GE Annual Report 2001

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Table of Contents

1 Letter to Our Share Owners, Customers and Employees 7 GE Values 8 People, Performance, Possibilities 16 GE at a Glance 22 GE Businesses 36 Board of Directors 38 Corporate Management 39 Operating Management 41 Financial Section 93 Corporate Information

Financial Highlights

Consolidated revenues (In billions) $132

125.9

110 88 66 44 22

97 98 99 00 01

Earnings per share before accounting changes (In dollars)

$1.44

1.41

1.20

.96

.72

.48

.24

97 98 99 00 01

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Cumulative cash flows since 1994 (In billions) $90

84.9

75

60

53.8

45

30

21.8

15

97 98 99 00 01

Cash flows from operating activities Dividends paid Shares repurchased since program authorized in 1994

To Our Share Owners, Customers and Employees:

2001 was a challenging but successful year for our Company. We were tested by one of the most brutal global economies in decades, as well as by the impact of the tragedy of September 11. But the GE business model works. Our people responded remarkably to these challenges, allowing GE's earnings to outperform the S&P 500 by the widest margin in 25 years. We have much to be proud of.

Earnings grew 11% to $14.1 billion ? a record. Earnings per share also increased 11% while average earnings for the S&P 500 declined by more than 20%.

Revenues were $125.9 billion, down 3% on a reported basis over 2000 but up 4% on a comparable basis. Industrial revenues grew 6%.

Cash from operating activities grew to $17.2 billion, up 12% from 2000. Excluding progress collections, cash was $13.8 billion, up 13% from 2000. Operating margin expanded to 19.6% from the previous year's comparable 18.9%; return on average total capital remained at 27%.

Our stock price was down 16%, slightly more than the S&P 500. Clearly, this was a disappointment. However, investors who have held our stock for five years, including 2001, have received an average 21% total annual return on investment. Those who recognize that GE is managed for the long term, and have held the stock for a decade, have received an average 23% total annual return.

We increased our dividend 13% in December, our 26th consecutive annual increase and 10th consecutive double-digit increase. We saw the lower stock price as a clear buying opportunity and repurchased $3.1 billion of our own stock. Overall, $9.5 billion was returned to our share owners.

" . . . what we have is a Company of diverse businesses whose sum truly is greater than the parts; a Company executing with excellence despite a brutal global economy to deliver over $17 billion of cash flow in 2001 . . . Some companies are different. We believe GE is different, and one of the things that makes us different is that ? in good times and bad ? we deliver. That is who we are."

Jeff Immelt

We announced acquisitions in 2001 totaling nearly $23 billion. GE Capital had a record year, building even stronger positions in midmarket financing and real estate. We added new platforms in Power, Medical and Industrial Systems. The Telemundo acquisition by NBC will extend our reach in the fast-growing Spanish-language segment in the United States.

We have great leaders in this Company, and they made for a seamless transition to the new management team. We had nearly 175 promotions among the top 575 leaders, providing evidence of the endless opportunities that make the best people join ? and stay with ? GE. More than 40% of the new officer appointments were women, minorities and from outside the U.S., as the face of GE continues to change.

Our Power Systems business moved 80 mobile generators to Lower Manhattan within 48 hours of the attack. Our Medical Systems business rapidly moved mobile CT and magnetic resonance scanners to hospitals closest to the tragedy. GE employees, many of whom are also volunteer firefighters, worked tirelessly at the World Trade Center site. We are proud of our team and their enormous effort.

GE continued to be the world's most honored company. We were Fortune's "Most Admired Company" for the fifth year in a row, and we were named "The World's Most Respected Company" by the Financial Times for the fourth time.

The Company responded immediately to the September 11 tragedy. The GE family gave $25 million of aid in cash and services. The GE Fund contributed $10 million to the Twin Towers Fund, and 20,000 GE employees gave $2.5 million to the Red Cross, which was matched by the GE Fund.

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A time of change

2001 was a time of transition at GE. We would like to thank Jack Welch ? on behalf of our share owners, customers and employees ? for his 40 years of excellence at GE. Jack has had a personal impact on thousands of people around the world. In his 21 years as Chairman, he had a profound impact on GE.

Jack has many remarkable talents. But he is, first and foremost, a teacher. In that vein, we renamed our management institute at Crotonville the "John F. Welch Learning Center." Every year, 5,000 GE executives and 1,000 customers from around the world come to work and learn at this center at Crotonville. It is one of the cornerstones of our culture and one of the institutions that makes GE work. Generations of GE leaders and customers will have the opportunity to benefit from Jack's vision and commitment. What a fitting tribute.

Jack left us a financially strong GE, as well as a culture that loves change. This is important because the world we knew in the late 1990s ? a world of global growth, political stability and corporate trust ? has changed. The U.S. economy began to slow in late 2000 and entered a recession in 2001. The world followed, with Europe and Japan in decline.

This was the backdrop for the terrorist attack on America that left the world stunned. Among the thousands lost in this tragedy were two GE employees. We mourn the loss of Janis Lasden and William Steckman.

The attack darkened the mood, deepened the recession and made economic recovery even more uncertain. Two industries important to GE ? airlines and insurance ? were profoundly impacted, and we have rushed to support our customers ? our friends in need ? through this crisis, and we will continue to do so.

The exuberance of the late 1990s and the inevitable downturn have created difficult times. Entire industries have collapsed, poor business models have been exposed, large companies have filed for bankruptcy and corporate credibility has been called into question.

In these difficult times, we see an opportunity to further differentiate GE. Turbulence challenges a company's character. GE is built to deliver in the most difficult environment, and it is built on trust. We delivered in 2001, and nothing builds trust like such consistent performance.

Outperformance in Every Cycle

'79-'84

Inflation / Recession GE EPS

S&P EPS

Nominal GDP

'85-'88

Disinflation / Recovery GE EPS

S&P EPS

Nominal GDP

'89-'93

Post-'87 Crash / Recession GE EPS

S&P EPS

Nominal GDP

'94-'98

Globalization / Growth GE EPS

S&P EPS

Nominal GDP

'99-'00

Market "Bubbles" / Global Slowdown GE EPS

S&P EPS

Nominal GDP

2001

Recession / Sept. 11

GE EPS

S&P EPS

Nominal GDP

Our earnings growth has outpaced the S&P 500 and the nominal Gross Domestic Product in every economic cycle of the past 23 years.

10% 5% 9%

10% 9% 7%

11% -2% 5%

15% 12% 5%

17% 15% 6%

11% ~ -20%

~ 3%

How GE delivers

GE is a resilient, strong and accountable company. We believe that our long-term performance differentiates GE. This performance is based on a well-defined business model.

We have a diverse portfolio of leading businesses; a stream of powerful Company-wide initiatives that drives growth and reduces cost; financial strength and Controllership that allow us to capitalize on opportunities through numerous cycles; and a set of common values that allows us to face any environment with confidence.

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How GE Delivers Consistent, Excellent Earnings Growth: Leadership Based on Financial Visibility and Accountability

Diverse set of #1 franchises in global markets

Business initiatives

Strong balance

+

with visible

+

sheet to capitalize on

financial benefits

change and opportunity

Every business executes and contributes

Portfolio produces growth through every cycle

Accelerating impact from Digitization

All initiatives deliver operational improvements

Disciplined approach to investment and risk

Core competence in acquisition and integration

Diverse Portfolio... The dramatic global slowdown had an impact on our more economically sensitive short-cycle businesses such as Plastics, Lighting and Appliances. But the rest of GE flourished and grew. Our long-cycle businesses and GE Capital, which together contributed more than 75% of GE's revenues, set records. In particular, our Power Systems business had a fabulous year because of its global leadership in gas turbine technology and its ability to meet customer needs.

The story behind our gas turbine success is worth telling. The seeds for our share gain were planted in the mid-1990s, when we invested in "F" turbine technology and acquired strategic global resources ? even though hardly anyone was buying! Those were tough times for Power Systems, but because NBC and Plastics were booming, we had the resources to take the long view ? and invest for the future.

Now, as we work through this recession, our short-cycle businesses are investing strategically and improving their positions. They will ignite GE growth and performance through the next recovery. This is how and why GE delivers so consistently, year after year, in good times and in bad. GE performs in any environment.

Initiatives give a company momentum, even on a rainy day. This was the case in 2001. Moreover, all our initiatives add revenues, subtract costs and add value for customers.

Financial Strength and Controllership... GE generated over $17 billion of cash in 2001. This helped us maintain a return on average total capital of 27%, a staggering performance in this economy. We have a leadership team that recognizes the importance of earnings quality and cash management. We have more than 450 internal auditors who drive the sharing of best practices and a spirit of Controllership. And our cash management gives us the ability to be a "buyer" during periods of crisis and reduced equity values.

Visibility and Accountability... GE performance is based on hard work. We review, refresh and manage our businesses constantly. We operate with intensity and transparency. Every day, more than 300,000 people around the world focus on creating and selling products and services in businesses they completely understand ? businesses most of which we either invented or have been intimately involved with for decades. We share a common set of values that dictates the actions of our leaders and shapes the character of our Company.

Initiatives Impact... Our initiatives helped us navigate in the rough economic waters of 2001. Globalization, for instance, is saving about $250 million a year through sourcing technical content and talent from around the world. Services continued to grow, increasing by 13%, an important factor for businesses like Transportation Systems, which grew revenues in 2001 despite shipping 20% fewer locomotives. A robust service business is a shock absorber when moving through business cycles. Six Sigma continues to bring us closer to the customer while growing our own productivity. In 2001, we completed more than 6,000 Six Sigma projects "At the Customer, For the Customer," meaning we literally took Six Sigma to our customers, working on very specific projects with them at their sites. Digitization ? our newest initiative ? is gaining enormous momentum. We generated $1.9 billion of incremental cost savings through what we call "e-Make" and "e-Buy."

This is a confusing time for investors. Poorly defined "new economy" business models have cost people hundreds of billions. It is a time when consistent, excellent performance confuses some pundits, who then imply that it is "managed." It is almost as if an earnings "miss" would be more virtuous than meeting your commitments during tough times ? but that is not GE. We manage businesses, not earnings. Our business diversity, initiatives, financial strength and values ensure that we deliver on our commitments.

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