEREST RATE AND CURRENCY RISK MANAGEMENT. As a matter of policy, neither GE nor GECS engages in derivatives trading, derivatives market-making or other speculative activities. GE and GECS use swaps primarily to optimize funding costs. To a lesser degree, and in combination with options and limit contracts, GECS 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. Both GE and GECS require 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. GECS INSURANCE ACCOUNTING POLICIES. Accounting policies for GECS insurance businesses follow. 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. 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 insurance contracts, acquisition costs consist primarily of commissions, F-26 ANNUAL REPORT PAGE 50 - --------------------- 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. 2 GE OTHER INCOME ------------------------------------ (In millions) 1998 1997 1996 - -------------------------------------------------------------------------------- Residual licensing and royalty income RCA Licensing $ 250 $ 287 $ 265 Other 51 54 60 Associated companies (9) 50 50 Marketable securities and bank deposits 114 78 72 Customer financing 19 26 29 Other investments Dividends 8 62 79 Interest 8 1 18 Other items 243 1,749 56 ------------------------------------ $ 684 $ 2,307 $ 629 ================================================================================ Effective January 1, 1999, GE transferred certain licenses and intellectual property pursuant to an agreement to sell the former RCA Consumer Electronics business. Licensing income from these assets is shown under the caption "RCA Licensing" in the table above. Included in the "Other items" caption for 1997 is a gain of $1,538 million related to a tax-free exchange between GE and Lockheed Martin Corporation (Lockheed Martin). In exchange for its investment in Lockheed Martin Series A preferred stock, GE acquired a Lockheed Martin subsidiary containing two businesses, an equity interest and cash to the extent necessary to equalize the value of the exchange, a portion of which was subsequently loaned to Lockheed Martin. 3 GECS REVENUES FROM SERVICES ----------------------------------- (In millions) 1998 1997 1996 - -------------------------------------------------------------------------------- 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 businesses 11,352 9,268 8,145 ------------------------------------ $41,320 $35,309 $30,787 ================================================================================ For insurance businesses, the effects of reinsurance on premiums written and premium and commission income were as follows: --------------------------------------- (In millions) 1998 1997 1996 - -------------------------------------------------------------------------------- PREMIUMS WRITTEN Direct $ 6,237 $ 5,206 $ 3,926 Assumed 7,470 5,501 5,455 Ceded (1,842) (1,311) (1,196) --------------------------------------- $ 11,865 $ 9,396 $ 8,185 ======================================= PREMIUM AND COMMISSION INCOME Direct $ 6,063 $ 5,138 $ 3,850 Assumed 7,151 5,386 5,353 Ceded (1,862) (1,256) (1,058) --------------------------------------- $ 11,352 $ 9,268 $ 8,145 ================================================================================ 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. F-27 ANNUAL REPORT PAGE 51 - --------------------- 4 SUPPLEMENTAL COST DETAILS Total expenditures for research and development were $1,930 million, $1,891 million and $1,886 million in 1998, 1997 and 1996, respectively. The Company-funded portion aggregated $1,537 million in 1998, $1,480 million in 1997 and $1,421 million in 1996. Rental expense under operating leases is shown below. ---------------------------------- (In millions) 1998 1997 1996 - -------------------------------------------------------------------------------- GE $568 $536 $512 GECS 889 734 547 - -------------------------------------------------------------------------------- At December 31, 1998, minimum rental commitments under noncancelable operating leases aggregated $2,479 million and $5,168 million for GE and GECS, respectively. Amounts payable over the next five years follow. ------------------------------------------------ (In millions) 1999 2000 2001 2002 2003 - -------------------------------------------------------------------------------- GE $453 $375 $296 $223 $187 GECS 720 636 582 519 468 - -------------------------------------------------------------------------------- GE's selling, general and administrative expense totaled $7,177 million in 1998, $7,476 million in 1997 and $6,274 million in 1996. Insignificant amounts of interest were capitalized by GE and GECS in 1998, 1997 and 1996. 5 PENSION BENEFITS GE and its affiliates sponsor a number of pension plans. Principal pension plans are discussed below; other pension plans are not significant individually or in the aggregate. PRINCIPAL PENSION PLANS are the GE Pension Plan and the GE Supplementary Pension Plan. The GE Pension Plan covers substantially all GE employees in the United States as well as approximately two-thirds of GECS employees in the United States. Generally, benefits are based on the greater of a formula recognizing career earnings or a formula recognizing length of service and final average earnings. Benefit provisions are subject to collective bargaining. At the end of 1998, the GE Pension Plan covered approximately 466,000 participants, including 127,000 employees, 149,000 former employees with vested rights to future benefits, and 190,000 retirees and beneficiaries receiving benefits. The GE Supplementary Pension Plan is a pay-as-you-go plan providing supplementary retirement benefits primarily to higher-level, longer-service U.S. employees. The effect on operations of principal pension plans is as follows: - -------------------------------------------------------------------------------- EFFECT ON OPERATIONS -------------------------------- (In millions) 1998 1997 1996 - -------------------------------------------------------------------------------- Expected return on plan assets $ 3,024 $ 2,721 $ 2,587 Service cost for benefits earned (a) (625) (596) (550) Interest cost on benefit obligation (1,749) (1,686) (1,593) Prior service cost (153) (145) (99) SFAS No. 87 transition gain 154 154 154 Net actuarial gain recognized 365 295 210 Special early retirement cost -- (412) -- -------------------------------- Total pension plan income $ 1,016 $ 331 $ 709 ================================================================================ (a) Net of participant contributions. - -------------------------------------------------------------------------------- FUNDING POLICY for the GE Pension Plan is to contribute amounts sufficient to meet minimum funding requirements as set forth in employee benefit and tax laws plus such additional amounts as GE may determine to be appropriate. GE has not made contributions since 1987 because the fully funded status of the GE Pension Plan precludes current tax deduction and because any GE contribution would require payment of annual excise taxes. Changes in the projected benefit obligation for principal pension plans follow. - -------------------------------------------------------------------------------- PROJECTED BENEFIT OBLIGATION ------------------------- December 31 (In millions) 1998 1997 - -------------------------------------------------------------------------------- Balance at January 1 $ 25,874 $ 23,251 Service cost for benefits earned (a) 625 596 Interest cost on benefit obligation 1,749 1,686 Participant contributions 112 120 Plan amendments -- 136 Actuarial loss 1,050 1,388 Benefits paid (1,838) (1,715) Special early retirement cost -- 412 ------------------------- Balance at December 31 $ 27,572 $ 25,874 ================================================================================ (a) Net of participant contributions. - -------------------------------------------------------------------------------- Changes in the fair value of assets for principal pension plans follow. - -------------------------------------------------------------------------------- FAIR VALUE OF ASSETS --------------------------- December 31 (In millions) 1998 1997 - -------------------------------------------------------------------------------- Balance at January 1 $ 38,742 $ 33,686 Actual return on plan assets 6,363 6,587 Employer contributions 68 64 Participant contributions 112 120 Benefits paid (1,838) (1,715) --------------------------- Balance at December 31 $ 43,447 $ 38,742 ================================================================================ Plan assets are held in trust and consist mainly of common stock and fixed-income investments. GE common stock represented about 7% and 6% of trust assets at year-end 1998 and 1997, respectively. F-28 ANNUAL REPORT PAGE 52 - --------------------- GE recorded assets and liabilities for principal pension plans as follows: - -------------------------------------------------------------------------------- PREPAID PENSION ASSET --------------------------- December 31 (In millions) 1998 1997 - -------------------------------------------------------------------------------- Fair value of plan assets $ 43,447 $ 38,742 Add (deduct) unrecognized balances SFAS No. 87 transition gain (308) (462) Net actuarial gain (9,462) (7,538) Prior service cost 850 1,003 Projected benefit obligation (27,572) (25,874) Pension liability 797 703 --------------------------- Prepaid pension asset $ 7,752 $ 6,574 ================================================================================ ACTUARIAL ASSUMPTIONS used to determine costs and benefit obligations for principal pension plans follow. - -------------------------------------------------------------------------------- ACTUARIAL ASSUMPTIONS ------------------------------- December 31 1998 1997 1996 - -------------------------------------------------------------------------------- Discount rate 6.75% 7.0% 7.5% Compensation increases 5.0 4.5 4.5 Return on assets for the year 9.5 9.5 9.5 ================================================================================ Experience gains and losses, as well as the effects of changes in actuarial assumptions and plan provisions, are amortized over the average future service period of employees. 6 RETIREE HEALTH AND LIFE BENEFITS GE and its affiliates sponsor a number of retiree health and life insurance benefit plans. Principal retiree benefit plans are discussed below; other such plans are not significant individually or in the aggregate. PRINCIPAL RETIREE BENEFIT PLANS generally provide health and life insurance benefits to employees who retire under the GE Pension Plan (see note 5) with 10 or more years of service. Retirees share in the cost of health care benefits. Benefit provisions are subject to collective bargaining. At the end of 1998, these plans covered approximately 250,000 retirees and dependents. The effect on operations of principal retiree benefit plans is shown in the following table. - -------------------------------------------------------------------------------- EFFECT ON OPERATIONS ------------------------------ (In millions) 1998 1997 1996 - -------------------------------------------------------------------------------- RETIREE HEALTH PLANS Service cost for benefits earned $ 79 $ 90 $ 77 Interest cost on benefit obligation 205 183 166 Prior service cost 14 (3) (20) Net actuarial loss recognized 28 16 20 Special early retirement cost -- 152 -- ------------------------------ Retiree health plan cost 326 438 243 ------------------------------ RETIREE LIFE PLANS Expected return on plan assets (149) (137) (132) Service cost for benefits earned 17 17 16 Interest cost on benefit obligation 114 116 106 Prior service cost (6) (8) (11) Net actuarial loss recognized 11 16 23 Special early retirement cost -- 13 -- ------------------------------ Retiree life plan cost (income) (13) 17 2 ------------------------------ Total cost $ 313 $ 455 $ 245 ================================================================================ FUNDING POLICY for retiree health benefits is generally to pay covered expenses as they are incurred. GE funds retiree life insurance benefits at its discretion. Changes in the accumulated postretirement benefit obligation for retiree benefit plans follow. - -------------------------------------------------------------------------------- ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATION Health plans Life plans -------------------- -------------------- December 31 (In millions) 1998 1997 1998 1997 - -------------------------------------------------------------------------------- Balance at January 1 $ 3,098 $ 2,415 $ 1,677 $ 1,539 Service cost for benefits earned 79 90 17 17 Interest cost on benefit obligation 205 183 114 116 Participant contributions 24 21 -- -- Plan amendments -- 325 -- 44 Actuarial loss 177 245 91 56 Benefits paid (363) (333) (112) (108) Special early retirement cost -- 152 -- 13 -------------------- -------------------- Balance at December 31 $ 3,220 $ 3,098 $ 1,787 $ 1,677 ================================================================================ Changes in the fair value of assets for retiree benefit plans follow. - -------------------------------------------------------------------------------- FAIR VALUE OF ASSETS Health plans Life plans -------------------- -------------------- December 31 (In millions) 1998 1997 1998 1997 - -------------------------------------------------------------------------------- Balance at January 1 $ -- $ -- $ 1,917 $ 1,682 Actual return on plan assets -- -- 316 343 Employer contributions 339 312 -- -- Participant contributions 24 21 -- -- Benefits paid (363) (333) (112) (108) -------------------- -------------------- Balanace at December 31 $ -- $ -- $ 2,121 $ 1,917 ================================================================================ F-29 ANNUAL REPORT PAGE 53 - --------------------- Plan assets are held in trust and consist mainly of common stock and fixed-income investments. GE common stock represented about 5% and 4% of trust assets at year-end 1998 and 1997, respectively. GE recorded assets and liabilities for retiree benefit plans as follows: - -------------------------------------------------------------------------------- RETIREE BENEFIT LIABILITY/ASSET Health plans Life plans -------------------- -------------------- December 31 (In millions) 1998 1997 1998 1997 - -------------------------------------------------------------------------------- Accumulated postretirement benefit obligation $ 3,220 $ 3,098 $ 1,787 $ 1,677 Add (deduct) unrecognized balances Net actuarial gain/(loss) (572) (423) 214 127 Prior service cost (157) (171) 49 55 Fair value of plan assets -- -- (2,121) (1,917) -------------------- -------------------- Retiree benefit liability/ (asset) $ 2,491 $ 2,504 $ (71) $ (58) ================================================================================ ACTUARIAL ASSUMPTIONS used to determine costs and benefit obligations for principal retiree benefit plans are shown below. - -------------------------------------------------------------------------------- ACTUARIAL ASSUMPTIONS ------------------------------- December 31 1998 1997 1996 - -------------------------------------------------------------------------------- Discount rate 6.75% 7.0% 7.5% Compensation increases 5.0 4.5 4.5 Health care cost trend (a) 7.8 7.8 8.0 Return on assets for the year 9.5 9.5 9.5 ================================================================================ (a) For 1998, gradually declining to 5.0% after 2003. - -------------------------------------------------------------------------------- Increasing or decreasing the health care cost trend rates by one percentage point would not have had a material effect on the December 31, 1998, accumulated postretirement benefit obligation or the annual cost of retiree health plans. Experience gains and losses, as well as the effects of changes in actuarial assumptions and plan provisions, are amortized over the average future service period of employees. 7 GECS ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES ---------------------------------- (In millions) 1998 1997 1996 - ------------------------------------------------------------------------------- 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 ================================================================================ 8 PROVISION FOR INCOME TAXES ---------------------------------- (In millions) 1998 1997 1996 - -------------------------------------------------------------------------------- GE Estimated amounts payable $ 2,227 $ 2,332 $ 2,235 Deferred tax expense (benefit) from temporary differences 590 (522) 60 ---------------------------------- 2,817 1,810 2,295 ---------------------------------- GECS Estimated amounts payable 815 368 164 Deferred tax expense from temporary differences 549 798 1,067 ---------------------------------- 1,364 1,166 1,231 ---------------------------------- CONSOLIDATED Estimated amounts payable 3,042 2,700 2,399 Deferred tax expense from temporary differences 1,139 276 1,127 ---------------------------------- $ 4,181 $ 2,976 $ 3,526 ================================================================================ GE includes GECS in filing a consolidated U.S. federal income tax return. The GECS provision for estimated taxes payable includes its effect on the consolidated return. Estimated consolidated amounts payable includes amounts applicable to U.S. federal income taxes of $1,459 million, $1,176 million and $971 million in 1998, 1997 and 1996, respectively, and amounts applicable to non-U.S. jurisdictions of $1,335 million, $1,298 million and $1,204 million in 1998, 1997 and 1996, respectively. Deferred tax expense related to U.S. federal income taxes was $971 million, $354 million and $1,081 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. See note 22 for details. Except for certain earnings that GE 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. Consolidated U.S. income before taxes was $9.7 billion in 1998, $8.2 billion in 1997 and $8.0 billion in 1996. The corresponding amounts for non-U.S.-based operations were $3.8 billion in 1998, $3.0 billion in 1997 and $2.8 billion in 1996. A reconciliation of the U.S. federal statutory tax rate to the actual tax rate is provided on the following page. F-30 ANNUAL REPORT PAGE 54 - ---------------------
- ------------------------------------------------------------------------------------------------------------------------------------ RECONCILIATION OF U.S. FEDERAL STATUTORY TAX RATE TO ACTUAL RATE Consolidated GE GECS ------------------------- -------------------------- ------------------------- 1998 1997 1996 1998 1997 1996 1998 1997 1996 ------------------------------------------------------------------------------------- Statutory U.S. federal income tax rate 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% ========================= ========================== ========================= Increase (reduction) in rate resulting from: Inclusion of after-tax earnings of GECS in before-tax earnings of GE -- -- -- (11.0) (11.4) (10.3) -- -- -- Lockheed Martin exchange (note 2) -- (4.8) -- -- (5.4) -- -- -- -- Amortization of goodwill 1.1 1.1 1.1 0.7 0.8 0.8 1.0 1.1 1.2 Tax-exempt income (1.8) (1.9) (2.0) -- -- -- (4.7) (4.9) (5.4) Foreign Sales Corporation tax benefits (1.2) (1.0) (0.7) (1.0) (0.9) (0.6) (0.6) (0.5) (0.3) Dividends received, not fully taxable (0.4) (0.5) (0.6) -- (0.2) (0.2) (1.0) (0.9) (1.1) All other -- net (1.7) (1.3) (0.2) (0.4) 0.2 (0.7) (3.3) (3.4) 1.0 ------------------------- -------------------------- ------------------------- (4.0) (8.4) (2.4) (11.7) (16.9) (11.0) (8.6) (8.6) (4.6) ------------------------- -------------------------- ------------------------- Actual income tax rate 31.0% 26.6% 32.6% 23.3% 18.1% 24.0% 26.4% 26.4% 30.4% ====================================================================================================================================
9 Earnings Per Share Information
1998 1997 1996 ------------------- ------------------- ------------------- (In millions; per-share amounts in dollars) Diluted Basic Diluted Basic Diluted Basic - ------------------------------------------------------------------------------------------------------------------------------------ CONSOLIDATED OPERATIONS Net earnings available to common share owners $9,296 $9,296 $8,203 $8,203 $7,280 $7,280 Dividend equivalents -- net of tax 13 -- 10 -- 9 -- ------------------- ------------------- ------------------- Net earnings available for per-share calculation $9,309 $9,296 $8,213 $8,203 $7,289 $7,280 ------------------- ------------------- ------------------- AVERAGE EQUIVALENT SHARES Shares of GE common stock outstanding 3,269 3,269 3,275 3,275 3,307 3,307 Employee compensation-related shares, including stock options 61 -- 70 -- 64 -- ------------------- ------------------- ------------------- Total average equivalent shares 3,330 3,269 3,345 3,275 3,371 3,307 ------------------- ------------------- ------------------- Net earnings per share $ 2.80 $ 2.84 $ 2.46 $ 2.50 $ 2.16 $ 2.20 ====================================================================================================================================
F-31 ANNUAL REPORT PAGE 55 - --------------------- 10 INVESTMENT SECURITIES ---------------------------------------------- Gross Gross Amortized unrealized unrealized Estimated (In millions) cost gains losses fair value - -------------------------------------------------------------------------------- DECEMBER 31, 1998 GE Equity securities $ 233 $ 26 $ -- $ 259 ---------------------------------------------- GECS 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 ---------------------------------------------- CONSOLIDATED TOTALS $ 74,709 $ 4,748 $ (740) $ 78,717 ================================================================================ DECEMBER 31, 1997 GE Equity securities $ 257 $ 13 $ (5) $ 265 ---------------------------------------------- GECS 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 ---------------------------------------------- CONSOLIDATED TOTALS $ 66,915 $ 3,917 $ (211) $ 70,621 ================================================================================ 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: - -------------------------------------------------------------------------------- CONTRACTUAL MATURITIES OF DEBT SECURITIES (EXCLUDING MORTGAGE-BACKED SECURITIES) ---------------------------- Amortized Estimated (In millions) cost fair value - -------------------------------------------------------------------------------- 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 ================================================================================ 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 by GE and GECS in 1998 were $16,707 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 $308 million in 1998 ($173 million in 1997 and $190 million in 1996). 11 GE CURRENT RECEIVABLES ------------------------- December 31 (In millions) 1998 1997 - -------------------------------------------------------------------------------- Aircraft Engines $ 1,722 $ 2,118 Appliances 299 300 Industrial Products and Systems 1,274 1,645 NBC 261 362 Plastics 1,070 1,037 Power Systems 2,620 2,376 Technical Products and Services 904 786 All Other 141 130 Corporate 495 538 ------------------------- 8,786 9,292 Less allowance for losses (303) (238) ------------------------- $ 8,483 $ 9,054 ================================================================================ Receivables balances at December 31, 1998 and 1997, before allowance for losses, included $5,447 million and $6,125 million, respectively, from sales of goods and services to customers, and $350 million and $285 million, respectively, from transactions with associated companies. Current receivables of $305 million at year-end 1998 and $303 million at year-end 1997 arose from sales, principally of aircraft engine goods and services, on open account to various agencies of the U.S. government, which is GE's largest single customer. About 4% of GE's sales of goods and services were to the U.S. government in 1998 and 1997, compared with about 5% in 1996. 12 INVENTORIES ------------------------- December 31 (In millions) 1998 1997 - -------------------------------------------------------------------------------- GE Raw materials and work in process $ 3,154 $ 3,070 Finished goods 2,967 2,895 Unbilled shipments 195 242 ------------------------- 6,316 6,207 Less revaluation to LIFO (1,011) (1,098) ------------------------- 5,305 5,109 ------------------------- GECS Finished goods 744 786 ------------------------- $ 6,049 $ 5,895 ================================================================================ LIFO revaluations decreased $87 million in 1998, compared with decreases of $119 million in 1997 and $128 million in 1996. Included in these changes were decreases of $29 million, $59 million and $58 million in 1998, 1997 and 1996, respectively, that resulted from lower LIFO inventory levels. There were net cost decreases in each of the last three years. As of December 31, 1998, GE is obligated to acquire certain raw materials at market prices through the year 2008 under various take-or-pay or similar arrangements. Annual minimum commitments under these arrangements are insignificant. F-32 ANNUAL REPORT PAGE 56 - --------------------- 13 GECS FINANCING RECEIVABLES (INVESTMENTS IN TIME SALES, LOANS AND FINANCING LEASES) --------------------------- December 31 (In millions) 1998 1997 - -------------------------------------------------------------------------------- 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 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 (3,288) (2,802) --------------------------- $ 121,566 $ 103,799 ================================================================================ 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 17 contains information on 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, GECS is taxed on total lease payments received and is entitled to tax deductions based on the cost of leased assets and tax deductions for interest paid to third-party participants. GECS 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. GECS has no general obligation for principal and interest on notes and other instruments representing third-party participation related to leveraged leases; such notes and other instruments have not been included in liabilities but have been offset against the related rentals receivable. The GECS share of rentals receivable on leveraged leases is subordinate to the share of other participants who also have security interests in the leased equipment. 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.
- --------------------------------------------------------------------------------------------------------------------------- NET INVESTMENT IN FINANCING LEASES Total financing leases Direct financing leases Leveraged leases ---------------------- ----------------------- --------------------- December 31 (In millions) 1998 1997 1998 1997 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------------ 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 (as shown above) 47,571 41,769 43,730 38,616 3,841 3,153 Less amounts to arrive at net investment Allowance for losses (619) (656) (519) (575) (100) (81) Deferred taxes (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) ====================================================================================================================================
F-33 ANNUAL REPORT PAGE 57 - --------------------- GECS has a noncontrolling interest in 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 discussions below. 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. Nonearning consumer receivables were $1,250 million and $1,049 million at December 31, 1998 and 1997, respectively, a substantial amount of which were 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 commercial loans held by GECS. An analysis of impaired loans follows. ---------------- December 31 (In millions) 1998 1997 - -------------------------------------------------------------------------------- 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 (a) 39 32 ================================================================================ (a) Principally on the cash basis. - -------------------------------------------------------------------------------- 14 OTHER GECS 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 GECS receivables" are trade receivables, accrued investment income, operating lease receivables and a variety of sundry items. 15 PROPERTY, PLANT AND EQUIPMENT (INCLUDING EQUIPMENT LEASED TO OTHERS) ---------------------- December 31 (In millions) 1998 1997 - -------------------------------------------------------------------------------- ORIGINAL COST GE Land and improvements $ 459 $ 459 Buildings, structures and related equipment 6,579 6,375 Machinery and equipment 19,491 18,376 Leasehold costs and manufacturing plant under construction 1,757 1,621 Other 24 24 ---------------------- 28,310 26,855 ---------------------- GECS Buildings and equipment 4,828 3,987 Equipment leased to others 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 ---------------------- 32,790 28,802 ---------------------- $61,100 $55,657 ====================== ACCUMULATED DEPRECIATION AND AMORTIZATION GE $16,616 $15,737 GECS Buildings and equipment 1,733 1,478 Equipment leased to others 7,021 6,126 ---------------------- $25,370 $23,341 ================================================================================ Amortization of GECS equipment leased to others 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-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. F-34 ANNUAL REPORT PAGE 58 - --------------------- 16 INTANGIBLE ASSETS -------------------- December 31 (In millions) 1998 1997 - -------------------------------------------------------------------------------- GE Goodwill $ 9,203 $ 8,046 Other intangibles 793 709 -------------------- 9,996 8,755 -------------------- GECS Goodwill 11,469 8,090 Present value of future profits (PVFP) 1,618 1,824 Other intangibles 552 452 -------------------- 13,639 10,366 -------------------- $23,635 $19,121 ================================================================================ GE intangible assets are shown net of accumulated amortization of $2,923 million in 1998 and $2,976 million in 1997. GECS intangible assets are net of accumulated amortization of $3,396 million in 1998 and $2,615 million in 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. 17 ALL OTHER ASSETS ------------------------- December 31 (In millions) 1998 1997 - -------------------------------------------------------------------------------- GE Investments Associated companies (a) $ 2,336 $ 1,692 Other 474 735 ------------------------- 2,810 2,427 Prepaid pension asset 7,752 6,574 Long-term receivables, including notes 2,379 2,389 Prepaid broadcasting rights 929 595 Other 4,161 2,744 ------------------------- 18,031 14,729 ------------------------- GECS Investments Assets acquired for resale 6,167 4,403 Associated companies (a) 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 ------------------------- ELIMINATIONS (662) (576) ------------------------- $ 52,908 $ 39,820 ================================================================================ (a) Includes advances - -------------------------------------------------------------------------------- In line with industry practice, sales of commercial jet aircraft engines often involve long-term customer financing commitments. In making such commitments, it is GE's general practice to require that it have or be able to establish a secured position in the aircraft being financed. Under such airline financing programs, GE had issued loans and guarantees (principally guarantees) amounting to $1,473 million at year-end 1998 and $1,590 million at year-end 1997; and it had entered into commitments totaling $1,519 million and $1,794 million at year-end 1998 and 1997, respectively, to provide financial assistance on future aircraft engine sales. Estimated fair values of the aircraft securing these receivables and associated guarantees exceeded the related account balances and guaranteed amounts at December 31, 1998. GECS acts as a lender and lessor to the commercial airline industry. At December 31, 1998 and 1997, the balance of such GECS loans, leases and equipment leased to others was $10,170 million and $8,980 million, respectively. In addition, at December 31, 1998, GECS 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). At year-end 1998, the National Broadcasting Company had $9,376 million of commitments to acquire broadcast material and the rights to broadcast television programs, including U.S. television rights to future Olympic Games, and commitments under long-term television station affiliation agreements that require payments through the year 2009. In connection with numerous projects, primarily power generation bids and contracts, GE had issued various bid and performance bonds and guarantees totaling $3,740 million at year-end 1998 and $2,895 million at year-end 1997. Separate accounts represent investments controlled by policyholders and are associated with identical amounts reported as insurance liabilities in note 20. 18 GE ALL OTHER CURRENT COSTS AND EXPENSES ACCRUED At year-end 1998 and 1997, this account included taxes accrued of $3,415 million and $2,866 million and compensation and benefit accruals of $1,487 million and $1,321 million, respectively. Also included are amounts for product warranties, restructuring, estimated costs on shipments billed to customers and a variety of sundry items. An analysis of changes in the restructuring liability follows. ---------------------------------------- Termination Exit (In millions) benefits costs Total - -------------------------------------------------------------------------------- 1997 provision $ 778 $ 465 $ 1,243 Charges (672) (395) (1,067) Reversed to operations -- (28) (28) ---------------------------------------- Balance at December 31, 1998 $ 106 $ 42 $ 148 ================================================================================ Substantially all of the 1997 provision is expected to be utilized by year-end 1999. F-35 ANNUAL REPORT PAGE 59 - --------------------- 19 BORROWINGS - -------------------------------------------------------------------------------- SHORT-TERM BORROWINGS ---------------------------------------------- 1998 1997 ----------------------- --------------------- Average Average December 31 (In millions) Amount rate (a) Amount rate (a) - --------------------------------------------------------- --------------------- GE Commercial paper (U.S.) $ 2,339 5.29% $ 1,835 5.88% Payable to banks, principally non-U.S 465 11.15 348 8.38 Current portion of long-term debt 50 5.08 1,099 5.85 Other 612 347 ---------------------------------------------- 3,466 3,629 ---------------------------------------------- GECS Commercial paper U.S 83,044 5.38 67,355 5.93 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 ---------------------------------------------- ELIMINATIONS (1,250) (828) ---------------------------------------------- $115,378 $98,075 ================================================================================ - -------------------------------------------------------------------------------- LONG-TERM BORROWINGS ---------------------------------------------- 1998 Average -------------------- December 31 (In millions) rate (a) Maturities 1998 1997 - -------------------------------------------------------------------------------- GE Industrial development/ pollution control bonds 3.78% 2003-2027 $ 327 $ 270 Payable to banks, principally non-U.S 9.56 2000-2006 230 195 Other (b) 124 264 --------------------- 681 729 --------------------- GECS Senior notes 6.07 2000-2055 58,042 44,993 Subordinated notes (c) 7.88 2006-2035 996 996 --------------------- 59,038 45,989 --------------------- ELIMINATIONS (56) (115) --------------------- $59,663 $ 46,603 ================================================================================ (a) 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. (b) A variety of obligations having various interest rates and maturities, including certain borrowings by parent operating components and affiliates. (c) Guaranteed by GE. - -------------------------------------------------------------------------------- Borrowings of GE and GECS are addressed below from two perspectives -- liquidity and interest rate management. Additional information about borrowings and associated swaps can be found in note 30. LIQUIDITY requirements of GE and GECS are principally met through the credit markets. Maturities of long-term borrowings during the next five years follow. --------------------------------------------------- (In millions) 1999 2000 2001 2002 2003 - -------------------------------------------------------------------------------- GE $ 50 $ 137 $ 132 $ 33 $ 48 GECS 14,645 13,889 10,925 7,059 4,794 - -------------------------------------------------------------------------------- Confirmed credit lines of $4.0 billion had been extended to GE by 23 banks at year-end 1998. Substantially all of GE's credit lines are available to GECS and its affiliates in addition to their own credit lines. At year-end 1998, GECS and its affiliates held committed lines of credit aggregating $26.7 billion, including $11.8 billion of revolving credit agreements pursuant to which it has the right to borrow funds for periods exceeding one year. Amounts drawn by GECS under these lines at December 31, 1998, were not significant. A total of $1.5 billion of GE Capital credit lines is available for use by GE. Both GE and GECS compensate certain banks for credit facilities in the form of fees, which were insignificant in each of the past three years. INTEREST RATES ARE MANAGED by GECS 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. The following table shows GECS borrowing positions considering the effects of swaps. - -------------------------------------------------------------------------------- EFFECTIVE BORROWINGS (INCLUDING SWAPS) ----------------------- December 31 (In millions) 1998 1997 - -------------------------------------------------------------------------------- Short-term $ 72,143 $ 56,961 ----------------------- Long-term (including current portion) Fixed rate (a) $ 74,226 $ 59,329 Floating rate 25,831 24,973 ----------------------- Total long-term $100,057 $ 84,302 ================================================================================ (a) 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. - -------------------------------------------------------------------------------- At December 31, 1998, 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). F-36 ANNUAL REPORT PAGE 60 - --------------------- 20 GECS INSURANCE LIABILITIES, RESERVES AND ANNUITY BENEFITS ----------------------- December 31 (In millions) 1998 1997 - -------------------------------------------------------------------------------- Investment contracts and universal life benefits $29,266 $28,266 Life insurance benefits and other (a) 16,104 14,356 Unpaid claims and claims adjustment expenses (b) 19,611 14,654 Unearned premiums 5,715 5,068 Separate accounts (see note 17) 6,563 4,926 ----------------------- $77,259 $67,270 ================================================================================ (a) 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. (b) 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. - -------------------------------------------------------------------------------- When GECS 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. A summary of activity affecting unpaid claims and claims adjustment expenses follows. ------------------------------------- (In millions) 1998 1997 1996 - ------------------------------------------------------------------------------- Balance at January 1 -- gross $ 14,654 $ 13,184 $ 12,662 Less reinsurance recoverables (2,246) (1,822) (1,853) ------------------------------------- Balance at January -- 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 ================================================================================ 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 are summarized below. -------------------------- December 31 (In millions) 1998 1997 - -------------------------------------------------------------------------------- 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 ================================================================================ 21 GE ALL OTHER LIABILITIES This account includes noncurrent compensation and benefit accruals at year-end 1998 and 1997 of $5,594 million and $5,484 million, respectively. Also included are amounts for deferred incentive compensation, deferred income, product warranties and a variety of sundry items. GE is involved in numerous remediation actions to clean up hazardous wastes as required by federal and state laws. Liabilities for remediation costs at each site are based on management's best estimate of undiscounted future costs, excluding possible insurance recoveries. When there appears to be a range of possible costs with equal likelihood, liabilities are based on the lower end of such range. Uncertainties about the status of laws, regulations, technology and information related to individual sites make it difficult to develop a meaningful estimate of the reasonably possible aggregate environmental remediation exposure. However, even in the unlikely event that remediation costs amounted to the high end of the range of costs for each site, the resulting additional liability would not be material to GE's financial position, results of operations or liquidity. F-37 ANNUAL REPORT PAGE 61 - --------------------- 22 DEFERRED INCOME TAXES Aggregate deferred tax amounts are summarized below. ------------------------ December 31 (In millions) 1998 1997 - -------------------------------------------------------------------------------- ASSETS GE $ 5,309 $ 4,891 GECS 5,305 4,320 ------------------------ 10,614 9,211 ------------------------ LIABILITIES GE 5,059 4,576 GECS 14,895 13,286 ------------------------ 19,954 17,862 ------------------------ NET DEFERRED TAX LIABILITY $ 9,340 $ 8,651 ================================================================================ Principal components of the net deferred tax balances for GE and GECS are as follows: ------------------------- December 31 (In millions) 1998 1997 - -------------------------------------------------------------------------------- GE Provisions for expenses (a) $(3,809) $(3,367) Retiree insurance plans (847) (856) Prepaid pension asset 2,713 2,301 Depreciation 935 955 Other-- net 758 652 ------------------------- (250) (315) ------------------------- GECS Financing leases 8,593 7,909 Operating leases 2,419 2,156 Net unrealized gains on securities 1,369 1,264 Allowance for losses (1,386) (1,372) Insurance reserves (1,022) (1,000) AMT credit carryforwards (903) (354) Other -- net 520 363 ------------------------- 9,590 8,966 ------------------------- NET DEFERRED TAX LIABILITY $ 9,340 $ 8,651 ================================================================================ (a) Represents the tax effects of temporary differences related to expense accruals for a wide variety of items, such as employee compensation and benefits, interest on tax deficiencies, product warranties and other provisions for sundry losses and expenses that are not currently deductible. - -------------------------------------------------------------------------------- 23 GECS MINORITY INTEREST IN EQUITY OF CONSOLIDATED AFFILIATES Minority interest in equity of consolidated GECS affiliates includes preferred stock issued by GE Capital and by an affiliate of GE Capital. The preferred stock pays cumulative dividends at variable rates. Value of the preferred shares is summarized below. ----------------------- December 31 (In millions) 1998 1997 - -------------------------------------------------------------------------------- GE Capital $2,300 $2,230 GE Capital affiliate 860 660 ================================================================================ 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. 24 RESTRICTED NET ASSETS OF GECS AFFILIATES Certain GECS consolidated affiliates are restricted from remitting funds to GECS in the form of dividends or loans by a variety of regulations, the purpose of which is to protect affected insurance policyholders, depositors or investors. At year-end 1998, net assets of regulated GECS affiliates amounted to $25.1 billion, of which $21.9 billion was restricted. 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. 25 SHARE OWNERS' EQUITY ----------------------------------- (In millions) 1998 1997 1996 - -------------------------------------------------------------------------------= COMMON STOCK ISSUED $ 594 $ 594 $ 594 =================================== ACCUMULATED NONOWNER CHANGES OTHER THAN EARNINGS Balance at January 1 $ 1,340 $ 615 $ 1,061 Unrealized gains (losses) on investment securities -- net of deferred taxes of $430, $860 and ($204) 795 1,467 (329) Currency translation adjustments -- net of deferred taxes of ($13), ($58) and ($9) 60 (742) (117) Reclassification adjustments-- net of deferred taxes of ($291) (531) -- -- ----------------------------------- Balance at December 31 $ 1,664 $ 1,340 $ 615 =================================== OTHER CAPITAL Balance at January 1 $ 4,434 $ 2,554 $ 1,602 Gains on treasury stock dispositions (a) 2,374 1,880 952 ----------------------------------- Balance at December 31 $ 6,808 $ 4,434 $ 2,554 =================================== RETAINED EARNINGS Balance at January 1 $ 43,338 $ 38,670 $ 34,528 Net earnings 9,296 8,203 7,280 Dividends (a) (4,081) (3,535) (3,138) ----------------------------------- Balance at December 31 $ 48,553 $ 43,338 $ 38,670 =================================== COMMON STOCK HELD IN TREASURY Balance at January 1 $ 15,268 $ 11,308 $ 8,176 Purchases (a) 6,475 6,392 4,842 Dispositions (a) (3,004) (2,432) (1,710) ----------------------------------- Balance at December 31 $ 18,739 $ 15,268 $ 11,308 ================================================================================ (a) Total dividends and other transactions with share owners reduced equity by $5,178 million, $5,615 million and $5,318 million in 1998, 1997 and 1996, respectively. - -------------------------------------------------------------------------------- The GE Board of Directors has authorized repurchase of $17 billion of common stock under the share repurchase program. This buyback will continue through the year 2000 at an annual rate of about $2 billion. Funds used for the share repurchase are expected to be generated largely from operating cash flow. F-38 ANNUAL REPORT PAGE 62 - --------------------- Through year-end 1998, a total of 287 million shares having an aggregate cost of $13.6 billion had been repurchased under this program and placed into treasury. Common shares issued and outstanding are summarized in the following table. - -------------------------------------------------------------------------------- SHARES OF GE COMMON STOCK ------------------------------------------ December 31 (In thousands) 1998 1997 1996 - -------------------------------------------------------------------------------- Issued 3,714,068 3,714,026 3,714,026 In treasury (442,772) (449,434) (424,942) ------------------------------------------ Outstanding 3,271,296 3,264,592 3,289,084 ================================================================================ GE has 50 million authorized shares of preferred stock ($1.00 par value), but no such shares have been issued. The effects of translating to U.S. dollars the financial statements of non-U.S. affiliates whose functional currency is the local currency are included in share owners' equity. Asset and liability accounts are translated at year-end exchange rates, while revenues and expenses are translated at average rates for the period. 26 OTHER STOCK-RELATED INFORMATION - -------------------------------------------------------------------------------- Average per share ------------------------------------ Shares subject Exercise Market (Shares in thousands) to option price price - -------------------------------------------------------------------------------- Balance at December 31, 1995 144,874 $21.60 $36.00 Options granted 19,034 42.39 42.39 Replacement options 8,622 26.34 26.34 Options exercised (18,278) 17.70 43.25 Options terminated (4,707) 26.18 -- ------------------------------------ Balance at December 31, 1996 149,545 24.86 49.44 Options granted (a) 13,795 68.07 68.07 Replacement options 30 24.16 24.16 Options exercised (21,746) 18.47 61.22 Options terminated (2,721) 31.10 -- ------------------------------------ Balance at December 31, 1997 138,903 30.03 73.38 Options granted 7,707 79.86 79.86 Options exercised (23,955) 20.76 84.45 Options terminated (2,727) 44.46 -- ------------------------------------ Balance at December 31, 1998 119,928 34.76 102.00 ================================================================================ (a) Without adjusting for the effect of the 2-for-1 stock split in April 1997, the number of options granted during 1997 would have been 13,476. - -------------------------------------------------------------------------------- Stock option plans, stock appreciation rights (SARs), restricted stock and restricted stock units are described in GE's current Proxy Statement. With certain restrictions, requirements for stock option shares can be met from either unissued or treasury shares. The replacement options replaced canceled SARs and have identical terms thereto. At year-end 1998, there were 1.4 million SARs outstanding at an average exercise price of $22.14. There were 9.2 million restricted stock shares and restricted stock units outstanding at year-end 1998. There were 121.0 million and 92.8 million additional shares available for grants of options, SARs, restricted stock and restricted stock units at December 31, 1998 and 1997, respectively. Under the 1990 Long-Term Incentive Plan, 0.95% of the Company's issued common stock (including treasury shares) as of the first day of each calendar year during which the Plan is in effect becomes available for granting awards in such year. Any unused portion, in addition to shares allocated to awards that are canceled or forfeited, is available for later years. Outstanding options and SARs expire on various dates through December 18, 2008. Restricted stock grants vest on various dates up to normal retirement of grantees. The following table summarizes information about stock options outstanding at December 31, 1998. - -------------------------------------------------------------------------------- STOCK OPTIONS OUTSTANDING (Shares in thousands) Outstanding Exercisable ----------------------------- -------------------- Average Average Exercise Average exercise exercise price range Shares life (a) price Shares price - -------------------------------------------------------------------------------- $12 1/8 - 21 9/16 20,690 2.7 $ 17.80 20,690 $ 17.80 $21 5/8 - 31 15/16 61,600 5.5 25.72 47,372 25.16 $36 3/16 - 51 1/2 17,565 7.6 42.65 4,436 41.19 $51 3/4 - 73 12,475 8.8 68.88 75 60.15 $77 1/2 - 96 7/8 7,598 9.7 79.88 22 78.30 ---------------------------------------------------- Total 119,928 5.9 34.76 72,595 24.09 ================================================================================ At year-end 1997, options with an average exercise price of $21.11 were exercisable on 72 million shares; at year-end 1996, options with an average exercise price of $19.58 were exercisable on 81 million shares. (a) Average contractual life remaining in years. - -------------------------------------------------------------------------------- Stock options expire 10 years from the date they are granted; options vest over service periods that range from one to five years. Disclosures required by Statement of Financial Accounting Standards (SFAS) No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, are as follows: - -------------------------------------------------------------------------------- OPTION VALUE INFORMATION (a) ----------------------------------- (In dollars) 1998 1997 1996 - -------------------------------------------------------------------------------- Fair value per option (b) $18.98 $17.81 $9.34 Valuation assumptions Expected option term (years) 6.2 6.3 6.2 Expected volatility 21.7% 20.0% 20.1% Expected dividend yield 1.8% 1.5% 2.3% Risk-free interest rate 4.9% 6.1% 6.6% ================================================================================ (a) Weighted averages of option grants during each period. (b) Estimated using Black-Scholes option pricing model. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PRO FORMA EFFECTS (a) December 31 (In millions; per-share amounts in dollars) ----------------------------------- 1998 1997 1996 - -------------------------------------------------------------------------------- Net earnings $9,196 $8,129 $7,235 Earnings per share -- diluted 2.77 2.43 2.15 -- basic 2.81 2.48 2.19 ================================================================================ (a) Valuations only of grants made after January 1, 1995; thus, the pro forma effect increased over the periods presented. - -------------------------------------------------------------------------------- F-39 ANNUAL REPORT PAGE 63 - --------------------- 27 SUPPLEMENTAL CASH FLOWS INFORMATION Changes in operating assets and liabilities are net of acquisitions and dispositions of principal businesses. "Payments for principal businesses purchased" in the Statement of Cash Flows is net of cash acquired and includes debt assumed and immediately repaid in acquisitions. "All other operating activities" in the Statement of Cash Flows consists primarily of adjustments to current and noncurrent accruals and deferrals of costs and expenses, increases and decreases in progress collections, adjustments for gains and losses on assets, increases and decreases in assets held for sale, and adjustments to assets. Noncash transactions include the 1998 acquisition of Marquette Medical Systems for 9.4 million shares of GE common stock valued at $829 million and the 1997 exchange transaction described in note 2. Other noncash transactions did not have a significant effect on the investing or financing activities of GE or GECS. Certain supplemental information related to GE and GECS cash flows is shown below.
--------------------------------- For the years ended December 31 (In millions) 1998 1997 1996 - -------------------------------------------------------------------------------------------------------------------- GE NET PURCHASE OF GE SHARES FOR TREASURY Open market purchases under share repurchase program $ (3,646) $ (3,492) $ (3,266) Other purchases (2,829) (2,900) (1,576) Dispositions (mainly to employee and dividend reinvestment plans) 3,656 3,577 2,519 --------------------------------- $ (2,819) $ (2,815) $ (2,323) ================================= GECS 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 GECS affiliates 270 605 155 Redemption of investment contracts (5,533) (4,537) (2,688) --------------------------------- $ (114) $ 785 $ 28 ====================================================================================================================
F-40 ANNUAL REPORT PAGE 64 - --------------------- 28 OPERATING SEGMENTS
- ------------------------------------------------------------------------------------------------------------------------------------ REVENUES For the years ended December 31 Total revenues Intersegment revenues External revenues -------------------------------- ------------------------ ------------------------------ (In millions) 1998 1997 1996 1998 1997 1996 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------------------------ GE Aircraft Engines $ 10,294 $ 7,799 $ 6,302 $ 292 $ 101 $ 86 $ 10,002 $ 7,698 $ 6,216 Appliances 5,619 5,801 5,586 12 12 5 5,607 5,789 5,581 Industrial Products and Systems 11,222 10,984 10,401 479 491 453 10,743 10,493 9,948 NBC 5,269 5,153 5,232 -- -- -- 5,269 5,153 5,232 Plastics 6,633 6,695 6,509 20 24 22 6,613 6,671 6,487 Power Systems 8,466 7,915 7,643 166 80 67 8,300 7,835 7,576 Technical Products and Services 5,323 4,861 4,700 14 18 23 5,309 4,843 4,677 All Other 264 308 291 -- -- -- 264 308 291 Eliminations (1,367) (1,176) (1,032) (983) (726) (656) (384) (450) (376) -------------------------------- ------------------------ ------------------------------ Total GE segment revenues 51,723 48,340 45,632 -- -- -- 51,723 48,340 45,632 Corporate items 507 2,919 1,116 -- -- -- 507 2,919 1,116 GECS net earnings 3,796 3,256 2,817 -- -- -- 3,796 3,256 2,817 -------------------------------- ------------------------ ------------------------------ Total GE 56,026 54,515 49,565 -- -- -- 56,026 54,515 49,565 GECS 48,694 39,931 32,713 -- -- -- 48,694 39,931 32,713 Eliminations (4,251) (3,606) (3,099) -- -- -- (4,251) (3,606) (3,099) -------------------------------- ------------------------ ------------------------------ CONSOLIDATED REVENUES $100,469 $90,840 $79,179 $ -- $ -- $ -- $100,469 $90,840 $79,179 ==================================================================================================================================== GE revenues include income from sales of goods and services to customers and other income. Sales from one Company component to another generally are priced at equivalent commercial selling prices. Includes revenues of $944 million and $789 million in 1997 and 1996, respectively, from an appliance distribution affiliate that was deconsolidated in 1998. Also includes $1,538 million in 1997 from exchanging preferred stock in Lockheed Martin Corporation for the stock of a newly formed subsidiary. - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ ASSETS PROPERTY, PLANT AND DEPRECIATION AND EQUIPMENT ADDITIONS AMORTIZATION (INCLUDING (INCLUDING EQUIPMENT GOODWILL AND OTHER LEASED TO OTHERS) INTANGIBLES) For the years ended For the years ended At December 31 December 31 December 31 ---------------------------------- ------------------------ ----------------------- (In millions) 1998 1997 1996 1998 1997 1996 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------------------------ GE Aircraft Engines $ 8,866 $ 8,895 $ 5,423 $ 480 $ 729 $ 551 $ 398 $ 292 $ 282 Appliances 2,436 2,354 2,399 150 83 168 137 131 123 Industrial Products and Systems 6,466 6,672 6,574 428 487 450 440 408 362 NBC 3,264 3,050 3,007 105 116 176 127 142 121 Plastics 9,813 8,890 9,130 722 618 748 591 494 552 Power Systems 7,253 6,182 6,322 246 215 185 215 199 184 Technical Products and Services 3,858 2,438 2,245 254 189 154 143 137 123 All Other 189 224 239 -- -- -- 52 46 40 ---------------------------------- ------------------------ ----------------------- Total GE segments 42,145 38,705 35,339 2,385 2,437 2,432 2,103 1,849 1,787 Investment in GECS 19,727 17,239 14,276 -- -- -- -- -- -- Corporate items and eliminations (a) 12,798 11,482 10,310 158 129 114 189 180 176 ---------------------------------- ------------------------ ----------------------- Total GE 74,670 67,426 59,925 2,543 2,566 2,546 2,292 2,029 1,963 GECS 303,297 255,408 227,419 8,110 7,320 5,762 3,568 3,240 2,805 Eliminations (22,032) (18,822) (14,942) -- -- -- -- -- -- ---------------------------------- ------------------------ ----------------------- CONSOLIDATED TOTALS $ 355,935 $ 304,012 $ 272,402 $10,653 $9,886 $8,308 $5,860 $5,269 $4,768 ==================================================================================================================================== Additions to property, plant and equipment include amounts relating to principal businesses purchased. (a) Depreciation and amortization includes $64 million of unallocated RCA goodwill amortization in 1998, 1997 and 1996 that relates to NBC. - --------------------------------------------------------------------------------
At year=end 1998, GE adopted SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION. Prior-period amounts have been restated in accordance with the requirements of the new standard. BASIS FOR PRESENTATION. The Company's operating businesses are organized based on the nature of products and services provided. Certain GE businesses do not meet the definition of a reportable operating segment and have been aggregated. The Industrial Products and Systems segment consists of Industrial Systems, Lighting, Transportation Systems and GE Supply. The Technical Products and Services segment consists of Medical Systems and Information Services. Segment accounting policies are the same as policies described in note 1. F-41 ANNUAL REPORT PAGE 65 - --------------------- Details of segment profit by operating segment can be found on page 36 of this report. A description of operating segments for General Electric Company and consolidated affiliates follows. AIRCRAFT ENGINES. Jet engines and replacement parts and repair and maintenance services for all categories of commercial aircraft (short/medium, intermediate and long-range); for a wide variety of military aircraft, including fighters, bombers, tankers and helicopters; and for executive and commuter aircraft. Sold worldwide to airframe manufacturers, airlines and government agencies. Also includes aircraft engine derivatives, reported both in this segment and in Power Systems, used as marine propulsion and industrial power sources. APPLIANCES. Major appliances and related services for products such as refrigerators, freezers, electric and gas ranges, dishwashers, clothes washers and dryers, microwave ovens, room air conditioners and residential water system products. Sold in North America and in global markets under various GE and private-label brands. Distributed to retail outlets, mainly for the replacement market, and to building contractors and distributors for new installations. INDUSTRIAL PRODUCTS AND SYSTEMS. Lighting products (including a wide variety of lamps, lighting fixtures, wiring devices and quartz products); electrical distribution and control equipment (including power delivery and control products such as transformers, meters, relays, capacitors and arresters); transportation systems products (including diesel-electric locomotives, transit propulsion equipment and motorized wheels for off-highway vehicles); electric motors and related products; a broad range of electrical and electronic industrial automation products (including drive systems); installation, engineering and repair services, which includes management and technical expertise for large projects such as process control systems; and GE Supply, a network of electrical supply houses. Markets are extremely diverse. Products are sold to commercial and industrial end users, including utilities, to original equipment manufacturers, to electrical distributors, to retail outlets, to railways and to transit authorities. Increasingly, products are developed for and sold in global markets. NBC. Principal businesses are the furnishing of U.S. network television services to more than 200 affiliated stations, production of television programs, operation of 13 VHF and UHF television broadcasting stations, operation of six cable/satellite networks around the world, and investment and programming activities in the Internet, multimedia and cable television. PLASTICS. High-performance engineered plastics used in applications such as automobiles and housings for computers and other business equipment; ABS resins; silicones; superabrasive industrial diamonds; and laminates. Sold worldwide to a diverse customer base consisting mainly of manufacturers. POWER SYSTEMS. Power plant products and services, including design, installation, operation and maintenance services. Markets and competition are global. Gas turbines are sold separately and as part of packaged power plants for electric utilities, independent power producers and for industrial cogeneration and mechanical drive applications. Steam turbine-generators are sold to electric utilities and, for cogeneration, to industrial and other power customers. Also includes nuclear reactors and fuel and support services for GE's new and installed boiling water reactors and aircraft engine derivatives, also reported in the Aircraft Engines segment, used as industrial power sources. TECHNICAL PRODUCTS AND SERVICES. Medical imaging systems such as magnetic resonance (MR) and computed tomography (CT) scanners, x-ray, nuclear imaging and ultrasound, as well as diagnostic cardiology and patient monitoring devices; related services, including equipment monitoring and repair, computerized data management and customer productivity services. Products and services are sold worldwide to hospitals and medical facilities. Also includes a full range of computer-based information and data interchange services for both internal and external use to commercial and industrial customers. GECS. The operating activities of the GECS segment follow. 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. 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. 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. 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. 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. Very few of the products financed by GECS are manufactured by GE. F-42 ANNUAL REPORT PAGE 66 - --------------------- 29 GEOGRAPHIC SEGMENT INFORMATION (CONSOLIDATED) The table below presents data by geographic region. Operating profit data by geographic segment have been restated on a basis consistent with operating segment information presented on page 36. Revenues and operating profit shown below are classified according to their country of origin (including exports from such areas). Revenues and operating profit classified under the caption "United States" include royalty and licensing income from non-U.S. sources.
- --------------------------------------------------------------------------------------------------------------------------- REVENUES For the years ended December 31 Total revenues Intersegment revenues External revenues - --------------------------------------------------------------- ---------------------------------- ------------------------------- (In millions) 1998 1997 1996 1998 1997 1996 1998 1997 1996 ---------------------------------- ---------------------------------- ------------------------------- United States $ 71,799 $ 66,330 $ 58,110 $ 2,608 $ 2,471 $ 2,292 $ 69,191 $ 63,859 $ 55,818 Europe 21,665 18,166 15,964 837 787 714 20,828 17,379 15,250 Pacific Basin 5,166 4,742 4,343 951 880 796 4,215 3,862 3,547 Other 6,925 6,420 5,140 690 680 576 6,235 5,740 4,564 Intercompany eliminations (5,086) (4,818) (4,378) (5,086) (4,818) (4,378) -- -- -- ---------------------------------- ---------------------------------- ------------------------------- Total $ 100,469 $ 90,840 $ 79,179 $ -- $ -- $ -- $ 100,469 $ 90,840 $ 79,179 ==================================================================================================================================== - ------------------------------------------------------------------------------------------------------------------------------------ OPERATING PROFIT ASSETS LONG-LIVED ASSETS For the years ended December 31 At December 31 At December 31 ----------------------------- ---------------------------------- ------------------------------- (In millions) 1998 1997 1996 1998 1997 1996 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------------------------ United States $ 11,558 $ 10,249 $ 9,745 $ 227,311 $ 206,655 $ 189,593 $ 18,048 $ 17,074 $ 15,016 Europe 2,393 2,271 1,724 84,518 66,740 55,196 6,334 5,180 4,483 Pacific Basin 431 355 269 18,427 8,881 8,125 1,326 971 881 Other 810 713 576 25,878 21,926 19,655 10,057 9,119 8,442 Intercompany eliminations (9) (23) 7 (199) (190) (167) (35) (28) (26) ----------------------------- ---------------------------------- ------------------------------- Total $ 15,183 $ 13,565 $12,321 $ 355,935 $ 304,012 $ 272,402 $ 35,730 $ 32,316 $ 28,796 ==================================================================================================================================== Includes $944 million and $789 million in 1997 and 1996, respectively, from an appliance distribution affiliate that was deconsolidated in 1998. Includes the Americas other than the United States and operations that cannot meaningfully be associated with specific geographic areas (for example, shipping containers used on ocean-going vessels). Excludes GECS income taxes of $1,364 million, $1,166 million and $1,231 million in 1998, 1997 and 1996, respectively, which are included in the measure of segment profit reported on page 36. Property, plant and equipment (including equipment leased to others). - --------------------------------------------------------------------------------
30 ADDITIONAL INFORMATION ABOUT FINANCIAL INSTRUMENTS This note contains estimated fair values of certain financial instruments to which GE and GECS are parties. Apart from borrowings by GE and GECS 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. F-43 ANNUAL REPORT PAGE 67 - ---------------------
- ------------------------------------------------------------------------------------------------------------------------------------ FINANCIAL INSTRUMENTS ---------------------------------------- --------------------------------------- 1998 1997 ---------------------------------------- --------------------------------------- Assets (liabilities) Assets (liabilities) ------------------------------- ----------------------------- Estimated Estimated Carrying fair value Carrying fair value Notional amount ------------------ Notional amount ------------------ December 31 (In millions) amount (net) High Low amount (net) High Low - ------------------------------------------------------------------------------------------------------------------------------------ GE Investment related Investments and notes receivable $ $ 1,764 $ 1,810 $ 1,793 $ $ 1,909 $ 1,915 $ 1,908 Cancelable interest rate swap 1,221 17 1 1 1,421 25 19 19 Borrowings and related instruments Borrowings (4,147) (4,155) (4,155) (4,358) (4,377) (4,377) Interest rate swaps 951 -- (60) (60) 531 -- (12) (12) Recourse obligations for receivables sold 441 (32) (32) (32) 427 (23) (23) (23) Financial guarantees 2,172 -- -- -- 2,141 -- -- -- Other firm commitments Currency forwards and options 7,914 72 114 114 6,656 82 270 270 Financing commitments 1,519 -- -- -- 1,794 -- -- -- GECS Assets Time sales and loans 74,616 75,474 74,293 62,712 63,105 61,171 Integrated interest rate swaps 14,135 16 (102) (102) 12,323 19 (125) (125) Purchased options 11,195 146 158 158 1,992 64 39 39 Mortgage-related positions Mortgage purchase commitments 1,983 -- 15 15 2,082 -- 11 11 Mortgage sale commitments 3,276 -- (9) (9) 2,540 -- (9) (9) Mortgages held for sale 4,405 4,457 4,457 2,378 2,379 2,379 Options, including "floors" 21,433 91 181 181 30,347 51 141 141 Interest rate swaps and futures 6,662 -- 49 49 3,681 -- 23 23 Other cash financial instruments 3,205 3,433 3,231 2,242 2,592 2,349 Liabilities Borrowings and related instruments Borrowings (172,200) (174,492) (174,492) (141,263) (141,828)(141,828) Interest rate swaps 46,325 -- (1,449) (1,449) 42,531 -- (250) (250) Currency swaps 29,645 -- 252 252 23,382 -- (1,249) (1,249) Currency forwards 23,409 -- (389) (389) 15,550 -- 371 371 Investment contract benefits (23,893) (23,799) (23,799) (23,045) (22,885) (22,885) Insurance -- financial guarantees and credit life 208,774 (3,135) (3,339) (3,446) 183,957 (2,897) (2,992) (3,127) Credit and liquidity support -- securitizations 21,703 (29) (29) (29) 13,634 (46) (46) (46) Performance guarantees -- principally letters of credit 2,684 -- -- -- 2,699 (34) -- (67) Other 2,888 (1,921) (1,190) (1,190) 3,147 (1,134) (1,282) (1,303) Other firm commitments Currency forwards 5,072 -- (52) (52) 1,744 -- 11 11 Currency swaps 915 72 72 72 1,073 192 192 192 Ordinary course of business lending commitments 9,839 -- (12) (12) 7,891 -- (62) (62) Unused revolving credit lines Commercial 6,401 -- -- -- 4,850 -- -- -- Consumer -- principally credit cards 132,475 -- -- -- 134,123 -- -- -- ==================================================================================================================================== Not applicable. Includes effects of interest rate and currency swaps, which also are listed separately. See note 19. - --------------------------------------------------------------------------------
Additional information about certain financial instruments in the table above follows. CURRENCY FORWARDS AND OPTIONS are employed by GE and GECS to manage exposures to changes in currency exchange rates associated with commercial purchase and sale transactions and by GECS to optimize borrowing costs as discussed in note 19. 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. F-44 ANNUAL REPORT PAGE 68 - --------------------- 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 GECS business activities, such as mortgage servicing and annuities. SWAPS OF INTEREST RATES AND CURRENCIES are used by GE and GECS to optimize borrowing costs for a particular funding strategy (see note 19). A cancelable interest rate swap was used by GE to hedge an investment position. Interest rate and currency swaps, along with purchased options and futures, are used by GECS 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, GECS also enters into swaps that are integrated into investments in or loans to particular customers and do not involve assumption of third-party credit risk. Such integrated swaps are evaluated and monitored like their associated investments or loans 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 credit exposure limits (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. - -------------------------------------------------------------------------------- COUNTERPARTY CREDIT CRITERIA ----------------------------- Credit rating ----------------------------- Moody's Standard & Poor's - -------------------------------------------------------------------------------- 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 ================================================================================ 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. 31 QUARTERLY INFORMATION (UNAUDITED)
First quarter Second quarter Third quarter Fourth quarter (Dollar amounts in millions; ------------------ ------------------ ------------------ ------------------ per-share amounts in dollars) 1998 1997 1998 1997 1998 1997 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------------ CONSOLIDATED OPERATIONS Net earnings $ 1,891 $ 1,677 $ 2,450 $ 2,162 $ 2,284 $ 2,014 $ 2,671 $ 2,350 Earnings per share -- diluted 0.57 0.50 0.74 0.65 0.69 0.60 0.80 0.70 -- basic 0.58 0.51 0.75 0.66 0.70 0.62 0.82 0.72 SELECTED DATA GE Sales of goods and services 11,408 10,522 13,217 12,620 12,075 11,698 14,846 14,112 Gross profit from sales 3,366 2,970 4,216 3,886 3,630 3,368 4,598 2,618 GECS Total revenues 11,151 9,544 11,801 9,317 12,016 10,182 13,726 10,888 Operating profit 1,252 1,081 1,219 1,138 1,584 1,229 1,105 974 Net earnings 881 754 933 798 1,082 938 900 766 ====================================================================================================================================
For GE, gross profit from sales is sales of goods and services less costs of goods and services sold. For GECS, operating profit is "Earnings before income taxes." Fourth-quarter gross profit from sales in 1997 was reduced by restructuring and other special charges. Such charges, including amounts shown in "Other costs and expenses," were $2,322 million before tax. Also in the fourth quarter of 1997, GE completed an exchange transaction with Lockheed Martin as described in note 2. Earnings-per-share amounts for each quarter are required to be computed independently. As a result, with the exception of 1998 diluted earnings per share, their sum does not equal the total year earnings-per-share amounts for 1998 and 1997. EXHIBIT 12 GENERAL ELECTRIC COMPANY RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN MILLIONS) Year ended December 31 -------------------------------------------------------- 1994 1995 1996 1997 1998 -------- -------- -------- -------- -------- GE EXCEPT GECS Earnings $ 7,828 $ 8,696 $ 9,677 $ 10,132 $ 12,230 Less: Equity in undistributed earnings of General Electric Capital Services, Inc. (1,181) (1,324) (1,836) (1,597) (2,124) Plus: Interest and other financial charges included in expense 410 649 595 797 883 One-third of rental expense 171 174 171 179 189 -------- -------- -------- -------- -------- Adjusted "earnings" $ 7,228 $ 8,195 $ 8,607 $ 9,511 $ 11,178 ======== ======== ======== ======== ======== Fixed Charges: Interest and other financial charges $ 410 $ 649 $ 595 $ 797 $ 883 Interest capitalized 21 13 19 31 38 One-third of rental expense 171 174 171 179 189 -------- -------- -------- -------- -------- Total fixed charges $ 602 $ 836 $ 785 $ 1,007 $ 1,110 ======== ======== ======== ======== ======== Ratio of earnings to fixed charges 12.01 9.80 10.96 9.44 10.07 ======== ======== ======== ======== ======== GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES Earnings $ 8,831 $ 9,941 $ 11,075 $ 11,419 $ 13,742 Plus: Interest and other financial charges included in expense 4,994 7,336 7,939 8,445 9,821 One-third of rental expense 327 349 353 423 486 -------- -------- -------- -------- -------- Adjusted "earnings" $ 14,152 $ 17,626 $ 19,367 $ 20,287 $ 24,049 ======== ======== ======== ======== ======== Fixed Charges: Interest and other financial charges $ 4,994 $ 7,336 $ 7,939 $ 8,445 $ 9,821 Interest capitalized 30 34 60 83 126 One-third of rental expense 327 349 353 423 486 -------- -------- -------- -------- -------- Total fixed charges $ 5,351 $ 7,719 $ 8,352 $ 8,951 $ 10,433 ======== ======== ======== ======== ======== Ratio of earnings to fixed charges 2.64 2.28 2.32 2.27 2.31 ======== ======== ======== ======== ======== Earnings before income taxes and minority interest. Earnings after income taxes, net of dividends. Considered to be representative of interest factor in rental expense.
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