<HTML> <head> <TITLE>Form 10-K</TITLE> </head> <body bgcolor="#FFFFFF"> <hr noshade size="1"> <center> <h2> <b>United States Securities and Exchange Commission</b></h2></center> <center> <h3> <b>Washington, D.C. 20549</b></h3></center> <hr noshade size="1" width="150"> <center><b>Form 10-K</b> <hr noshade size="1" width="150"></center> <p><br> <center><table BORDER=0 CELLSPACING=5 CELLPADDING=5 > <tr> <td VALIGN=TOP COLSPAN="3"><font size=-1>(Mark One)</font></td> </tr> <tr> <td VALIGN=TOP><font size=-1>[x] </font></td> <td VALIGN=TOP COLSPAN="2"><font size=-1>Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934</font></td> </tr> <tr> <td VALIGN=TOP></td> <td VALIGN=TOP><font size=-1>For the fiscal year ended December 31, 1999 </font></td> <td ALIGN=CENTER><font size=-1>Commission file number 1-35 </font></td> </tr> <tr> <td VALIGN=TOP></td> <td ALIGN=CENTER VALIGN=TOP COLSPAN="2"><font size=-1>or</font></td> </tr> <tr> <td VALIGN=TOP><font size=-1>[ ] </font></td> <td VALIGN=TOP COLSPAN="2"><font size=-1>Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934</font></td> </tr> <tr> <td VALIGN=TOP></td> <td VALIGN=TOP COLSPAN="2"><font size=-1>For the transition period from ______to ______</font></td> </tr> </TABLE></center> <br> <center> <p><b><font size=-1>General Electric Company <hr width="400" noshade size="1">(Exact name of registrant as specified in charter)</font></b></center> <p><br> <center><table BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="605" > <tr> <td ALIGN=CENTER VALIGN=TOP WIDTH="271"><font size=-1>New York </font> <hr noshade size="1"></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="83"><font size=-1> </font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="245"><font size=-1>14-0689340</font> <hr noshade size="1"></td> </tr> <tr> <td ALIGN=CENTER VALIGN=TOP WIDTH="271"><font size=-1>(State or other jurisdiction of </font> <br><font size=-1>incorporation or organization)</font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="83"><font size=-1> </font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="245"><font size=-1>(I.R.S. Employer Identification No.)</font></td> </tr> </TABLE></center> <br> <center><table BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="604" > <tr> <td ALIGN=CENTER VALIGN=TOP WIDTH="271"><font size=-1>3135 Easton Turnpike, Fairfield, CT</font> <hr noshade size="1"></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="30"><font size=-1> </font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="96"><font size=-1>06431-0001 </font> <hr noshade size="1"></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="82"><font size=-1> </font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="116"><font size=-1>203/373-2211 </font> <hr noshade size="1"></td> </tr> <tr> <td ALIGN=CENTER VALIGN=TOP WIDTH="271"><font size=-1>(Address of principal executive offices)</font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="30"></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="96"><font size=-1> (Zip Code)</font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="82"></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="115"><font size=-1>(Telephone No.)</font></td> </tr> </TABLE></center> <br> <center><table BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="606" > <tr> <td VALIGN=TOP COLSPAN="3" WIDTH="604"><b><font size=-1>Securities Registered Pursuant to Section 12(b) of the Act:</font></b></td> </tr> <tr> <td VALIGN=TOP><b><font size=-1>Title of each class</font></b> <hr noshade size="1"></td> <td VALIGN=TOP WIDTH="32"> </td> <td VALIGN=TOP><b><font size=-1>Name of each exchange on which registered</font></b> <hr noshade size="1"></td> </tr> <tr> <td VALIGN=TOP><font size=-1>Common stock, par value $0.16 per share</font></td> <td VALIGN=TOP WIDTH="32"></td> <td VALIGN=TOP><font size=-1>New York Stock Exchange</font> <br><font size=-1>Boston Stock Exchange</font></td> </tr> </TABLE></center> <p><font size=-1> There were 3,295,312,114 shares of voting common stock with a par value of $0.16 outstanding at March 5, 2000. These shares, which constitute all of the outstanding common equity of the registrant, had an aggregate market value on March 6, 2000, of $451.7 billion. Affiliates of the Company beneficially own, in the aggregate, less than one-tenth of one percent of such shares.</font> <p><font size=-1> 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 <u> x </u> No __</font> <p><font size=-1> 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. <u> x</u></font> <p><b><font size=-1>Documents Incorporated by Reference</font></b> <p><font size=-1> The definitive proxy statement relating to the registrant's Annual Meeting of Share Owners, to be held April 26, 2000, is incorporated by reference in Part III to the extent described therein.</font> <br> <hr noshade size="1"> <center> <h3> <b>Table of Contents</b></h3></center> <center><table BORDER=0 CELLPADDING=2 > <tr> <td VALIGN=TOP></td> <td VALIGN=TOP></td> <td ALIGN=RIGHT VALIGN=TOP><b><font size=-1>Page</font></b></td> </tr> <tr> <td VALIGN=TOP COLSPAN="2"><b><font size=-1>Part I</font></b> <hr noshade size="1"></td> <td ALIGN=RIGHT VALIGN=TOP></td> </tr> <tr> <td VALIGN=TOP><font size=-1><a href="#Item 1">Item 1.</a></font></td> <td VALIGN=TOP><font size=-1>Business</font></td> <td ALIGN=RIGHT VALIGN=TOP><font size=-1>3</font></td> </tr> <tr> <td VALIGN=TOP><font size=-1><a href="#Item 2">Item 2.</a></font></td> <td VALIGN=TOP><font size=-1>Properties</font></td> <td ALIGN=RIGHT VALIGN=TOP><font size=-1>18</font></td> </tr> <tr> <td VALIGN=TOP><font size=-1><a href="#Item 3">Item 3.</a></font></td> <td VALIGN=TOP><font size=-1>Legal Proceedings</font></td> <td ALIGN=RIGHT VALIGN=TOP><font size=-1>18</font></td> </tr> <tr> <td VALIGN=TOP><font size=-1><a href="#Item 4">Item 4.</a></font></td> <td VALIGN=TOP><font size=-1>Submission of Matters to a Vote of Security Holders</font></td> <td ALIGN=RIGHT VALIGN=TOP><font size=-1>19</font></td> </tr> <tr> <td VALIGN=TOP COLSPAN="2"> <hr noshade size="1"><b><font size=-1>Part II</font></b> <hr noshade size="1"></td> <td ALIGN=RIGHT VALIGN=TOP></td> </tr> <tr> <td VALIGN=TOP><font size=-1><a href="#Item 5">Item 5.</a></font></td> <td VALIGN=TOP><font size=-1>Market for the Registrant's Common Equity and Related Stockholder Matters</font></td> <td ALIGN=RIGHT VALIGN=TOP><font size=-1>19</font></td> </tr> <tr> <td VALIGN=TOP><font size=-1><a href="#Item 6">Item 6.</a></font></td> <td VALIGN=TOP><font size=-1>Selected Financial Data</font></td> <td ALIGN=RIGHT VALIGN=TOP><font size=-1>30</font></td> </tr> <tr> <td VALIGN=TOP><font size=-1><a href="#Item 7">Item 7.</a></font></td> <td VALIGN=TOP><font size=-1>Management's Discussion and Analysis of Results of Operations</font></td> <td ALIGN=RIGHT VALIGN=TOP><font size=-1>20</font></td> </tr> <tr> <td VALIGN=TOP><font size=-1><a href="#Item 7A">Item 7A</a></font></td> <td VALIGN=TOP><font size=-1>Quantitative and Qualitative Disclosures About Market Risk</font></td> <td ALIGN=RIGHT VALIGN=TOP><font size=-1>20</font></td> </tr> <tr> <td VALIGN=TOP><font size=-1><a href="#Item 8">Item 8.</a></font></td> <td VALIGN=TOP><font size=-1>Financial Statements and Supplementary Data</font></td> <td ALIGN=RIGHT VALIGN=TOP><font size=-1>20</font></td> </tr> <tr> <td VALIGN=TOP><font size=-1><a href="#Item 9">Item 9.</a></font></td> <td VALIGN=TOP><font size=-1>Changes in and Disagreements with Accountants on Accounting and Financial Disclosure</font></td> <td ALIGN=RIGHT VALIGN=TOP><font size=-1>20</font></td> </tr> <tr> <td VALIGN=TOP COLSPAN="2"> <hr noshade size="1"><b><font size=-1>Part III</font></b> <hr noshade size="1"></td> <td ALIGN=RIGHT VALIGN=TOP></td> </tr> <tr> <td VALIGN=TOP><font size=-1><a href="#Item 10">Item 10.</a></font></td> <td VALIGN=TOP><font size=-1>Directors and Executive Officers of the Registrant</font></td> <td ALIGN=RIGHT VALIGN=TOP><font size=-1>21</font></td> </tr> <tr> <td VALIGN=TOP><font size=-1><a href="#Item 11">Item 11.</a></font></td> <td VALIGN=TOP><font size=-1>Executive Compensation</font></td> <td ALIGN=RIGHT VALIGN=TOP><font size=-1>21</font></td> </tr> <tr> <td VALIGN=TOP><font size=-1><a href="#Item 12">Item 12.</a></font></td> <td VALIGN=TOP><font size=-1>Security Ownership of Certain Beneficial Owners and Management</font></td> <td ALIGN=RIGHT VALIGN=TOP><font size=-1>22</font></td> </tr> <tr> <td VALIGN=TOP><font size=-1><a href="#Item 13">Item 13.</a></font></td> <td VALIGN=TOP><font size=-1>Certain Relationships and Related Transactions</font></td> <td ALIGN=RIGHT VALIGN=TOP><font size=-1>22</font></td> </tr> <tr> <td VALIGN=TOP COLSPAN="2"> <hr noshade size="1"><b><font size=-1>Part IV</font></b> <hr noshade size="1"></td> <td ALIGN=RIGHT VALIGN=TOP></td> </tr> <tr> <td VALIGN=TOP><font size=-1><a href="#Item 14">Item 14.</a></font></td> <td VALIGN=TOP><font size=-1>Exhibits, Financial Statement Schedules, and Reports on Form 8-K</font></td> <td ALIGN=RIGHT VALIGN=TOP><font size=-1>22</font></td> </tr> <tr> <td VALIGN=TOP></td> <td VALIGN=TOP><font size=-1><a href="#Signatures">Signatures</a></font></td> <td ALIGN=RIGHT VALIGN=TOP><font size=-1>26</font></td> </tr> </TABLE></center> <p> <hr> <center> <p><b>Part I</b></center> <p><a NAME="Item 1"></a><b><font size=-1>Item 1. Business</font></b> <p><b><font size=-1>General</font></b> <p><font size=-1> Unless otherwise indicated by the context, the terms "GE," "GECS" and "GE Capital Services" are used on the basis of consolidation described in note 1 to the consolidated financial statements on page 56 of the 1999 Annual Report to Share Owners of General Electric Company. The financial section of such Annual Report to Share Owners (pages 33 through 76 of that document) is set forth in Part IV Item 14(a)(1) of this 10-K Report and is an integral part hereof. References in Parts I and II of this 10-K Report are to the page numbers of the 1999 Annual Report to Share Owners included in Part IV of this 10-K Report. Also, unless otherwise indicated by the context, "General Electric" means the parent company, General Electric Company.</font> <p><font size=-1> General Electric's address is 1 River Road, Schenectady, NY 12345-6999; the Company also maintains executive offices at 3135 Easton Turnpike, Fairfield, CT 06431-0001.</font> <p><font size=-1> GE is one of the largest and most diversified industrial corporations in the world. GE has engaged in developing, manufacturing and marketing a wide variety of products for the generation, transmission, distribution, control and utilization of electricity since its incorporation in 1892. Over the years, GE has developed or acquired new technologies and services that have broadened considerably the scope of its activities.</font> <p><font size=-1> GE's products include major appliances; lighting products; industrial automation products; medical diagnostic imaging equipment; motors; electrical distribution and control equipment; locomotives; power generation and delivery products; nuclear power support services and fuel assemblies; commercial and military aircraft jet engines; and engineered materials, such as plastics, silicones and superabrasive industrial diamonds.</font> <p><font size=-1> GE's services include product services; electrical product supply houses; electrical apparatus installation, engineering, repair and rebuilding services; and computer-related information services. Through its affiliate, the National Broadcasting Company, Inc., GE delivers network television services, operates television stations, and provides cable, Internet and multimedia programming and distribution services. Through another affiliate, General Electric Capital Services, Inc., GE offers a broad array of financial and other services including consumer financing, commercial and industrial financing, real estate financing, asset management and leasing, mortgage services, consumer savings and insurance services, specialty insurance and reinsurance, and satellite communications.</font> <p><font size=-1> In virtually all of its global business activities, the Company encounters aggressive and able competition. In many instances, the competitive climate is characterized by changing technology that requires continuing research and development commitments, and by capital-intensive needs to meet customer requirements. With respect to manufacturing operations, management believes that, in general, GE is one of the leading firms in most of the major industries in which it participates. The NBC Television Network is one of four major U.S. commercial broadcast television networks. It also competes with two relatively new commercial broadcast networks, syndicated broadcast television programming and cable and satellite television programming activities. The businesses in which GE Capital Services engages are subject to competition from various types of financial institutions, including commercial banks, thrifts, investment banks, broker-dealers, credit unions, leasing companies, consumer loan companies, independent finance companies, finance companies associated with manufacturers, and insurance and reinsurance companies.</font> <p><font size=-1> GE has substantial export sales from the United States. In addition, the Company has expanded significantly its non-U.S. activities through majority, minority or other joint venture interests in companies engaged primarily in manufacturing and distributing products and providing nonfinancial services similar to those sold within the United States. GECS financial services operations outside the United States also have expanded considerably over the past several years.</font> <p><b><font size=-1>Operating Segments</font></b> <p><font size=-1> Revenue and segment profit information about the Company's operating segments in accordance with Statement of Financial Accounting Standards (SFAS) No. 131<i>, Disclosures About Segments of an Enterprise and Related Information</i>, is presented on page 44 of the 1999 Annual Report to Share Owners. Additional financial data and commentary on recent financial results for operating segments are provided on pages 43-48 of that Report and in note 28 (pages 72 and 73) to the consolidated financial statements.</font> <p><font size=-1> Operating businesses that are reported as segments under SFAS No. 131 include Aircraft Engines, Appliances, GECS, Power Systems, Plastics and NBC. The remaining key businesses do not meet the definition of a reportable segment and have been aggregated into two operating segments based on common characteristics of their activities (Industrial Products and Systems, and Technical Products and Services). For the GECS segment, revenues and net earnings are presented and analyzed on pages 46-48 of the 1999 Annual Report to Shares Owners by the five major operating activities in which it conducts its business (consumer services, equipment management, mid-market financing, specialized financing and specialty insurance). There is appropriate elimination of the net earnings of GECS and the immaterial effect of transactions between GE and GECS segments to arrive at total consolidated data. A summary description of each of the Company's operating segments follows.</font> <p><b><font size=-1>Aircraft Engines</font></b> <p><font size=-1> Aircraft Engines (9.5%, 10.2% and 8.6% of consolidated revenues in 1999, 1998 and 1997, respectively) produces, sells and services jet engines, turboprop and turboshaft engines, and related replacement parts for use in military and commercial aircraft. GE's military engines are used in a wide variety of aircraft that includes fighters, bombers, tankers, helicopters and surveillance aircraft. The CFM56, produced by CFMI, a company jointly owned by GE and Snecma of France, and GE's CF6 engines power aircraft in all categories of large commercial aircraft: short/medium, intermediate and long-range. Applications for the CFM56 engine include: Boeing's 737-300/-400/-500 series, the next generation 737-600X/-700/-800/-900 series, and the 737 business jet; Airbus Industrie's A318, A319, A320, A321 and A340 series; and military aircraft such as the KC-135R, E/KE-3 and E-6. The CF6 family of engines powers intermediate and long-range aircraft such as Boeing's 747, 767, DC-10 and MD-11 series, as well as Airbus Industrie's A300, A310 and A330 series. The GE90 engine is used to power Boeing's 777 series twin-engine aircraft. The business also produces jet engines for executive aircraft and regional commuter aircraft and aircraft engine derivatives used for marine propulsion, mechanical drives and industrial power generation sources. These aircraft engine derivatives are also reported as part of the Power Systems segment. Maintenance, overhaul and component repair services are provided for many models of engines, including engines manufactured by competitors. The business further expanded its product services operations through acquisitions of the overhaul operations of Varig Airlines in 1998 and Greenwich Air Services/UNC in 1997.</font> <p><font size=-1> The worldwide competition in aircraft jet engines is intense. Both U.S. and export markets are important. Product development cycles are long and product quality and efficiency are critical to success. Research and development expenditures, both customer-financed and internally funded, are also important in this segment. Potential sales for any engine are limited by, among other things, its technological lifetime, which may vary considerably depending upon the rate of advance in the state of the art, by the small number of potential customers and by the limited number of applicable airframe applications. Sales of product services (replacement parts and services) are an important part of the business. Aircraft engine orders tend to follow military and airline procurement cycles, although cycles for military and commercial engine procurement are different. Procurements of military jet engines are affected by changes in global political and economic factors.</font> <p><font size=-1> In line with industry practice, sales of commercial jet aircraft engines often involve long-term financing commitments to customers. 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 $1.5 billion at year-end 1999, and had entered into commitments totaling $1.8 billion 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, 1999.</font> <p><font size=-1> For current information about Aircraft Engines orders and backlog, see page 45 of the 1999 Annual Report to Share Owners.</font> <p><b><font size=-1>Appliances</font></b> <p><font size=-1> Appliances (5.1%, 5.6% and 6.4% of consolidated revenues in 1999, 1998 and 1997, respectively) manufactures and/or markets a single class of product - -- major appliances -- that includes refrigerators, electric and gas ranges, microwave ovens, freezers, dishwashers, clothes washers and dryers, water-softening and filtering products, and room air conditioning equipment. These are sold under GE, Hotpoint, Monogram, Profile and Profile Performance brands as well as under private brands for retailers and others. GE microwave ovens, room air conditioners, water softening and filtering products, and freezers are sourced from suppliers while investment in Company-owned facilities is focused on refrigerators, dishwashers, ranges (primarily electric, but some gas) and home laundry equipment. A large portion of appliance sales is for replacement of installed units. Such sales are through a variety of retail outlets. The other principal channel consists of residential building contractors who install appliances in new dwellings. GE has an extensive U.S. product services network that provides repair services, expanded service plans, warranty administration and risk management services.</font> <p><font size=-1> Demand for appliances is influenced by economic trends such as increases or decreases in consumer disposable income, availability of credit and housing construction. Competition is very active in all products and comes from a number of principal manufacturers and suppliers. An important factor is innovation and new product features. GE Appliances continued to use its Six Sigma new product introduction process to bring new, exciting products to the consumer. In 1999 we launched the revolutionary Advantium™ speedcooking oven which cooks oven quality food in one-fourth the time of a conventional oven. Highlighting this revolutionary advance in cooking technology were best new product of the year awards from <i>Business Week</i> and <i>Popular Science</i>. We also introduced the Triton™ Dishwasher, Spectra™ Electric Range and CustomStyle™ Refrigerator. Quality is also a key element to success in the appliance market. Our Six Sigma quality initiative continues to enable the business to improve the quality of products to record levels, reduce waste and provide better product services. Other significant factors include product cost, brand recognition, customer responsiveness and appliance service capability.</font> <p><font size=-1> GE Appliances aggressively added to its e-commerce capabilities in 1999. During the year the business sold more than $2 billion of appliances electronically and more than $500 million using its state-of-the-art CustomerNet website. In addition, the business formed strategic partnerships with BuildNet.com, ImproveNet.com and JG Sullivan Interactive to further enable GE Appliances to utilize the Internet to serve its customers.</font> <p><b><font size=-1>Industrial Products and Systems</font></b> <p><font size=-1> Industrial Products and Systems (10.4%, 11.2% and 12.1% of consolidated revenues in 1999, 1998 and 1997, respectively) encompasses the following businesses: Lighting, Transportation Systems, Industrial Systems, and GE Supply. Products and services provided by each of the businesses in this segment are sold primarily to industrial customers, including original equipment manufacturers, industrial end users, utilities, electrical contractors, as well as to distributors. These businesses compete against a variety of both U.S. and non-U.S. manufacturers and service providers. Markets for industrial products and services are diverse, global and highly price competitive. The aggregate level of economic activity in markets for such products and services generally lag overall economic slowdowns as well as subsequent recoveries. In the United States, industrial markets are undergoing significant structural changes reflecting, among other factors, increased international competition and pressures to modernize productive capacity. A description of products and services provided by each of the businesses in this segment follows.</font> <p><font size=-1> Lighting includes a wide variety of lamps -- incandescent, fluorescent, high intensity discharge, halogen and specialty -- as well as outdoor lighting fixtures, wiring devices and quartz products. Customers for lighting products are diverse, ranging from household consumers to commercial and industrial end users and original equipment manufacturers. Markets and customers are global. In early 1999, the business formed GELcore LLC, a joint venture with Emcore Corporation, focusing on the technology and market development of "white light" LEDs (light-emitting diodes). Additionally, its industrial fixtures business acquired a majority interest in Hadasa, a Spanish company specializing in the manufacture and sale of high-intensity discharge lighting fixtures. In 1997, the business acquired certain assets of Flame Electrical Ltd., a lighting products distributor in South Africa, and entered into an agreement with MagneTek, Inc. that provides GE exclusive sales responsibility for electronic ballasts in North America.</font> <p><font size=-1> Transportation Systems includes locomotives, transit propulsion and control equipment, motorized wheels for off-highway vehicles such as those used in mining operations, motors for drilling devices, and parts and product services for the foregoing. Locomotives are sold worldwide, principally to railroads, while customers for other products include state and urban transit authorities and industrial users. An increasingly important product line is the alternating current (AC) locomotive, which was first introduced at 4,400 horsepower. In 1998, the business began delivering a new 6,000 horsepower AC unit. Product services include maintenance and repair of locomotives and communications and logistics systems for locomotive, train and fleet control provided through GE-Harris Railway Electronics, L.L.C., a joint venture with Harris Corporation. Information about Transportation Systems orders and backlog is provided on page 45 of the 1999 Annual Report to Share Owners.</font> <p><font size=-1> Industrial Systems includes electric motors and related products and services for the appliance, commercial, industrial, heating, air conditioning, automotive and utility markets; power delivery and control products such as circuit breakers, transformers, electricity meters, relays, capacitors and arresters sold for installation in commercial, industrial and residential facilities; electrical and electronic industrial automation products, including drive systems, for metal and paper processing, mining, utilities and marine applications. Product services include engineering, management and technical expertise for power plants and other large projects; maintenance, inspection, repair and rebuilding of electrical apparatus produced by GE and others; and on-site engineering and upgrading of already installed products sold by GE and others. Other product services include the integration of software with hardware (principally motors, drives and programmable controls) into customized systems solutions for customers in the semiconductor, water treatment, pulp and paper, and petroleum industries. In 1999, the business strengthened its position in the equipment market by acquiring the GEC Alstom Low Voltage business in the United Kingdom and the GEC Alstom and AEG-NGEF Ltd. businesses in India. In 1997, the business expanded its presence in this emerging market segment through several small acquisitions. Motor products are used within GE and also are sold externally. Industrial automation products cover a broad range of electrical and electronic products with emphasis on manufacturing and advanced engineering automation applications. Through a 50-50 joint venture (GE Fanuc Automation Corporation) which has two operating subsidiaries (one in North America and the other in Europe), the business offers a wide range of high-technology industrial automation systems and equipment, including computer numerical controls and programmable logic controls. In 1998, GE Fanuc acquired Total Control Products, Inc., strengthening its position in the emerging market for open control systems.</font> <p><font size=-1> GE Supply operates a U.S. network of electrical supply houses and, through its affiliates, has operations in Mexico, Brazil and Ireland. GE Supply offers products of General Electric and other manufacturers to electrical contractors and to industrial, commercial and utility customers.</font> <p><b><font size=-1>NBC</font></b> <p><font size=-1> NBC (5.2%, 5.2% and 5.7% of consolidated revenues in 1999, 1998 and 1997, respectively) is principally engaged in the broadcast of network television services to affiliated television stations within the United States; the production of live and recorded television programs; the operation, under licenses from the Federal Communications Commission (FCC), of television broadcasting stations; the ownership of four cable/satellite networks around the world, and investment and programming activities in multimedia, the Internet and cable television. The NBC Television Network is one of four major U.S. commercial broadcast television networks and serves more than 220 affiliated stations within the United States. At December 31, 1999, NBC owned and/or operated 13 VHF and UHF television stations located in Birmingham, AL; Los Angeles, CA; San Diego, CA; Hartford, CT; Miami, FL; Chicago, IL; Columbus, OH; New York, NY; Raleigh-Durham, NC; Philadelphia, PA; Providence, RI; Dallas, TX; and Washington, DC. Broadcasting operations, including the NBC Television Network and owned stations, are subject to FCC regulation. NBC's operations include investment and programming activities in cable television, principally through CNBC, MSNBC, CNBC Europe, and CNBC Asia, as well as equity investments in Arts and Entertainment, The History Channel, ValueVision, Inc. and Rainbow Media Holdings, Inc. in the United States. In 1999, NBC contributed NBC.com, NBC-IN.com and VideoSeeker, its interest in Snap, an Internet directory and search services business, plus a 10% interest in CNBC.com, to NBC Internet, Inc. (NBCi), a newly-formed entity combining NBC's contributed Internet assets with the businesses of Xoom.com, a community services Internet site, and Snap.com in exchange for a non-controlling interest of approximately 47.3% in NBCi. Also in 1999, NBC launched CNBC.com, an Internet financial information service developed in connection with its CNBC cable television channel. NBC also acquired $415 million in convertible preferred stock of Paxson Communications Corporation, which, if converted, would represent approximately 32% of common stock of Paxson, together with the right to acquire up to a total of approximately 49% of the common stock of Paxson (including Chairman Lowell Paxson's controlling stock) after February 1, 2002 if FCC rules then permit. NBC entered into long-term arrangements with Triple Crown Productions and the National Association For Stock Car Auto Racing (NASCAR) that give NBC exclusive American broadcast rights to the Kentucky Derby, the Preakness Stakes and the Belmont Stakes beginning in 2001 through 2005 and, in conjunction with Turner Broadcasting System, Inc., to the exclusive television rights to 20 NASCAR races per network per year beginning in 2001 through 2006. In 1998, NBC acquired a majority ownership position in KXAS, a television station in Dallas, and an equity stake in Snap. 1998 marked the end of a 33-year affiliation with the National Football League. In 1997, the business entered into a strategic alliance with Dow Jones that merged the European and Asian business news services of Dow Jones with those of CNBC and uses Dow Jones editorial resources in the United States. The business also entered into long-term arrangements with the National Basketball Association (NBA) and the United States Golf Association (USGA) that give NBC exclusive national over-the-air broadcast rights to NBA games through the 2002 season and to the USGA's major golf championships through the year 2003. NBC also has secured United States television rights to the 2000, 2002, 2004, 2006 and 2008 Olympic Games.</font> <p><b><font size=-1>Plastics</font></b> <p><font size=-1> Plastics (6.2%, 6.6% and 7.4% of consolidated revenues in 1999, 1998 and 1997, respectively) includes high-performance plastics used by compounders, molders and major original equipment manufacturers for use in a variety of applications, including fabrication of automotive parts, computer enclosures, compact disks and optical-quality media, major appliance parts and construction materials. Products also include ABS resins, silicones, superabrasive industrial diamonds and laminates. Market opportunities for many of these products are created by substituting resins for other materials, which provides customers with productivity through improved material performance at lower cost. These materials are sold to a diverse worldwide customer base, mainly manufacturers. The business has a significant operating presence around the world and participates in numerous manufacturing and distribution joint ventures. During 1999, in addition to its polycarbonate plant in Cartagena, Spain the business announced plans to build new compounding plants in both Thailand and China. Also in 1999, Plastics moved forward with its e-commerce initiative, growing internet sales from essentially zero in January 1999 to more than $5 million per week today. During 1998, the business established two joint ventures with Bayer of Germany. The first venture, Exatec, is developing polycarbonate automotive glazing technology and manufacturing systems. The second venture, GE-Bayer Silicones Europe, strengthens the position of the silicones business in the European region.</font> <p><font size=-1> The materials business environment is characterized by technological innovation and heavy capital investment. Being competitive requires emphasis on efficient manufacturing process implementation and significant resources devoted to market and application development. Competitors include large, technology-driven suppliers of the same, as well as other functionally equivalent, materials. The business is cyclical and is subject to variations in price and in the availability of raw materials, such as cumene, benzene and methanol. Adequate capacity to satisfy growing demand and anticipation of new product or material performance requirements are key factors affecting competition.</font> <p><b><font size=-1>Power Systems</font></b> <p><font size=-1> Power Systems (9.0%, 8.4% and 8.7% of consolidated revenues in 1999, 1998 and 1997, respectively) serves utility, industrial and governmental customers worldwide with electricity generating products, services and energy management systems. Gas turbines are used principally in power plants for generation of electricity and for industrial cogeneration and mechanical drive applications. In 1999, the business acquired the heavy duty gas turbine division at Alstom with manufacturing facilities in France and Germany. In 1998, the business acquired the gas turbine division of Stewart and Stevenson Services, Inc., which further expands its product and product services offerings to the industrial power generation market. Power Systems also packages aircraft engine derivatives for use as industrial power sources. This activity is also reported in the Aircraft Engines segment. Centrifugal compressors are sold for application in gas reinjection, pipeline services and such process applications as refineries and ammonia plants. Steam turbine-generators are sold to the electric utility industry and to private industrial customers for cogeneration applications. Nuclear reactors, fuel and support services for both new and installed boiling water reactors are also a part of this segment. There have been no nuclear power plant orders in the United States since the mid-1970's. However, the business is currently participating in the construction of nuclear power plants in Japan and Taiwan. The business continues to invest in advanced technology development and to focus its resources in refueling and servicing its installed boiling-water reactors.</font> <p><font size=-1> Worldwide competition for power generation products and services is intense. Demand for most power generation products and services is worldwide and as a result is sensitive to the economic and political environment of each country in which the business participates. In the United States, demand for power generation equipment is sensitive to the financial condition of the electric utility industry as well as the electric power conservation efforts by power users. Internationally, the influence of petroleum and related prices has a large impact on demand. For information about orders and backlog, see page 45 of the 1999 Annual Report to Share Owners.</font> <p><b><font size=-1>Technical Products and Services</font></b> <p><font size=-1> Technical Products and Services (6.1%, 5.3% and 5.4% of consolidated revenues in 1999, 1998 and 1997, respectively) consists of technology operations providing products, systems and services to a variety of customers. Principal businesses included in this segment are Medical Systems and Information Services.</font> <p><font size=-1> Medical Systems includes magnetic resonance (MR) scanners, computed tomography (CT) scanners, x-ray, nuclear imaging, ultrasound, and other diagnostic and therapy equipment, and product services sold to hospitals and medical facilities worldwide. Product services include remote diagnostic and repair services for medical equipment manufactured by GE and by others, as well as computerized data management and customer productivity services. GE Medical Systems has a significant operating presence in Europe and Asia, including the operations of its affiliates, GE Medical Systems S.A. (France), GE Yokogawa Medical Systems (Japan) and WIPRO GE Medical Systems (India). Acquisitions in 1999 included OEC Medical Systems, a leader in mobile and surgical x-ray systems, and Applicare, a leading supplier of web-based archiving and imaging services. In addition, we announced our agreement to acquire MECON, a leader in healthcare data mining. In 1998, the business completed three strategic acquisitions: Marquette Medical Systems, a global leader in diagnostic cardiology and patient monitoring devices, Diasonics Vingmed Ultrasound, a leading maker of cardiac ultrasound systems, and Elscint Ltd., which enhances Medical Systems' position in the nuclear imaging and magnetic resonance imaging segments. In 1997, the business acquired Lockheed Martin Medical Systems and a 20% stake in ALI, a leader in ultrasound image archiving. See page 46 of the 1999 Annual Report to Share Owners for information about orders and backlog of GE Medical Systems.</font> <p><font size=-1> Business-to-business electronic commerce solutions are provided to over 100,000 trading partners around the world by GE Information Services (GEIS). Its global network-based solutions include Electronic Data Interchange and messaging services, Internet, extranet and systems integration services, and a line of applications that help customers to lower their costs, reduce cycle times, and improve quality in purchasing, logistics, and supplier and distribution channel management.</font> <p><font size=-1> Serving a range of customers with special needs (which are rapidly changing in areas such as medical and information systems), businesses in this segment compete against a variety of both U.S. and non-U.S. manufacturers or services operations. Technological competence and innovation, excellence in design, high product performance, quality of services and competitive pricing are among the key factors affecting competition for these products and services. Throughout the world, demands on health care providers to control costs have become much more important.</font> <p><b><font size=-1>GECS</font></b> <p><font size=-1> GECS (49.9%, 48.5% and 44.0% of consolidated revenues in 1999, 1998 and 1997, respectively) consists of 28 businesses that, for purposes of analysis, are grouped into five key operating activities: consumer services, equipment management, mid-market financing, specialized financing and specialty insurance. In addition, as discussed on page 48 of the 1999 GE Annual Report to Share Owners, GECS acquired control of Montgomery Ward LLC ("Wards") on August 2, 1999. Further information about Wards is provided in the description of GECS All Other operating activities. Very little of the financing provided by GECS businesses involves products that are manufactured by GE.</font> <p><font size=-1> GE Capital'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. 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. GECS' international operations are also subject to regulation in their respective jurisdictions. To date, compliance with the regulations discussed above has not had a material adverse effect on GE Capital's financial position or results of operations.</font> <p><font size=-1> On March 28, 1991, GE entered into an agreement to make payments to GE Capital, constituting additions to pre-tax income, to the extent necessary to cause the ratio of earnings to fixed charges of GE Capital and consolidated affiliates (determined on a consolidated basis) to be not less than 1.10 for the period, as a single aggregation, of each GE Capital fiscal year commencing with fiscal year 1991. The agreement can only be terminated by written notice and termination is not effective until the third anniversary of the date of such notice. GE Capital's ratios of earnings to fixed charges for the years 1999, 1998 and 1997, respectively, were 1.60, 1.50 and 1.48, substantially above the level at which payments would be required. Under a separate agreement, GE has committed to make a capital contribution to GE Capital in the event certain GE Capital preferred stock is redeemed and such redemption were to cause the GE Capital debt-to-equity ratio, excluding from equity all net unrealized gains and losses on investment securities, to exceed 8 to 1.</font> <p><font size=-1> A description of principal businesses included in each of GECS operating activities follows.</font> <p><i><font size=-1>Consumer Services</font></i> <p><font size=-1> 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.</font> <p><font size=-1> GE Capital Auto Financial Services ("AFS") provides financial services to automobile dealers, manufacturers, financing companies and the consumer customers of those entities in North America. In the United States, AFS is a leading independent financier of leases for new and used motor vehicles leased at retail and sub-prime and prime financing products to consumers through a variety of distribution channels. In addition, AFS provides private-label programs for auto manufacturers and inventory financing programs and direct loans to auto dealers and finance companies.</font> <p><font size=-1> Global Consumer Finance Auto Europe ("GCF Auto Europe") is a leading independent provider of automobile financing products to automobile dealers and their customers in Europe. Products include hire purchase contracts, finance leases, operating leases, loans, revolving credit facilities and insurance premium financing. GCF Auto Europe has a significant presence in the United Kingdom, the Republic of Ireland, Portugal, France, Spain, Italy, Sweden and Denmark.</font> <p><font size=-1> 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 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. On June 30, 1999, CS completed its exit of the consumer bankcard business through the sale of approximately $3.4 billion in financing receivables of which $2.2 billion were sold in December 1998. These were principally MasterCard® and Visa® credit loan products issued to retail customers throughout the United States. On December 6, 1999, CS acquired J.C. Penney's ("JCP") private label credit card accounts receivable and their credit card services facilities for approximately $3.2 billion. In addition, the Company entered into an initial 10 year agreement with JCP to provide private label credit card services.</font> <p><font size=-1> 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. GCF provides financing to consumers through operations in the United Kingdom, Austria, France, Republic of 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.</font> <p><font size=-1> 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.</font> <p><i><font size=-1>Equipment Management</font></i> <p><font size=-1> 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 operating leases, sale/leasebacks, aircraft purchase and trading, financing leases, engine/spare parts financing, pilot training, fleet planning and financial advisory services. GECAS owns or manages a fleet of nearly 900 aircraft worldwide with more than 200 additional planes on order or on option from Boeing and Airbus. GECAS has 155 customers in 54 countries.</font> <p><font size=-1> 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 1 million 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 <b>- </b>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 1999, GECFS completed several acquisitions. These included, Japan Lease Auto Corporation -- a leading fleet leasing company in Japan, a small fleet leasing portfolio from Bank of America in the United States, InTraffic -- a fleet services provider in Sweden and McClean Leasing in Canada.</font> <p><font size=-1> 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.</font> <p><font size=-1> Transport International Pool ("TIP") is one of the global leaders in renting, leasing, selling and financing transportation equipment. TIP's fleet of over 350,000 dry freight, refrigerated and double vans, flatbeds, intermodal assets, and specialized trailers is available for rent, lease or purchase at over 250 locations in the United States, Europe, Canada, and Mexico. TIP's commercial vehicle fleet of over 24,000 units is available for rent, lease, or purchase in the United Kingdom. TIP also finances new and used trailers and buys trailer fleets. TIP's customer base comprises trucking companies, railroads, shipping lines, manufacturers and retailers.</font> <p><font size=-1> In 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 Ltd. GE SeaCo is one of the world's largest lessors of marine shipping containers and specialized containers for global cargo transport. 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.</font> <p><font size=-1> GE Capital is a limited partner in Penske Truck Leasing ("Penske"), which is a leading provider of full-service truck leasing and commercial and consumer truck rental in the United States. Penske operates through a national network of full-service truck leasing and rental facilities. At December 31, 1999, Penske had a fleet of about 98,000 tractors, trucks and trailers in its leasing and rental fleets and provided contract maintenance programs or other support services for about 33,000 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.</font> <p><font size=-1> 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.</font> <p><font size=-1> GE Capital Railcar Services ("GERSCO") is one of the leading railcar leasing companies in North America, with a fleet of 190,000 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.</font> <p><font size=-1> 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 125,000 mobile and modular units.</font> <p><i><font size=-1>Mid-Market Financing</font></i> <p><font size=-1> 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 redeploys off-lease equipment. The portfolio includes loans and leases for vehicles, manufacturing equipment, corporate aircraft, construction equipment, medical diagnostic equipment, office equipment, telecommunications equipment and electronics.</font> <p><font size=-1> During 1999, CEF together with GE Capital Vendor Financial Services purchased the leasing and installment sales division of Japan Leasing Corporation</font> <p><font size=-1> GE Capital Vendor Financial Services ("VFS") provides financing services to over 100 equipment manufacturers and more than 3,500 dealers in North America, Europe and Asia (including Japan). Customers include major U.S. and non-U.S. 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.</font> <p><i><font size=-1>Specialized Financing</font></i> <p><font size=-1> 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).</font> <p><font size=-1> GE Capital Structured Finance Group ("SFG") makes equity investments and provides specialized financial products and services to its client partners in the commercial and industrial, energy, telecommunications 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 manages an investment portfolio of approximately $11 billion.</font> <p><font size=-1> GE Capital Commercial Finance ("CF") is a leading provider of revolving and term debt and equity to finance acquisitions, business expansion, bank refinancings, recapitalizations and other special situations. Products also include asset securitization facilities, capital expenditure lines and bankruptcy-related facilities. Transactions typically range in size from under $2 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, and has industry specialists 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.</font> <p><font size=-1> 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, telecommunications, 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.</font> <p><i><font size=-1>Specialty Insurance</font></i> <p><font size=-1> GE Global Insurance, together with its affiliates, writes substantially all lines of reinsurance and certain lines of property and casualty insurance. GE Global Insurance has three principal subsidiaries: Employers Reinsurance Corporation, GE Reinsurance Corporation (formerly Kemper Reinsurance Corporation) and Medical Protective Corporation. These affiliates, together with their direct and indirect subsidiaries, reinsure property and casualty risks written by more than 1,000 insurers around the world. They also write certain specialty lines of insurance on a direct basis, principally excess workers' compensation for self-insurers, medical malpractice coverage for physicians and dentists, errors and omissions coverage for insurance agents and brokers, excess indemnity for self-insurers of medical benefits, and libel and allied torts. Other property and casualty affiliates write excess and surplus lines insurance and provide reinsurance brokerage services. The life reinsurance affiliates are engaged in the reinsurance of life insurance products, including term, whole and universal life, annuities, group long-term health products and the provision of financial reinsurance to life insurers. During 1999, GE Global Insurance acquired a major property and casualty reinsurance/insurance business that strengthens its presence in the London broker-serviced market. Also in 1999, Employers Reinsurance Corporation sold its reinsurance brokerage subsidiary. Insurance and reinsurance operations are subject to regulation by various insurance regulatory agencies.</font> <p><font size=-1> 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 $137 billion at December 31, 1999. Approximately 85% 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.</font> <p><font size=-1> 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, 1999, GE Capital Mortgage Insurance was the mortgage insurance carrier for over 1,460,000 residential homes, with total insurance in force aggregating approximately $152 billion and total risk in force aggregating approximately $52 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.</font> <p><font size=-1> GE Insurance Holdings (formerly Consolidated Financial Insurance) is a leading specialty insurer with operations in 13 European countries and the Philippines. GE Insurance Holdings is one of the leading payment protection insurers in the United Kingdom and Europe. Payment protection insurance is designed to protect customers' loan repayment obligations in the event of unemployment, disability or death. The product is sold alongside most forms of consumer credit through banks, building societies and finance houses. GE Insurance Holdings also provides an extensive range of personal investment products, including pension and purchased life annuities, home income plans and investment bonds through a network of over 6,000 independent financial advisors and a direct sales force, in the United Kingdom. In addition, GE Insurance Holdings sells pet insurance, provides travel and personal accident insurance, and offers the management of uninsured loss claims on behalf of victims of traffic accidents.</font> <p><i><font size=-1>All Other</font></i> <p><font size=-1> All Other consists primarily of the activities of Montgomery Ward LLC. Wards is one of the largest retail merchandising operations in the United States. Wards offers a wide range of branded and private-label merchandise including apparel, fine jewelry, furniture, home furnishings, appliances, electronics, and automotive services. Wards operates 252 stores in 32 states, encompassing approximately 20 million square feet of selling space.</font> <p><b><font size=-1>Geographic Segments, Exports from the U.S. and Total International Operations</font></b> <p><font size=-1> Financial data for geographic segments (based on the location of the Company operation supplying goods or services and including exports from the U.S. to unaffiliated customers) are reported in note 29 to consolidated financial statements on page 74 of the 1999 Annual Report to Share Owners.</font> <p><font size=-1> Additional financial data about GE's exports from the U.S. and total international operations are provided on pages 48-49 of the 1999 Annual Report to Share Owners.</font> <p><b><font size=-1>Orders Backlog</font></b> <p><font size=-1> See pages 45, 46 and 54 of the 1999 Annual Report to Share Owners for information about GE's backlog of unfilled orders.</font> <p><b><font size=-1>Research and Development</font></b> <p><font size=-1> Total expenditures for research and development were $2,017 million in 1999. Total expenditures had been $1,930 million in 1998 and $1,891 million in 1997. Of these amounts, $1,667 million in 1999 was GE-funded ($1,537 million in 1998 and $1,480 million in 1997); and $350 million in 1999 was funded by customers ($393 million in 1998 and $411 million in 1997), principally the U.S. government. Aircraft Engines accounts for the largest share of GE's research and development expenditures from both GE and customer funds. Medical Systems, Power Systems, Transportation Systems and Plastics made other significant expenditures of GE and customer research and development funds.</font> <p><font size=-1> Approximately 8,941 person-years of scientist and engineering effort were devoted to research and development activities in 1999, with about 89% of the time involved primarily in GE-funded activities.</font> <p><b><font size=-1>Environmental Matters</font></b> <p><font size=-1> See pages 54 and 68 of GE's 1999 Annual Report to Share Owners for a discussion of environmental matters.</font> <p><b><font size=-1>Employee Relations</font></b> <p><font size=-1> At year-end 1999, General Electric Company and consolidated affiliates employed 340,000 persons, of whom approximately 197,000 were in the United States. For further information about employees, see page 55 of the 1999 Annual Report to Share Owners.</font> <p><font size=-1> Approximately 32,000 GE manufacturing and service employees in the United States are represented for collective bargaining purposes by a total of approximately 150 different local collective bargaining groups. A majority of such employees are represented by union locals that are affiliated with, and bargain in conjunction with, the International Union of Electronic, Electrical, Salaried, Machine and Furniture Workers (IUE-AFL-CIO). During 1997, General Electric Company negotiated three-year contracts with unions representing a substantial majority of those United States employees who are represented by unions. Most of these contracts will terminate in June 2000. NBC is party to approximately 100 labor agreements covering about 2,000 staff employees (and a large number of freelance employees) in the United States. These agreements are with various labor unions, expire at various dates and are generally for a term ranging from three to five years.</font> <p><b><font size=-1>Executive Officers</font></b> <p><font size=-1> <a href="#Item 10">See Part III, Item 10 of this 10-K Report</a> for information about Executive Officers of the Registrant.</font> <p><b><font size=-1>Other</font></b> <p><font size=-1> Because of the diversity of the Company's products and services, as well as the wide geographic dispersion of its production facilities, the Company uses numerous sources for the wide variety of raw materials needed for its operations. The Company has not been adversely affected by inability to obtain raw materials.</font> <p><font size=-1> The Company owns, or holds licenses to use, numerous patents. New patents are continuously being obtained through the Company's research and development activities as existing patents expire. Patented inventions are used both within the Company and licensed to others, but no operating segment is substantially dependent on any single patent or group of related patents.</font> <p><font size=-1> Agencies of the U.S. Government constitute GE's largest single customer. An analysis of sales of goods and services as a percentage of revenues follows:</font> <br> <table BORDER=0 WIDTH="594" > <tr> <td VALIGN=TOP WIDTH="236"><font size=-1> </font></td> <td VALIGN=TOP COLSPAN="5" WIDTH="159"> <center><b><font size=-1>% of Consolidated Revenues</font></b> <hr noshade size="1"></center> </td> <td VALIGN=TOP WIDTH="22"><font size=-1> </font></td> <td VALIGN=TOP COLSPAN="5" WIDTH="151"> <center><b><font size=-1>% of GE Revenues</font></b> <hr noshade size="1"></center> </td> </tr> <tr> <td VALIGN=TOP WIDTH="236"><font size=-1> </font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="41"> <center><b><font size=-1>1999</font></b> <hr noshade size="1"></center> </td> <td ALIGN=CENTER VALIGN=TOP WIDTH="5"><font size=-1> </font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="41"> <center><b><font size=-1>1998</font></b> <hr noshade size="1"></center> </td> <td ALIGN=CENTER VALIGN=TOP WIDTH="5"><font size=-1> </font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="41"> <center><b><font size=-1>1997</font></b> <hr noshade size="1"></center> </td> <td ALIGN=CENTER VALIGN=TOP WIDTH="22"><font size=-1> </font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="41"> <center><b><font size=-1>1999</font></b> <hr noshade size="1"></center> </td> <td ALIGN=CENTER VALIGN=TOP WIDTH="5"><font size=-1> </font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="41"> <center><b><font size=-1>1998</font></b> <hr noshade size="1"></center> </td> <td ALIGN=CENTER VALIGN=TOP WIDTH="5"><font size=-1> </font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="41"> <center><b><font size=-1>1997</font></b> <hr noshade size="1"></center> </td> </tr> <tr> <td VALIGN=TOP WIDTH="236"><font size=-1>Total sales to U.S. Government Agencies</font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="41"><font size=-1>2%</font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="5"><font size=-1> </font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="41"><font size=-1>2%</font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="5"><font size=-1> </font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="41"><font size=-1>2%</font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="22"><font size=-1> </font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="41"><font size=-1>3%</font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="5"><font size=-1> </font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="41"><font size=-1>4%</font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="5"><font size=-1> </font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="41"><font size=-1>3%</font></td> </tr> <tr> <td VALIGN=TOP WIDTH="236"><font size=-1>Aircraft Engines defense-related sales</font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="41"><font size=-1>1 </font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="5"><font size=-1> </font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="41"><font size=-1>1 </font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="5"><font size=-1> </font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="41"><font size=-1>2 </font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="22"><font size=-1> </font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="41"><font size=-1>3 </font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="5"><font size=-1> </font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="41"><font size=-1>3 </font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="5"><font size=-1> </font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="41"><font size=-1>3 </font></td> </tr> </TABLE> <p><a NAME="Item 2"></a><b><font size=-1>Item 2. Properties</font></b> <p><font size=-1> Manufacturing operations are carried out at approximately 131 manufacturing plants located in 33 states in the United States and Puerto Rico and at some 154 manufacturing plants located in 31 other countries.</font> <p><a NAME="Item 3"></a><b><font size=-1>Item 3. Legal Proceedings</font></b> <p><b><font size=-1>General</font></b> <p><font size=-1> As previously reported, on March 12, 1993, a complaint was filed in United States District Court for the District of Connecticut by ten employees of the Company's former Aerospace business, purportedly on behalf of all GE Aerospace employees whose GE employment status is or was affected by the then planned transfer of GE Aerospace to a new company controlled by the stockholders of Martin Marietta Corporation. The complaint sought to clarify and enforce the plaintiffs' claimed rights to pension benefits in accordance with, and rights to assets then held in, the GE Pension Plan (the "Plan"). The complaint named the Company, the trustees of the GE Pension Trust ("Trust"), and Martin Marietta Corporation and one of its former plan administrators as defendants. The complaint alleged primarily that the Company's planned transfer of certain assets of the Trust to a Martin Marietta pension trust, in connection with the transfer of the Aerospace business, violated the rights of the plaintiffs under the Plan and applicable provisions of the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code. The complaint sought equitable and declaratory relief, including an injunction against transfer of the Plan assets except under circumstances and protections, if any, approved by the court, an order that the Company disgorge all profits allegedly received by it as a result of any such transfer and the making of restitution to the Trust for alleged investment losses resulting from the Company's treatment of Plan assets in connection with the transaction or alternatively the transfer of additional assets from the Trust to a new Martin Marietta pension trust, and an order requiring Martin Marietta to continue to offer transferred employees all accrued pension-related benefits for which they were eligible under the Plan as of the closing date of the transfer of the GE Aerospace business to Martin Marietta. On March 23, 1993, the Company and Martin Marietta Corporation filed motions to dismiss the complaint on the basis that the complaint does not state any claim upon which relief can be granted as a matter of law. On April 2, 1993, the transfer of the Aerospace business occurred, and on June 7, 1993, the court issued an order denying plaintiffs' request for injunctive relief. On September 26, 1996, the District Court granted defendants' motion to dismiss those claims which were based on allegations that the transfer of plan assets was unlawful, and ordered discovery on the remaining claims. On September 28, 1998, the class was certified as to the remaining claims.</font> <p><font size=-1><font color="#0000FF"> </font>As previously reported, the directors (other than Messrs. Cash, Fudge, Gonzalez, Jung, Langone, McNealy, Nunn, Opie, Penske and Warner) and certain officers are defendants in a civil suit purportedly brought on behalf of the Company as a shareholder derivative action by Leslie McNeil, Harold Sachs, Arun Shingala and Paul and Harriet Luts (the McNeil action) in New York State Supreme Court on November 19, 1991. The suit alleges the Company was negligent and engaged in fraud in connection with the design and construction of containment systems for nuclear power plants and contends that, as a result, GE has incurred significant financial liabilities and is potentially exposed to additional liabilities from claims brought by the Company's customers. The suit alleges breach of fiduciary duty by the defendants and seeks unspecified compensatory damages and other relief. On March 31, 1992, the defendants filed motions to dismiss the suit. On September 28, 1992, the court denied the motions as premature but ruled that they may be renewed after the completion of limited discovery. Defendants moved for reconsideration of that order, and on April 3, 1993, the court granted defendants' motion for reconsideration and directed that discovery be stayed pending the filing of an amended complaint. Plaintiffs filed an amended complaint on March 18, 1994, alleging breach of fiduciary duty, waste and indemnification claims. The defendants have moved to dismiss the amended complaint. The Company and the defendants believe the plaintiffs' claims are without merit.</font> <p><b><font size=-1>Environmental</font></b> <p><font size=-1> As previously reported, in May 1999, the New York State Department of Environmental Conservation informed the company that it was seeking penalties of $325,000 for violations of the state's Clean Water Act at its Waterford, NY facility. The state alleges discharges in excess of permitted limits as well as reporting violations. The state has since reduced its penalty demand to $200,000. The matter is still subject to negotiation.</font> <p><font size=-1> For further information regarding environmental matters, see pages 54 and 68 of GE's 1999 Annual Report to Share Owners.</font> <p><font size=-1> It is the view of management that none of the above described proceedings will have a material effect on the Company's financial position, results of operations, liquidity or competitive position.</font> <p><a NAME="Item 4"></a><b><font size=-1>Item 4. Submission of Matters to a Vote of Security Holders</font></b> <p><font size=-1> Not applicable.</font> <center> <p><b>Part II</b></center> <p><a NAME="Item 5"></a><b><font size=-1>Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters</font></b> <p><font size=-1> With respect to "Stock Exchange Information", in the United States, GE common stock is listed on the New York Stock Exchange (its principal market) and on the Boston Stock Exchange. GE common stock also is listed on The Stock Exchange, London. Trading, as reported on the New York Stock Exchange, Inc., Composite Transactions Tape, and dividend information follows:</font> <br> <table BORDER=0 WIDTH="402" > <tr> <td VALIGN=TOP COLSPAN="2" NOWRAP WIDTH="138"><font size=-1> </font></td> <td ALIGN=RIGHT VALIGN=TOP COLSPAN="2" NOWRAP WIDTH="163"> <center><b><font size=-1>Common stock market price</font></b> <hr noshade size="1"></center> </td> <td ALIGN=RIGHT VALIGN=TOP NOWRAP WIDTH="81"><font size=-1> </font></td> </tr> <tr> <td VALIGN=CENTER COLSPAN="2" NOWRAP WIDTH="138"><i><font size=-1>(In dollars)</font></i></td> <td ALIGN=RIGHT VALIGN=BOTTOM NOWRAP WIDTH="80"> <center><b><font size=-1>High</font></b> <hr noshade size="1"></center> </td> <td ALIGN=RIGHT VALIGN=BOTTOM NOWRAP WIDTH="77"> <center><b><font size=-1>Low</font></b> <hr noshade size="1"></center> </td> <td ALIGN=RIGHT VALIGN=BOTTOM NOWRAP WIDTH="81"> <center><b><font size=-1>Dividends</font></b> <br><b><font size=-1>declared</font></b> <hr noshade size="1"></center> </td> </tr> <tr> <td VALIGN=TOP COLSPAN="2" NOWRAP WIDTH="138"><b><font size=-1>1999</font></b></td> <td ALIGN=RIGHT VALIGN=TOP NOWRAP WIDTH="80"><font size=-1> </font></td> <td ALIGN=RIGHT VALIGN=TOP NOWRAP WIDTH="77"><font size=-1> </font></td> <td ALIGN=RIGHT VALIGN=TOP NOWRAP WIDTH="81"><font size=-1> </font></td> </tr> <tr> <td VALIGN=TOP NOWRAP WIDTH="30"><font size=-1> </font></td> <td VALIGN=TOP NOWRAP WIDTH="102"><font size=-1>Fourth quarter</font></td> <td ALIGN=RIGHT VALIGN=TOP NOWRAP WIDTH="60"><font size=-1>$159 1/2</font></td> <td ALIGN=RIGHT VALIGN=TOP NOWRAP WIDTH="60"><font size=-1>$114 5/8</font></td> <td ALIGN=RIGHT VALIGN=TOP NOWRAP WIDTH="50"><font size=-1>$.41</font></td> </tr> <tr> <td VALIGN=TOP NOWRAP WIDTH="30"><font size=-1> </font></td> <td VALIGN=TOP NOWRAP WIDTH="102"><font size=-1>Third quarter</font></td> <td ALIGN=RIGHT VALIGN=TOP NOWRAP WIDTH="60"> <div align=right><font size=-1>122 1/2</font></div> </td> <td ALIGN=RIGHT VALIGN=TOP NOWRAP WIDTH="60"><font size=-1>102 9/16</font></td> <td ALIGN=RIGHT VALIGN=TOP NOWRAP WIDTH="50"><font size=-1>.35</font></td> </tr> <tr> <td VALIGN=TOP NOWRAP WIDTH="30"><font size=-1> </font></td> <td VALIGN=TOP NOWRAP WIDTH="102"><font size=-1>Second quarter</font></td> <td ALIGN=RIGHT VALIGN=TOP NOWRAP WIDTH="60"> <div align=right><font size=-1>117 7/16</font></div> </td> <td ALIGN=RIGHT VALIGN=TOP NOWRAP WIDTH="60"><font size=-1>99 13/16</font></td> <td ALIGN=RIGHT VALIGN=TOP NOWRAP WIDTH="50"><font size=-1>.35</font></td> </tr> <tr> <td VALIGN=TOP NOWRAP WIDTH="30"><font size=-1> </font></td> <td VALIGN=TOP NOWRAP WIDTH="102"><font size=-1>First quarter</font></td> <td ALIGN=RIGHT VALIGN=TOP NOWRAP WIDTH="60"> <div align=right><font size=-1>114 3/16</font></div> </td> <td ALIGN=RIGHT VALIGN=TOP NOWRAP WIDTH="60"><font size=-1>94 1/4</font></td> <td ALIGN=RIGHT VALIGN=TOP NOWRAP WIDTH="50"><font size=-1>.35</font></td> </tr> <tr> <td VALIGN=TOP COLSPAN="2" NOWRAP WIDTH="138"><b><font size=-1>1998</font></b></td> <td ALIGN=RIGHT VALIGN=TOP NOWRAP WIDTH="60"><font size=-1> </font></td> <td ALIGN=RIGHT VALIGN=TOP NOWRAP WIDTH="60"><font size=-1> </font></td> <td ALIGN=RIGHT VALIGN=TOP NOWRAP WIDTH="50"><font size=-1> </font></td> </tr> <tr> <td VALIGN=TOP NOWRAP WIDTH="30"><font size=-1> </font></td> <td VALIGN=TOP NOWRAP WIDTH="102"><font size=-1>Fourth quarter</font></td> <td ALIGN=RIGHT VALIGN=TOP NOWRAP WIDTH="60"> <div align=right><font size=-1>$103 15/16</font></div> </td> <td ALIGN=RIGHT VALIGN=TOP NOWRAP WIDTH="60"><font size=-1>$69 </font></td> <td ALIGN=RIGHT VALIGN=TOP NOWRAP WIDTH="50"><font size=-1>$.35</font></td> </tr> <tr> <td VALIGN=TOP NOWRAP WIDTH="30"><font size=-1> </font></td> <td VALIGN=TOP NOWRAP WIDTH="102"><font size=-1>Third quarter</font></td> <td ALIGN=RIGHT VALIGN=TOP NOWRAP WIDTH="60"> <div align=right><font size=-1>96 7/8</font></div> </td> <td ALIGN=RIGHT VALIGN=TOP NOWRAP WIDTH="60"><font size=-1>72 5/8</font></td> <td ALIGN=RIGHT VALIGN=TOP NOWRAP WIDTH="50"><font size=-1>.30</font></td> </tr> <tr> <td VALIGN=TOP NOWRAP WIDTH="30"><font size=-1> </font></td> <td VALIGN=TOP NOWRAP WIDTH="102"><font size=-1>Second quarter</font></td> <td ALIGN=RIGHT VALIGN=TOP NOWRAP WIDTH="60"> <div align=right><font size=-1>92</font></div> </td> <td ALIGN=RIGHT VALIGN=TOP NOWRAP WIDTH="60"><font size=-1>80 11/16</font></td> <td ALIGN=RIGHT VALIGN=TOP NOWRAP WIDTH="50"><font size=-1>.30</font></td> </tr> <tr> <td VALIGN=TOP NOWRAP WIDTH="30"><font size=-1> </font></td> <td VALIGN=TOP NOWRAP WIDTH="102"><font size=-1>First quarter</font></td> <td ALIGN=RIGHT VALIGN=TOP NOWRAP WIDTH="60"> <div align=right><font size=-1>87 5/8</font></div> </td> <td ALIGN=RIGHT VALIGN=TOP NOWRAP WIDTH="60"><font size=-1>70 1/4</font></td> <td ALIGN=RIGHT VALIGN=TOP NOWRAP WIDTH="50"><font size=-1>.30</font></td> </tr> </TABLE> <p><font size=-1>As of December 31, 1999, there were about 557,000 share owner accounts of record.</font> <p><a NAME="Item 6"></a><b><font size=-1>Item 6. Selected Financial Data</font></b> <p><font size=-1> Reported as data for revenues; net earnings; net earnings per share (basic and diluted); dividends declared; dividends declared per share; long-term borrowings; and total assets appearing on page 55 of the 1999 Annual Report to Share Owners.</font> <p><a NAME="Item 7"></a><b><font size=-1>Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations</font></b> <p><font size=-1> Reported on pages 41-43 and 45-54 (and graphs on pages 41, 42, 43, 45-49, and 51-54) of the Annual Report to Share Owners for the fiscal year ended December 31, 1999.</font> <p><a NAME="Item 7A"></a><b><font size=-1>Item 7A. Quantitative and Qualitative Disclosures About Market Risk</font></b> <p><font size=-1> Reported on pages 51 and 52 of the Annual Report to Share Owners for the fiscal year ended December 31, 1999.</font> <p><a NAME="Item 8"></a><b><font size=-1>Item 8. Financial Statements and Supplementary Data</font></b> <p><font size=-1> <a href="#Item 14">See index under item 14.</a></font> <p><a NAME="Item 9"></a><b><font size=-1>Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure</font></b> <p><font size=-1> Not applicable.</font> <center> <p><b>Part III</b></center> <p><a NAME="Item 10"></a><b><font size=-1>Item 10. Directors and Executive Officers of Registrant</font></b> <p><font size=-1> Executive Officers of the Registrant (As of March 17, 2000)</font> <br> <table BORDER=0 > <tr> <td VALIGN=BOTTOM WIDTH="26%" HEIGHT="46"><b><font size=-1>Name</font></b> <hr noshade size="1"></td> <td VALIGN=BOTTOM WIDTH="49%" HEIGHT="46"><b><font size=-1>Position</font></b> <hr noshade size="1"></td> <td VALIGN=BOTTOM WIDTH="7%" HEIGHT="46"><b><font size=-1>Age</font></b> <hr noshade size="1"></td> <td VALIGN=BOTTOM WIDTH="18%" HEIGHT="46"><b><font size=-1>Date assumed Executive Officer position</font></b> <hr noshade size="1"></td> </tr> <tr> <td VALIGN=TOP WIDTH="26%"><font size=-1>John F. Welch, Jr.</font></td> <td VALIGN=TOP WIDTH="49%"><font size=-1>Chairman of the Board and Chief Executive Officer</font></td> <td VALIGN=TOP WIDTH="7%"><font size=-1>64</font></td> <td VALIGN=TOP WIDTH="18%"><font size=-1>April 1981</font></td> </tr> <tr> <td VALIGN=TOP WIDTH="26%"><font size=-1>Philip D. Ameen</font></td> <td VALIGN=TOP WIDTH="49%"><font size=-1>Vice President and Comptroller</font></td> <td VALIGN=TOP WIDTH="7%"><font size=-1>51</font></td> <td VALIGN=TOP WIDTH="18%"><font size=-1>April 1994</font></td> </tr> <tr> <td VALIGN=TOP WIDTH="26%"><font size=-1>James R. Bunt</font></td> <td VALIGN=TOP WIDTH="49%"><font size=-1>Vice President and Treasurer</font></td> <td VALIGN=TOP WIDTH="7%"><font size=-1>58</font></td> <td VALIGN=TOP WIDTH="18%"><font size=-1>January 1993</font></td> </tr> <tr> <td VALIGN=TOP WIDTH="26%"><font size=-1>William J. Conaty</font></td> <td VALIGN=TOP WIDTH="49%"><font size=-1>Senior Vice President, Human Resources</font></td> <td VALIGN=TOP WIDTH="7%"><font size=-1>54</font></td> <td VALIGN=TOP WIDTH="18%"><font size=-1>October 1993</font></td> </tr> <tr> <td VALIGN=TOP WIDTH="26%"><font size=-1>Dennis D. Dammerman</font></td> <td VALIGN=TOP WIDTH="49%"><font size=-1>Vice Chairman of the Board and Executive Officer</font></td> <td VALIGN=TOP WIDTH="7%"><font size=-1>54</font></td> <td VALIGN=TOP WIDTH="18%"><font size=-1>March 1984</font></td> </tr> <tr> <td VALIGN=TOP WIDTH="26%"><font size=-1>Lewis S. Edelheit</font></td> <td VALIGN=TOP WIDTH="49%"><font size=-1>Senior Vice President, Research and Development</font></td> <td VALIGN=TOP WIDTH="7%"><font size=-1>57</font></td> <td VALIGN=TOP WIDTH="18%"><font size=-1>November 1992</font></td> </tr> <tr> <td VALIGN=TOP WIDTH="26%"><font size=-1>Benjamin W. Heineman, Jr.</font></td> <td VALIGN=TOP WIDTH="49%"><font size=-1>Senior Vice President, General Counsel and Secretary</font></td> <td VALIGN=TOP WIDTH="7%"><font size=-1>56</font></td> <td VALIGN=TOP WIDTH="18%"><font size=-1>September 1987</font></td> </tr> <tr> <td VALIGN=TOP WIDTH="26%"><font size=-1>Jeffrey R. Immelt</font></td> <td VALIGN=TOP WIDTH="49%"><font size=-1>Senior Vice President, GE Medical Systems</font></td> <td VALIGN=TOP WIDTH="7%"><font size=-1>44</font></td> <td VALIGN=TOP WIDTH="18%"><font size=-1>January 1997</font></td> </tr> <tr> <td VALIGN=TOP WIDTH="26%"><font size=-1>Lawrence R. Johnston</font></td> <td VALIGN=TOP WIDTH="49%"><font size=-1>Senior Vice President, GE Appliances</font></td> <td VALIGN=TOP WIDTH="7%"><font size=-1>51</font></td> <td VALIGN=TOP WIDTH="18%"><font size=-1>November 1999</font></td> </tr> <tr> <td VALIGN=TOP WIDTH="26%"><font size=-1>W. James McNerney, Jr.</font></td> <td VALIGN=TOP WIDTH="49%"><font size=-1>Senior Vice President, GE Aircraft Engines</font></td> <td VALIGN=TOP WIDTH="7%"><font size=-1>50</font></td> <td VALIGN=TOP WIDTH="18%"><font size=-1>January 1992</font></td> </tr> <tr> <td VALIGN=TOP WIDTH="26%"><font size=-1>Robert L. Nardelli</font></td> <td VALIGN=TOP WIDTH="49%"><font size=-1>Senior Vice President, GE Power Systems</font></td> <td VALIGN=TOP WIDTH="7%"><font size=-1>51</font></td> <td VALIGN=TOP WIDTH="18%"><font size=-1>February 1992</font></td> </tr> <tr> <td VALIGN=TOP WIDTH="26%"><font size=-1>Robert W. Nelson</font></td> <td VALIGN=TOP WIDTH="49%"><font size=-1>Vice President, Financial Planning and Analysis</font></td> <td VALIGN=TOP WIDTH="7%"><font size=-1>59</font></td> <td VALIGN=TOP WIDTH="18%"><font size=-1>September 1991</font></td> </tr> <tr> <td VALIGN=TOP WIDTH="26%"><font size=-1>John D. Opie</font></td> <td VALIGN=TOP WIDTH="49%"><font size=-1>Vice Chairman of the Board and Executive Officer</font></td> <td VALIGN=TOP WIDTH="7%"><font size=-1>62</font></td> <td VALIGN=TOP WIDTH="18%"><font size=-1>August 1986</font></td> </tr> <tr> <td VALIGN=TOP WIDTH="26%"><font size=-1>Gary M. Reiner</font></td> <td VALIGN=TOP WIDTH="49%"><font size=-1>Senior Vice President, Chief Information Officer</font></td> <td VALIGN=TOP WIDTH="7%"><font size=-1>45</font></td> <td VALIGN=TOP WIDTH="18%"><font size=-1>January 1991</font></td> </tr> <tr> <td VALIGN=TOP WIDTH="26%"><font size=-1>John G. Rice</font></td> <td VALIGN=TOP WIDTH="49%"><font size=-1>Vice President, GE Transportation Systems</font></td> <td VALIGN=TOP WIDTH="7%"><font size=-1>43</font></td> <td VALIGN=TOP WIDTH="18%"><font size=-1>September 1997</font></td> </tr> <tr> <td VALIGN=TOP WIDTH="26%"><font size=-1>Gary L. Rogers</font></td> <td VALIGN=TOP WIDTH="49%"><font size=-1>Senior Vice President, GE Plastics</font></td> <td VALIGN=TOP WIDTH="7%"><font size=-1>55</font></td> <td VALIGN=TOP WIDTH="18%"><font size=-1>December 1989</font></td> </tr> <tr> <td VALIGN=TOP WIDTH="26%"><font size=-1>Keith S. Sherin</font></td> <td VALIGN=TOP WIDTH="49%"><font size=-1>Senior Vice President, Finance, and Chief Financial Officer</font></td> <td VALIGN=TOP WIDTH="7%"><font size=-1>41</font></td> <td VALIGN=TOP WIDTH="18%"><font size=-1>January 1999</font></td> </tr> <tr> <td VALIGN=TOP WIDTH="26%"><font size=-1>Lloyd G. Trotter</font></td> <td VALIGN=TOP WIDTH="49%"><font size=-1>Senior Vice President, GE Industrial Systems</font></td> <td VALIGN=TOP WIDTH="7%"><font size=-1>54</font></td> <td VALIGN=TOP WIDTH="18%"><font size=-1>November 1992</font></td> </tr> <tr> <td VALIGN=TOP WIDTH="26%"><font size=-1>Mike S. Zafirovski</font></td> <td VALIGN=TOP WIDTH="49%"><font size=-1>Senior Vice President, GE Lighting</font></td> <td VALIGN=TOP WIDTH="7%"><font size=-1>46</font></td> <td VALIGN=TOP WIDTH="18%"><font size=-1>August 1999</font></td> </tr> </TABLE> <p><font size=-1> All Executive Officers are elected by the Board of Directors for an initial term which continues until the first Board meeting following the next annual statutory meeting of share owners and thereafter are elected for one-year terms or until their successors have been elected. All Executive Officers have been executives of GE for the last five years.</font> <p><font size=-1> The remaining information called for by this item is incorporated by reference to "Election of Directors" in the definitive proxy statement relating to the registrant's Annual Meeting of Share Owners to be held April 26, 2000.</font> <p><a NAME="Item 11"></a><b><font size=-1>Item 11. Executive Compensation</font></b> <p><font size=-1> Incorporated by reference to "Board of Directors and Committees," "Summary Compensation Table," "Stock Options and Stock Appreciation Rights" and "Retirement Benefits" in the definitive proxy statement relating to the registrant's Annual Meeting of Share Owners to be held April 26, 2000.</font> <p><a NAME="Item 12"></a><b><font size=-1>Item 12. Security Ownership of Certain Beneficial Owners and Management</font></b> <p><font size=-1> Incorporated by reference to "Information relating to Directors, Nominees and Executive Officers" in the registrant's definitive proxy statement relating to its Annual Meeting of Share Owners to be held April 26, 2000.</font> <p><a NAME="Item 13"></a><b><font size=-1>Item 13. Certain Relationships and Related Transactions</font></b> <p><font size=-1> Incorporated by reference to "Certain Transactions" in the registrant's definitive proxy statement relating to its Annual Meeting of Share Owners to be held April 26, 2000.</font> <center> <p><b>Part IV</b></center> <p><a NAME="Item 14"></a><b><font size=-1>Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K</font></b> <blockquote><font size=-1>(a)1. Financial statements applicable to General Electric Company and consolidated affiliates are contained on the page(s) indicated in the GE Annual Report to Share Owners for the fiscal year ended December 31, 1999.</font></blockquote> <center><table BORDER=0 WIDTH="609" > <tr> <td VALIGN=BOTTOM COLSPAN="2" WIDTH="490"></td> <td VALIGN=BOTTOM WIDTH="23"></td> <td ALIGN=LEFT VALIGN=BOTTOM WIDTH="64"><b><font size=-1>Annual</font></b> <br><b><font size=-1>Report</font></b> <br><b><font size=-1>Page(s)</font></b> <hr noshade size="1"></td> <td ALIGN=LEFT VALIGN=BOTTOM WIDTH="19"></td> <td ALIGN=LEFT VALIGN=BOTTOM WIDTH="77"><b><font size=-1>10-K</font></b> <br><b><font size=-1>Report</font></b> <br><b><font size=-1>Page(s)</font></b> <hr noshade size="1"></td> </tr> <tr> <td VALIGN=TOP COLSPAN="2" WIDTH="490"><font size=-1>Statement of earnings for the years ended December 31, 1999, 1998 and 1997</font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="23"></td> <td ALIGN=LEFT VALIGN=TOP WIDTH="64"><font size=-1>34</font></td> <td ALIGN=LEFT VALIGN=TOP WIDTH="19"></td> <td ALIGN=LEFT VALIGN=TOP WIDTH="77"><font size=-1>F-2</font></td> </tr> <tr> <td VALIGN=TOP COLSPAN="2" WIDTH="490"><font size=-1>Consolidated statement of changes in share owners' equity for the years </font> <br><font size=-1> ended December 31, 1999, 1998 and 1997</font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="23"></td> <td ALIGN=LEFT VALIGN=TOP WIDTH="64"><font size=-1>34</font></td> <td ALIGN=LEFT VALIGN=TOP WIDTH="19"></td> <td ALIGN=LEFT VALIGN=TOP WIDTH="77"><font size=-1>F-2</font></td> </tr> <tr> <td VALIGN=TOP COLSPAN="2" WIDTH="490"><font size=-1>Statement of financial position at December 31, 1999 and 1998</font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="23"></td> <td ALIGN=LEFT VALIGN=TOP WIDTH="64"><font size=-1>36</font></td> <td ALIGN=LEFT VALIGN=TOP WIDTH="19"></td> <td ALIGN=LEFT VALIGN=TOP WIDTH="77"><font size=-1>F-4</font></td> </tr> <tr> <td VALIGN=TOP COLSPAN="2" WIDTH="490"><font size=-1>Statement of cash flows for the years ended December 31, 1999, 1998 and 1997</font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="23"></td> <td ALIGN=LEFT VALIGN=TOP WIDTH="64"><font size=-1>38</font></td> <td ALIGN=LEFT VALIGN=TOP WIDTH="19"></td> <td ALIGN=LEFT VALIGN=TOP WIDTH="77"><font size=-1>F-6</font></td> </tr> <tr> <td VALIGN=TOP COLSPAN="2" WIDTH="490"><font size=-1>Independent Auditors' Report</font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="23"></td> <td ALIGN=LEFT VALIGN=TOP WIDTH="64"><font size=-1>40</font></td> <td ALIGN=LEFT VALIGN=TOP WIDTH="19"></td> <td ALIGN=LEFT VALIGN=TOP WIDTH="77"><font size=-1>F-8</font></td> </tr> <tr> <td VALIGN=TOP COLSPAN="2" WIDTH="490"><font size=-1>Other financial information:</font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="23"></td> <td ALIGN=LEFT VALIGN=TOP WIDTH="64"></td> <td ALIGN=LEFT VALIGN=TOP WIDTH="19"></td> <td ALIGN=LEFT VALIGN=TOP WIDTH="77"></td> </tr> <tr> <td VALIGN=TOP WIDTH="20"></td> <td VALIGN=TOP WIDTH="464"><font size=-1>Notes to consolidated financial statements</font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="23"></td> <td ALIGN=LEFT VALIGN=TOP WIDTH="64"><font size=-1>56-76</font></td> <td ALIGN=LEFT VALIGN=TOP WIDTH="19"></td> <td ALIGN=LEFT VALIGN=TOP WIDTH="77"><font size=-1>F-24 to F-44</font></td> </tr> <tr> <td VALIGN=TOP WIDTH="20"></td> <td VALIGN=TOP WIDTH="464"><font size=-1>Operating segment information</font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="23"></td> <td ALIGN=LEFT VALIGN=TOP WIDTH="64"><font size=-1>43-48</font> <br><font size=-1>72-73</font></td> <td ALIGN=LEFT VALIGN=TOP WIDTH="19"></td> <td ALIGN=LEFT VALIGN=TOP WIDTH="77"><font size=-1>F-11 to F-16</font> <br><font size=-1>F-40 to F-41</font></td> </tr> <tr> <td VALIGN=TOP WIDTH="20"></td> <td VALIGN=TOP WIDTH="464"><font size=-1>Geographic segment information</font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="23"></td> <td ALIGN=LEFT VALIGN=TOP WIDTH="64"><font size=-1>74</font></td> <td ALIGN=LEFT VALIGN=TOP WIDTH="19"></td> <td ALIGN=LEFT VALIGN=TOP WIDTH="77"><font size=-1>F-42</font></td> </tr> <tr> <td VALIGN=TOP WIDTH="20"></td> <td VALIGN=TOP WIDTH="464"><font size=-1>Operations by quarter (unaudited)</font></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="23"></td> <td ALIGN=LEFT VALIGN=TOP WIDTH="64"><font size=-1>76</font></td> <td ALIGN=LEFT VALIGN=TOP WIDTH="19"></td> <td ALIGN=LEFT VALIGN=TOP WIDTH="77"><font size=-1>F-44</font></td> </tr> </TABLE></center> <blockquote><font size=-1>(a)2. The schedules listed in Reg. 210.5-04 have been omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto.</font> <p><font size=-1>(a)3. Exhibit Index</font> <blockquote><font size=-1>(3) Restated Certificate of Incorporation, as amended, and By-laws, as amended, of General Electric Company. (Incorporated by reference to Exhibit of the same number to General Electric Form 8-K (Commission file number 1-35) filed with the Commission April 28, 1997.)</font> <p><font size=-1>(4) 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 consolidated subsidiaries.*</font> <p><font size=-1>(10) All of the following exhibits consist of Executive Compensation Plans or Arrangements:</font> <blockquote><font size=-1>(a) General Electric Incentive Compensation Plan, as amended effective July 1, 1991. (Incorporated by reference to Exhibit of the same number to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1991.)</font> <p><font size=-1>(b) General Electric Supplementary Pension Plan, as amended effective July 1, 1991. (Incorporated by reference to Exhibit 10(e) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1991.)</font> <p><font size=-1>(c) Amendment to General Electric Supplementary Pension Plan dated May 22, 1992. (Incorporated by reference to Exhibit 10(d) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1992.)</font> <p><font size=-1>(d) Amendment to General Electric Supplementary Pension Plan, dated September 10, 1993. (Incorporated by reference to Exhibit 10(e) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1993.)</font> <p><font size=-1>(e) Amendment to General Electric Supplementary Pension Plan, dated July 1, 1994. (Incorporated by reference to Exhibit 10(f) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1994.)</font> <p><font size=-1>(f) General Electric Insurance Plan for Directors. (Incorporated by reference to Exhibit 10(i) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1980.)</font> <p><font size=-1>(g) General Electric Financial Planning Program, as amended through September 1993. (Incorporated by reference to Exhibit 10(h) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1993.)</font> <p><font size=-1>(h) General Electric Supplemental Life Insurance Program, as amended February 8, 1991. (Incorporated by reference to Exhibit 10(i) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1990.)</font> <p><font size=-1>(i) General Electric Directors' Retirement and Optional Life Insurance Plan. (Incorporated by reference to Exhibit 10(l) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1986.)</font> <p><font size=-1>(j) General Electric 1987 Executive Deferred Salary Plan. (Incorporated by reference to Exhibit 10(k) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1987.)</font> <p><font size=-1>(k) General Electric 1991 Executive Deferred Salary Plan. (Incorporated by reference to Exhibit 10(n) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1990.)</font> <p><font size=-1>(l) General Electric 1994 Executive Deferred Salary Plan. (Incorporated by reference to Exhibit 10(o) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1993.)</font> <p><font size=-1>(m) General Electric Directors' Charitable Gift Plan, as amended through May 1993. (Incorporated by reference to Exhibit 10(p) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1993.)</font> <p><font size=-1>(n) General Electric Leadership Life Insurance Program, effective January 1, 1994. (Incorporated by reference to Exhibit 10(r) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1993.)</font> <p><font size=-1>(o) General Electric 1996 Stock Option Plan for Non-Employee Directors. (Incorporated by reference to Exhibit A to the General Electric Proxy Statement for its Annual Meeting of Share Owners held on April 24, 1996.)</font> <p><font size=-1>(p) General Electric 1995 Executive Deferred Salary Plan. (Incorporated by reference to Exhibit 10(t) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1995.)</font> <p><font size=-1>(q) General Electric 1996 Executive Deferred Salary Plan. (Incorporated by reference to Exhibit 10(v) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1996.)</font> <p><font size=-1>(r) Employment and Post-Retirement Consulting Agreement Between General Electric Company and John F. Welch, Jr. (Incorporated by reference to Exhibit 10(w) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1996.)</font> <p><font size=-1>(s) General Electric 1997 Executive Deferred Salary Plan. (Incorporated by reference to Exhibit 10(t) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1997.)</font> <p><font size=-1>(t) General Electric 1990 Long Term Incentive Plan as restated and amended effective August 1, 1997. (Incorporated by reference to Exhibit 10(u) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1997.)</font> <p><font size=-1>(u) General Electric Deferred Compensation Plan for Directors, as amended December 19, 1997. (Incorporated by reference to Exhibit 10(v) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1997.)</font> <p><font size=-1>(v) General Electric 1998 Executive Deferred Salary Plan. (Incorporated by reference to Exhibit 10(v) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1998.)</font> <p><font size=-1>(w) General Electric Non-Employee Director Fee Plan (Formerly the Deferred Compensation Plan for Directors). (Incorporated by reference to Exhibit 10(w) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1998.)</font> <p><font size=-1>(x) General Electric 1999 Executive Deferred Salary Plan.*</font></blockquote> <font size=-1>(11) Statement re Computation of Per Share Earnings.**</font> <p><font size=-1>(12) Computation of Ratio of Earnings to Fixed Charges.*</font> <p><font size=-1>(21) Subsidiaries of Registrant.*</font> <p><font size=-1>(23) Consent of independent auditors incorporated by reference in each Prospectus constituting part of the Registration Statements on Form S-3 (Registration Nos. 33-29024, 33-3908, 33-39596, 33-39596-01, 33-47085, 33-50639, 33-61029, 33-61029-01, 333-46551 and 333-59671), on Form S-4 (Registration Nos. 333-01947 and 333-74417) and on Form S-8 (Registration Nos. 2-84145, 33-35922, 333-01953, 333-96287, 333-42695, 333-74415, 333-65781, 333-88233 and 333-94101).*</font> <p><font size=-1>(24) Power of Attorney.*</font> <p><font size=-1>(27) Financial Data Schedule.*</font> <p><font size=-1>(99)(a) Income Maintenance Agreement, dated March 28, 1991, between the registrant and General Electric Capital Corporation. (Incorporated by reference to Exhibit 28(a) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1990.)</font> <p><font size=-1>(99)(b) Undertaking for Inclusion in Registration Statements on Form S-8 of General Electric Company. (Incorporated by reference to Exhibit 99(b) to General Electric Annual Report on Form 10-K (Commission file number 1-35) for the fiscal year ended December 31, 1992.)</font> <p><font size=-1>(99)(c) Letter, dated June 29, 1995, from Dennis D. Dammerman of General Electric Company to Gary C. Wendt 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 share of its Variable Cumulative Preferred Stock. (Incorporated by reference to Exhibit 99(g) to General Electric Capital Corporation's Registration Statement on Form S-3, File No. 33-61257.)</font> <p><font size=-1>* Filed electronically herewith.</font> <p><font size=-1>** Information required to be presented in Exhibit 11 is now provided in note 8 to the 1999 Annual Report to Share Owners in accordance with the provisions of FASB Statement of Financial Accounting Standards (SFAS) No. 128, <i>Earnings per Share</i>.</font></blockquote> <font size=-1>(b) Reports on Form 8-K during the quarter ended December 31, 1999.</font> <blockquote><font size=-1>No reports on Form 8-K were filed during the quarter ended December 31, 1999.</font></blockquote> </blockquote> <center><a NAME="Signatures"></a><b>Signatures</b></center> <p><font size=-1> Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the registrant has duly caused this annual report on Form 10-K for the fiscal year ended December 31, 1999, to be signed on its behalf by the undersigned, and in the capacities indicated, thereunto duly authorized in the Town of Fairfield and State of Connecticut on the 17<sup>th</sup> day of March 2000.</font> <br> <br> <center><table BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="248" > <tr> <td VALIGN=TOP WIDTH="33"></td> <td ALIGN=CENTER VALIGN=TOP WIDTH="205"><font size=-1>General Electric Company</font> <br><font size=-1>(Registrant)</font> <p> </td> </tr> <tr> <td VALIGN=TOP WIDTH="33"><font size=-1>By</font></td> <td VALIGN=TOP WIDTH="205"><font size=-1>/s/ Keith S. Sherin <hr noshade size="1">Keith S. Sherin</font> <br><font size=-1>Senior Vice President, Finance, and</font> <br><font size=-1>Chief Financial Officer</font> <br><font size=-1>(Principal Financial Officer) </font></td> </tr> </TABLE></center> <p><font size=-1> 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 dates indicated.</font> <br> <br> <br> <table BORDER=0 CELLSPACING=0 CELLPADDING=0 > <tr> <td ALIGN=LEFT VALIGN=TOP NOWRAP><font size=-1>Signer</font> <hr noshade size="1" width="50" align="left"></td> <td VALIGN=TOP></td> <td VALIGN=TOP><font size=-1>Title</font> <hr noshade size="1" width="50" align="left"></td> <td VALIGN=TOP><font size=-1>Date</font> <hr noshade size="1" width="50" align="left"> <p> </td> </tr> <tr> <td ALIGN=LEFT VALIGN=TOP NOWRAP><font size=-1>/s/ Keith S. Sherin <hr noshade size="1">Keith S. Sherin</font> <br><font size=-1>Senior Vice President, Finance, </font> <br><font size=-1>and Chief Financial Officer</font> <br> <br> <p> </td> <td VALIGN=TOP WIDTH="30"></td> <td VALIGN=TOP><font size=-1>Principal Financial Officer</font></td> <td VALIGN=TOP><font size=-1>March 17, 2000</font></td> </tr> <tr> <td ALIGN=LEFT VALIGN=TOP NOWRAP><font size=-1>/s/ Philip D. Ameen <hr noshade size="1">Philip D. Ameen</font> <br><font size=-1>Vice President and Comptroller</font> <br> <br> <p> </td> <td VALIGN=TOP></td> <td VALIGN=TOP><font size=-1>Principal Accounting Officer</font></td> <td VALIGN=TOP><font size=-1>March 17, 2000</font></td> </tr> <tr> <td ALIGN=LEFT VALIGN=TOP NOWRAP><font size=-1>John F. Welch, Jr.*</font></td> <td VALIGN=TOP></td> <td VALIGN=TOP><font size=-1>Chairman of the Board of Directors </font> <br><font size=-1>(Principal Executive Officer)</font></td> <td VALIGN=TOP></td> </tr> </TABLE> <br> <table BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="483" > <tr> <td VALIGN=TOP WIDTH="210"><font size=-1>James I. Cash, Jr.*</font></td> <td VALIGN=TOP WIDTH="269"><font size=-1>Director</font></td> </tr> <tr> <td VALIGN=TOP WIDTH="210"><font size=-1>Dennis D. Dammerman*</font></td> <td VALIGN=TOP WIDTH="269"><font size=-1>Director</font></td> </tr> <tr> <td VALIGN=TOP WIDTH="210"><font size=-1>Ann M. Fudge*</font></td> <td VALIGN=TOP WIDTH="269"><font size=-1>Director</font></td> </tr> <tr> <td VALIGN=TOP WIDTH="210"><font size=-1>Claudio X. Gonzalez*</font></td> <td VALIGN=TOP WIDTH="269"><font size=-1>Director</font></td> </tr> <tr> <td VALIGN=TOP WIDTH="210"><font size=-1>Andrea Jung*</font></td> <td VALIGN=TOP WIDTH="269"><font size=-1>Director</font></td> </tr> <tr> <td VALIGN=TOP WIDTH="210"><font size=-1>Kenneth G. Langone*</font></td> <td VALIGN=TOP WIDTH="269"><font size=-1>Director</font></td> </tr> <tr> <td VALIGN=TOP WIDTH="210"><font size=-1>Scott G. McNealy*</font></td> <td VALIGN=TOP WIDTH="269"><font size=-1>Director</font></td> </tr> <tr> <td VALIGN=TOP WIDTH="210"><font size=-1>Sam Nunn*</font></td> <td VALIGN=TOP WIDTH="269"><font size=-1>Director</font></td> </tr> <tr> <td VALIGN=TOP WIDTH="210"><font size=-1>John D. Opie*</font></td> <td VALIGN=TOP WIDTH="269"><font size=-1>Director</font></td> </tr> <tr> <td VALIGN=TOP WIDTH="210"><font size=-1>Roger S. Penske*</font></td> <td VALIGN=TOP WIDTH="269"><font size=-1>Director</font></td> </tr> <tr> <td VALIGN=TOP WIDTH="210"><font size=-1>Frank H.T. Rhodes*</font></td> <td VALIGN=TOP WIDTH="269"><font size=-1>Director</font></td> </tr> <tr> <td VALIGN=TOP WIDTH="210"><font size=-1>Douglas A. Warner III*</font></td> <td VALIGN=TOP WIDTH="269"><font size=-1>Director</font></td> </tr> </TABLE> <br> <p><font size=-1>A majority of the Board of Directors</font> <br> <br> <br> <table BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH="267" > <tr> <td VALIGN=TOP WIDTH="39"><font size=-1>*By</font></td> <td VALIGN=TOP WIDTH="224"><font size=-1>/s/ Benjamin W. Heineman, Jr. </font> <hr noshade size="1" align="left"></td> </tr> <tr> <td VALIGN=TOP WIDTH="39"> </td> <td VALIGN=TOP WIDTH="224"><font size=-1>Benjamin W. Heineman, Jr.</font></td> </tr> <tr> <td VALIGN=TOP WIDTH="39"> </td> <td VALIGN=TOP WIDTH="224"><font size=-1>Attorney-in-fact</font></td> </tr> <tr> <td VALIGN=TOP WIDTH="39"> </td> <td VALIGN=TOP WIDTH="224"><font size=-1>March 17, 2000</font></td> </tr> </TABLE> <hr> <pre>PAGE F-1 ANNUAL REPORT PAGE 33 FINANCIAL SECTION CONTENTS 40 INDEPENDENT AUDITORS' REPORT AUDITED FINANCIAL STATEMENTS 34 Earnings 34 Changes in Share Owners' Equity 36 Financial Position 38 Cash Flows 56 Notes to Consolidated Financial Statements MANAGEMENT'S DISCUSSION 40 Financial Responsibility 41 Operations 41 Consolidated Operations 43 Segment Operations 48 International Operations 50 Financial Resources and Liquidity 54 Selected Financial Data [CHART HERE] CONSOLIDATED REVENUES - ----------------------------------------------------------------------------- (IN BILLIONS) 1995 1996 1997 1998 1999 - ----------------------------------------------------------------------------- $70.028 $79.179 $90.840 $100.469 $111.630 - ----------------------------------------------------------------------------- [CHART HERE] EARNINGS PER SHARE - ----------------------------------------------------------------------------- (IN DOLLARS) 1995 1996 1997 1998 1999 - ----------------------------------------------------------------------------- $1.93 $2.16 $2.46 $2.80 $3.22 - ----------------------------------------------------------------------------- [CHART HERE] DIVIDENDS DECLARED PER SHARE - ----------------------------------------------------------------------------- (IN DOLLARS) 1995 1996 1997 1998 1999 - ----------------------------------------------------------------------------- $0.845 $0.950 $1.080 $1.250 $1.460 - ----------------------------------------------------------------------------- </pre> <hr> <pre>PAGE F-2 ANNUAL REPORT PAGE 34 STATEMENT OF EARNINGS General Electric Company For the years ended December 31 and consolidated affiliates (In millions; per-share amounts in dollars) ---------------------------------- 1999 1998 1997 - -------------------------------------------------------------------------------- REVENUES Sales of goods $ 47,785 $ 43,749 $ 40,675 Sales of services 16,283 14,938 12,729 Other income (note 2) 798 649 2,300 Earnings of GECS -- -- -- GECS revenues from services (note 3) 46,764 41,133 35,136 ---------------------------------- Total revenues 111,630 100,469 90,840 ---------------------------------- COSTS AND EXPENSES (NOTE 4) Cost of goods sold 34,554 31,772 30,889 Cost of services sold 11,404 10,508 9,199 Interest and other financial charges 10,013 9,753 8,384 Insurance losses and policyholder and annuity benefits 11,028 9,608 8,278 Provision for losses on financing receivables (note 13) 1,678 1,609 1,421 Other costs and expenses 27,011 23,477 21,250 Minority interest in net earnings of consolidated affiliates 365 265 240 ---------------------------------- Total costs and expenses 96,053 86,992 79,661 ---------------------------------- EARNINGS BEFORE INCOME TAXES 15,577 13,477 11,179 Provision for income taxes (note 7) (4,860) (4,181) (2,976) ---------------------------------- NET EARNINGS $ 10,717 $ 9,296 $ 8,203 =============================================================================== PER-SHARE AMOUNTS (note 8) Diluted earnings per share $ 3.22 $ 2.80 $ 2.46 Basic earnings per share $ 3.27 $ 2.84 $ 2.50 =============================================================================== DIVIDENDS DECLARED PER SHARE $ 1.46 $ 1.25 $ 1.08 =============================================================================== CONSOLIDATED STATEMENT OF CHANGES IN SHARE OWNERS' EQUITY ---------------------------------- (In millions) 1999 1998 1997 - ------------------------------------------------------------------------------- CHANGES IN SHARE OWNERS' EQUITY Balance at January 1 $ 38,880 $ 34,438 $ 31,125 ---------------------------------- Dividends and other transactions with share owners (note 25) (4,632) (5,178) (5,615) ---------------------------------- Changes other than transactions with share owners Increase attributable to net earnings 10,717 9,296 8,203 Unrealized gains (losses) on investment securities--net (note 25) (1,776) 264 1,467 Currency translation adjustments (note 25) (632) 60 (742) ---------------------------------- Total changes other than transactions with share owners 8,309 9,620 8,928 --------- --------- -------- Balance at December 31 $ 42,557 $ 38,880 $ 34,438 =============================================================================== The notes to consolidated financial statements on pages 56 -76 are an integral part of these statements. </pre> <hr> <pre>PAGE F-3 ANNUAL REPORT PAGE 35 STATEMENT OF EARNINGS (Continued) GE GECS For the years ended December 31 -------------------------------- -------------------------------- (In millions; per-share amounts in dollars) 1999 1998 1997 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------ REVENUES Sales of goods $ 39,045 $ 36,376 $ 36,059 $ 8,740 $ 7,374 $ 4,622 Sales of services 16,600 15,170 12,893 -- -- -- Other income (note 2) 856 684 2,307 -- -- -- Earnings of GECS 4,443 3,796 3,256 -- -- -- GECS revenues from services (note 3) -- -- -- 47,009 41,320 35,309 -------------------------------- -------------------------------- Total revenues 60,944 56,026 54,515 55,749 48,694 39,931 -------------------------------- -------------------------------- COSTS AND EXPENSES (NOTE 4) Cost of goods sold 26,578 24,996 26,747 7,976 6,777 4,147 Cost of services sold 11,721 10,740 9,363 -- -- -- Interest and other financial charges 810 883 797 9,359 8,966 7,649 Insurance losses and policyholder and annuity benefits -- -- -- 11,028 9,608 8,278 Provision for losses on financing receivables (note 13) -- -- -- 1,678 1,609 1,421 Other costs and expenses 7,732 7,177 7,476 19,426 16,426 13,893 Minority interest in net earnings of consolidated affiliates 179 117 119 186 148 121 -------------------------------- -------------------------------- Total costs and expenses 47,020 43,913 44,502 49,653 43,534 35,509 -------------------------------- -------------------------------- EARNINGS BEFORE INCOME TAXES 13,924 12,113 10,013 6,096 5,160 4,422 Provision for income taxes (note 7) (3,207) (2,817) (1,810) (1,653) (1,364) (1,166) -------------------------------- -------------------------------- NET EARNINGS $ 10,717 $ 9,296 $ 8,203 $ 4,443 $ 3,796 $ 3,256 ================================================================================================================== 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 34. 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. </pre> <hr> <pre>PAGE F-4 ANNUAL REPORT PAGE 36 STATEMENT OF FINANCIAL POSITION General Electric Company and consolidated affiliates --------------------------- At December 31 (In millions) 1999 1998 - -------------------------------------------------------------------------------- ASSETS Cash and equivalents $ 8,554 $ 4,317 Investment securities (note 9) 81,758 78,717 Current receivables (note 10) 8,531 8,224 Inventories (note 11) 7,007 6,049 Financing receivables (investments in time sales, loans and financing leases) -- net (notes 12 and 13) 137,629 121,566 Other GECS receivables (note 14) 29,708 24,789 Property, plant and equipment (including equipment leased to others) -- net (note 15) 41,022 35,730 Investment in GECS -- -- Intangible assets--net (note 16) 26,010 23,635 All other assets (note 17) 64,981 52,908 --------------------- TOTAL ASSETS $ 405,200 $ 355,935 =============================================================================== LIABILITIES AND EQUITY Short-term borrowings (note 19) $ 130,346 $ 115,378 Accounts payable, principally trade accounts 13,676 12,502 Progress collections and price adjustments accrued 4,618 2,765 Dividends payable 1,347 1,146 All other GE current costs and expenses accrued (note 18) 11,229 9,788 Long-term borrowings (note 19) 71,427 59,663 Insurance liabilities, reserves and annuity benefits (note 20) 86,776 77,259 All other liabilities (note 21) 28,772 24,939 Deferred income taxes (note 22) 9,238 9,340 --------------------- Total liabilities 357,429 312,780 --------------------- Minority interest in equity of consolidated affiliates (note 23) 5,214 4,275 --------------------- Accumulated unrealized gains on investment securities -- net (a) 626 2,402 Accumulated currency translation adjustments (a) (1,370) (738) Common stock (3,284,843,000 and 3,271,296,000 shares outstanding at year-end 1999 and 1998, respectively) 594 594 Other capital 10,790 6,808 Retained earnings 54,484 48,553 Less common stock held in treasury (22,567) (18,739) - ------------------------------------------------------------------------------- Total share owners' equity (notes 25 and 26) 42,557 38,880 - ------------------------------------------------------------------------------- TOTAL LIABILITIES AND EQUITY $ 405,200 $ 355,935 =============================================================================== The notes to consolidated financial statements on pages 56-76 are an integral part of this statement (a) The sum of accumulated unrealized gains on investment securities -- net and accumulated currency translation adjustments constitutes "Accumulated nonowner changes other than earnings," as shown in note 25, and was $(744) million and $1,664 million at year-end 1999 and 1998, respectively. </pre> <hr> <pre>PAGE F-5 ANNUAL REPORT PAGE 37 STATEMENT OF FINANCIAL POSITION (Continued) GE GECS ---------------------- ---------------------- At December 31 (In millions) 1999 1998 1999 1998 - ------------------------------------------------------------------------------------------------------------------- ASSETS Cash and equivalents $ 2,000 $ 1,175 $ 6,931 $ 3,342 Investment securities (note 9) 1,273 259 80,485 78,458 Current receivables (note 10) 8,743 8,483 -- -- Inventories (note 11) 5,798 5,305 1,209 744 Financing receivables (investments in time sales, loans and financing leases) -- net (notes 12 and 13) -- -- 137,629 121,566 Other GECS receivables (note 14) -- -- 30,681 25,973 Property, plant and equipment (including equipment leased to others) -- net (note 15) 12,381 11,694 28,641 24,036 Investment in GECS 20,321 19,727 -- -- Intangible assets -- net (note 16) 11,262 9,996 14,748 13,639 All other assets (note 17) 20,805 18,031 44,694 35,539 ---------------------- ---------------------- TOTAL ASSETS $ 82,583 $ 74,670 $ 345,018 $ 303,297 ==================================================================================================================== LIABILITIES AND EQUITY Short-term borrowings (note 19) $ 2,245 $ 3,466 $ 129,259 $ 113,162 Accounts payable, principally trade accounts 5,068 4,845 9,749 8,815 Progress collections and price adjustments accrued 4,618 2,765 -- -- Dividends payable 1,347 1,146 -- -- All other GE current costs and expenses accrued (note 18) 11,048 9,708 -- -- Long-term borrowings (note 19) 722 681 70,766 59,038 Insurance liabilities, reserves and annuity benefits (note 20) -- -- 86,776 77,259 All other liabilities (note 21) 13,872 12,613 14,801 12,247 Deferred income taxes (note 22) 283 (250) 8,955 9,590 ---------------------- ---------------------- Total liabilities 39,203 34,974 320,306 280,111 ---------------------- ---------------------- Minority interest in equity of consolidated affiliates (note 23) 823 816 4,391 3,459 ---------------------- ---------------------- Accumulated unrealized gains on investment securities -- net (a) 626 2,402 170 2,376 Accumulated currency translation adjustments (a) (1,370) (738) (384) (215) Common stock (3,284,843,000 and 3,271,296,000 shares outstanding at year-end 1999 and 1998, respectively) 594 594 1 1 Other capital 10,790 6,808 2,682 2,490 Retained earnings 54,484 48,553 17,852 15,075 Less common stock held in treasury (22,567) (18,739) -- -- ---------------------- ---------------------- Total share owners' equity (notes 25 and 26) 42,557 38,880 20,321 19,727 ---------------------- ---------------------- TOTAL LIABILITIES AND EQUITY $ 82,583 $ 74,670 $ 345,018 $ 303,297 =================================================================================================================== 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 36. </pre> <hr> <pre>PAGE F-6 ANNUAL REPORT PAGE 38 STATEMENT OF CASH FLOWS General Electric Company and consolidated affiliates ---------------------------- For the years ended December 31 (In millions) 1999 1998 1997 - -------------------------------------------------------------------------------------- CASH FLOWS -- OPERATING ACTIVITIES Net earnings $ 10,717 $ 9,296 $ 8,203 Adjustments to reconcile net earnings to cash provided from operating activities Depreciation and amortization of property, plant and equipment 4,908 4,377 4,082 Amortization of goodwill and other intangibles 1,783 1,483 1,187 Earnings retained by GECS -- -- -- Deferred income taxes 1,502 1,143 284 Decrease in GE current receivables 143 649 250 Decrease (increase) in inventories 266 150 (386) Increase (decrease) in accounts payable 820 1,576 200 Increase in insurance liabilities and reserves 4,584 3,670 1,669 Provision for losses on financing receivables 1,678 1,609 1,421 All other operating activities (1,808) (4,593) (2,670) -------------------------------- CASH FROM OPERATING ACTIVITIES 24,593 19,360 14,240 -------------------------------- CASH FLOWS -- INVESTING ACTIVITIES Additions to property, plant and equipment (15,502) (8,982) (8,388) Dispositions of property, plant and equipment 6,262 4,043 2,251 Net increase in GECS financing receivables (13,088) (6,301) (1,898) Payments for principal businesses purchased (11,654) (18,610) (5,245) All other investing activities (8,197) (10,283) (4,995) -------------------------------- CASH USED FOR INVESTING ACTIVITIES (42,179) (40,133) (18,275) -------------------------------- CASH FLOWS -- FINANCING ACTIVITIES Net increase in borrowings (maturities of 90 days or less) 6,171 16,881 13,684 Newly issued debt (maturities longer than 90 days) 48,158 42,008 21,249 Repayments and other reductions (maturities longer than 90 days) (27,539) (32,814) (23,787) Net purchase of GE shares for treasury (1,002) (2,819) (2,815) Dividends paid to share owners (4,587) (3,913) (3,411) All other financing activities 622 (114) 785 CASH FROM (USED FOR) FINANCING ACTIVITIES 21,823 19,229 5,705 -------------------------------- INCREASE (DECREASE) IN CASH AND EQUIVALENTS DURING YEAR 4,237 (1,544) 1,670 Cash and equivalents at beginning of year 4,317 5,861 4,191 -------------------------------- Cash and equivalents at end of year $ 8,554 $ 4,317 $ 5,861 ====================================================================================== SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION Cash paid during the year for interest $(10,078) $ (9,297) $ (8,264) Cash paid during the year for income taxes (1,597) (2,098) (1,937) ====================================================================================== The notes to consolidated financial statements on pages 56-76 are an integral part of this statement. </pre> <hr> <pre>PAGE F-7 ANNUAL REPORT PAGE 39 STATEMENT OF CASH FLOWS (Continued) GE GECS -------------------------------- -------------------------------- For the years ended December 31 (In millions) 1999 1998 1997 1999 1998 1997 - -------------------------------------------------------------------------------------------------------------------------- CASH FLOWS -- OPERATING ACTIVITIES Net earnings $ 10,717 $ 9,296 $ 8,203 $ 4,443 $ 3,796 $ 3,256 Adjustments to reconcile net earnings to cash provided from operating activities Depreciation and amortization of property, plant and equipment 1,735 1,761 1,622 3,173 2,616 2,460 Amortization of goodwill and other intangibles 584 531 407 1,199 952 780 Earnings retained by GECS (2,777) (2,124) (1,597) -- -- -- Deferred income taxes 655 594 (514) 847 549 798 Decrease in GE current receivables 190 520 215 -- -- -- Decrease (increase) in inventories (61) 69 (145) 327 81 (244) Increase (decrease) in accounts payable 104 199 237 699 1,673 (64) Increase in insurance liabilities and reserves -- -- -- 4,584 3,670 1,669 Provision for losses on financing receivables -- -- -- 1,678 1,609 1,421 All other operating activities 616 (814) 889 (2,131) (3,991) (3,851) -------------------------------- -------------------------------- CASH FROM OPERATING ACTIVITIES 11,763 10,032 9,317 14,819 10,955 6,225 -------------------------------- -------------------------------- CASH FLOWS -- INVESTING ACTIVITIES Additions to property, plant and equipment (2,036) (2,047) (2,191) (13,466) (6,935) (6,197) Dispositions of property, plant and equipment -- 6 39 6,262 4,037 2,212 Net increase in GECS financing receivables -- -- -- (13,088) (6,301) (1,898) Payments for principal businesses purchased (1,594) (1,455) (1,425) (10,060) (17,155) (3,820) All other investing activities (432) 477 483 (7,823) (11,078) (5,646) -------------------------------- -------------------------------- CASH USED FOR INVESTING ACTIVITIES (4,062) (3,019) (3,094) (38,175) (37,432) (15,349) -------------------------------- -------------------------------- CASH FLOWS -- FINANCING ACTIVITIES Net increase in borrowings (maturities of 90 days or less) (1,230) 1,015 809 7,308 16,288 13,594 Newly issued debt (maturities longer than 90 days) 558 509 424 47,605 41,440 20,825 Repayments and other reductions (maturities longer than 90 days) (615) (1,787) (1,030) (26,924) (31,027) (22,757) Net purchase of GE shares for treasury (1,002) (2,819) (2,815) - -- -- -- Dividends paid to share owners (4,587) (3,913) (3,411) (1,666) (1,672) (1,653) All other financing activities -- - -- -- 622 (114) 785 -------------------------------- -------------------------------- CASH FROM (USED FOR) FINANCING ACTIVITIES (6,876) (6,995) (6,023) 26,945 24,915 10,794 -------------------------------- -------------------------------- INCREASE (DECREASE) IN CASH AND EQUIVALENTS DURING YEAR 825 18 200 3,589 (1,562) 1,670 Cash and equivalents at beginning of year 1,175 1,157 957 3,342 4,904 3,234 -------------------------------- -------------------------------- Cash and equivalents at end of year $ 2,000 $ 1,175 $ 1,157 $ 6,931 $ 3,342 $ 4,904 ========================================================================================================================== SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION Cash paid during the year for interest $ (482) $ (620) $ (467) $ (9,596) $ (8,677) $ (7,797) Cash paid during the year for income taxes (1,246) (1,151) (1,596) (351) (947) (341) ========================================================================================================================== 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 38. </pre> <hr> <pre>PAGE F-8 ANNUAL REPORT PAGE 40 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 customers, including 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, independent auditors, provide 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 1999 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 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 Senior Vice President, Finance, and Chief Executive Officer and Chief Financial Officer February 4, 2000 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, 1999 and 1998, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1999, in conformity with generally accepted accounting principles. KPMG LLP Stamford, Connecticut February 4, 2000 </pre> <hr> <pre>PAGE F-9 ANNUAL REPORT PAGE 41 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 1999, reflecting continuing benefits of its globalization, product services, Six Sigma quality and e-Business initiatives. Revenues rose 11% to a record $111.6 billion, as global activities and product services continued to grow. Revenues were $100.5 billion in 1998, an 11% increase from 1997 attributable primarily to increased global activities and higher sales of product services. Earnings increased to a record $10,717 million, a 15% increase from $9,296 million reported in 1998. Earnings per share increased to $3.22 during 1999, up 15% from the prior year's $2.80. (Except as otherwise noted, earnings per share are presented on a diluted basis). Earnings in 1998 rose 13% from $8,203 million reported in 1997. In 1998, earnings per share increased 14% from $2.46 in 1997. TWO CHANGES IN ACCOUNTING STANDARDS may affect future financial statements. The Financial Accounting Standards Board (FASB) has issued Statement of Financial Accounting Standards No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (STATEMENT 133), effective for GE and GECS on January 1, 2001. Upon adoption, all derivative instruments (including certain derivative instruments embedded in other contracts) will be recognized in balance sheets at fair value, and changes in such fair values must be recognized immediately in earnings unless specific hedging criteria are met. Changes in the values of derivatives meeting these hedging criteria will ultimately offset related earnings effects of the hedged items; effects of qualifying changes in fair value are to be recorded in equity pending recognition in earnings. Certain significant refinements and interpretations of Statement 133 are being deliberated by the FASB, and the effects on accounting for GE and GECS financial instruments will depend to some degree on the results of such deliberations. Management has not determined the total probable effects on its financial statements of adopting Statement 133 and does not believe that an estimate of such effects would be meaningful at this time. The FASB has also proposed new accounting for business combinations that, among other things, would change the accounting for and display of goodwill and other intangibles recorded in business acquisitions for transactions after January 1, 2001. An important aspect of the proposal is that goodwill amortization would be displayed as a separate element in the Statement of Earnings, net of applicable income taxes, and related per-share effects could be displayed. Management believes that this proposal represents a useful approach to understanding financial performance but believes that the utility of this information would be materially enhanced if the proposed approach for goodwill were applied to all intangible assets acquired with a business. On this preferred basis, GE would have reported earnings per share before amortization of goodwill and acquired intangibles of $3.63 in 1999, an increase of 16% over $3.14 in 1998, which was 15% higher than $2.73 in 1997. [CHART HERE] GE/S&P CUMULATIVE DIVIDEND GROWTH SINCE 1994 - ----------------------------------------------------------------------------- 1995 1996 1997 1998 1999 - ----------------------------------------------------------------------------- GE 10.80% 22.93% 38.71% 60.87% 88.62% S&P 500 4.63 13.05 17.60 22.91 26.25 - ----------------------------------------------------------------------------- DIVIDENDS DECLARED IN 1999 AMOUNTED TO $4,786 MILLION. Per-share dividends of $1.46 were up 17% from 1998, following a 16% increase from the preceding year. GE has rewarded its share owners with 24 consecutive years of dividend growth. The chart above 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 26.8% in 1999, up from 25.7% and 25.0% in 1998 and 1997, respectively. Except as otherwise noted, the analysis in the remainder of this section presents GE results with GECS on an equity basis. </pre> <hr> <pre>PAGE F-10 ANNUAL REPORT PAGE 42 GE TOTAL REVENUES were $60.9 billion in 1999, compared with $56.0 billion in 1998 and $54.5 billion in 1997. * GE sales of goods and services were $55.6 billion in 1999, an increase of 8% from 1998, which in turn was 5% higher than in 1997. Volume was about 10% higher in 1999, reflecting growth across all businesses during the year, led by strong double-digit increases at Medical Systems and Power Systems. While overall selling prices were down slightly in 1999, the effects of selling prices on sales in various businesses differed markedly. Revenues were also negatively affected by exchange rates for sales denominated in currencies other than the U.S. dollar. Volume in 1998 was about 8% higher than in 1997, with selling price and currency effects both slightly negative. For purposes of the financial statement display of GE sales and costs of sales on pages 34 and 35, "goods" is required to include sales of tangible products, and "services" must include all other sales, including broadcasting and information services activities. An increasingly important element of GE sales includes both spare parts (goods) as well as repair services--sales referred to by management as "product services." Sales of product services were $14.4 billion in 1999, a 14% increase over 1998. All businesses reported increases in product services revenues, led by double-digit increases at Medical Systems, Aircraft Engines and Power Systems. Operating margin from product services was approximately $3.2 billion, up 16% from 1998. The increase reflected improvements in all product services businesses and was led by double-digit growth at Aircraft Engines and Medical Systems. * GE other income, earned from a wide variety of sources, was $0.9 billion in 1999, $0.7 billion in 1998 and $2.3 billion in 1997. Comparisons over the three-year period are affected by certain gains in 1999 and 1997. A pre-tax gain of $388 million was recognized in 1999 as a result of the contribution of certain of NBC's internet assets to NBC Internet (NBCi), a newly formed publicly traded Internet company, in exchange for a noncontrolling interest in NBCi. The gain was reduced by $62 million of related operating losses from the non-consolidated contributed Internet properties, resulting in incremental revenue of $326 million from the transaction. In 1997, a $1,538 million after-tax gain was realized from the exchange of preferred stock in Lockheed Martin Corporation for the stock of a newly formed subsidiary. See note 2 for further information. * Earnings of GECS were up 17% in 1999, following a 17% increase the year before. See page 46 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 43) as well as in lower direct material costs. Another important initiative is e-Business, a broad-based program under which GE is investing in Internet businesses, as well as internal infrastructure hardware and software that will enable its businesses to conduct a growing portion of their business over the Internet. The benefits expected from the e-Business initiative include improved customer service, expanded product and service offerings and increased operating efficiency for both GE and its customers. Principally because of the funding status of the GE Pension Plan (described in note 5) and other benefit plans (described in note 6), principal U.S. postemployment benefit plans contributed cost reductions of $1,062 million and $703 million in 1999 and 1998, respectively. The present funding status provides assurance of benefits for participating employees, but future effects on operating results depend on economic conditions and investment performance. The discussion that follows provides additional information about certain unusual charges that are included in costs and expenses for 1999 and 1997 and are relevant to comparisons of costs over the three-year period. Costs and expenses in 1999 included $326 million of unusual charges, the largest of which resulted from fourth-quarter developments affecting liabilities associated with past activities at former manufacturing sites that [CHART HERE] RETURNS ON INVESTED CAPITAL - ----------------------------------------------------------------------------- 1995 1996 1997 1998 1999 - ----------------------------------------------------------------------------- RETURN ON EQUITY 23.5% 24.0% 25.0% 25.7% 26.8% RETURN ON TOTAL CAPITAL 21.3 22.2 23.6 23.9 25.8 - ----------------------------------------------------------------------------- </pre> <hr> <pre>PAGE F-11 ANNUAL REPORT PAGE 43 are not part of any current business segment. Other significant components of unusual charges included amounts described on page 45 for NBC and costs for rationalizing certain operations and facilities of GE's worldwide industrial businesses. Major elements of the restructuring program included costs for employee severance, lease termination, dismantlement and site restoration. In 1997, restructuring charges were recognized amounting to $1,243 million that covered costs of plans to rationalize certain production, service and administration activities of GE's worldwide industrial businesses. Principal actions required under those plans were complete by the end of 1999. Other 1997 special charges, which amounted to $1,079 million, were principally associated with strategic decisions that enhanced the long-term competitiveness of certain industrial businesses and fourth-quarter 1997 developments affecting liabilities associated with past activities at former manufacturing sites that were not part of any current business segment. OPERATING MARGIN is sales of goods and services less the costs of goods and services sold, and selling, general and administrative expenses. GE's reported operating margin was 17.3% in 1999, net of unusual charges discussed above. GE's ongoing operating margin (before such charges) reached a record 17.8% of sales, up from last year's 16.7% and 15.7% in 1997, on a comparable basis. GE reported operating margin of 11.0% of sales in 1997. The improvement in ongoing operating margin in 1999 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 1999 was 4.2%, reflecting benefits from improvements in variable cost productivity achieved through the Six Sigma quality initiative. Most businesses achieved improvements in variable cost productivity in excess of 4%. Total cost productivity was 4.4% in 1998, reflecting Six Sigma quality benefits as well as higher volume. In 1998, three businesses--Medical Systems, Power Systems and NBC--achieved 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 1999 amounted to $810 million, compared with $883 million in 1998 and $797 million in 1997. The decrease in 1999 was attributable to the combination of lower average interest rates on debt and lower average levels of borrowings during the year. The increase in 1998 reflected higher average levels of borrowings and other financing activities, which more than offset the effect of lower interest rates. INCOME TAXES on a consolidated basis were 31.2% of pretax earnings in 1999, compared with 31.0% in 1998 and 26.6% in 1997. The most significant factor explaining the lower effective tax rate in 1997 was a 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 7. [CHART HERE] GE OPERATING MARGIN AS A PERCENTAGE OF SALES - ----------------------------------------------------------------------------- 1995 1996 1997 1998 1999 - ----------------------------------------------------------------------------- AS REPORTED 14.4% 14.8% 11.0% 16.7% 17.3% UNUSUAL CHARGES - - 4.7 - 0.6 - ----------------------------------------------------------------------------- SEGMENT OPERATIONS REVENUES AND SEGMENT PROFIT FOR OPERATING SEGMENTS are shown on page 44. For additional information, including a description of the products and services included in each segment, see note 28. AIRCRAFT ENGINES reported a 3% increase in revenues in 1999, reflecting higher volume in product services. Operating profit increased 19% in 1999 as a result of productivity and growth in product services. Revenues, including acquisitions, increased 32% in 1998 as volume in commercial engines and product services increased. Operating profit increased 30% in 1998 with strong growth in product services as well as good volume growth in commercial engines. In 1999, $1.6 billion of Aircraft Engines revenues were from sales to the U.S. government, about the same as in 1998, which was $0.1 billion higher than in 1997. </pre> <hr> <pre>PAGE F-12 ANNUAL REPORT PAGE 44 SUMMARY OF OPERATING SEGMENTS General Electric Company and consolidated affiliates --------------------------------------------------------------------- For the years ended December 31 (In millions) 1999 1998 1997 1996 1995 - ----------------------------------------------------------------------------------------------------------------------------------- REVENUES GE Aircraft Engines $ 10,558 $ 10,294 $ 7,799 $ 6,302 $ 6,098 Appliances 5,671 5,619 5,801 5,586 5,137 Industrial Products and Systems 11,555 11,222 10,984 10,401 10,209 NBC 5,790 5,269 5,153 5,232 3,919 Plastics 6,941 6,633 6,695 6,509 6,647 Power Systems 10,046 8,466 7,915 7,643 6,962 Technical Products and Services 6,863 5,323 4,861 4,700 4,430 Eliminations (1,542) (1,367) (1,176) (1,032) (1,082) --------------------------------------------------------------------- Total GE segment revenues 55,882 51,459 48,032 45,341 42,320 Corporate items (a) 619 771 3,227 1,407 1,446 GECS net earnings 4,443 3,796 3,256 2,817 2,415 --------------------------------------------------------------------- Total GE revenues 60,944 56,026 54,515 49,565 46,181 GECS segment revenues 55,749 48,694 39,931 32,713 26,492 Eliminations (b) (5,063) (4,251) (3,606) (3,099) (2,645) --------------------------------------------------------------------- CONSOLIDATED REVENUES $ 111,630 $ 100,469 $ 90,840 $ 79,179 $ 70,028 =================================================================================================================================== SEGMENT PROFIT GE Aircraft Engines $ 2,105 $ 1,769 $ 1,366 $ 1,214 $ 1,135 Appliances 655 755 771 748 682 Industrial Products and Systems 2,095 1,880 1,789 1,587 1,488 NBC 1,576 1,349 1,216 1,020 797 Plastics 1,651 1,584 1,500 1,443 1,435 Power Systems 1,693 1,306 1,203 1,124 782 Technical Products and Services 1,359 1,109 988 855 810 --------------------------------------------------------------------- Total GE operating profit 11,134 9,752 8,833 7,991 7,129 GECS net earnings 4,443 3,796 3,256 2,817 2,415 --------------------------------------------------------------------- Total segment profit 15,577 13,548 12,089 10,808 9,544 (552) (1,279) (638) (263) GE interest and other financial charges (810) (883) (797) (595) (649) GE provision for income taxes (3,207) (2,817) (1,810) (2,295) (2,059) --------------------------------------------------------------------- CONSOLIDATED NET EARNINGS $ 10,717 $ 9,296 $ 8,203 $ 7,280 $ 6,573 =================================================================================================================================== The notes to consolidated financial statements on pages 56-76 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. The segment profit measure for GE's industrial businesses is operating profit (earnings before interest and other financial charges, and income taxes). The segment profit measure for GECS is net earnings, reflecting the importance of financing and tax considerations to its operating activities. (a) Includes revenues of $944 million, $789 million and $796 million in 1997, 1996 and 1995, 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. (b) Principally the elimination of GECS net earnings. (c) Includes income, principally from licensing activities, previously reported in the All Other segment of $62 million, $271 million, $310 million, $282 million and $285 million in 1999, 1998, 1997, 1996 and 1995, respectively. (d) 1999 includes unusual charges amounting to $265 million. Of the total, amounts that relate to activities of operating segments were as follows: Aircraft Engines -- $42 million, Appliances -- $75 million, Industrial Products and Systems -- $12 million, Plastic -- $13 million and Technical Products and Services -- $34 million. 1997 includes unusual charges of $2,322 million. Of the total, amounts that relate to activities of GE operating segments were as follows: Aircraft Engine -- $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 (a) above. </pre> <hr> <pre>PAGE F-13 ANNUAL REPORT PAGE 45 Aircraft Engines received orders of $12.0 billion in 1999, compared with $10.8 billion in 1998. The backlog at year-end 1999 was $10.0 billion ($9.7 billion at the end of 1998). Of the total, $7.6 billion related to products, about 54% of which was scheduled for delivery in 2000; the remainder related to 2000 product services. APPLIANCES revenues were 1% higher than a year ago, as volume increases offset lower selling prices and adverse currency effects. Operating profit decreased 13%, reflecting lower selling prices and increased spending on programs for new products and e-Business. Revenues in 1998 were 3% lower than in 1997, largely as a result of selling price decreases and, to a lesser extent, lower volume. Operating profit decreased 2% in 1998, as the decreases in selling prices and volume more than offset productivity. INDUSTRIAL PRODUCTS AND SYSTEMS revenues increased 3% in 1999, largely as a result of volume increases across all businesses in the segment (particularly at Transportation Systems), which more than offset lower selling prices. Operating profit increased 11%, as strong productivity at Industrial Systems and Lighting more than offset the lower selling prices. Revenues rose 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% in 1998, reflecting productivity and the improvement in volume, which more than offset the effects of selling price decreases. Transportation Systems received orders of $1.4 billion in 1999, compared with $2.4 billion in 1998. The backlog at year-end 1999 was $1.4 billion ($2.3 billion at the end of 1998). Of the total, $1.1 billion related to products, of which 80% was scheduled for shipment in 2000; the remainder related to 2000 product services. NBC revenues increased 10% in 1999, reflecting higher revenues in NBC's owned-and-operated stations and growth in cable operations. Operating profit was 17% higher in 1999, reflecting a strong advertising marketplace and improved pricing at the network, excellent results in cable operations and continued cost reductions across NBC, which more than offset higher license fees for certain prime-time programs that were renewed. Operating profit in 1999 included $123 million of the gain from the NBCi transaction, described on page 42. That gain was entirely offset by $62 million of operating losses from NBCi and predecessor operations (recorded as a reduction of "other income"), as well as $61 million of unusual costs recorded as "other costs and expenses" for entering into a loss programming contract and for exiting CNBC's current facilities. In 1998, revenues increased 2%, 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 increased 11% in 1998 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. PLASTICS revenues increased 5%, primarily as a result of improved volume across all product lines, which more than offset the effects of lower selling prices. Operating profit increased by 4% as productivity and the increase in volume more than offset pricing. Revenues decreased by 1% in 1998, as pricing and adverse currency exchange rates offset slightly higher volume. Operating profit in 1998 improved by 6%, as lower material costs and productivity more than offset pricing. [CHART HERE] OPERATING PROFIT OF GE SEGMENTS - ----------------------------------------------------------------------------- (IN BILLIONS) 1995 1996 1997 1998 1999 - ----------------------------------------------------------------------------- $7.129 $7.991 $8.833 $9.752 $11.134 - ----------------------------------------------------------------------------- POWER SYSTEMS revenues increased 19%, primarily as a result of strong double-digit growth in gas turbine volume and in product services. Operating profit rose 30%, reflecting productivity, growth in product services and the increase in volume. Revenues in 1998 were 7% higher than in 1997, primarily as a result of 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. Power Systems orders were $14.0 billion for 1999, a 33% increase over 1998, reflecting very strong U.S. market growth. The backlog of unfilled orders at year-end 1999 was $16.1 billion ($12.4 billion at the end of 1998). Of that total, $14.8 billion related to products, of which 60% was scheduled for delivery in 2000; the remainder related to 2000 product services. </pre> <hr> <pre>PAGE F-14 ANNUAL REPORT PAGE 46 [CHART HERE] GECS REVENUES - ----------------------------------------------------------------------------- (IN BILLIONS) 1995 1996 1997 1998 1999 - ----------------------------------------------------------------------------- $26.492 $32.713 $39.931 $48.694 $55.749 TECHNICAL PRODUCTS AND SERVICES revenues rose 29% in 1999, following a 10% increase in 1998. The improvement in revenues in both years was primarily attributable to growth at Medical Systems, the result of higher equipment volume, including new products, and continued growth in product services, partially offset by lower selling prices across the segment. Operating profit increased 23% in 1999 as productivity and volume increases, particularly at Medical Systems, more than offset lower selling prices. Operating profit increased 12% in 1998 as productivity and volume increases more than offset the effects of lower selling prices. Orders received by Medical Systems in 1999 were $6.4 billion, compared with $4.8 billion in 1998. The backlog of unfilled orders at year-end 1999 was $3.1 billion ($2.6 billion at the end of 1998). Of the total, $1.9 billion related to products, of which 83% was scheduled for delivery in 2000; the remainder related to 2000 product services. GECS consists of 28 businesses grouped for management purposes into five operating activities: consumer services, equipment management, mid-market financing, specialized financing and specialty insurance. GECS net earnings were $4,443 million in 1999, up 17% from $3,796 million in 1998, with strong double-digit earnings growth in three of the five operating activities. Net earnings in 1998 increased 17% from 1997. The earnings improvement throughout the three-year period resulted from asset growth, principally from acquisitions of businesses and portfolios, and origination volume. * GECS total revenues increased 14% to $55.7 billion in 1999, following a 22% increase to $48.7 billion in 1998. The increases in both years reflected the contributions of businesses acquired as well as growth in origination volume. * GECS cost of goods sold amounted to $8.0 billion in 1999, compared with $6.8 billion in 1998 and $4.1 billion in 1997, and relates to IT Solutions and Montgomery Ward LLC (Wards). The increase in 1999 primarily reflects the consolidation of Wards as discussed on page 48; the increase in 1998 is principally the result of acquisition-related growth at IT Solutions. * GECS interest on borrowings in 1999 was $9.4 billion, up from $9.0 billion in 1998 and $7.6 billion in 1997. In both 1999 and 1998, while average borrowings increased in order to finance asset growth, the associated higher interest costs were partially mitigated by lower average interest rates. The composite interest rate was 5.14% in 1999, compared with 5.92% in 1998 and 6.07% in 1997. See page 51 for a discussion of interest rate risk management. * GECS insurance losses and policyholder and annuity benefits increased to $11.0 billion in 1999, compared with $9.6 billion in 1998 and $8.3 billion in 1997, reflecting effects of business acquisitions and growth in premium volume throughout the period. In addition, the increase in 1999 reflected the higher loss ratio in the reinsurance business discussed on page 47. * GECS provision for losses on financing receivables increased to $1.7 billion in 1999, compared with $1.6 billion in 1998 and $1.4 billion in 1997. 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 48 under financing receivables. The provision throughout the three-year period reflected higher average receivable balances, a different mix of business, as well as the effects of lower delinquency rates, consistent with industry experience. * GECS other costs and expenses were $19.4 billion in 1999, an increase from $16.4 billion in 1998 and $13.9 billion in 1997, principally because of increased costs associated with acquired businesses and portfolios, higher investment levels and increases in insurance commissions. Financing spreads (the excess of yields over interest rates on borrowings) were essentially flat throughout the three-year period, reflecting slightly lower yields offset by slight 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. CONSUMER SERVICES revenues increased 7% in 1999 and 18% in 1998, and net earnings increased 35% in 1999 and 47% in 1998. The growth in revenues and net earnings was led by Global Consumer Finance, with strong returns on investments in Japan and other international growth. Additionally, revenues and net earnings were increased by higher premium and investment income </pre> <hr> <pre>PAGE F-15 ANNUAL REPORT PAGE 47 at GE Financial Assurance, the consumer savings and insurance business, partially offset by the effects of asset reductions in Card Services and Auto Financial Services. A higher provision for losses on financing receivables because of higher average receivables balances also affected earnings in 1998. - -------------------------------------------------------------------------------- GECS REVENUES AND NET EARNINGS FROM OPERATING ACTIVITIES - -------------------------------------------------------------------------------- (In millions) 1999 1998 1997 - -------------------------------------------------------------------------------- REVENUES Consumer services $ 17,061 $ 15,948 $ 13,550 Equipment management 15,317 14,869 11,326 Mid-market financing 4,685 3,751 3,009 Specialized financing 4,603 3,368 2,828 Specialty insurance 12,399 10,594 8,836 All other 1,684 164 382 ----- - ----------------------------------- Total revenues $ 55,749 $ 48,694 $ 39,931 ================================================================================ NET EARNINGS Consumer services $ 1,074 $ 797 $ 544 Equipment management 695 806 708 Mid-market financing 604 478 391 Specialized financing 1,244 745 593 Specialty insurance 1,223 1,166 973 All other (397) (196) 47 ----- - ----------------------------------- Total net earnings $ 4,443 $ 3,796 $ 3,256 ================================================================================ EQUIPMENT MANAGEMENT revenues grew 3% in 1999, following a 31% increase in 1998. Growth in 1999 revenues was primarily the result of Japanese acquisitions in the corporate auto fleet management operation, as well as higher revenue from commercial aircraft management at GE Capital Aviation Services (GECAS), largely offset by decreases in sales volume at the remaining equipment management businesses. The 1998 increase reflected acquisitions by IT Solutions and, to a lesser extent, asset growth. Net earnings decreased 14% in 1999, following a 14% increase in 1998. In 1999, as market conditions became more competitive, pricing at IT Solutions and utilization at the European equipment management businesses declined, more than offsetting growth in GECAS and the satellite service business, Americom. Net earnings increased in 1998, reflecting higher volume in most businesses from both increased origination as well as acquisitions of businesses and portfolios. These factors were partially offset in 1998 by lower pricing and higher operating costs at IT Solutions and Modular Space. MID-MARKET FINANCING revenues increased 25% in both 1999 and 1998, while net earnings grew 26% and 22%, respectively. Asset growth from both acquisitions and originations 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 37% and 19%, while net earnings increased 67% and 26% in 1999 and 1998, respectively. Revenues principally reflect increases in asset gains as well as origination growth, with GE Equity, Commercial Finance and Real Estate accounting for most of the 1999 increase. Revenue and net earnings growth in both years is principally the result of gains on equity investments. Net earnings in 1998 also included the effects of certain tax-advantaged transactions and higher tax credits. SPECIALTY INSURANCE revenues increased 17% and 20% in 1999 and 1998, respectively, as premiums and investment income grew throughout the period. Premiums earned increased in line with higher origination volume and acquisitions. Investment income also grew, partially reflecting an increase in net realized investment gains in GE Global Insurance, which amounted to $699 million, $432 million and $308 million in 1999, 1998 and 1997, respectively. Increases in property and casualty-related losses in GE Global Insurance were directly related to the frequency and severity of large loss events during the last three years. Large loss events are individual events that, after specific reinsurance recoveries and related premium adjustments, affect GE Global Insurance operations by $2 million or more, and include losses from earthquakes, aviation or railroad accidents, fire damage, and weather-related damage from hurricanes, tornadoes, wind and ice. [CHART HERE] GECS NET EARNINGS - ----------------------------------------------------------------------------- (IN BILLIONS) 1995 1996 1997 1998 1999 - ----------------------------------------------------------------------------- $2.415 $2.817 $3.256 $3.796 $4.443 - ----------------------------------------------------------------------------- </pre> <hr> <pre>PAGE F-16 ANNUAL REPORT PAGE 48 [CHART HERE] CONSOLIDATED INTERNATIONAL REVENUES - ----------------------------------------------------------------------------- (IN BILLIONS) 1995 1996 1997 1998 1999 - ----------------------------------------------------------------------------- INTERNATIONAL OPERATIONS $20.768 $25.447 $29.328 $33.756 $38.164 EXPORTS 7.220 7.581 8.912 8.751 7.513 - ----------------------------------------------------------------------------- Large loss events for GE Global Insurance amounted to approximately $720 million, $230 million and $70 million in 1999, 1998 and 1997, respectively. 1999 losses were partially recovered under aggregate risk coverage obtained in the ordinary course of the reinsurance business. Overall losses for Specialty Insurance were mitigated by favorable experience in the Mortgage Insurance business, particularly in 1999. ALL OTHER GECS operating activities include the results of Wards subsequent to August 2, 1999, when GECS acquired control of the formerly bankrupt retailer. Wards had sales of $1,622 million and a net loss of $26 million for the period during which it was consolidated. 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. FINANCING RECEIVABLES is the largest category of assets for GECS and represents one of its primary sources of revenues. The portfolio of financing receivables, before allowance for losses, increased to $141.4 billion at the end of 1999 from $124.9 billion at the end of 1998, principally reflecting higher origination volume and acquisition growth partially offset by securitizations and other sales of receivables. The related allowance for losses at the end of 1999 amounted to $3.8 billion ($3.3 billion at the end of 1998), representing management's best estimate of probable losses inherent in the portfolio. In GECS financing receivables, "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. Consumer financing receivables, primarily credit card and personal loans and auto loans and leases, were $52.3 billion at year-end 1999, an increase of $0.7 billion from year-end 1998. The credit card and personal receivables increased $5.2 billion, primarily from acquisition growth and origination volume, partially offset by sales and securitizations. Auto receivables decreased $4.5 billion primarily as a result of reduced volume. Nonearning receivables at year-end 1999 were $0.9 billion, about 1.8% of total consumer financing receivables, compared with $1.3 billion, about 2.4% of total consumer receivables at year-end 1998. Write-offs of consumer receivables declined to $1.2 billion from $1.4 billion at year-end 1998, reflecting improved delinquency trends. Other financing receivables, totaling $89.1 billion at December 31, 1999, consisted of a diverse commercial, industrial and equipment loan and lease portfolio. This portfolio increased $15.8 billion during 1999, reflecting the combination of acquisition growth and increased originations. Related nonearning and reduced-earning receivables were $0.9 billion at year-end 1999, compared with $0.4 billion at year-end 1998. GECS loans and leases to commercial airlines amounted to $11.8 billion at the end of 1999, up from $10.2 billion at the end of 1998. 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. International revenues in 1999 were $45.7 billion (41% of consolidated revenues), compared with $42.5 billion in 1998 and $38.2 billion in 1997. The chart above left depicts the growth in international revenues over the past five years. [CHART HERE] CONSOLIDATED INTERNATIONAL REVENUES BY REGION - ----------------------------------------------------------------------------- (IN BILLIONS) 1995 1996 1997 1998 1999 - ----------------------------------------------------------------------------- EUROPE $14.062 $18.030 $20.634 $24.353 $25.816 PACIFIC BASIN 7.183 7.573 7.981 8.058 10.195 AMERICAS 4.110 4.706 6.196 6.907 6.730 OTHER 2.633 2.719 3.429 3.189 2.936 - ----------------------------------------------------------------------------- </pre> <hr> <pre>PAGE F-17 ANNUAL REPORT PAGE 49 - -------------------------------------------------------------------------------- CONSOLIDATED INTERNATIONAL REVENUES - -------------------------------------------------------------------------------- (In millions) 1999 1998 1997 - -------------------------------------------------------------------------------- Europe (a) $22,919 $21,665 $18,166 Pacific Basin 7,879 5,166 4,742 Americas 5,229 5,030 4,632 Other 2,136 1,895 1,788 ----------------------------------- 38,163 33,756 29,328 Exports from the U.S. to external customers 7,513 8,751 8,912 ----------------------------------- $45,676 $42,507 $38,240 ================================================================================ (a) Includes $944 million in 1997 from an appliance distribution affiliate that was deconsolidated in 1998. - -------------------------------------------------------------------------------- GE international revenues were $24.0 billion in 1999, compared with $24.3 billion in 1998, which was $0.2 billion higher than in 1997. Over the three-year period, international revenues were slightly less than half of total revenues. The decrease in such revenues during 1999 was attributable to lower U.S. exports which offset sales growth in operations based outside the United States. Exports decreased 14%, largely as a result of lower exports in Power Systems. Revenues from operations based outside the United States grew 6% to $16.5 billion in 1999. European revenues were 3% higher in 1999, led by good increases at Medical Systems and Aircraft Engines. Pacific Basin revenues were 11% higher in 1999, reflecting double-digit growth at Medical Systems and Plastics. Revenues from the Americas (North and South America, except for the United States) increased 5%, principally as a result of growth in Canadian operations. GECS international revenues were $21.7 billion in 1999, an increase of 19% from $18.2 billion in 1998. Revenues in the Pacific Basin more than doubled in 1999. Much of the increase was attributable to growth in Japan, the result of several strategic acquisitions, the largest of which were the purchase of assets and infrastructure of Japan Leasing and the acquisition of Lake. Revenues in Europe increased 7% in 1999, reflecting a mix of acquisition and core growth across all GECS operating activities. Overall, these increases reflect the continued expansion of GECS as a global provider of a wide range of financial services. Consolidated international operating profit was $5.4 billion in 1999, an increase of 5% over 1998, which was 8% higher than in 1997. Additional information is provided in note 29. Total assets of international operations were $141.3 billion in 1999 (35% of consolidated assets), an increase of 10% over 1998. The increase in 1999 reflected strong growth at GECS in the Pacific Basin, where current economic conditions continue to provide a favorable environment for strategic investments. GECS had a particularly large increase in Japan, reflecting a mix of acquisitions, discussed previously, and strong core asset growth. GECS also had significant asset growth at GECAS, its aviation services business, which is classified as "other international." 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. Thus, when countries or regions experience currency and/or economic stress, GE may have increased exposure to certain risks but also may have new profit opportunities. Potential increased risks include, among other things, higher receivables delinquencies and bad debts, delays or cancellation of sales and orders principally related to power and aircraft equipment, higher local currency financing costs and a slowdown in established financial services activities. New profit opportunities include, among other things, 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. Financial results of GE's international 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] CONSOLIDATED TOTAL ASSETS - ----------------------------------------------------------------------------- (IN BILLIONS) 1995 1996 1997 1998 1999 - ----------------------------------------------------------------------------- UNITED STATES $158.710 $189.427 $206.465 $227.112 $263.778 INTERNATIONAL 69.325 82.975 97.547 128.823 141.259 - ----------------------------------------------------------------------------- </pre> <hr> <pre>PAGE F-18 ANNUAL REPORT PAGE 50 MANAGEMENT'S DISCUSSION OF FINANCIAL RESOURCES AND LIQUIDITY OVERVIEW This discussion of financial resources and liquidity addresses the Statement of Financial Position (page 36), Statement of Changes in Share Owners' Equity (page 34) and the Statement of Cash Flows (page 38). 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 meaningful analysis of each individual statement. INVESTMENT SECURITIES for each of the past two years comprised mainly investment-grade debt securities held by GE Financial Assurance and the specialty insurance businesses of GECS in support of obligations to annuitants and policyholders. GE investment securities were $1.3 billion at year-end 1999, an increase of $1.0 billion from 1998, reflecting increases in the fair value of debt and equity investments as well as additional investments. The increase of $2.0 billion at GECS during 1999 was principally related to investment of premiums received and acquisitions, partially offset by decreases in the fair value of debt securities associated with rising interest rates. See analysis of the Statement of Changes in Share Owners' Equity on page 52 for further information. A breakdown of the investment securities portfolio is provided in note 9. CURRENT RECEIVABLES for GE were $8.7 billion at the end of 1999, an increase of $0.2 billion from year-end 1998, and included $5.8 billion due from customers at the end of 1999, which was $0.4 billion higher than the amount due at the end of 1998. As a measure of asset management, turnover of customer receivables from sales of goods and services was 9.4 in 1999, compared with 8.8 in 1998. 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 $5.8 billion at December 31, 1999, up $0.5 billion from the end of 1998. GE inventory turnover was 8.3 in 1999, about the same as in 1998. Acquisitions of inventories in business combinations more than offset the positive effects of inventory management programs throughout the period. Last-in, first-out (LIFO) revaluations decreased $84 million in 1999, compared with decreases of $87 million in 1998 and $119 million in 1997. Included in these changes were decreases of $4 million, $29 million and $59 million in 1999, 1998 and 1997, respectively, that resulted from lower LIFO inventory levels. There were net cost decreases in each of the last three years. 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 was 11.5 in 1999, compared with 9.2 in 1998. Working capital also includes trade accounts payable and progress collections. GECS inventories were $1,209 million and $744 million at December 31, 1999 and 1998, respectively. The increase in 1999 primarily reflects the consolidation of the retail operations of Wards. FINANCING RECEIVABLES of GECS were $137.6 billion at year-end 1999, net of allowance for doubtful accounts, up $16.1 billion over 1998. These receivables are discussed on page 48 and in notes 12 and 13. OTHER RECEIVABLES of GECS were $30.7 billion and $26.0 billion at December 31, 1999 and 1998, respectively. Of the 1999 increase, $3.6 billion was attributable to acquisitions. PROPERTY, PLANT AND EQUIPMENT (including equipment leased to others) was $41.0 billion at December 31, 1999, up $5.3 billion from 1998. 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 are presented in note 15. GE total expenditures for new plant and equipment during 1999 totaled $2.0 billion, about the same as in 1998. Total expenditures for the past five years were $10.6 billion, of which 39% was investment for growth through new capacity and product development; 32% was investment in productivity through new equipment and process improvements; and 29% was investment for such other purposes as improvement of research and development facilities and safety and environmental protection. </pre> <hr> <pre>PAGE F-19 ANNUAL REPORT PAGE 51 GECS additions to equipment leased to others, including business acquisitions, were $13.4 billion during 1999 ($7.2 billion during 1998), primarily reflecting acquisitions of transportation equipment. INTANGIBLE ASSETS were $26.0 billion at year-end 1999, up from $23.6 billion at year-end 1998. GE intangibles increased to $11.3 billion from $10.0 billion at the end of 1998, principally as a result of goodwill related to acquisitions, the largest of which was Marquette Medical Systems. The $1.1 billion increase in GECS intangibles related to goodwill and other intangibles associated with acquired companies, the largest of which were Signature Group and the Australian consumer financial services business of AVCO. ALL OTHER ASSETS totaled $65.0 billion at year-end 1999, an increase of $12.1 billion from the end of 1998. GE other assets increased $2.8 billion, principally reflecting an increase in the prepaid pension asset and higher costs associated with increased volume of long-term service agreements, as well as additional investments in associated companies. The increase in GECS other assets of $9.2 billion was principally attributable to increases in "separate accounts" (see note 17) and additional investments in associated companies, partially offset by decreases in assets acquired for resale, which reflected sales and securitizations in excess of originations. CONSOLIDATED BORROWINGS aggregated $201.8 billion at December 31, 1999, compared with $175.0 billion at the end of 1998. 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. GE has committed to contribute capital to GE Capital in the event of either a decrease below a specified level in GE Capital's ratio of 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, 1999 and 1998. 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 $3.0 billion at year-end 1999 ($2.3 billion short-term, $0.7 billion long-term), a decrease of $1.2 billion from year-end 1998. GE total debt at the end of 1999 equaled 6.4% of total capital, down from 9.5% at the end of 1998. GECS total borrowings were $200.0 billion at December 31, 1999, of which $129.2 billion is due in 2000 and $70.8 billion is due in subsequent years. Comparable amounts at the end of 1998 were $172.2 billion in total, $113.2 billion due within one year and $59.0 billion due thereafter. A large portion of GECS borrowings ($96.6 billion and $87.0 billion at the end of 1999 and 1998, 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 53 days and 5.82% at the end of 1999, compared with 45 days and 5.35% at the end of 1998. [CHART HERE] GE WORKING CAPITAL TURNOVER - ----------------------------------------------------------------------------- 1995 1996 1997 1998 1999 - ----------------------------------------------------------------------------- 5.56 6.30 7.42 9.22 11.52 - ----------------------------------------------------------------------------- The GE Capital ratio of debt to equity was 8.44 to 1 at the end of 1999 and 7.86 to 1 at the end of 1998. 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. GE and GECS use various financial instruments, particularly interest rate and currency swaps, but also futures, options and currency forwards, principally 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. Management requires </pre> <hr> <pre>PAGE F-20 ANNUAL REPORT PAGE 52 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 provide 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. * 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 2000 net earnings of GECS based on year-end 1999 positions by approximately $105 million; the pro forma effect for GE was approximately $13 million. Based on positions at year-end 1998, the pro forma effect on 1999 net earnings of such an increase in interest rates was estimated to be approximately $111 million for GECS and $17 million for GE. * As shown in the chart to the 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 1999 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 have an insignificant effect on the 2000 net earnings of GE and GECS based on year-end 1999 positions. Based on conditions at year-end 1998, the effect on 1999 net earnings of such a decrease in exchange rates was estimated to be a reduction in net earnings of $11 million for GE and insignificant for GECS. INSURANCE LIABILITIES, RESERVES AND ANNUITY BENEFITS were $86.8 billion, $9.5 billion higher than in 1998. The increase was primarily attributable to increases in separate accounts, the addition of liabilities from acquired companies and growth in guaranteed investment contracts. For additional information on these liabilities, see note 20. [CHART HERE] TOTAL ASSETS OF INTERNATIONAL OPERATIONS - ----------------------------------------------------------------------------- (IN BILLIONS) 1995 1996 1997 1998 1999 - ----------------------------------------------------------------------------- EUROPE $44.1072 $55.1956 $66.7401 $84.5179 $83.3580 PACIFIC BASIN 6.4424 8.1245 8.8814 18.4266 28.2140 AMERICAS 6.5591 7.2265 8.6168 11.2481 13.2920 OTHER 12.2167 12.4287 13.3090 14.6307 16.3950 - ----------------------------------------------------------------------------- STATEMENT OF CHANGES IN SHARE OWNERS' EQUITY Share owners' equity increased $3,677 million to $42,557 million at year-end 1999. The increase was largely attributable to net earnings during the period of $10,717 million, partially offset by dividends of $4,786 million. Investment securities had unrealized losses of $1,776 million during 1999, principally as a result of decreases in fair value attributable to increases in interest rates during 1999. A significant majority of the unrealized losses are associated with debt securities held by insurance businesses of GECS and are matched with insurance liabilities of similar </pre> <hr> <pre>PAGE F-21 ANNUAL REPORT PAGE 53 duration. Accordingly, decreases in fair values of such investment securities are directionally offset by corresponding decreases in fair values of associated insurance liabilities. However, changes in the fair values of insurance liabilities are difficult to measure and are appropriately not recognized under generally accepted accounting principles. Currency translation adjustments reduced equity by $632 million in 1999. Changes in the currency translation adjustment reflect the effects of changes in currency exchange rates on GE's net investment in non-U.S. subsidiaries that have functional currencies other than the U.S. dollar. The decrease during 1999 largely reflected weakening in the European currencies, partially offset by strengthening in Asian currencies. Such adjustments affect earnings only when all or a portion of an affiliate is disposed of. 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 $2.0 billion at the end of 1999, up from $1.2 billion at year-end 1998. During 1999, GE generated a record $11.8 billion in cash from operating activities, a 17% increase over 1998. The increase reflected improvements in earnings and working capital, principally cash from progress collections. The 1999 cash generation provided the necessary resources to repurchase $1.9 billion of GE common stock under the share repurchase program, to pay $4.6 billion in dividends to share owners, to invest $2.0 billion in new plant and equipment and to make $1.6 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 $31 billion of cash. The principal application of this cash was distributions of approximately $21 billion to share owners, both through payment of dividends ($11.9 billion) and through the share repurchase program ($9.0 billion) described below. Other applications included investment in new plant and equipment ($6.3 billion) and acquisitions ($4.5 billion). Under the share repurchase program initiated in December 1994, GE has purchased more than $15 billion of GE stock -- over 300 million shares. In December 1999, GE's Board of Directors increased the amount authorized from $17 billion to $22 billion. Funds used for the share repurchase are expected to be generated largely from operating cash flow. 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 $2.5 billion in 2000, principally for productivity and growth. GECS CASH AND EQUIVALENTS aggregated $6.9 billion at the end of 1999, up from $3.3 billion at year-end 1998 as management held short-term investments as additional liquidity over year-end 1999. 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 $37.2 billion. New borrowings of $109.9 billion having maturities longer than 90 days were added during those years, while $80.7 billion of such longer-term borrowings were retired. GECS also generated $32.0 billion from operating activities. The principal use of cash by GECS has been investing in assets to grow its businesses. Of the $91.0 billion that GECS invested over the past three years, $21.3 billion was used for additions to financing receivables; $26.6 billion was used to invest in new equipment, principally for lease to others; and $31.0 billion was used for acquisitions of new businesses, the largest of which were Japan Leasing and the credit card operations of JC Penney, both in 1999. 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. [CHART HERE] GE CUMULATIVE CASH FLOWS - ----------------------------------------------------------------------------- (IN BILLIONS) 1995 1996 1997 1998 1999 - ----------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES $12.1360 $21.2030 $30.5200 $40.5520 $52.3150 SHARES REPURCHASED 5.2310 8.2819 11.6930 15.6060 20.1930 DIVIDENDS PAID 4.1750 7.4410 10.9330 14.5700 16.4450 - ----------------------------------------------------------------------------- </pre> <hr> <pre>PAGE F-22 ANNUAL REPORT PAGE 54 MANAGEMENT'S DISCUSSION OF SELECTED FINANCIAL DATA SELECTED FINANCIAL DATA summarized on the following page 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 $2,017 million in 1999, up 5% over 1998 and 1997. In 1999, expenditures from GE's own funds were $1,667 million, an increase of 8% over 1998, reflecting continuing research and development work related to new product, service and process technologies. Product technology efforts in 1999 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 provided improved product quality and performance and increased capacity for manufacturing engineered materials. Expenditures funded by customers (mainly the U.S. government) were $350 million in 1999, down $43 million from 1998. [CHART HERE] YEAR END MARKET CAPITALIZATION - ----------------------------------------------------------------------------- (IN BILLIONS) 1995 1996 1997 1998 1999 - ----------------------------------------------------------------------------- $119.989 $162.604 $239.539 $333.672 $508.329 - ----------------------------------------------------------------------------- GE'S TOTAL BACKLOG of firm unfilled orders at the end of 1999 was $32.4 billion, an increase of 14% over 1998, reflecting strong double-digit growth at Power Systems and Medical Systems. Of the total, $27.0 billion related to products, of which 63% was scheduled for delivery in 2000. Services orders are included in this reported backlog for only the succeeding 12 months and were $5.4 billion at the end of 1999. Orders constituting this backlog may be canceled or deferred by customers, subject in certain cases to cancellation penalties. See Segment Operations beginning on page 43 for further information. 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 1999, GE expended about $66 million for capital projects related to the environment. The comparable amount in 1998 was $81 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 $65 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. [CHART HERE] GE SHARE PRICE ACTIVITY - ----------------------------------------------------------------------------- (IN DOLLARS) 1995 1996 1997 1998 1999 - ----------------------------------------------------------------------------- HIGH $36 9/16 $53 1/16 $76 9/16 $103 15/16 $159 1/2 LOW 24 15/16 34 3/4 47 15/16 69 94 1/4 CLOSE 36 49 7/16 73 3/8 102 154 3/4 - ----------------------------------------------------------------------------- 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 $114 million in 1999, compared with $127 million in 1998. It is presently expected that such remediation actions will require average annual expenditures in the range of $90 million to $150 million over the next two years. </pre> <hr> <pre>PAGE F-23 ANNUAL REPORT PAGE 55 SELECTED FINANCIAL DATA ------------------------------------------------------------------ (Dollar amounts in millions; per-share amounts in dollars) 1999 1998 1997 1996 1995 - ----------------------------------------------------------------------------------------------------------------------------------- GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES Revenues $ 111,630 $ 100,469 $ 90,840 $ 79,179 $ 70,028 Net earnings 10,717 9,296 8,203 7,280 6,573 Dividends declared 4,786 4,081 3,535 3,138 2,838 Earned on average share owners' equity 26.8% 25.7% 25.0% 24.0% 23.5% Per share Earnings -- diluted $ 3.22 $ 2.80 $ 2.46 $ 2.16 $ 1.93 Earnings -- basic 3.27 2.84 2.50 2.20 1.95 Dividends declared 1.46 1.25 1.08 0.95 0.845 Stock price range 159 1/2- 103 15/16- 76 9/16- 53 1/16- 36 9/16- 94 1/4 69 47 15/16 34 3/4 24 15/16 Year-end closing stock price 154 3/4 102 73 3/8 49 7/16 36 Total assets 405,200 355,935 304,012 272,402 228,035 Long-term borrowings 71,427 59,663 46,603 49,246 51,027 Shares outstanding -- average (in thousands) 3,277,826 3,268,998 3,274,692 3,307,394 3,367,624 Share owner account -- average 549,000 534,000 509,000 486,000 460,000 =================================================================================================================================== GE DATA Short-term borrowings $ 2,245 $ 3,466 $ 3,629 $ 2,339 $ 1,666 Long-term borrowings 722 681 729 1,710 2,277 Minority interest 823 816 569 477 434 Share owners' equity 42,557 38,880 34,438 31,125 29,609 ------------------------------------------------------------------ Total capital invested $ 46,347 $ 43,843 $ 39,365 $ 35,651 $ 33,986 ================================================================== Return on average total capital invested 25.8% 23.9% 23.6% 22.2% 21.3% Borrowings as a percentage of total capital invested 6.4% 9.5% 11.1% 11.4% 11.6% Working capital (a) $ 3,922 $ 5,038 $ 5,990 $ 6,598 $ 7,405 Additions to property, plant and equipment 2,036 2,047 2,191 2,389 1,831 Employees at year end United States 124,000 125,000 128,000 123,000 124,000 Other countries 86,000 82,000 81,000 65,000 59,000 ------------------------------------------------------------------ Total employees 210,000 207,000 209,000 188,000 183,000 =================================================================================================================================== GECS DATA Revenues $ 55,749 $ 48,694 $ 39,931 $ 32,713 $ 26,492 Net earnings 4,443 3,796 3,256 2,817 2,415 Share owner's equity 20,321 19,727 17,239 14,276 12,774 Minority interest 4,391 3,459 3,113 2,530 2,522 Borrowings from others 200,025 172,200 141,263 125,621 111,598 Ratio of debt to equity at GE Capital 8.44:1 7.86:1 7.45:1 7.84:1 7.59:1 Total assets $ 345,018 $ 303,297 $ 255,408 $ 227,419 $ 185,729 Insurance premiums written 13,624 11,865 9,396 8,185 6,158 Employees at year end United States 73,000 38,000 37,000 32,000 26,000 Other countries 57,000 48,000 30,000 19,000 13,000 ------------------------------------------------------------------ Total employees 130,000 86,000 67,000 51,000 39,000 =================================================================================================================================== Transactions between GE and GECS have been eliminated from the consolidated information. (a) Working capital is defined as the sum of receivables from the sales of goods and services plus inventories less trade accounts payable and progress collections. </pre> <hr> <pre>PAGE F-24 ANNUAL REPORT PAGE 56 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. * GE. This represents the adding together of all affiliates other than General Electric Capital Services, Inc. (GECS), whose operations are presented on a one-line basis. * GECS. This affiliate owns all of the common stock of General Electric Capital Corporation (GE Capital) and GE Global Insurance Holding Corporation (GE Global Insurance), the parent of Employers Reinsurance Corporation. GE Capital, GE Global Insurance and their respective affiliates are consolidated in the GECS columns and constitute its business. * 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 1999 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. Income from investment and insurance activities is discussed on page 57. 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 reflects management's best estimate of probable losses inherent in the portfolio determined principally on the basis of historical experience. For other receivables, principally the larger loans and leases, the allowance for losses is determined primarily on the basis of management's best estimate of 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. </pre> <hr> <pre>PAGE F-25 ANNUAL REPORT PAGE 57 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 based primarily on quoted market prices or, if quoted prices are not available, discounted expected cash flows using market rates commensurate with credit quality and maturity of the investment. Substantially all investment securities are designated as available for sale, with unrealized gains and losses included in 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 are amortized on appropriate bases over their estimated lives. No amortization period exceeds 40 years. When an intangible asset exceeds associated expected operating cash flows, it 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. 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. Designated interest rate and currency swaps that modify borrowings or certain 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: * 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. * 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. * 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, brokerage expenses and premium taxes. </pre> <hr> <pre>PAGE F-26 ANNUAL REPORT PAGE 58 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. * For short-duration insurance contracts, these costs are amortized pro rata over the contract periods in which the related premiums are earned. * 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. * 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) 1999 1998 1997 - -------------------------------------------------------------------------------- Residual licensing and royalty income RCA Licensing $ 23 $ 250 $ 287 Other 44 51 54 Associated companies (1) (32) 50 Marketable securities and bank deposits 105 114 78 Customer financing 17 19 26 Other investments Dividends 24 8 62 Interest 6 8 1 Other items 638 266 1,749 ---------------------------------- $ 856 $ 684 $2,307 ================================================================================ 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. Other income in 1999 includes $326 million from NBC Internet (NBCi), an amount that appears in two categories in the above table. "Other items" includes a gain of $388 million related to the contribution of certain of NBC's Internet assets to NBCi, a newly formed publicly traded Internet company, in exchange for a noncontrolling interest in NBCi. Assets contributed by NBC include its 100% interest in three Internet properties: NBC.com, NBC-IN.com and VideoSeeker.com and a 10% interest in a fourth Internet property, CNBC.com. Also included in the "associated companies" caption for 1999 is $62 million of operating losses related to NBCi and predecessor operations. 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) 1999 1998 1997 - -------------------------------------------------------------------------------- Time sales, loan and other income $18,209 $14,682 $12,211 Operating lease rentals 6,022 5,402 4,819 Financing leases 3,587 4,267 3,499 Investment income 6,243 5,617 5,512 Premium and commission income of insurance businesses 12,948 11,352 9,268 ---------------------------------- $47,009 $41,320 $35,309 ================================================================================ For insurance businesses, the effects of reinsurance on premiums written and premium and commission income were as follows: - ------------------------------------- (In millions) 1999 1998 1997 - ------------------------------------------------------------------------------- PREMIUMS WRITTEN Direct $ 7,382 $ 6,237 $ 5,206 Assumed 8,520 7,470 5,501 Ceded (2,278) (1,842) (1,311) - ------------------------------------- $ 13,624 $ 11,865 $ 9,396 ===================================== PREMIUM AND COMMISSION INCOME Direct $ 7,002 $ 6,063 $ 5,138 Assumed 8,460 7,151 5,386 Ceded (2,514) (1,862) (1,256) - ------------------------------------- $ 12,948 $ 11,352 $ 9,268 =============================================================================== Reinsurance recoveries recognized as a reduction of insurance losses and policyholder and annuity benefits amounted to $2,648 million, $1,594 million and $903 million for the years ended December 31, 1999, 1998 and 1997, respectively. </pre> <hr> <pre>PAGE F-27 ANNUAL REPORT PAGE 59 4 SUPPLEMENTAL COST INFORMATION Total expenditures for research and development were $2,017 million, $1,930 million and $1,891 million in 1999, 1998 and 1997, respectively. The Company-funded portion aggregated $1,667 million in 1999, $1,537 million in 1998 and $1,480 million in 1997. Rental expense under operating leases is shown below. - ------------------------------------- (In millions) 1999 1998 1997 - ------------------------------------------------------------------------------- GE $ 607 $ 568 $ 536 GECS 1,067 889 734 =============================================================================== At December 31, 1999, minimum rental commitments under noncancelable operating leases aggregated $2,431 million and $5,041 million for GE and GECS, respectively. Amounts payable over the next five years follow. ------------------------------------------------ (In millions) 2000 2001 2002 2003 2004 - -------------------------------------------------------------------------------- GE $458 $366 $284 $226 $195 GECS 834 663 603 540 413 ================================================================================ GE's selling, general and administrative expense totaled $7,732 million in 1999, $7,177 million in 1998 and $7,476 million in 1997. Insignificant amounts of interest were capitalized by GE and GECS in 1999, 1998 and 1997. 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 provides benefits to certain U.S. employees based on the greater of a formula recognizing career earnings or a formula recognizing length of service and final average earnings. Benefit provisions are subject to collective bargaining. At the end of 1999, the GE Pension Plan covered approximately 470,000 participants, including 124,000 employees, 153,000 former employees with vested rights to future benefits, and 193,000 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) 1999 1998 1997 - ------------------------------------------------------------------------------- Expected return on plan assets $ 3,407 $ 3,024 $ 2,721 Service cost for benefits earned (a) (693) (625) (596) Interest cost on benefit obligation (1,804) (1,749) (1,686) Prior service cost (151) (153) (145) SFAS No. 87 transition gain 154 154 154 Net actuarial gain recognized 467 365 295 Special early retirement cost -- -- (412) ------------------------------- Total pension plan income $ 1,380 $ 1,016 $ 331 =============================================================================== (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 excise taxes. Changes in the projected benefit obligation for principal pension plans follow. - ------------------------------------------------------------------------------- PROJECTED BENEFIT OBLIGATION ------------------------ December 31 (In millions) 1999 1998 - ------------------------------------------------------------------------------- Balance at January 1 $ 27,572 $ 25,874 Service cost for benefits earned (a) 693 625 Interest cost on benefit obligation 1,804 1,749 Participant contributions 122 112 Actuarial (gain)/loss (b) (2,790) 1,050 Benefits paid (1,879) (1,838) ------------------------ Balance at December 31 $ 25,522 $ 27,572 =============================================================================== (a) Net of participant contributions. (b) Principally associated with discount rate changes. - ------------------------------------------------------------------------------- Changes in the fair value of assets for principal pension plans follow. - ------------------------------------------------------------------------------- FAIR VALUE OF ASSETS ------------------------ December 31 (In millions) 1999 1998 - ------------------------------------------------------------------------------- Balance at January 1 $ 43,447 $ 38,742 Actual return on plan assets 8,472 6,363 Employer contributions 81 68 Participant contributions 122 112 Benefits paid (1,879) (1,838) ------------------------ Balance at December 31 $ 50,243 $ 43,447 =============================================================================== Plan assets are held in trust and consist mainly of common stock and fixed-income investments. GE common stock represented 9.8% and 7.5% of trust assets at year-end 1999 and 1998, respectively. </pre> <hr> <pre>PAGE F-28 ANNUAL REPORT PAGE 60 GE recorded assets and liabilities for principal pension plans as follows: - ------------------------------------------------------------------------------- PREPAID PENSION ASSET - ------------------------------------------------------------------------------- December 31 (In millions) 1999 1998 ------------------------ Fair value of plan assets $ 50,243 $ 43,447 Add (deduct) unrecognized balances Prior service cost 699 850 SFAS No. 87 transition gain (154) (308) Net actuarial gain (16,850) (9,462) Projected benefit obligation (25,522) (27,572) Pension liability 981 797 ------------------------ Prepaid pension asset $ 9,397 $ 7,752 =============================================================================== Actuarial assumptions used to determine costs and benefit obligations for principal pension plans follow. - ------------------------------------------------------------------------------- ACTUARIAL ASSUMPTIONS ------------------------------- December 31 1999 1998 1997 - ------------------------------------------------------------------------------- Discount rate 7.75% 6.75% 7.0% Compensation increases 5.0 5.0 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 1999, 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) 1999 1998 1997 - ------------------------------------------------------------------------------- RETIREE HEALTH PLANS Service cost for benefits earned $ 88 $ 79 $ 90 Interest cost on benefit obligation 206 205 183 Prior service cost 14 14 (3) Net actuarial loss recognized 38 28 16 Special early retirement cost -- -- 152 ------------------------------- Retiree health plan cost 346 326 438 ------------------------------- RETIREE LIFE PLANS Expected return on plan assets (165) (149) (137) Service cost for benefits earned 19 17 17 Interest cost on benefit obligation 117 114 116 Prior service cost (6) (6) (8) Net actuarial loss recognized 7 11 16 Special early retirement cost -- -- 13 ------------------------------- Retiree life plan cost (income) (28) (13) 17 ------------------------------- Total cost $ 318 $ 313 $ 455 =============================================================================== 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) 1999 1998 1999 1998 ----------- - ----------------------------- Balance at January 1 $3,220 $3,098 $ 1,787 $ 1,677 Service cost for benefits earned 88 79 19 17 Interest cost on benefit obligation 206 205 117 114 Participant contributions 24 24 -- -- Actuarial (gain)/loss 103 177 (165) 91 Benefits paid (392) (363) (107) (112) Other 26 -- -- -- ----------- - ----------------------------- Balance at December 31 $3,275 $3,220 $ 1,651 $ 1,787 =============================================================================== Changes in the fair value of assets for retiree benefit plans follow. - ------------------------------------------------------------------------------- FAIR VALUE OF ASSETS Health plans Life plans ---------------- ------------------- December 31 (In millions) 1999 1998 1999 1998 - ------------------------------------------------------------------------------- Balance at January 1 $-- $-- $ 2,121 $ 1,917 Actual return on plan assets -- -- 355 316 Employer contributions 368 339 -- -- Participant contributions 24 24 -- -- Benefits paid (392) (363) (107) (112) ----------- - ----------------------------- Balance at December 31 $-- $-- $ 2,369 $ 2,121 - ------------------------------------------------------------------------------- </pre> <hr> <pre>PAGE F-29 ANNUAL REPORT PAGE 61 Plan assets are held in trust and consist mainly of common stock and fixed-income investments. GE common stock represented 6.2% and 4.5% of trust assets at year-end 1999 and 1998, respectively. GE recorded assets and liabilities for retiree benefit plans as follows: - ------------------------------------------------------------------------------- RETIREE BENEFIT LIABILITY/ASSET Health plans Life plans ----------------- ------------------- December 31 (In millions) 1999 1998 1999 1998 - ------------------------------------------------------------------------------- Accumulated postretirement benefit obligation $3,275 $3,220 $ 1,651 $ 1,787 Add (deduct) unrecognized balances Prior service cost (143) (157) 43 49 Net actuarial gain/(loss) (637) (572) 576 214 Fair value of plan assets -- -- (2,369) (2,121) ----------- - ----------------------------- Retiree benefit liability/(asset) $2,495 $2,491 $ (99) $ (71) =============================================================================== ACTUARIAL ASSUMPTIONS used to determine costs and benefit obligations for principal retiree benefit plans are shown below. - ------------------------------------------------------------------------------- ACTUARIAL ASSUMPTIONS ------------------------------- December 31 1999 1998 1997 - ------------------------------------------------------------------------------- Discount rate 7.75% 6.75% 7.0% Compensation increases 5.0 5.0 4.5 Health care cost trend (a) 9.0 7.8 7.8 Return on assets for the year 9.5 9.5 9.5 - ------------------------------------------------------------------------------- (a) For 1999, gradually declining to 5% after 2004. - ------------------------------------------------------------------------------- Increasing or decreasing the health care cost trend rates by one percentage point would have had an insignificant effect on the December 31, 1999, accumulated postretirement benefit obligation and 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 PROVISION FOR INCOME TAXES ------------------------------- (In millions) 1999 1998 1997 - ------------------------------------------------------------------------------- GE Estimated amounts payable $ 2,555 $ 2,227 $ 2,332 Deferred tax expense (benefit) from temporary differences 652 590 (522) ------------------------------- 3,207 2,817 1,810 ------------------------------- GECS Estimated amounts payable 806 815 368 Deferred tax expense from temporary differences 847 549 798 ------------------------------- 1,653 1,364 1,166 ------------------------------- Consolidated Estimated amounts payable 3,361 3,042 2,700 Deferred tax expense from temporary differences 1,499 1,139 276 ------------------------------- $ 4,860 $ 4,181 $ 2,976 =============================================================================== 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 $1,632 million, $1,459 million and $1,176 million in 1999, 1998 and 1997, respectively, and amounts applicable to non-U.S. jurisdictions of $1,399 million, $1,335 million and $1,298 million in 1999, 1998 and 1997, respectively. Deferred tax expense related to U.S. federal income taxes was $1,475 million, $971 million and $354 million in 1999, 1998 and 1997, 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 $11.3 billion in 1999, $9.7 billion in 1998 and $8.2 billion in 1997. The corresponding amounts for non-U.S.-based operations were $4.3 billion in 1999, $3.8 billion in 1998 and $3.0 billion in 1997. A reconciliation of the U.S. federal statutory tax rate to the actual tax rate is provided on the following page. </pre> <hr> <pre>PAGE F-30 ANNUAL REPORT PAGE 62 - --------------------------------------------------------------------------------------------------------------------------- RECONCILIATION OF U.S. FEDERAL Consolidated GE GECS STATUTORY TAX RATE TO ACTUAL RATE ------------------------ ------------------------ ------------------------ 1999 1998 1997 1999 1998 1997 1999 1998 1997 - --------------------------------------------------------------------------------------------------------------------------- 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 -- -- - -- (11.2) (11.0) (11.4) -- -- -- Lockheed Martin exchange (note 2) -- -- (4.8) -- -- (5.4) -- -- -- Amortization of goodwill 1.1 1.1 1.1 0.8 0.7 0.8 1.0 1.0 1.1 Tax-exempt income (1.7) (1.8) (1.9) -- -- -- (4.4) (4.7) (4.9) Tax on international activities (including Foreign Sales Corporation benefits) (4.2) (3.0) (2.7) (2.6) (2.7) (2.1) (4.8) (1.3) (2.2) All other -- net 1.0 (0.3) (0.1) 1.0 1.3 1.2 0.3 (3.6) (2.6) ----------- - ------------------------------------------------------------------------- (3.8) (4.0) (8.4) (12.0) (11.7) (16.9) (7.9) (8.6) (8.6) ----------- - ------------------------------------------------------------------------- Actual income tax rate 31.2% 31.0% 26.6% 23.0% 23.3% 18.1% 27.1% 26.4% 26.4% =========================================================================================================================== 8 EARNINGS PER SHARE INFORMATION ----------------- ------------------ ----------------- 1999 1998 1997 ----------------- ------------------ ----------------- (In millions; per-share amounts in dollars) Diluted Basic Diluted Basic Diluted Basic - -------------------------------------------------------------------------------------------------------------------------------- CONSOLIDATED OPERATIONS Net earnings available to common share owners $10,717 $10,717 $9,296 $9,296 $8,203 $8,203 Dividend equivalents -- net of tax 8 -- 13 -- 10 - -- ----------------- ------------------ ----------------- Net earnings available for per-share calculation $10,725 $10,717 $9,309 $9,296 $8,213 $8,203 ----------------- ------------------ ----------------- AVERAGE EQUIVALENT SHARES Shares of GE common stock outstanding 3,278 3,278 3,269 3,269 3,275 3,275 Employee compensation-related shares, including stock options 54 -- 61 -- 70 -- ----------------- ------------------ ----------------- Total average equivalent shares 3,332 3,278 3,330 3,269 3,345 3,275 ----------------- ------------------ ----------------- Net earnings per share $ 3.22 $ 3.27 $ 2.80 $ 2.84 $ 2.46 $ 2.50 ================================================================================================================================ </pre> <hr> <pre>PAGE F-31 ANNUAL REPORT PAGE 63 9 INVESTMENT SECURITIES ------------------------------------------------ Gross Gross Amortized unrealized unrealized Estimated (In millions) cost gains losses fair value - -------------------------------------------------------------------------------- DECEMBER 31, 1999 GE SECURITIES Equity $ 149 $ 547 $ (1) $ 695 Debt -- U.S. corporate 430 148 -- 578 ------------------------------------------------ 579 695 (1) 1,273 ------------------------------------------------ GECS SECURITIES Debt U.S. corporate 31,512 175 (1,759) 29,928 State and municipal 12,558 141 (452) 12,247 Mortgage-backed 12,799 173 (376) 12,596 Corporate -- non-U.S 9,923 228 (248) 9,903 Government -- non-U.S 4,675 114 (77) 4,712 U.S. government and federal agency 2,481 5 (171) 2,315 Equity 6,420 2,641 (277) 8,784 ------------------------------------------------ 80,368 3,477 (3,360) 80,485 ------------------------------------------------ CONSOLIDATED TOTALS $80,947 $4,172 $ (3,361) $81,758 ================================================================================ DECEMBER 31, 1998 GE SECURITIES Equity $ 233 $ 26 $ -- $ 259 ------------------------------------------------ GECS SECURITIES Debt 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 5,651 1,415 (192) 6,874 ------------------------------------------------ 74,476 4,722 (740) 78,458 ------------------------------------------------ CONSOLIDATED TOTALS $74,709 $4,748 $ (740) $78,717 ================================================================================ The majority of mortgage-backed securities shown in the table above are collateralized by U.S. residential mortgages. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACTUAL MATURITIES OF DEBT SECURITIES (EXCLUDING MORTGAGE-BACKED SECURITIES) --------------------------- Amortized Estimated (In millions) cost fair value - -------------------------------------------------------------------------------- Due in 2000 $ 5,237 $ 5,309 2001-2004 13,348 13,310 2005-2009 14,478 13,953 2010 and later 28,086 26,533 ================================================================================ 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 1999 were $18,521 million ($16,707 million in 1998 and $14,728 million in 1997). Gross realized gains were $1,430 million in 1999 ($1,126 million in 1998 and $1,018 million in 1997). Gross realized losses were $484 million in 1999 ($308 million in 1998 and $173 million in 1997). 10 GE CURRENT RECEIVABLES -------------------------- December 31 (In millions) 1999 1998 - ------------------------------------------------------------------------------- Aircraft Engines $ 1,541 $ 1,722 Appliances 285 299 Industrial Products and Systems 1,163 1,274 NBC 329 261 Plastics 953 1,070 Power Systems 3,350 2,620 Technical Products and Services 1,036 904 All Other 44 141 Corporate 362 495 -------------------------- 9,063 8,786 Less allowance for losses (320) (303) -------------------------- $ 8,743 $ 8,483 - ------------------------------------------------------------------------------- Receivables balances at December 31, 1999 and 1998, before allowance for losses, included $5,832 million and $5,447 million, respectively, from sales of goods and services to customers, and $296 million and $350 million, respectively, from transactions with associated companies. Current receivables of $203 million at year-end 1999 and $305 million at year-end 1998 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 1999, 1998 and 1997. 11 INVENTORIES -------------------------- December 31 (In millions) 1999 1998 - ------------------------------------------------------------------------------- GE Raw materials and work in process $ 3,438 $ 3,154 Finished goods 3,054 2,967 Unbilled shipments 233 195 -------------------------- 6,725 6,316 Less revaluation to LIFO (927) (1,011) -------------------------- 5,798 5,305 -------------------------- GECS Finished goods (a) 1,209 744 -------------------------- $ 7,007 $ 6,049 =============================================================================== (a) Including $773 million of Wards' retail inventory at year-end 1999. - ------------------------------------------------------------------------------- LIFO revaluations decreased $84 million in 1999, compared with decreases of $87 million in 1998 and $119 million in 1997. Included in these changes were decreases of $4 million, $29 million and $59 million in 1999, 1998 and 1997, respectively, that resulted from lower LIFO inventory levels. There were net cost decreases in each of the last three years. As of December 31, 1999, 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. </pre> <hr> <pre>PAGE F-32 ANNUAL REPORT PAGE 64 12 GECS FINANCING RECEIVABLES (INVESTMENTS IN TIME SALES, LOANS AND FINANCING LEASES) -------------------------- December 31 (In millions) 1999 1998 - ------------------------------------------------------------------------------- TIME SALES AND LOANS Consumer services $ 48,435 $ 42,573 Specialized financing 24,999 16,693 Mid-market financing 19,186 17,065 Equipment management 977 849 Specialty insurance 28 103 -------------------------- Time sales and loans 93,625 77,283 -------------------------- INVESTMENT IN FINANCING LEASES Direct financing leases 43,738 43,730 Leveraged leases 4,045 3,841 -------------------------- Investment in financing leases 47,783 47,571 -------------------------- 141,408 124,854 Less allowance for losses (3,779) (3,288) -------------------------- $137,629 $121,566 =============================================================================== 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 1999 and 1998, financing receivables included $15,782 million and $14,452 million, respectively, for commercial real estate loans and leases. Note 17 contains information on airline loans and leases. 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. - ---------------------------------------------------------------------------------------------------------------------------------- NET INVESTMENT IN FINANCING LEASES Total financing Direct financing leases leases Leveraged leases -------------------- -------------------- -------------------- December 31 (In millions) 1999 1998 1999 1998 1999 1998 - ---------------------------------------------------------------------------------------------------------------------------------- Total minimum lease payments receivable $ 68,158 $ 66,528 $ 47,069 $ 47,451 $ 21,089 $ 19,077 Less principal and interest on third-party nonrecourse debt (17,184) (15,176) -- -- (17,184) (15,176) -------------------- -------------------- -------------------- Net rentals receivable 50,974 51,352 47,069 47,451 3,905 3,901 Estimated unguaranteed residual value of leased assets 7,157 6,826 4,945 5,011 2,212 1,815 Less deferred income (10,348) (10,607) (8,276) (8,732) (2,072) (1,875) -------------------- -------------------- -------------------- INVESTMENT IN FINANCING LEASES (as shown above) 47,783 47,571 43,738 43,730 4,045 3,841 Less amounts to arrive at net investment Allowance for losses (581) (619) (509) (519) (72) (100) Deferred taxes (8,593) (8,593) (5,087) (5,147) (3,506) (3,446) -------------------- -------------------- -------------------- NET INVESTMENT IN FINANCING LEASES $ 38,609 $ 38,359 $ 38,142 $ 38,064 $ 467 $ 295 ================================================================================================================================== </pre> <hr> <pre>PAGE F-33 ANNUAL REPORT PAGE 65 - ------------------------------------------------------------------------------- CONTRACTUAL MATURITIES -------------------------------- Total time sales Net rentals (In millions) and loans (a) receivable (a) - ------------------------------------------------------------------------------- Due in 2000 $ 25,878 $ 14,901 2001 18,489 11,625 2002 17,649 7,567 2003 7,466 4,613 2004 5,972 2,906 2005 and later 18,171 9,362 -------------------------------- Total $ 93,625 $ 50,974 - ------------------------------------------------------------------------------- (a) Experience has shown that a substantial portion of receivables will be paid prior to contractual maturity, and these amounts should not be regarded as forecasts of future cash flows. - ------------------------------------------------------------------------------- Nonearning consumer receivables were $930 million and $1,250 million at December 31, 1999 and 1998, respectively, a substantial amount of which were private-label credit card loans. Nonearning and reduced-earning receivables other than consumer receivables were $932 million and $354 million at year-end 1999 and 1998, 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) 1999 1998 - ------------------------------------------------------------------------------- Loans requiring allowance for losses $ 631 $ 346 Loans expected to be fully recoverable 219 158 -------------------------- $ 850 $ 504 ========================== Allowance for losses $ 179 $ 109 Average investment during year 610 512 Interest income earned while impaired (a) 27 39 =============================================================================== (a) Principally on the cash basis. - ------------------------------------------------------------------------------- 13 GECS ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES ------------------------------- (In millions) 1999 1998 1997 - ------------------------------------------------------------------------------- Balance at January 1 $ 3,288 $ 2,802 $ 2,693 Provisions charged to operations 1,678 1,609 1,421 Net transfers primarily related to acquisitions and sales 270 388 127 Amounts written off -- net (1,457) (1,511) (1,439) ------------------------------- Balance at December 31 $ 3,779 $ 3,288 $ 2,802 =============================================================================== 14 OTHER GECS RECEIVABLES At year-end 1999 and 1998, this account included reinsurance recoverables of $8,138 million and $6,124 million and insurance-related receivables of $7,417 million and $7,109 million, respectively. Premium receivables, policy loans and funds on deposit with reinsurers 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) 1999 1998 - ------------------------------------------------------------------------------- ORIGINAL COST GE Land and improvements $ 526 $ 483 Buildings, structures and related equipment 6,674 6,579 Machinery and equipment 20,849 19,491 Leasehold costs and manufacturing plant under construction 2,150 1,757 -------------------------- 30,199 28,310 -------------------------- GECS Buildings and equipment 7,163 4,828 Equipment leased to others Vehicles 10,942 9,825 Aircraft 10,591 9,321 Railroad rolling stock 3,323 2,804 Marine shipping containers 2,309 2,565 Other 3,832 3,447 -------------------------- 38,160 32,790 -------------------------- $ 68,359 $ 61,100 ========================== ACCUMULATED DEPRECIATION AND AMORTIZATION GE $ 17,818 $ 16,616 GECS Buildings and equipment 2,127 1,733 Equipment leased to others 7,392 7,021 -------------------------- $ 27,337 $ 25,370 =============================================================================== Amortization of GECS equipment leased to others was $2,673 million, $2,185 million and $2,102 million in 1999, 1998 and 1997, respectively. Noncancelable future rentals due from customers for equipment on operating leases at year-end 1999 totaled $16,058 million and are due as follows: $4,177 million in 2000; $3,177 million in 2001; $2,332 million in 2002; $1,624 million in 2003; $1,086 million in 2004; and $3,662 million thereafter. </pre> <hr> <pre>PAGE F-34 ANNUAL REPORT PAGE 66 16 INTANGIBLE ASSETS -------------------------- December 31 (In millions) 1999 1998 - ------------------------------------------------------------------------------- GE Goodwill $ 10,805 $ 9,203 Other intangibles 457 793 -------------------------- 11,262 9,996 -------------------------- GECS Goodwill 12,301 11,469 Present value of future profits (PVFP) 1,812 1,618 Other intangibles 635 552 -------------------------- 14,748 13,639 -------------------------- $ 26,010 $ 23,635 =============================================================================== GE intangible assets are shown net of accumulated amortization of $2,891 million in 1999 and $2,923 million in 1998. GECS intangible assets are net of accumulated amortization of $4,233 million in 1999 and $3,396 million in 1998. PVFP amortization, which is on an accelerated basis and net of interest, is projected to range from 15% to 7% of the year-end 1999 unamortized balance for each of the next five years. 17 ALL OTHER ASSETS -------------------------- December 31 (In millions) 1999 1998 - ------------------------------------------------------------------------------- GE Investments Associated companies (a) $ 2,678 $ 2,336 Other 741 474 -------------------------- 3,419 2,810 Prepaid pension asset 9,397 7,752 Long-term receivables, including notes 2,024 2,379 Prepaid broadcasting rights 1,078 929 Other 4,887 4,161 -------------------------- 20,805 18,031 -------------------------- GECS Investments Assets acquired for resale 3,406 6,167 Associated companies (a) 11,298 7,670 Real estate ventures 4,397 3,131 Other 4,424 3,473 -------------------------- 23,525 20,441 Separate accounts 10,335 6,563 Servicing assets (b) 1,707 1,625 Deferred insurance acquisition costs 4,682 3,326 Other 4,445 3,584 -------------------------- 44,694 35,539 -------------------------- ELIMINATIONS (518) (662) -------------------------- $ 64,981 $ 52,908 =============================================================================== (a) Includes advances. (b) Associated primarily with serviced residential mortgage loans amounting to $86 billion and $91 billion at December 31, 1999 and 1998, respectively. - ------------------------------------------------------------------------------- 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 $1,453 million at year-end 1999 and $1,473 million at year-end 1998; and it had entered into commitments totaling $1,843 million and $1,519 million at year-end 1999 and 1998, 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, 1999. GECS acts as a lender and lessor to the commercial airline industry. At December 31, 1999 and 1998, the balance of such GECS loans, leases and equipment leased to others was $11,772 million and $10,170 million, respectively. In addition, at December 31, 1999, GECS had issued financial guarantees and funding commitments of $59 million ($74 million at year-end 1998) and had placed multi-year orders for various Boeing and Airbus aircraft with list prices of approximately $9.9 billion ($9.4 billion at year-end 1998). At year-end 1999, the National Broadcasting Company had $8,843 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 2010. In connection with numerous projects, primarily power generation bids and contracts, GE had issued various bid and performance bonds and guarantees totaling $3,794 million at year-end 1999 and $3,740 million at year-end 1998. 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 1999 and 1998, this account included taxes accrued of $3,940 million and $3,415 million and compensation and benefit accruals of $1,648 million and $1,487 million, respectively. Also included are amounts for product warranties, estimated costs on shipments billed to customers and a variety of sundry items. </pre> <hr> <pre>PAGE F-35 ANNUAL REPORT PAGE 67 19 BORROWINGS SHORT-TERM BORROWINGS 1999 1998 ---------------------- ---------------------- Average Average December 31 (In millions) Amount rate (a) Amount rate (a) - ------------------------------------------------------------------------------- GE Commercial paper U.S $521 6.54% $2,339 5.29% Non-U.S. 396 5.02 -- -- Payable to banks, principally non-U.S. 629 10.18 465 11.15 Current portion of long-term debt 123 7.27 50 5.08 Other 576 612 ----------------------------------------------- 2,245 3,466 ----------------------------------------------- GECS Commercial paper U.S. 84,702 6.07 83,044 5.38 Non-U.S. 11,909 4.19 3,953 4.80 Current portion of long-term debt 22,902 5.59 14,645 5.66 Other 9,746 11,520 ----------------------------------------------- 129,259 113,162 ---------------------- ---------------------- ELIMINATIONS (1,158) (1,250) $130,346 $115,378 =============================================================================== - ------------------------------------------------------------------------------- LONG-TERM BORROWINGS ------------------------------------------------ 1999 Average December 31 (In millions) rate (a) Maturities 1999 1998 - ------------------------------------------------------------------------------- GE Industrial development/ pollution control bonds 3.65% 2003-2027 $ 328 $ 327 Payable to banks, principally non-U.S. 11.11 2001-2006 156 230 Other (b) 238 124 ---------------------- 722 681 ---------------------- GECS Senior notes 5.50 2001-2055 69,770 58,042 Subordinated notes (c) 7.88 2006-2035 996 996 ---------------------- 70,766 59,038 ---------------------- ELIMINATIONS (61) (56) ---------------------- $71,427 $59,663 =============================================================================== (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 (including the current portion) during the next five years follow. ------------------------------------------------------ (In millions) 2000 2001 2002 2003 2004 - -------------------------------------------------------------------------------- GE $ 123 $ 73 $ 33 $ 17 $ 132 GECS 22,902 15,948 12,763 10,153 7,922 - -------------------------------------------------------------------------------- Committed credit lines of $4.2 billion had been extended to GE by 24 banks at year-end 1999. Substantially all of GE's credit lines are available to GECS and its affiliates in addition to their own credit lines. At year-end 1999, GECS and its affiliates held committed lines of credit aggregating $32.5 billion, including $12.0 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, 1999, were not significant. A total of $7.7 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) 1999 1998 Short-term $ 74,347 $ 72,143 ======================== Long-term (including current portion) Fixed rate (a) $ 90,361 $ 74,226 Floating rate 35,317 25,831 ------------------------ Total long-term $125,678 $100,057 =============================================================================== (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, 1999, swap maturities ranged from 2000 to 2048, and average interest rates for fixed-rate borrowings (including "synthetic" fixed-rate borrowings) were 5.63% (6.03% at year-end 1998). </pre> <hr> <pre>PAGE F-36 ANNUAL REPORT PAGE 68 20 GECS INSURANCE LIABILITIES, RESERVES AND ANNUITY BENEFITS ------------------------ December 31 (In millions) 1999 1998 - ------------------------------------------------------------------------------- Investment contracts and universal life benefits $ 30,448 $ 29,266 Life insurance benefits and other (a) 18,460 16,104 Unpaid claims and claims adjustment expenses (b) 21,473 19,611 Unearned premiums 6,060 5,715 Separate accounts (see note 17) 10,335 6,563 ------------------------ $ 86,776 $ 77,259 - ------------------------------------------------------------------------------- (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 1999 and 1998. (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 and asbestos exposures is based on known facts and an assessment of applicable law and coverage litigation. Liabilities are recognized for both known and unasserted claims (including the cost of related litigation) when sufficient information has been developed to indicate that a claim has been incurred and a range of potential losses can be reasonably estimated. Developed case law and adequate claim history do not exist for certain claims principally due to significant uncertainties as to both the level of ultimate losses that will occur and what portion, if any, will be deemed to be insured amounts. A summary of activity affecting unpaid claims and claims adjustment expenses follows. ------------------------------- (In millions) 1999 1998 1997 - ------------------------------------------------------------------------------- Balance at January 1 -- gross $19,611 $14,654 $13,184 Less reinsurance recoverables (3,483) (2,246) (1,822) ------------------------------- Balance at January 1 -- net 16,128 12,408 11,362 Claims and expenses incurred Current year 6,917 6,330 4,494 Prior years 248 (162) 146 Claims and expenses paid Current year (2,508) (2,400) (1,780) Prior years (5,162) (3,692) (2,816) Claim reserves related to acquired companies 929 3,476 1,360 Other 89 168 (358) ------------------------------- Balance at December 31 -- net 16,641 16,128 12,408 Add reinsurance recoverables 4,832 3,483 2,246 ------------------------------- Balance at December 31 -- gross $21,473 $19,611 $14,654 =============================================================================== 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) 1999 1998 - ------------------------------------------------------------------------------- Guarantees, principally on municipal bonds and structured finance issues $177,840 $171,020 Mortgage insurance risk in force 59,798 43,941 Credit life insurance risk in force 26,427 31,018 Less reinsurance (37,992) (37,205) ------------------------ $226,073 $208,774 =============================================================================== 21 GE ALL OTHER LIABILITIES This account includes noncurrent compensation and benefit accruals at year-end 1999 and 1998 of $5,839 million and $5,594 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. 22 DEFERRED INCOME TAXES Aggregate deferred tax amounts are summarized below. ------------------------ December 31 (In millions) 1999 1998 - ------------------------------------------------------------------------------- ASSETS GE $ 5,808 $ 5,309 GECS 5,528 5,305 ------------------------ 11,336 10,614 ------------------------ LIABILITIES GE 6,091 5,059 GECS 14,483 14,895 ------------------------ 20,574 19,954 ------------------------ NET DEFERRED TAX LIABILITY $ 9,238 $ 9,340 =============================================================================== </pre> <hr> <pre>PAGE F-37 ANNUAL REPORT PAGE 69 Principal components of the net deferred tax balances for GE and GECS are as follows: ------------------------ December 31 (In millions) 1999 1998 - ------------------------------------------------------------------------------- GE Provisions for expenses (a) $ (4,203) $ (3,809) Retiree insurance plans (839) (847) Prepaid pension asset 3,289 2,713 Depreciation 922 935 Other -- net 1,114 758 ------------------------ 283 (250) ------------------------ GECS Financing leases 8,593 8,593 Operating leases 2,840 2,419 Net unrealized gains on securities 73 1,369 Allowance for losses (1,379) (1,386) Insurance reserves (1,052) (1,022) AMT credit carryforwards (1,185) (903) Other -- net 1,065 520 ------------------------ 8,955 9,590 ------------------------ NET DEFERRED TAX LIABILITY $ 9,238 $ 9,340 =============================================================================== (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 affiliates of GE Capital. The preferred stock pays cumulative dividends at variable rates. Value of the preferred shares is summarized below. ------------------------ December 31 (In millions) 1999 1998 - ------------------------------------------------------------------------------- GE Capital $ 2,600 $ 2,300 GE Capital affiliates 1,421 860 - -------------------------------------------------------------------------------- Dividend rates in local currency on the preferred stock ranged from 0.6% to 6.1% during 1999 and from 3.9% to 5.2% during 1998. 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 1999, net assets of regulated GECS affiliates amounted to $31.0 billion, of which $25.9 billion was restricted. At December 31, 1999 and 1998, the aggregate statutory capital and surplus of the insurance businesses totaled $14.5 billion and $14.4 billion, respectively. Accounting practices prescribed by statutory authorities are used in preparing statutory statements. 25 SHARE OWNERS' EQUITY ------------------------------- (In millions) 1999 1998 1997 - ------------------------------------------------------------------------------- COMMON STOCK ISSUED $ 594 $ 594 $ 594 ACCUMULATED NONOWNER CHANGES OTHER THAN EARNINGS Balance at January 1 $ 1,664 $ 1,340 $ 615 Unrealized gains (losses) on investment securities -- net of deferred taxes of $(614), $430 and $860 (1,132) 795 1,467 Currency translation adjustments -- net of deferred taxes of $(100), $(13) and $(58) (632) 60 (742) Reclassification adjustments -- net of deferred taxes of $(349) and $(291) (644) (531) -- ------------------------------- Balance at December 31 $ (744) $ 1,664 $ 1,340 =============================== OTHER CAPITAL Balance at January 1 $ 6,808 $ 4,434 $ 2,554 Gains on treasury stock dispositions (a) 3,982 2,374 1,880 ------------------------------- Balance at December 31 $10,790 $ 6,808 $ 4,434 =============================== RETAINED EARNINGS Balance at January 1 $48,553 $43,338 $38,670 Net earnings 10,717 9,296 8,203 Dividends (a) (4,786) (4,081) (3,535) ------------------------------- Balance at December 31 $54,484 $48,553 $43,338 =============================== COMMON STOCK HELD IN TREASURY Balance at January 1 $18,739 $15,268 $11,308 Purchases (a) 7,488 6,475 6,392 Dispositions (a) (3,660) (3,004) (2,432) ------------------------------- Balance at December 31 $22,567 $18,739 $15,268 =============================================================================== (a) Total dividends and other transactions with share owners reduced equity by $4,632 million, $5,178 million and $5,615 million in 1999, 1998 and 1997, respectively. - -------------------------------------------------------------------------------- In December 1999, GE's Board of Directors increased the authorization to repurchase Company common stock to $22 billion and authorized the program to continue through 2002. Funds used for the share repurchase will be generated largely from free cash flow. Through year-end 1999, a total of 304 million shares having an aggregate cost of $15.4 billion had been repurchased under this program and placed in treasury. Common shares issued and outstanding are summarized in the following table. - ------------------------------------------------------------------------------- SHARES OF GE COMMON STOCK --------------------------------- December 31 (In thousands) 1999 1998 1997 - ------------------------------------------------------------------------------- Issued 3,715,018 3,714,068 3,714,026 In treasury (430,175) (442,772) (449,434) --------------------------------- Outstanding 3,284,843 3,271,296 3,264,592 =============================================================================== </pre> <hr> <pre>PAGE F-38 ANNUAL REPORT PAGE 70 The Proxy Statement for the 2000 Annual Meeting of Share Owners will include a proposal recommended by the Board of Directors on December 17, 1999, which, if approved by share owners, would (a) increase the number of authorized shares of common stock from 4,400,000,000 shares each with a par value of $0.16 to 13,200,000,000 shares each with a par value of $0.06 and (b) split each unissued and issued common share, including shares held in treasury, into three shares of common stock each with a par value of $0.06. 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 - ------------------------------------------------------------------------------- STOCK OPTION ACTIVITY --------------------------------- Average per share Shares --------------------- subject Exercise Market (Shares in thousands) to option price price - ------------------------------------------------------------------------------- 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 Options granted 17,094 113.80 113.80 Options exercised (20,560) 23.47 118.25 Options terminated (2,671) 63.46 -- --------------------------------- Balance at December 31, 1999 113,791 48.02 154.75 =============================================================================== (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 1999, there were 544 thousand SARs outstanding at an average exercise price of $23.54. There were 8.9 million restricted stock shares and restricted stock units outstanding at year-end 1999. There were 141.0 million and 121.0 million additional shares available for grants of options, SARs, restricted stock and restricted stock units at December 31, 1999 and 1998, 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 15, 2009. 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, 1999. - -------------------------------------------------------------------------------- STOCK OPTIONS OUTSTANDING (Shares in thousands) Outstanding Exercisable ------------------------------- -------------------- Average Average Exercise Average exercise exercise price range Shares life (a) price Shares price - -------------------------------------------------------------------------------- $ 13 27/32 - 25 3/16 28,493 2.8 $ 20.91 28,493 $ 20.91 25 1/2 - 39 11/16 34,428 4.9 27.14 30,763 26.55 40 7/16 - 69 1/8 21,435 6.9 49.30 8,590 44.73 72 1/4 - 97 5/8 12,882 8.4 76.75 475 78.77 104 7/8 - 147 1/2 16,553 9.5 114.06 455 107.47 -------------------------------------------------------- Total 113,791 5.8 48.02 68,776 27.38 ================================================================================ At year-end 1998, options with an average exercise price of $24.09 were exercisable on 73 million shares; at year-end 1997, options with an average exercise price of $21.11 were exercisable on 72 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) 1999 1998 1997 Fair value per option (b) $33.70 $18.98 $17.81 Valuation assumptions Expected option term (years) 6.5 6.2 6.3 Expected volatility 23.7% 21.7% 20.0% Expected dividend yield 1.3% 1.8% 1.5% Risk-free interest rate 5.8% 4.9% 6.1% - -------------------------------------------------------------------------------- (a) Weighted averages of option grants during each period. (b) Estimated using Black-Scholes option pricing model. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PRO FORMA EFFECTS December 31 (In millions; ---------------------------- per-share amounts in dollars) 1999 1998 1997 - ------------------------------------------------------------------------------- Net earnings $10,572 $ 9,196 $ 8,129 Earnings per share -- diluted 3.18 2.77 2.43 -- basic 3.23 2.81 2.48 - ------------------------------------------------------------------------------- </pre> <hr> <pre>PAGE F-39 ANNUAL REPORT PAGE 71 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 following: in 1999, GE's contribution of certain Internet properties in exchange for a noncontrolling interest in NBCi, a newly formed publicly traded Internet company (described in note 2); the 1998 acquisition of Marquette Medical Systems for 9.4 million shares of GE common stock valued at $829 million; and the 1997 exchange of preferred stock in Lockheed Martin Corporation (Lockheed Martin) for the stock of a newly formed subsidiary (described in note 2). Certain supplemental information related to GE and GECS cash flows is shown below. -------------------------------------- For the years ended December 31 (In millions) 1999 1998 1997 - ----------------------------------------------------------------------------------------------------------------------------------- GE NET PURCHASE OF GE SHARES FOR TREASURY Open market purchases under share repurchase program $ (1,866) $ (3,646) $ (3,492) Other purchases (5,622) (2,829) (2,900) Dispositions (mainly to employee and dividend reinvestment plans) 6,486 3,656 3,577 -------------------------------------- $ (1,002) $ (2,819) $ (2,815) ====================================== GECS FINANCING RECEIVABLES Increase in loans to customers $(95,661) $(76,142) $(55,689) Principal collections from customers -- loans 86,379 65,573 50,679 Investment in equipment for financing leases (18,173) (20,299) (16,420) Principal collections from customers -- financing leases 13,634 15,467 13,796 Net change in credit card receivables (10,740) (4,705) (4,186) Sales of financing receivables 11,473 13,805 9,922 -------------------------------------- $(13,088) $ (6,301) $ (1,898) ====================================== ALL OTHER INVESTING ACTIVITIES Purchases of securities by insurance and annuity businesses $(26,271) $(23,897) $(19,274) Dispositions and maturities of securities by insurance and annuity businesses 23,979 20,639 17,280 Proceeds from principal business dispositions 279 -- 241 Other (5,810) (7,820) (3,893) -------------------------------------- $ (7,823) $(11,078) $(5,646) ====================================== NEWLY ISSUED DEBT HAVING MATURITIES LONGER THAN 90 DAYS Short-term (91 to 365 days) $ 15,799 $ 5,881 $ 3,502 Long-term (longer than one year) 30,082 33,453 15,566 Proceeds -- nonrecourse, leveraged lease debt 1,724 2,106 1,757 -------------------------------------- $ 47,605 $ 41,440 $ 20,825 ====================================== REPAYMENTS AND OTHER REDUCTIONS OF DEBT HAVING MATURITIES LONGER THAN 90 DAYS Short-term (91 to 365 days) $(21,211) $(25,901) $(21,320) Long-term (longer than one year) (5,447) (4,739) (1,150) Principal payments -- nonrecourse, leveraged lease debt (266) (387) (287) -------------------------------------- $(26,924) $(31,027) $(22,757) ====================================== ALL OTHER FINANCING ACTIVITIES Proceeds from sales of investment contracts $ 7,236 $ 5,149 $ 4,717 Preferred stock issued by GECS affiliates 513 270 605 Redemption of investment contracts (7,127) (5,533) (4,537) -------------------------------------- $ 622 $ (114) $ 785 =================================================================================================================================== </pre> <hr> <pre>PAGE F-40 ANNUAL REPORT PAGE 72 28 OPERATING SEGMENTS - --------------------------------------------------------------------------------------------------------------------------------- REVENUES For the years ended December 31 Total revenues Intersegment revenues External revenues ------------------------------- ------------------------ ---------------------------- (In millions) 1999 1998 1997 1999 1998 1997 1999 1998 1997 - --------------------------------------------------------------------------------------------------------------------------------- GE Aircraft Engines $10,558 $10,294 $ 7,799 $ 477 $ 292 $ 101 $10,081 $ 10,002 $ 7,698 Appliances 5,671 5,619 5,801 4 12 12 5,667 5,607 5,789 Industrial Products and Systems 11,555 11,222 10,984 530 479 491 11,025 10,743 10,493 NBC 5,790 5,269 5,153 -- -- -- 5,790 5,269 5,153 Plastics 6,941 6,633 6,695 17 20 24 6,924 6,613 6,671 Power Systems 10,046 8,466 7,915 162 166 80 9,884 8,300 7,835 Technical Products and Services 6,863 5,323 4,861 15 14 18 6,848 5,309 4,843 Eliminations (1,542) (1,367) (1,176) (1,205) (983) (726) (337) (384) (450) ------------------------------- ------------------------ ---------------------------- Total GE segment revenues 55,882 51,459 48,032 -- - -- -- 55,882 51,459 48,032 Corporate items (a) 619 771 3,227 -- -- -- 619 771 3,227 GECS net earnings 4,443 3,796 3,256 -- -- -- 4,443 3,796 3,256 ------------------------------- ------------------------ ---------------------------- Total GE 60,944 56,026 54,515 -- -- -- 60,944 56,026 54,515 GECS 55,749 48,694 39,931 -- -- -- 55,749 48,694 39,931 Eliminations (5,063) (4,251) (3,606) -- -- -- (5,063) (4,251) (3,606) ------------------------------- ------------------------ ---------------------------- CONSOLIDATED REVENUES $111,630 $100,469 $90,840 $ -- $ -- $ -- $111,630 $100,469 $90,840 ================================================================================================================================= 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. (a) Includes revenues of $944 million in 1997 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 LEASED GOODWILL AND OTHER TO OTHERS) INTANGIBLES) For the years ended For the years ended At December 31 December 31 December 31 ----------------------- - ------------ -------------------------- ------------------------ (In millions) 1999 1998 1997 1999 1998 1997 1999 1998 1997 - --------------------------------------------------------------------------------------------------------------------------------- GE Aircraft Engines $ 8,890 $ 8,866 $ 8,895 $ 368 $ 480 $ 729 $ 382 $ 398 $ 292 Appliances 2,463 2,436 2,354 151 150 83 147 137 131 Industrial Products and Systems 6,740 6,466 6,672 423 428 487 433 440 408 NBC 5,243 3,264 3,050 94 105 116 126 127 142 Plastics 9,261 9,813 8,890 462 722 618 561 591 494 Power Systems 9,814 7,253 6,182 510 246 215 285 215 199 Technical Products and Services 5,048 3,858 2,438 164 254 189 230 143 137 ----------------------- - ------------ -------------------------- ------------------------ Total GE segments 47,459 41,956 38,481 2,172 2,385 2,437 2,164 2,051 1,803 Investment in GECS 20,321 19,727 17,239 -- -- -- -- -- -- Corporate items and eliminations (a) 14,803 12,987 11,706 62 158 129 155 241 226 ----------------------- - ------------ -------------------------- ------------------------ Total GE 82,583 74,670 67,426 2,234 2,543 2,566 2,319 2,292 2,029 GECS 345,018 303,297 255,408 15,432 8,110 7,320 4,372 3,568 3,240 Eliminations (22,401) (22,032) (18,822) -- -- -- -- -- -- ----------------------- - ------------ -------------------------- ------------------------ CONSOLIDATED TOTALS $ 405,200 $ 355,935 $ 304,012 $17,666 $10,653 $9,886 $6,691 $5,860 $5,269 ================================================================================================================================= 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 1999, 1998 and 1997 that relates to NBC. - --------------------------------------------------------------------------------------------------------------------------------- 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. Details of segment profit by operating segment can be found on page 44 of this report. A description of operating segments for General Electric Company and consolidated affiliates is provided on the facing page. </pre> <hr> <pre>PAGE F-41 ANNUAL REPORT PAGE 73 AIRCRAFT ENGINES. Jet engines and replacement parts and repair and maintenance services for all categories of commercial aircraft (short/medium, intermediate and long-range); for a wide variety of military aircraft, including fighters, bombers, tankers and helicopters; and for executive and commuter aircraft. Products are sold worldwide to airframe manufacturers, airlines and government agencies. Also includes aircraft engine derivatives, used as marine propulsion and industrial power sources; the latter is also reported in Power Systems. 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. Products are 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 220 affiliated stations, production of television programs, operation of 13 VHF and UHF television broadcasting stations, operation of four cable/satellite networks around the world, and investment and programming activities in the Internet, multimedia and cable television. 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. Products are 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 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. </pre> <hr> <pre>PAGE F-42 ANNUAL REPORT PAGE 74 29 GEOGRAPHIC SEGMENT INFORMATION (CONSOLIDATED) The table below presents data by geographic region. Revenues and operating profit shown below are classified according to their country of origin (including exports from such areas). Revenues 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) 1999 1998 1997 1999 1998 1997 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------ United States $ 78,970 $ 71,799 $ 66,330 $ 2,690 $ 2,608 $ 2,471 $76,280 $69,191 $63,859 Europe (a) 22,919 21,665 18,166 1,081 837 787 21,838 20,828 17,379 Pacific Basin 7,879 5,166 4,742 924 951 880 6,955 4,215 3,862 Other (b) 7,365 6,925 6,420 808 690 680 6,557 6,235 5,740 Intercompany eliminations (5,503) (5,086) (4,818) (5,503) (5,086) (4,818) -- -- -- ---------------------------------- ----------------------------- --------------------------- Total $ 111,630 $ 100,469 $ 90,840 $ -- $ -- $ -- $111,630 $100,469 $90,840 ============================================================================================================================== - ------------------------------------------------------------------------------------------------------------------------------ OPERATING PROFIT (c) ASSETS LONG-LIVED ASSETS (d) For the years ended December 31 At December 31 At December 31 ---------------------------------- ----------------------------- --------------------------- (In millions) 1999 1998 1997 1999 1998 1997 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------ United States $ 13,293 $ 11,287 $ 9,939 $264,129 $227,311 $206,655 $21,612 $18,048 $17,074 Europe 1,884 2,393 2,271 83,358 84,518 66,740 6,101 6,334 5,180 Pacific Basin 1,089 431 355 28,214 18,427 8,881 2,017 1,326 971 Other (b) 953 810 713 29,687 25,878 21,926 11,329 10,057 9,119 Intercompany eliminations 11 (9) (23) (188) (199) (190) (37) (35) (28) ---------------------------------- ----------------------------- --------------------------- Total $ 17,230 $ 14,912 $ 13,255 $405,200 $355,935 $304,012 $41,022 $35,730 $32,316 ============================================================================================================================== (a) Includes $944 million in 1997 from an appliance distribution affiliate that was deconsolidated in 1998. (b) 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). (c) Excludes GECS income taxes of $1,653 million, $1,364 million and $1,166 million in 1999, 1998 and 1997, respectively, which are included in the measure of segment profit reported on page 44. (d) 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, 1999 or 1998. 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. </pre> <hr> <pre>PAGE F-43 ANNUAL REPORT PAGE 75 - --------------------------------------------------------------------------------------------------------------------------------- FINANCIAL INSTRUMENTS 1999 1998 -------------------------------------- --------------------------------------- Assets (liabilities) Assets (liabilities) ----------------------------- ----------------------------- Carrying Estimated fair value Carrying Estimated 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 $ (a) $ 1,700 $ 1,739 $ 1,684 $ (a) $ 1,764 $ 1,810 $ 1,793 Cancelable interest rate swap 1,046 11 22 22 1,221 17 1 1 Borrowings and related instruments Borrowings(b) (c) (a) (2,967) (2,966) (2,966) (a) (4,147) (4,155) (4,155) Interest rate swaps 1,408 - -- 30 30 951 -- (60) (60) Currency swaps 879 -- (17) (17) 1,046 -- 1 1 Recourse obligations for receivables sold 555 (36) (36) (36) 607 (38) (38) (38) Financial guarantees 2,710 - -- -- -- 2,172 -- -- -- Other firm commitments Forwards and options 6,764 16 (30) (30) 6,868 72 113 113 Financing commitments 1,858 -- -- -- 1,519 -- -- -- GECS Assets Time sales and loans (a) 90,427 90,313 88,813 (a) 74,616 75,474 74,293 Integrated interest rate swaps 15,933 18 59 59 14,135 16 (102) (102) Purchased options 8,949 60 174 174 11,195 146 158 158 Mortgage-related positions Mortgage purchase commitments 669 -- - -- -- 1,983 -- 15 15 Mortgage sale commitments 1,452 -- 4 4 3,276 -- (9) (9) Mortgages held for sale (a) 2,522 2,516 2,488 (a) 4,405 4,457 4,457 Options, including "floors" 23,929 76 56 56 21,433 91 181 181 Interest rate swaps and futures 4,054 -- (67) (67) 6,662 -- 49 49 Other financial instruments (a) 4,478 4,558 4,528 (a) 3,205 3,433 3,231 Liabilities Borrowings and related instruments Borrowings(b) (c) (a) (200,025) (198,798) (198,798) (a) (172,200) (174,492) (174,492) Interest rate swaps 56,339 -- (99) (99) 46,325 -- (1,449) (1,449) Currency swaps 22,744 -- (1,425) (1,425) 29,645 -- 252 252 Currency forwards 26,806 - -- (459) (459) 23,409 -- (389) (389) Investment contract benefits (a) (24,943) (24,420) (24,420) (a) (23,893) (23,799) (23,799) Insurance--financial guarantees and credit life 226,073 (2,757) (2,797) (2,909) 208,774 (3,135) (3,339) (3,446) Credit and liquidity support -- securitizations 34,389 (144) (144) (144) 21,703 (29) (29) (29) Performance guarantees -- principally letters of credit 3,472 (56) (56) (56) 2,684 -- -- -- Other financial instruments 2,545 (1,473) (1,444) (1,444) 2,888 (1,921) (1,190) (1,190) Other firm commitments Currency forwards 3,778 (14) (41) (41) 5,072 -- (52) (52) Currency swaps 767 238 200 200 915 72 72 72 Ordinary course of business lending commitments 7,822 - -- -- -- 9,839 -- (12) (12) Unused revolving credit lines Commercial 11,440 -- -- -- 6,401 -- -- -- Consumer -- principally credit cards 151,651 -- -- -- 132,475 -- -- -- - --------------------------------------------------------------------------------------------------------------------------------- (a) Not applicable. (b) Includes effects of interest rate and currency swaps, which also are listed separately. (c) 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. </pre> <hr> <pre>PAGE F-44 ANNUAL REPORT PAGE 76 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 funding 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 counter-parties. At December 31, 1999 and 1998, this gross market risk amounted to $2.0 billion and $2.3 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 at both year-end 1999 and 1998. 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. * 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 - -------------------------------------------------------------- * 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) 1999 1998 1999 1998 1999 1998 1999 1998 - -------------------------------------------------------------------------------------------------------------- CONSOLIDATED OPERATIONS Net earnings $ 2,155 $ 1,891 $ 2,820 $ 2,450 $ 2,653 $ 2,284 $ 3,089 $ 2,671 Earnings per share -- diluted 0.65 0.57 0.85 0.74 0.80 0.69 0.93 0.80 -- basic 0.66 0.58 0.86 0.75 0.81 0.70 0.94 0.82 SELECTED DATA GE Sales of goods and services 11,796 11,408 13,966 13,217 13,228 12,075 16,655 14,846 Gross profit from sales 3,667 3,366 4,545 4,216 4,091 3,630 5,043 4,598 GECS Total revenues 12,383 11,151 13,378 11,801 14,002 12,016 15,986 13,726 Operating profit 1,400 1,252 1,461 1,219 1,745 1,584 1,490 1,105 Net earnings 1,032 881 1,092 933 1,262 1,082 1,057 900 - -------------------------------------------------------------------------------------------------------------- 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." Earnings-per-share amounts for each quarter are required to be computed independently. As a result, their sum does not equal the total year earnings-per-share amounts for diluted earnings per share in 1999 and basic earnings per share in 1998. </pre> </body> </HTML>