<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
FORM 10-K
-------------
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____ TO _____
------------------------
COMMISSION FILE NUMBER 1-6461
------------------------
GENERAL ELECTRIC CAPITAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW YORK 13-1500700
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
260 LONG RIDGE ROAD,
STAMFORD, CONNECTICUT 06927 (203) 357-4000
(Address of principal (Zip Code) (Registrant's telephone
executive offices) number, including area code)
------------------------
SECURITIES REGISTERED PURSUANT
TO SECTION 12(b) OF THE ACT:
NAME OF EACH
TITLE OF EACH CLASS EXCHANGE ON WHICH REGISTERED
----------------------- --------------------------------
7 7/8% GUARANTEED SUBORDINATED NEW YORK STOCK EXCHANGE
NOTES DUE DECEMBER 1, 2006
SECURITIES REGISTERED PURSUANT
TO SECTION 12(g) OF THE ACT:
NONE.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No | |
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|
At March 24, 1999, 3,837,825 shares of voting common stock, which constitute all
of the outstanding common equity, with a par value of $200 were outstanding.
Aggregate market value of the outstanding common equity held by nonaffiliates of
the registrant at March 24, 1999. None.
DOCUMENTS INCORPORATED BY REFERENCE
The consolidated financial statements of General Electric Company, set forth in
the Annual Report on Form 10-K of General Electric Company for the year ended
December 31, 1998 are incorporated by reference into Part IV hereof.
REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION I(1)(a) AND (b)
OF FORM 10-K AND IS THEREFORE FILING THIS FORM 10-K WITH THE REDUCED DISCLOSURE
FORMAT.
<PAGE>
TABLE OF CONTENTS
PAGE
--------
PART I
Item 1. Business ............................................. 1
Item 2. Properties ........................................... 11
Item 3. Legal Proceedings .................................... 11
Item 4. Submission of Matters to a Vote of Security Holders .. 11
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters ......................... 12
Item 6. Selected Financial Data .............................. 12
Item 7. Management's Discussion and Analysis of
Results of Operations ............................... 12
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk ................................... 21
Item 8. Financial Statements and Supplementary Data .......... 22
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure .............. 46
PART III
Item 10. Directors and Executive Officers of the Registrant ... 46
Item 11. Executive Compensation ............................... 46
Item 12. Security Ownership of Certain Beneficial Owners
and Management ...................................... 46
Item 13. Certain Relationships and Related Transactions ....... 46
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K ......................................... 47
<PAGE>
PART I
ITEM 1. BUSINESS.
GENERAL
General Electric Capital Corporation (herein, together with its consolidated
affiliates, called "the Corporation" or "GE Capital" unless the context
otherwise requires) was incorporated in 1943 in the State of New York under the
provisions of the New York Banking Law relating to investment companies, as
successor to General Electric Contracts Corporation, which was formed in 1932.
Until November 1987, the name of the Corporation was General Electric Credit
Corporation. All outstanding common stock of the Corporation is owned by General
Electric Capital Services, Inc. ("GE Capital Services"), formerly General
Electric Financial Services, Inc., the common stock of which is in turn wholly
owned by General Electric Company ("GE Company"). The business of the
Corporation originally related principally to financing the distribution and
sale of consumer and other products of GE Company. Currently, however, the types
and brands of products financed and the services offered are significantly more
diversified. Very few of the products financed by GE Capital are manufactured by
GE Company.
GE Capital operates in five operating segments that are described below. These
operations are subject to a variety of regulations in their respective
jurisdictions.
Services of the Corporation are offered primarily in the United States, Canada,
Europe and the Pacific Basin. The Corporation's principal executive offices are
located at 260 Long Ridge Road, Stamford, Connecticut 06927 (Telephone number
(203) 357-4000). At December 31, 1998, the Corporation employed approximately
82,600 persons.
The Corporation's principal assets are classified as time sales and loans,
investment in financing leases, equipment on operating leases and investment
securities. The following table presents, by operating segment, these principal
financing products which, together with other assets, constitute the
Corporation's total assets at December 31, 1998 and 1997.
1
<PAGE>
<TABLE>
<CAPTION>
TOTAL ASSETS BY OPERATING SEGMENT
(In millions) 1998
--------------------------------------------------------------------
NET
TIME INVESTMENT
SALES AND NET IN ALLOWANCE
LOANS, INVESTMENT EQUIPMENT FOR LOSSES
NET OF IN ON AND ALL
DEFERRED FINANCING OPERATING INVESTMENT OTHER TOTAL
INCOME LEASES LEASES SECURITIES ASSETS ASSETS
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CONSUMER SERVICES
GE Financial Assurance ................ $ 3,025 $ -- $ -- $ 37,972 $ 16,070 $ 57,067
Auto Financial Services ............... 2,946 10,496 1,913 5 781 16,141
Auto Financial Services Europe ........ 6,550 1,349 11 60 1,758 9,728
GE Card Services ...................... 9,907 -- -- 80 2,529 12,516
Global Consumer Finance ............... 17,587 1,695 -- 462 4,483 24,227
Mortgage Services ..................... 343 -- -- 594 6,070 7,007
Other ................................. 2,215 608 189 537 626 4,175
-------- -------- -------- -------- -------- --------
Total ............................... 42,573 14,148 2,113 39,710 32,317 130,861
EQUIPMENT MANAGEMENT
Aviation Services ..................... 459 3,210 6,499 118 1,294 11,580
Fleet Services ........................ 89 3,254 1,722 -- 1,227 6,292
Information Technology Solutions ...... -- 197 31 -- 3,908 4,136
Transport International Pool .......... 75 20 3,418 -- 1,458 4,971
GE SeaCo/GE Capital Container
Finance Corporation .................. 24 235 1,608 27 163 2,057
Penske Truck Leasing .................. -- -- -- 30 2,559 2,589
GE American Communications ............ 160 -- -- -- 2,007 2,167
Railcar Services ...................... -- 426 1,908 -- 124 2,458
Modular Space ......................... 42 81 1,021 -- 508 1,652
Other ................................. -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total ............................... 849 7,423 16,207 175 13,248 37,902
MID-MARKET FINANCING
Commercial Equipment Financing ........ 13,412 10,039 1,784 110 1,329 26,674
Vendor Financial Services ............. 1,998 3,867 236 1 894 6,996
European Equipment Finance ............ 620 5,556 20 -- 653 6,849
Other ................................. 1,035 87 3 16 108 1,249
-------- -------- -------- -------- -------- --------
Total ............................... 17,065 19,549 2,043 127 2,984 41,768
SPECIALIZED FINANCING
Real Estate ........................... 7,200 1,563 -- 163 5,940 14,866
Structured Finance Group .............. 1,899 4,910 506 932 1,580 9,827
Commercial Finance .................... 6,983 14 -- 56 1,685 8,738
GE Equity ............................. 49 -- -- 43 1,445 1,537
Other ................................. 73 -- -- 742 24 839
-------- -------- -------- -------- -------- --------
Total ............................... 16,204 6,487 506 1,936 10,674 35,807
SPECIALTY INSURANCE .................... 103 -- -- 14,470 4,782 19,355
ALL OTHER .............................. -- (71) 72 857 2,499 3,357
-------- -------- -------- -------- -------- --------
TOTAL ............................... $ 76,794 $ 47,536 $ 20,941 $ 57,275 $ 66,504 $269,050
======== ======== ======== ======== ======== ========
1997
--------------------------------------------------------------------
NET
TIME INVESTMENT
SALES AND NET IN ALLOWANCE
LOANS, INVESTMENT EQUIPMENT FOR LOSSES
NET OF IN ON AND ALL
DEFERRED FINANCING OPERATING INVESTMENT OTHER TOTAL
INCOME LEASES LEASES SECURITIES ASSETS ASSETS
-------- -------- -------- -------- -------- --------
CONSUMER SERVICES
GE Financial Assurance ................ $ 2,724 $ -- $ -- $ 35,690 $ 13,213 $ 51,627
Auto Financial Services ............... 2,543 10,681 2,795 4 689 16,712
Auto Financial Services Europe ........ 4,875 1,417 -- 55 1,863 8,210
GE Card Services ...................... 17,146 -- -- 40 1,192 18,378
Global Consumer Finance ............... 10,922 1,053 (9) 55 1,051 13,072
Mortgage Services ..................... 764 -- -- 689 4,443 5,896
Other ................................. 1,555 560 157 715 528 3,515
-------- -------- -------- -------- -------- --------
Total ............................... 40,529 13,711 2,943 37,248 22,979 117,410
EQUIPMENT MANAGEMENT
Aviation Services ..................... 257 3,162 5,559 374 813 10,165
Fleet Services ........................ 1 3,033 1,444 -- 1,147 5,625
Information Technology Solutions ...... 22 172 24 -- 3,620 3,838
Transport International Pool .......... 31 62 2,396 -- 1,165 3,654
GE SeaCo/GE Capital Container
Finance Corporation .................. -- 330 1,971 -- 250 2,551
Penske Truck Leasing .................. -- -- -- 30 2,127 2,157
GE American Communications ............ -- -- -- -- 1,531 1,531
Railcar Services ...................... -- 270 1,595 -- 147 2,012
Modular Space ......................... 16 82 797 -- 452 1,347
Other ................................. -- 24 163 -- 336 523
-------- -------- -------- -------- -------- --------
Total ............................... 327 7,135 13,949 404 11,588 33,403
MID-MARKET FINANCING
Commercial Equipment Financing ........ 7,112 8,145 1,085 64 703 17,109
Vendor Financial Services ............. 1,395 3,310 239 2 636 5,582
European Equipment Finance ............ 377 4,349 15 -- 537 5,278
Other ................................. 1,127 89 3 16 111 1,346
-------- -------- -------- -------- -------- --------
Total ............................... 10,011 15,893 1,342 82 1,987 29,315
SPECIALIZED FINANCING
Real Estate ........................... 7,930 42 -- 303 4,639 12,914
Structured Finance Group .............. 1,334 5,049 532 1,412 1,299 9,626
Commercial Finance .................... 4,411 15 -- 173 379 4,978
GE Equity ............................. 53 -- -- 35 1,005 1,093
Other ................................. 35 -- -- 152 12 199
-------- -------- -------- -------- -------- --------
Total ............................... 13,763 5,106 532 2,075 7,334 28,810
SPECIALTY INSURANCE .................... 202 -- -- 12,583 4,975 17,760
ALL OTHER .............................. -- (76) (77) 711 1,521 2,079
-------- -------- -------- -------- -------- --------
TOTAL ............................... $ 64,832 $ 41,769 $ 18,689 $ 53,103 $ 50,384 $228,777
======== ======== ======== ======== ======== ========
</TABLE>
2
<PAGE>
OPERATING SEGMENTS
The Corporation provides a wide variety of financing, asset management, and
insurance products and services which are organized into the following operating
segments:
o Consumer Services - private-label and bank credit card loans,
personal loans, time sales and revolving credit and inventory
financing for retail merchants, auto leasing and inventory
financing, mortgage servicing, and consumer savings and insurance
services.
o Equipment Management - leases, loans, sales and asset management
services for portfolios of commercial and transportation equipment,
including aircraft, trailers, auto fleets, modular space units,
railroad rolling stock, data processing equipment, containers used
on ocean-going vessels, and satellites.
o Mid-Market Financing - loans, financing and operating leases, and
other services for middle-market customers, including
manufacturers, distributors and end users, for a variety of
equipment that includes vehicles, corporate aircraft, data
processing equipment, medical and diagnostic equipment, and
equipment used in construction, manufacturing, office applications,
electronics and telecommunications activities.
o Specialized Financing - loans and financing leases for major
capital assets, including industrial facilities and equipment, and
energy-related facilities; commercial and residential real estate
loans and investments; and loans to and investments in public and
private entities in diverse industries.
o Specialty Insurance - financial guaranty insurance, principally on
municipal bonds and structured finance issues; private mortgage
insurance; and creditor insurance covering international customer
loan repayments.
Refer to Item 7, "Management's Discussion and Analysis of Results of
Operations," in this Annual Report on Form 10-K for discussion of the
Corporation's Portfolio Quality. A description of the Corporation's principal
businesses by operating segment follows.
CONSUMER SERVICES
GE Financial Assurance
GE Financial Assurance ("GEFA") provides consumers financial security solutions
by selling a wide variety of insurance, investment and retirement products,
primarily in the United States and Japan. These products help consumers
accumulate wealth, transfer wealth, and protect their lifestyles and assets and
are sold through a family of regulated insurance and annuity companies.
GEFA's principal product lines are annuities (deferred and immediate; either
fixed or variable), life insurance (universal, term, ordinary and group),
guaranteed investment contracts, mutual funds, long-term care insurance,
supplemental accident and health insurance, personal lines of automobile
insurance and credit insurance. The distribution of these products is
accomplished through four distribution methods: intermediaries (brokerage
general agents, banks, securities brokerage firms, personal producing general
agents and specialized brokers), career or dedicated sales forces, marketing
through businesses and affinity groups and direct marketing.
GEFA's principal operating companies include General Electric Capital Assurance
Company, First Colony Life Insurance Company, GE Life and Annuity Assurance
Company (formerly The Life Insurance Company of Virginia), Colonial Penn
Insurance Company, Union Fidelity Life Insurance Company, GE Edison Life
Insurance Company, established in Japan in 1998, and GE Capital Life Assurance
of New York.
GEFA headquarters are in Richmond, Virginia.
Auto Financial Services
GE Capital Auto Financial Services ("AFS") is a full service provider of
automobile financing for automobile dealers, manufacturers and their customers
in North America, and, to a lesser extent, Asia.
3
<PAGE>
In the United States, AFS is one of the leading independent auto lessors for new
and used lease financing and, to a much lesser degree, sub-prime and prime
retail financing to customers. AFS also provides private-label financing for
American Isuzu Motors, Inc. and participates in a private-label purchase program
with Volvo of North America. In addition, AFS offers inventory financing
programs and direct loans to segments of the automotive industry, including
dealers and finance companies.
AFS' Asian activities include affiliates in Taiwan, Hong Kong, Thailand and
Japan. AFS also maintains additional presence in Asia through equity investments
in Indonesia, Taiwan, Singapore, Malaysia, Korea, and India.
AFS headquarters are in Barrington, Illinois.
Auto Financial Services Europe
GE Capital Auto Financial Services Europe ("AFS Europe") is a leading
independent provider of automobile financing products to automobile dealers and
their customers in Europe. Products include hire purchase, finance leases, loans
and insurance premium financing.
AFS Europe has a significant presence in 13 countries throughout Western and
Central Europe including the United Kingdom, Ireland, Portugal, France, Spain,
Italy, Sweden, Denmark, Poland, the Czech Republic, Hungary, Switzerland and
Austria.
AFS Europe headquarters are in Dublin, Ireland.
GE Card Services
GE Card Services ("CS") provides sales financing services to North American
retailers in a broad range of consumer industries. Details of financing plans
differ, but include customized private-label credit card programs with retailers
and inventory financing programs with manufacturers, distributors and retailers.
CS provides financing directly to customers of retailers or purchases the
retailers' customer receivables. Most of the retailers sell a variety of
products of various manufacturers on a time sales basis. The terms for these
financing plans differ according to the size of contract and credit standing of
the customer. CS generally maintains a security interest in the merchandise
financed. Financing is provided to consumers under contractual arrangements,
both with and without recourse to retailers. CS' wide range of financial
services includes application processing, sales authorization, statement
billings, customer services and collection services. CS provides inventory
financing for retailers primarily in the appliance and consumer electronics
industries. CS maintains a security interest in the inventory and retailers are
obliged to maintain insurance coverage for the merchandise financed.
CS also provides and services MasterCard(R) and Visa(R) credit card loan
products issued to retail customers throughout the United States. These loans
originate through loan portfolio acquisitions, direct mail campaigns,
private-label credit card loan conversions, telemarketing efforts and
point-of-sale applications. CS also issues and services the GE Capital Corporate
Card product, providing payment and information systems which help medium and
large-sized companies reduce travel costs, and the GE Capital Purchasing Card
product, which helps customers streamline their purchasing and accounts payable
processes.
CS sold approximately $2 billion of its MasterCard(R) and Visa(R) credit card
loan portfolio in 1998 and intends to limit its future loan origination efforts
to portfolios that it retains. In connection with the 1998 sale, General
Electric has agreed to permit a third party to use its tradename in connection
with the offering of general-purpose credit cards in the United States.
CS has a noncontrolling investment in the common stock of Montgomery Ward
Holding Corp. ("MWHC"), which, together with its wholly-owned subsidiary,
Montgomery Ward & Co., Incorporated ("MWC"), is engaged in retail
merchandising and direct response marketing, the latter conducted primarily
through Signature Financial/Marketing, Inc. ("Signature"), which markets
consumer club and insurance products. CS also provides financing to
customers of MWHC and affiliates. As discussed on page 20 and in
note 3 to the consolidated financial statements, MWHC, MWC
4
<PAGE>
and certain of their affiliates (excluding Signature) filed a bankruptcy
petition for reorganization in 1997 and have announced plans to emerge from
bankruptcy protection in 1999.
CS headquarters are in Stamford, Connecticut.
Global Consumer Finance
GE Capital Global Consumer Finance ("GCF") is a leading provider of credit
services to non-U.S. retailers and consumers. GCF provides private-label credit
cards and proprietary credit services to retailers in Europe, Asia, and, to a
lesser extent, South America as well as offering a variety of direct-to-consumer
credit programs such as consumer loans, bankcards and credit insurance. GCF's
wide range of proprietary financial services includes private-label credit
cards, credit promotion and accounting services, billing (in the retailer's
name) and customer credit and collection services.
During 1998, GCF expanded its global presence through acquisitions including
Agrobanka in the Czech Republic, Prokredit Ltd. in Switzerland, and Koei Credit
and Lake Finance in Japan. In addition, GCF launched a bankcard joint venture in
India and a retail financing joint venture in Brazil.
GCF provides financing to consumers through operations in the United Kingdom,
Austria, France, Ireland, Germany, The Netherlands, Italy, Spain, Portugal,
Poland, Switzerland, the Czech Republic, Japan, Thailand, Hong Kong, China,
Brazil and Australia and joint ventures in Indonesia, India and Brazil.
GCF headquarters are in Stamford, Connecticut.
Mortgage Services
GE Capital Mortgage Services, Inc. ("GECMSI"), a wholly-owned affiliate of GE
Capital Mortgage Corporation, is engaged primarily in the business of
originating, purchasing, selling and servicing residential mortgage loans
collateralized by one-to-four-family homes located throughout the United States.
GECMSI obtains servicing through the origination and purchase of mortgage loans
and servicing rights, and primarily packages the loans it originates and
purchases into mortgage-backed securities which it sells to investors. GECMSI
also originates and services home equity loans.
GECMSI headquarters are in Cherry Hill, New Jersey.
EQUIPMENT MANAGEMENT
Aviation Services
GE Capital Aviation Services ("GECAS") is a global commercial aviation financial
services business that offers a broad range of financial products to airlines
and aircraft operators, owners, lenders and investors. Financial products
include financing leases, operating leases, and tax-advantaged and other
incentive-based financing. GECAS also provides asset management, marketing, and
technical support services to aircraft owners, lenders and investors.
GECAS has firm orders and options for more than 250 new Boeing and Airbus
aircraft with deliveries scheduled through 2006. GECAS current fleet comprises
850 owned and managed aircraft leased to more than 175 customers in 58
countries.
During 1998, GECAS acquired a commercial aviation training business from
Raytheon Company. The training facility, located at London's Gatwick airport,
operates a wide range of full-flight motion simulators to train commercial
pilots and serves more than 100 airlines.
GECAS headquarters are in Stamford, Connecticut, with regional offices in
Shannon, Ireland; Miami, Florida; Vienna, Austria; Beijing and Hong Kong, China
and Singapore.
5
<PAGE>
Fleet Services
GE Capital Fleet Services ("GECFS") is one of the leading corporate fleet
management companies with operations in North America, Europe, Australia, New
Zealand, Brazil and Japan with approximately 950,000 cars and trucks under lease
and service management. GECFS offers finance and operating leases to several
thousand customers with an average lease term of 36 months. The primary product
in North America is a Terminal Rental Adjustment Clause (TRAC) lease through
which the customer assumes the residual risk - that is, risk that the book value
will be greater than market value at lease termination. In Europe, the primary
product is a closed-end lease in which GECFS assumes residual risk. In addition
to the services directly associated with the lease, GECFS offers value-added
fleet management services designed to reduce customers' total fleet management
costs. These services include, among others, maintenance management programs,
accident services, national account purchasing programs, fuel programs and title
and licensing services. GECFS customer base is diversified with respect to
industry and geography and includes many Fortune 500 companies.
In 1998, GECFS expanded its fleet management services with acquisitions of fleet
logistics businesses in the United Kingdom, The Netherlands, Brazil and New
Zealand.
GECFS headquarters are in Eden Prairie, Minnesota.
Information Technology Solutions
GE Capital Information Technology Solutions ("IT Solutions") is a leading
worldwide provider of a broad array of information technology products and
services, including full life cycle services that provide customers with
cost-effective control and management of their information systems. Products
offered include desktop personal computers, client server systems, UNIX systems,
local and wide area network hardware, and software. Services offered include
network design, network support, asset management, help desk, disaster recovery,
enterprise management and financial services. IT Solutions serves commercial,
educational and governmental customers in over 20 countries. During 1998, the
company expanded its presence through acquisitions in the United States, France,
Canada, and Portugal.
IT Solutions headquarters are in Newport, Kentucky.
Transport International Pool
Transport International Pool ("TIP") is one of the global leaders in renting,
leasing, selling and financing transportation equipment. TIP's fleet of over
260,000 dry freight, refrigerated and double vans, flatbeds, intermodal assets,
and specialized trailers is available for rent, lease or purchase at over 240
locations in the United States, Europe, Canada, and Mexico. TIP's commercial
vehicle fleet of over 25,000 units is available for rent, lease, or purchase in
the United Kingdom. TIP also finances new and used trailers and buys trailer
fleets. During 1998, TIP acquired the operating assets of Trailer Leasing Co.,
Inc., a trailer rental and leasing company in the United States. TIP also
acquired a majority interest in Bay Cities Leasing LLC, a United States entity
predominately doing business as a lessor of intermodal equipment. TIP's customer
base comprises trucking companies, railroads, shipping lines, manufacturers and
retailers.
TIP operates a European service center in Amsterdam, The Netherlands and a
commercial vehicle operations and administrative center in Manchester, England.
TIP headquarters are in Devon, Pennsylvania.
GE SeaCo/GE Capital Container Finance Corporation
In May 1998, GE Capital and Sea Containers Ltd. formed GE SeaCo SRL ("GE
SeaCo"), a joint venture which operates the combined marine container fleets of
Genstar Container Corporation ("Genstar") and Sea Containers. GE SeaCo is one of
the world's largest lessors of marine shipping containers with a combined fleet
of over 1,100,000 TEU ("twenty-foot equivalent units") of dry-cargo,
refrigerated and specialized containers for global cargo transport. Lessees are
primarily shipping lines which lease on a long-term or master lease basis.
6
<PAGE>
Concurrent with the formation of the joint venture, GE Capital Container Finance
Corporation ("GECCF") was created to service the existing finance lease
portfolio formerly run by Genstar, and to provide traditional finance leases and
structured finance products to the global marine container industry.
GE SeaCo headquarters are in London, England. GECCF headquarters are in San
Francisco, California.
Penske Truck Leasing
GE Capital is a limited partner in Penske Truck Leasing ("Penske"), which
operates the second largest full-service truck leasing business and one of the
largest commercial and consumer truck rental businesses in the United States.
Penske operates through a national network of full-service truck leasing and
rental facilities. At December 31, 1998, Penske had a fleet of about 78,000
tractors, trucks and trailers in its leasing and rental fleets and provided
contract maintenance programs or other support services for about 32,000
additional vehicles.
Penske also provides dedicated logistics operations support which combines
company-employed drivers with its full-service lease vehicles to provide
dedicated contract carriage services. In addition, Penske offers supply chain
services such as distribution consulting, warehouse management and information
systems support.
Penske headquarters are in Reading, Pennsylvania.
GE American Communications
GE American Communications ("GE Americom") is a leading satellite service
supplier to a diverse array of customers, including the broadcast and cable TV
industries, broadcast radio, business information and integrated communications
services for government and commercial customers. GE Americom operates 13
communications satellites and maintains a supporting network of earth stations,
central terminal offices, and telemetry, tracking and control facilities.
GE Americom headquarters are in Princeton, New Jersey.
Railcar Services
GE Capital Railcar Services ("GERSCO") is one of the leading railcar leasing
companies in North America, with a fleet of 186,000 railcars in its total
portfolio. Serving Class 1 railroads, short-line railroads, and shippers
throughout North America, GERSCO offers one of the most diverse fleets in the
industry, and a variety of lease options.
GERSCO also owns and operates a network of railcar repair and maintenance
facilities located throughout North America. The repair facilities offer a
variety of services, ranging from light maintenance to heavy repair of damaged
railcars. The company also provides railcar management, administration and other
services.
In addition, GERSCO is a pan-European provider of rail transport services,
offering a broad range of railcar equipment and rail-related services to
railroads, shippers and other transport providers.
European sales offices are in England, France, Germany, Italy and Sweden. GERSCO
headquarters are in Chicago, Illinois.
Modular Space
GE Capital Modular Space ("GECMS") provides commercial mobile and modular
structures for rental, lease and sale from over 100 facilities in the United
States, Europe, Canada and Mexico. The primary markets served include
construction, education, healthcare, financial, commercial, institutional and
government. GECMS products are available as custom mobile and modular buildings,
designed to customer specifications, or are available through the GECMS stock
fleet of approximately 120,000 mobile and modular units.
During 1998, GECMS continued its European growth through the acquisition of
certain units of the modular structure business of MVS GmbH. This acquisition
doubled the size of the European fleet to approximately 50,000 units.
7
<PAGE>
GECMS has offices in North America and Europe. GECMS world headquarters are in
Malvern, Pennsylvania; its European headquarters are in Antwerp, Belgium.
MID-MARKET FINANCING
Commercial Equipment Financing
GE Capital Commercial Equipment Financing ("CEF") offers a broad line of
financial products including leases and loans to middle-market customers,
including manufacturers, distributors, dealers and end-users, as well as
municipal financing. Products are either held for CEF's own account or brokered
to third parties.
Generally, transactions range in size from $50 thousand to $50 million, with
financing terms from 36 to 180 months. CEF also maintains an asset management
operation that both redeploys off-lease equipment and monitors asset values. The
portfolio includes loans and leases for vehicles, manufacturing equipment,
corporate aircraft, construction equipment, medical diagnostic equipment, office
equipment, telecommunications equipment and electronics.
During 1998, CEF expanded through acquisitions including: Simuflite Training
International, Inc., a provider of advanced training to pilots and maintenance
professionals operating turbine-powered aircraft in corporate, government and
military service, located in Dallas, Texas; Barcom plc, a provider of
construction fleet management services to the mining and quarrying, civil
engineering, housing and industrial sectors, located in Wellingborough,
Northampton, United Kingdom; and MetLife Capital Corporation, a provider of
secured financing for middle-market businesses, located in Bellevue, Washington.
CEF operates from offices throughout the United States, Puerto Rico, Canada,
Mexico, Europe and Asia and through joint ventures in Indonesia and China. CEF
headquarters are in Danbury, Connecticut.
Vendor Financial Services
GE Capital Vendor Financial Services ("VFS") provides financing services to over
90 equipment manufacturers and more than 3,500 dealers in North America, Europe
and Asia. Customers include major U.S. and foreign manufacturers in a variety of
industries including information technology, office equipment, healthcare,
telecommunications, energy and industrial equipment. VFS establishes sales
financing in two ways - by forming captive partnerships with manufacturers that
do not have them, and by outsourcing captives from manufacturers that do. VFS
offers industry-specific knowledge, leading edge technology, leasing and
equipment expertise, and global capabilities. In addition, VFS provides an
expanding array of related financial services to customers including trade
payables financing.
In 1998, VFS acquired Colonial Pacific Leasing Corporation, the market leader in
indirect broker small-ticket leasing. In addition, VFS sold Digital Financial
Services (the financing captive for Digital Equipment Corporation.)
VFS has sales offices throughout the United States, Canada, Europe, Asia, and
Australia. VFS headquarters are in Danbury, Connecticut.
European Equipment Finance
GE Capital European Equipment Finance ("EEF") is one of Europe's leading
diversified equipment leasing businesses, offering financial solutions on a
single-country or pan-European basis. Customers include manufacturers, vendors
and end-users in industries such as office imaging, materials handling,
corporate aircraft, information technology, broadcasting, machine tools,
telecommunications and transportation. Products and services include loans,
leases, off-balance sheet financing, master lease coordination and other
services, such as helping end-users increase purchasing power through financing
options and helping manufacturers and vendors offer leasing programs.
8
<PAGE>
During 1998, EEF expanded through acquisitions that included WTB Westdeutsche
Kreditbank GmbH and its subsidiary WTB Leasing GmbH, leading German providers of
equipment financing and leasing products and services, and the equipment finance
operation of ABN AMRO, a leading provider of equipment financing solutions in
Sweden.
EEF operates from offices in the United Kingdom, Italy, France, Germany,
Belgium, Ireland, Portugal, Central Europe and the Nordic countries. EEF
headquarters are in Hounslow, England.
SPECIALIZED FINANCING
Real Estate
GE Capital Real Estate ("Real Estate") provides funds for the acquisition,
refinancing and renovation of a wide range of commercial and residential
properties located throughout the United States, and, to a lesser extent, in
Canada, Mexico, Europe, and the Far East. Real Estate also provides asset
management services to real estate investors and selected services to real
estate owners.
Lending is a major portion of Real Estate's business in the form of
intermediate-term senior or subordinated fixed and floating-rate loans secured
by existing income-producing commercial properties such as office buildings,
rental apartments, shopping centers, industrial buildings, mobile home parks,
hotels and warehouses. Loans range in amount from single-property mortgages
typically not less than $5 million to multi-property portfolios of several
hundred million dollars. Approximately 90% of all loans are senior mortgages.
Real Estate purchases and provides restructuring financing for portfolios of
real estate, mortgage loans, limited partnerships, and tax-exempt bonds. Real
Estate's business also includes the origination and securitization of low
leverage real estate loans, which are intended to be held less than one year
before outplacement. To a lesser degree, Real Estate provides equity capital for
real estate partnerships through the holding of limited partnership interests
and receives preferred returns; typically such investments range from $2 million
to $10 million.
Real Estate also offers a variety of real estate management services to outside
investors, institutions, corporations, investment banks, and others through its
real estate services subsidiaries. Asset management services include
acquisitions and dispositions, strategic asset management, asset restructuring,
and debt and equity management. Real Estate also provides investment products
and advisory and asset management services to pension fund clients through GE
Capital Investment Advisors, its registered investment advisor, as well as loan
administration and servicing through GE Capital Asset Management. In addition,
Real Estate offers owners of multi-family housing ways to reduce costs and
enhance value in properties by offering buying services (e.g., for appliances,
roofing).
Real Estate has offices throughout the United States, as well as in Canada,
Mexico, Australia, Japan, Sweden, France and the United Kingdom. Real Estate
headquarters are in Stamford, Connecticut.
Structured Finance Group
GE Capital Structured Finance Group ("SFG") provides specialized financial
products and services to clients in the commercial and industrial,
communications, energy, and transportation sectors, worldwide.
SFG combines industry and technical expertise with significant financial
capabilities to deliver a full range of sophisticated financial services and
products. Services include project finance (construction and term), corporate
finance, acquisition finance and arrangement and placement services. Products
include a variety of debt and equity instruments, as well as structured
transactions, including leasing and partnerships.
SFG has regional offices in the United States, Australia, Brazil, Canada, China,
Hong Kong, Mexico, Singapore, and the United Kingdom. SFG headquarters are in
Stamford, Connecticut.
Commercial Finance
GE Capital Commercial Finance ("CF") is a leading provider of revolving and term
debt and equity to finance acquisitions, business expansion, bank refinancings,
recapitalizations and other special situations. Products also
9
<PAGE>
include asset securitization facilities, capital expenditure lines and
bankruptcy-related facilities. Transactions typically range in size from under
$5 million to over $200 million.
CF's clients are owners, managers and buyers of both public and private
companies, principally manufacturers, distributors, retailers and diversified
service providers in the healthcare, retail and communications industries.
Through its Merchant Banking Group, CF provides senior debt, subordinated debt
and bridge financing to buyout and private equity firms, and co-invests equity
with buying groups or invests directly on a select basis.
CF has lending operations in 25 cities, including international offices in
Toronto, Mexico City, and London, and also has significant factoring operations
in France, Germany, the United Kingdom and Italy serving European companies and
U.S. exporters. CF headquarters are in Stamford, Connecticut.
GE Equity
GE Equity (formerly Equity Capital Group) purchases equity investments,
primarily convertible preferred and common stock investments including, in some
cases, stock warrants convertible into equity ownership. GE Equity's primary
objective is long-term capital appreciation. Investments include the retail,
financial services, healthcare, food and beverage, cable and broadcasting
industries.
The portfolio is geographically diversified with investments located throughout
the United States, as well as in Latin America, Europe and Asia.
GE Equity headquarters are in Stamford, Connecticut.
SPECIALTY INSURANCE
Financial Guaranty Insurance
FGIC Holdings ("FGIC"), through its subsidiary, Financial Guaranty Insurance
Company ("Financial Guaranty"), is an insurer of municipal bonds, including new
issues, bonds traded in the secondary market and bonds held in unit investment
trusts and mutual funds. Financial Guaranty also guarantees certain taxable
structured debt. The guaranteed principal, after reinsurance, amounted to
approximately $131 billion at December 31, 1998. Approximately 86% of the
business written to date by Financial Guaranty is municipal bond insurance.
FGIC subsidiaries provide a variety of services to state and local governments
and agencies, liquidity facilities in variable-rate transactions, municipal
investment products and other services.
FGIC headquarters are in New York, New York.
Mortgage Insurance
GE Capital Mortgage Insurance is engaged principally in providing residential
mortgage guaranty insurance. Operating in 25 field locations, GE Capital
Mortgage Insurance is licensed in 50 states, the District of Columbia and the
Virgin Islands. At December 31, 1998, GE Capital Mortgage Insurance was the
mortgage insurance carrier for over 1,480,000 residential homes, with total
insurance in force aggregating approximately $153 billion and total risk in
force aggregating approximately $42 billion. When a claim is received, GE
Capital Mortgage Insurance proceeds by either paying up to a guaranteed
percentage based on the specified coverage, or paying the mortgage and
delinquent interest, taking title to the property and arranging for its sale. GE
Capital Mortgage Insurance also provides mortgage guaranty insurance in the
United Kingdom, Canada, and Australia.
GE Capital Mortgage Insurance headquarters are in Raleigh, North Carolina.
GE Insurance Holdings
GE Insurance Holdings (formerly Consolidated Financial Insurance) is a leading
specialty insurer with operations in 13 European countries, Australia and the
Philippines. GE Insurance Holdings is one of the leading payment
10
<PAGE>
protection insurers in the United Kingdom and Europe. Payment protection
insurance is designed to protect customers' loan repayment obligations in the
event of unemployment, disability or death. The product is sold alongside most
forms of consumer credit through banks, building societies and finance houses.
GE Insurance Holdings also provides an extensive range of personal investment
products, including pension and purchased life annuities, home income plans and
investment bonds through a network of over 6,000 independent financial advisors
and a direct sales force, in the United Kingdom.
In addition, GE Insurance Holdings sells insurance administration services for
extended product warranty insurance and pet insurance, provides travel and
personal accident insurance, and offers the management of uninsured loss claims
on behalf of victims of traffic accidents.
GE Insurance Holdings headquarters are in London, England.
REGULATIONS AND COMPETITION
The Corporation's activities are subject to a variety of federal and state
regulations including, at the federal level, the Consumer Credit Protection Act,
the Equal Credit Opportunity Act and certain regulations issued by the Federal
Trade Commission. A majority of states have ceilings on rates chargeable to
customers in retail time sales transactions, installment loans and revolving
credit financing. Common carrier services of GE Americom are subject to
regulation by the Federal Communications Commission. Insurance and reinsurance
operations are subject to regulation by various state insurance commissions or
foreign regulatory authorities, as applicable. The Corporation's international
operations are subject to regulation in their respective jurisdictions. To date,
compliance with such regulations has not had a material adverse effect on the
Corporation's financial position or results of operations.
The businesses in which the Corporation engages are highly competitive. The
Corporation is subject to competition from various types of financial
institutions, including banks, thrifts, investment banks, broker-dealers, credit
unions, leasing companies, consumer loan companies, independent finance
companies, finance companies associated with manufacturers, insurance and
reinsurance companies.
ITEM 2. PROPERTIES.
The Corporation conducts its business from various facilities, most of which are
leased.
ITEM 3. LEGAL PROCEEDINGS.
The Corporation is not involved in any material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Omitted.
11
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
See note 13 to the consolidated financial statements. The common stock of the
Corporation is owned entirely by GE Capital Services and, therefore, there is no
trading market in such stock.
ITEM 6. SELECTED FINANCIAL DATA.
The following selected financial data should be read in conjunction with the
financial statements of GE Capital and consolidated affiliates and the related
Notes to Consolidated Financial Statements.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------------------
(Dollar amounts in millions) 1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues ........................................... $ 41,405 $ 33,404 $ 26,570 $ 21,179 $ 16,923
Net earnings ....................................... 3,374 2,729 2,632 2,261 1,918
Return on common equity <F1> <F2> .................. 20.33% 18.62% 20.18% 19.89% 19.59%
Ratio of earnings to fixed charges ................. 1.50 1.48 1.53 1.51 1.63
Ratio of earnings to combined fixed charges
and preferred stock dividends ..................... 1.48 1.46 1.51 1.49 1.62
Ratio of debt to equity ............................ 7.86 7.45 7.84 7.59 8.43
Financing receivables - net ........................ $121,058 $103,799 $ 99,714 $ 93,272 $ 76,357
Total assets ....................................... 269,050 228,777 200,816 160,825 130,904
Short-term borrowings .............................. 107,419 91,680 74,971 59,264 54,579
Long-term senior notes ............................. 57,486 44,437 46,124 47,794 33,615
Long-term subordinated notes ....................... 697 697 697 697 697
Minority interest .................................. 1,137 860 679 703 615
Equity ............................................. 21,069 18,373 15,526 14,202 10,540
<FN>
<F1> Equity excludes unrealized gains and losses on investment securities, net
of tax.
<F2> Earnings are adjusted for preferred stock dividends and equity excludes
preferred stock.
</FN>
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS.
OVERVIEW
The Corporation's net earnings were $3.374 billion in 1998, which, after payment
of dividends on its variable cumulative preferred stock, resulted in a
contribution of $3.277 billion to GE Capital Services' 1998 net earnings, an
increase of 24% over 1997. The Corporation's net earnings for 1997 were $2.729
billion, which, after payment of dividends on its variable cumulative preferred
stock, resulted in a contribution of $2.651 billion to GE Capital Services' 1997
net earnings, an increase of 4% over 1996. The results reflected the
globalization and diversity of the Corporation's businesses, with double-digit
increases in each of its five segments in 1998. The improvement in earnings in
both 1998 and 1997 was largely attributable to the effects of continued asset
growth, principally from acquisitions of businesses and portfolios and higher
origination volume.
Comparisons of revenues and net earnings throughout the period were affected by
the operating results of Montgomery Ward Holding Corp., which are discussed on
page 20. Net earnings in 1997 were also affected by increased automobile
residual losses. These matters were partially offset in 1997 by the effects of
higher asset gains, including securitizations.
12
<PAGE>
OPERATING RESULTS
TOTAL REVENUES increased 24% to $41.4 billion in 1998, following a 26% increase
to $33.4 billion in 1997. The increases in both years reflected the
contributions of businesses acquired as well as growth in core volume.
INTEREST EXPENSE on borrowings in 1998 was $8.6 billion, 18% higher than in
1997, which was 4% higher than in 1996. The increases in 1998 and 1997 were
caused by higher average borrowings used to finance asset growth, partially
offset by the effects of lower average interest rates. The composite interest
rate was 5.90% in 1998, compared with 6.05% in 1997 and 6.24% in 1996. See page
16 for a discussion of interest rate risk management.
OPERATING AND ADMINISTRATIVE expenses were $11.7 billion in 1998, an increase
from $9.5 billion in 1997 and $7.6 billion in 1996. The increase in both 1998
and 1997 primarily reflected costs associated with acquired businesses and
portfolios, higher investment levels and increases in costs that vary directly
with increased revenues.
INSURANCE LOSSES AND POLICYHOLDER AND ANNUITY BENEFITS increased to $5.5 billion
in 1998, compared with $4.8 billion in 1997 and $3.2 billion in 1996, reflecting
effects of business acquisitions and growth in premium volume throughout the
period.
COST OF GOODS SOLD is associated with activities of the Corporation's computer
equipment distribution businesses. This cost amounted to $6.8 billion in 1998,
compared with $4.1 billion in 1997 and $1.7 billion in 1996, principally the
result of acquisition-related growth.
PROVISION FOR LOSSES ON FINANCING RECEIVABLES increased to $1.6 billion in 1998,
compared with $1.4 billion in 1997 and $1.0 billion in 1996. These provisions
principally related to private-label credit cards, bank credit cards, auto loans
and auto leases in the consumer services operations, all of which are discussed
on pages 19-20 under Financing Receivables. The increases principally reflected
higher average receivable balances and the effects of delinquency rates --
higher during 1997 and lower during 1998 -- consistent with industry experience.
DEPRECIATION AND AMORTIZATION OF BUILDINGS AND EQUIPMENT AND EQUIPMENT ON
OPERATING LEASES increased 6% to $2.6 billion in 1998, compared with $2.4
billion in 1997, a 14% increase over 1996. The increase in both years was the
result of additions to equipment on operating leases, primarily reflecting
acquisitions of vehicles and aircraft in 1998, and a shift in auto lease volume
from financing leases to operating leases and acquisitions of aircraft in 1997.
PROVISION FOR INCOME TAXES was $1.2 billion in 1998 (an effective tax rate of
26.0%), compared with $1.0 billion in 1997 (an effective tax rate of 26.8%) and
$1.2 billion in 1996 (an effective tax rate of 30.8%). The higher provision for
income taxes in 1998 primarily reflected increased pre-tax earnings subject to
statutory rates. The decreases in the 1997 provision for income taxes and
effective tax rate were primarily caused by increased tax credits and decreased
taxes on non-U.S. earnings.
Financing spreads (the excess of yields over interest rates on borrowings) were
essentially flat in 1998, 1997 and 1996, reflecting slightly lower yields offset
by decreases in borrowing rates.
OPERATING SEGMENTS
At year-end 1998, the Corporation adopted Statement of Financial Accounting
Standards ("SFAS") No. 131, Disclosures about Segments of an Enterprise and
Related Information, which requires segment data to be measured and analyzed on
a basis that is consistent with how business activities are reported internally
to management. Previously reported data have been restated as required by SFAS
No. 131. For additional information, see note 16 to the consolidated financial
statements.
13
<PAGE>
Revenues and net earnings of the Corporation, by operating segment, for the past
three years are summarized and discussed below.
<TABLE>
<CAPTION>
(In millions) 1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
REVENUES
Consumer Services .......................................................... $ 15,939 $ 13,549 $ 11,108
Equipment Management ....................................................... 14,821 11,280 7,682
Mid-Market Financing ....................................................... 3,751 3,009 2,781
Specialized Financing ...................................................... 3,300 2,770 2,935
Specialty Insurance ........................................................ 3,437 2,838 2,084
All other .................................................................. 157 (42) (20)
-------- -------- --------
Total revenues ............................................................. $ 41,405 $ 33,404 $ 26,570
======== ======== ========
NET EARNINGS
Consumer Services .......................................................... $ 797 $ 546 $ 795
Equipment Management ....................................................... 806 708 603
Mid-Market Financing ....................................................... 478 391 362
Specialized Financing ...................................................... 740 591 566
Specialty Insurance ........................................................ 479 396 310
All other .................................................................. 74 97 (4)
-------- -------- --------
Total net earnings ......................................................... $ 3,374 $ 2,729 $ 2,632
======== ======== ========
</TABLE>
Consumer Services revenues increased 18% in 1998 and 22% in 1997. This growth --
largely acquisition related -- was led by higher premium and investment income
at GE Financial Assurance, the consumer savings and insurance business of the
Corporation. Asset growth in several of the other consumer services businesses
also contributed to the increase in 1998. Net earnings increased 46% in 1998,
following a 31% decrease in 1997. Comparisons of revenues and net earnings
throughout the period were affected by the operating results of Montgomery Ward
Holding Corp., which are discussed on page 20. Net earnings in 1998 also
reflected acquisition and core volume growth, led by the Global Consumer Finance
and GE Financial Assurance businesses. Overall gains on asset sales, including
securitizations, were higher in 1997 than in 1998; gains in 1998 included the
sale of certain bankcard assets. Net earnings in 1997 were affected by increased
automobile residual losses, partially offset by acquisition and core growth,
principally at GE Financial Assurance. A higher provision for losses on
financing receivables also affected earnings in both years, as discussed
previously.
Equipment Management revenues grew 31% in 1998, following a 47% increase in
1997, primarily as a result of acquisitions by IT Solutions and, to a lesser
extent, asset growth. Net earnings increased 14% in 1998, following a 17%
increase in 1997. Increases in both years reflected higher volumes in most
businesses resulting from origination growth and acquisitions of businesses and
portfolios, with those effects in 1998 partially offset by lower earnings at IT
Solutions and Modular Space, primarily the result of lower pricing from
competitive market conditions and higher operating expenses.
Mid-Market Financing revenues increased 25% in 1998, compared with an 8%
increase in 1997. Net earnings for these businesses grew 22% and 8% in 1998 and
1997, respectively. Asset growth resulting from higher volumes and acquisitions
of businesses and portfolios was the most significant contributing factor in
both years. Revenues and net earnings were also favorably affected in 1998 by
the disposition of certain assets.
Specialized Financing revenues rose 19% and net earnings increased 25% in 1998.
The increase in revenues reflected asset growth and a higher level of asset
gains, while the increase in net earnings included those factors as well as the
effects of certain tax-advantaged transactions and higher levels of tax credits.
Revenues decreased 6% in 1997, primarily as a result of lower investment levels.
Net earnings increased 4% in 1997, reflecting asset gains and lower levels of
asset write-offs.
Specialty Insurance revenues increased 21% in 1998, following a 36% increase in
1997. The increases in both years primarily resulted from increased
investment income the result of continued growth in the investment portfolios,
as well as a higher level of realized gains on investment securities.
The increases also reflected the 1997 contribution of
14
<PAGE>
assets of Consolidated Insurance Group, a component of Consolidated Financial
Insurance, from GE Capital Services to the Corporation. Net earnings increased
21% in 1998 and 28% in 1997, primarily reflecting improved conditions in the
Mortgage Insurance business, the result of improvements in loss experience, and
increased investment income.
INTERNATIONAL OPERATIONS
The Corporation's international operations include its operations located
outside the United States and certain of its operations that cannot be
meaningfully associated with specific geographic areas (for example, commercial
aircraft and shipping containers used on ocean-going vessels). The Corporation's
international revenues were $14.9 billion in 1998, an increase of 39% from $10.7
billion in 1997. International assets grew 38%, from $68.5 billion at year-end
1997 to $94.6 billion at the end of 1998. Revenues in Europe increased 52% in
1998, reflecting a mix of acquisition and core growth across all of the
Corporation's segments. At the same time, revenues in the Pacific Basin grew
51%, principally in Japan, and principally as a result of consumer financing
acquisitions by Global Consumer Finance and the acquisition of Toho Mutual
Life's infrastructure and sales force by GE Financial Assurance. International
revenues from the Americas (North and South America, except for the U.S.)
increased 21% in 1998, largely as a result of acquisitions and core growth in
Canada and Latin America. The increase in international assets occurred
primarily in Europe and the Pacific Basin (principally Japan) reflecting the
same factors discussed above. Overall, these increases reflect the Corporation's
continued expansion as a global provider of a wide range of services.
The Corporation's activities span all global regions and primarily encompass
leasing of aircraft and providing certain financial services within these
regional economies. As such, when certain countries or regions such as the
Pacific Basin and Latin America experience currency and/or economic stress, the
Corporation may have increased exposure to certain risks but also may have new
profit opportunities. Increased risks include, among other things, higher
receivables delinquencies and bad debts, delays or cancellation of sales and
orders principally related to aircraft-related equipment, higher local currency
financing costs and a slowdown in established financial services activities.
New profit opportunities include, among other things, more opportunities for
lower cost outsourcing, expansion of financial services activities through
purchases of companies or assets at reduced prices and lower U.S. debt financing
costs. Thus, while the Corporation's global activities warrant close monitoring
and significant management attention, regional economic disruptions had only a
modest adverse effect on the overall financial position, results of operations
and liquidity of the Corporation in 1998, and there is little change in the
outlook for 1999.
CAPITAL RESOURCES AND LIQUIDITY
STATEMENT OF FINANCIAL POSITION
INVESTMENT SECURITIES for each of the past two years comprised mainly
investment-grade debt securities held by the Corporation's specialty insurance
and annuity and investment businesses in support of obligations to policyholders
and annuitants. The increase of $4.2 billion during 1998 was principally related
to acquisitions and investment of premiums received. A breakdown of the
investment securities portfolio is provided in note 2 to the consolidated
financial statements.
INVENTORIES were $744 million and $786 million at December 31, 1998 and 1997,
respectively. The decrease in 1998 primarily reflected improved inventory
management in the computer equipment distribution businesses.
FINANCING RECEIVABLES were $121.1 billion at year-end 1998, net of allowance for
doubtful accounts, up $17.3 billion over 1997. These receivables are discussed
on pages 19-20 and in notes 3 and 4 to the consolidated financial statements.
OTHER RECEIVABLES were $17.8 billion and $11.9 billion at December 31, 1998 and
1997, respectively. Of the 1998 increase, $2.1 billion was attributable to
acquisitions and the remainder resulted from core growth.
EQUIPMENT ON OPERATING LEASES was $20.9 billion at December 31, 1998, up $2.3
billion from 1997. Details by category of investment can be found in note 6 to
the consolidated financial statements. Additions to equipment on operating
leases, including business acquisitions, were $7.2 billion during 1998 ($6.8
billion during 1997), primarily reflecting acquisitions of vehicles and
aircraft.
15
<PAGE>
INTANGIBLE ASSETS were $12.0 billion at year-end 1998, up from $9.5 billion at
year-end 1997. The $2.6 billion increase in intangible assets related primarily
to goodwill from acquisitions, the largest of which were the consumer finance
business of Lake Corporation ("Lake") in Japan and MetLife Capital in the United
States.
OTHER ASSETS totaled $33.2 billion at year-end 1998, compared with $24.0 billion
at the end of 1997. The $9.2 billion increase related principally to additional
investments in associated companies, increases in assets acquired for resale,
primarily residential mortgages, and increases in "separate accounts," which are
investments controlled by policyholders and are associated with identical
amounts reported as insurance liabilities.
INSURANCE LIABILITIES, RESERVES AND ANNUITY BENEFITS were $54.4 billion at
year-end 1998, $4.2 billion higher than in 1997. The increase was primarily
attributable to the increase in separate accounts and acquisitions. For
additional information on these liabilities, see note 11 to the consolidated
financial statements.
BORROWINGS were $165.6 billion at December 31, 1998, of which $107.4 billion is
due in 1999 and $58.2 billion is due in subsequent years. Comparable amounts at
the end of 1997 were $136.8 billion total, $91.7 billion due within one year and
$45.1 billion due thereafter. The Corporation's composite interest rates are
discussed on page 13. A large portion of the Corporation's borrowings ($81.0
billion and $67.6 billion at the end of 1998 and 1997, respectively) was issued
in active commercial paper markets that management believes will continue to be
a reliable source of short-term financing. The average remaining terms and
interest rates of the Corporation's commercial paper were 45 days and 5.35% at
the end of 1998, compared with 44 days and 5.83% at the end of 1997. The
Corporation's ratio of debt to equity was 7.86 to 1 at the end of 1998 and 7.45
to 1 at the end of 1997.
GE Company has committed to contribute capital to GE Capital in the event of
either a decrease below a specified level in the ratio of GE Capital's earnings
to fixed charges, or a failure to maintain a specified debt-to-equity ratio in
the event certain GE Capital preferred stock is redeemed. GE Company also has
guaranteed the Corporation's subordinated debt with a face amount of $700
million at December 31, 1998 and 1997. Management believes the likelihood that
GE Company will be required to contribute capital under either the commitments
or the guarantees is remote.
STATEMENT OF CASH FLOWS
One of the Corporation's primary sources of cash is financing activities
involving the continued rollover of short-term borrowings and appropriate
addition of borrowings with a reasonable balance of maturities. Over the past
three years, the Corporation's borrowings with maturities of 90 days or less
have increased by $38.1 billion. New borrowings of $84.6 billion having
maturities longer than 90 days were added during those years, while $77.8
billion of such longer-term borrowings were retired. The Corporation also
generated $27.2 billion of cash from continuing operating activities during the
last three years.
The Corporation's principal use of cash has been investing in assets to grow its
businesses. Of the $67.8 billion that the Corporation invested in continuing
operations over the past three years, $10.3 billion was used for additions to
financing receivables; $18.5 billion was used to invest in new equipment,
principally for lease to others; and $24.2 billion was used for acquisitions of
new businesses, the largest of which were MetLife Capital and Lake in 1998.
With the financial flexibility that comes with excellent credit ratings,
management believes the Corporation should be well positioned to meet the global
needs of its customers for capital and to continue growing its diversified asset
base.
INTEREST RATE AND CURRENCY RISK MANAGEMENT
In normal operations, the Corporation must deal with effects of changes in
interest rates and currency exchange rates. The following discussion presents an
overview of how such changes are managed and a view of their potential effects.
A related discussion of recent developments in the global economy is provided on
page 15.
The Corporation uses various financial instruments, particularly interest rate
and currency swaps, but also futures, options and currency forwards, to manage
risks. The Corporation is exclusively an end user of these instruments, which
are commonly referred to as derivatives. The Corporation does not engage in any
trading, market-making or other speculative activities in the derivative
markets. More detailed information regarding these financial
16
<PAGE>
instruments, as well as the strategies and policies for their use, is contained
in notes 1, 10 and 20 to the consolidated financial statements.
The Corporation manages its exposure to changes in interest rates, in part, by
funding its assets with an appropriate mix of fixed and variable rate debt and
its exposure to currency fluctuations principally by funding local currency
denominated assets with debt denominated in those same currencies. It uses
interest rate swaps, currency swaps (including non-U.S. currency and cross
currency interest rate swaps) and currency forwards to achieve lower borrowing
costs. Substantially all of these derivatives have been designated as modifying
interest rates and/or currencies associated with specific debt instruments.
These financial instruments allow the Corporation to lower its cost of funds by
substituting credit risk for interest rate and currency risks. Since the
Corporation's principal use of such swaps is to optimize funding costs, changes
in interest rates and exchange rates underlying swaps would not be expected to
have a material impact on the Corporation's financial position or results of
operations. The Corporation conducts almost all activities with these
instruments in the over-the-counter markets.
The Corporation is exposed to prepayment risk in certain of its business
activities, such as in its mortgage servicing and annuities activities. In order
to hedge those exposures, the Corporation uses swaps, futures, and option-based
financial instruments. These instruments generally behave based on limits
("caps", "floors" or "collars") on interest rate movement. These swaps, futures
and option-based instruments are governed by the credit risk policies described
below and are transacted in either exchange-traded or over-the-counter markets.
In addition, as part of its ongoing customer activities, the Corporation may
enter into swaps that are integrated with investments in, loans to or guarantees
of the obligations of particular customers and do not involve assumption of
third-party credit risk beyond the risk previously approved by the Corporation
with respect to such investments, loans or guarantees. Such integrated swaps are
evaluated and monitored like their associated investments, loans or guarantees,
and are not therefore subject to the same credit criteria that would apply to a
stand-alone swap. All other swaps, forward contracts and other derivatives have
been designated as hedges of non-U.S. net investments or other assets.
Established practices require that derivative financial instruments relate to
specific asset, liability or equity transactions or to currency exposures.
Substantially all treasury actions are centrally executed by the Corporation's
Treasury Department, which maintains controls on all exposures, adheres to
stringent counterparty credit standards and actively monitors marketplace
exposures.
Given the ways in which the Corporation uses swaps, purchased options and
forwards, the principal risk is credit risk - risk that counterparties will be
financially unable to make payments in accordance with the agreements.
Associated market risk is meaningful only as it relates to how changes in the
market value affect credit exposure to individual counterparties. Except as
noted above for positions that are integrated into financings, all swaps,
purchased options and forwards are carried out within the following credit
policy constraints.
17
<PAGE>
o Once a counterparty reaches a credit exposure limit (see table below),
no additional transactions are permitted until the exposure with that
counterparty is reduced to an amount that is within the established
limit. Open contracts remain in force.
<TABLE>
<CAPTION>
COUNTERPARTY CREDIT CRITERIA CREDIT RATING
-----------------------
STANDARD &
MOODY'S POOR'S
---------- ----------
<S> <C> <C>
Term of transaction
Between one and five years ........... Aa3 AA-
Greater than five years .............. Aaa AAA
Credit exposure limits
Up to $50 million .................... Aa3 AA-
Up to $75 million .................... Aaa AAA
</TABLE>
o All swaps are executed under master swap agreements containing mutual
credit downgrade provisions that provide the ability to require
assignment or termination in the event either party is downgraded below
A3 or A-.
More credit latitude is permitted for transactions having original maturities
shorter than one year because of their lower risk.
The conversion of interest rate and currency risk into credit risk results in a
need to monitor counterparty credit risk actively. At December 31, 1998, the
notional amount of long-term derivatives for which the counterparty was rated
below Aa3/AA- was $3.1 billion. These amounts are primarily the result of (1)
counterparty downgrades, (2) transactions executed prior to the adoption of the
Corporation's current counterparty credit standards, and (3) transactions
relating to acquired assets or businesses.
Following is an analysis of credit risk exposures for the last three years.
<TABLE>
<CAPTION>
PERCENTAGE OF NOTIONAL DERIVATIVE EXPOSURE BY COUNTERPARTY CREDIT RATING
- -------------------------------------------------------------------------------
MOODY'S/STANDARD & POOR'S 1998 1997 1996
- ------------------------- -------- -------- --------
<S> <C> <C> <C>
Aaa/AAA .................................... 66% 75% 78%
Aa/AA ...................................... 32% 20% 17%
A/A and below .............................. 2% 5% 5%
</TABLE>
The optimal funding strategy is sometimes achieved by using multiple swaps. For
example, to obtain fixed rate U.S. dollar funding, several alternatives are
generally available. One alternative is a swap of non-U.S. dollar denominated
fixed rate debt into U.S. dollars. The synthetic U.S. dollar denominated debt
would be effectively created by taking the following steps: (1) issuing fixed
rate, non-U.S. currency denominated debt, (2) entering into a swap under which
fixed rate non-U.S. currency denominated interest will be received and floating
rate non-U.S. currency denominated interest will be paid, and (3) entering into
a swap under which floating rate non-U.S. currency principal and interest will
be received and fixed rate U.S. dollar denominated principal and interest will
be paid. The end result is, in every important respect, fixed rate U.S. dollar
denominated financing with an element of controlled credit risk. The Corporation
uses multiple swaps only as part of such transactions.
The interplay of the Corporation's credit risk policy with its funding
activities is seen in the following example, in which the Corporation is assumed
to have been offered three alternatives for funding five-year fixed rate U.S.
dollar assets with five-year fixed rate U.S. dollar debt.
18
<PAGE>
<TABLE>
<CAPTION>
SPREAD OVER
U.S.
TREASURIES IN
BASIS POINTS COUNTERPARTY
------------- ------------
<S> <C> <C>
1. Fixed rate five-year medium term note ..... +65 --
2. U.S. dollar commercial paper swapped into
five-year U.S. dollar fixed rate funding . +40 A
3. Swiss franc fixed rate debt swapped into
five-year U.S. dollar fixed rate funding . +35 B
</TABLE>
Counterparty A is a major brokerage house with a Aaa/AAA rated swap subsidiary
and a current exposure to the Corporation of $39 million. Counterparty B is a
Aa2/AA rated insurance company with a current exposure of $50 million.
In this hypothetical case, the Corporation would have chosen alternative 2.
Alternative 1 is unacceptably costly. Although alternative 3 would have yielded
a lower immediate cost of funds, the additional credit risk of Counterparty B
would have exceeded the Corporation's risk management limits.
The U.S. Securities and Exchange Commission requires that registrants disclose
information about potential effects of changes in interest rates and currency
exchange. Although the rules offer alternatives for presenting this information,
none of the alternatives is without limitations. The following discussion is
based on so-called "shock-tests," which model effects of interest rate and
currency shifts on the reporting company. Shock tests, while probably the most
meaningful analysis permitted, are constrained by several factors, including the
necessity to conduct the analysis based on a single point in time and by their
inability to include the complex market reactions that normally would arise from
the market shifts modeled. While the following results of shock tests for
interest rates and currencies may have some limited use as benchmarks, they
should not be viewed as forecasts.
o One means of assessing exposure to interest rate changes is a
duration-based analysis that measures the potential loss in net earnings
resulting from a hypothetical increase in interest rates of 100 basis
points across all maturities (sometimes referred to as a "parallel shift in
the yield curve"). Under this model, it is estimated that, all else
constant, such an increase, including repricing effects in the securities
portfolio, would reduce the 1999 net earnings of the Corporation based on
year-end 1998 positions by approximately $95 million. Based on conditions
at year-end 1997, the effect on 1998 net earnings of such an increase in
interest rates was estimated to be approximately $100 million.
o One means of assessing exposure to changes in currency exchange rates is
to model effects on reported earnings using a sensitivity analysis.
Year-end 1998 consolidated currency exposures, including financial
instruments designated and effective as hedges, were analyzed to identify
Corporation assets and liabilities denominated in other than their relevant
functional currency. Net unhedged exposures in each currency were then
remeasured assuming a 10% decrease (substantially greater decreases for
hyperinflationary currencies) in currency exchange rates compared with the
U.S. dollar. Under this model, it is estimated that, all else constant,
such a decrease would reduce the 1999 net earnings of the Corporation based
on year-end 1998 positions by an insignificant amount.
PORTFOLIO QUALITY
FINANCING RECEIVABLES are the largest asset of the Corporation and one of its
primary sources of revenues. The portfolio of financing receivables, before
allowance for losses, increased to $124.3 billion at the end of 1998 from $106.6
billion at the end of 1997, principally reflecting acquisition growth and
origination volume that were partially offset by securitizations and other sales
of receivables. The related allowance for losses at the end of 1998 amounted to
$3.3 billion ($2.8 billion at the end of 1997) and, in management's judgment, is
appropriate given the risk profile of the portfolio.
A discussion of the quality of certain elements of the financing receivable
portfolio follows. "Nonearning" receivables are those that are 90 days or more
delinquent (or for which collection has otherwise become doubtful) and "reduced-
19
<PAGE>
earning" receivables are commercial receivables whose terms have been
restructured to a below-market yield. The following discussion of the nonearning
and reduced-earning receivable balances and write-off amounts excludes amounts
related to Montgomery Ward Holding Corp. and affiliates, which are separately
discussed below.
CONSUMER FINANCING RECEIVABLES at year-end 1998 and 1997 are shown in the
following table:
<TABLE>
<CAPTION>
(In millions) 1998 1997
-------- --------
<S> <C> <C>
Credit card and personal loans ......................... $ 28,064 $ 25,773
Auto loans ............................................. 9,496 8,973
Auto financing leases .................................. 14,063 13,346
-------- --------
Total consumer financing receivables ................. $ 51,623 $ 48,092
======== ========
Nonearning ............................................. $ 1,250 $ 1,049
- As a percentage of total ............................ 2.4% 2.2%
Receivable write-offs for the year ..................... $ 1,357 $ 1,298
</TABLE>
The increase in credit card and personal loan portfolios primarily resulted from
acquisition growth and origination volume, partially offset by securitizations
and other sales of receivables. Both the auto loan and financing lease
portfolios increased primarily as a result of acquisition growth; however, the
increase in auto financing leases was partially offset by decreases in U.S.
lease volume. A substantial amount of the nonearning consumer receivables were
private-label credit card loans that were subject to various loss-sharing
agreements that provide full or partial recourse to the originating retailer.
Increased write-offs of consumer receivables were primarily attributable to the
impact of higher average receivable balances.
OTHER FINANCING RECEIVABLES, totaling $72.7 billion at December 31, 1998,
consisted of a diverse commercial, industrial and equipment loan and lease
portfolio. This portfolio increased $14.2 billion during 1998, reflecting the
combination of acquisition growth and increased origination volume, partially
offset by sales of receivables. Related nonearning and reduced-earning
receivables were $354 million at year-end 1998, compared with $353 million at
year-end 1997.
As discussed in note 3 to the consolidated financial statements, Montgomery Ward
Holding Corp. ("MWHC") filed a bankruptcy petition for reorganization in 1997.
The Corporation's after-tax share of the losses of MWHC and affiliates was $49
million in 1998 and $380 million in 1997. The Corporation's investment in MWHC
and affiliates at year-end was $622 million in 1998 and $795 million in 1997 (of
which $578 million and $617 million, respectively, were classified as financing
receivables). Subsequent to the filing of the petition, the Corporation
committed to provide MWHC up to $1.0 billion in debtor-in-possession financing,
a majority of which has been syndicated: the Corporation's loans under this
facility at December 31, 1998 were approximately $56 million. The Corporation
also provides revolving credit card financing directly to customers of MWHC and
affiliates; such receivables totaled $3.4 billion at December 31, 1998,
including $1.6 billion that had been sold with recourse. The obligations of
customers with respect to these receivables are not affected by the bankruptcy
filing. On February 1, 1999, MWHC announced that it plans to emerge from
bankruptcy protection in mid-1999 as a result of an agreement reached with the
creditors' committee.
The Corporation's loans and leases to commercial airlines amounted to $10.2
billion at the end of 1998, up from $9.0 billion at the end of 1997. The
Corporation's commercial aircraft positions also included financial guarantees,
funding commitments and aircraft orders as discussed in note 6 to the
consolidated financial statements.
ENTERING 1999, management believes that continued vigilant attention to risk
management and controllership and a strong focus on Six Sigma quality - complete
satisfaction of customer needs - position it to deal effectively with the
increasing competition in an ever-changing economy.
YEAR 2000
Year 2000 will test the capability of business processes to function correctly.
The Corporation has undertaken a global effort to identify and mitigate Year
2000 issues in its information systems, products and services, facilities and
20
<PAGE>
suppliers, as well as to assess the extent to which Year 2000 issues will affect
its customers. Each business has a Year 2000 leader who oversees a
multifunctional remediation project team responsible for applying a Six Sigma
quality approach in four phases: (1) define/measure- identify and inventory
possible sources of Year 2000 issues; (2) analyze- determine the nature and
extent of Year 2000 issues and develop project plans to address those issues;
(3) improve- execute project plans and perform a majority of the testing; and
(4) control- complete testing, continue monitoring readiness and complete
necessary contingency plans. The progress of this program is monitored at each
business, and Company-wide reviews with senior management are conducted monthly.
The first three phases of the program have been completed for a substantial
majority of mission-critical activities. Management plans to have nearly all
significant information systems, products and services and facilities through
the control phase of the program by mid-1999.
The scope of the global Year 2000 effort encompasses many thousands of
applications and computer programs; products and services; facilities and
facilities-related equipment; suppliers and customers. Business operations are
also affected by the Year 2000 readiness of customers and infrastructure
suppliers in areas such as utilities, communications, transportation and other
services. In this environment, there will likely be instances of failure that
could cause disruptions in business processes for the Corporation's businesses,
affect their customers' ability to repay amounts owed or result in an increased
level of insurance claims activity. The likelihood and effects of failures in
the customer base, infrastructure systems and in the supply chain cannot be
estimated. However, with respect to operations under its direct control,
management does not expect, in view of its Year 2000 program efforts and the
diversity of its businesses, suppliers and customers, that occurrences of Year
2000 failures will have a material adverse effect on the financial position,
results of operations or liquidity of the Corporation.
Including amounts attributable to recent acquisitions, total Year 2000
remediation expenditures are expected to be approximately $265 million, of which
65% was spent by the end of 1998. Substantially all of the remainder is expected
to be spent in 1999. Most of these costs are not likely to be incremental costs,
but rather will represent the redeployment of existing resources. The activities
involved in the Year 2000 effort necessarily involve estimates and projections
of activities and resources that will be required in the future. These estimates
and projections could change as work progresses.
NEW ACCOUNTING STANDARDS
New accounting standards issued in 1998 are described below. Statement of
Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities, requires that, upon adoption, all derivative
instruments (including certain derivative instruments embedded in other
contracts) be recognized in the balance sheet at fair value, and that changes in
such fair values be recognized in earnings unless specific hedging criteria are
met. Changes in the values of derivatives that meet these hedging criteria will
ultimately offset related earnings effects of the hedged items; effects of
certain changes in fair value are recorded in equity pending recognition in
earnings. The Corporation will adopt the Statement on January 1, 2000. The
impact of adoption will be determined by several factors, including the specific
hedging instruments in place and their relationships to hedged items, as well as
market conditions. Management has not estimated the effects of adoption as it
believes that such determination will not be meaningful until closer to the
adoption date. Statement of Position ("SOP") 98-5, Reporting on the Costs of
Start-Up Activities, provides guidance on accounting for start-up costs and
organization costs, which must be expensed as incurred. The SOP, which is
consistent with the Corporation's previous accounting policy, is effective for
financial statements beginning January 1, 1999.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Information about potential effects of changes in interest rates and currency
exchange on the Corporation is discussed on pages 16-19.
21
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
General Electric Capital Corporation:
We have audited the consolidated financial statements of General Electric
Capital Corporation and consolidated affiliates as listed in Item 14. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedule listed in Item 14. These
consolidated financial statements and the financial statement schedule are the
responsibility of the Corporation's management. Our responsibility is to express
an opinion on these consolidated financial statements and the financial
statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of General Electric
Capital Corporation and consolidated affiliates at December 31, 1998 and 1997,
and the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 1998, in conformity with generally
accepted accounting principles. Also in our opinion, the related financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
/s/ KPMG LLP
Stamford, Connecticut
February 12, 1999
22
<PAGE>
<TABLE>
<CAPTION>
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
STATEMENT OF EARNINGS
For the years ended December 31 (In millions) 1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
REVENUES
Time sales, loan and other income .......................................... $ 14,518 $ 11,877 $ 11,305
Operating lease rentals .................................................... 5,402 4,819 4,341
Financing leases ........................................................... 4,267 3,499 3,485
Investment income .......................................................... 4,184 4,071 2,377
Premium and commission income of insurance affiliates (Note 11) ............ 5,660 4,516 3,136
Sales of goods ............................................................. 7,374 4,622 1,926
-------- -------- --------
Total revenues ........................................................... 41,405 33,404 26,570
-------- -------- --------
EXPENSES
Interest ................................................................... 8,618 7,330 7,042
Operating and administrative (Note 14) ..................................... 11,663 9,472 7,565
Insurance losses and policyholder and annuity benefits (Note 11) ........... 5,544 4,825 3,183
Cost of goods sold ......................................................... 6,777 4,147 1,720
Provision for losses on financing receivables (Note 4) ..................... 1,601 1,421 1,033
Depreciation and amortization of buildings and equipment and
equipment on operating leases (Notes 6 & 7) ............................... 2,594 2,443 2,137
Minority interest in net earnings of consolidated affiliates ............... 49 40 86
-------- -------- --------
Total expenses ........................................................... 36,846 29,678 22,766
-------- -------- --------
Earnings before income taxes ............................................... 4,559 3,726 3,804
Provision for income taxes (Note 15) ....................................... (1,185) (997) (1,172)
-------- -------- --------
NET EARNINGS ............................................................... $ 3,374 $ 2,729 $ 2,632
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN SHARE OWNERS' EQUITY
(In millions) 1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
CHANGES IN SHARE OWNERS' EQUITY
Balance at January 1 ....................................................... $ 18,373 $ 15,526 $ 14,202
-------- -------- --------
Dividends and other transactions with share owners (Note 13) ............... (706) (826) (889)
-------- -------- --------
Changes other than transactions with share owners:
Increases attributable to net earnings .................................... 3,374 2,729 2,632
Unrealized gains (losses) on investment securities - net (Note 13) ........ 22 996 (394)
Currency translation adjustments (Note 13) ................................ 6 (52) (25)
-------- -------- --------
Total changes other than transactions with share owners .................. 3,402 3,673 2,213
-------- -------- --------
Balance at December 31 ..................................................... $ 21,069 $ 18,373 $ 15,526
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
23
<PAGE>
<TABLE>
<CAPTION>
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
STATEMENT OF FINANCIAL POSITION
At December 31 (In millions) 1998 1997
-------- --------
<S> <C> <C>
ASSETS
Cash and equivalents ................................................................... $ 3,080 $ 4,648
Investment securities (Note 2) ......................................................... 57,275 53,103
Financing receivables (Note 3):
Time sales and loans, net of deferred income ......................................... 76,794 64,832
Investment in financing leases, net of deferred income ............................... 47,536 41,769
-------- --------
124,330 106,601
Allowance for losses on financing receivables (Note 4) ............................... (3,272) (2,802)
-------- --------
Financing receivables - net ........................................................ 121,058 103,799
Other receivables - net (Note 5) ....................................................... 17,837 11,925
Inventories ............................................................................ 744 786
Equipment on operating leases (at cost), less accumulated amortization of $7,021
and $6,126 (Note 6) ................................................................... 20,941 18,689
Buildings and equipment (at cost), less accumulated depreciation of $1,654 and
$1,421 (Note 7) ....................................................................... 2,876 2,335
Intangible assets - net (Note 8) ....................................................... 12,033 9,459
Other assets (Note 9) .................................................................. 33,206 24,033
-------- --------
TOTAL ASSETS ......................................................................... $269,050 $228,777
======== ========
LIABILITIES AND SHARE OWNERS' EQUITY
Short-term borrowings (Note 10) ........................................................ $107,419 $ 91,680
Long-term borrowings (Note 10) ......................................................... 58,183 45,134
-------- --------
Total borrowings ..................................................................... 165,602 136,814
Accounts payable ....................................................................... 7,974 6,003
Insurance liabilities, reserves and annuity benefits (Note 11) ........................ 54,435 50,248
Other liabilities ...................................................................... 9,934 8,312
Deferred income taxes (Note 15) ........................................................ 8,899 8,167
-------- --------
Total liabilities .................................................................... 246,844 209,544
-------- --------
Minority interest in equity of consolidated affiliates (Note 12) ....................... 1,137 860
-------- --------
Variable cumulative preferred stock, $100 par value, liquidation preference
$100,000 per share (28,000 and 23,000 shares authorized, 23,000 and 22,300
shares outstanding, at December 31, 1998 and 1997, respectively) ...................... 2 2
Common stock, $200 par value (3,866,000 shares authorized and 3,837,825 shares
outstanding at December 31, 1998 and 1997, respectively) .............................. 768 768
Additional paid-in capital ............................................................. 4,933 4,744
Retained earnings ...................................................................... 14,340 11,861
Accumulated unrealized gains on investment securities - net <F1> ....................... 1,167 1,145
Accumulated foreign currency translation adjustments <F1> .............................. (141) (147)
-------- --------
Total share owners' equity (Note 13) ................................................. 21,069 18,373
-------- --------
TOTAL LIABILITIES AND SHARE OWNERS' EQUITY ........................................... $269,050 $228,777
======== ========
<FN>
<F1> The sum of accumulated unrealized gains on investment securities and
accumulated foreign currency translation adjustments constitutes
"Accumulated nonowner changes other than earnings," as shown in Note 13,
and was $1,026 million and $998 million at year-end 1998 and 1997,
respectively.
</FN>
</TABLE>
See Notes to Consolidated Financial Statements.
24
<PAGE>
<TABLE>
<CAPTION>
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
STATEMENT OF CASH FLOWS
For the years ended December 31 (In millions) 1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings ............................................................... $ 3,374 $ 2,729 $ 2,632
Adjustments to reconcile net earnings to cash provided from
operating activities:
Provision for losses on financing receivables ............................ 1,601 1,421 1,033
Increase in insurance liabilities, reserves and annuity benefits ......... 2,466 1,825 1,373
Decrease (increase) in inventories ....................................... 81 (244) (58)
Increase in deferred income taxes ........................................ 601 588 1,025
Depreciation and amortization of buildings and equipment and
equipment on operating leases ........................................... 2,594 2,443 2,137
Amortization of goodwill and other intangibles ........................... 858 695 561
Increase in accounts payable ............................................. 1,491 138 422
Other - net .............................................................. (1,392) (3,477) 292
-------- -------- --------
Cash from operating activities ............................................ 11,674 6,118 9,417
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in financing receivables (Note 19) ............................ (6,117) (1,898) (2,278)
Buildings and equipment and equipment on operating leases
- additions ............................................................... (6,942) (6,160) (5,348)
- dispositions ............................................................ 4,027 2,209 1,326
Payments for principal businesses purchased, net of cash acquired .......... (15,959) (3,820) (4,385)
All other investing activities (Note 19) ................................... (11,877) (5,163) (5,405)
-------- -------- --------
Cash used for investing activities ........................................ (36,868) (14,832) (16,090)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in borrowings (maturities of 90 days or less) ................... 14,160 12,964 10,996
Newly issued debt (maturities longer than 90 days) (Note 19) ............... 41,440 20,825 22,345
Repayments and other reductions (maturities longer than 90 days) (Note 19) (31,027) (22,757) (24,056)
Dividends paid ............................................................. (895) (1,540) (891)
Issuance of variable cumulative preferred stock in excess of par value ..... 70 430 --
Issuance of variable cumulative preferred stock by consolidated affiliate .. 200 175 125
All other financing activities (Note 19) ................................... (322) 191 (88)
-------- -------- --------
Cash from financing activities ............................................ 23,626 10,288 8,431
-------- -------- --------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS DURING THE YEAR ................ (1,568) 1,574 1,758
CASH AND EQUIVALENTS AT BEGINNING OF YEAR .................................. 4,648 3,074 1,316
-------- -------- --------
CASH AND EQUIVALENTS AT END OF YEAR ........................................ $ 3,080 $ 4,648 $ 3,074
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
25
<PAGE>
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION - The consolidated financial statements represent the adding
together of General Electric Capital Corporation ("the Parent") and all of its
majority-owned and controlled affiliates ("consolidated affiliates"),
(collectively called "the Corporation"). All outstanding common stock of the
Parent is owned by General Electric Capital Services, Inc. ("GE Capital
Services"), all of whose common stock is owned by General Electric Company ("GE
Company"). All significant transactions among the Parent and consolidated
affiliates have been eliminated. Other associated companies, generally companies
that are 20% to 50% owned and over which the Corporation, directly or
indirectly, has significant influence, are included in other assets and valued
at the appropriate share of equity plus loans and advances. Certain prior-year
amounts have been reclassified to conform to the current year presentation.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect reported amounts and related disclosures. Actual results could differ
from those estimates.
METHODS OF RECORDING REVENUES FROM SERVICES (EARNED INCOME) - Income on all
loans is recognized on the interest method. Accrual of interest income is
suspended at the earlier of the time at which collection of an account becomes
doubtful or the account becomes 90 days delinquent. Interest income on impaired
loans is recognized either as cash is collected or on a cost recovery basis as
conditions warrant.
Financing lease income is recorded on the interest method so as to produce a
level yield on funds not yet recovered. Estimated unguaranteed residual values
of leased assets are based primarily on periodic independent appraisals of the
values of leased assets remaining at expiration of the lease terms.
Operating lease income is recognized on a straight-line basis over the terms of
the underlying leases.
Origination, commitment and other nonrefundable fees related to fundings are
deferred and recorded in earned income on the interest method. Commitment fees
related to loans not expected to be funded and line-of-credit fees are deferred
and recorded in earned income on a straight-line basis over the period to which
the fees relate. Syndication fees are recorded in earned income at the time
related services are performed unless significant contingencies exist.
Premium income from insurance activities is discussed under insurance accounting
policies.
SALES OF GOODS - A sale is recorded when title passes to the customer.
CASH AND EQUIVALENTS - Certificates and other time deposits are treated as cash
equivalents.
RECOGNITION OF LOSSES ON FINANCING RECEIVABLES AND INVESTMENTS - The allowance
for losses on small-balance receivables is determined principally on the basis
of actual experience during the preceding three years. Further allowances are
provided to reflect management's judgment of additional probable losses. For
other receivables, principally the larger loans and leases, the allowance for
losses is determined primarily on the basis of management's judgment of the net
probable losses, including specific allowances for known troubled accounts.
All accounts or portions thereof deemed to be uncollectible or to require an
excessive collection cost are written off to the allowance for losses.
Small-balance accounts generally are written off when 6 to 12 months delinquent,
although any such balance judged to be uncollectible, such as an account in
bankruptcy, is written down immediately to estimated realizable value.
Large-balance accounts are reviewed at least quarterly, and those accounts with
amounts that are judged to be uncollectible are written down to estimated
realizable value.
26
<PAGE>
When collateral is repossessed in satisfaction of a loan, the receivable is
written down against the allowance for losses to estimated fair value less costs
to sell, transferred to other assets and subsequently carried at the lower of
cost or estimated fair value less costs to sell. This accounting method has been
employed principally for specialized financing transactions.
INVESTMENT SECURITIES - Investments in debt and marketable equity securities are
reported at fair value. Substantially all investment securities are designated
as available for sale, with unrealized gains and losses included in equity, net
of applicable taxes and other adjustments. Unrealized losses that are other than
temporary are recognized in earnings. Realized gains and losses are accounted
for on the specific identification method.
INVENTORIES - The Corporation's inventories consist primarily of finished
products held for sale. All inventories are stated at the lower of cost or
realizable values. Cost is primarily determined on a first-in, first-out basis.
EQUIPMENT ON OPERATING LEASES - Equipment is amortized, principally on a
straight-line basis, to estimated residual value over the lease term or over the
estimated economic life of the equipment.
BUILDINGS AND EQUIPMENT - Depreciation is recorded on either a sum-of-the-years
digits formula or a straight-line basis over the lives of the assets.
INTANGIBLE ASSETS - Goodwill is amortized over its estimated period of benefit
on a straight-line basis; other intangible assets, including internal-use
software, are amortized on appropriate bases over their estimated lives. No
amortization period exceeds 40 years. Goodwill in excess of associated expected
operating cash flows is considered to be impaired and is written down to fair
value, which is determined based on either discounted future cash flows or
appraised values, depending on the nature of the assets.
INTEREST RATE AND CURRENCY RISK MANAGEMENT - As a matter of policy, the
Corporation does not engage in derivatives trading, derivatives market-making or
other speculative activities. The Corporation uses swaps primarily to optimize
funding costs. To a lesser degree, and in combination with options and limit
contracts, the Corporation uses swaps to stabilize cash flows from
mortgage-related assets.
Interest rate and currency swaps that modify borrowings or designated assets,
including swaps associated with forecasted commercial paper renewals, are
accounted for on an accrual basis. The Corporation requires all other swaps, as
well as futures, options and currency forwards, to be designated and accounted
for as hedges of specific assets, liabilities or committed transactions;
resulting payments and receipts are recognized contemporaneously with effects of
hedged transactions. A payment or receipt arising from early termination of an
effective hedge is accounted for as an adjustment to the basis of the hedged
transaction.
Instruments used as hedges must be effective at reducing the risk associated
with the exposure being hedged and must be designated as a hedge at the
inception of the contract. Accordingly, changes in market values of hedge
instruments must be highly correlated with changes in market values of
underlying hedged items both at inception of the hedge and over the life of the
hedge contract. As a matter of policy, any derivative that is either not
designated as a hedge, or is so designated but is ineffective, is marked to
market and recognized in operations immediately.
INSURANCE ACCOUNTING POLICIES - Accounting policies for insurance businesses are
as follows.
PREMIUM INCOME. Insurance premiums are reported as earned income as follows:
o For short-duration insurance contracts (including property and casualty,
accident and health, and financial guaranty insurance), premiums are
reported as earned income, generally on a pro rata basis, over the terms of
the related agreements. For retrospectively rated reinsurance contracts,
premium adjustments are recorded based on estimated losses and loss
expenses, taking into consideration both case and incurred-but-not-reported
reserves.
o For traditional long-duration insurance contracts (including term and
whole life contracts and annuities payable for the life of the annuitant),
premiums are reported as earned income when due.
o For investment contracts and universal life contracts, premiums received
are reported as liabilities, not as revenues. Universal life contracts are
long-duration insurance contracts with terms that are not fixed
and guaranteed; for these contracts, revenues are
recognized for assessments against the policyholder's account,
27
<PAGE>
mostly for mortality, contract initiation, administration and surrender.
Investment contracts are contracts that have neither significant mortality
nor significant morbidity risk, including annuities payable for a
determined period; for these contracts, revenues are recognized on the
associated investments and amounts credited to policyholder accounts are
charged to expense.
DEFERRED POLICY ACQUISITION COSTS. Costs that vary with and are primarily
related to the acquisition of new and renewal insurance and investment contracts
are deferred and amortized over the respective policy terms. For short-duration
contracts, acquisition costs consist primarily of commissions, brokerage
expenses and premium taxes. For long-duration insurance contracts, these costs
consist primarily of first-year commissions in excess of recurring renewal
commissions, certain variable sales expenses and certain support costs such as
underwriting and policy issue expenses.
o For short-duration insurance contracts, these costs are amortized pro rata
over the contract periods in which the related premiums are earned.
o For traditional long-duration insurance contracts, these costs are
amortized over the respective contract periods in proportion to either
anticipated premium income or, in the case of limited-payment contracts,
estimated benefit payments.
o For investment contracts and universal life contracts, these costs are
amortized on the basis of anticipated gross profits.
Periodically, deferred policy acquisition costs are reviewed for recoverability;
anticipated investment income is considered in making recoverability
evaluations.
PRESENT VALUE OF FUTURE PROFITS. The actuarially determined present value of
anticipated net cash flows to be realized from insurance, annuity and investment
contracts in force at the date of acquisition of life insurance enterprises is
recorded as the present value of future profits and is amortized over the
respective policy terms in a manner similar to deferred policy acquisition
costs. Unamortized balances are adjusted to reflect experience and impairment,
if any.
28
<PAGE>
NOTE 2. INVESTMENT SECURITIES
A summary of investment securities follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
(In millions) COST GAINS LOSSES FAIR VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
DECEMBER 31, 1998
Debt securities:
U.S. corporate ................................................ $ 24,858 $ 1,194 $ (306) $ 25,746
State and municipal ........................................... 6,295 336 (6) 6,625
Mortgage-backed ............................................... 8,877 319 (99) 9,097
Corporate - non-U.S. .......................................... 6,429 311 (84) 6,656
Government - non-U.S. ......................................... 2,538 41 (7) 2,572
U.S. government and federal agency ............................ 1,543 187 (4) 1,726
Equity securities .............................................. 4,652 321 (120) 4,853
-------- -------- -------- --------
$ 55,192 $ 2,709 $ (626) $ 57,275
======== ======== ======== ========
DECEMBER 31, 1997
Debt securities:
U.S. corporate ................................................ $ 22,308 $ 972 $ (49) $ 23,231
State and municipal ........................................... 5,235 290 (l) 5,524
Mortgage-backed ............................................... 9,777 255 (27) 10,005
Corporate - non-U.S. .......................................... 5,953 258 (6) 6,205
Government - non-U.S. ......................................... 1,257 30 -- 1,287
U.S. government and federal agency ............................ 1,838 86 (3) 1,921
Equity securities .............................................. 4,617 367 (54) 4,930
-------- -------- -------- --------
$ 50,985 $ 2,258 $ (140) $ 53,103
======== ======== ======== ========
</TABLE>
The majority of mortgage-backed securities shown in the table above are
collateralized by U.S. residential mortgages.
At December 31, 1998, contractual maturities of debt securities, other than
mortgage-backed securities, were as follows:
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
(In millions) COST FAIR VALUE
-------- --------
<S> <C> <C>
Due in:
1999 .................................................................................. $ 4,212 $ 4,411
2000-2003 ............................................................................. 10,390 10,605
2004-2008 ............................................................................. 8,012 8,242
2009 and later ........................................................................ 19,049 20,067
</TABLE>
It is expected that actual maturities will differ from contractual maturities
because borrowers have the right to call or prepay certain obligations. Proceeds
from sales of investment securities in 1998 were $11,092 million ($8,485 million
in 1997 and $5,375 million in 1996). Gross realized gains were $589 million in
1998 ($618 million in 1997 and $321 million in 1996). Gross realized losses were
$198 million in 1998 ($81 million in 1997 and $96 million in 1996).
29
<PAGE>
NOTE 3. FINANCING RECEIVABLES
Financing receivables at December 31, 1998 and 1997, are shown below.
<TABLE>
<CAPTION>
(In millions) 1998 1997
-------- --------
<S> <C> <C>
Time sales and loans:
Consumer Services ..................................................................... $ 44,680 $ 42,270
Mid-Market Financing .................................................................. 20,240 11,401
Specialized Financing ................................................................. 16,320 13,974
Equipment Management .................................................................. 1,066 469
Specialty Insurance ................................................................... 103 202
-------- --------
82,409 68,316
Deferred income ........................................................................ (5,615) (3,484)
-------- --------
Time sales and loans - net of deferred income ........................................ 76,794 64,832
-------- --------
Investment in financing leases:
Direct financing leases ............................................................... 43,695 38,616
Leveraged leases ...................................................................... 3,841 3,153
-------- --------
Investment in financing leases ....................................................... 47,536 41,769
-------- --------
124,330 106,601
Less allowance for losses (Note 4) ..................................................... (3,272) (2,802)
-------- --------
$121,058 $103,799
======== ========
</TABLE>
Time sales and loans represents transactions in a variety of forms, including
time sales, revolving charge and credit, mortgages, installment loans,
intermediate-term loans and revolving loans secured by business assets. The
portfolio includes time sales and loans carried at the principal amount on which
finance charges are billed periodically, and time sales and loans carried at
gross book value, which includes finance charges. At year-end 1998 and 1997,
specialized financing and consumer services loans included $12,858 million and
$10,503 million, respectively, for commercial real estate loans. Note 6 contains
information on commercial airline loans and leases.
At December 31, 1998, contractual maturities for time sales and loans were
$30,643 million in 1999; $14,807 million in 2000; $9,448 million in 2001; $6,675
million in 2002; $5,465 million in 2003 and $15,371 million thereafter -
aggregating $82,409 million. Experience has shown that a substantial portion of
receivables will be paid prior to contractual maturity. Accordingly, the
maturities of time sales and loans are not to be regarded as forecasts of future
cash collections.
Investment in financing leases consists of direct financing and leveraged leases
of aircraft, railroad rolling stock, autos, other transportation equipment, data
processing equipment and medical equipment, as well as other manufacturing,
power generation, commercial real estate, and commercial equipment and
facilities.
As the sole owner of assets under direct financing leases and as the equity
participant in leveraged leases, the Corporation is taxed on total lease
payments received and is entitled to tax deductions based on the cost of leased
assets and tax deductions for interest paid to third-party participants. The
Corporation generally is entitled to any residual value of leased assets.
Investment in direct financing and leveraged leases represents net unpaid
rentals and estimated unguaranteed residual values of leased equipment, less
related deferred income. The Corporation has no general obligation for principal
and interest on notes and other instruments representing third-party
participation related to leveraged leases; such notes and other instruments have
not been included in liabilities but have been offset against the related
rentals receivable. The Corporation's share of rentals receivable on leveraged
leases is subordinate to the share of other participants who also have security
interests in the leased equipment.
30
<PAGE>
The Corporation's net investment in financing leases at December 31, 1998 and
1997, is shown below.
<TABLE>
<CAPTION>
TOTAL DIRECT
FINANCING LEASES FINANCING LEASES LEVERAGED LEASES
-------------------- -------------------- --------------------
(In millions) 1998 1997 1998 1997 1998 1997
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Total minimum lease payments receivable $ 66,513 $ 58,543 $ 47,436 $ 42,901 $ 19,077 $ 15,642
Less principal and interest on
third-party nonrecourse debt .......... (15,176) (12,097) -- -- (15,176) (12,097)
-------- -------- -------- -------- -------- --------
Net rentals receivable ............... 51,337 46,446 47,436 42,901 3,901 3,545
Estimated unguaranteed residual value
of leased assets ..................... 6,806 5,591 4,991 4,244 1,815 1,347
Less deferred income ................... (10,607) (10,268) (8,732) (8,529) (1,875) (1,739)
-------- -------- -------- -------- -------- --------
Investment in financing leases ....... 47,536 41,769 43,695 38,616 3,841 3,153
Less: Allowance for losses ............ (619) (656) (519) (575) (100) (81)
Deferred taxes arising from
financing leases ............... (8,583) (7,909) (5,137) (4,671) (3,446) (3,238)
-------- -------- -------- -------- -------- --------
Net investment in financing leases ..... $ 38,334 $ 33,204 $ 38,039 $ 33,370 $ 295 $ (166)
======== ======== ======== ======== ======== ========
</TABLE>
At December 31, 1998, contractual maturities for net rentals receivable under
financing leases were $14,088 million in 1999; $12,083 million in 2000; $8,944
million in 2001; $4,360 million in 2002; $2,758 million in 2003 and $9,104
million thereafter - aggregating $51,337 million. As with time sales and loans,
experience has shown that a portion of these receivables will be paid prior to
contractual maturity, and these amounts should not be regarded as forecasts of
future cash flows.
The Corporation has a noncontrolling investment in the common stock of
Montgomery Ward Holding Corp. ("MWHC") which, together with certain of its
affiliates, filed a bankruptcy petition for reorganization in 1997. Loans to
MWHC, which are considered impaired (as defined below), were $578 million and
$617 million at year-end 1998 and 1997, respectively. These amounts are excluded
from the nonearning and reduced earning receivable and impaired loan discussion
below. The Corporation also provides revolving credit card financing directly to
customers of MWHC and affiliates; such receivables totaled $3.4 billion at
December 31, 1998, including $1.6 billion that had been sold with recourse. The
obligations of customers with respect to these receivables are not affected by
the bankruptcy filing.
Nonearning consumer receivables were $1,250 million and $1,049 million at
December 31, 1998 and 1997, respectively, a substantial amount of which were
U.S. private-label credit card loans subject to various loss-sharing agreements
that provide full or partial recourse to the originating retailer. Nonearning
and reduced-earning receivables other than consumer receivables were $354
million and $353 million at year-end 1998 and 1997, respectively.
"Impaired" loans are defined by generally accepted accounting principles as
loans for which it is probable that the lender will be unable to collect all
amounts due according to original contractual terms of the loan agreement. That
definition excludes, among other things, leases or large groups of
smaller-balance homogenous loans, and therefore applies principally to the
Corporation's commercial loans. An analysis of impaired loans at December 31,
1998 and 1997 is shown below.
<TABLE>
<CAPTION>
(In millions) 1998 1997
-------- --------
<S> <C> <C>
Loans requiring allowance for losses ................................................... $ 343 $ 339
Loans expected to be fully recoverable ................................................. 158 167
-------- --------
$ 501 $ 506
======== ========
Allowance for losses ................................................................... $ 109 $ 170
Average investment during year ......................................................... 512 647
Interest income earned while impaired <F1> ............................................. 39 32
<FN>
<F1> Principally on the cash basis.
</FN>
</TABLE>
31
<PAGE>
NOTE 4. ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES
<TABLE>
<CAPTION>
(In millions) 1998 1997 1996
-------- -------- --------
<S> <C> <C> <C> <C>
Balance at January 1 ....................................................... $ 2,802 $ 2,693 $ 2,519
Provisions charged to operations ........................................... 1,601 1,421 1,033
Net transfers primarily related to companies acquired or sold .............. 377 127 139
Amounts written off - net .................................................. (1,508) (1,439) (998)
-------- -------- --------
Balance at December 31 ..................................................... $ 3,272 $ 2,802 $ 2,693
======== ======== ========
</TABLE>
NOTE 5. OTHER RECEIVABLES
At year-end 1998 and 1997, this account included reinsurance recoverables of
$2,188 million and $2,206 million and insurance-related receivables of $2,627
million and $1,830 million, respectively. Premium receivables, funds on deposit
with reinsurers and policy loans are included in insurance-related receivables.
Also in other receivables are trade receivables, accrued investment income,
operating lease receivables and a variety of sundry items.
NOTE 6. EQUIPMENT ON OPERATING LEASES
Equipment on operating leases by type of equipment and accumulated amortization
at December 31, 1998 and 1997, are shown below.
<TABLE>
<CAPTION>
(In millions) 1998 1997
-------- --------
<S> <C> <C>
Original cost
Vehicles .............................................................................. $ 9,825 $ 9,144
Aircraft .............................................................................. 9,321 7,686
Railroad rolling stock ................................................................ 2,804 2,367
Marine shipping containers ............................................................ 2,565 2,774
Other ................................................................................. 3,447 2,844
-------- --------
27,962 24,815
Accumulated amortization ............................................................... (7,021) (6,126)
-------- --------
$ 20,941 $ 18,689
======== ========
</TABLE>
Amortization of equipment on operating leases was $2,185 million, $2,102 million
and $1,848 million in 1998, 1997 and 1996, respectively. Noncancelable future
rentals due from customers for equipment on operating leases at year-end 1998
totaled $12,808 million and are due as follows: $3,377 million in 1999; $2,540
million in 2000; $1,841 million in 2001; $1,318 million in 2002; $897 million in
2003 and $2,835 million thereafter.
The Corporation acts as a lender and lessor to the commercial airline industry.
At December 31, 1998 and 1997, the balance of such loans, leases and equipment
leased to others was $10,170 million and $8,980 million, respectively. In
addition, at December 31, 1998, the Corporation had issued financial guarantees
and funding commitments of $74 million ($123 million at year-end 1997) and had
placed multiyear orders for various Boeing and Airbus aircraft with list prices
of approximately $9.4 billion ($6.2 billion at year-end 1997).
32
<PAGE>
NOTE 7. BUILDINGS AND EQUIPMENT
Buildings and equipment include office buildings, satellite communications
equipment, data processing equipment, vehicles, furniture and office equipment.
Depreciation expense was $409 million in 1998, $341 million in 1997 and $289
million in 1996.
NOTE 8. INTANGIBLE ASSETS
Intangible assets at December 31, 1998 and 1997, are shown in the table below.
<TABLE>
<CAPTION>
(In millions) 1998 1997
-------- --------
<S> <C> <C>
Goodwill ............................................................................... $ 10,143 $ 7,368
Present value of future profits ("PVFP") ............................................... 1,479 1,671
Other intangibles ...................................................................... 411 420
-------- --------
$ 12,033 $ 9,459
======== ========
</TABLE>
The Corporation's intangible assets are shown net of accumulated amortization of
$2,763 million at December 31, 1998, and $2,098 million at December 31, 1997.
PVFP amortization, which is on an accelerated basis and net of interest, is
projected to range from 15% to 8% of the year-end 1998 unamortized balance for
each of the next five years.
NOTE 9. OTHER ASSETS
Other assets at December 31, 1998 and 1997, are shown in the table below.
<TABLE>
<CAPTION>
(In millions) 1998 1997
-------- --------
<S> <C> <C>
Investments:
Assets acquired for resale ............................................................ $ 6,164 $ 4,403
Investments in and advances to associated companies ................................... 7,495 4,626
Real estate ventures .................................................................. 3,131 2,326
Other ................................................................................. 2,935 1,986
-------- --------
19,725 13,341
Separate accounts ...................................................................... 6,476 4,851
Servicing assets ....................................................................... 1,606 1,710
Deferred insurance acquisition costs ................................................... 2,115 1,671
Other .................................................................................. 3,284 2,460
-------- --------
$ 33,206 $ 24,033
======== ========
</TABLE>
Separate accounts represent investments controlled by policyholders and are
associated with identical amounts reported as insurance liabilities in note 11.
33
<PAGE>
NOTE 10. BORROWINGS
Total short-term borrowings at December 31, 1998 and 1997, consisted of the
following:
<TABLE>
<CAPTION>
1998 1997
-------------------- --------------------
AVERAGE AVERAGE
(Dollars in millions) AMOUNT RATE <F1> AMOUNT RATE <F1>
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Commercial paper - U.S. ........................................ $ 77,076 5.38% $ 63,819 5.93%
Commercial paper - non-U.S. .................................... 3,953 4.80 3,879 4.18
Current portion of long-term debt .............................. 14,645 5.66 15,101 6.30
Other .......................................................... 11,745 8,881
-------- --------
$107,419 $ 91,680
======== ========
Total long-term borrowings at December 31, 1998 and 1997, were as follows:
1998
AVERAGE
RATE
(Dollars in millions) <F1> MATURITIES 1998 1997
-------- -------- -------- --------
Senior notes ................................................... 6.04% 2000-2055 $ 57,486 $ 44,437
Subordinated notes <F2> ........................................ 8.04 2006-2012 697 697
-------- --------
$ 58,183 $ 45,134
======== ========
<FN>
<F1> Based on year-end balances and local currency interest rates, including
the effects of interest rate and currency swaps, if any, directly
associated with the original debt issuance.
<F2> Guaranteed by GE Company.
</FN>
</TABLE>
Borrowings of the Corporation are addressed below from two perspectives -
liquidity and interest rate management. Additional information about borrowings
and associated swaps can be found in note 20.
LIQUIDITY requirements of the Corporation are principally met through the credit
markets. Maturities of long-term borrowings during the next five years,
including the current portion of long-term debt, at December 31, 1998, were
$14,645 million in 1999; $13,889 million in 2000; $10,925 million in 2001;
$7,059 million in 2002 and $4,794 million in 2003.
At December 31, 1998, the Corporation held committed lines of credit aggregating
$26.7 billion with 133 banks, including $11.8 billion of revolving credit
agreements pursuant to which it has the right to borrow funds for periods
exceeding one year. A total of $3.4 billion and $1.5 billion of these credit
lines were also available for use by GE Capital Services and GE Company,
respectively. Also, at December 31, 1998, substantially all of the approximately
$4.0 billion of GE Company's credit lines were available for use by the
Corporation or GE Capital Services. During 1998, amounts drawn under these lines
were not significant. The Corporation compensates banks for credit facilities in
the form of fees, which were insignificant in each of the past three years.
INTEREST RATES ARE MANAGED by the Corporation in light of the anticipated
behavior, including prepayment behavior, of assets in which debt proceeds are
invested. A variety of instruments, including interest rate and currency swaps
and currency forwards, are employed to achieve management's interest rate
objectives. Effective interest rates are lower under these "synthetic" positions
than could have been achieved by issuing debt directly.
34
<PAGE>
The following table shows the Corporation's borrowing positions at December 31,
1998 and 1997, considering the effects of swaps.
<TABLE>
<CAPTION>
(In millions) 1998 1997
-------- --------
<S> <C> <C>
EFFECTIVE BORROWINGS (INCLUDING SWAPS)
Short-term ............................................................................. $ 68,001 $ 53,366
======== ========
Long-term (including current portion)
Fixed rate <F1> ....................................................................... $ 71,770 $ 58,474
Floating rate ......................................................................... 25,831 24,974
-------- --------
Total long-term ........................................................................ $ 97,601 $ 83,448
======== ========
<FN>
<F1> Includes the notional amount of long-term interest rate swaps that
effectively convert the floating-rate nature of short-term borrowings to
fixed rates of interest.
</FN>
</TABLE>
At December 31, 1998, interest rate swap maturities ranged from 1999 to 2048,
and average interest rates for fixed-rate borrowings (including "synthetic"
fixed-rate borrowings) were 6.01% (6.29% at year-end 1997).
NOTE 11. INSURANCE LIABILITIES, RESERVES AND ANNUITY BENEFITS
Insurance liabilities, reserves and annuity benefits at December 31, 1998 and
1997, are shown below.
<TABLE>
<CAPTION>
(In millions) 1998 1997
-------- --------
<S> <C> <C>
Investment contracts and universal life benefits ....................................... $ 26,995 $ 25,961
Life insurance benefits and other <F1> ................................................. 13,725 11,967
Unpaid claims and claims adjustment expenses <F2> ...................................... 3,721 3,670
Unearned premiums ...................................................................... 3,518 3,799
Separate accounts (see note 9) ......................................................... 6,476 4,851
-------- --------
$ 54,435 $ 50,248
======== ========
<FN>
<F1> Life insurance benefits are accounted for mainly by a net-level-premium
method using estimated yields generally ranging from 5% to 9% in both
1998 and 1997.
<F2> Principally property and casualty reserves; includes amounts for both
reported and incurred-but-not-reported claims, reduced by anticipated
salvage and subrogation recoveries. Estimates of liabilities are reviewed
and updated continually, with changes in estimated losses reflected in
operations.
</FN>
</TABLE>
When the Corporation cedes insurance to third parties, it is not relieved of its
primary obligation to policyholders. Losses on ceded risks give rise to claims
for recovery; allowances are established for such receivables from reinsurers.
35
<PAGE>
A summary of activity affecting unpaid claims and claims adjustment expenses
follows.
<TABLE>
<CAPTION>
(In millions) 1998 1997 1996
-------- -------- --------
<S> <C> <C> <C> <C>
Balance at January 1 - gross ............................................... $ 3,670 $ 1,907 $ 1,432
Less reinsurance recoverables .............................................. (438) (117) (76)
-------- -------- --------
Balance at January 1 - net ................................................. 3,232 1,790 1,356
Claims and expenses incurred:
Current year .............................................................. 2,469 1,989 1,230
Prior years ............................................................... (184) 61 29
Claims and expenses paid:
Current year .............................................................. (1,222) (1,144) (541)
Prior years ............................................................... (1,176) (902) (614)
Claim reserves related to acquired companies ............................... 6 1,360 309
Other ...................................................................... 18 78 21
-------- -------- --------
Balance at December 31 - net ............................................... 3,143 3,232 1,790
Add reinsurance recoverables ............................................... 578 438 117
-------- -------- --------
Balance at December 31 - gross ............................................. $ 3,721 $ 3,670 $ 1,907
======== ======== ========
</TABLE>
Prior-year claims and expenses incurred in the preceding table resulted
principally from settling claims established in earlier accident years for
amounts that differed from expectations.
Financial guarantees and credit life risk of insurance affiliates at December
31, 1998 and 1997, are summarized below.
<TABLE>
<CAPTION>
(In millions) 1998 1997
-------- --------
<S> <C> <C>
Guarantees, principally on municipal bonds and structured finance issues ............... $166,576 $140,077
Mortgage insurance risk in force ....................................................... 43,939 46,243
Credit life insurance risk in force .................................................... 31,018 26,593
Less reinsurance ....................................................................... (37,184) (33,503)
-------- --------
$204,349 $179,410
======== ========
</TABLE>
The effects of reinsurance on premiums written and premiums and commissions
earned were as follows for the past three years.
<TABLE>
<CAPTION>
PREMIUMS WRITTEN PREMIUMS AND COMMISSIONS EARNED
-------------------------------- --------------------------------
(In millions) 1998 1997 1996 1998 1997 1996
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Direct ................................. $ 5,696 $ 4,541 $ 3,175 $ 5,547 $ 4,500 $ 3,126
Assumed ................................ 817 502 534 885 479 380
Ceded .................................. (698) (493) (493) (772) (463) (370)
-------- -------- -------- -------- -------- --------
Net .................................... $ 5,815 $ 4,550 $ 3,216 $ 5,660 $ 4,516 $ 3,136
======== ======== ======== ======== ======== ========
</TABLE>
Reinsurance recoveries recognized as a reduction of insurance losses and
policyholder and annuity benefits amounted to $396 million, $334 million and
$286 million for the years ended December 31, 1998, 1997 and 1996, respectively.
36
<PAGE>
NOTE 12. MINORITY INTEREST
Minority interest in equity of consolidated affiliates includes preferred stock
issued by a subsidiary with a liquidation preference value of $860 million and
$660 million as of December 31, 1998 and 1997, respectively. Dividend rates on
the preferred stock ranged from 3.9% to 4.6% during 1998, from 3.8% to 4.5%
during 1997, and from 3.8% to 4.3% during 1996.
NOTE 13. EQUITY
Changes in equity for each of the last three years were as follows:
<TABLE>
<CAPTION>
ACCUMULATED
NONOWNER
VARIABLE CHANGES
CUMULATIVE ADDITIONAL OTHER
PREFERRED COMMON PAID-IN RETAINED THAN
(In millions) STOCK STOCK CAPITAL EARNINGS EARNINGS TOTAL
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996 ............. $ 2 $ 768 $ 4,022 $ 8,937 $ 473 $ 14,202
Capital contributions .................. -- -- 2 -- -- 2
Net unrealized losses on
investment securities <F1> ............ -- -- -- -- (394) (394)
Currency translation adjustments <F2> .. -- -- -- -- (25) (25)
Net earnings ........................... -- -- -- 2,632 -- 2,632
Dividends declared:
Common stock .......................... -- -- -- (815) -- (815)
Preferred stock ....................... -- -- -- (76) -- (76)
-------- -------- -------- -------- -------- --------
Balance at December 31, 1996 ........... 2 768 4,024 10,678 54 15,526
Capital contributions .................. -- -- 290 -- -- 290
Preferred stock issued ................. -- -- 430 -- -- 430
Net unrealized gains on
investment securities <F1> ............ -- -- -- -- 996 996
Currency translation adjustments <F2> .. -- -- -- -- (52) (52)
Net earnings ........................... -- -- -- 2,729 -- 2,729
Dividends declared:
Common stock .......................... -- -- -- (1,468) -- (1,468)
Preferred stock ....................... -- -- -- (78) -- (78)
-------- -------- -------- -------- -------- --------
Balance at December 31, 1997 ........... 2 768 4,744 11,861 998 18,373
Capital contributions .................. -- -- 119 -- -- 119
Preferred stock issued ................. -- -- 70 -- -- 70
Net unrealized gains on
investment securities <F1> ............ -- -- -- -- 276 276
Currency translation adjustments <F2> .. -- -- -- -- 6 6
Reclassification adjustments <F3> ...... -- -- -- -- (254) (254)
Net earnings ........................... -- -- -- 3,374 -- 3,374
Dividends declared:
Common stock .......................... -- -- -- (798) -- (798)
Preferred stock ....................... -- -- -- (97) -- (97)
-------- -------- -------- -------- -------- --------
Balance at December 31, 1998 ........... $ 2 $ 768 $ 4,933 $ 14,340 $ 1,026 $ 21,069
======== ======== ======== ======== ======== ========
<FN>
<F1> Presented net of deferred taxes of $139 million, $663 million and ($265)
million in 1998, 1997 and 1996, respectively.
<F2> Presented net of deferred taxes of $5 million, ($36) million and ($16)
million in 1998, 1997 and 1996, respectively.
<F3> Presented net of deferred taxes of ($141) million.
</FN>
</TABLE>
All common stock is owned by GE Capital Services, all of the common stock of
which is in turn wholly owned by GE Company.
37
<PAGE>
Changes in fair value of available-for-sale investment securities are reflected,
net of applicable taxes and other adjustments, in equity. The changes from year
to year were primarily attributable to the effects of changes in year-end market
interest rates on the fair value of the securities.
During 1998 and 1997, the Corporation issued 700 and 4,300 additional shares of
its variable cumulative preferred stock, respectively. Dividend rates on the
preferred stock ranged from 3.9% to 5.2% during 1998, and from 3.8% to 5.2%
during 1997 and 1996.
During 1998, the Corporation authorized 750,000 shares of preferred stock, $.01
par value, none of which was issued or outstanding at December 31, 1998.
At December 31, 1998 and 1997, the aggregate statutory capital and surplus of
the insurance businesses totaled $9.4 billion and $7.8 billion, respectively.
Accounting practices prescribed by statutory authorities are used in preparing
statutory statements.
NOTE 14. OPERATING AND ADMINISTRATIVE EXPENSES
Employees and retirees of the Corporation are covered under a number of pension,
health and life insurance plans. The principal pension plan is the GE Company
Pension Plan, a defined benefit plan, while employees of certain affiliates are
covered under separate plans. The Corporation provides health and life insurance
benefits to certain of its retired employees, principally through GE Company's
benefit program. The annual cost to the Corporation of providing these benefits
is not material.
Rental expense relating to equipment the Corporation leases from others for the
purposes of subleasing was $439 million in 1998, $392 million in 1997 and $269
million in 1996. Other rental expense was $429 million in 1998, $327 million in
1997 and $263 million in 1996, principally for the rental of office space and
data processing equipment. Minimum future rental commitments under noncancelable
leases at December 31, 1998 are $700 million in 1999; $617 million in 2000; $566
million in 2001; $510 million in 2002; $461 million in 2003 and $2,222 million
thereafter. The Corporation, as a lessee, has no material lease agreements
classified as capital leases.
Amortization of deferred insurance acquisition costs charged to operations in
1998, 1997 and 1996 was $863 million, $543 million and $365 million,
respectively.
NOTE 15. INCOME TAXES
The provision for income taxes is summarized in the following table.
<TABLE>
<CAPTION>
(In millions) 1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Estimated amounts payable .................................................. $ 584 $ 409 $ 157
Deferred tax expense from temporary differences ............................ 601 588 1,015
-------- -------- --------
$ 1,185 $ 997 $ 1,172
======== ======== ========
</TABLE>
GE Company files a consolidated U.S. federal income tax return which includes
the Corporation. The provision for estimated taxes payable includes the effect
of the Corporation on the consolidated return.
Estimated amounts payable includes amounts applicable to non-U.S. jurisdictions
of $699 million, $573 million and $485 million in 1998, 1997 and 1996,
respectively.
Deferred income tax balances reflect the impact of temporary differences between
the carrying amounts of assets and liabilities and their tax bases and are
stated at enacted tax rates expected to be in effect when taxes are actually
paid or recovered.
38
<PAGE>
Except for certain earnings that the Corporation intends to reinvest
indefinitely, provision has been made for the estimated U.S. federal income tax
liabilities applicable to undistributed earnings of affiliates and associated
companies. It is not practicable to determine the U.S. federal income tax
liability, if any, that would be payable if such earnings were not reinvested
indefinitely.
U.S. income before taxes was $3.2 billion in 1998, and $2.4 billion in 1997 and
$2.7 billion in 1996. The corresponding amounts for non-U.S. based operations
were $1.3 billion in 1998 and 1997 and $1.1 billion in 1996.
A reconciliation of the U.S. federal statutory rate to the actual income tax
rate follows.
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Statutory U.S. federal income tax rate ..................................... 35.0% 35.0% 35.0%
Increase (reduction) in rate resulting from:
Amortization of goodwill .................................................. 1.0 1.1 1.0
Tax-exempt income ......................................................... (3.2) (3.2) (3.0)
Foreign Sales Corporation tax benefits .................................... (0.7) (0.6) (0.4)
Dividends received, not fully taxable ..................................... (1.8) (1.8) (1.7)
Fuels credits ............................................................. (2.0) (1.9) (0.9)
Other - net ............................................................... (2.3) (1.8) 0.8
-------- -------- --------
Actual income tax rate ..................................................... 26.0% 26.8% 30.8%
======== ======== ========
</TABLE>
Principal components of the net deferred tax liability balances at December 31,
1998 and 1997, were as follows:
<TABLE>
<CAPTION>
(In millions) 1998 1997
-------- --------
<S> <C> <C>
Assets:
Allowance for losses .................................................................. $ 1,359 $ 1,360
Insurance reserves .................................................................... 1,012 1,243
AMT credit carryforwards .............................................................. 903 354
Other ................................................................................. 1,897 2,100
-------- --------
Total deferred tax assets .............................................................. 5,171 5,057
-------- --------
Liabilities:
Financing leases ...................................................................... 8,583 7,909
Operating leases ...................................................................... 2,417 2,156
Net unrealized gains on securities .................................................... 655 657
Other ................................................................................. 2,415 2,502
-------- --------
Total deferred tax liabilities ......................................................... 14,070 13,224
-------- --------
Net deferred tax liability ............................................................. $ 8,899 $ 8,167
======== ========
</TABLE>
NOTE 16. OPERATING SEGMENT DATA
At year-end 1998, the Corporation adopted Statement of Financial Accounting
Standards ("SFAS") No. 131, Disclosures about Segments of an Enterprise and
Related Information, which requires segment data to be measured and analyzed on
a basis that is consistent with how business activities are reported internally
for management. Prior period amounts have been restated in accordance with the
requirements of the new standard. The Corporation's operating segments are
organized based on the nature of products and services provided. A description
of the operating segments can be found in Item 1. Business., under the heading
Operating Segments, on page 3 of this report. The accounting policies for these
segments are the same as those described for the consolidated entity.
The Corporation evaluates the performance of its operating segments primarily on
the basis of net earnings. Details of total revenues and net earnings by
operating segment are provided in Item 7. Management's Discussion and Analysis
of Results of Operations. Operating Segments, in the tables on page 14 of this
report.
39
<PAGE>
Other specific information is provided below in accordance with the requirements
of SFAS 131 because they are included as a component of overall segment net
earnings or total assets.
<TABLE>
<CAPTION>
(In millions) DEPRECIATION AND AMORTIZATION <F1> PROVISION FOR INCOME TAXES
-------------------------------- --------------------------------
For the years ended December 31 1998 1997 1996 1998 1997 1996
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Consumer Services ...................... $ 961 $ 897 $ 569 $ 442 $ 230 $ 430
Equipment Management ................... 1,890 1,690 1,643 257 353 298
Mid-Market Financing ................... 405 398 400 239 198 174
Specialized Financing .................. 51 50 41 41 170 157
Specialty Insurance .................... 53 40 30 103 40 39
All other .............................. 92 63 15 103 6 74
-------- -------- -------- -------- -------- --------
Total ................................ $ 3,452 $ 3,138 $ 2,698 $ 1,185 $ 997 $ 1,172
======== ======== ======== ======== ======== ========
TIME SALES, LOAN, INVESTMENT AND
OTHER INCOME <F2> INTEREST EXPENSE
-------------------------------- --------------------------------
For the years ended December 31 1998 1997 1996 1998 1997 1996
-------- -------- -------- -------- -------- --------
Consumer Services ...................... $ 10,661 $ 9,585 $ 8,051 $ 3,601 $ 3,225 $ 3,003
Equipment Management ................... 2,241 1,985 1,403 1,486 1,296 1,204
Mid-Market Financing ................... 1,719 1,160 1,065 1,674 1,276 1,172
Specialized Financing .................. 2,645 2,192 2,487 1,541 1,436 1,491
Specialty Insurance .................... 1,301 953 696 538 427 327
All other .............................. 135 73 (20) (222) (330) (155)
-------- -------- -------- -------- -------- --------
Total ................................ $ 18,702 $ 15,948 $ 13,682 $ 8,618 $ 7,330 $ 7,042
======== ======== ======== ======== ======== ========
PROPERTY, PLANT AND EQUIPMENT
ADDITIONS (INCLUDING EQUIPMENT
ASSETS LEASED TO OTHERS) <F3>
At December 31 For the years ended December 31
-------------------------------- --------------------------------
1998 1997 1996 1998 1997 1996
-------- -------- -------- -------- -------- --------
Consumer Services <F4> ................. $130,861 $117,410 $104,695 $ 2,218 $ 1,863 $ 1,675
Equipment Management <F5> .............. 37,902 33,403 28,521 4,408 4,314 3,264
Mid-Market Financing ................... 41,768 29,315 25,991 1,316 978 696
Specialized Financing <F5> ............. 35,807 28,810 28,197 88 36 36
Specialty Insurance .................... 19,355 17,760 11,770 22 31 21
All other .............................. 3,357 2,079 1,642 25 64 48
-------- -------- -------- -------- -------- --------
Total ................................ $269,050 $228,777 $200,816 $ 8,077 $ 7,286 $ 5,740
======== ======== ======== ======== ======== ========
<FN>
<F1> Includes amortization of goodwill and other intangibles.
<F2> Principally interest income.
<F3> Additions to property, plant and equipment (including equipment leased
to others) include amounts relating to principal businesses purchased.
<F4> In 1997, the Corporation recorded its share of Montgomery Ward Holding
Corp. ("MWHC") losses of $380 million (after tax), by reducing its
investments in MWHC, resulting in the writing off of its investment in
MWHC common and preferred stock.
<F5> Total assets of the Equipment Management and Specialized Financing
segments at December 31, 1998, include investments in and advances to
non-consolidated affiliates of $2,937 million and $4,765 million,
respectively, which contributed approximately $173 million and $295
million, respectively, to segment pre-tax income for the year ended
December 31, 1998.
</FN>
</TABLE>
40
<PAGE>
NOTE 17. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data were as follows:
<TABLE>
<CAPTION>
FIRST QUARTER SECOND QUARTER
-------------------- --------------------
(In millions) 1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues ....................................................... $ 9,501 $ 7,773 $ 9,984 $ 7,658
-------- -------- -------- --------
Expenses:
Interest ...................................................... 1,948 1,711 2,105 1,780
Operating and administrative and cost of goods sold ........... 4,113 3,025 4,447 2,855
Insurance losses and policyholder and annuity benefits ........ 1,342 1,149 1,367 1,106
Provision for losses on financing receivables ................. 332 312 408 337
Depreciation and amortization of buildings and equipment and
equipment on operating leases ................................ 652 565 598 563
Minority interest in net earnings of consolidated affiliates .. 11 13 10 1
-------- -------- -------- --------
Earnings before income taxes ................................... 1,103 998 1,049 1,016
Provision for income taxes ..................................... (323) (301) (236) (298)
-------- -------- -------- --------
Net earnings ................................................... $ 780 $ 697 $ 813 $ 718
======== ======== ======== ========
THIRD QUARTER FOURTH QUARTER
-------------------- --------------------
1998 1997 1998 1997
-------- -------- -------- --------
Revenues ....................................................... $ 10,335 $ 8,377 $ 11,585 $ 9,596
-------- -------- -------- --------
Expenses:
Interest ...................................................... 2,076 1,832 2,489 2,007
Operating and administrative and cost of goods sold ........... 4,498 3,567 5,382 4,172
Insurance losses and policyholder and annuity benefits ........ 1,418 1,227 1,417 1,343
Provision for losses on financing receivables ................. 304 371 557 401
Depreciation and amortization of buildings and equipment and
equipment on operating leases ................................ 663 623 681 692
Minority interest in net earnings of consolidated affiliates .. 14 13 14 13
-------- -------- -------- --------
Earnings before income taxes ................................... 1,362 744 1,045 968
Provision for income taxes ..................................... (432) (176) (194) (222)
-------- -------- -------- --------
Net earnings ................................................... $ 930 $ 568 $ 851 $ 746
======== ======== ======== ========
</TABLE>
NOTE 18. RESTRICTED NET ASSETS OF AFFILIATES
Certain of the Corporation's consolidated affiliates are restricted from
remitting funds to the Parent in the form of dividends or loans by a variety of
regulations, the purpose of which is to protect affected insurance
policyholders, depositors or investors. At year-end 1998, net assets of the
Corporation's regulated affiliates amounted to $18.1 billion, of which $15.0
billion was restricted.
NOTE 19. SUPPLEMENTAL CASH FLOWS INFORMATION
"Other - net operating activities" in the Statement of Cash Flows consists
principally of adjustments to other liabilities, current and noncurrent accruals
and deferrals of costs and expenses, adjustments for gains and losses on assets,
increases and decreases in assets held for sale, and adjustments to assets such
as amortization of goodwill and intangibles.
The Statement of Cash Flows excludes certain noncash transactions that had no
significant effect on the investing or financing activities of the Corporation.
41
<PAGE>
Certain supplemental information related to the Corporation's cash flows were as
follows for the past three years.
<TABLE>
<CAPTION>
(In millions) 1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
FINANCING RECEIVABLES
Increase in loans to customers ............................................. $(73,827) $(55,689) $(49,890)
Principal collections from customers - loans ............................... 63,407 50,679 49,923
Investment in equipment for financing leases ............................... (20,298) (16,420) (14,427)
Principal collections from customers - financing leases .................... 15,501 13,796 11,158
Net change in credit card receivables ...................................... (4,705) (4,186) (3,068)
Sales of financing receivables ............................................. 13,805 9,922 4,026
-------- -------- --------
$ (6,117) $ (1,898) $ (2,278)
======== ======== ========
ALL OTHER INVESTING ACTIVITIES
Purchases of securities by insurance and annuity businesses ................ $(17,728) $(11,700) $ (8,244)
Dispositions and maturities of securities by insurance and
annuity businesses ........................................................ 14,231 10,261 6,736
Proceeds from principal business dispositions .............................. -- 241 --
Other ...................................................................... (8,380) (3,965) (3,897)
-------- -------- --------
$(11,877) $ (5,163) $ (5,405)
======== ======== ========
NEWLY ISSUED DEBT HAVING MATURITIES LONGER THAN 90 DAYS
Short-term (91 to 365 days) ................................................ $ 5,881 $ 3,502 $ 5,061
Long-term (longer than one year) ........................................... 33,453 15,566 16,689
Proceeds - nonrecourse, leveraged lease debt ............................... 2,106 1,757 595
-------- -------- --------
$ 41,440 $ 20,825 $ 22,345
======== ======== ========
REPAYMENTS AND OTHER REDUCTIONS OF DEBT HAVING MATURITIES LONGER
THAN 90 DAYS
Short-term (91 to 365 days) ................................................ $(25,901) $(21,320) $(22,755)
Long-term (longer than one year) ........................................... (4,739) (1,150) (1,025)
Principal payments - nonrecourse, leveraged lease debt ..................... (387) (287) (276)
-------- -------- --------
$(31,027) $(22,757) $(24,056)
======== ======== ========
ALL OTHER FINANCING ACTIVITIES
Proceeds from sales of investment contracts ................................ $ 4,914 $ 4,462 $ 2,341
Redemption of investment contracts ......................................... (5,355) (4,453) (2,429)
Capital contributions from parent company .................................. 119 182 --
-------- -------- --------
$ (322) $ 191 $ (88)
======== ======== ========
CASH PAID DURING THE YEAR FOR:
Interest ................................................................... $ (8,324) $ (7,471) $ (7,166)
Income taxes ............................................................... (883) (502) (87)
</TABLE>
Changes in operating assets and liabilities are net of acquisitions and
dispositions of businesses.
42
<PAGE>
"Payments for principal businesses purchased" in the Statement of Cash Flows is
net of cash acquired and includes debt assumed and immediately repaid in
acquisitions. In conjunction with the acquisitions, liabilities were assumed as
follows:
<TABLE>
<CAPTION>
(In millions) 1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Fair value of assets acquired .............................................. $ 23,431 $ 15,190 $ 27,341
Cash paid .................................................................. (16,986) (4,736) (4,839)
-------- -------- --------
Liabilities assumed ........................................................ $ 6,445 $ 10,454 $ 22,502
======== ======== ========
</TABLE>
NOTE 20. ADDITIONAL INFORMATION ABOUT FINANCIAL INSTRUMENTS
This note contains estimated fair values of certain financial instruments to
which the Corporation is a party. Apart from the Corporation's own borrowings
and certain marketable securities, relatively few of these instruments are
actively traded. Thus, fair values must often be determined by using one or more
models that indicate value based on estimates of quantifiable characteristics as
of a particular date. Because this undertaking is, by its nature, difficult and
highly judgmental, for a limited number of instruments, alternative valuation
techniques may have produced disclosed values different from those that could
have been realized at December 31, 1998 or 1997. Assets and liabilities that, as
a matter of accounting policy, are reflected in the accompanying financial
statements at fair value are not included in the following disclosures; such
items include cash and equivalents, investment securities and separate accounts.
A description of how values are estimated follows.
BORROWINGS. Based on quoted market prices or market comparables. Fair values of
interest rate and currency swaps on borrowings are based on quoted market prices
and include the effects of counterparty creditworthiness.
TIME SALES AND LOANS. Based on quoted market prices, recent transactions and/or
discounted future cash flows, using rates at which similar loans would have been
made to similar borrowers.
INVESTMENT CONTRACT BENEFITS. Based on expected future cash flows, discounted at
currently offered discount rates for immediate annuity contracts or cash
surrender values for single premium deferred annuities.
FINANCIAL GUARANTEES AND CREDIT LIFE. Based on future cash flows, considering
expected renewal premiums, claims, refunds and servicing costs, discounted at a
market rate.
ALL OTHER INSTRUMENTS. Based on comparable transactions, market comparables,
discounted future cash flows, quoted market prices, and/or estimates of the cost
to terminate or otherwise settle obligations to counterparties.
43
<PAGE>
Information about financial instruments that were not carried at fair value at
December 31, 1998 and 1997, is shown below.
<TABLE>
<CAPTION>
1998
--------------------------------------------
ASSETS (LIABILITIES)
---------------------------------
CARRYING ESTIMATED FAIR VALUE
NOTIONAL AMOUNT --------------------
(In millions) AMOUNT (NET) HIGH LOW
-------------------- --------------------
<S> <C> <C> <C> <C>
Assets
Time sales and loans .......................................... $ <F1> $ 74,141 $ 75,000 $ 73,820
Integrated interest rate swaps ................................ 13,217 16 (96) (96)
Purchased options ............................................. 11,180 136 120 120
Mortgage-related positions
Mortgage purchase commitments ................................ 1,983 -- 15 15
Mortgage sale commitments .................................... 3,276 -- (9) (9)
Mortgages held for sale ...................................... <F1> 4,402 4,454 4,454
Options, including "floors" .................................. 21,406 87 176 176
Interest rate swaps and futures .............................. 6,662 -- 49 49
Other cash financial instruments .............................. <F1> 3,089 3,317 3,115
Liabilities
Borrowings and related instruments
Borrowings <F2> <F3> ......................................... <F1> (165,602) (167,814) (167,814)
Interest rate swaps .......................................... 44,718 -- (1,275) (1,275)
Currency swaps ............................................... 29,645 -- 252 252
Currency forwards ............................................ 22,864 -- (392) (392)
Investment contract benefits .................................. <F1> (22,609) (22,529) (22,529)
Insurance - financial guarantees and credit life .............. 204,349 (3,091) (3,298) (3,390)
Credit and liquidity support - securitizations ................ 17,471 (29) (29) (29)
Performance guarantees - principally letters of credit ........ 2,340 -- -- --
Other ......................................................... 2,888 (1,921) (1,190) (1,190)
Other firm commitments
Currency forwards ............................................. 5,072 -- (52) (52)
Ordinary course of business lending commitments ............... 9,839 -- (12) (12)
Unused revolving credit lines
Commercial ................................................... 6,401 -- -- --
Consumer - principally credit cards .......................... 132,475 -- -- --
1997
--------------------------------------------
ASSETS (LIABILITIES)
---------------------------------
CARRYING ESTIMATED FAIR VALUE
NOTIONAL AMOUNT --------------------
AMOUNT (NET) HIGH LOW
-------------------- --------------------
Assets
Time sales and loans .......................................... $ <F1> $ 62,712 $ 63,105 $ 61,171
Integrated interest rate swaps ................................ 11,378 19 (128) (128)
Purchased options ............................................. 1,979 54 9 9
Mortgage-related positions
Mortgage purchase commitments ................................ 2,082 -- 11 11
Mortgage sale commitments .................................... 2,540 -- (9) (9)
Mortgages held for sale ...................................... <F1> 2,378 2,379 2,379
Options, including "floors" .................................. 30,347 51 141 141
Interest rate swaps and futures .............................. 3,681 -- 23 23
Other cash financial instruments .............................. <F1> 2,242 2,592 2,349
Liabilities
Borrowings and related instruments
Borrowings <F2> <F3> ......................................... <F1> (136,814) (137,360) (137,360)
Interest rate swaps .......................................... 40,880 -- (170) (170)
Currency swaps ............................................... 23,382 -- (1,249) (1,249)
Currency forwards ............................................ 14,483 -- 367 367
Investment contract benefits .................................. <F1> (21,703) (21,556) (21,556)
Insurance - financial guarantees and credit life .............. 179,410 (2,837) (2,936) (3,052)
Credit and liquidity support - securitizations ................ 10,008 (46) (46) (46)
Performance guarantees - principally letters of credit ........ 2,553 (34) -- (67)
Other ......................................................... 3,288 (1,134) (1,282) (1,303)
Other firm commitments
Currency forwards ............................................. 1,744 -- 11 11
Ordinary course of business lending commitments ............... 7,891 -- (62) (62)
Unused revolving credit lines
Commercial ................................................... 4,850 -- -- --
Consumer - principally credit cards .......................... 134,123 -- -- --
<FN>
<F1> Not applicable.
<F2> Includes effects of interest rate and currency swaps, which also are
listed separately.
<F3> See note 10.
</FN>
</TABLE>
Additional information about certain financial instruments in the above table
follows.
44
<PAGE>
CURRENCY FORWARDS AND OPTIONS are employed by the Corporation to manage
exposures to changes in currency exchange rates associated with commercial
purchase and sale transactions and to optimize borrowing costs as discussed in
note 10. These financial instruments generally are used to fix the local
currency cost of purchased goods or services or selling prices denominated in
currencies other than the functional currency. Currency exposures that result
from net investments in affiliates are managed principally by funding assets
denominated in local currency with debt denominated in those same currencies. In
certain circumstances, net investment exposures are managed using currency
forwards and currency swaps.
OPTIONS AND INSTRUMENTS CONTAINING OPTION FEATURES that behave based on limits
("caps", "floors" or "collars") on interest rate movement are used primarily to
hedge prepayment risk in certain of the Corporation's business activities, such
as mortgage servicing and annuities.
SWAPS OF INTEREST RATES AND CURRENCIES are used by the Corporation to optimize
borrowing costs for a particular funding strategy (see note 10). Interest rate
and currency swaps, along with purchased options and futures, are used by the
Corporation to establish specific hedges of mortgage-related assets and to
manage net investment exposures. Credit risk of these positions is evaluated by
management under the credit criteria discussed below. As part of its ongoing
customer activities, the Corporation also enters into swaps that are integrated
into investments in, loans to or guarantees of the obligations of particular
customers and do not involve assumption of third-party credit risk beyond the
risk previously approved by the Corporation with respect to such investments,
loans or guarantees. Such integrated swaps are evaluated and monitored like
their associated investments, loans or guarantees, and are not therefore subject
to the same credit criteria that would apply to a stand-alone position.
COUNTERPARTY CREDIT RISK - risk that counterparties will be financially unable
to make payments according to the terms of the agreements - is the principal
risk associated with swaps, purchased options and forwards. Gross market value
of probable future receipts is one way to measure this risk, but is meaningful
only in the context of net credit exposure to individual counterparties. At
December 31, 1998 and 1997, this gross market risk amounted to $2.2 billion and
$1.9 billion, respectively. Aggregate fair values that represent associated
probable future obligations, normally associated with a right of offset against
probable future receipts, amounted to $3.4 billion and $2.8 billion at December
31, 1998 and 1997, respectively.
Except as noted above for positions that are integrated into financings, all
swaps, purchased options and forwards are carried out within the following
credit policy constraints.
o Once a counterparty reaches a credit exposure limit (see table below),
no additional transactions are permitted until the exposure with that
counterparty is reduced to an amount that is within the established
limit. Open contracts remain in force.
<TABLE>
<CAPTION>
COUNTERPARTY CREDIT CRITERIA CREDIT RATING
-----------------------
STANDARD &
MOODY'S POOR'S
---------- ----------
<S> <C> <C>
Term of transaction
Between one and five years ........... Aa3 AA-
Greater than five years .............. Aaa AAA
Credit exposure limits
Up to $50 million .................... Aa3 AA-
Up to $75 million .................... Aaa AAA
</TABLE>
o All swaps are executed under master swap agreements containing mutual
credit downgrade provisions that provide the ability to require
assignment or termination in the event either party is downgraded below
A3 or A-.
More credit latitude is permitted for transactions having original maturities
shorter than one year because of their lower risk.
45
<PAGE>
NOTE 21. GEOGRAPHIC SEGMENT INFORMATION
The table below presents data by geographic region. Revenues shown below are
classified according to their country of origin.
<TABLE>
<CAPTION>
REVENUES LONG-LIVED ASSETS
For the years ended December 31 At December 31
-------------------------------- --------------------------------
(In millions) 1998 1997 1996 1998 1997 1996
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
United States .......................... $ 26,538 $ 22,737 $ 18,424 $ 10,389 $ 9,666 $ 7,854
Europe ................................. 9,743 6,414 4,429 3,482 2,601 1,865
Pacific Basin .......................... 1,418 940 693 625 270 157
Global <F1> ............................ 1,682 1,669 1,651 8,160 7,543 7,094
Other <F2> ............................. 2,024 1,644 1,373 1,161 944 811
-------- -------- -------- -------- -------- --------
Total ................................ $ 41,405 $ 33,404 $ 26,570 $ 23,817 $ 21,024 $ 17,781
======== ======== ======== ======== ======== ========
<FN>
<F1> Includes operations that cannot meaningfully be associated with specific
geographic areas (for example, commercial aircraft and shipping containers
used on ocean-going vessels).
<F2> Principally the Americas other than the United States.
</FN>
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
Not applicable
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Omitted
ITEM 11. EXECUTIVE COMPENSATION.
Omitted
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Omitted
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Omitted
46
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. FINANCIAL STATEMENTS
Included in Part II of this report:
Independent Auditors' Report
Statement of Earnings for each of the years in the three-year
period ended December 31, 1998
Statement of Changes in Share Owners' Equity for each of the
years in the three-year period ended December 31, 1998
Statement of Financial Position at December 31, 1998 and 1997
Statement of Cash Flows for each of the years in the three-year
period ended December 31, 1998
Notes to Consolidated Financial Statements
Incorporated by reference:
The consolidated financial statements of General Electric
Company, set forth in the Annual Report on Form 10-K of General
Electric Company (S.E.C. File No. 001-00035) for the year ended
December 31, 1998 (pages F-1 through F-44) and Exhibit 12 (Ratio
of Earnings to Fixed Charges) of General Electric Company.
(a) 2. FINANCIAL STATEMENT SCHEDULES
Schedule I. Condensed financial information of registrant.
All other schedules are omitted because of the absence of
conditions under which they are required or because the required
information is shown in the financial statements or notes thereto.
(a) 3. EXHIBIT INDEX
The exhibits listed below, as part of Form 10-K, are numbered in
conformity with the numbering used in Item 601 of Regulation S-K of
the Securities and Exchange Commission.
47
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- ---------- -----------
3(i) A complete copy of the Organization Certificate of the Corporation
as last amended as of February 16, 1999 and currently in effect,
consisting of the following: (a) the Organization Certificate of the
Corporation as in effect immediately prior to the filing of the
Certificate of Amendment as of April 21, 1995 (Incorporated by
reference to Exhibit 3(i) to the Corporation's Form 10-K Report for
the year ended December 31, 1993); (b) a Certificate of Amendment
filed in the Office of the Superintendent of Banks of the State of New
York (the "Office of the Superintendent") as of April 21, 1995
(Incorporated by reference to Exhibit 4(b) to the Corporation's
Registration Statement on Form S-3, File No. 33-58771; (c) a
Certificate of Amendment filed in the Office of the Superintendent as
of May 11, 1995 (Incorporated by reference to Exhibit 4(c) to the
Corporation's Registration Statement on form S-3, File No. 33-61257);
(d) a Certificate of Amendment filed in the Office of the
Superintendent as of June 28, 1995 (Incorporated by reference to
Exhibit 4(d) to the Corporation's Registration Statement on Form S-3,
File No. 33-61257); (e) a Certificate of Amendment filed in the Office
of the Superintendent as of July 17, 1995 (Incorporated by reference
to Exhibit 4(e) to the Corporation's Registration Statement on Form
S-3, File No. 33-61257); (f) a Certificate of Amendment filed in the
Office of the Superintendent as of November 1, 1995 (Incorporated by
reference to Exhibit 3(i) to the Corporation's Form 10-K Report for
the year ended December 31, 1995); (g) a Certificate of Amendment
filed in the Office of the Superintendent as of September 27, 1996
(Incorporated by reference to Exhibit 4(g) to the Corporation's
Registration Statement on Form S-3, File No. 333-13195); (h) a
Certificate of Amendment filed in the Office of the Superintendent as
of December 9, 1997 (Incorporated by reference to Exhibit 4(g) to the
Corporation's Post-Effective Amendment No. 1 to Registration Statement
on Form S-3, File No. 333-13195); (i) a Certificate of Amendment filed
in the Office of the Superintendent as of December 19, 1997
(Incorporated by reference to Exhibit 4(h) to the Corporation's
Post-Effective Amendment No. 1 to Registration Statement on Form S-3,
File No. 333-13195); (j) a Certificate of Amendment filed in the
Office of the Superintendent as of February 17, 1998 (Incorporated by
reference to Exhibit 4(i) to the Corporation's Post-Effective
Amendment No. 1 to Registration Statement on Form S-3, File No. 333-
13195); (k) a Certificate of Amendment filed in the Office of the
Superintendent as of June 24, 1998 (incorporated by reference to
Exhibit 4(l) to the Corporation's Post-Effective Amendment No. 2 to
Registration Statement on Form S-3, file number 333-59707); (l)
a Certificate of Amendment filed in the Office of the Superintendent
as of July 23, 1998 (incorporated by reference to Exhibit 4(k)
to the Corporation's Post-Effective Amendment No. 1 to Registration
Statement on Form S-3, file number 333-59707); and (m) a Certificate
of Amendment filed in the Office of the Superintendent as of February
16, 1999 (incorporated by reference to Exhibit 4(m) to the
Corporation's Post-Effective Amendment No. 2 to Registration Statement
on Form S-3, file number 333-59707).
3(ii) A complete copy of the By-Laws of the Corporation as last amended
on June 30, 1994, and currently in effect. (Incorporated by reference
to Exhibit 3(ii) of the Corporation's Form 10-K Report for the year
ended December 31, 1994).
4(a) Amended and Restated Fiscal and Paying Agency Agreement, dated as of
July 2, 1996, among the Corporation, General Electric Capital
Australia Limited, General Electric Capital Canada Inc. and The Chase
Manhattan Bank (National Association), London Branch.
4(b) Amendment No. 1, dated as of December 8, 1997, to the Amended and
Restated Fiscal and Paying Agency Agreement dated as of July 2, 1996,
among the Corporation, General Electric Capital Australia (ACN 008
562 534), Australian Retail Financial Network (ACN 008 583 588),
General Electric Capital Canada Inc., General Electric Capital Canada
Retailer Financial Services Company and The Chase Manhattan Bank,
London Branch.
4(c) Form of Euro Medium-Term Note and Debt Security - Temporary Global
Fixed Rate Bearer Note.
4(d) Form of Euro Medium-Term Note and Debt Security - Permanent Global
Fixed Rate Bearer Note.
48
<PAGE>
4(e) Form of Euro Medium-Term Note and Debt Security - Temporary Global
Floating Rate Bearer Note.
4(f) Form of Euro Medium-Term Note and Debt Security - Permanent Global
Floating Rate Bearer Note.
4(g) Agreement to furnish to the Securities and Exchange Commission
upon request a copy of instruments defining the rights of holders of
certain long-term debt of the registrant and all subsidiaries for
which consolidated or unconsolidated financial statements are required
to be filed.
12(a) Computation of ratio of earnings to fixed charges.
12(b) Computation of ratio of earnings to combined fixed charges and
preferred stock dividends.
23(ii) Consent of KPMG LLP.
24 Power of Attorney.
27 Financial Data Schedule (filed electronically herewith).
99(a) Income Maintenance Agreement dated March 28, 1991, between General
Electric Company and the Corporation. (Incorporated by reference to
Exhibit 28(a) of the Corporation's Form 10-K Report for the year ended
December 31, 1992).
99(b) The consolidated financial statements of General Electric Company,
set forth in the Annual Report on Form 10-K of General Electric
Company (S.E.C. File No. 001-00035) for the year ended December 31,
1998, (pages F-1 through F-44) and Exhibit 12 (Ratio of Earnings to
Fixed Charges) of General Electric Company.
99(c) Letter, dated February 4, 1999 from Dennis D. Dammerman of General
Electric Company to Denis J. Nayden of General Electric Capital
Corporation pursuant to which General Electric Company agrees to
provide additional equity to General Electric Capital Corporation
in conjunction with certain redemptions by General Electric Capital
Corporation of shares of its Variable Cumulative Preferred Stock.
(Incorporated by reference to Exhibit 99(g) to the Corporation's Post-
Effective Amendment No. 1 to Registration Statement on Form S-3, File
No. 333-59707).
(b) REPORTS ON FORM 8-K
None.
49
<PAGE>
<TABLE>
<CAPTION>
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
GENERAL ELECTRIC CAPITAL CORPORATION
CONDENSED STATEMENT OF CURRENT AND RETAINED EARNINGS
For the years ended December 31 (In millions) 1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
REVENUES ................................................................... $ 5,310 $ 4,867 $ 6,631
-------- -------- --------
EXPENSES:
Interest, net of allocations .............................................. 5,444 3,548 3,871
Operating and administrative .............................................. 1,988 1,765 1,573
Provision for losses on financing receivables ............................. (125) 4 65
Depreciation and amortization ............................................. 443 345 255
-------- -------- --------
7,750 5,662 5,764
-------- -------- --------
Earnings (loss) before income taxes and equity in earnings of affiliates ... (2,440) (795) 867
Income tax (provision) benefit ............................................. 1,008 439 (218)
Equity in earnings of affiliates ........................................... 4,806 3,085 1,983
-------- -------- --------
NET EARNINGS ............................................................... 3,374 2,729 2,632
Dividends paid ............................................................. (895) (1,546) (891)
Retained earnings at January 1 ............................................. 11,861 10,678 8,937
-------- -------- --------
RETAINED EARNINGS AT DECEMBER 31 ........................................... $ 14,340 $ 11,861 $ 10,678
======== ======== ========
</TABLE>
See Notes to Condensed Financial Statements.
50
<PAGE>
<TABLE>
<CAPTION>
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT - (CONTINUED)
GENERAL ELECTRIC CAPITAL CORPORATION
CONDENSED STATEMENT OF FINANCIAL POSITION
At December 31 (In millions) 1998 1997
-------- --------
<S> <C> <C>
ASSETS
Cash and equivalents ................................................................... $ 15 $ 249
Investment securities .................................................................. 3,758 3,916
Financing receivables:
Time sales and loans .................................................................. 21,546 19,509
Investment in financing leases ........................................................ 12,525 11,817
-------- --------
34,071 31,326
Allowance for losses on financing receivables ......................................... (642) (786)
-------- --------
Financing receivables - net ......................................................... 33,429 30,540
Investments in and advances to affiliates .............................................. 118,299 95,578
Equipment on operating leases (at cost), less accumulated amortization of $906
and $726 .............................................................................. 3,666 3,477
Other assets ........................................................................... 10,314 6,240
-------- --------
TOTAL ASSETS ........................................................................ $169,481 $140,000
======== ========
LIABILITIES AND EQUITY
Short-term borrowings .................................................................. $ 93,670 $ 79,755
Long-term borrowings ................................................................... 47,135 35,189
Other liabilities ...................................................................... 4,982 3,938
Deferred income taxes .................................................................. 2,625 2,745
-------- --------
Total liabilities ................................................................... 148,412 121,627
-------- --------
Capital stock .......................................................................... 770 770
Additional paid-in capital ............................................................. 4,933 4,744
Retained earnings ...................................................................... 14,340 11,861
Accumulated unrealized gains on investment securities - net <F1> ....................... 1,167 1,145
Accumulated foreign currency translation adjustments <F1> .............................. (141) (147)
-------- --------
Total equity ........................................................................ 21,069 18,373
-------- --------
TOTAL LIABILITIES AND EQUITY ........................................................ $169,481 $140,000
======== ========
<FN>
<F1> The sum of accumulated unrealized gains on investment securities and
accumulated foreign currency translation adjustments constitutes
"Accumulated nonowner changes other than earnings," and was $1,026 million
and $998 million at year-end 1998 and 1997, respectively.
</FN>
</TABLE>
See Notes to Condensed Financial Statements.
51
<PAGE>
<TABLE>
<CAPTION>
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT - (CONTINUED)
GENERAL ELECTRIC CAPITAL CORPORATION
CONDENSED STATEMENT OF CASH FLOWS
For the years end December 31 (In millions) 1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
CASH FROM (USED FOR) OPERATING ACTIVITIES .................................. $ (628) $ (872) $ 1,243
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in loans to customers ............................................. (49,265) (42,575) (40,381)
Principal collections from customers - loans ............................... 46,902 42,486 44,447
Investment in assets on financing leases ................................... (5,915) (4,589) (2,206)
Principal collections from customers - financing leases .................... 3,207 2,665 2,127
Net change in credit card receivables ...................................... (709) 1,805 (269)
Buildings, equipment and equipment on operating leases
- additions .............................................................. (421) (900) (1,111)
- dispositions ........................................................... 445 350 335
Payments for principal businesses purchased, net of cash acquired .......... (15,959) (4,736) (4,839)
Proceeds from principal business dispositions .............................. -- 209 --
Change in investment in and advances to affiliates ........................ (1,956) (5,290) (6,436)
Other - net ................................................................ (2,372) 1,348 (1,863)
-------- -------- --------
Cash used for investing activities ...................................... (26,043) (9,227) (10,196)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in borrowings (less than 90-day maturities) ..................... 14,263 15,537 13,249
Newly issued debt
- short-term (91-365 days) ............................................... 5,881 4,066 5,061
- long-term senior ....................................................... 25,381 9,700 11,065
Proceeds - non-recourse, leveraged lease debt .............................. 1,422 1,043 219
Repayments and other reductions
- short-term ............................................................. (16,553) (18,379) (18,846)
- long-term senior ....................................................... (3,109) (787) (583)
Principal payments - non-recourse, leveraged lease debt .................... (142) (107) (130)
Dividends paid ............................................................. (895) (1,540) (891)
Contributions to additional paid-in capital ................................ 119 182 --
Issuance of preferred stock in excess of par ............................... 70 430 --
-------- -------- --------
Cash from financing activities .......................................... 26,437 10,145 9,144
-------- -------- --------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS DURING THE YEAR ................ (234) 46 191
CASH AND EQUIVALENTS AT BEGINNING OF YEAR .................................. 249 203 12
-------- -------- --------
CASH AND EQUIVALENTS AT END OF YEAR ........................................ $ 15 $ 249 $ 203
======== ======== ========
</TABLE>
See Notes to Condensed Financial Statements.
52
<PAGE>
GENERAL ELECTRIC CAPITAL CORPORATION AND CONSOLIDATED AFFILIATES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT - (CONCLUDED)
GENERAL ELECTRIC CAPITAL CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
BORROWINGS
Total long-term borrowings at December 31, 1998 and 1997 are shown below.
<TABLE>
<CAPTION>
1998
AVERAGE
RATE
(Dollars in millions) <F1> MATURITIES 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Senior notes ................................................... 6.20% 2000-2055 $ 46,438 $ 34,492
Subordinated notes <F2>......................................... 8.04 2006-2012 697 697
-------- --------
$ 47,135 $ 35,189
======== ========
<FN>
<F1> Includes the effects of associated interest rate and currency swaps.
<F2> Guaranteed by General Electric Company.
</FN>
</TABLE>
At December 31, 1998, long-term borrowing maturities during the next five years,
including the current portion of long-term notes payable, are $11,671 million in
1999, $10,722 million in 2000, $9,225 million in 2001, $5,767 million in 2002,
and $4,295 million in 2003.
INTEREST RATES ARE MANAGED by General Electric Capital Corporation ("GE
Capital") in light of the anticipated behavior, including prepayment behavior,
of assets in which debt proceeds are invested. A variety of instruments,
including interest rate and currency swaps and currency forwards, are employed
to achieve management's interest rate objectives. Effective interest rates are
lower under these "synthetic" positions than could have been achieved by issuing
debt directly. At December 31, 1998 interest rate swap maturities ranged from
1999 to 2048, and average interest rates for fixed-rate borrowings (including
"synthetic" fixed-rate borrowings) were 6.16% (6.32% at year end 1997).
Interest expense on the Condensed Statement of Current and Retained Earnings is
net of interest income on loans and advances to majority owned affiliates of
$2,050 million, $2,971 million and $2,332 million for 1998, 1997 and 1996,
respectively.
INCOME TAXES
General Electric Company files a consolidated U.S. federal income tax return
which includes GE Capital. Income tax (provision) benefit includes the effect of
GE Capital on the consolidated return.
53
<PAGE>
EXHIBIT 4(g)
March 25, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Subject: General Electric Capital Corporation Annual Report on Form 10-K for
the fiscal year ended December 31, 1998 - File No. 1-6461
Dear Sirs:
Neither General Electric Capital Corporation (the "Corporation") nor any of its
subsidiaries has outstanding any instrument with respect to its long-term debt
that is not registered or filed with the Commission and under which the total
amount of securities authorized exceeds 10% of the total assets of the
registrant and its subsidiaries on a consolidated basis. In accordance with
paragraph (b) (4) (iii) of Item 601 of Regulation S-K (17 CFR ss.229.601), the
Corporation hereby agrees to furnish to the Securities and Exchange Commission,
upon request, a copy of each instrument which defines the rights of holders of
such long-term debt.
Very truly yours,
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ J.A. Parke
--------------------------------
J.A. Parke,
Senior Vice President, Finance
54
<PAGE>
EXHIBIT 12 (a)
<TABLE>
<CAPTION>
GENERAL ELECTRIC CAPITAL CORPORATION
AND CONSOLIDATED AFFILIATES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
YEARS ENDED DECEMBER 31
--------------------------------------------------------
(Dollar amounts in millions) 1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net earnings ....................................... $ 3,374 $ 2,729 $ 2,632 $ 2,261 $ 1,918
Provision for income taxes ......................... 1,185 997 1,172 1,071 896
Minority interest .................................. 49 40 86 81 109
-------- -------- -------- -------- --------
Earnings before income taxes and minority interest . 4,608 3,766 3,890 3,413 2,923
-------- -------- -------- -------- --------
Fixed charges:
Interest .......................................... 8,772 7,440 7,114 6,520 4,464
One-third of rentals .............................. 289 240 177 170 153
-------- -------- -------- -------- --------
Total fixed charges ................................ 9,061 7,680 7,291 6,690 4,617
-------- -------- -------- -------- --------
Less interest capitalized, net of amortization ..... 88 52 41 21 9
-------- -------- -------- -------- --------
Earnings before income taxes and minority
interest plus fixed charges ....................... $ 13,581 $ 11,394 $ 11,140 $ 10,082 $ 7,531
======== ======== ======== ======== ========
Ratio of earnings to fixed charges ................. 1.50 1.48 1.53 1.51 1.63
======== ======== ======== ======== ========
</TABLE>
55
<PAGE>
EXHIBIT 12 (b)
<TABLE>
<CAPTION>
GENERAL ELECTRIC CAPITAL CORPORATION
AND CONSOLIDATED AFFILIATES
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
YEARS ENDED DECEMBER 31
--------------------------------------------------------
(Dollar amounts in millions) 1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net earnings ....................................... $ 3,374 $ 2,729 $ 2,632 $ 2,261 $ 1,918
Provision for income taxes ......................... 1,185 997 1,172 1,071 896
Minority interest .................................. 49 40 86 81 109
-------- -------- -------- -------- --------
Earnings before income taxes and minority interest . 4,608 3,766 3,890 3,413 2,923
-------- -------- -------- -------- --------
Fixed charges:
Interest .......................................... 8,772 7,440 7,114 6,520 4,464
One-third of rentals .............................. 289 240 177 170 153
-------- -------- -------- -------- --------
Total fixed charges ................................ 9,061 7,680 7,291 6,690 4,617
-------- -------- -------- -------- --------
Less interest capitalized, net of amortization ..... 88 52 41 21 9
-------- -------- -------- -------- --------
Earnings before income taxes and minority
interest plus fixed charges ....................... $ 13,581 $ 11,394 $ 11,140 $ 10,082 $ 7,531
======== ======== ======== ======== ========
Preferred stock dividend requirements .............. $ 97 $ 78 $ 76 $ 57 $ 30
Ratio of earnings before provision for income
taxes to net earnings ............................. 1.35 1.37 1.45 1.47 1.47
-------- -------- -------- -------- --------
Preferred stock dividend factor on pre-tax basis ... 131 107 110 84 44
Fixed charges ...................................... 9,061 7,680 7,291 6,690 4,617
-------- -------- -------- -------- --------
Total fixed charges and preferred stock dividend
requirements ...................................... $ 9,192 $ 7,787 $ 7,401 $ 6,774 $ 4,661
======== ======== ======== ======== ========
Ratio of earnings to combined fixed charges and
preferred stock dividends ........................ 1.48 1.46 1.51 1.49 1.62
======== ======== ======== ======== ========
</TABLE>
56
<PAGE>
EXHIBIT 23 (ii)
To the Board of Directors
General Electric Capital Corporation:
We consent to incorporation by reference in the Registration Statements (Nos.
33-43420, 33-51793, 333-22265, 333-59707 and 333-59977) on Form S-3 of General
Electric Capital Corporation, and in the Registration Statement (No. 33-39596)
on Form S-3 jointly filed by General Electric Capital Corporation and General
Electric Company, of our report dated February 12, 1999, relating to the
statement of financial position of General Electric Capital Corporation and
consolidated affiliates as of December 31, 1998 and 1997, and the related
statements of earnings, changes in share owners' equity and cash flows for each
of the years in the three-year period ended December 31, 1998, and the related
schedule, which report appears in the December 31, 1998 annual report on Form
10-K of General Electric Capital Corporation.
/s/ KPMG LLP
Stamford, Connecticut
March 25, 1999
57
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, being directors
and/or officers of General Electric Capital Corporation, a New York corporation
(the "Corporation"), hereby constitutes and appoints Denis J. Nayden, James A.
Parke, Joan C. Amble and Nancy E. Barton, and each of them, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead in any and all capacities, to sign one
or more Annual Reports for the Corporation's fiscal year ended December 31,
1998, on Form 10-K under the Securities Exchange Act of 1934, as amended, or
such other form as such attorney-in-fact may deem necessary or desirable, any
amendments thereto, and all additional amendments thereto in such form as they
or any one of them may approve, and to file the same with all exhibits thereto
and other documents in connection therewith with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done to the end that such Annual Report or Annual
Reports shall comply with the Securities Exchange Act of 1934, as amended, and
the applicable Rules and Regulations of the Securities and Exchange Commission
adopted or issued pursuant thereto, as fully and to all intents and purposes as
he might or could in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them or their or his substitute or
resubstitute, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has hereunto set his hand this 25th
day of March, 1999.
/s/ Denis J. Nayden /s/ James A. Parke
- ----------------------------- -----------------------------
Denis J. Nayden, James A. Parke,
Director, President Director and Senior Vice
and Chief Executive Officer President, Finance
(Principal Executive Officer) (Principal Financial Officer)
/s/ Joan C. Amble
-----------------------------
Joan C. Amble,
Vice President and Controller
(Principal Accounting Officer)
(Page 1 of 2)
58
<PAGE>
/s/ Nigel D.T. Andrews /s/ John H. Myers
- ----------------------------- -----------------------------
Nigel D.T. Andrews, John H. Myers,
Director Director
/s/ Nancy E. Barton /s/ Robert L. Nardelli
- ----------------------------- -----------------------------
Nancy E. Barton, Robert L. Nardelli,
Director Director
/s/ James R. Bunt /s/ Michael A. Neal
- ----------------------------- -----------------------------
James R. Bunt, Michael A. Neal,
Director Director
/s/ David M. Cote /s/ John M. Samuels
- ----------------------------- -----------------------------
David M. Cote, John M. Samuels,
Director Director
/s/ Dennis D. Dammerman /s/ Keith S. Sherin
- ----------------------------- -----------------------------
Dennis D. Dammerman, Keith S. Sherin,
Director Director
/s/ Benjamin W. Heineman, Jr.
- ----------------------------- -----------------------------
Benjamin W. Heineman, Jr., Edward D. Stewart,
Director Director
/s/ Jeffrey R. Immelt /s/ John F. Welch, Jr.
- ----------------------------- -----------------------------
Jeffrey R. Immelt, John F. Welch, Jr.,
Director Director
/s/ W. James McNerney, Jr.
- -----------------------------
W. James McNerney, Jr.,
Director
A MAJORITY OF THE BOARD OF DIRECTORS
(Page 2 of 2)
59
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
GENERAL ELECTRIC CAPITAL CORPORATION
March 25, 1999 By: /s/ Denis J. Nayden
---------------------------------
(Denis J. Nayden)
President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ Denis J. Nayden Director, President and March 25, 1999
- ---------------------- Chief Executive Officer
(Denis J. Nayden) (Principal Executive Officer)
/s/ James A. Parke Director and March 25, 1999
- ---------------------- Senior Vice President, Finance
(James A. Parke) (Principal Financial Officer)
/s/ Joan C. Amble Vice President and Controller March 25, 1999
- ---------------------- (Principal Accounting Officer)
(Joan C. Amble)
NIGEL D.T. ANDREWS* Director
NANCY E. BARTON* Director
JAMES R. BUNT* Director
DAVID M. COTE* Director
DENNIS D. DAMMERMAN* Director
BENJAMIN W. HEINEMAN, JR.* Director
JEFFREY R. IMMELT* Director
W. JAMES McNERNEY, JR.* Director
JOHN H. MYERS* Director
ROBERT L. NARDELLI* Director
MICHAEL A. NEAL* Director
JOHN M. SAMUELS* Director
KEITH S. SHERIN* Director
JOHN F. WELCH, JR.* Director
A MAJORITY OF THE BOARD OF DIRECTORS
*By: /s/ Joan C. Amble March 25, 1999
----------------------
(Joan C. Amble)
Attorney-in-fact
60
<PAGE>
AMENDED AND RESTATED
FISCAL AND PAYING AGENCY AGREEMENT
among
GENERAL ELECTRIC CAPITAL CORPORATION,
GE CAPITAL AUSTRALIA LIMITED,
GENERAL ELECTRIC CAPITAL CANADA INC.
and
THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION)
LONDON BRANCH
Euro Medium-Term Notes and Other Debt Securities Due
9 Months or more
from Date of Issue
------------------------------------------
Dated as of July 2, 1996
------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
<C> <S> <C>
1. Appointment of Fiscal and Paying Agent 1
--------------------------------------
2. Notes Issuable in Series 1
------------------------
3. Execution and Authentication of Notes; Date and Denomination of Notes 5
---------------------------------------------------------------------
4. Exchange and Registration of Transfer of Notes 9
----------------------------------------------
5. Payments of Principal, Premium and Interest; Paying Agents 11
----------------------------------------------------------
6. Redemption; Sinking Funds; Repayment at the Option of the Holder 15
----------------------------------------------------------------
7. Mutilated, Destroyed, Stolen or Lost Notes 19
------------------------------------------
8. Events of Default 20
-----------------
9. Additional Payments; Tax Redemption 24
-----------------------------------
10. Covenant of the Issuers and the Guarantor 32
-----------------------------------------
11. Obligations of the Fiscal and Paying Agent 32
------------------------------------------
12. Maintenance and Resignation of Fiscal and Paying Agent 35
------------------------------------------------------
13. Paying Agency 36
-------------
14. Merger, Consolidation, Sale or Conveyance 37
-----------------------------------------
15. Meetings of Holders of the Notes 38
--------------------------------
16. Consent of Holders 41
------------------
17. Stamp Taxes 41
-----------
18. Modifications and Amendments 42
----------------------------
19. Notices to Parties 43
------------------
20. Notices to and by Holders of the Notes 44
--------------------------------------
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
21. Business Day 45
------------
22. Central Bank Reporting Requirements 45
-----------------------------------
23. Governing Law 46
-------------
24. Consent to Service 46
------------------
25. Counterparts 46
------------
26. Inspection of Agreement 46
-----------------------
27. Descriptive Headings 46
--------------------
28. Provisions Binding on Successors 46
--------------------------------
29. Official Acts by Successor Corporation 47
--------------------------------------
30. Severability 47
------------
</TABLE>
<PAGE>
AMENDED AND RESTATED FISCAL AND PAYING AGENCY AGREEMENT, dated
as of July 2, 1996 between GENERAL ELECTRIC CAPITAL CORPORATION, a New York
corporation ("GE Capital"), GE Capital Australia Limited (ACN 008 562 534), a
company organized under the laws of the Australian Capital Territory ("GEC
Australia") and General Electric Capital Canada Inc., a Canadian corporation
("GEC Canada") (each an "Issuer" and together the "Issuers") and THE CHASE
MANHATTAN BANK (NATIONAL ASSOCIATION), LONDON BRANCH, as Fiscal and Paying Agent
(the "Agreement").
Pursuant to the Amended and Restated Euro MTN Distribution
Agreement dated as of July 2, 1996, among the Issuers (including GE Capital in
its capacity as Guarantor of Notes issued by GEC Australia or GEC Canada) and
the agents named therein (the "Agents") (as amended from time to time, the
"Distribution Agreement"), each Issuer has agreed to issue from time to time its
Euro Medium-Term Notes ("Medium Term Notes") and other debt securities ("Other
Debt Securities") having maturities from 9 months or more from date of issue
(collectively, Medium Term Notes and Other Debt Securities are referred to
herein as the "Notes"). The Guarantor has agreed to guarantee Notes issued
pursuant to this Agreement by GEC Australia or GEC Canada in the form of the
guarantee attached hereto as Exhibit D-1 (the "Guarantee"). Administrative
procedures, which have been agreed to by the Issuers (including GE Capital in
its capacity as Guarantor of Notes issued by GEC Australia or GEC Canada) and
the Agents as of the date hereof, are attached as Exhibit A hereto (such
procedures, as amended from time to time pursuant to the Distribution Agreement,
are hereinafter referred to as the "Administrative Procedures").
<PAGE>
1. Appointment of Fiscal and Paying Agent. Each Issuer and (in
--------------------------------------
the case of Notes issued by GEC Australia or GEC Canada) the Guarantor hereby
appoint The Chase Manhattan Bank (National Association), acting through its
London Branch located at Woolgate House, Coleman Street, London EC2P 2HD,
England, as the fiscal agent and as the principal paying agent (in such
capacities and including any successor Fiscal and Paying Agent appointed
hereunder, the "Fiscal and Paying Agent") in respect of the Notes, upon the
terms and subject to the conditions stated herein and in the Notes certified
from time to time pursuant to Section 2 hereof. The Fiscal and Paying Agent
hereby accepts such appointment and agrees, upon such terms and subject to such
conditions, to perform its obligations under this Agreement, the Notes certified
from time to time pursuant to Section 2 hereof and the Administrative
Procedures.
2. Notes Issuable in Series. (a) Each Issuer may issue Notes
-------------------------
hereunder in one or more series of Notes, each series (a "Series") having
identical terms but for authentication date and public offering price; provided
--------
that a Series of Notes may comprise Notes in bearer form ("Bearer Notes") and
Notes in registered form ("Registered Notes"). Each such Series may contain one
or more tranches of Notes, each such tranche (a "Tranche") having identical
terms, including authentication date and public offering price; provided that a
--------
Tranche of Notes may comprise Bearer Notes and Registered Notes.
(b) Notes issued hereunder shall be issued pursuant to
authority granted by the Board of Directors of the relevant Issuer and (in the
case of Notes issued by GEC Australia or GEC Canada) the Guarantor or any duly
authorized committee thereof and shall be in such form as shall be certified to
the Fiscal and Paying Agent from time to time by any one authorized person, as
specified in Section 3(a) hereof.
(c) Prior to the issue of the first Tranche of Notes of a
Series hereunder, the relevant Issuer and (in the case of Notes issued by GEC
Australia or GEC Canada) the Guarantor shall advise the Fiscal and Paying Agent
in writing of the following terms which shall be applicable to such Series of
Notes (each such set of written instructions shall be provided by such persons
as are designated by an Issuer Authorized Representative (as defined in Section
3(a)) from time to time in an incumbency certificate delivered to the Fiscal and
Paying Agent and shall hereinafter be referred to as a "Corporate Order"):
(1) the title of the Series (which shall distinguish the Notes
of such Series from all other Notes), including identifying whether
such series will be issued as Medium Term Notes or Other Debt
Securities;
(2) any limit upon the aggregate principal amount of the Notes
of such Series which may be authenticated and delivered under this
Agreement (except for Notes authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other
Notes of the Series pursuant to Sections 3, 4, 6 and 7);
(3) the date or dates on which the principal of and premium,
if any, on the Notes of the Series are payable;
<PAGE>
(4) the rate or rates, or the method of determination thereof,
at which the Notes of the Series shall bear interest, if any, the date
or dates from which such interest shall accrue, the interest payment
dates on which such interest shall be payable and, in the case of any
Registered Note, if other than as set forth in Section 3, the record
dates for the determination of holders to whom interest is payable;
(5) the place or places where the principal of, and premium,
if any, and interest on Notes of the Series shall be payable;
(6) the currency in which the Notes of such Series is
denominated, which may include U.S. dollars, any foreign currency or
any composite of two or more currencies (the "Specified Currency");
(7) the currency or currencies in which payments on the Notes
of such Series are payable, if other than the Specified Currency;
(8) the price or prices at which, the period or periods within
which and the terms and conditions upon which the Notes of such Series
may be redeemed, in whole or in part, at the option of the relevant
Issuer, pursuant to any sinking fund or otherwise;
(9) the obligation, if any, of the relevant Issuer or the
Guarantor to redeem, purchase or repay the Notes of such Series
pursuant to any right to do so contained in the Notes or pursuant to
sinking fund or analogous provisions or at the option of a holder
thereof and the price or prices at which and the period or periods
within which and the terms and conditions upon which the Notes of such
Series shall be redeemed, purchase or repaid, in whole or in part,
pursuant to such obligation;
(10) the denominations in which the Notes of such Series shall
be issuable, if other than (a) in the case of Registered Notes, 10,000
units of the Specified Currency and integral multiples of 1,000 units
of the Specified Currency in excess thereof, or (b) in the case of all
Bearer Notes in definitive form, 1,000, 10,000 and 100,000 units of the
Specified Currency, or (c) in the case of Bearer Notes in global form,
any integral multiple of 1,000 units of the Specified Currency;
(11) if other than the principal amount thereof, the portion
of the principal amount of the Notes of such Series which shall be
payable upon declaration of acceleration of the maturity thereof
pursuant to Section 8;
(12) if other than the Specified Currency, the coin or
currency in which payment of the principal of, premium, if any, or
interest on the Notes of such Series shall be payable;
(13) if the principal of, premium, if any, or interest on the
Notes of such Series are to be payable, at the election of the relevant
Issuer or the Guarantor or a holder thereof, in a coin or currency
other than the Specified Currency, the period
<PAGE>
or periods within which, and the terms and conditions upon which, such
election may be made;
(14) if the amount of payments of principal of, premium, if
any, and interest on the Notes of such Series may be determined with
reference to an index based on a coin or currency other than the
Specified Currency, the manner in which such amounts shall be
determined;
(15) if other than as provided in Sections 3, 4 and 5 hereof,
whether the Notes of such Series will be issuable as Registered Notes
or Bearer Notes (with or without coupons), or any combination of the
foregoing, any restriction applicable to the offer, sale or delivery of
Bearer Notes or the payment of interest thereon and the terms upon
which Bearer Notes of any Series may be exchanged for Registered Notes
of such Series, except that the Notes of such Series shall only be
issuable as Bearer Notes unless otherwise provided in such Corporate
Order;
(16) any Events of Default with respect to the Notes of such
Series, if not set forth herein;
(17) if other than those named herein, any other depositaries,
authenticating or paying agents, transfer agents or registrars or any
other agents with respect to such Series;
(18) the stock exchanges, if any, on which the Notes will be
listed and related information;
(19) any applicable restrictions on the transfer of any of the
Notes of such Series; and
(20) any other terms of the Series (which terms shall not
be inconsistent with the provisions of this Agreement).
All Notes of any one Series and coupons, if any, appertaining
thereto, shall be substantially identical except as to denomination and except
as may otherwise be provided in or pursuant to such Corporate Order. The Notes
and the coupons, if any, appertaining thereto shall be in substantially such
form as shall be established pursuant to a resolution of the Board of Directors
of the relevant Issuer and the Guarantor, in each case with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Agreement, and may have such legends or endorsements placed
thereon as the officers executing the same may approve (execution thereof to be
conclusive evidence of such approval) and as are not inconsistent with the
provisions of this Agreement, or as may be required to comply with the
directions of Morgan Guaranty Trust Company of New York, Brussels Office, as
operator of the Euroclear System (the "Euroclear Operator") or Cedel Bank,
societe anonyme ("Cedel Bank") or any successors thereto or with any law or with
any rule or regulation made pursuant thereto or with any rule or regulation of
any stock exchange on which such Notes may be listed, or to conform to usage.
<PAGE>
(d) An additional Tranche of the same Series may be issued
subsequent to the original issue date of any Notes of such Series (hereinafter
called "Additional Notes") following the receipt by the Fiscal and Paying Agent
of a Corporate Order pertaining to such Tranche, which Corporate Order will
identify the Series to which such Tranche belongs and the issue date and
aggregate principal amount of the Notes of such Tranche. Any such Additional
Notes shall be issued initially as provided in Section 3. In the event
Additional Notes are issued prior to the Exchange Date (as hereinafter defined)
for a temporary global Bearer Note representing a prior Tranche of Notes of the
same Series, the Exchange Date for such prior Tranche of Notes may be extended
to a date not less than 40 days after the issue date of such Additional Notes;
provided however, in no event shall the Exchange Date for any Tranche of Notes
- -------- -------
be extended to a date more than 160 days after their issue date.
Additional Notes, together with each prior and subsequent
Tranche of Notes of the same Series, shall constitute one and the same Series of
Notes for all purposes under this Agreement.
3. Execution and Authentication of Notes; Date and
-----------------------------------------------
Denomination of Notes. (a) Execution, delivery and safekeeping of Notes. The
- --------------------- --------------------------------------------
Notes and, if applicable, coupons appertaining thereto in the form certified to
the Fiscal and Paying Agent pursuant to the provisions of Section 2(b) shall
each be executed on behalf of the GEC Capital or GEC Australia by any one of GE
Capital's Chairman of the Board, its President, its Senior Vice President,
Finance, its Senior Vice President-Corporate Treasury and Global Funding
Operation, or by a duly authorized attorney-in-fact, and on behalf of GEC Canada
by any one of GEC Canada's members of its Board of Directors, a Vice-President
or an Assistant Vice President (each an "Issuer Authorized Representative").
Such signatures may be the manual or facsimile signatures of any person who, at
the time of such execution, holds any such office or of a duly authorized
attorney-in-fact. Any signature in facsimile may be imprinted or otherwise
reproduced on the Notes or the coupons. Each definitive Note shall have
imprinted thereon a facsimile of the corporate seal of the relevant Issuer
attested by the Secretary or any Assistant Secretary of such Issuer. In case any
authorized officer of such Issuer or attorney-in-fact who shall have signed any
Note or coupon shall cease to hold such office or be such attorney-in-fact
before the Note so signed (or the Note to which the coupon so signed is
attached) shall be authenticated and delivered by the Fiscal and Paying Agent or
disposed of by such Issuer, such Note or coupon nevertheless may be
authenticated and delivered or disposed of as though the person who signed such
Note or coupon had not ceased to hold such office or be such attorney-in-fact;
and any Note or coupon may be signed on behalf of such Issuer by any person who,
as at the actual date of the execution of such Note or coupon, shall hold such
office or be an attorney-in-fact, although at the date of the execution and
delivery of this Agreement any such person did not hold such office or was not
an attorney-in-fact.
The relevant Issuer will furnish the Fiscal and Paying Agent
with an adequate supply of Notes having attached thereto appropriate coupons, if
any, in the forms approved in accordance with Section 2(b) of this Agreement,
bearing consecutive control numbers. Such Notes shall have been executed by an
Issuer Authorized Representative and
<PAGE>
attested by the Secretary or an Assistant Secretary of such Issuer in accordance
with this Section. The Fiscal and Paying Agent or its designated agent will hold
such blank Notes in safekeeping in accordance with its customary practice and
shall issue such Notes in the order of the control numbers imprinted thereon.
The Fiscal and Paying Agent will permit the relevant Issuer and its agents, at
all reasonable times and upon reasonable notice, to examine the Notes and all
books, records and other materials and information of the Fiscal and Paying
Agent relating thereto.
(b) Execution of Guarantee. The Guarantee endorsed on Notes
----------------------
issued by GEC Australia or GEC Canada shall be executed on behalf of the
Guarantor by any one of its Chairman of the Board, its President, its Senior
Vice President, Finance, its Senior Vice President-Corporate Treasury and Global
Funding Operation, or by a duly authorized attorney-in-fact. Such signatures may
be the manual or facsimile signatures of any person who, at the time of such
execution, holds any such office or of a duly authorized attorney-in-fact. Any
signature in facsimile may be imprinted or otherwise reproduced on the Guarantee
endorsed on such Notes. Each Guarantee endorsed on each definitive Note shall
have imprinted thereon a facsimile of the corporate seal of the Guarantor. In
case any authorized officer of the Guarantor or attorney-in-fact who shall have
signed any Guarantee shall cease to hold such office or be such attorney-in-fact
before the Note endorsed with the Guarantee so signed shall be authenticated and
delivered by the Fiscal and Paying Agent or disposed of by the relevant Issuer,
such Note or coupon nevertheless may be authenticated and delivered or disposed
of as though the person who signed such Guarantee endorsed on such Note had not
ceased to hold such office or be such attorney-in-fact; and any Guarantee may be
signed on behalf of the Guarantor by any person who, as at the actual date of
the execution of such Guarantee, shall hold such office or be an
attorney-in-fact, although at the date of the execution and delivery of this
Agreement any such person did not hold such office or was not an
attorney-in-fact.
(c) Authentication of temporary global Notes. Unless otherwise
----------------------------------------
specified in the applicable Corporate Order or by the relevant Agent or Agents,
each Tranche of Notes, including any Tranche of Additional Notes issued prior to
the Exchange Date for a prior Tranche of Notes of the same Series, shall
initially be issued in the form of a single temporary global Note in bearer
form. The temporary global Bearer Notes shall be authenticated by the Fiscal and
Paying Agent or by a duly authorized officer or attorney-in-fact of the Fiscal
and Paying Agent, upon the same conditions, in substantially the same manner and
with the same effect as the definitive Notes, and shall be deposited with a
common depositary (the "Depositary") for the accounts of the Euroclear Operator
and Cedel Bank or any other recognized or agreed clearing system for credit to
the respective securities clearance accounts of the relevant Agents (or to such
other accounts as they may have directed) maintained with the Euroclear Operator
or with Cedel Bank. For purposes of this Agreement "Exchange Date" for any
Series of Notes shall mean the first Business Day that is at least 40 days after
the issue date of such Series; provided that in the event a Tranche of
Additional Notes of the same Series is issued prior to the Exchange Date of a
prior Tranche of such Series (as such Exchange Date may have been extended
pursuant to this sentence), such Exchange Date shall be extended (or further
extended, as the case may be) to a date not earlier than 40 days after the issue
date of such subsequent Tranche; provided however, in no event shall the
-------- -------
Exchange Date for any Tranche of Notes be
<PAGE>
extended to a date more than 160 days after their issue date. No such exchange
will be made on a day that is not a business day in the city of London, England,
but shall instead be made on the next succeeding day that is a business day in
the city of London, England.
(d) Exchange of temporary global Notes; certification
-------------------------------------------------
requirements. On or up to 10 days prior to the Exchange Date for any Series of
- ------------
Notes held in temporary global form, the beneficial owners of such temporary
global Note shall deliver to the Euroclear Operator or Cedel Bank, as the case
may be, a certificate substantially in the form set forth in Exhibit B-1 hereto,
copies of which certificate shall be available at the offices of the Euroclear
Operator and Cedel Bank, the Fiscal and Paying Agent and each other paying agent
of the relevant Issuer and (in the case of Notes issued by GEC Australia or GEC
Canada) the Guarantor. On or after the Exchange Date for any Series of Notes,
upon the request of the Depositary, acting on behalf of the Euroclear Operator
and Cedel Bank, acting in turn on behalf of such beneficial owners, the Fiscal
and Paying Agent shall authenticate a permanent global Note in bearer form or
(if specified in the applicable Corporate Order) definitive Bearer Notes and/or
definitive Registered Notes in the amounts requested in an aggregate principal
amount equal to the aggregate principal amount of the temporary global Note
beneficially owned by such owners, but only upon delivery by the Euroclear
Operator and/or Cedel Bank, acting on behalf of such owners, to the Fiscal and
Paying Agent or its duly authorized attorney-in-fact of a certificate or
certificates substantially in the form set forth in Exhibit B-2 hereto. Such
permanent global Note, if any, shall be authenticated by the Fiscal and Paying
Agent or by a duly authorized officer or attorney-in-fact of the Fiscal and
Paying Agent, upon the same conditions, in substantially the same manner and
with the same effect as the definitive Notes, and shall be deposited with the
Depositary for the accounts of the Euroclear Operator and Cedel Bank for credit
to the respective accounts of such beneficial owners.
Upon any such exchange of all or a portion of a temporary
global Note for a permanent global Note or definitive Notes, such temporary
global Note shall be endorsed by the Fiscal and Paying Agent or its duly
authorized attorney-in-fact to reflect the reduction of its principal amount by
an amount equal to the aggregate principal amount of such permanent global Note
or definitive Notes as to which certification has been provided as set forth in
the preceding paragraph.
(e) Exchange of permanent global Note; certification
------------------------------------------------
requirements. Beneficial owners of Notes desiring to exchange their interests in
- ------------
any permanent global Bearer Note for definitive Notes in bearer form or (if the
relevant Corporate Order so allows) for definitive Notes in registered form
shall instruct the Euroclear Operator or Cedel Bank to request such exchange on
their behalf and shall deliver to the Euroclear Operator or Cedel Bank, as the
case may be, a certificate substantially in the form set forth in Exhibit C-1
hereto, copies of which certificate shall be available at the offices of the
Euroclear Operator and Cedel Bank, the Fiscal and Paying Agent and each other
paying agent of the relevant Issuer and (in the case of Notes issued by GEC
Australia or GEC Canada) the Guarantor. Upon the request of the Depositary,
acting on behalf of the Euroclear Operator and Cedel Bank, acting in turn on
behalf of such beneficial owners, the Fiscal and Paying Agent shall, upon 30-
days' written notice, authenticate and deliver outside the United States,
Australia and Canada (except in compliance with the securities
<PAGE>
laws of Canada and the provinces and territories thereof) to or for the account
of such beneficial owners, definitive Notes in an aggregate principal amount
equal to the aggregate principal amount of such permanent global Bearer Note,
but only upon delivery by the Euroclear Operator or Cedel Bank, acting on behalf
of such owners, to the Fiscal and Paying Agent or its duly authorized attorney-
in-fact of a certificate or certificates substantially in the form set forth in
Exhibit C-2 hereto. All expenses incurred as a result of any such exchange shall
be paid by the relevant Issuer or (in the case of Notes issued by GEC Australia
or GEC Canada) the Guarantor. Notwithstanding anything to the contrary contained
in this subsection 3(e), the Fiscal Agent shall not be required to exchange the
entire aggregate principal amount of a permanent global Bearer Note for
definitive Bearer Notes in the event beneficial owners of less than the entire
aggregate principal amount of the permanent global Bearer Note have requested
definitive Bearer Notes, provided the operating rules and regulations of the
clearance system then in effect would permit less than the entire aggregate
principal amount of the permanent global Bearer Note to be so exchanged.
Each permanent global Note shall in all respects be entitled
to the same benefits under this Agreement as definitive Notes authenticated and
delivered hereunder.
Any certification referred to in Section 3(c) or (d) above
which is delivered to the Fiscal and Paying Agent by the Euroclear Operator or
by Cedel Bank, as the case may be, may be relied upon by the Fiscal and Paying
Agent as conclusive evidence that the corresponding certification or
certifications of the beneficial owner or owners have been delivered to the
Euroclear Operator or to Cedel Bank, as the case may be, pursuant to the terms
of this Agreement and the terms of the Notes.
(f) Authentication of Registered Notes. If so specified in the
----------------------------------
applicable Corporate Order, Notes of any Series may be issued in fully
registered form. Such Corporate Order will specify whether Registered Notes of
such Series may be issued in exchange for Bearer Notes of such Series and
whether the Notes of such Series may initially be issued in permanent global or
definitive form. Registered Notes shall be authenticated by the Fiscal and
Paying Agent or by a duly authorized officer or attorney-in-fact of the Fiscal
and Paying Agent and, in the case of permanent global Registered Notes,
deposited with the Depositary for the accounts of the Euroclear Operator and
Cedel Bank for credit to the respective securities clearance accounts of the
relevant Agents (or to such other accounts as they may have directed) maintained
with the Euroclear Operator or with Cedel Bank or the Depositary Trust Company
in New York City for credit to the respective accounts of the relevant Agents
(or to such other accounts as they may have directed) maintained with the
Depositary Trust Company or such other clearance and settlement organization as
is specified in the applicable Corporate Order.
4. Exchange and Registration of Transfer of Notes. (a)
----------------------------------------------
Exchange of Registered Notes. Registered Notes of any Series may be exchanged
- ----------------------------
for a like aggregate principal amount of Registered Notes of the same Series of
other authorized denominations. Bearer Notes will not be issuable in exchange
for Registered Notes.
<PAGE>
If so provided in the relevant Corporate Order, Bearer Notes
of any Series (with all unmatured coupons, if any, and all matured coupons, if
any, then in default, attached thereto) will be exchangeable (upon the terms,
set forth in Section 3) for Registered Notes of the same Series of any
authorized denominations and in an equal aggregate principal amount. Bearer
Notes surrendered in exchange for Registered Notes after the close of business
on (i) any record date with respect to any regular payment of interest and
before the opening of business at such office on the relevant interest payment
date, or (ii) any record date to be established for the payment of defaulted
interest and before the opening of business on the related proposed date for
payment of defaulted interest, shall be surrendered without the coupon relating
to such date for payment of interest.
Notes to be exchanged pursuant to the preceding two paragraphs
shall be surrendered, at the option of the holders thereof, either at the office
or agency designated and maintained by the relevant Issuer and (in the case of
Notes issued by GEC Australia or GEC Canada) the Guarantor for such purpose in
accordance with the provisions of Section 5 or at any of such other offices or
agencies as may be designated and maintained by such Issuer and the Guarantor
for such purpose in accordance with the provisions of Section 5, and such Issuer
shall execute and register, the Guarantor shall cause the Guarantee to be
endorsed thereon and the Fiscal and Paying Agent shall authenticate and deliver
in exchange therefor the Note or Notes which the Noteholder making the exchange
shall be entitled to receive. The term "Noteholder," "holder of Notes," or other
similar terms, shall mean, (a) with respect to any Registered Note, the person
in whose name at the time such Registered Note is registered on the books of the
relevant Issuer kept for that purpose in accordance with the terms hereof, or
(b) with respect to any Bearer Note, the bearer thereof. Each person designated
by the relevant Issuer pursuant to the provisions of Section 5 as a person
authorized to register and register transfer of the Notes is sometimes herein
referred to as a "Registrar." In no event shall such Issuer designate more than
one Registrar for each Series of Registered Notes. No person shall at any time
be designated as or act as a Registrar unless such person is at such time
empowered under applicable law to act as such and duly registered to act as such
under and to the extent required by applicable law and regulations.
(b) Transfers of Registered Notes. Each Registrar shall keep,
-----------------------------
at each such office or agency, a register for each Series of Notes (for which it
has been appointed Registrar) issuable in registered form (the registers of all
Registrars being herein sometimes collectively referred to as the "Register") in
which, subject to such reasonable regulations as it may prescribe, the Registrar
shall register Registered Notes and shall register the transfer of Registered
Notes as herein provided. The Register shall be in written form or in any other
form capable of being converted into written form within a reasonable time. At
all reasonable times the Register shall be open for inspection by the relevant
Issuer, the Guarantor, the Fiscal and Paying Agent and any Registrar. Upon due
presentment for registration of transfer of any Registered Note of any Series at
any designated office or agency, such Issuer shall execute, the Guarantor shall
(in the case of Notes issued by GEC Australia or GEC Canada) cause the Guarantee
to be endorsed thereon, the Registrar shall register and the Fiscal and Paying
Agent shall authenticate and deliver in the name of the transferee or
transferees a new Registered Note or Registered Notes of the same Series for
<PAGE>
an equal aggregate principal amount. Registration or registration of transfer of
any Registered Note by any Registrar in the Register maintained by such
Registrar, and delivery of such Registered Note, duly authenticated, shall be
deemed to complete the registration or registration of transfer of such
Registered Note.
All Registered Notes presented for registration of transfer or
for exchange, redemption, repayment or payment shall (if so required by the
relevant Issuer, the Guarantor or the Registrar) be duly endorsed by, or be
accompanied by a written instrument or instruments of transfer or exchange in
form satisfactory to such Issuer, the Guarantor and the Registrar duly executed
by, the holder or his attorney duly authorized in writing.
If so specified in the applicable Corporate Order, the
transfer of some or all of the Registered Notes of any Series may be subject to
the restrictions set forth therein. If so specified in such Corporate Order, the
Registrar for such Notes shall not register the transfer of any such Notes
absent compliance with such restrictions.
(c) Exchange and transfer of Bearer Notes. Bearer Notes in
-------------------------------------
definitive form of any Series will be exchangeable for Bearer Notes in
definitive form of the same Series in other authorized denominations, in an
equal aggregate principal amount. Bearer Notes to be so exchanged shall be
surrendered, at the option of the holders thereof, at the office of any Paying
Agent appointed by the relevant Issuer and (in the case of Notes issued by GEC
Australia or GEC Canada) the Guarantor to perform such service in accordance
with the provisions of Section 5, and such Issuer shall execute, the Guarantor
shall cause the Guarantee to be endorsed thereon and such Paying Agent shall
authenticate and deliver in exchange therefor the Bearer Note or Notes which the
Noteholder making the exchange shall be entitled to receive. Bearer Notes and
any coupons appertaining thereto will be transferable by delivery.
(d) Repository of master list of holders of Registered Notes.
--------------------------------------------------------
The relevant Issuer will at all times designate one person (who may be such
Issuer and who need not be the Registrar of any Series) to act as repository of
a master list of names and addresses of the holders of the Registered Notes. The
Fiscal and Paying Agent shall act as such repository unless and until some other
person is, by written notice from such Issuer to the Fiscal and Paying Agent and
each Registrar, designated by such Issuer to act as such. Such Issuer shall
cause each Registrar to furnish to such repository, on a current basis, such
information as to all registrations of transfer and exchanges effected by such
Registrar, as may be necessary to enable such repository to maintain such master
list on as current a basis as is practicable.
(e) Miscellaneous. Except as provided in Section 3(d), no
-------------
service charge shall be made for any exchange or registration of transfer of
Notes, but the relevant Issuer and (in the case of Notes issued by GEC Australia
or GE Canada) the Guarantor may require payment of a sum sufficient to cover any
transfer taxes governmental charge that may be imposed in connection therewith.
<PAGE>
The relevant Issuer shall not be required (i) to issue,
register the transfer of or exchange Notes to be redeemed for a period of
fifteen calendar days preceding the first publication of the relevant notice of
redemption, or if Registered Notes are outstanding and there is no publication,
the mailing of the relevant notice of redemption, or (ii) to register the
transfer of or exchange any Registered Notes selected for redemption, in whole
or in part, except the unredeemed portion of any such Registered Notes being
redeemed in part, or (iii) to exchange any Bearer Notes selected for redemption,
except that such Bearer Notes may be exchanged for Registered Notes of like
tenor, provided that such Registered Notes shall be simultaneously surrendered
for redemption or (iv) to register transfer of or exchange any Notes surrendered
for optional repayment, in whole or in part.
Notwithstanding anything herein or in the terms of any Notes
to the contrary, none of the relevant Issuer, the Fiscal and Paying Agent or any
agent of such Issuer or the Fiscal and Paying Agent shall be required to
exchange any Bearer Note for a Registered Note if such exchange would result in
adverse income tax consequences to such Issuer (such as, for example, the
inability of such Issuer to deduct from its income, as computed for income tax
purposes, the interest payable on the Bearer Notes) under (i) then applicable
United States Federal income tax laws, (ii) then applicable income tax
legislation in Australia (in the case of Notes issued by GEC Australia), or
(iii) the Income Tax Act (Canada) (or any successor or similar legislation) and
similar Canadian provincial tax legislation (in the case of Notes issued by GEC
Canada).
5. Payments of Principal, Premium and Interest; Paying Agents.
----------------------------------------------------------
(a) Payment generally. In order to provide for the payment of the principal of,
-----------------
premium and interest on each Series of Notes as the same shall become due and
payable on any payment date, the relevant Issuer hereby agrees to pay to the
Fiscal and Paying Agent at the place and in the manner specified below or to
such account or at such offices of any paying agent outside of the United States
and (in the case of Notes issued by GEC Australia) outside of Australia as the
Fiscal and Paying Agent shall specify in writing to such Issuer and (in the case
of Notes issued by GEC Australia or GEC Canada) the Guarantor, such writing to
be delivered not less than five calendar days prior to the payment date, in such
currency or currency units as shall be required to make the payment due on such
payment date, on each interest payment date and on the maturity date of such
Series of Notes or any date fixed for redemption or acceleration of such Series
of Notes (in each case determined in accordance with the terms of such Notes),
in immediately available funds available on such interest payment, maturity,
redemption or acceleration date, as the case may be, in an aggregate amount
which (together with any funds then held by the Fiscal and Paying Agent and
available for the purpose) shall be sufficient to pay the entire amount of the
principal of, premium and interest on such Series of Notes (including Additional
Amounts (as defined below), if any, becoming due on such interest payment,
maturity, redemption or acceleration date), and the Fiscal and Paying Agent
shall hold such amount in trust and apply it to the payment of any such
principal, premium or interest on such interest payment, maturity, redemption or
acceleration date. Nothing contained herein shall be construed to require the
Fiscal and Paying Agent or any other paying agent to make any payment to the
holder of a Note until funds have been received from the relevant Issuer
pursuant to this Section.
<PAGE>
(b) Payments on temporary global Notes; certification
-------------------------------------------------
requirements. Beneficial owners of any temporary global Note may receive
- ------------
interest payments prior to the Exchange Date of such temporary global Note;
provided such beneficial owners deliver a certificate or certificates to the
- --------
Euroclear Operator or Cedel Bank substantially in the form set forth in Exhibit
B-1 and instruct the Euroclear Operator or Cedel Bank, as the case may be, to
request such interest payment on their behalf. Upon the request of the
Depositary, acting on behalf of the Euroclear Operator and Cedel Bank, acting in
turn on behalf of beneficial owners of Notes, the Fiscal and Paying Agent shall
make payments of interest to the beneficial owners of interests in temporary
global Notes, but only upon delivery by the Euroclear Operator or Cedel Bank,
acting on behalf of such owners, to the Fiscal and Paying Agent or its duly
authorized attorney-in-fact of a certificate or certificates substantially in
the form set forth in Exhibit B-2 hereto.
In the event of redemption or acceleration of all or any part
of any temporary global Note prior to its Exchange Date, beneficial owners will
be entitled to receive payment on or after the date fixed for such redemption or
on which such acceleration occurs upon compliance by such beneficial owners and
the Euroclear Operator and Cedel Bank, as applicable, with the provisions of the
preceding paragraph of this Section.
(c) Payments on Registered Notes. The person in whose name any
----------------------------
Registered Note of a particular Series is registered at the close of business or
on any Record Date (as hereinafter defined) with respect to any interest payment
date for such Series shall be entitled to receive the interest payable on such
interest payment date notwithstanding the cancellation of such Registered Note
upon any registration of transfer or exchange subsequent to the Record Date and
prior to such interest payment date; provided however, that (i) if and to the
-------- -------
extent that the relevant Issuer shall default in the payment of the interest on
such interest payment date, such defaulted interest shall be paid to the persons
in whose names outstanding Registered Notes of such Series are registered on a
subsequent Record Date established by notice given by mail by or on behalf of
such Issuer to the holders of such Registered Notes not less than 15 calendar
days preceding such subsequent Record Date, such Record Date to be not less than
five calendar days preceding the date or payment of such defaulted interest and
(ii) interest payable at maturity, redemption or repayment of such Registered
Note shall be payable to the person to whom principal shall be payable. The term
"Record Date" as used in this Section with respect to any regular interest
payment date, shall mean the fifteenth calendar day preceding such interest
payment date, whether or not such fifteenth calendar day shall be a Business Day
(as defined in Section 21).
Interest on Registered Notes may at the option of the relevant
Issuer be paid by check mailed to the persons entitled thereto at their
respective addresses as such appear in the Register, or, at the option of any
holder of $5,000,000 (or the equivalent thereof in more of more foreign or
composite currencies) or more aggregate principal amount of Registered Notes of
any Series and subject to applicable laws and regulations, be made by transfer
to an account denominated in the currency in which such payment is to be made,
maintained by such holder, if appropriate wire transfer instructions have been
received by such Issuer or its agent not less than 10 calendar days prior to the
applicable interest payment date.
<PAGE>
(d) Payments on Bearer Notes. Payments on Bearer Notes or the
------------------------
coupons appertaining thereto will, upon presentation of such Notes or coupons at
a designated office outside of the United States, at the holder's option and
subject to applicable laws and regulations, be made by check or wire transfer to
an account denominated in the Specified Currency (unless otherwise provided in
the applicable Corporate Order) in which such payment is to be made, maintained
by such holder with a bank outside the United States and (in the case of Notes
issued by GEC Australia) outside Australia, if appropriate wire transfer
instructions have been received by the relevant Issuer or its agent not less
than 10 calendar days prior to the applicable interest payment date.
The relevant Issuer will maintain one or more offices or
agencies in a city or cities located outside the United States and (in the case
of Notes issued by GEC within Australia) outside Australia (including any city
in which such an agency is required to be maintained under the rules of any
stock exchange on which any of the Notes are listed) where any Bearer Notes
issued hereunder and coupons, if any, appertaining thereto may be presented for
payment. No payment on any Bearer Note or coupon will be made upon presentation
of such Bearer Note or coupon at an agency of the relevant Issuer or the
Guarantor within the United States or (in the case of Notes issued by GEC
Australia) within Australia nor will any payment be made by transfer to an
account in, or by check mailed to an address in, the United States or (in the
case of Notes issued by GEC Australia) in Australia unless pursuant to
applicable United States or Australian laws and regulations then in effect such
payment can be made without adverse tax consequences to such Issuer.
Notwithstanding the foregoing, (a) payments in U.S. dollars on Bearer Notes and
coupons appertaining thereto may be made at an agency of such Issuer maintained
in the Borough of Manhattan, The City of New York if such payment in U.S.
dollars at each agency maintained by such Issuer outside the United States for
payment on such Bearer Notes is illegal or effectively precluded by exchange
controls or other similar restrictions, and (b) payments in Canadian dollars on
Bearer Notes and Coupons appertaining thereto may be made at an agency of such
Issuer maintained in the City of Toronto if such payment in Canadian dollars at
each agency maintained by such Issuer outside Canada for payment on such Bearer
Notes is illegal or effectively precluded by exchange controls or similar
restrictions.
(e) Place of payment. As long as any Registered Notes remain
----------------
outstanding hereunder, the relevant Issuer will designate and maintain in
London, England an office or agency where such Registered Notes may be presented
for payment, and where such Notes may be presented for registration of transfer
and for exchange as in this Agreement provided.
The relevant Issuer may from time to time designate one or
more additional offices or agencies where Notes and any coupons appertaining
thereto may be presented for payment, where Notes may be presented for exchange
as provided in this Agreement and where Registered Notes may be presented for
registration of transfer as in this Agreement provided, and such Issuer may from
time to time rescind any such designation, as such Issuer may deem desirable or
expedient; provided, however, that no such designation or rescission shall in
-------- -------
any manner relieve such Issuer of its obligation to maintain the agencies
<PAGE>
provided for in this Section. Such Issuer will give to the Fiscal and Paying
Agent prompt written notice of any such designation or rescission thereof.
The relevant Issuer will give to the Fiscal and Paying Agent
written notice of the location of each such office or agency and of any change
of location thereof. In case such Issuer shall fail to give such notice of the
location or of any change in the location thereof, presentations and demands may
be made and notices may be served at the principal office of the Fiscal and
Paying Agent in London, England.
The relevant Issuer and (in the case of Notes issued by GEC
Australia or GEC Canada) the Guarantor hereby initially designates the offices
of The Chase Manhattan Bank (National Association), London Branch as the office
or agency where Registered Notes may be presented for payment, for registration
of transfer and for exchange as in this Agreement provided and where notices and
demands to or upon such Issuer and the Guarantor in respect of the Bearer Notes
or of this Agreement may be served. Such principal office is also designated as
repository pursuant to Section 4 for the master list of the names and addresses
of the holders of Registered Notes.
(f) Payments by the Guarantor. If GEC Australia or GEC Canada
-------------------------
shall fail to provide for the amounts payable on any Notes issued by GEC
Australia or GEC Canada, as the case may be, or coupons appertaining thereto, if
any, the Guarantor shall, subject to its right to avail itself of defenses under
all relevant laws for the prescription of actions in respect of such Notes and
coupons appertaining thereto, forthwith upon receipt of notice of such failure
from the Fiscal and Paying Agent (who shall give such notice forthwith upon such
failure) deliver or cause to be delivered to the Fiscal and Paying Agent the
amount thereof (to the extent that the same has not then been delivered by GEC
Australia or GEC Canada, as the case may be), which amount shall be held and
applied in payment of such amounts by the Fiscal Agent and Paying Agent in all
respects as if received from the relevant Issuer under this Agreement.
(g) Taxes; foreign exchange clearance. The Fiscal Agent hereby
---------------------------------
agrees to use its best efforts to obtain, prior to any payment date on the
Notes, any tax or foreign exchange clearance or other authorization required
under the laws of the United States or Australia (in the case of Notes issued by
GEC Australia) or Canada or any province or territory thereof (in the case of
Notes issued by GEC Canada) or any applicable foreign country or other authority
with respect to the payment to be made on the Notes on such date.
6. Redemption; Sinking Funds; Repayment at the Option of the
---------------------------------------------------------
Holder. (a) The provisions of this Section shall be applicable, as the case may
- ------
be, (i) to any Notes which are redeemable or subject to repayment at the option
of the holder before their maturity and (ii) to any sinking fund for the
retirement of any Notes, in either case except as otherwise specified as
contemplated by Section 2 for any Series of Notes.
The minimum amount of any sinking fund payment provided for by
the terms of any Notes is herein referred to as a "mandatory sinking fund
payment," and any
<PAGE>
payment in excess of such minimum amount provided for by the terms of such Notes
is herein referred to as an "optional sinking fund payment."
In case the relevant Issuer shall desire to exercise any right
to redeem all, or, as the case may be, any part of, the Notes of any Series in
accordance with their terms, it shall fix a date for redemption. Notice of
redemption to the holders of Registered Notes to be redeemed in whole or in part
at the option of such Issuer shall be given by mailing notice of such redemption
by first class mail, postage prepaid, at least 30 days and not more than 60 days
prior to the date fixed for redemption to such holders at their last addresses
as they shall appear in the Register. Notice of redemption to holders of Bearer
Notes shall be published in a leading daily newspaper in the English language of
general circulation in London, England and, if the Series of Notes to be
redeemed is listed on the Luxembourg Stock Exchange and such Exchange so
requires, in a daily newspaper of general circulation in Luxembourg or, if
publication in either London or Luxembourg is not practical, elsewhere in
Western Europe. The term "daily newspaper" shall mean a newspaper customarily
published on each business day in morning editions, whether or not it shall be
published in Saturday, Sunday or holiday editions. Such notice is expected to be
published in the Financial Times and (if such Series of Notes is listed on the
---------------
Luxembourg Stock Exchange) the Luxemburger Wort and shall be published at least
----------------
once a week for three successive weeks prior to the date fixed for redemption,
the first such publication to be not less than 30 days nor more than 60 days
prior to the date fixed for redemption. If by reason of the temporary or
permanent suspension of publication of any newspaper or by reason of any other
cause, it shall be impossible to make publication of such notice in a daily
newspaper as herein provided, then such publication or other notice in lieu
thereof as shall be made by the Fiscal and Paying Agent shall constitute
sufficient publication of such notice, if such publication or other notice
shall, so far as may be possible, approximate the terms and conditions of the
publication in lieu of which it is given. The Fiscal and Paying Agent shall
promptly furnish to the relevant Issuer and to each other paying agent of such
Issuer a copy of each notice of redemption so published. Any notice if given in
the manner herein provided shall be conclusively presumed to have been duly
given, whether or not the holder receives such notice. In any case, failure to
give notice or any defect in the notice to the holder of any Note of a Series
designated for redemption in whole or in part shall not affect the validity of
the proceedings for the redemption of any other Note of such Series.
Each such notice of redemption shall specify the date fixed
for redemption, the redemption price at which the Notes of such Series are to be
redeemed, the place or places of payment, that payment will be made upon
presentation and surrender of such Notes and, in the case of Notes issued with
coupons, of all coupons appertaining thereto maturing after the date fixed for
redemption, that any interest accrued to the date fixed for redemption will be
paid as specified in said notice, and that on and after said date any interest
thereon or on the portions thereof to be redeemed will cease to accrue. If less
than all the Notes of a Series are to be redeemed the notice of redemption shall
specify the number or numbers of the Notes to be redeemed. In case any Note is
to be redeemed in part only, the notice of redemption shall state the portion of
the principal amount thereof to be redeemed and shall state that on and after
the date fixed for redemption, upon surrender of such Note, a new Note or Notes
of the same Series in principal amount equal
<PAGE>
to the unredeemed portion thereof, together with any unmatured coupons
appertaining thereto, will be issued.
On or prior to the redemption date specified in the notice of
redemption given as provided in this Section, the relevant Issuer will deposit
with the Fiscal and Paying Agent or with one or more paying agents an amount of
money sufficient to redeem on the redemption date all the Notes or portions
thereof so called for redemption, together with accrued interest to the date
fixed for redemption. If less than all the Notes of a Series are to be redeemed
such Issuer will give the Fiscal and Paying Agent notice not less than 60 days
prior to the redemption date as to the aggregate principal amount of Notes of
such Series to be redeemed and the Fiscal and Paying Agent shall select or cause
to be selected, in such manner as in its sole discretion it shall deem
appropriate and fair, the Notes or portions thereof to be redeemed. Notes of a
Series may be redeemed in part only in multiples of the smallest authorized
denomination of that Series.
(b) If notice of redemption has been given as provided in this
Section, the Notes or portions of Notes of the Series with respect to which such
notice has been given shall become due and payable on the date and at the place
or places stated in such notice at the applicable redemption price together with
any interest accrued to the date fixed for redemption, and on and after said
date (unless the relevant Issuer shall default in the payment of Notes or
portions of such Notes, together with any interest accrued to said date) any
interest on the Notes or portions of Notes of such Series so called for
redemption shall cease to accrue, and the unmatured coupons, if any,
appertaining thereto shall be void. On presentation and surrender of such Notes
at a place of payment in said notice specified, together with all coupons, if
any, appertaining thereto maturing after the date fixed for redemption, the said
Notes or the specified portions thereof shall be paid and redeemed by the
relevant Issuer at the applicable redemption price, together with any interest
accrued thereon to the date fixed for redemption; provided, however, that
-----------------
payment of interest becoming due on the date fixed for redemption shall be
payable in the case of Notes with coupons attached thereto, to the holders of
the coupons for such interest upon surrender thereof, and in the case of
Registered Notes, to the persons to whom the principal thereof shall be payable.
If any Note issued with coupons is surrendered for redemption
and is not accompanied by all appurtenant coupons maturing after the date fixed
for redemption, the surrender of such missing coupon or coupons may be waived by
the relevant Issuer and the Fiscal and Paying Agent, if there be furnished to
each of them such security or indemnity as they may require to save each of them
harmless.
Upon presentation of any Note redeemed in part only, the
relevant Issuer shall execute and the Fiscal and Paying Agent shall authenticate
and deliver to the holder thereof, at the expense of such Issuer, a new Note or
Notes of the same Series, of authorized denominations, together with all
unmatured coupons, if any, appertaining thereto, in aggregate principal amount
equal to the unredeemed portion of the Note so presented.
<PAGE>
In lieu of making all or any part of any mandatory sinking
fund payment with respect to any Notes in cash the relevant Issuer may at its
option (a) deliver to the Fiscal and Paying Agent Notes, together with all
unmatured coupons, if any, appertaining thereto, of the same Series theretofore
purchased or otherwise acquired by such Issuer, or (b) receive credit for the
principal amount of Notes of the same Series which have been redeemed either at
the election of such Issuer pursuant to the terms of such Notes or through the
application of permitted optional sinking fund payments pursuant to the terms of
such Notes; provided that such Notes have not previously been so credited. Such
--------
Notes shall be received and credited for such purpose by the Fiscal and Paying
Agent at the redemption price specified in such Notes for redemption through
operation of the sinking fund and the amount of such mandatory sinking fund
payment shall be reduced accordingly.
Not less than 60 days prior to each sinking fund payment date
for any Notes, the relevant Issuer will deliver to the Fiscal and Paying Agent a
certificate signed by an Issuer Authorized Representative specifying the amount
of the next ensuing sinking fund payment for such Notes pursuant to the terms
thereof, the portion thereof, if any, which is to be satisfied by payment of
cash (which cash may be deposited with the Fiscal and Paying Agent or with one
or more paying agents) and the portion thereof, if any, which is to be satisfied
by delivering and crediting Notes of the same Series pursuant to this Section
(which Notes, if not theretofore delivered, will accompany such certificate) and
whether such Issuer intends to exercise its right to make a permitted optional
sinking fund payment with respect to such Notes. Such certificate shall also
state that no Event of Default (as defined in Section 8 below) has occurred and
is continuing with respect to such Notes. Such certificate shall be irrevocable
and upon its delivery the relevant Issuer shall be obligated to make the cash
payment or payments therein referred to, if any, on or before the next
succeeding sinking fund payment date. In the case of the failure of the relevant
Issuer to deliver such certificate (or to deliver the Notes specified in this
paragraph), the sinking fund payment due on the next succeeding sinking fund
payment date for such Notes shall be paid entirely in cash and shall be
sufficient to redeem the principal amount of such Notes subject to a mandatory
sinking fund payment without the option to deliver or credit Notes as provided
in this Section and without the right to make any optional sinking fund payment,
if any, with respect to such Notes.
Any sinking fund payment or payments (mandatory or optional)
made in cash plus any unused balance of any preceding sinking fund payments made
in cash which shall equal or exceed 100,000 units of the Specified Currency with
respect to the particular Series (or a lesser sum if the relevant Issuer shall
so request or determine) with respect to any Notes shall be applied by the
Fiscal and Paying Agent on the sinking fund payment date on which such payment
is made (or, if such payment is made before a sinking fund payment date, on the
next sinking fund payment date following the date of such payment) to the
redemption of such Notes at the redemption price specified in such Notes for
operation of the sinking fund together with accrued interest, if any, to the
date fixed for redemption. Any sinking fund moneys not so applied or allocated
by the Fiscal and Paying Agent to the redemption of Notes shall be added to the
next cash sinking fund payment received by the Fiscal and Paying Agent for such
Notes and, together with such payment (or such amount so segregated) shall be
applied in accordance with the provisions of this
<PAGE>
Section. Any and all sinking fund moneys with respect to any Notes held by the
Fiscal and Paying Agent on the last sinking fund payment date with respect to
such Notes and not held for the payment or redemption of particular Notes of
such Series shall be applied by the Fiscal and Paying Agent, together with other
moneys, if necessary, to be deposited (or segregated) sufficient for the
purpose, to the payment of the principal of the Notes of that Series at
maturity.
The Fiscal and Paying Agent shall select or cause to be
selected the Notes to be redeemed upon such sinking fund payment date in the
manner specified in the last paragraph of subsection (a) and the relevant Issuer
shall cause notice of the redemption thereof to be given in the manner provided
in subsection (b) except that the notice of redemption shall also state that the
Notes are being redeemed by operation of the sinking fund. Such notice having
been duly given, the redemption of such Notes shall be made upon any Series of
Notes the terms and in the manner stated in subsection (b).
On or before each sinking fund payment date, the relevant
Issuer shall pay to the Fiscal and Paying Agent in cash a sum equal to any
interest accrued to the date fixed for redemption of Notes or portions thereof
to be redeemed on such sinking fund payment date pursuant to this Section.
Neither the Fiscal and Paying Agent nor the relevant Issuer
shall redeem any Notes of any Series with sinking fund moneys or give any notice
of redemption of such Notes by operation of the sinking fund for such Series
during the continuance of a default in payment of interest, if any, on such
Notes or of any Event of Default (other than an Event of Default occurring as a
consequence of this paragraph) with respect to Notes of such Series, except that
if the notice of redemption of any such Notes shall theretofore have been given
in accordance with the provisions hereof, the Fiscal and Paying Agent shall
redeem such Notes if cash sufficient for that purpose shall be deposited with
the Fiscal and Paying Agent for that purpose in accordance with the terms of
this Section. Except as aforesaid, any moneys in the sinking fund for Notes of
such Series at the time when any such default or Event of Default shall occur
and any moneys thereafter paid into such sinking fund shall, during the
continuance of such default or Event of Default, be held as security for the
payment of such Notes; provided, however, that in case such default or Event of
-------- -------
Default shall have been cured or waived as provided herein, such moneys shall
thereafter be applied on the next sinking fund payment date for Notes of such
Series on which such moneys may be applied pursuant to the provisions of this
Section.
(c) Any Series of Notes may be made, by provision contained in
or established pursuant to a Corporate Order pursuant to Section 2(c) hereof,
subject to repayment, in whole or in part, at the option of the holder on a date
or dates specified prior to maturity, at a price equal to 100% of the principal
amount thereof, together with accrued interest to but excluding the date of
repayment, on such notice as may be required, provided, however, that the holder
of a Note of such Series may only elect partial repayment in an amount that will
result in the portion of such Note that will remain outstanding after such
repayment constituting an authorized denomination, or combination thereof, of
Notes of such Series.
<PAGE>
7. Mutilated, Destroyed, Stolen or Lost Notes. (a) The Fiscal
------------------------------------------
and Paying Agent is hereby authorized to authenticate and deliver from time to
time Notes of any Series, with all unmatured coupons attached, in exchange for
or in lieu of Notes of such Series which become mutilated, defaced, destroyed,
stolen or lost or Notes of such Series to which mutilated, defaced, destroyed,
stolen or lost coupons appertain. In every case the applicant for a substituted
Note of such Series or coupon appertaining thereto shall furnish to the relevant
Issuer, the Guarantor (in the case of Notes issued by GEC Australia or GEC
Canada) and to the Fiscal and Paying Agent such security or indemnity as may be
required by them to save each of them harmless, and, in every case of
destruction, loss or theft, the applicant shall also furnish to such Issuer, the
Guarantor and to the Fiscal and Paying Agent evidence to their satisfaction of
the destruction, loss or theft of such Note or coupon and of the ownership
thereof. Each Note authenticated and delivered in exchange for or in lieu of any
such Note shall carry all the rights to interest accrued and unpaid and to
accrue which were carried by such Note and shall have attached thereto coupons
such that neither gain nor loss in interest shall result from such exchange or
substitution.
Upon the issuance of any substituted Note or coupon, the
relevant Issuer may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses connected therewith. In case any Note or coupon which has matured or is
about to mature shall become mutilated or be destroyed, lost or stolen, the
relevant Issuer may, instead of issuing a substituted Note, pay or authorized
the payment of the same (without surrender thereof except in the case of a
mutilated Note or coupon) if the applicant for such payment shall furnish to
such Issuer, the Guarantor and to the Fiscal and Paying Agent such security or
indemnity as may be required by them to save each of them harmless and, in case
of destruction, loss or theft, evidence satisfactory to such Issuer, the
Guarantor and the Fiscal and Paying Agent of the destruction, loss or theft of
such Note or coupon and the ownership thereof.
(b) All Notes and coupons surrendered for payment, redemption,
repayment, exchange or registration of transfer or for credit against any
sinking fund shall be delivered to, or to the order of, the Fiscal and Paying
Agent for cancellation. The Fiscal and Paying Agent shall cancel and destroy, or
procure the cancellation and destruction of, all such Notes and coupons and
shall deliver a certificate of destruction to the relevant Issuer and (in the
case of Notes issued by GEC Australia or GEC Canada) the Guarantor. In the case
of any global Note initially issued in temporary global form, which shall be
destroyed by the Fiscal and Paying Agent upon exchange in full, the certificate
of destruction shall state that a certification in the form required pursuant to
the terms of such global Note was received with respect to each portion thereof
exchanged for an interest in a Note in permanent global form or in definitive
form.
8. Events of Default. The term "Events of Default" whenever
-----------------
used herein with respect to Notes of any Series means any one of the following
events and such other events as may be established with respect to the Notes of
such Series as contemplated by Section 2 hereof, continued for the period of
time, if any, and after the giving of notice, if any, designated in this
Agreement or as may be established with respect to such Notes as contemplated by
Section 2 hereof, as the case may
<PAGE>
be, unless it is either inapplicable or is specifically deleted or modified in
the applicable Corporate Order under which such Series of Notes is issued, as
the case may be, as contemplated by Section 2:
(i) default in the payment of any installment of interest
(including U.S. Additional Amounts, Australian Additional Amounts (in
the case of Notes issued by GEC Australia) and Canadian Additional
Amounts (in the case of Notes issued by GEC Canada)) upon any Note of
such Series as and when the same shall become due and payable, and
continuance of such default for a period of 30 days; or
(ii) default in the payment of the principal of, or premium,
if any, on any Note of such Series as and when the same shall become
due and payable whether at maturity, upon redemption, by declaration,
repayment or otherwise; or
(iii) default in the making or satisfaction of any sinking
fund payment or analogous obligation as and when the same shall become
due and payable by the terms of any Notes of such Series; or
(iv) failure on the part of the relevant Issuer and (in the
case of Notes issued by GEC Australia or GEC Canada) the Guarantor duly
to observe or perform any other of the covenants or agreements on the
part of such Issuer or the Guarantor in respect of the Notes of such
Series contained in such Notes or this Agreement (other than a covenant
or agreement in respect of the Notes of such Series a default in whose
observance or performance is elsewhere in this Section specifically
dealt with) continued for a period of 60 days after the date on which
written notice of such failure, requiring such Issuer or the Guarantor
to remedy the same, shall have been given to such Issuer, the Guarantor
and the Fiscal and Paying Agent by the holders of at least twenty-five
percent in aggregate principal amount of the Notes of such Series at
the time outstanding; or
(v) an event of default with respect to any other Series of
Notes issued or hereafter issued pursuant to this Agreement or as
defined in any indenture or instrument evidencing or under which GE
Capital has at the date of this Agreement or shall hereafter have
outstanding any indebtedness for borrowed money shall happen and be
continuing and such other Series of Notes or such indebtedness, as the
case may be, shall have been accelerated so that the same shall be or
become due and payable prior to the date on which the same would
otherwise have become due and payable, and such acceleration shall not
be rescinded or annulled within ten calendar days after written notice
thereof shall have been given to the relevant Issuer, the Guarantor and
the Fiscal and Paying Agent by the holders of at least twenty-five
percent in aggregate principal amount of the Notes of such Series at
the time outstanding; provided, however, that if such event of default
-------- -------
with respect to such other Series of Notes or under such indenture or
instrument, as the case may be, shall be remedied or cured by GE
Capital, or waived by the holders of such other Series of Notes or of
such indebtedness, as the case may be, then the Event of Default
hereunder by reason thereof shall be deemed likewise to have been
<PAGE>
thereupon remedied, cured or waived without further action upon the
part of either the Fiscal and Paying Agent or any of the Noteholders of
such Series; or
(vi) in the case of Notes issued by GEC Australia, an event of
default with respect to any other Series of Notes issued or hereafter
issued by GEC Australia pursuant to this Agreement or as defined in any
indenture or instrument evidencing or under which GEC Australia has at
the date of this Agreement or shall hereafter have outstanding any
indebtedness for borrowed money in the aggregate principal amount of at
least A$10,000,000 (or the equivalent thereof in one or more foreign or
composite currencies) shall happen and be continuing and such other
Series of Notes or such indebtedness, as the case may be, shall have
been accelerated so that the same shall be or become due and payable
prior to the date on which the same would otherwise have become due and
payable, and such acceleration shall not be rescinded or annulled
within ten calendar days after written notice thereof shall have been
given to GEC Australia, the Guarantor and the Fiscal and Paying Agent
by the holders of at least twenty-five percent in aggregate principal
amount of the Notes of such Series at the time outstanding; provided,
--------
however, that if such event of default with respect to such other
-------
Series of Notes or under such indenture or instrument, as the case may
be, shall be remedied or cured by GEC Australia or the Guarantor, or
waived by the holders of such other Series of Notes or of such
indebtedness, as the case may be, then the Event of Default hereunder
by reason thereof shall be deemed likewise to have been thereupon
remedied, cured or waived without further action upon the part of
either the Fiscal and Paying Agent or any of the Noteholders of such
Series; or
(vii) in the case of Notes issued by GEC Canada, an event of
default with respect to any other Series of Notes issued or hereafter
issued by GEC Canada pursuant to this Agreement or as defined in any
indenture or instrument evidencing or under which GEC Canada has at the
date of this Agreement or shall hereafter have outstanding any
indebtedness for borrowed money in the aggregate principal amount of at
least Cdn.$10,000,000 (or the equivalent thereof in one or more foreign
or composite currencies) shall happen and be continuing and such other
Series of Notes or such indebtedness, as the case may be, shall have
been accelerated so that the same shall be or become due and payable
prior to the date on which the same would otherwise have become due and
payable, and such acceleration shall not be rescinded or annulled
within ten calendar days after written notice thereof shall have been
given to GEC Canada, the Guarantor and the Fiscal and Paying Agent by
the holders of at least twenty-five percent in aggregate principal
amount of the Notes of such Series at the time outstanding; provided,
--------
however, that if such event of default with respect to such other
-------
Series of Notes or under such indenture or instrument, as the case may
be, shall be remedied or cured by GEC Canada or the Guarantor, or
waived by the holders of such other Series of Notes or of such
indebtedness, as the case may be, then the Event of Default hereunder
by reason thereof shall be deemed likewise to have been thereupon
remedied, cured or waived without further action upon the part of
either the Fiscal and Paying Agent or any of the Noteholders of such
Series; or
<PAGE>
(viii) a decree or order by a court having jurisdiction in the
premises shall have been entered adjudging GE Capital a bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization of GE Capital under the United States Federal Bankruptcy
Code or any other similar applicable United States Federal or State
law, and such decree and order shall have continued undischarged and
unstayed for a period of 60 days; or a decree or order of a court
having jurisdiction in the premises for the appointment of a receiver
or liquidator or trustee or assignee (or other similar official) in
bankruptcy or insolvency of GE Capital or of all or substantially all
of its property, or for the winding up or liquidation of its affairs,
shall have been entered, and such decree and order shall have continued
undischarged and unstayed for a period of 60 days; or
(ix) GE Capital shall institute proceedings to be adjudicated
a voluntary bankrupt, or shall consent to the filing of a bankruptcy
proceeding against it, or shall file a petition or answer or consent
seeking reorganization under the United States Federal Bankruptcy Code
or any other similar applicable United States Federal or State law, or
shall consent to the filing of any such petition, or shall consent to
the appointment of a receiver or liquidator or trustee or assignee (or
other similar official) in bankruptcy or insolvency of it or of its
property, or shall make an assignment for the benefit or creditors, or
shall admit in writing its inability to pays its debts generally as
they become due; or
(x) GEC Australia (in the case of Notes issued by GEC
Australia) shall be declared bankrupt, or a liquidator, a receiver,
manager, receiver and manager, administrator or any other officer with
similar powers shall be appointed with respect to GEC Australia or all
or substantially all of the property of GEC Australia, and, in all such
cases, continues both undischarged and unstayed for a period of 90
days; or
(xi) an order shall be made or an effective resolution be
passed for the winding-up or liquidation or dissolution of GEC Canada
(in the case of Notes issued by GEC Canada) by operation of law, except
in the course of carrying out, or pursuant to, a reconstruction,
reorganization, consolidation, merger, amalgamation, transfer, sale,
conveyance, lease or other disposition contemplated in or permitted
under this Agreement; or
(xii) GEC Canada (in the case of Notes issued by GEC Canada)
shall make a general assignment for the benefit of its creditors or a
proposal under applicable bankruptcy legislation, or if an effective
resolution be passed by GEC Canada to give effect to any of the
foregoing; or
(xiii) GEC Canada (in the case of Notes issued by GEC Canada)
shall be declared bankrupt, or if a custodian or sequestrator or a
receiver and manager or any other officer with similar powers shall be
appointed of GEC Canada or of all or substantially all of the property
of GEC Canada, and, in all such cases, such continues both undischarged
and unstayed for a period of 90 days; or
<PAGE>
(xiv) any other Event of Default provided in the applicable
Corporate Order under which such Series of Notes is issued as
contemplated by Section 2.
If an Event of Default with respect to Notes of any Series at
the time outstanding occurs and is continuing, then and in each and every case,
unless the principal of the Notes of such Series shall have already become due
and payable, each Note of such Series shall, at the option of and upon written
notice to the relevant Issuer, the Guarantor and the Fiscal and Paying Agent by
the then holder thereof, mature and become due and payable upon the date that
such written notice is received by such Issuer, the Guarantor and the Fiscal and
Paying Agent at a price equal to 100% of the principal amount thereof (or, if
such Note provides for an amount less than the principal amount thereof to be
due and payable upon redemption or a declaration of acceleration of the maturity
thereof pursuant to this Section (hereinafter an "Original Issue Discount
Note"), such portion of the principal amount as may be specified in the terms of
such Note), together with accrued interest to such date, upon presentation and
surrender of such Note and all coupons appertaining thereto maturing after such
date, unless prior to such date all Events of Default in respect of all such
Notes of such Series shall have been cured.
9. Additional Payments; Tax Redemption. (a) U.S. Additional
----------------------------------- ---------------
Amounts. The relevant Issuer or (in the case of Notes issued by GEC Australia or
- -------
GEC Canada) the Guarantor will, subject to certain exceptions and limitations
set forth below, pay such additional amounts (the "U.S. Additional Amounts" and,
together with the Australian Additional Amounts and the Canadian Additional
Amounts (as such terms are hereinafter defined), the "Additional Amounts") to
the holder of any Note of any Series or of any interest coupon appertaining
thereto who is a United States Alien (as defined below) as may be necessary in
order that every net payment of the principal of, premium and interest,
including original issue discount, on such Note and any other amounts payable on
such Note, after withholding for or on account of any present or future tax,
assessment or other governmental charge imposed upon or as a result of such
payment by the United States (or any political subdivision or taxing authority
thereof or therein), will not be less than the amount provided for in such Note
or coupon to be then due and payable. However, the relevant Issuer or the
Guarantor, as the case may be, will not be required to make any payment of U.S.
Additional Amounts to any such holder for or on account of:
(i) any such tax, assessment or other governmental charge
which would not have been so imposed but for (1) the existence of any
present or former connection between such holder (or between a
fiduciary, settlor, beneficiary, member or shareholder of such holder,
if such holder is an estate, a trust, a partnership or a corporation)
and the United States, including, without limitation, such holder (or
such fiduciary, settlor, beneficiary, member or shareholder) being or
having been a citizen or resident thereof or being or having been
engaged in a trade or business or present therein or having, or having
had, a permanent establishment therein or (2) the presentation by the
holder of any such Note or coupon for payment on a date more than 15
calendar days after the date on which such payment became due and
payable or the date on which payment thereof is duly provided for,
whichever occurs later;
<PAGE>
(ii) any estate, inheritance, gift, sales, transfer or
personal property tax or any similar tax, assessment or governmental
charge;
(iii) any tax, assessment or other governmental charge imposed
by reason of such holder's past or present status as a personal holding
company or foreign personal holding company or controlled foreign
corporation or passive foreign investment company with respect to the
United States or as a corporation which accumulates earnings to avoid
United States federal income tax or as a private foundation or other
tax-exempt organization;
(iv) any tax, assessment or other governmental charge which is
payable otherwise than by withholding from payments on or in respect of
any Note;
(v) any tax, assessment or other governmental charge required
to be withheld by any paying agent from any payment of principal of,
premium or interest on, any Note, if such payment can be made without
such withholding by any other paying agent in a city in Western Europe;
(vi) any tax, assessment or other governmental charge which
would not have been imposed but for the failure to comply with
certification, information or other reporting requirements concerning
the nationality, residence or identity of the holder or beneficial
owner of such Note, if such compliance is required by statute or by
regulation of the United States or of any political subdivision or
taxing authority thereof or therein as a precondition to relief or
exemption from such tax, assessment or other governmental charge;
(vii) any tax, assessment or other governmental charge imposed
by reason of such holder's past or present status as the actual or
constructive owner of 10% or more of the total combined voting power of
all classes of stock entitled to vote of the relevant Issuer or of the
Guarantor or as a direct or indirect subsidiary of the relevant Issuer
or of the Guarantor; or
(viii) any combination of items (i), (ii), (iii), (iv), (v),
(vi) or (vii);
nor shall U.S. Additional Amounts be paid with respect to any payment on any
such Note to a United States Alien who is a fiduciary or partnership or other
than the sole beneficial owner of such payment to the extent such payment would
be required by the laws of the United States (or any political subdivision
thereof) to be included in the income, for tax purposes, of a beneficiary or
settlor with respect to such fiduciary or a member of such partnership or a
beneficial owner who would not have been entitled to the U.S. Additional Amounts
had such beneficiary, settlor, member or beneficial owner been the holder of
such Note.
The term "United States Alien" means any person who, for United States
federal income tax purposes, is a foreign corporation, a non-resident alien
individual, a non-resident alien fiduciary of a foreign estate or trust, or a
foreign partnership, one or more of
<PAGE>
the members of which is a foreign corporation, a non-resident alien individual
or a non-resident alien fiduciary of a foreign estate or trust.
(b) Australian Additional Amounts. All payments of principal
-----------------------------
and interest in respect of Notes issued by GEC Australia and any interest
coupons appertaining thereto will be made without withholding of or deduction
for, or on account of, any present or future taxes, duties, assessments or
governmental charges of whatever nature imposed or levied by or on behalf of the
Commonwealth of Australia or any political subdivision thereof or any authority
or agency therein or thereof having power to tax unless the withholding or
deduction of such taxes, duties, assessments or charges is required by law or
the application, administration or interpretation thereof. In the event that
such withholding or deduction is so required, GEC Australia or the Guarantor (if
the Guarantor is required to make payments under the Guarantee) shall pay
(subject to GEC Australia's right of redemption referred to above in Section 6 -
"Redemption; Sinking Funds; Repayment at the Option of the Holder") such
additional amounts (the "Australian Additional Amounts") as may be necessary in
order that the net amounts received by the holders of Notes and coupons
appertaining thereto after such withholding or deduction shall equal the
respective amounts of principal and interest which otherwise would have been
received by them in respect of the Notes or coupons, as the case may be, in the
absence of such withholding or deduction, except that no Australian Additional
Amounts shall be payable with respect to any Note or coupon presented for
payment:
(a) by or on behalf of a holder who is subject to such taxes,
duties, assessments or governmental charges by reason of his
being resident or deemed to be resident in Australia or
otherwise than merely by the holding or use or deemed holding
or use outside Australia or ownership as a non-resident of
Australia of such Notes or coupons; or
(b) by or on behalf of a holder who is a resident of Australia
where no additional amount would have been required to be paid
had a tax file number been quoted to GEC Australia in respect
of the relevant Note before the due date for payment in
respect of the relevant Note ("resident" and "tax file number"
having the same meaning for this purpose as they have in the
Income Tax Assessment Act 1936 (as amended) of Australia); or
(c) by or on behalf of a holder who is subject to such taxes,
duties, assessments or government charges which would not have
been so imposed but for the presentation by the holder of any
such Note or coupon for payment on a date more than 15 days
after the date on which such payment became due and payable or
the date on which payment thereof is duly provided for,
whichever occurs later.
(c) Canadian Additional Amounts. All payments of principal and
---------------------------
interest in respect of Notes issued by GEC Canada and any interest coupons
appertaining thereto will be made without withholding of or deduction for, or on
account of, any present or future taxes, duties, assessments or governmental
charges of whatever nature imposed or levied by or on behalf of the Government
of Canada or any province or territory or
<PAGE>
political subdivision thereof or any authority or agency therein or thereof
having power to tax unless the withholding or deduction of such taxes, duties,
assessments or charges is required by law or the application, administration or
interpretation thereof. In the event that such withholding or deduction is so
required, GEC Canada or the Guarantor (if the Guarantor is required to make
payments under the Guarantee) shall pay (subject to GEC Canada's right of
redemption referred to above in Section 6 - "Redemption; Sinking Funds;
Repayment at the Option of the Holder") such additional amounts (the "Canadian
Additional Amounts") as may be necessary in order that the net amounts received
by the holders of Notes and coupons appertaining thereto after such withholding
or deduction shall equal the respective amounts of principal and interest which
otherwise would have been received by them in respect of such Notes or coupons,
as the case may be, in the absence of such withholding or deduction, except that
no Canadian Additional Amounts shall be payable with respect to any such Note or
coupon presented for payment:
(a) by or on behalf of a holder who is subject to such taxes,
duties, assessments or charges otherwise than merely by the
holding or use or deemed holding or use outside Canada or
ownership as a non-resident of Canada of such Note or coupon;
or
(b) by or on behalf of a holder in respect of whom such taxes,
duties, assessments or charges are required to be withheld or
deducted by reason of the holder being a person with whom GEC
Canada is not dealing at arm's length (within the meaning of
the Income Tax Act (Canada)); or
(c) more than 15 days after the Relevant Date (as defined below),
except to the extent that the holder thereof would have been
entitled to such Canadian Additional Amounts on presenting
such Note or coupon for payment on the last day of such period
of 15 days.
The term "Relevant Date" means the later of (i) the date on
which payment in respect of the relevant Note or Coupon becomes due and payable;
and (ii) if the full amount of the moneys payable on such date has not been
received by the Fiscal and Paying Agent on or prior to such date, the date on
which the full amount of such moneys having been so received, notice of such
receipt is duly published in accordance with the terms set out under Section 19
- - "Notices to Parties" below.
(d) Tax Redemption. All Notes of the same Series may be
--------------
redeemed in whole but not in part, at the option of the relevant Issuer at any
time prior to maturity, upon the giving of a notice of redemption, at a
redemption price (except as otherwise specified herein or in the applicable
Corporate Order) equal to 100% of the principal amount thereof, together with
accrued interest to the date fixed for redemption, or, in the case of Original
Issue Discount Notes, at 100% of the portion of the face amount thereof that has
accreted to the date of redemption, if the relevant Issuer or (in the case of
Notes issued by GEC Australia or GEC Canada) the Guarantor determines that, as a
result of any change in or amendment to the laws (or any regulations or ruling
promulgated thereunder) of the United States or of any political subdivision or
taxing authority thereof or therein affecting taxation, or any change in
official position regarding the application or
<PAGE>
interpretation of such laws, regulations or ruling, which change or amendment
becomes effective on or after the date of issuance of the first Tranche of Notes
of such Series (if sold on an agency basis) or the date on which an Agent acting
as principal agreed to purchase such Tranche of Notes, the relevant Issuer or
the Guarantor, as the case may be, has or will become obligated to pay U.S.
Additional Amounts with respect to such Notes as described under Section 9(a)
hereof. Prior to the giving of any notice of redemption pursuant to this
paragraph, the relevant Issuer shall deliver to the Fiscal and Paying Agent, (i)
a certificate stating that the relevant Issuer is entitled to effect such
redemption and setting forth a statement of facts showing that the conditions
precedent to the right of such Issuer to so redeem have occurred (the date on
which such certificate is delivered to the Fiscal and Paying Agent is herein
called the"Redemption Determination Date"), and (ii) an opinion of counsel
satisfactory to the Fiscal Agent to such effect based on such statement of
facts; provided that no such notice of redemption shall be given earlier than 90
days prior to the earliest date on which the relevant Issuer or the Guarantor,
as the case may be, would be obligated to pay such U.S. Additional Amounts if a
payment in respect of such Notes were then due.
Notice of redemption will be given not less than 30 nor more
than 60 days prior to the date fixed for redemption, which date and the
applicable redemption price will be specified in the notice.
If any date fixed for redemption is a date prior to the
Exchange Date for a temporary global Bearer Note, payment on such redemption
date will be made subject to receipt of a certificate substantially in the form
set forth in Exhibit B-1, delivery of which is a condition to payment of such
Notes.
(e) Tax Redemption: Notes Issued by GEC Australia. All Notes
---------------------------------------------
of the same Series issued by GEC Australia may be redeemed, at the option of GEC
Australia, in whole but not in part, at any time prior to maturity, upon the
giving of a notice of redemption as described under Section 9(d) hereof, at a
redemption price (except as otherwise specified herein or in the applicable
Corporate Order) equal to 100% of the principal amount thereof, together with
accrued interest to the date fixed for redemption, or, in the case of Original
Issue Discount Notes, at 100% of the portion of the face amount thereof that has
accreted to the date of redemption, if (i) a certificate under Section 128F(4)
of the Income Tax Assessment Act 1936 (as amended) of Australia (a "128F
Certificate") with respect to the payment of interest on such Notes is required
for an exemption to Australian withholding tax and such certificate is not
issued or any application by GEC Australia for such a 128F Certificate is denied
with the result that on the occasion of the next payment due in respect of such
Notes GEC Australia or the Guarantor, as the case may be, would be required to
pay Australian Additional Amounts with respect to such Notes as described under
Section 9(b) hereof or (ii) GEC Australia or the Guarantor, as the case may be,
determines that, as a result of any change in or amendment to the laws (or any
regulations or rulings promulgated thereunder) of Australia or of any political
subdivision or taxing authority thereof or therein affecting taxation, or any
change in official position regarding the application or interpretation of such
laws, regulations or rulings, including any change effected by guidance in any
form from an official source, which change or amendment becomes effective on or
after the date of issuance of the first
<PAGE>
Tranche of Notes of such Series (if sold on an agency basis) or the date on
which an Agent acting as principal agrees to purchase such Tranche of Notes, GEC
Australia or the Guarantor, as the case may be, has or will become obligated to
pay Australian Additional Amounts with respect to the Notes as described under
Section 9(b) hereof. Prior to the giving of any notice of redemption pursuant to
this paragraph, GEC Australia or the Guarantor, as the case may be, shall
deliver to the Fiscal Agent (i) a certificate stating that GEC Australia is
entitled to effect such redemption and setting forth a statement of facts
showing that the conditions precedent to the right of GEC Australia to so redeem
have occurred and (ii) an opinion of counsel satisfactory to the Fiscal Agent to
such effect based on such statement of facts; provided that no such notice of
redemption shall be given earlier than 90 days prior to the earliest date on
which GEC Australia or the Guarantor, as the case may be, would be obligated to
pay such Australian Additional Amounts if a payment in respect of such Notes
were then due.
(f) Tax Redemption: Notes Issued by GEC Canada. All Notes of
------------------------------------------
the same Series issued by GEC Canada may be redeemed, at the option of GEC
Canada, in whole but not in part, at any time prior to maturity, upon the giving
of a notice of redemption as described under Section 9(d) hereof, at a
redemption price (except as otherwise specified herein or in the applicable
Corporate Order) equal to 100% of the principal amount thereof, together with
accrued interest to the date fixed for redemption, or, in the case of Original
Issue Discount Notes, at 100% of the portion of the face amount thereof that has
accreted to the date of redemption, if GEC Canada or the Guarantor, as the case
may be, determines that, as a result of any change in or amendment to the laws
(or any regulations or rulings promulgated thereunder) of Canada or of any
province or territory or political subdivision thereof or any authority or
agency therein or thereof having power to tax, or any change in official
position regarding the application or interpretation of such laws, regulations
or rulings, including any change effected by guidance in any form from an
official source, which change or amendment becomes effective on or after the
date of issuance of the first Tranche of Notes of such Series (if sold on an
agency basis) or the date on which an Agent acting as principal agreed to
purchase such Tranche of Notes, GEC Canada or the Guarantor, as the case may be,
has or will become obligated to pay Canadian Additional Amounts with respect to
the Notes as described under Section 9(c) hereof. Prior to the giving of any
notice of redemption pursuant to this paragraph, GEC Canada or the Guarantor, as
the case may be, shall deliver to the Fiscal Agent (i) a certificate stating
that GEC Canada is entitled to effect such redemption and setting forth a
statement of facts showing that the conditions precedent to the right of GEC
Canada to so redeem have occurred and (ii) an opinion of counsel satisfactory to
the Fiscal Agent to such effect based on such statement of facts; provided that
no such notice of redemption shall be given earlier than 90 days prior to the
earliest date on which GEC Canada or the Guarantor, as the case may be, would be
obligated to pay such Canadian Additional Amounts if a payment in respect of
such Notes were then due.
(g) Special Tax Redemption of Bearer Notes. If the relevant
--------------------------------------
Issuer or (in the case of Notes issued by GEC Australia or GEC Canada) the
Guarantor shall determine that any payment made outside the United States by
such Issuer, the Guarantor (if the Guarantor is required to make payments under
the relevant Guarantee) or any Paying Agent
<PAGE>
of principal or interest due in respect of any Bearer Notes of any Series would,
under any present or future laws or regulations of the United States, be subject
to any certification, identification or other information reporting requirement
of any kind, the effect of which requirement is the disclosure to such Issuer,
the Guarantor, any Paying Agent or any governmental authority of the
nationality, residence or identity of a beneficial owner of such Bearer Note or
coupon who is a United States Alien (other than such a requirement (a) which
would not be applicable to a payment made by such Issuer, the Guarantor or any
Paying Agent (i) directly to the beneficial owner or (ii) to a custodian,
nominee or other agent of the beneficial owner, or (b) which can be satisfied by
such custodian, nominee or other agent certifying to the effect that such
beneficial owner is a United States Alien, provided that in each case referred
to in clauses (a)(ii) and (b) payment by such custodian, nominee or agent to
such beneficial owner is not otherwise subject to any such requirement), the
relevant Issuer shall (in the case of Notes issued by GE Capital or GEC
Australia) or may (in the case of Notes issued by GEC Canada) redeem the Bearer
Notes of such Series, in whole, at a redemption price equal to 100% of the
principal amount thereof, together with accrued interest to the date fixed for
redemption, or, in the case of Original Issue Discount Notes, at 100% of the
portion of the face amount thereof that has accreted to the date of redemption,
or, at the election of such Issuer or the Guarantor, if the conditions of the
next paragraph are satisfied, pay the additional amounts specified in such
paragraph. The relevant Issuer or the Guarantor, as the case may be, shall make
such determination and election as soon as practicable and publish prompt notice
thereof (the "Determination Notice") stating the effective date of such
certification, identification or other information reporting requirements,
whether such Issuer will redeem the Bearer Notes of such Series, or whether such
Issuer or the Guarantor, as the case may be, has elected to pay the U.S.
Additional Amounts specified in the next paragraph, and (if applicable) the last
date by which the redemption of the Bearer Notes of such Series must take place,
as provided in the next succeeding sentence. If the relevant Issuer redeems the
Bearer Notes of such Series, such redemption shall take place on such date, not
later than one year after the publication of the Determination Notice, as the
relevant Issuer or the Guarantor, as the case may be, shall elect by notice to
the Fiscal and Paying Agent at least 60 days prior to the date fixed for
redemption. Notice of such redemption of the Bearer Notes of such Series will be
given to the holders of such Bearer Notes not more than 60 nor less than 30 days
prior to the date fixed for redemption. Such redemption notice shall include a
statement as to the last date by which the Bearer Notes of such Series to be
redeemed may be exchanged for Registered Notes. Notwithstanding the foregoing,
the relevant Issuer shall not so redeem such Bearer Notes if such Issuer or the
Guarantor shall subsequently determine, not less than 30 days prior to the date
fixed for redemption, that subsequent payments would not be subject to any such
requirement, in which case such Issuer or the Guarantor shall publish prompt
notice of such determination and any earlier redemption notice shall be revoked
and of no further effect. The right of the holders of Bearer Notes called for
redemption pursuant to this paragraph to exchange such Bearer Notes for
Registered Notes will terminate at the close of business of the Principal Paying
Agent on the fifteenth day prior to the date fixed for redemption, and no
further exchanges of such Series of Bearer Notes for Registered Notes shall be
permitted.
If and so long as the certification, identification or other
information reporting requirements referred to above in the preceding paragraph
would be fully
<PAGE>
satisfied by payment of a backup withholding tax or similar charge, the relevant
Issuer or the Guarantor, as the case may be, may elect to pay as U.S. Additional
Amounts such amounts as may be necessary so that every net payment made outside
the United States following the effective date of such requirements by such
Issuer, the Guarantor or any Paying Agent of principal or interest, including
original issue discount, due in respect of any Bearer Note or any coupon of
which the beneficial owner is a United States Alien (but without any requirement
that the nationality residence of identity of such beneficial owner be disclosed
to such Issuer, the Guarantor, any Paying Agent or any governmental authority,
with respect to the payment of such additional amounts), after deduction or
withholding for or on account of such backup withholding tax or similar charge
(other than a backup withholding tax or similar charge which (i) would not be
applicable in the circumstances referred to in the third parenthetical clause of
the first sentence of the preceding paragraph, or (ii) is imposed as a result of
presentation of such Bearer Note or coupon for payment more than 15 days after
the date on which such payment becomes due and payable or on which payment
thereof is duly provided for, whichever occurs later), will not be less than the
amount provided for in such Bearer Note or coupon to be then due and payable. In
the event the relevant Issuer or the Guarantor, as the case may be, elects to
pay any U.S. Additional Amounts pursuant to this paragraph, such Issuer shall
have the right to redeem the Bearer Notes of such Series in whole at any time
pursuant to the applicable provisions of the preceding paragraph and the
redemption price of such Bearer Notes shall not be reduced for applicable
withholding taxes. If such Issuer or the Guarantor, as the case may be, elects
to pay U.S. Additional Amounts pursuant to this paragraph and the condition
specified in the first sentence of this paragraph should no longer be satisfied,
then such Issuer shall (in the case of Notes issued by GE Capital or GEC
Australia) or may (in the case of Notes issued by GEC Canada) redeem the Bearer
Notes of such Series in whole, pursuant to the applicable provisions of the
preceding paragraph.
10. Covenant of the Issuers and the Guarantor. (a) Each Issuer
-----------------------------------------
and (in the case of Notes issued by GEC Australia or GEC Canada) the Guarantor
covenant and agree for the benefit of all Notes issued hereunder that they will
duly and punctually pay or cause to be paid the principal of, premium, if any,
and interest, if any, on all such Notes (together with any Additional Amounts)
at the places, at the respective times and in the manner provided in such Notes,
in the coupons, if any appertaining thereto, and in this Agreement. The interest
on Notes issued with coupons (together with any Additional Amounts) shall be
payable only upon presentation and surrender of the several coupons for such
interest installments as are evidenced thereby as they severally mature. If any
temporary Bearer Note provides that interest thereon may be paid while such Note
is in temporary form, the interest on any such temporary Bearer Note (together
with any Additional Amounts) shall be paid, as to the installments of interest
only upon presentation and surrender thereof, and, as to the other installments
of interest, if any, only upon presentation of such Notes for notation thereon
of the payment of such interest, in each case subject to the restrictions set
forth in Section 5.
11. Obligations of the Fiscal and Paying Agent. The Fiscal and
------------------------------------------
Paying Agent accepts its obligations set forth herein and in the Notes upon the
terms and conditions hereof and
<PAGE>
thereof, including the following, to all of which each Issuer and (in the case
of Notes issued by GEC Australia or GEC Canada) the Guarantor agree and to all
of which the rights of the holders from time to time of the Notes of each Series
shall be subject:
(a) The Fiscal and Paying Agent shall be entitled to the
compensation to be agreed upon with the relevant Issuer and the
Guarantor for all services rendered by it, and such Issuer and the
Guarantor agree promptly to pay such compensation and to reimburse the
Fiscal and Paying Agent for its reasonable out-of-pocket expenses
(including fees and expenses of counsel) incurred by it in connection
with the services rendered by it hereunder. The relevant Issuer and the
Guarantor also agree to indemnify the Fiscal and Paying Agent and each
paying agent of such Issuer and the Guarantor for, and to hold each of
them harmless against, any loss, liability or expense incurred without
negligence or bad faith on their part arising out of or in connection
with their acting as Fiscal and Paying Agent or paying agent of such
Issuer and the Guarantor hereunder. The obligations of such Issuer and
the Guarantor under this subsection (a) shall survive the payment of
the Notes and the resignation or removal of the Fiscal and Paying Agent
and each paying agent of such Issuer and the Guarantor, as the case may
be.
(b) In acting under this Agreement and in connection with the
Notes, the Fiscal and Paying Agent and each paying agent of the
relevant Issuer and the Guarantor are acting solely as agents of such
Issuer and the Guarantor and do not assume any obligation towards or
relationship of agency or trust for or with any of the beneficial
owners or holders of the Notes except that all funds held by the Fiscal
and Paying Agent or any other paying agent of such Issuer and the
Guarantor for the payment of the principal of, premium and interest on
(and Additional Amounts, if any, with respect to) the Notes shall be
held in trust by them and applied as set forth herein and in the Notes,
but need not be segregated from other funds held by them, except as
required by law; provided that moneys paid by the relevant Issuer or
--------
the Guarantor to the Fiscal and Paying Agent or any other paying agent
of such Issuer or the Guarantor for the payment of the principal of,
premium and interest on (and Additional Amounts, if any, with respect
to) any of the Notes and remaining unclaimed at the end of three years
after the date on which such principal, premium or interest (or
Additional Amounts, if any) shall have become due and payable shall be
repaid to the relevant Issuer or the Guarantor, as the case may be, as
provided and in the manner set forth in Section 5, whereupon the
aforesaid trust shall terminate and all liability of the Fiscal and
Paying Agent or any other paying agent of the relevant Issuer and the
Guarantor to such Issuer and the Guarantor with respect to such moneys
shall cease.
(c) The Fiscal and Paying Agent may consult with counsel and
any advice or written opinion of such counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted to be taken by it hereunder in good faith and in
accordance with such advice or opinion.
(d) The Fiscal and Paying Agent and each paying agent of the
relevant Issuer and the Guarantor shall be protected and shall incur no
liability for or in
<PAGE>
respect of any action taken or omitted to be taken or thing suffered by
them in reliance upon any Note, coupon, notice, direction, consent,
certificate, affidavit, statement or other paper or document reasonably
believed by them to be genuine and to have been presented or signed by
the proper party or parties.
(e) The Fiscal and Paying Agent or any paying agent of the
relevant Issuer or the Guarantor may, in its individual capacity or any
other capacity, become the owner of, or acquire any interest in, any
Notes or other obligations of such Issuer or the Guarantor with the
same rights that it would have if it were not the Fiscal and Paying
Agent or such paying agent of such Issuer or the Guarantor, and may
engage or be interested in any financial or other transaction with such
Issuer or the Guarantor and may act on, or as depositary, trustee or
agent for, any committee or body of beneficial owners or holders of
Notes or other obligations of such Issuer or the Guarantor as freely as
if it were not the Fiscal and Paying Agent or such paying agent of such
Issuer or the Guarantor.
(f) Neither the Fiscal and Paying Agent nor any other paying
agent of the relevant Issuer or the Guarantor shall be under any
liability for interest on any moneys received by it pursuant to any of
the provisions of this Agreement or the Notes.
(g) The recitals contained herein and in the Notes (except in
the Fiscal and Paying Agent's certificate of authentication) shall be
taken as the statements of the relevant Issuer and the Guarantor, and
the Fiscal and Paying Agent assumes no responsibility for the
correctness of the same. The Fiscal and Paying Agent does not make any
representation as to the validity or sufficiency of this Agreement or
the Notes. Neither the Fiscal and Paying Agent nor any paying agent of
the relevant Issuer and the Guarantor shall be accountable for the use
or application by such Issuer of any of the Notes or the proceeds
thereof.
(h) The Fiscal and Paying Agent and each paying agent of the
relevant Issuer and the Guarantor shall be obligated to perform such
duties and only such duties as are herein and in the Notes specifically
set forth, and no implied duties or obligations shall be read into this
Agreement or the Notes against the Fiscal and Paying Agent or any such
paying agent. The Fiscal and Paying Agent shall not be under any
obligation to take any action hereunder which may tend to involve it in
any expense or liability, the payment of which within a reasonable time
is not, in its reasonable opinion, assured to it.
(i) Unless otherwise specifically provided herein or in the
Notes, any order, certificate, notice, request, direction or other
communication from the relevant Issuer or the Guarantor made or given
under any provision of this Agreement shall be sufficient if signed by
the President, any Senior Vice President or Vice President, the
Secretary or any Assistant Secretary or any duly authorized
attorney-in-fact of the relevant Issuer or the Guarantor, as the case
may be.
<PAGE>
12. Maintenance and Resignation of Fiscal and Paying Agent.
------------------------------------------------------
(a) The relevant Issuer and (in the case of Notes issued by GEC Australia or GEC
Canada) the Guarantor agree, for the benefit of the beneficial owners from time
to time of the Notes, that, until all of the Notes and coupons are no longer
outstanding or until moneys for the payment of all of the principal of, premium
and interest on all outstanding Notes (and Additional Amounts, if any) shall
have been made available at the principal office of the Fiscal and Paying Agent,
and shall have been returned to the relevant Issuer or (in the case of Notes
issued by GEC Australia or GEC Canada) the Guarantor as provided in Section
11(b), whichever occurs earlier, there shall at all times be a Fiscal and Paying
Agent hereunder. The Fiscal and Paying Agent shall at all times maintain a place
of business in, or in lieu thereof maintain an agent for service of process
located in, London, England.
(b) The Fiscal and Paying Agent may at any time resign by
giving written notice of its resignation mailed to the relevant Issuer and the
Guarantor specifying the date on which its resignation shall become effective;
provided that such date shall be at least 90 days after the date on which such
- --------
notice is given unless such Issuer and the Guarantor agree to accept less
notice. Upon receiving such notice of resignation, the relevant Issuer and the
Guarantor shall promptly appoint a successor fiscal and paying agent, qualified
as aforesaid, by written instrument in duplicate signed on behalf of such Issuer
and the Guarantor, one copy of which shall be delivered to the resigning Fiscal
and Paying Agent and one copy to the successor fiscal and paying agent. Such
resignation shall become effective upon the earlier of (i) the effective date of
such resignation or (ii) the acceptance of appointment by the successor fiscal
and paying agent as provided in subsection (c). The relevant Issuer and the
Guarantor may, at any time and for any reason, and shall, upon any event set
forth in the next succeeding sentence, remove the Fiscal and Paying Agent and
appoint a successor fiscal and paying agent, qualified as aforesaid, by written
instrument in duplicate signed on behalf of such Issuer and the Guarantor, one
copy of which shall be delivered to the Fiscal and Paying Agent being removed
and one copy to the successor fiscal and paying agent. The Fiscal and Paying
Agent shall be removed as aforesaid if it shall become incapable of acting, or
shall be adjudged a bankrupt or insolvent, or a receiver of the Fiscal and
Paying Agent or of its property shall be appointed, or any public officer shall
take charge or control of it or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation. Any removal of the Fiscal and
Paying Agent and any appointment of a successor fiscal and paying agent shall
become effective upon acceptance of appointment by the successor fiscal and
paying agent as provided in subsection (c). Upon its resignation or removal, the
Fiscal and Paying Agent shall be entitled to the payment by the relevant Issuer
or the Guarantor of its compensation for the services rendered hereunder and to
the reimbursement of all reasonable out-of-pocket expenses incurred in
connection with the services rendered by it hereunder (including any resignation
expenses of the Fiscal and Paying Agent and fees and expenses of counsel).
(c) Any successor fiscal and paying agent appointed as
provided in subsection (b) shall execute and deliver to its predecessor and to
the relevant Issuer and the Guarantor an instrument accepting such appointment
hereunder, and thereupon such successor fiscal and paying agent, without any
further act, deed or conveyance, shall
<PAGE>
become vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with like effect as if originally named as Fiscal and
Paying Agent hereunder, and such predecessor, upon payment of its compensation
and out-of-pocket expenses then unpaid, shall pay over to such successor agent
all moneys or other property at the time held by it hereunder.
(d) Any corporation or bank into which the Fiscal and Paying
Agent may be merged or converted, or with which the Fiscal and Paying Agent may
be consolidated, or any corporation or bank resulting from any merger,
conversion or consolidation to which the Fiscal and Paying Agent shall be a
party, or any corporation or bank succeeding to the fiscal agency business of
the Fiscal and Paying Agent shall be the successor to the Fiscal and Paying
Agent hereunder (provided that such corporation or bank shall be qualified as
aforesaid) without the execution or filing of any paper or any further act on
the part of any of the parties hereto.
13. Paying Agency. Each Issuer and (in the case of Notes
-------------
issued by GEC Australia or GEC Canada) the Guarantor hereby initially appoints
Chase Manhattan Bank Luxembourg S.A. as its paying agent for the Notes outside
the United States (a "Paying Agent"). In addition, each Issuer and the Guarantor
initially appoints Chase Manhattan Bank AG as its Paying Agent for Notes
denominated or payable in Deutsche Marks. Each Issuer and the Guarantor shall
cause each Paying Agent appointed by such Issuer and the Guarantor to execute
and deliver to the Fiscal and Paying Agent an instrument in which such agent
shall agree with the Fiscal and Paying Agent, subject to the provisions of this
Section,
(1) that it will hold all sums held by it as such agent for
the payment of the principal of, premium, if any, or interest, if any,
on such Notes (whether such sums have been paid to it by the Issuer or
the Guarantor or by any other obligor on such Notes) in trust for the
benefit of the holders of such Notes, or the coupons appertaining
thereto, if any;
(2) that it will give the Fiscal and Paying Agent notice of
any failure by any such Issuer or the Guarantor (or by any other
obligor on such Notes) to make any payment of the principal of,
premium, if any, or interest, if any, on such Notes when the same shall
be due and payable; and
(3) that at any time during the continuance of any failure by
any such Issuer or the Guarantor (or by any other obligor on such
Notes) specified in the preceding paragraph (2), such paying agent
will, upon the written request of the Fiscal and Paying Agent,
forthwith pay to the Fiscal and Paying Agent all sums so held in trust
by it.
The Fiscal and Paying Agent shall arrange with all such paying agencies for the
payment, from funds furnished by each Issuer and the Guarantor to the Fiscal and
Paying Agent pursuant to this Agreement, of the principal of, premium and
interest on the Notes (and Additional Amounts, if any, with respect to the
Notes).
<PAGE>
14. Merger, Consolidation, Sale or Conveyance. (a) Each Issuer
-----------------------------------------
and (in the case of Notes issued by GEC Australia and GEC Canada) the Guarantor
covenant that they will not merge or consolidate with any other corporation or
sell, convey, transfer or otherwise dispose of all or substantially all of their
respective assets to any corporation, unless (i) either such Issuer or the
Guarantor, as the case may be, shall be the continuing corporation, or the
successor corporation (if other than such Issuer or the Guarantor) shall be (a)
with respect to GE Capital, a corporation organized and existing under the laws
of the United States of America or a state thereof, (b) with respect to GEC
Australia, a corporation incorporated under the laws of Australia and (c) with
respect to GEC Canada, a corporation incorporated under the laws of Canada or
any province of territory thereof, and such corporation shall expressly assume
the due and punctual payment of the principal of, and premium, if any, and
interest, if any, on all the Notes and coupons, if any, according to their
tenor, and the due and punctual performance and observance of all of the
covenants and conditions of this Agreement and the Notes to be performed by such
Issuer or the Guarantor, as the case may be, executed and delivered to the
Fiscal and Paying Agent by such corporation, and (ii) such Issuer or the
Guarantor or such successor corporation, as the case may be, shall not,
immediately after such merger or consolidation, or such sale, conveyance,
transfer or other disposition, be in default in the performance of any such
covenants or conditions.
(b) In case of any such consolidation, merger, sale,
conveyance (other than by way of lease), transfer or other disposition, and upon
any such assumption by the successor corporation, such successor corporation
shall succeed to and be substituted for the relevant Issuer or the Guarantor, as
the case may be, with the same effect as if it had been named herein as such
Issuer or the Guarantor, and such Issuer or the Guarantor shall be relieved of
any further obligation under this Agreement and under the Notes and coupons, if
any, and may be dissolved, wound up and liquidated at any time thereafter. Such
successor corporation thereupon may cause to be signed, and may issue either in
its own name or in the name of the relevant Issuer or the Guarantor, as the case
may be, any or all of the Notes issuable hereunder together with any coupons
appertaining thereto which theretofore shall not have been signed by such Issuer
or the Guarantor and delivered to the Fiscal and Paying Agent; and, upon the
order of such successor corporation, instead of such Issuer or the Guarantor and
subject to all the terms, conditions and limitations in this Agreement
prescribed, the Fiscal and Paying Agent shall authenticate and shall deliver any
Notes together with any coupons appertaining thereto which previously shall have
been signed and delivered to the Fiscal and Paying Agent for that purpose. All
Notes appertaining thereto shall in all respects have the same legal rank and
benefit under this Agreement as the Notes theretofore or thereafter issued in
accordance with the terms of this Agreement as though all or such Notes had been
issued at the date of the execution hereof.
In case of any such consolidation, merger, sale, conveyance,
transfer or other disposition, such changes in phraseology and form (but not in
substance) may be made in the Notes and coupons thereafter to be issued as may
be appropriate.
15. Meetings of Holders of the Notes. (a) Each Issuer or (in
--------------------------------
the case of Notes issued by GEC Australia or GEC
<PAGE>
Canada) the Guarantor may at any time call a meeting of the holders of the Notes
of any or all Series, such meeting to be held at such time and at such place as
such Issuer or the Guarantor shall determine, for the purpose of obtaining a
waiver of or an amendment to any provision of this Agreement or the Notes of any
Series (to the extent permitted in Section 18 hereof). For purposes of this
Section, "holders of a global Bearer Note" shall be those persons shown on the
records of the Euroclear Operator or Cedel Bank as having interests in such
global Bearer Note credited to their respective securities clearance accounts on
the date on which notice of the meeting is given. Notice of any meeting of
Noteholders, setting forth the time and place of such meeting and in general
terms the action proposed to be taken at such meeting, shall be (i) if any
Bearer Notes of a Series affected are then outstanding, published prior to the
date fixed for the meeting at least once a week for three successive weeks in a
daily newspaper in the English language of general circulation in London,
England and if the Notes of such Series are listed on the Luxembourg Stock
Exchange and such Exchange so requires, in a daily newspaper (as defined in
Section 6(a) hereof) of general circulation in Luxembourg or, if publication in
either London or Luxembourg is not practical, elsewhere in Western Europe and
(ii) if any Registered Notes of a Series affected are then outstanding, mailed
to the holders of then outstanding Registered Notes of each Series affected at
their addresses as they shall appear on the books of the Registrar. The first
publication or mailing of notice, in the case of Registered Notes, shall be made
not less than 20 nor more than 180 days prior to the date fixed for such
meeting. Such publication is expected to be made in the Financial Times and (if
---------------
such Series of Notes is listed on the Luxembourg Stock Exchange) the Luxemburger
-----------
Wort. To be entitled to vote at any meeting of holders of Notes a person shall
- ----
be (i) a holder of one of more Notes of the relevant Series with respect to
which such meeting is being held or (ii) a person appointed by an instrument in
writing as proxy by the holder of one or more such Notes. The only persons who
shall be entitled to be present or to speak at any meeting of the holders of the
Notes of any Series shall be the persons entitled to vote at such meeting and
their counsel and any representatives of the relevant Issuer, the Guarantor and
their counsel.
(b) The persons entitled to vote a majority in principal
amount of the Notes of the relevant Series at the time outstanding shall
constitute a quorum for the purpose of obtaining any such waiver or amendment.
No business shall be transacted in the absence of a quorum, unless a quorum is
present when the meeting is called to order. In the absence of a quorum within
30 minutes of the time appointed for any such meeting, the meeting shall be
adjourned for a period of not less than 10 calendar days as determined by the
chairman of the meeting. In the absence of a quorum within 30 minutes of the
time appointed for any such adjourned meeting, such adjourned meeting shall be
further adjourned for a period of not less than 10 calendar days as determined
by the chairman of the meeting. Notice of the reconvening of any
<PAGE>
adjourned meeting shall be given as provided above except that such notice need
be published only once, but must be mailed or published not less than five days
prior to the date on which the meeting is scheduled to be reconvened. Subject to
the foregoing, at the reconvening of any meeting further adjourned for lack of a
quorum, the persons entitled to vote 25% in principal amount of the Notes of the
relevant Series at the time outstanding shall constitute a quorum for the taking
of any action set forth in the notice of the original meeting. Notice of the
reconvening of an adjourned meeting shall state expressly the percentage of the
aggregate principal amount of the outstanding Notes of the relevant Series which
shall constitute a quorum.
(c) At a meeting or an adjourned meeting duly reconvened and
at which a quorum is present as aforesaid, any resolution with respect to such
waiver or amendment shall be effectively passed and decided if passed and
decided by the favorable vote of persons entitled to vote the lesser of (i) a
majority in the principal amount of the Notes of the relevant Series then
outstanding or (ii) 75% in principal amount of such Notes represented and voting
at the meeting. Any Noteholder who has executed an instrument in writing
appointing a person as proxy shall be deemed to be present for the purposes of
determining a quorum and be deemed to have voted; provided that such Noteholder
shall be considered as present and voting only with respect to the matters
covered by such instrument in writing (which may include authorization to vote
on any other matters as may come before the meeting). Any resolution passed or
decision taken at any meeting of Noteholders duly held in accordance with this
Section shall be conclusive and binding on all the Noteholders of the relevant
Series whether or not present or represented at the meeting.
(d) The holding of definitive Bearer Notes of the relevant
Series for purposes of this Section shall be proved by the production of such
Notes or by a certificate executed by any trust company, bank, banker or
recognized securities dealer satisfactory to the relevant Issuer and the
Guarantor, wherever situated, if such certificate shall be deemed by such Issuer
and the Guarantor to be satisfactory. Each such certificate shall be dated and
shall state that on the date thereof a Note of the relevant Series bearing a
specified identifying number was deposited with or exhibited to such trust
company, bank, banker or recognized securities dealer by the person named in
such certificate. Any such certificate may be issued in respect of one or more
such Bearer Notes specified therein. The holding of an interest in any global
Bearer Note of the relevant Series shall be proved by a certificate of the
Euroclear Operator or Cedel Bank. The holding by the person named in any such
certificate of any such Bearer Note or interest in a global Bearer Note
specified therein shall be presumed to continue for a period of one year from
the date of such certificate unless at the time of any determination of such
holding (i) another certificate bearing a later date issued in respect of the
same Bearer Note or interest in a global Bearer Note shall be produced, (ii)
such Bearer Note specified in such certificate shall be produced by some other
person or (iii) such Bearer Note specified in such certificate shall have ceased
to be outstanding. The appointment of any proxy shall be proved by having the
signature of the person executing the proxy witnessed or guaranteed by any bank,
banker, trust company or New York Stock Exchange member firm satisfactory to the
relevant Issuer and the Guarantor.
(e) Each Issuer and the Guarantor shall appoint a temporary
chairman of the meeting. A permanent chairman and a permanent secretary of the
meeting shall be elected by vote of the holders of a majority in principal
amount of the Notes of the relevant Series represented at the meeting. At any
meeting each Noteholder of the relevant Series or proxy shall be entitled to one
vote for each 1,000 U.S. dollars (or the equivalent thereof in any foreign or
composite currency) of principal amount (in the case of Original Issue Discount
Notes of the relevant Series, such principal amount thereof that would be due
and
<PAGE>
payable as of the date of such meeting upon a declaration of acceleration of
the maturity thereof pursuant to Section 8) of such Notes held or represented by
such Noteholder or proxy; provided, however, that no vote shall be cast or
-------- -------
counted at any meeting in respect of any Note of the relevant Series challenged
as not outstanding and ruled by the chairman of the meeting to be not
outstanding. The chairman of the meeting shall have no right to vote except as a
Noteholder or proxy. Any meeting of Noteholders duly called at which a quorum is
present may be adjourned from time to time, and the meeting may be held as so
adjourned without further notice.
(f) The vote upon any resolution submitted to any meeting of
Noteholders shall be by written ballot on which shall be subscribed the
signatures of such Noteholders or proxies and on which shall be inscribed the
principal amount (in the case of Original Issue Discount Notes of the relevant
Series, such principal amount thereof that would be due and payable as of the
date of such vote upon a declaration of acceleration of the maturity thereof
pursuant to Section 8) and the identifying number or numbers of the Notes of
such Series held or represented by them. The permanent chairman of the meeting
shall appoint two inspectors of votes who shall count all votes cast at the
meeting for or against any resolution and who shall make and file with the
secretary of the meeting their verified written reports in duplicate of all
votes cast at the meeting. A record in duplicate of the proceedings of each
meeting of Noteholders shall be prepared by the secretary of the meeting and
there shall be attached to said record the original reports of the inspectors of
votes on any vote by ballot taken thereat and affidavits by one or more persons
having knowledge of the facts setting forth a copy of the notice of the meeting
and showing that said notice was published as provided above. The record will
show the principal amount of the Notes (in the case of Original Issue Discount
Notes, such principal amount thereof that would be due and payable as of the
date of such vote upon a declaration of acceleration of the maturity thereof
pursuant to Section 8) voting in favor of or against any resolution. The record
shall be signed and verified by the permanent chairman and secretary of the
meeting and one of the duplicates shall be delivered to the relevant Issuer or
the Guarantor and the other to the Fiscal and Paying Agent to be preserved by
the Fiscal and Paying Agent, the latter to have attached thereto the ballots
voted at the meeting. Any record so signed and verified shall be conclusive
evidence of the matters therein stated.
16. Consent of Holders. (a) Any authorization, direction,
------------------
notice, consent, waiver, amendment or other action provided by the provisions of
this Agreement or the Notes of any Series to be given or taken by holders (which
term as used in this Section shall mean with respect to any global Bearer Note
those persons shown on the records of the Euroclear Operator or Cedel Bank as
having interests in such global Bearer Note credited to their respective
securities clearance accounts) of Notes of such Series may be embodied in and
evidenced by one or more instruments of substantially similar tenor, listing the
serial number of the Note or Notes of such Series in respect of which each such
instrument is submitted, signed by the requisite number of such holders in
person or by their agent duly appointed in writing; and, except as herein or
therein expressly provided, any such instrument shall become irrevocable when
delivered, and such action shall become effective when such instrument signed by
such holders is delivered to the Fiscal and Paying Agent or other paying agency
of the relevant Issuer and (in the case of Notes issued by GEC Australia or GEC
Canada) the Guarantor. Proof of
<PAGE>
execution of any such instrument or of a writing appointing any such agent by
the holder of any such Note shall be sufficient for any such purpose of this
Agreement or such Notes and conclusive in favor of (i) the Fiscal and Paying
Agent or other paying agency of such Issuer and the Guarantor and (ii) such
Issuer and the Guarantor if made in the manner provided in this Section.
(b) The fact and date of execution of any such instrument and
the fact that any person is the holder of the Note or Notes of any Series of
which the serial numbers are listed in such instrument may be proved by the
certificate of a financial institution of recognized standing to such effect, or
in any other manner which the relevant Issuer and the Guarantor deem sufficient.
(c) Any authorization, direction, notice, consent, waiver or
other action by the holder of any Note shall bind every future holder of such
Note in respect of anything done, omitted or suffered to be done in reliance
thereon, whether or not notation of such action is made upon such Note.
17. Stamp Taxes. The relevant Issuer or the Guarantor will pay
-----------
all stamp or other documentary taxes or duties, if any, to which the execution
or delivery of this Agreement or the issuance of the Notes of any Series or any
coupons appertaining thereto may be subject.
18. Modifications and Amendments. (a) This Agreement may be
----------------------------
amended by the parties hereto, without the consent of the holder (which term as
used in this Section shall mean with respect to any global Bearer Note those
persons shown on the records of the Euroclear Operator or Cedel Bank as having
interests in such global Bearer Note credited to their respective securities
clearance accounts) of any Note, for the purposes of (i) providing for the
issuance of Notes pursuant to Section 2 hereof; (ii) curing any ambiguity or
correcting or supplementing any provision contained herein which may be
defective or inconsistent with any other provision contained herein; (iii)
adding to the covenants of the relevant Issuer or (in the case of Notes issued
by GEC Australia or GEC Canada) the Guarantor for the protection of the holders
of all or any Series of the Notes; (iv) effecting any assumption of the relevant
Issuer's or the Guarantor's obligations hereunder and under the Notes or the
Guarantee by a successor corporation pursuant to Section 14(a) of this
Agreement; (v) evidencing and providing for the acceptance of appointment
hereunder by a successor Fiscal and Paying Agent with respect to the Notes of
one or more Series; or (vi) amending this Agreement in any other manner which
the parties may mutually deem necessary or desirable and which shall not
adversely affect the interests of the holders of the Notes of any Series
outstanding on the date of such amendment. Nothing in the Fiscal Agency
Agreement prevents the Issuers, the Guarantor and the Fiscal Agent from amending
the Fiscal Agency Agreement in such a manner as to only have a prospective
effect on Notes issued on or after the date of such amendment.
(b) Modifications and amendments to this Agreement or the
Notes of any Series or the Guarantee may also be made, and future compliance
therewith or past Event of Default by the relevant Issuer or the Guarantor may
be waived, by holders of not less
<PAGE>
than a majority in aggregate principal amount of the Notes of such Series (or,
in each case, such lesser amount as shall have acted at a meeting of holders of
such Notes, pursuant to Section 15 of this Agreement); provided, however, that
-------- -------
no such modification or amendment to this Agreement or the Notes may, without
the consent of the holders of each such Note of such Series affected thereby,
(i) change the stated maturity of the principal of any such Note of such Series
or extend the time for payment of interest thereon; (ii) change the amount of
the principal of an Original Issue Discount Note of such Series that would be
due and payable upon an acceleration of the maturity thereof; (iii) reduce the
amount of interest payable thereon or the amount payable thereon in the event of
redemption or acceleration; (iv) change the currency of payment of principal of
or any other amounts payable on any such Note; (v) impair the right to institute
suit for the enforcement of any such payment on or with respect to any such Note
or the Guarantee; (vi) reduce the above-stated percentage of the principal
amount of Notes of such Series the consent of whose holders is necessary to
modify or amend this Agreement or the Notes of such Series or reduce the
percentage of Note of such Series required for the taking of action or the
quorum required at any such meeting of holders of Notes of such Series; or (vii)
modify the foregoing requirements to reduce the percentage of outstanding Notes
of such Series necessary to waive any future compliance or past default.
(c) Any such modification or amendments will be conclusive and
binding on all holders of Notes of the relevant Series and on all future holders
of such Notes, whether or not they have consented to such modifications or
amendments and whether or not notation of such modifications or amendments is
made upon the Notes of such Series.
19. Notices to Parties. All notices hereunder to the parties
------------------
hereto shall be deemed to have been given when sent by certified or registered
mail, postage prepaid, or by facsimile transmission, addressed to any party
hereto as follows:
Address
-------
GE Capital General Electric Capital Corporation
260 Long Ridge Road
Stamford, Connecticut 06927 U.S.A.
Attention: Senior Vice President-Corporate Treasury
and Global Funding Operation
Facsimile: 203-357-4975
Telephone: 203-357-4000
GEC Australia GE Capital Australia Limited
88 Walker Street
North Sydney NSW 2060
Australia
Attention: Robert Johnston
Facsimile: 612-954-1870
Telephone: 612-900-4300
<PAGE>
in each case with a copy to GE Capital in its
capacity as Guarantor delivered in accordance with
this Section 19;
GEC Canada General Electric Capital Canada Inc.
2300 Meadowvale Boulevard
Mississauga, Ontario
Canada L5N 5P9
Attention: Vice President and Counsel
Facsimile: 905-858-5456
Telephone: 905-858-5100
in each case with a copy to GE Capital in its
capacity as Guarantor delivered in accordance with
this Section 19;
Fiscal and
Paying Agent The Chase Manhattan Bank (National Association),
London Branch
Woolgate House, Coleman Street
London EC2P 2HD, England
Attention: Manager, Corporate Trust Operations
Facsimile: 011-44-1202-347-945
Telephone: 011-44-1202-347-432
or at any other address of which either of the foregoing shall have notified the
other in writing.
Any notice, direction, request or demand by any holder of
Notes or coupons to or upon the Fiscal and Paying Agent shall be deemed to have
been sufficiently given or made, for all purposes, if given or made in writing
at the principal London office of the Fiscal and Paying Agent, addressed to the
attention of its corporate trust office.
20. Notices to and by Holders of the Notes. Each Issuer and
--------------------------------------
(in the case of Notes issued by GEC Australia or GEC Canada) the Guarantor will
give notice promptly to the holders of the Notes of the termination of
appointment of any paying agent of such Issuer and the Guarantor. Such notice
shall be published in a daily newspaper in the English language of general
circulation in London, England, and if the Series of Notes is listed on the
Luxembourg Stock Exchange and such Exchange so requires, in a daily newspaper of
general circulation in Luxembourg or, if publication in either London or
Luxembourg is not practical, elsewhere in Western Europe. Such publication is
expected to be made in the Financial Times and (if such Series is listed on the
---------------
Luxembourg Stock Exchange) the Luxemburger Wort. Any notice to the holders of
----------------
Notes by publication shall be deemed to have been given on the date of such
publication, or if published in newspapers on different dates, on the date of
the first such publication.
<PAGE>
Notice to holders of any Notes denominated in French francs or
denominated in another currency or currencies that are linked, directly or
indirectly to French francs and that are listed on the Paris Bourse will be
given by publication in a French language daily newspaper of general circulation
in Paris (which is expected to be La Tribune Desfosses) and such notice will
--------------------
comply with the applicable rules of the Paris Bourse.
Notice to holders of any Notes denominated in Dutch guilder
that are listed on the Amsterdam Stock Exchange will be given by publication in
a leading daily newspaper in the English language of general circulation in
Amsterdam and London. So long as such Notes are listed on the Amsterdam Stock
Exchange and the rules of such Exchange so require, such notice shall also be
published in the Official Price List ("Officiele Prijscourant"). If publication
in London or Amsterdam, as the case may be, is not practical, such publication
shall be made elsewhere in Western Europe. Such publication is expected to be
made in the Financial Times in London and the Het Financieele Dagblad in
Amsterdam. Such notices will be deemed to have been given on the date of such
publication or if published in such newspapers on different dates, on the date
of the first such publication.
So long as no definitive Notes are in issue in respect of a
particular Series, there may, so long as the global Note(s) for such Series is
or are held in its or their entirety on behalf of Euroclear and Cedel Bank, and
the Notes for such Series are not listed on the Luxembourg Stock Exchange or the
Paris Bourse, as the case may be, (or if so listed, for as long as the
Luxembourg Stock Exchange or the Paris Bourse, as the case may be, so permits),
be substituted for such publication in such newspaper(s) the delivery of the
relevant notice to Euroclear and Cedel Bank for communication by them to the
holders of the Notes. Any such notice shall be deemed to have been given to the
holders of the Notes on the seventh day after the day on which the said notice
was given to Euroclear and Cedel Bank.
Notices to be given by a Noteholder shall be in writing and
given by lodging the same, together with the relative Note or Notes, with the
Agent. Whilst any Notes are represented by a global Note, such notice may be
given by a Noteholder to the Agent via Euroclear and/or Cedel Bank, as the case
may be, in such manner as the Agent and Euroclear and/or Cedel Bank may approve
for this purpose.
21. Business Day. For the purposes of this Agreement,
------------
"Business Day" shall mean, unless otherwise specified with respect to a
particular Series of Notes, any day other than a Saturday or Sunday or any other
day on which banking institutions are generally authorized or obligated by law
or regulation to close in (i) the principal financial center of the country in
which the relevant Issuer is incorporated, (ii) the principal financial center
of the country of the currency in which the Notes are denominated, (iii) the
place at which payment on such Note or coupon is to be made and (iv) London,
England; provided, however, that with respect to Notes denominated in ECUs, such
day is not a day that is a non-ECU clearing day as determined by the ECU Banking
Association in Paris, France. For purposes of this definition, the principal
financial center of the United States is New
<PAGE>
York, the principal financial center of Australia is Sydney and the principal
financial center of Canada is Toronto, Ontario.
22. Central Bank Reporting Requirements. In addition to its
-----------------------------------
other duties set forth in this Agreement, the Fiscal and Paying Agent is hereby
designated as the relevant Issuer's and (in the case of Notes issued by GEC
Australia or GEC Canada) the Guarantor's agent for the purpose of complying with
notification, reporting or other applicable requirements of the various central
banks or similar monetary authorities regulating Notes issued in Specified
Currencies other than U.S. dollars. Without limiting the generality of the
foregoing, at the date hereof such duties shall include the information
reporting requirements of (i) the Japanese Ministry of Finance with respect to
any Series of Notes where the Specified Currency is Japanese Yen, (ii) the
German Bundesbank with respect to any Series of Notes where the Specified
Currency is Deutschemarks, and (iii) the Bank of England with respect to any
Series of Notes where the Specified Currency is Pounds Sterling.
23. Governing Law. THIS AGREEMENT, THE NOTES AND ANY COUPONS
-------------
APPERTAINING THERETO SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK, U.S.A.
24. Consent to Service. Each Issuer and (in the case of Notes
------------------
issued by GEC Australia or GEC Canada) the Guarantor has designated the Senior
Vice President-Corporate Treasury and Global Funding Operation of each Issuer
and the Guarantor as authorized agent for service of process in any legal action
or proceeding arising out of or relating to the Fiscal Agency Agreement, the
Notes or the Guarantees brought in any federal or state court in the Borough of
Manhattan, the City of New York, State of New York and irrevocably submit to the
non-exclusive jurisdiction of such courts for such purposes (and only for such
purposes) as long as there are any outstanding Notes.
25. Counterparts. This Agreement may be signed in any number
------------
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument. Such
counterparts shall together constitute but one and the same instrument.
26. Inspection of Agreement. A copy of this Agreement shall be
-----------------------
made available by the Fiscal and Paying Agent for inspection at all reasonable
times at its office as stated in Section 19 and at the offices of the paying
agents specified in the Notes.
27. Descriptive Headings. The descriptive headings in this
--------------------
Agreement are for convenience of reference only and shall not define or limit
the provisions of this Agreement.
28. Provisions Binding on Successors. All the covenants,
--------------------------------
stipulations, promises and agreements in this Agreement contained by the
relevant Issuer and (in the case of Notes issued by GEC Australia or GEC Canada)
the Guarantor shall bind its successors and assigns whether so expressed or not.
<PAGE>
29. Official Acts by Successor Corporation. Any act or
--------------------------------------
proceeding by any provision of this Agreement authorized or required to be done
or performed by any board, committee or officer of the relevant Issuer or (in
the case of Notes issued by GEC Australia or GEC Canada) the Guarantor shall and
may be done and performed with like force and effect by the like board,
committee or officer of any corporation that shall at the time be the lawful
sole successor of such Issuer or the Guarantor.
30. Severability. In case any provision in this Agreement or
------------
in the Notes shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provision shall not in any way be affected
or impaired thereby.
<PAGE>
IN WITNESS WHEREOF, the parties hereto, including GE Capital
in its capacity both as Issuer and as Guarantor of Notes to be issued by GEC
Australia or GEC Canada, have caused this Agreement to be duly executed as of
the day and year first above written.
GENERAL ELECTRIC CAPITAL CORPORATION
By:/s/ Jeffrey S. Werner
---------------------------------------------
Senior Vice President-Corporate Treasury
and Global Funding Operation
Attest:
/s/ Scott Cameron
- ------------------------
Assistant Secretary
GE CAPITAL AUSTRALIA LIMITED
By: /s/ Jeffrey S. Werner
---------------------------------------------
Authorized Signatory
GENERAL ELECTRIC CAPITAL CANADA INC.
By: /s/ Jeffrey S. Werner
---------------------------------------------
Authorized Signatory
THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), LONDON BRANCH,
as Fiscal and Paying Agent
By: /s/ Chris Knowles
----------------------------
Title: Second Vice President
<PAGE>
EXHIBIT A
GENERAL ELECTRIC CAPITAL CORPORATION
GE CAPITAL AUSTRALIA LIMITED
GENERAL ELECTRIC CAPITAL CANADA INC.
EURO MEDIUM-TERM NOTES AND OTHER DEBT SECURITIES
ADMINISTRATIVE PROCEDURES
JULY 2, 1996
The Euro Medium-Term Notes and other debt securities (the
"Notes") are to be offered on a continuous basis by each of General Electric
Capital Corporation ("GE Capital"), GE Capital Australia Limited ("GEC
Australia") and General Electric Capital Canada Inc. ("GEC Canada") (each an
"Issuer" and together the "Issuers"). Notes issued by GEC Australia or GEC
Canada will be unconditionally and irrevocably guaranteed by GE Capital (the
"Guarantor"). Each of Barclays de Zoete Wedd Limited, CS First Boston Limited,
Goldman Sachs International, Merrill Lynch International, PaineWebber
International (U.K.) Ltd., Swiss Bank Corporation, UBS Limited, CS First Boston
- - Effectenbank Aktiengesellschaft, Goldman Sachs & Co. oHG, Merrill Lynch Bank
AG, Schweizerische Bankgesellschaft (Deutschland) AG and Schweizerischer
Bankverein (Deutschland) AG (each an "Agent") has agreed to solicit offers to
purchase the Notes. The Notes may be issued in registered form without coupons
("Registered Notes"), in bearer form with or without coupons ("Bearer Notes"),
or in any combination of any such registered or bearer forms. Bearer Notes
initially will be represented by Temporary Global Notes and subsequently by
Permanent Global Notes or individual definitive Bearer Notes or Registered
Notes. The Notes are being sold pursuant to an amended and restated Euro MTN
Distribution Agreement dated as of July 2, 1996 (the "Distribution Agreement")
between each Issuer (including GE Capital in its capacity as Guarantor of Notes
issued by GEC Australia or GEC Canada) and the Agents. In the Distribution
Agreement, each Agent has agreed to use its best efforts to solicit purchases of
the Notes. Each Agent, as principal, may purchase Notes for its own account and
if it does so, the relevant Issuer, the Guarantor and such Agent will enter into
a terms agreement, as contemplated by the Distribution Agreement. Each Issuer
and the Guarantor has reserved the right in the Distribution Agreement from time
to time to appoint one or more additional firms either to solicit purchases of
Notes from the relevant Issuer by others or to purchase Notes directly from the
relevant Issuer as principal for resale to others, and any reference herein to
"Agent" shall include each such additional firm.
The Notes will be issued under an Amended and Restated Fiscal
and Paying Agency Agreement dated as of July 2, 1996, between each Issuer
(including GE Capital in its capacity as Guarantor of Notes issued by GEC
Australia or GEC Canada) and The
<PAGE>
Chase Manhattan Bank (National Association), London Branch, as fiscal agent (in
such capacity, the "Fiscal Agent") and principal paying agent (in such capacity,
the "Principal Paying Agent"), as supplemented from time to time (the "Fiscal
Agency Agreement"). Unless otherwise specified with respect to a particular
series of Notes, The Chase Manhattan Bank (National Association), London Branch,
will also act as the authenticating agent (the "Authenticating Agent") for the
Notes and will be the Registrar for the Registered Notes and will perform the
duties specified herein and in the Fiscal Agency Agreement. The Chase Manhattan
Bank (National Association), London Branch, will also act as Calculation Agent
with respect to the Notes unless a different Calculation Agent is appointed by
an Issuer or the Guarantor with respect to a specific series of Notes. If the
relevant Issuer issues any Notes denominated in Hong Kong dollars, the Principal
Paying Agent will act through one of its branches or agencies located outside of
Hong Kong and will request of the Euroclear Operator and Cedel Bank (each as
defined below) that the common depositary act through an office outside of Hong
Kong, or as may otherwise be required by applicable laws or regulations. Each
Issuer has appointed Kredietbank S.A. Luxembourgeoise in Luxembourg as listing
agent (the "Listing Agent") for each series of Notes that is listed on the
Luxembourg Stock Exchange. Series of Notes may be issued that will not be listed
on any stock exchange. As used herein, the term "series of Notes" shall refer to
all Notes having identical terms but for authentication date and public offering
price, and the term "tranche of Notes" shall refer to all Notes having identical
terms, including authentication date and public offering price.
Notes will bear interest at a fixed rate (the "Fixed Rate
Notes"), which may be zero in the case of certain original issue discount notes
(the "OID Notes"), or at floating rates (the "Floating Rate Notes"). The Notes
will be issued in U.S. dollars or other currencies, including composite
currencies such as the European Currency Unit (the "Specified Currency"). Each
Bearer Note initially will be represented by a temporary global Note (each, a
"Temporary Global Note") delivered to a common depositary located outside the
United States (the "Depositary") for Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear System (the "Euroclear Operator")
and Cedel Bank, societe anonyme ("Cedel Bank") and subsequently by a permanent
global Note (each, a "Permanent Global Note") and/or one or more definitive
Bearer Notes (each, a "Definitive Bearer Note") or, under certain circumstances,
for definitive Registered Notes.
The Notes are described in an Offering Circular prepared by
each Issuer (including GE Capital in its capacity as Guarantor of Notes issued
by GEC Australia or GEC Canada) which may be amended from time to time (the
"Offering Circular"). The terms of each tranche of Notes issued under the Fiscal
Agency Agreement will be described in a supplement to the Offering Circular
(each such supplement hereinafter referred to as a "Pricing Supplement"). The
term "Offering Circular" is used herein to describe the Offering Circular
together with the applicable Pricing Supplement unless the context otherwise
required.
In case of any conflict between these Administrative
Procedures and either the Distribution Agreement or the Fiscal Agency Agreement,
the terms of the Distribution Agreement or the Fiscal Agency Agreement,
respectively, shall govern. Terms used but not defined herein shall have the
meanings assigned to them in the Distribution Agreement.
<PAGE>
ADMINISTRATIVE PROCEDURES
Issuance: Bearer Notes. Each Bearer
------------
Note will be dated and issued as of the date
of authentication by the Fiscal Agent. Each
Note will bear an original issue date, which
will be (i) with respect to a Temporary
Global Note (or any portion thereof), the
date of its original issue as specified in
such Temporary Global Note or (ii) with
respect to any Permanent Global Note or
Definitive Bearer Note (or portion thereof)
issued subsequently upon transfer or
exchange of a Bearer Note or in lieu of a
destroyed, lost or stolen Bearer Note, the
original issue date of the predecessor
Bearer Note, regardless of the date of
authentication of such subsequently issued
Bearer Note.
Registered Notes. Except as described below,
----------------
each Registered Note will be dated and
issued as of the date of its authentication
by the Authenticating Agent. Each Registered
Note will bear an original issue date, which
will be (i) with respect to an original
Registered Note (or any portion thereof),
its original issuance date (which will be
the settlement date), (ii) with respect to
any Registered Note (or portion thereof)
issued subsequently upon transfer or
exchange of a Registered Note or in lieu of
a destroyed, lost or stolen Registered Note,
the original issuance date of the
predecessor Registered Note, regardless of
the date of authentication of such
subsequently issued Registered Note and
(iii) with respect to any Registered Note
(or portion thereof) issued in exchange for
an interest in a Permanent Global Note, the
last date on which interest was paid on such
Permanent Global Note or any predecessor
Note.
Registration: Registered Notes will be
issued only in fully registered form without
coupons.
Guarantee: Each Note issued by GEC
Australia or GEC Canada will have the
Guarantee of the Guarantor endorsed thereon.
Transfers and
Exchanges: Bearer Notes. Transfers
------------
of interests in a Temporary or Permanent
Global Note will be made by the Euroclear
Operator or Cedel Bank in accordance with
its customary operating procedures. Title to
definitive Bearer Notes and coupons will
pass by physical delivery. The bearer of
each coupon, whether or not attached to a
definitive Bearer Note, shall be subject to
and bound by all the provisions contained in
the definitive Bearer Note to which such
coupon relates. The bearer of any definitive
Bearer
<PAGE>
Note and any coupon may, to the fullest
extent permitted by applicable law, be
treated at all times, by all persons and for
all purposes as the absolute owner of such
definitive Bearer Note or coupon, as the
case may be, regardless of any notice of
ownership, theft or loss or of any writing
thereon. Bearer Notes may be exchanged, if
so provided in the applicable Pricing
Supplement, for Registered Notes.
Registered Notes. A Registered Note may be
----------------
presented for transfer or exchange at the
corporate trust office of the Registrar or
any Transfer Agent appointed under the
Fiscal Agency Agreement. Registered Notes
will be exchangeable for other Registered
Notes having identical terms but different
denominations without service charge.
Registered Notes will not be exchangeable
for Bearer Notes.
Maturities: Each Note will mature on
a date from nine months to 60 years from its
date of issue; provided, however, Notes
-------- -------
denominated in Specified Currencies other
than US dollars may be subject to
restrictions on maturities as provided for
in the Distribution Agreement or as
otherwise may be required by regulations of
the applicable central bank or similar
monetary authority of the country issuing
the Specified Currency.
Specified Currency: The currency denomination
with respect to any Note and the payment of
interest and the repayment of principal with
respect to any such Note shall be as set
forth therein and in the applicable Pricing
Supplement.
Denominations: Unless otherwise provided
in the applicable Pricing Supplement, the
following denominations shall apply:
(a) Definitive Bearer Notes.
-----------------------
Definitive Bearer Notes will be
issued in denominations of 100,000
units, 10,000 units or 1,000 units
of the Specified Currency indicated
on the face of such Note;
(b) Global Bearer Notes. Global
-------------------
Bearer Notes will be issued in
denominations of 1,000 units of the
Specified Currency indicated on the
face thereof and integral multiples
thereof;
<PAGE>
(c) Registered Notes. Registered
----------------
Notes will be issued in
denominations of 10,000 units of the
Specified Currency indicated on the
face of such Note or an integral
multiple of 1,000 units of such
Specified Currency in excess
thereof;
provided, however, Notes denominated
-------- -------
in Specified Currencies other than
US Dollars may be subject to
denomination restrictions as set
forth in the Distribution Agreement
or as otherwise may be required by
regulations of the applicable
central bank or similar monetary
authority of the country issuing the
Specified Currency.
Global Notes and Definitive Bearer
and Registered Notes: Until the 40th day following the
date of issuance of any tranche of
Bearer Notes or such other date as
may be required to comply with the
terms of Regulation S ("Regulation
S") under the U.S. Securities Act of
1933, as amended, as described in
the Distribution Agreement (the
"Exchange Date"), and until Final
Certification (as defined below) in
accordance with TEFRA D as described
in the Distribution Agreement, such
tranche of Bearer Notes will be
represented by one or more Temporary
Global Notes in bearer form without
interest coupons. The relevant
Issuer shall execute, and upon the
instructions of the relevant Issuer
the Authenticating Agent shall
complete and authenticate, such
Temporary Global Note upon the same
conditions and in substantially the
same manner, and with the same
effect, as an individual definitive
Bearer Note. On or prior to the
settlement date (which will normally
be the original issue date) with
respect to such Notes, the
Authenticating Agent shall deposit
the Temporary Global Note with the
Depositary in the manner specified
below under "Settlement Procedures;
Bearer Notes". The interest of each
beneficial owner of Bearer Notes
represented by such Temporary Global
Note will be credited to the
appropriate account with Cedel Bank
or the Euroclear Operator, as
specified below under "Interest --
General; Bearer Notes".
On or after the Exchange Date and
provided that Final Certification
(as described below) has occurred,
the interest of the beneficial
owners of the Notes represented by
the Temporary Global Note shall be
cancelled and such interests shall
thereafter be
<PAGE>
represented by a Permanent Global
Note or Definitive Bearer Notes or,
if provided in the applicable
Pricing Supplement, by definitive
Registered Notes. The interest of
each beneficial owner of Bearer
Notes represented by a Permanent
Global Note will be credited to the
appropriate account with Cedel Bank
or the Euroclear Operator.
The beneficial owner of an interest
in a Permanent Global Note may, at
any time, upon 30 days' written
notice to the Fiscal Agent as
provided in the Fiscal Agency
Agreement given by such beneficial
owner through either Cedel Bank or
the Euroclear Operator, as the case
may be, exchange its beneficial
interest in such Permanent Global
Note for one or more Definitive
Bearer Notes (or, if provided in the
applicable Pricing Supplement, a
Registered Note) equal in aggregate
principal amount to such beneficial
interest. Upon receipt by the Fiscal
Agent of an initial request to
exchange an interest in a Permanent
Global Note for a Definitive Bearer
Note or Notes, all other interests
in such Permanent Global Note shall,
so long as the Euroclear Operator
and Cedel Bank shall so require, be
exchanged for Definitive Bearer
Notes. Such exchange shall occur at
no expense to the beneficial owners
as soon as practicable after the
receipt of the initial request for
Definitive Bearer Notes. After such
exchange has occurred, all remaining
interests in the temporary global
Bearer Note will be exchangeable
only for definitive Bearer Notes or
(if so provided in the applicable
Pricing Supplement) for definitive
Registered Notes.
In all events, Bearer Notes will be
delivered by the Fiscal Agent only
outside the United States.
Final Certification: Final Certification
with respect to a Temporary Global
Note shall mean the delivery by the
Euroclear Operator or Cedel Bank, as
the case may be, to the Fiscal Agent
of a signed certificate (a
"Clearance System Certificate") in
substantially the form set forth in
Exhibit B-1 to the Fiscal Agency
Agreement with respect to the Notes
being exchanged, dated no earlier
than the Exchange Date for such
Notes, to the effect that the
Euroclear Operator or Cedel Bank, as
the case may be, has received
certificates ("Certificates of Non-
U.S.
<PAGE>
Beneficial Ownership") in the form
substantially set forth in Exhibit
B-2 to the Fiscal Agency Agreement
with respect to each of such Notes,
which Certificates of Non-U.S.
Beneficial Ownership shall be dated
no earlier than ten days before the
Exchange Date and shall be delivered
by the account holders appearing on
its records as entitled to such
Notes.
Interest: The following is a
summary of terms of the Notes with
respect to interest and is for
informational purposes only; the
terms of each Note as described in
the Pricing Supplement and the
Offering Circular shall govern in
the case of any conflict with the
provisions set forth below. Terms
used but not defined herein shall
have the meanings assigned to them
in the Offering Circular.
General: Bearer Notes. Interest on
---------------------
each Bearer Note will accrue from
and including the original issue
date of such Note for the first
interest period and from and
including the most recent date to
which interest has been paid for all
subsequent interest periods. Each
payment of interest on a Bearer Note
will include interest accrued from
and including the next preceding
Interest Payment Date in respect of
which interest has been paid (or
from and including the date of
issue, if no interest has been paid)
to but excluding the Interest
Payment Date; provided, however,
-------- -------
that in the case of Floating Rate
Notes on which the interest rate is
reset daily or weekly, each interest
payment will include interest
accrued from and including the date
of issue or from but excluding the
fifteenth calendar day preceding the
next preceding Interest Payment Date
(whether or not such fifteenth
calendar day is a Business Day),
unless otherwise specified in the
applicable Pricing Supplement; and
provided, further, that interest in
-------- -------
respect of any Interest Payment Date
on any interest in a Temporary
Global Note for which Final
Certification has not been made
shall not be paid until the
occurrence of the earlier of (1)
Final Certification with respect to
such interest in such Temporary
Global Note and (2) in the case of
an Interest Payment Date occurring
between the original issue date and
the Exchange Date, delivery by the
Euroclear Operator or Cedel Bank, as
the case may be, to the Fiscal Agent
of a Clearing System Certificate
dated no earlier than such Interest
Payment
<PAGE>
Date to the effect that the
Euroclear Operator or Cedel Bank, as
the case may be, has received
Certificates of Non-U.S. Beneficial
Ownership with respect to such
interests in the Temporary Global
Note, which Certificates of Non-U.S.
Beneficial Ownership shall have been
dated no earlier than ten days
before such Interest Payment Date
and shall be signed by the account
holders appearing on its records as
entitled to such Notes.
Fixed Rate Bearer Notes. Unless
-----------------------
otherwise specified in the
applicable Pricing Supplement,
interest payments on Fixed Rate
Bearer Notes will be made
semi-annually on March 15 and
September 15 of each year and at
maturity or upon any earlier
redemption or repayment.
Floating Rate Bearer Notes. Interest
--------------------------
payments will be made on Floating
Rate Bearer Notes monthly,
quarterly, semi-annually or
annually. Except as provided below
or as specified in the applicable
Pricing Supplement, interest will be
payable, in the case of Floating
Rate Bearer Notes with a daily,
weekly or monthly Interest Reset
Date, on the third Wednesday of each
month or on the third Wednesday of
March, June, September and December,
as specified pursuant to Settlement
Procedure "A" below; in the case of
Notes with a quarterly Interest
Reset Date, on the third Wednesday
of March, June, September and
December of each year; in the case
of Notes with a semi-annual Interest
Reset Date, on the third Wednesday
of the two months specified pursuant
to Settlement Procedure "A" below
and in the case of Notes with an
annual Interest Reset Date, on the
third Wednesday of the month
specified pursuant to Settlement
Procedure "A" below and, in each
case, on the Maturity Date. If any
such Interest Payment Date is not a
Business Day, the provisions set
forth under "Payments of Principal
and Interest -- Bearer Notes" shall
apply.
General: Registered Notes. Interest
-------------------------
on each Registered Note will accrue
from and including the original
issue date of such Note for the
first interest period and from and
including the most recent date to
which interest has been paid for all
subsequent interest periods. Each
payment of interest on a Registered
<PAGE>
Note will include interest accrued
from and including the next
preceding Interest Payment Date in
respect of which interest has been
paid (or from and including the date
of issue, if no interest has been
paid) to but excluding the Interest
Payment Date, provided, however,
-------- -------
that in the case of Floating Rate
Notes which reset daily or weekly,
interest payments will include
interest from and including the date
of issue or from but excluding the
last Regular Record Date to which
interest has been paid, as the case
may be, through and including the
Regular Record Date next preceding
the Interest Payment Date, unless
otherwise specified in the
applicable Pricing Supplement; and
provided, further, that at the
-------- -------
Maturity Date, the interest payable
will include interest accrued to but
excluding the Maturity Date.
Fixed Rate Registered Notes. Unless
---------------------------
otherwise specified in the
applicable Pricing Supplement,
interest payments on Fixed Rate
Registered Notes will be made
semi-annually on March 15 and
September 15 of each year and at the
Maturity Date; provided, however,
-------- -------
that in the case of Registered Fixed
Rate Notes issued between a Regular
Record Date and an Interest Payment
Date, the first interest payment
will be made on the Interest Payment
Date following the next succeeding
Regular Record Date. Floating Rate
-------------
Registered Notes. Interest payments
----------------
will be made on Floating Rate
Registered Notes monthly, quarterly,
semiannually or annually. Except as
provided below or as specified in
the applicable Pricing Supplement,
interest will be payable, in the
case of Floating Rate Registered
Notes with a daily, weekly or
monthly Interest Reset Date, on the
third Wednesday of each month or on
the third Wednesday of March, June,
September and December, as specified
pursuant to settlement procedure
"AA" below; in the case of Notes
with a quarterly Interest Reset
Date, on the third Wednesday of
March, June, September and December
of each year; in the case of Notes
with a semi-annual Interest Reset
Date, on the third Wednesday of the
two months specified pursuant to
Settlement Procedure "AA" below; and
in the case of Notes with an annual
Interest Reset Date, on the third
Wednesday of the month specified
pursuant to Settlement Procedure
"AA" below and, in each case, on the
Maturity Date; provided, however,
-------- -------
that in the
<PAGE>
case of Registered Floating Rate
Notes issued between a Regular
Record Date and an Interest Payment
Date, the first interest payment
will be made on the Interest Payment
Date following the next succeeding
Record Date. If any such Interest
Payment Date is not a Business Day,
the provisions set forth under
"Payments of Principal and
Interest -- Registered Notes"
shall apply.
Disclosure under Interest In the case of Notes issued by GEC
Act (Canada) Canada, whenever it is necessary to
compute any amount of interest in
respect of the Notes for a period of
less than a full year, such interest
shall be calculated on the basis of
a 360-day year consisting of 12
months of 30 days each. For purposes
only of disclosure under the
Interest Act (Canada), the yearly
rate of interest to which interest
so calculated is equivalent is the
interest rate set forth herein
multiplied by a fraction the
numerator of which is the number of
days in the calendar year in which
the same is to be ascertained and
the denominator of which is 360.
Calculation of The following is a summary of terms
Interest: of the Notes with respect to the
calculation of interest and is for
informational purposes only; the
terms of each Note as described in
the Pricing Supplement and the
Offering Circular shall govern in
the case of any conflict with the
provisions set forth below. Terms
used but not defined herein shall
have the meanings assigned to them
in the Offering Circular.
Fixed Rate Notes. Unless otherwise
----------------
specified in the applicable Pricing
Supplement, interest on Fixed Rate
Notes (including interest for
partial periods) will be calculated
on the basis of a 360-day year of
twelve 30-day months.
Floating-Rate Notes. Interest rates
-------------------
on Floating Rate Notes will be
determined as set forth in the
Offering Circular and the applicable
Pricing Supplement. Interest on
Floating Rate Notes will be
calculated on the basis of actual
days elapsed and a year of 360 days
except that in the case of Treasury
Rate Notes, interest will be
calculated on the basis of the
actual number of days in the year.
<PAGE>
Payments of The following is a summary of terms
Principal and Interest: of the Notes with respect to the
payment of principal and interest
and is for informational purposes
only; the terms of each Note (as
described in the Pricing Supplement
and the Offering Circular) and the
Fiscal Agency Agreement shall govern
in the case of any conflict with the
provisions set forth below. Terms
used but not defined herein shall
have the meanings assigned to them
in the Fiscal Agency Agreement.
Bearer Notes. Except as otherwise
------------
provided in the Bearer Notes,
payment of the principal amount of
each Bearer Note at the Maturity
Date thereof will be made only upon
presentation and surrender of such
Bearer Note to the Principal Paying
Agent or any Paying Agent outside
the United States. Such payment,
together with payment of interest
due at the Maturity Date of such
Note, will be made in funds
available for immediate use by the
Principal Paying Agent or such
Paying Agent and in turn by the
holder of such Note. Bearer Notes
presented to the Principal Paying
Agent or a Paying Agent at the
Maturity Date for payment will be
cancelled or destroyed by such
paying agent and delivered to the
relevant Issuer with a certificate
of cancellation or destruction, as
applicable. All interest payments on
a Bearer Note (other than interest
due at the Maturity Date) will be
made by check drawn on the Principal
Paying Agent (or another person
appointed by the Principal Paying
Agent) and delivered to an address
outside the United States by the
Principal Paying Agent to the person
entitled thereto or by wire transfer
of immediately available to an
account maintained by the payee with
a bank located outside the United
States.
Except as specified in "Interest --
General; Bearer Notes" above,
interest on a Temporary Global Note
or Permanent Global Note shall be
payable to the beneficial owner
thereof through credit to the
account of such owner or of the
custodian bank of such owner with
Cedel Bank or the Euroclear
Operator. Except as otherwise
provided in the Bearer Notes,
interest on a definitive Bearer Note
shall be payable to the holder of
the appropriate coupon appertaining
thereto only upon presentation and
surrender of such coupon at the
office of the Principal Paying Agent
or any other Paying Agent outside
the United States.
<PAGE>
If any Interest Payment Date or the
Maturity Date or redemption or
repayment date of a Fixed Rate
Bearer Note is not a Business Day,
the payment due on such day shall be
made on the next succeeding Business
Day and no interest shall accrue on
such payment for the period from and
after such Interest Payment Date or
Maturity Date, as the case may be.
If any Interest Payment Date or the
Maturity Date for any Floating Rate
Bearer Note would fall on a day that
is not a Business Day with respect
to such Note, such Interest Payment
Date or Maturity Date will be the
following day that is a Business Day
with respect to such Note, except
that, in the case of a Bearer LIBOR
Note, if such Business Day is in the
next succeeding calendar month, such
Interest Payment Date or Maturity
Date, as the case may be, shall be
the immediately preceding day that
is a Business Day with respect to
such Bearer LIBOR Note.
Registered Notes. Except as
----------------
otherwise provided in a Registered
Note, the Principal Paying Agent
will pay the principal amount of
each Registered Note at the Maturity
Date upon presentation and surrender
of such Note to its offices. Such
payment, together with payment of
interest due at the Maturity Date of
such Note, will be made in funds
available for immediate use by the
Principal Paying Agent and in turn
by the holder of such Note.
Registered Notes presented to the
Principal Paying Agent at the
Maturity Date for payment will be
cancelled or destroyed and delivered
to the relevant Issuer with a
certificate of cancellation or
destruction, as applicable. All
interest payments on a Registered
Note (other than interest due at the
Maturity Date) will be made by check
drawn on the Principal Paying Agent
(or another person appointed by the
Principal Paying Agent) and mailed
by the Principal Paying Agent to the
person entitled thereto as provided
in such Note and the Fiscal Agency
Agreement or by wire transfer of
immediately available funds.
Following each Regular Record Date,
the Principal Paying Agent will
furnish the relevant Issuer with a
list of interest payments to be made
on the following Interest Payment
Date for each Registered Note and in
total for all Registered Notes.
Interest at the Maturity Date will
be payable to the person to whom the
payment of principal is payable.
<PAGE>
The Principal Paying Agent will
provide monthly to the relevant
Issuer lists of principal and
interest, to the extent
ascertainable, to be paid on
Registered Notes maturing or to be
redeemed in the next month. The
Principal Paying Agent will be
responsible for withholding taxes on
interest paid on Registered Notes as
required by applicable law.
If any Interest Payment Date or the
Maturity Date of a Fixed Rate
Registered Note is not a Business
Day, the payment due on such day
shall be made on the next succeeding
Business Day and no interest shall
accrue on such payment for the
period from and after such Interest
Payment Date or Maturity Date, as
the case may be. If any Interest
Payment Date or the Maturity Date
for any Floating Rate Registered
Note would fall on a day that is not
a Business Day with respect to such
Note, such Interest Payment Date or
Maturity Date will be the following
day that is a Business Day with
respect to such Note, except that,
in the case of a Registered LIBOR
Note, if such Business Day is in the
next succeeding calendar month, such
Interest Payment Date shall be the
immediately preceding day that is a
Business Day with respect to such
Registered LIBOR Note.
Preparation of If any offer to purchase a tranche
Pricing Supplement: of Notes is accepted by or on behalf
of the relevant Issuer, the relevant
Issuer and (in the case of Notes
issued by GEC Australia or GEC
Canada) the Guarantor will prepare a
pricing supplement (a "Pricing
Supplement") reflecting the terms of
such tranche of Note and will
deliver the number of copies of such
Pricing Supplement to the relevant
Agent as such Agent shall request as
soon as practicable, but in no event
later than 5 Business Days following
the date such offer to purchase
Notes is accepted. The relevant
Agent will cause such Pricing
Supplement together with the
Offering Circular to be delivered to
each purchaser of such tranche of
Note. In addition, the relevant
Issuer shall forward the Pricing
Supplement to the Fiscal Agent as
soon as it becomes available but in
no event later than the issue date.
In each instance that a Pricing
Supplement is prepared, the Agents
receiving such Pricing Supplement
will affix the Pricing Supplement to
the Offering Circular prior to their
use. Outdated Pricing Supplements,
and
<PAGE>
the Offering Circular to which
they are attached (other than those
retained for files), will be
destroyed.
Settlement: The receipt by the
relevant Issuer of immediately
available funds in exchange for the
delivery of an authenticated
Temporary Global Note to the
Depositary in the manner described
in "Settlement Procedures; Bearer
Notes" below or an authenticated
Registered Note delivered to the
relevant Agent and such Agent's
delivery of such Note against
receipt of immediately available
funds shall constitute "settlement"
with respect to such Note. All
orders accepted by the relevant
Issuer will be settled on such date
as the relevant Issuer and the
purchaser shall agree upon.
Settlement Procedures; Settlement Procedures with regard to
each Bearer Notes: Note sold by each
Issuer to or through an Agent shall
be as follows:
A. The relevant Agent will
advise the relevant Issuer
by telephone that such Note
is initially a Bearer Note
and of the following
settlement information:
1. Principal amount.
2. Maturity Date.
3. In the case of a Fixed
Rate Bearer Note, the
Interest Rate, the
frequency of interest
payments, and whether
such Note is an
Amortizing Note and, if
so, the amortization
schedule, or, in the
case of a Floating Rate
Bearer Note, the Initial
Interest Rate (if known
at such time), Interest
Payment Dates, Interest
Payment Period,
Calculation Agent, Base
Rate, Index Maturity,
Interest Reset Period,
Interest Reset Dates,
Spread or Spread
Multiplier (if any),
Minimum Interest Rate
(if any), Maximum
Interest Rate (if any)
and the Alternate Rate
Event Spread (if any).
4. Redemption or repayment
provisions, if any.
<PAGE>
5. Settlement date and
time.
6. Issue Price.
7. Denominations.
8. Specified Currency.
9. Agent's commission, if
any, determined as
provided in the
Distribution Agreement.
10. Agent's account number
at Cedel Bank or the
Euroclear Operator.
11. Whether the Note is
issued with more than a
de minimis amount of
discount.
12. Whether the Note is an
Indexed Note, and if it
is an Indexed Note, the
Indexed Currency, the
Currency Base Rate and
the Determination Agent.
13. Whether the Note is a
Dual Currency Note, and
if it is a Dual Currency
Note, the Face Amount
Currency, the Optional
Payment Currency, the
Designated Exchange
Rate, the Option
Election Dates and the
Option Value Calculation
Agent.
14. If applicable, wire
transfer instructions
including name of
banking institution
where transfer is to be
made and account number.
15. Whether such Note is to
be listed on the
Luxembourg Stock
Exchange.
16. Any other applicable
terms.
B. The relevant Issuer will
advise the Fiscal Agent by
telephone or electronic
transmission confirmed in
writing at any time on the
sale date of the
information set forth in
Settlement Procedure A
above and shall give the
Fiscal Agent written
instructions to issue a
Temporary
<PAGE>
Global Note (substantially
in the form set out in
Appendix 1). The relevant
Issuer will send a copy of
such instructions to the
relevant Agent or Agents.
The Fiscal Agent shall
telephone each of the
Euroclear Operator or Cedel
Bank with a request for a
security code for each
tranche agreed to be
issued, which security code
or codes will be notified
by the Fiscal Agent to the
relevant Issuer and the
relevant Agent or Agents.
The relevant Issuer and (in
the case of Notes issued by
GEC Australia or GEC
Canada) the Guarantor shall
prepare and cause to be
delivered to the Fiscal
Agent a Pricing Supplement
to the Offering Circular
describing the terms of the
particular tranche of
Notes.
C. In accordance with the
written instructions and
the applicable Pricing
Supplement, the Fiscal
Agent shall prepare and
authenticate a Temporary
Global Note for each
tranche which the relevant
Issuer has agreed to sell,
the settlement for which
tranche is to occur on the
settlement date. The
Temporary Global Note will
then be delivered to the
Depositary. The Fiscal
Agent will also give
instructions to the
Euroclear Operator or Cedel
Bank to credit the Notes
represented by such
Temporary Global Notes
delivered to such
Depositary to the Fiscal
Agent's distribution
account at the Euroclear
Operator or Cedel Bank, as
the case may be. The Fiscal
Agent will instruct the
Euroclear Operator or Cedel
Bank to debit, on the
settlement date, from the
distribution account of the
Fiscal Agent the number of
Notes of each Tranche with
respect to which the
relevant Agent has
solicited an offer to
purchase and to credit, on
the settlement date, such
Notes to the account of
such Agent with the
Euroclear Operator or Cedel
Bank against payment of the
issue price of such Notes.
Each relevant Agent shall
give corresponding
instructions to the
Euroclear Operator or Cedel
Bank.
<PAGE>
D. The Euroclear Operator and
Cedel Bank shall debit and
credit accounts in
accordance with
instructions received by
them. The Fiscal Agent
shall pay the relevant
Issuer the aggregate net
proceeds received by it in
immediately available funds
via a transfer of funds to
the account of the relevant
Issuer with a bank selected
by such Issuer notified to
the Fiscal Agent from time
to time in writing.
Settlement Procedures For sales by each Issuer of
Timetable; Bearer Notes: Bearer Notes to or through
an Agent, Bearer Settlement
Procedures "A" through "D"
above shall be completed on
or before the respective
times set forth below:
Settlement
Procedure;
Bearer Notes Time
------------ ----
A 12:00 P.M. (NYC time)
three days before
settlement date
B 9:00 A.M. (London
time) two days before
settlement date
C 3:45 P.M. (London
time) on day before
settlement date
D 5:00 P.M. (NYC time)
on settlement date
Settlement Procedures;
Registered Notes: Settlement Procedures with regard to
each Note sold by each Issuer to or
through an Agent shall be as
follows:
AA. The relevant Agent will
advise the relevant Issuer
by telephone that such Note
is a Registered Note and of
the following settlement
information:
1. Name in which such Note is
to be registered
("Registered Owner").
<PAGE>
2. Address of the Registered
Owner and address for
payment of principal and
interest.
3. Taxpayer identification
number of the Registered
Owner (if available); if a
taxpayer identification
number is not available,
the Agent shall request
that the purchasers of the
Notes prepare the
applicable form required by
the United States Internal
Revenue Code of 1986, as
amended (the "Code") and
cause such form to be
delivered to the Fiscal and
Paying Agent on or prior to
the settlement date.
4. Principal amount.
5. Maturity Date.
6. In the case of a Fixed Rate
Registered Note, the
Interest Rate, the
frequency of interest
payments and whether such
Note is an Amortizing Note
and, if so, the
amortization schedule, or,
in the case of a Floating
Rate Registered Note, the
Initial Interest Rate (if
known at such time),
Interest Payment Dates,
Interest Payment Period,
Calculation Agent, Base
Rate, Index Maturity,
Interest Reset Period,
Interest Reset Dates,
Spread or Spread Multiplier
(if any), Minimum Interest
Rate (if any), Maximum
Interest Rate (if any) and
the Alternate Rate Event
Spread (if any).
7. Redemption or repayment
provisions, if any.
8. Settlement date and time.
9. Issue Price.
10. Denominations.
11. Specified Currency.
<PAGE>
12. Agent's commission, if any,
determined as provided in
the Distribution Agreement.
13. Whether the Note is issued
with more than a de minimis
amount of discount.
14. Whether the Note is an
Indexed Note, and if it is
an Indexed Note, the
Indexed Currency, the
Currency Base Rate and the
Determination Agent.
15. Whether the Note is a Dual
Currency Note, and if it is
a Dual Currency Note, the
Face Amount Currency, the
Optional Payment Currency,
the Designated Exchange
Rate, the Option Election
Dates and the Option Value
Calculation Agent.
16. If applicable, wire
transfer instructions,
including name of banking
institution where transfer
is to be made and account
number.
17. Whether such Note is to be
listed on the Luxembourg
Stock Exchange.
18. Any other applicable terms.
BB. The relevant Issuer will
advise the Fiscal Agent by
telephone or electronic
transmission (confirmed in
writing at any time on the
sale date) of the
information set forth in
Settlement Procedure "AA"
above.
CC. The relevant Issuer will
have delivered to the
Authenticating Agent an
executed Note. The
Authenticating Agent will
complete such Note and
authenticate such Note and
deliver it through the
Fiscal Agent (with the
confirmation) to the
relevant Agent, and such
Agent will acknowledge
receipt of the Note. Such
delivery will be made only
against such acknowledgment
of receipt and evidence
that instructions have been
given by such Agent for
payment to the account of
the relevant Issuer, in
funds available for
immediate use, of an amount
equal to the
<PAGE>
price of such Note less
such Agent's commission, if
any; provided however, the
-------- -------
relevant Issuer and the
Fiscal Agent may agree on
different delivery
procedures for definitive
Registered Notes
denominated in Specified
Currencies other than U.S.
dollars. In the event that
the instructions given by
such Agent for payment to
the account of such Issuer
are revoked, such Issuer
will as promptly as
possible wire transfer to
the account of such Agent
an amount of immediately
available funds equal to
the amount of such payment
made.
The Principal Paying Agent
shall pay the relevant
Issuer the aggregate net
proceeds received by it in
immediately available funds
via a transfer of funds to
the account of the relevant
Issuer maintained at a bank
selected by such Issuer
notified to the Principal
Paying Agent from time to
time in writing.
DD. Unless the relevant Agent
purchased such Note for its
own account, such Agent
will deliver such Note
(with confirmation) to the
customer against payment in
immediately payable funds.
Such Agent will obtain the
acknowledgment of receipt
of such Note. If the
relevant Agent purchased
such Note for its own
account, such Agent will
accept delivery of such
Note against payment in
immediately available
funds, and will deliver an
acknowledgement of receipt
of such Note.
EE. Periodically, the Fiscal
Agent will send to the
relevant Issuer a statement
setting forth the principal
amount of the Registered
Notes outstanding as of
that date under the Fiscal
Agency Agreement and
setting forth a brief
description of any sales of
which such Issuer has
advised the Fiscal Agent
but which have not yet been
settled.
Settlement Procedures For sales by the relevant
Timetable; Registered Issuer of
<PAGE>
Registered Notes to or
through an Agent,
Notes: Procedures "AA" through
"DD" set forth above shall
be completed on or before
the respective times
(London Time) set forth
below:
Settlement
Procedure;
Registered
Notes Time
----- ----
Failure to Settle: Bearer Notes. If any
------------
Agent shall have advanced its own
funds for payment against subsequent
receipt of funds from the purchaser
and if a purchaser shall fail to
make payment for a Note, such Agent
will promptly notify the relevant
Issuer, the Fiscal Agent, the
Principal Paying Agent, the
Depositary and the Euroclear
Operator and Cedel Bank by
telephone, promptly confirmed in
writing (but no later than the next
Business Day). In such event, the
relevant Issuer shall promptly
instruct the Fiscal Agent to cancel
the purchaser's interest in the
appropriate Temporary Global Note
representing such Note. Upon (i)
confirmation from the Fiscal Agent
in writing (which may be given by
telex or telecopy) that the Fiscal
Agent has cancelled such purchaser's
interest in such Temporary Global
Note and upon (ii) confirmation from
such Agent in writing (which may be
given by telex or telecopy) that
such Agent has not received payment
from the purchaser, the relevant
Issuer will promptly pay to such
Agent an amount in immediately
available funds equal to the amount
previously paid by such Agent in
respect of such Bearer Note. Such
payment will be made on the
settlement date, if possible, and in
any event not later than 12 noon
(New York City time) on the Business
Day following the settlement date.
The
<PAGE>
Fiscal Agent and the Depositary
will make or cause to be made such
revisions to such Temporary Global
Note as are necessary to reflect the
cancellation of such portion of such
Temporary Global Note.
If a purchaser shall fail to make
payment for the Note for any reason
other than the failure of such Agent
to provide the necessary information
to the relevant Issuer as described
above for settlement or to provide a
confirmation to the purchaser within
a reasonable period of time as
described above, and if such Agent
shall have otherwise complied with
its obligations hereunder and in the
Distribution Agreement, the relevant
Issuer will reimburse such Agent on
an equitable basis for such Agent's
loss of the use of funds during the
period when they were credited to
account of such Issuer or the Fiscal
Agent.
Immediately upon such cancellation,
the Fiscal Agent will make
appropriate entries in its records
to reflect the fact that a
settlement did not occur with
respect to such Note.
Registered Notes. If a purchaser
----------------
fails to accept delivery of and make
payment for any Registered Note, the
relevant Agent will notify the
relevant Issuer and the Fiscal Agent
by telephone and return such Note to
the Fiscal Agent. Upon receipt of
such notice, the relevant Issuer
will immediately wire transfer to
the account of such Agent an amount
equal to the amount previously
credited thereto in respect of such
Note. Such wire transfer will be
made on the settlement date, if
possible, and in any event not later
than the Business Day following the
settlement date. If a purchaser
shall fail to make payment for the
Note for any reason other than the
failure of such Agent to provide the
necessary information to the
relevant Issuer as described above
for settlement or to provide a
confirmation to the purchaser within
a reasonable period of time as
described above, and if such Agent
shall have otherwise complied with
its obligations hereunder and in the
Distribution Agreement, then the
relevant Issuer will reimburse such
Agent or the Principal Paying Agent,
as
<PAGE>
appropriate, on an equitable
basis for its loss of the use of the
funds during the period when they
were credited to the account of such
Issuer. Immediately upon receipt of
the Registered Note in respect of
which such failure occurred, the
Principal Paying Agent will mark
such Note "cancelled," make
appropriate entries in the Principal
Paying Agent's records and send such
Note to the relevant Issuer.
Notice of Issuance to The Listing
Agent will provide information
Luxembourg Stock with respect to
each tranche of Notes to Exchange:
be listed on the Luxembourg Stock
Exchange to such Exchange and will
advise the relevant Issuer and the
relevant Agent in writing as to the
effectiveness of the listing of such
Notes by the close of business on
the related settlement date. To the
extent required by the Luxembourg
Stock Exchange, the Agents will
provide the Listing Agent with
secondary market information
regarding any tranche of Notes
listed on the Luxembourg Stock
Exchange and the Listing Agent will
provide such information to the
Luxembourg Stock Exchange.
Listing: The Listing Agent will, on a
regular basis, provide the
Luxembourg Stock Exchange with such
information as such Exchange may
require regarding any tranches of
Notes that are listed on such
Exchange and are issued and
outstanding.
<PAGE>
APPENDIX 1
----------
FORM OF NOTICE TO THE PRINCIPAL PAYING AGENT
--------------------------------------------
To: The Chase Manhattan Bank (National Association) London Office
Attention: Manager, Corporate Trust Operations
Re: Amended and Restated Euro MTN Distribution Agreement dated as
of July 2, 1996
Terms defined in the Administrative Procedures relating to the above-referenced
Euro MTN Distribution Agreement have the same meanings therein.
We hereby confirm our telephone instruction to prepare, complete, authenticate
and issue a Temporary Global Note in accordance with the terms of the Fiscal
Agency Agreement, the Administrative Procedures and the Pricing Supplement and
to give instructions to the Euroclear Operator and/or Cedel Bank in order for
you to:
* Credit account of [Name of Agent] with [Euroclear/Cedel Bank]** with
the following Bearer Notes:
* Separate instructions are to be sent in respect of each offer
accepted by the relevant Issuer. Repeat this information (numbering
consecutively if Bearer Notes of more than one Tranche are to be issued to an
Agent.
** Delete as appropriate.
<PAGE>
[FORM OF CERTIFICATE TO BE GIVEN BY AN ACCOUNT
HOLDER OF THE EUROCLEAR OPERATOR AND CEDEL BANK]
EXHIBIT B-1
-----------
CERTIFICATE
[General Electric Capital Corporation]
[GE Capital Australia Limited]
[General Electric Capital Canada Inc.]
Euro Medium-Term Notes or Other Debt Securities
[Unconditionally Guaranteed as to Payment
of Principal and Interest by
General Electric Capital Corporation]
Represented by Temporary Global Note No. __.
This is to certify that as of the date hereof, and except as set forth
below, the above-captioned Notes held by you for our account [(A) are
beneficially owned by persons that are not residents of Canada, except residents
of Canada to whom the principal amount of Notes so beneficially owned has been
sold and who acquired the same in compliance with the securities laws of Canada
or of the applicable province or territory thereof; and (B)] (i) are owned by
person(s) that are not citizens or residents of the United States, domestic
partnerships, domestic corporations or any estate or trust the income of which
is subject to United States Federal income taxation regardless of its source
("United States person(s)"), (ii) are owned by United States person(s) that (a)
are foreign branches of United States financial institutions (as defined in U.S.
Treasury Regulations Section 1.165-12(c)(1)(v)) ("financial institutions")
purchasing for their own account or for resale, or (b) acquired the Notes
through foreign branches of United States financial institutions and who hold
the Notes through such United States financial institutions on the date hereof
(and in either case (a) or (b), each such United States financial institution
hereby agrees, on its own behalf or through its agent, that you may advise the
Issuer or the Issuer's agent that it will comply with the requirements of
Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder), or (iii) are owned by United States or
foreign financial institution(s) for purposes of resale during the restricted
period (as defined in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)),
and in addition if the owner of the Notes is a United States or foreign
financial institution described in clause (iii) above (whether or not also
described in clause (i) or (ii)) such financial institution has not acquired the
Notes for purposes of resale directly or indirectly to a United States person or
to a person within the United States or its possessions.
As used herein, "United States" means the United States of America
(including the States and the District of Columbia) and its "possessions"
including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake
Island and the Northern Mariana Islands.
We undertake to advise you promptly by tested telex on or prior to the
date on which you intend to submit your certification relating to the Notes held
by you for our account in
<PAGE>
EXHIBIT B-1
-----------
Page 2
accordance with your Operating Procedures if any applicable statement herein is
not correct on such date, and in the absence of any such notification it may be
assumed that this certification applies as of such date.
This certification excepts and does not relate to $ _____ of such
interest in the above Notes in respect of which we are not able to certify and
as to which we understand exchange and delivery of definitive Notes (or, if
relevant, exercise of any rights or collection of any interest) cannot be made
until we do so certify.
We understand that this certification is required in connection with
[certain securities laws of Canada and] certain tax laws and, if applicable,
certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certification is or would be relevant, we irrevocably authorize
you to produce this certification to any interested party in such proceedings.
Dated: _______________, 19
[To be dated no earlier than the 10th day before
[insert date of Interest Payment Date prior to Exchange Date]
[insert date of redemption or acceleration prior to Exchange Date]
[insert Exchange Date]]
[Name of Account Holder]
By:
(Authorized Signatory)
Name:
Title:
<PAGE>
[FORM OF CERTIFICATE TO BE GIVEN BY
THE EUROCLEAR OPERATOR AND CEDEL BANK]
EXHIBIT B-2
-----------
CERTIFICATE
[General Electric Capital Corporation]
[GE Capital Australia Limited]
[General Electric Capital Canada Inc.]
Euro Medium-Term Notes or Other Debt Securities
[Unconditionally Guaranteed as to Payment
of Principal and Interest by
General Electric Capital Corporation]
Represented by Temporary Global Note No. ____.
This is to certify that, based solely on certifications we have
received in writing, by tested telex or by electronic transmission from member
organizations appearing in our records as persons being entitled to a portion of
the principal amount set forth below (our "Member Organizations") substantially
to the effect set forth in Exhibit B-1 to the Fiscal and Paying Agency
Agreement, as of the date hereof, ___________ principal amount of the above-
captioned Notes [(A) is beneficially owned by persons that are not residents of
Canada, except residents of Canada to whom the principal amount of Notes so
beneficially owned has been sold and who acquired the same in compliance with
the securities laws of Canada or of the applicable province or territory
thereof; and (B)](i) is owned by persons that are not citizens or residents of
the United States, domestic partnerships, domestic corporations or any estate or
trust the income of which is subject to United States Federal income taxation
regardless of its source ("United States persons"), (ii) is owned by United
States persons that (a) are foreign branches of United States financial
institutions (as defined in U.S. Treasury Regulations Section 1.165-12(c)(1)(v)
("financial institutions") purchasing for their own account or for resale, or
(b) acquired the Notes through foreign branches of United States financial
institutions and who hold the Notes through such United States financial
institutions on the date hereof (and in either case (a) or (b), each such United
States financial institution has agreed, on its own behalf or through its agent,
that we may advise the Issuer or the Issuer's agent that it will comply with the
requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of
1986, as amended, and the regulations thereunder), or (iii) is owned by United
States or foreign financial institutions for purposes of resale during the
restricted period (as defined in U.S. Treasury Regulations Section 1.163-
5(c)(2)(i)(D)(7), and to the further effect that United States or foreign
financial institutions described in clause (iii) above (whether or not also
described in clause (i) or (ii)) have certified that they have not acquired the
Notes for purposes of resale directly or indirectly to a United States person or
to a person within the United States or its possessions.
<PAGE>
EXHIBIT B-2
-----------
Page 2
As used herein, "United States" means the United States of America
(including the States and the District of Columbia) and its "possessions"
including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake
Island and the Northern Mariana Islands.
We further certify (i) that we are not making available herewith for
exchange any portion of the temporary global Note excepted as set forth herein
and (ii) that as of the date hereof we have not received any notification from
any of our Member Organizations to the effect that the statements made by such
Member Organizations with respect to any portion of the part submitted herewith
are no longer true and cannot be relied upon as the date hereof.
We understand that this certification is required in connection with
[certain securities laws of Canada and] certain tax laws and, if applicable,
certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certification is or would be relevant, we irrevocably authorize
you to produce this certification to any interested party in such proceedings.
Dated: , 19
[To be dated no earlier than
[insert date of Interest Payment Date prior to Exchange Date]
[insert date of redemption or acceleration prior to Exchange Date]
[insert Exchange Date]]
[MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, BRUSSELS OFFICE,
as Operator of the Euroclear System]
[CEDEL BANK, SOCIETE ANONYME ]
By:
<PAGE>
[FORM OF CERTIFICATE TO BE GIVEN BY AN ACCOUNT
HOLDER OF THE EUROCLEAR OPERATOR AND CEDEL BANK]
EXHIBIT C-1
-----------
CERTIFICATE
[General Electric Capital Corporation]
[GE Capital Australia Limited]
[General Electric Capital Canada Inc.]
Euro Medium-Term Notes or Other Debt Securities
[Unconditionally guaranteed as to Payment
of Principal and Interest by
General Electric Capital Corporation]
Represented by Permanent Global Note No. __.
This is to certify that as of the date hereof, and except as set forth
below, the above-captioned Notes held by you for our account (i) are owned by
person(s) requesting definitive [Registered/Bearer] Notes in exchange for their
interests in the above-referenced permanent Global Note and (ii) such persons
desire to exchange _____ principal amount of the above-captioned Notes for
definitive [Registered/Bearer] Notes.
We undertake to advise you promptly by tested telex on or prior to the
date on which you intend to submit your certification relating to the Notes held
by you for our account in accordance with your Operating Procedures if any
applicable statement herein is not correct on such date, and in the absence of
any such notification it may be assumed that this certification applies as of
such date.
This certification excepts and does not relate to $ ____ of such
interest in the above Notes in respect of which we do not desire to exchange for
definitive Notes.
Dated: _______________, 19
[Name of Account Holder]
By:
(Authorized Signatory)
Name:
Title:
<PAGE>
[FORM OF CERTIFICATE TO BE GIVEN BY
THE EUROCLEAR OPERATOR AND CEDEL BANK]
EXHIBIT C-2
-----------
CERTIFICATE
[General Electric Capital Corporation]
[GE Capital Australia Limited]
[General Electric Capital Canada Inc.]
Euro Medium-Term Notes or Other Debt Securities
[Unconditionally Guaranteed as to Payment
of Principal and Interest by
General Electric Capital Corporation]
Represented by Permanent Global Note No. ____.
This is to certify that, based solely on certifications we have
received in writing, by tested telex or by electronic transmission from member
organizations appearing in our records as persons being entitled to a portion of
the principal amount set forth below (our "Member Organizations") substantially
to the effect set forth in Exhibit C-1 to the Fiscal and Paying Agency Agreement
relating to such Notes, as of the date hereof, ________ principal amount of the
above-captioned Notes (i) is owned by person(s) requesting definitive
[Registered/Bearer] Notes in exchange for their interests in the above-
referenced permanent Global Note and (ii) such persons desire to exchange ______
principal amount of the above-captioned Notes for definitive [Registered/Bearer]
Notes.
We further certify (i) that we are making available herewith for
exchange all interests in the permanent global Note and (ii) that as of the date
hereof we have not received any notification from any of our Member
Organizations to the effect that the statements made by such Member
Organizations with respect to any portion of the permanent global Note submitted
herewith are no longer true and cannot be relied upon as the date hereof.
Dated: ______________, 19
[MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, BRUSSELS OFFICE,
as Operator of the Euroclear System]
[CEDEL BANK, SOCIETE ANONYME]
By:
<PAGE>
[FORM OF GUARANTEE TO BE ENDORSED ON NOTES]
EXHIBIT D-1
-----------
1. FOR VALUE RECEIVED, GENERAL ELECTRIC CAPITAL CORPORATION, a New York
corporation (the "Guarantor"), hereby unconditionally and irrevocably guarantees
to the holder of the Note upon which this guarantee is endorsed the due and
punctual payment of any and all amounts required to be paid upon said Note
according to its terms, when, where and as the same shall become due and
payable, whether on an interest payment date, at maturity, upon redemption or
purchase or otherwise, in accordance with the terms thereof. Terms and
expressions defined in the Fiscal and Paying Agency Agreement dated as of July
2, 1996, as it may be amended or supplemented from time to time, among General
Electric Capital Corporation, GE Capital Australia Limited, General Electric
Capital Canada Inc. and The Chase Manhattan Bank (National Association), London
Branch, (the "Fiscal Agency Agreement") and the Notes shall have the same
meanings herein, except as otherwise defined herein or unless there is something
in the subject matter or context inconsistent therewith.
2. (a) In case of failure by [GE Capital Australia Limited] [General Electric
Capital Canada Inc.] or its successors or assigns (the "Issuer") punctually to
pay any such amount, the Guarantor hereby agrees to cause such payment to be
made punctually when, where and as the same shall become due and payable,
whether at maturity, upon redemption or otherwise, and as if such payment were
made by the Issuer. The Guarantor hereby agrees that its obligations hereunder
shall be unconditional, irrespective of the validity, legality or enforceability
of the Note, the absence of any action to enforce the same, the waiver or
consent by the holder of the Note with respect to any provisions thereof, the
recovery of any judgment against the Issuer or any action to enforce the same or
any other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a guarantor.
(b) The Guarantor shall be subrogated to all rights of the holder of the Note
against the Issuer in respect of any amounts paid by the Guarantor pursuant to
the provisions of this Guarantee; provided that the Guarantor shall not be
entitled to enforce or receive any payment arising out of, or based upon, such
right of subrogation until all amounts due on or to become due on or in respect
of all of the Notes shall have been paid in full or duly provided for.
(c) The Guarantor hereby waives notice of acceptance of this Guarantee and
also waives notice of nonpayment of any and all amounts payable or in respect of
said Note or any part thereof.
(d) This Guarantee is unsecured and ranks equally with all other unsecured
and unsubordinated obligations of the Guarantor.
3. (a) The Guarantor will not merge or consolidate with any other corporation or
sell, convey, transfer or otherwise dispose of all or substantially all of its
properties to any other corporation, unless (i) either the Guarantor shall be
the continuing corporation or the successor corporation (if other than the
Guarantor) (the "successor corporation") shall be a corporation organized under
the laws of the United States of America or of a state thereof and such
successor corporation shall expressly assume the due and punctual payments of
all amounts due under this Guarantee and the due and punctual performance of all
of the covenants and obligations of the Guarantor under this Guarantee endorsed
on all the Notes, by supplemental agreement satisfactory to the Fiscal and
Paying Agent executed and delivered to such Fiscal and Paying Agent by the
successor corporation and the Guarantor and (ii) the Guarantor or such successor
corporation, as the case may be, shall not, immediately after such merger or
consolidation, or such sale, conveyance, transfer or other disposition, be in
default in the performance of any such covenant or obligation.
(b) Upon any such merger or consolidation, sale, conveyance, transfer or
other disposition, such successor corporation shall succeed to and be
substituted for, and may exercise every right and power of and shall be subject
to all the obligations of, the Guarantor under this Guarantee, with the same
effect as if
<PAGE>
such successor corporation had been named as the Guarantor herein, and the
Guarantor shall be released from its liability as Guarantor under this Guarantee
and under the Fiscal Agency Agreement.
4. The Guarantor hereby certifies and warrants that all acts, conditions and
things required to be done and performed and to have happened precedent to the
creation and issuance of this Guarantee, and to constitute the same the legal,
valid and binding obligation of the Guarantor enforceable in accordance with its
terms, except that enforcement may be limited by bankruptcy, insolvency,
liquidation, reorganization and other laws of general application relating to or
affecting the rights of creditors or by general principles of equity, including
the limitation that specific performance, being an equitable remedy, is
discretionary and may not be ordered, have been done and performed and have
happened in due and strict compliance with all applicable laws.
5. This Guarantee shall be construed in accordance with and governed by the laws
of the State of New York, United States of America.
6. This Guarantee is dated the date of the Note upon which it is endorsed.
IN WITNESS WHEREOF, the Guarantor has caused this Guarantee to be duly
executed.
GENERAL ELECTRIC CAPITAL
CORPORATION
By:___________________________
<PAGE>
AMENDMENT NO. 1
to the
AMENDED AND RESTATED FISCAL
AND PAYING AGENCY AGREEMENT
dated as of July 2, 1996
GENERAL ELECTRIC CAPITAL CORPORATION
GE CAPITAL AUSTRALIA (ACN 008 562 534)
AUSTRALIAN RETAIL FINANCIAL NETWORK (ACN 008 583 588)
GENERAL ELECTRIC CAPITAL CANADA INC.
GE CAPITAL CANADA RETAILER FINANCIAL SERVICES COMPANY
THE CHASE MANHATTAN BANK, LONDON BRANCH
AMENDMENT NO. 1, dated as of December 8, 1997, to the Amended and Restated
Fiscal and Paying Agency Agreement dated as of July 2, 1996 (as so amended, the
"Agreement") among General Electric Capital Corporation ("GE Capital") and the
other parties thereto. Unless otherwise defined herein, all capitalized terms
used herein shall have the meanings assigned to them in the Agreement.
WHEREAS, as of the date hereof, GE Capital and the other parties hereto
desire to amend the Agreement to add the below-named institutions as additional
Issuers under the Euro MTN Program.
NOW, THEREFORE, the parties hereto agree as follows:
1. Amendment to Cover Page of the Agreement. The list of Issuers set
----------------------------------------
forth on the cover page of the Agreement is hereby amended to add the following:
AUSTRALIAN RETAIL FINANCIAL NETWORK (ACN 008 583 588)
GE CAPITAL CANADA RETAILER FINANCIAL SERVICES COMPANY
2. Amendment to Introduction Paragraphs of the Agreement.
-----------------------------------------------------
(a) The first paragraph on page 1 of the Agreement is hereby
amended to include Australian Retail Financial Network, a company organized
under the laws of the Australian Capital Territory ("ARFN") and GE Capital
Canada Retailer Financial Services Company, a Canadian corporation ("GEC
Canada RFS") in the definitions of "Issuer" and "Issuers".
(b) The second paragraph on page 1 of the Agreement is amended to
read, in its entirety, as follows:
<PAGE>
"Pursuant to the Amended and Restated Euro MTN Distribution Agreement
dated as of July 2, 1996, among the Issuers (including GE Capital in
its capacity as Guarantor of Notes issued by GEC Australia, ARFN, GEC
Canada or GEC Canada RFS) and the agents named therein (the "Agents")
(as amended from time to time, the "Distribution Agreement"), each
Issuer has agreed to issue from time to time its Euro Medium-Term
Notes ("Medium Term Notes") and other debt securities ("Other Debt
Securities") having maturities from 9 months or more from date of
issue (collectively, Medium Term Notes and Other Debt Securities are
referred to herein as the "Notes"). The Guarantor has agreed to
guarantee Notes issued pursuant to this Agreement by GEC Australia,
ARFN, GEC Canada or GEC Canada RFS in the form of the guarantee
attached hereto as Exhibit D-1 (the "Guarantee"). Administrative
procedures, which have been agreed to by the Issuers (including GE
Capital in its capacity as Guarantor of Notes issued by GEC Australia,
ARFN, GEC Canada or GEC Canada RFS) and the Agents as of the date
hereof, are attached as Exhibit A hereto (such procedures, as amended
from time to time pursuant to the Distribution Agreement, are
hereinafter referred to as the "Administrative Procedures")."
3. Amendment to References to GEC Capital's Subsidiaries. Except as
-----------------------------------------------------
specified in Sections 1, 2, 5, 6, 7, 9, 10, and 11 herein, references in the
Agreement to GEC Australia will be amended to add a reference to ARFN. Except
as specified in Sections 1, 2, 5, 6, 7, 9, 10, and 11 herein, references in the
Agreement to GEC Canada will be amended to add a reference to GEC Canada RFS.
For example, the phrase "(in the case of Notes issued by GEC Australia or GEC
Canada)" will be amended to read "(in the case of Notes issued by GEC Australia,
ARFN, GEC Canada or GEC Canada RFS)", the phrase "(in the case of Notes issued
by GEC Australia)" will be amended to read "(in the case of Notes issued by
either GEC Australia or ARFN)", the phrase "(in the case of Notes issued by GEC
Canada)" will be amended to read "(in the case of Notes issued by either GEC
Canada or GEC Canada RFS)".
4. Amendment to References to The Chase Manhattan Bank.
(a) References in the Agreement and in all the Exhibits thereto to
"The Chase Manhattan Bank (National Association), London Branch" will be amended
to delete "(National Association)".
(b) Reference to the location of The Chase Manhattan Bank, London
Branch in Section 1 of the Agreement is hereby amended to read "Trinity Tower, 9
Thomas More Street, London E1 9YT, England".
2
<PAGE>
5. Amendment to Section 3 of Agreement. The first sentence of Section
-----------------------------------
3(a) is hereby amended by deleting the "and" at the beginning of the last clause
thereof and by adding the following immediately prior to the parenthetical at
the end thereof:
", on behalf of GEC Canada RFS by any one of GEC Canada RFS's members
of its Board of Directors, a Vice-President or an Assistant Vice
President, and on behalf of ARFN by any one of ARFN's members of its
Board of Directors, a Vice-President or an Assistant Vice President ."
6. Amendment to Section 8 of the Agreement.
---------------------------------------
(a) Sections 8 is hereby amended to add new clauses (xv) and (xvi)
which shall be identical in all respects to clauses (vi) and (x) respectively,
except that references to GEC Australia contained in clauses (vi) and (x) shall
be changed so that in clauses (xv) and (xvi) such reference shall be to ARFN.
(b) Sections 8 is hereby amended to add new clauses (xvii), (xviii),
(xix) and (xx) which shall be identical in all respects to clauses (vii), (xi),
(xii) and (xiii) respectively, except that references to GEC Canada contained in
clauses (vii), (xi), (xii) and (xiii) shall be changed so that in clauses
(xvii), (xviii), (xix) and (xx) such reference shall be to GEC Canada RFS.
7. Amendment to Section 9 of the Agreement.
---------------------------------------
(a) Sections 9(b) and (e) shall be amended in their entirety in order
to apply to Notes issued by ARFN, as well as to GEC Australia, and when applied
in the case of ARFN, references in Sections 9(b) and (e) shall be amended to
refer to ARFN, and when applied in the case of GEC Australia, references in
Sections 9(b) and (e) shall be amended to refer to GEC Australia.
(b) Sections 9(c) and (f) shall be amended in their entirety in order
to apply to Notes issued by GEC Canada RFS, as well as to GEC Canada, and when
applied in the case of GEC Canada RFS, references in
3
<PAGE>
Sections 9(c) and (f) shall be amended to refer to GEC Canada RFS, and when
applied in the case of GEC Canada, references in Sections 9(c) and (f) shall be
amended to refer to GEC Canada.
8. Amendment to Section 19 of the Agreement.
----------------------------------------
(a) Section 19 of the Agreement is hereby amended by adding the
following:
Australian Retail Financial Network (ACN 008 583 588)
Address: 258 Queensberry Street, Carlton 3053, Australia
Phone: 613 9277-6522
Fax: 613 9277-6584
Attention: Lyn Boxall
GE Capital Canada Retailer Financial Services Company
Address: c/o 2300 Meadowvale Blvd., Mississauga, Ontario L5N 5P9
Phone: 905-858-6571
Fax: 905-858-5456
Attention: Leslie Battrick, Assistant Secretary
(In each case with a copy to the Guarantor at 201 High Ridge Road, Stamford, CT
06897 Attention: Senior Vice President - Corporate Treasury and Global Funding
Operation)
(b) The address of the Fiscal and Paying Agent is hereby amended as
follows:
The Chase Manhattan Bank, London Branch
Address: Trinity Tower, 9 Thomas More Street, London E1 9YT, England
Phone: 011 44 1202 347430
Fax: 011 44 1202 347438
Attention: Manager, Global Trust Services Operations
9. Amendment to Exhibit A Administrative Procedures. Exhibit A of the
------------------------------------------------
Agreement is hereby amended by the amendments thereto contained in Section 9 of
Amendment No. 1, dated as of December 8, 1997, to the Amended and Restated Euro
MTN Distribution Agreement, dated as of July 2, 1996.
4
<PAGE>
10. Amendment to Exhibits B-1, B-2, C-1 and C-2 Forms of Certificate to
-------------------------------------------------------------------
be Given by an Account Holder of the Euroclear Operator and Cedel Bank and Forms
- --------------------------------------------------------------------------------
of Certificate to be Given by the Euroclear Operator and Cedel Bank. The title
- -------------------------------------------------------------------
caption on the covers of the certificates is hereby amended to add the following
before "Euro Medium-Term Notes or Other Debt Securities":
[Australian Retail Financial Network (ACN 008 583 588)]
[GE Capital Canada Retailer Financial Services Company]
11. Amendment to Exhibit D-1 Form of Guarantee to be Endorsed on Notes.
------------------------------------------------------------------
(a) The second sentence of paragraph 1 is amended to read in its
entirety as follows:
"Terms and expressions defined in the Fiscal and Paying Agency Agreement
dated as of July 2, 1996, as it may be amended or supplemented from time to
time, among General Electric Capital Corporation, GE Capital Australia,
Australian Retail Financial Network, General Electric Capital Canada Inc.,
GE Capital Retailer Financial Services Company and The Chase Manhattan
Bank, London Branch, (the "Fiscal Agency Agreement") and said Notes shall
have the same meanings herein, except as otherwise defined herein or unless
there is something in the subject matter or context inconsistent
therewith."
(b) The first sentence of paragraph 2(a) is amended to read in its
entirety as follows:
"In case of failure by [GE Capital Australia] [General Electric Capital
Canada inc.] [Australian Retailer Financial Network (ACN 008 583 588)] [GE
Capital Canada Retailer Financial Services Company] or its successors or
assigns (the "Company") punctually to pay any such amount, the Guarantor
hereby agrees to cause such payment to be made punctually when, where and
as the same shall be come due and payable, whether at maturity, upon
redemption or otherwise, and as if such payment were made by the Company."
(c) References to "the Issuer" are hereby deleted and replaced with
references to "the Company".
5
<PAGE>
12. Governing Law. This Amendment No. 1 to the Agreement shall be
--------------
governed by the laws of the State of New York applicable to agreements made and
to be performed in such State.
13. Miscellaneous. All provisions of this Amendment No. 1 shall be
-------------
deemed to be incorporated in, and made part of, the Agreement, and the
Agreement, as amended and supplemented by this Amendment No. 1, shall be read,
taken and construed as one and the same instrument. This Amendment No. 1 may be
executed in any number of counterparts, each of which when so executed shall be
deemed to be an original.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1 as of
the date first written above.
GENERAL ELECTRIC CAPITAL CORPORATION
By /S/
--------------------------------------------------------
Name: Jeffrey S. Werner
Title: Senior Vice President - Corporate Treasury
and Global Funding Operation
GE CAPITAL AUSTRALIA
By /S/
--------------------------------------------------------
Name: Jeffrey S. Werner
Title: Authorized Signatory
AUSTRALIAN RETAIL FINANCIAL NETWORK
By /S/
--------------------------------------------------------
Name: Jeffrey S. Werner
Title: Authorized Signatory
GENERAL ELECTRIC CAPITAL CANADA INC.
By /S/
--------------------------------------------------------
Name: Jeffrey S. Werner
Title: Senior Vice President - Corporate Treasury
and Global Funding Operation
GE CAPITAL CANADA RETAILER FINANCIAL
SERVICES COMPANY
By /S/
--------------------------------------------------------
Name: Jeffrey S. Werner
Title: Senior Vice President - Corporate Treasury
and Global Funding Operation
7
<PAGE>
THE CHASE MANHATTAN BANK, LONDON BRANCH
as Fiscal and Paying Agent
By /S/
-------------------------------------------------------
Name: Chris Knowles
Title: Vice President
<PAGE>
(form effective July 2, 1996)
[FORM OF [EMTN]/1/ [DEBT SECURITY]/2/ TEMP. GLOBAL
FIXED RATE BEARER NOTE]
Temporary Global Fixed Rate Bearer Note
BEARER BEARER
- ----------------------
/1/ To be inserted if the Note is denominated in pounds sterling and the
Banking Act 1987 (Exempt Transactions) regulations are applicable, or if the
Note is denominated in a currency other than pounds sterling.
/2/ To be inserted if the Note is denominated in pounds sterling and the
Banking Act 1987 (Exempt Transactions) regulations are not applicable.
<PAGE>
2
No. TGFX [ ]/1/
[ ]/2/
[EURO MEDIUM-TERM NOTE ISSUED IN ACCORDANCE WITH REGULATIONS MADE UNDER SECTION
4 OF THE BANKING ACT 1987. GENERAL ELECTRIC CAPITAL CORPORATION IS NOT AN
AUTHORIZED INSTITUTION UNDER THE BANKING ACT 1987. REPAYMENT OF THE PRINCIPAL
AND THE PAYMENT OF ANY INTEREST OR PREMIUM IN CONNECTION WITH THIS NOTE HAS NOT
BEEN GUARANTEED.]/3/
THIS SECURITY IS A TEMPORARY GLOBAL BEARER NOTE, WITHOUT COUPONS, EXCHANGEABLE
FOR AN INTEREST IN A PERMANENT GLOBAL BEARER NOTE, WITHOUT COUPONS, REPRESENTING
(AND EXCHANGEABLE FOR) DEFINITIVE BEARER NOTES OR IF SO PROVIDED HEREIN
REGISTERED NOTES. IF SO PROVIDED HEREIN, THIS GLOBAL NOTE MAY ALSO BE EXCHANGED
DIRECTLY FOR DEFINITIVE BEARER NOTES OR DEFINITIVE REGISTERED NOTES. THE RIGHTS
ATTACHING TO THIS NOTE AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE
ARE AS SPECIFIED IN THE FISCAL AGENCY AGREEMENT (AS DEFINED HEREIN).
ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO
LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS
PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR AN INTEREST IN A
PERMANENT GLOBAL BEARER NOTE OR FOR DEFINITIVE NOTES, THIS GLOBAL NOTE MAY NOT
BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE
DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER
NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.
- -------------------------
/1/ Insert Principal Amount.
/2/ Insert Optional Payment Amount if the Note has a dual-currency feature.
/3/ To be inserted if the Note is denominated in pounds sterling and the
Banking Act 1987 (Exempt Transactions) regulations are applicable.
<PAGE>
3
GENERAL ELECTRIC CAPITAL CORPORATION
[EURO MEDIUM-TERM NOTE]/1/ [DEBT SECURITY]/2/
(Fixed Rate)
SERIES:
<TABLE>
<S> <C> <C> <C>
PRIVATE INITIAL REDEMPTION SPECIFIED (FACE DETERMINATION
COMMON DATE: AMOUNT) CURRENCY: AGENT:
CODE:
INITIAL REDEMPTION OPTIONAL PAYMENT APPLICABILITY OF
ISIN: PERCENTAGE: CURRENCY: MODIFIED PAYMENT
UPON ACCELERATION
OR REDEMPTION:
ORIGINAL ISSUE APPLICABILITY OF DESIGNATED EXCHANGE
DATE: ANNUAL REDEMPTION RATE: If yes, state Issue Price and
PERCENTAGE each redemption date and
REDUCTION: redemption price:
MATURITY DATE: OPTION VALUE
CALCULATION AGENT:
If yes, state Annual Percentage
INTEREST RATE: Reduction:
DENOMINATIONS OF
DEFINITIVE NOTES (if not
INDEXED CURRENCY: as set forth herein):
INTEREST OPTIONAL REPAYMENT
PAYMENT DATE(S): CURRENCY BASE RATE: TAX REDEMPTION DATE:
PERIOD:
INTEREST ACCRUAL AVAILABILITY OF
DATE: REGISTERED NOTES:
INTEREST
PAYMENT IF THIS NOTE IS
DATE(S): OPTION ELECTION DATES: EXCHANGEABLE
DIRECTLY FOR
DEFINITIVE NOTES,
INDICATE FORM(S) OF
DEFINITIVE NOTES:
</TABLE>
General Electric Capital Corporation, a New York corporation (together with
its successors and assigns, the "Company"), for value received, hereby promises
to pay to each of Morgan Guaranty Trust Company of New York, Brussels Office, as
operator of the Euroclear System (the "Euroclear Operator"), and Cedel Bank,
societe anonyme ("Cedel Bank"), or any other recognized or agreed clearing
system, with respect to that portion of this Note held for its account, the
principal sum (or Face Amount, if the Note has a dual-currency or index feature)
specified in Schedule A hereto, on the Maturity Date specified above (except to
the extent redeemed or repaid prior to the Maturity Date) and to pay interest
thereon at the Interest Rate per annum specified above from the Original Issue
Date specified above until the principal hereof is paid or duly made available
for payment (except as provided below), in arrears monthly, quarterly,
semiannually or annually as specified above as the Interest
- ---------------------
/1/ To be inserted if the Note is denominated in pounds sterling and the
Banking Act 1987 (Exempt Transactions) regulations are applicable, or if the
Note is denominated in a currency other than pounds sterling.
/2/ To be inserted if the Note is denominated in pounds sterling and the
Banking Act 1987 (Exempt Transactions) regulations are not applicable.
<PAGE>
4
Payment Period on each Interest Payment Date (as specified above), commencing
with the first Interest Payment Date next succeeding the Original Issue Date
specified above, and on the Maturity Date (or any redemption or repayment date).
Interest on this Note will accrue from the most recent Interest Payment
Date to which interest has been paid or duly provided for, or, if no interest
has been paid or duly provided for, from the Original Issue Date, until the
principal hereof has been paid or duly made available for payment, in each case,
upon Certification. Upon the payment of interest on this Note, the Fiscal and
Paying Agent (as defined below) shall cause Schedule A of this Note to be
endorsed to reflect such payment of interest and the amount of interest so paid
shall be noted. No payments on this Note will be made at any office or agency
maintained by the Company in the United States for the payment of principal of,
premium, if any, and interest, if any, on this Note, nor will any such payment
be made by mail to an address in the United States or by transfer to an account
maintained by the holder of this Note with a bank in the United States.
Notwithstanding the foregoing, if this Note is payable in U.S. dollars and if
payment in U.S. dollars of the full amount payable on this Note at the offices
of all paying agencies outside the United States would be illegal or effectively
precluded as a result of exchange controls or similar restrictions, payment on
this Note will be made by a paying agency in the United States, if such paying
agency, under applicable law and regulations, would be able to make such
payment.
This Note is issued in bearer form and represents a portion of a duly
authorized issue of [Euro Medium-Term Notes]/1/ [Debt Securities]/2/ of the
Series specified above, issued under an amended and restated fiscal and paying
agency agreement, dated as of July 2, 1996 among the Company, GE Capital
Australia Limited, General Electric Capital Canada Inc. and The Chase Manhattan
Bank (National Association), London Branch, as fiscal agent and as principal
paying agent (in such capacities, the "Fiscal and Paying Agent") (as amended and
supplemented from time to time, the "Fiscal Agency Agreement"). The Notes are
issuable in bearer form (the "Bearer Notes"), with interest coupons attached
(except in the case of Bearer Notes in global form), and (if so provided above)
are also issuable in fully registered form, without coupons (the "Registered
Notes" and, together with the Bearer Notes, the "Notes"). Unless otherwise
specified above, the definitive Bearer Notes, with interest coupons attached,
are issuable in the denominations of 1,000 units, 10,000 units or 100,000 units
of the Specified Currency indicated on the face hereof and the definitive
Registered Notes are issuable in denominations of 100,000 units of the Specified
Currency indicated on the face hereof or any integral multiple of 1,000 units of
such Specified Currency in excess thereof.
[The Company has complied, as at the Issue Date of this temporary global
Note, with its obligations under the listing rules made by the London Stock
Exchange Limited (the "London Stock Exchange") pursuant to Section 142(6) of the
Financial Services Act 1986 in respect of its debt securities that have been
admitted to the Official List of the London Stock Exchange and since the last
publication in compliance with such rules of information about the Company, the
Company, having made all reasonable enquiries, has not become aware of any
change in circumstances that could reasonably be regarded as significantly and
adversely affecting its ability to meet its obligations in respect of the Notes
represented by this temporary global Note as they fall due.]/3/
- -------------------
/1/ To be inserted if the Note is denominated in pounds sterling and the
Banking Act 1987 (Exempt Transactions) regulations are applicable.
/2/ To be inserted if the Note is denominated in pounds sterling and the
Banking Act 1987 (Exempt Transactions) regulations are applicable, or if the
Note is denominated in a currency other than pounds sterling.
/3/ To be inserted if the Note is denominated in pounds sterling and the
Banking Act 1987 (Exempt Transactions) regulations are not applicable.
<PAGE>
5
Except as otherwise provided herein, this Note is governed by the terms and
conditions of the Permanent Global Fixed Rate Bearer Note (the"Permanent Global
Fixed Rate Bearer Note") (or if so specified above, the definitive Fixed Rate
Bearer Notes or definitive Fixed Rate Registered Notes) to be issued in exchange
for this Note, which terms and conditions are hereby incorporated by reference
herein mutatis mutandis and shall be binding on the Company and the holder
------- --------
hereof as if fully set forth herein.
This Note is exchangeable in whole or from time to time in part for (i) an
interest (equal to the principal amount of the Bearer Notes being exchanged
theretofore represented by this Note) in a single Permanent Global Fixed Rate
Bearer Note or (ii) if so specified above, an equal principal amount of
definitive Fixed Rate Bearer Notes and/or definitive Fixed Rate Registered Notes
upon request of the Euroclear Operator or Cedel Bank, acting on behalf of the
owner of a beneficial interest in the Note, to the Fiscal and Paying Agent only
on or after the Exchange Date upon Certification to the effect that the Notes to
be issued upon such exchange are not being acquired by or on behalf of a United
States Person or, if a United States Person has a beneficial interest in the
Notes, that such person is (i) a Qualifying Foreign Branch purchasing for its
own account or for resale, (ii) a United States Person who acquires the Notes
through a Qualifying Foreign Branch and who holds the obligation through such
financial institution on the date of Certification, or (iii) a financial
institution who acquires the Notes for purposes of resale during the Restricted
Period other than for purposes of resale directly or indirectly to a United
States Person or to a person within the United States. Upon exchange of any
portion of this Note for a Permanent Global Fixed Rate Bearer Note (or
definitive Fixed Rate Bearer Notes and/or definitive Fixed Rate Registered
Notes), the Fiscal and Paying Agent shall cause Schedule A of this Note to be
endorsed to reflect the reduction of its principal amount by an amount equal to
the aggregate principal amount being so exchanged. Except as otherwise provided
herein, until exchanged for a Permanent Global Fixed Rate Bearer Note (or
definitive Fixed Rate Bearer Notes and/or definitive Fixed Rate Registered
Notes), this Note shall in all respects be entitled to the same benefits under
the Fiscal Agency Agreement as a duly authenticated and delivered definitive
Note.
If this Note is subject to a tax redemption or if all or any portion of the
principal hereof is accelerated, each as described in the Fiscal Agency
Agreement, payment of the amount due upon any such redemption or acceleration
shall be subject to receipt of Certification.
Unless the certificate of authentication hereon has been executed by the
Fiscal and Paying Agent by manual signature, this Note shall not be entitled to
any benefit under the Fiscal Agency Agreement or be valid or obligatory for any
purpose.
As used herein:
(a) the term "Certification" means a certificate substantially in the form
of Exhibit B-2 hereto delivered by the Euroclear Operator or Cedel Bank, as the
case may be, which certificate is based on a certificate substantially in the
form of Exhibit B-1 hereto provided to it by its account holders;
(b) the term "Qualifying Foreign Branch" means a branch of a United States
financial institution, as defined in United States Treasury Regulations Section
1.165-12(c)(1)(v), located outside the United States that is purchasing for its
own account or for resale and that has agreed, as a condition of purchase, to
comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the United
States Internal Revenue Code of 1986, as amended and the regulations thereunder;
<PAGE>
6
(c) the term "Restricted Period" with respect to each issuance means the
period which begins on the earlier of the date on which the Company receives the
proceeds of the sale of this Note with respect to its issuance or the first date
on which this Note is offered to persons other than the Agents, and which ends
40 days after the date on which the Company receives the proceeds of the sale of
this Note; provided that if this Note is held as part of an unsold allotment or
--------
subscription, any offer or sale of this Note shall be deemed to be during the
Restricted Period;
(d) the term "United States" means the United States of America (including
the States and the District of Columbia), its territories, its possessions and
other areas subject to its jurisdiction;
(e) the term "United States Person" means (i) a citizen or resident of the
United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or (iii) an estate or trust
the income of which is subject to United States federal income taxation
regardless of its source; and
(f) all other terms used in this Note which are defined in the Fiscal
Agency Agreement and not otherwise defined herein shall have the meanings
assigned to them in the Fiscal Agency Agreement.
<PAGE>
7
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
under its corporate seal.
DATED: GENERAL ELECTRIC CAPITAL
CORPORATION
[SEAL] By:_______________________________
Title:
Attest:
By:________________________
Title
CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred
to in the within-mentioned Fiscal Agency Agreement.
THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION),
as Fiscal and Paying Agent
By:_______________________
Authorized Officer
<PAGE>
SCHEDULE A
----------
SCHEDULE OF EXCHANGES
---------------------
The Initial Principal Amount of this Note is _____________. The following
payments of interest and exchanges of a part of this Note for an interest in a
single Permanent Global Fixed Rate Bearer Note (or if so specified above, for
definitive Notes) have been made:
<TABLE>
<CAPTION>
====================================================================================================================
Date Payment of Principal (Face)/1/ Remaining Notation made by
of Exchange or Interest Amount Principal (Face)/1/ or on behalf of
Interest Payment Exchanged for Amount Fiscal and Paying
Permanent Global Outstanding Agent
Bearer Notes or Following Such
Definitive Notes Exchange
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------
/1/ To be used instead of "Principal" if the Note has a dual-currency or
index feature.
<PAGE>
[FORM OF CERTIFICATE TO BE GIVEN BY AN ACCOUNT
HOLDER OF THE EUROCLEAR OPERATOR AND CEDEL BANK]
EXHIBIT B-1
-----------
CERTIFICATE
-------------------------------------------------
General Electric Capital Corporation
[Euro Medium-Term Notes]/1/ [Debt Securities]/2/
Represented by Temporary Global Note No. __.
This is to certify that as of the date hereof, and except as set forth
below, the above-captioned Notes held by you for our account (i) are owned by
person(s) that are not citizens or residents of the United States, domestic
partnerships, domestic corporations or any estate or trust the income of which
is subject to United States Federal income taxation regardless of its source
("United States person(s)"), (ii) are owned by United States person(s) that (a)
are foreign branches of United States financial institutions (as defined in U.S.
Treasury Regulations Section 1.165-12(c)(1)(v)) ("financial institutions")
purchasing for their own account or for resale, or (b) acquired the Notes
through foreign branches of United States financial institutions and who hold
the Notes through such United States financial institutions on the date hereof
(and in either case (a) or (b), each such United States financial institution
hereby agrees, on its own behalf or through its agent, that you may advise the
Issuer or the Issuer's agent that it will comply with the requirements of
Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder), or (iii) are owned by United States or
foreign financial institution(s) for purposes of resale during the restricted
period (as defined in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)),
and in addition if the owner of the Notes is a United States or foreign
financial institution described in clause (iii) above (whether or not also
described in clause (i) or (ii)) such financial institution has not acquired the
Notes for purposes of resale directly or indirectly to a United States person or
to a person within the United States or its possessions.
As used herein, "United States" means the United States of America
(including the States and the District of Columbia) and its "possessions"
including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake
Island and the Northern Mariana Islands.
We undertake to advise you promptly by tested telex on or prior to the
date on which you intend to submit your certification relating to the Notes held
by you for our account in accordance with your Operating Procedures if any
applicable statement herein is not correct on such date, and in the absence of
any such notification it may be assumed that this certification applies as of
such date.
- ---------------------
/1/ To be inserted if the Note is denominated in pounds sterling and the
Banking Act 1987 (Exempt Transactions) regulations are applicable, or if the
Note is denominated in a currency other than pounds sterling.
/2/ To be inserted if the Note is denominated in pounds sterling and the
Banking Act 1987 (Exempt Transactions) regulations are not applicable.
<PAGE>
EXHIBIT B-1
-----------
Page 2
This certification excepts and does not relate to $________ of such
interest in the above Notes in respect of which we are not able to certify and
as to which we understand exchange and delivery of definitive Notes (or, if
relevant, exercise of any rights or collection of any interest) cannot be made
until we do so certify.
We understand that this certification is required in connection with
certain tax laws and, if applicable, certain securities laws of the United
States. In connection therewith, if administrative or legal proceedings are
commenced or threatened in connection with which this certification is or would
be relevant, we irrevocably authorize you to produce this certification to any
interested party in such proceedings.
Dated: _______________, 19__
[To be dated no earlier than the 10th day before
[insert date of Interest Payment Date prior to Exchange Date]
[insert date of redemption or acceleration prior to Exchange Date]
[insert Exchange Date]]
[Name of Account Holder]
By:______________________
(Authorized Signatory)
Name:
Title:
<PAGE>
[FORM OF CERTIFICATE TO BE GIVEN BY
THE EUROCLEAR OPERATOR AND CEDEL BANK]
EXHIBIT B-2
-----------
CERTIFICATE
----------------------------------------
General Electric Capital Corporation
[Euro Medium-Term Notes]/1/ [Debt Securities]/2/
Represented by Temporary Global Note No. ____.
This is to certify that, based solely on certifications we have received in
writing, by tested telex or by electronic transmission from member organizations
appearing in our records as persons being entitled to a portion of the principal
amount set forth below (our "Member Organizations") substantially to the effect
set forth in Exhibit B-1 to the Fiscal and Paying Agency Agreement, as of the
date hereof, _____________ principal amount of the above-captioned Notes (i) is
owned by persons that are not citizens or residents of the United States,
domestic partnerships, domestic corporations or any estate or trust the income
of which is subject to United States Federal income taxation regardless of its
source ("United States persons"), (ii) is owned by United States persons that
(a) are foreign branches of United States financial institutions (as defined in
U.S. Treasury Regulations Section 1.165-12(c)(1)(v) ("financial institutions")
purchasing for their own account or for resale, or (b) acquired the Notes
through foreign branches of United States financial institutions and who hold
the Notes through such United States financial institutions on the date hereof
(and in either case (a) or (b), each such United States financial institution
has agreed, on its own behalf or through its agent, that we may advise the
Issuer or the Issuer's agent that it will comply with the requirements of
Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder), or (iii) is owned by United States or
foreign financial institutions for purposes of resale during the restricted
period (as defined in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7),
and to the further effect that United States or foreign financial institutions
described in clause (iii) above (whether or not also described in clause (i) or
(ii)) have certified that they have not acquired the Notes for purposes of
resale directly or indirectly to a United States person or to a person within
the United States or its possessions.
As used herein, "United States" means the United States of America
(including the States and the District of Columbia) and its "possessions"
including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake
Island and the Northern Mariana Islands.
- ------------------------
/1/ To be inserted if the Note is denominated in pounds sterling and the
Banking Act 1987 (Exempt Transactions) regulations are applicable, or if the
Note is denominated in a currency other than pounds sterling.
/2/ To be inserted if the Note is denominated in pounds sterling and the
Banking Act 1987 (Exempt Transactions) regulations are not applicable.
<PAGE>
EXHIBIT B-2
-----------
Page 2
We further certify (i) that we are not making available herewith for
exchange any portion of the temporary global Note excepted as set forth herein
and (ii) that as of the date hereof we have not received any notification from
any of our Member Organizations to the effect that the statements made by such
Member Organizations with respect to any portion of the part submitted herewith
are no longer true and cannot be relied upon as the date hereof.
We understand that this certification is required in connection with
certain tax laws and, if applicable, certain securities laws of the United
States. In connection therewith, if administrative or legal proceedings are
commenced or threatened in connection with which this certification is or would
be relevant, we irrevocably authorize you to produce this certification to any
interested party in such proceedings.
Dated: __________________, 19__
[To be dated no earlier than
[insert date of Interest Payment Date prior to Exchange Date]
[insert date of redemption or acceleration prior to Exchange Date]
[insert Exchange Date]]
[MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, BRUSSELS OFFICE,
as Operator of the Euroclear System]
[CEDEL BANK, SOCIETE ANONYME]
By:__________________________
<PAGE>
Page 1
(Form effective July 2, 1996)
FORM OF [EMTN]/1/ [DEBT SECURITY]/2/ PERMANENT GLOBAL
FIXED RATE BEARER NOTE
BEARER BEARER
No. PGFX [ ]/3/
[ ]/4/
[EURO MEDIUM-TERM NOTE ISSUED IN ACCORDANCE WITH REGULATIONS MADE UNDER SECTION
4 OF THE BANKING ACT 1987. GENERAL ELECTRIC CAPITAL CORPORATION IS NOT AN
AUTHORIZED INSTITUTION UNDER THE BANKING ACT 1987. REPAYMENT OF THE PRINCIPAL
AND THE PAYMENT OF ANY INTEREST OR PREMIUM IN CONNECTION WITH THIS NOTE HAS NOT
BEEN GUARANTEED.]/5/
THIS SECURITY IS A PERMANENT GLOBAL BEARER NOTE, WITHOUT COUPONS, EXCHANGEABLE
FOR THE RIGHTS ATTACHING TO THIS NOTE AND THE CONDITIONS AND PROCEDURES
GOVERNING ITS EXCHANGE FOR DEFINITIVE BEARER NOTES OR IF SO PROVIDED HEREIN
REGISTERED NOTES ARE AS SPECIFIED IN THE FISCAL AGENCY AGREEMENT (AS DEFINED
BELOW).
ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO
LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS
PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR DEFINITIVE BEARER NOTES
OR IF SO PROVIDED HEREIN REGISTERED NOTES, THIS GLOBAL NOTE MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY
OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR
A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.
- -------------------------------
/1/ To be inserted if the Note is denominated in pounds sterling and the Banking
Act 1987 (Exempt Transactions) regulations are applicable, or if the Note is
denominated in a currency other than pounds sterling.
/2/ To be inserted if the Note is denominated in pounds sterling and the Banking
Act 1987 (Exempt Transactions) regulations are not applicable.
/3/ Insert Principal Amount.
/4/ Insert Optional Payment Amount if the Note has dual-currency feature.
/5/ To be inserted if the Note is denominated in pounds sterling and the Banking
Act 1987 (Exempt Transactions) regulations are applicable.
<PAGE>
Page 2
GENERAL ELECTRIC CAPITAL CORPORATION
[EURO MEDIUM-TERM NOTE]/6/ [DEBT SECURITY]/7/
(Fixed Rate)
SERIES:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COMMON CODE: INITIAL REDEMPTION DATE: SPECIFIED (FACE AMOUNT) CURRENCY: DETERMINATION AGENT:
ISIN: INITIAL REDEMPTION PERCENTAGE: OPTIONAL PAYMENT CURRENCY: APPLICABILITY OF MODIFIED
PAYMENT UPON ACCELERATION OR
REDEMPTION:
ORIGINAL ISSUE DATE: APPLICABILITY OF ANNUAL REDEMPTION DESIGNATED EXCHANGE RATE: If yes, state Issue Price
PERCENTAGE REDUCTION: and each redemption date and
redemption price:
MATURITY DATE: If yes, state Annual Percentage OPTION VALUE CALCULATION AGENT:
Reduction: DENOMINATIONS OF DEFINITIVE
NOTES (if not as set forth
herein):
INTEREST RATE: OPTIONAL REPAYMENT DATE(S): INDEXED CURRENCY:
INTEREST PAYMENT PERIOD: INTEREST ACCRUAL DATE: CURRENCY BASE RATE: ADDENDUM
Attached: [ ] Yes
INTEREST PAYMENT DATE(S): AVAILABILITY OF [ ] No
OPTION ELECTION DATES: REGISTERED NOTES:
TAX REDEMPTION
DATE:
</TABLE>
General Electric Capital Corporation, a New York corporation (together
with its successors and assigns, the "Company"), for value received, hereby
promises to pay to the holder hereof upon surrender hereof, the principal sum
(or Face Amount, if the Note has a dual-currency or index feature) specified in
Schedule A hereto on the Maturity Date specified above (except to the extent
redeemed or repaid prior to the Maturity Date) and to pay interest thereon to
the bearer at the Interest Rate per annum specified above from the Original
Issue Date specified above until the principal hereof is paid or duly made
available for payment (except as provided below), in arrears monthly, quarterly,
semiannually or annually as specified above as the Interest Payment Period on
each Interest Payment Date (as specified above), commencing with the first
Interest Payment Date next succeeding the Original Issue Date specified above,
and on the Maturity Date (or any redemption or repayment date); provided,
--------
however, that each of Morgan Guaranty Trust Company of New York, Brussels
- -------
Office, as operator of
- ----------------------
/6/ To be inserted if the Note is denominated in pounds sterling and the Banking
Act 1987 (Exempt Transactions) regulations are applicable, or if the Note is
denominated in a currency other than pounds sterling.
/7/ To be inserted if the Note is denominated in pounds sterling and the Banking
Act 1987 (Exempt Transactions) regulations are not applicable.
<PAGE>
Page 3
the Euroclear System, and Cedel Bank, societe anonyme ("Cedel Bank"), or any
other recognized or agreed clearing system, shall be deemed a holder of this
Note with respect to the portion hereof held for its respective account; and
provided further, however, that if the Original Issue Date occurs between a date
- -------- ------- -------
that is 15 days prior to the next succeeding Interest Payment Date and such
Interest Payment Date, interest payments will commence on the second Interest
Payment Date succeeding the Original Issue Date to the holder of this Note on
such second Interest Payment Date.
Payment of the principal of this Note and any premium due at the
Maturity Date (or any redemption or repayment date) will be made in immediately
available funds upon surrender of this Note at the office or agency of the
Fiscal and Paying Agent or at the office or agency of such other paying agents
outside the United States (this and certain other capitalized terms used herein
are defined on the reverse of this Note) as the Company may determine maintained
for that purpose (a "Paying Agent").
Interest on this Note will accrue from the most recent Interest
Payment Date to which interest has been paid or duly provided for, or, if no
interest has been paid or duly provided for, from the Original Issue Date, until
the principal hereof has been paid or duly made available for payment (except as
provided below). The interest so payable, and punctually paid or duly provided
for, on any Interest Payment Date, will be paid to the holder of this Note at
the office or agency of the Fiscal and Paying Agent or at the office of any
Paying Agent and the Fiscal and Paying Agent shall cause Schedule A of this Note
to be endorsed to reflect such payment of interest and the amount of interest so
paid will be noted.
If the Specified Currency is other than U.S. dollars, then, except as
provided on the reverse hereof, payment of the principal of and premium, if any,
and interest on this Note will be made in such Specified Currency either by a
check drawn on a bank in London, Luxembourg or a city in the country of such
Specified Currency or by wire transfer of immediately available funds if
appropriate wire transfer instructions in writing have been received by the
Fiscal and Paying Agent or any Paying Agent not less than 10 days prior to the
applicable Interest Payment Date.
If the Specified Currency indicated on the face hereof is U.S.
dollars, any payment of the principal of and premium, if any, and interest on
this Note will be made, subject to applicable laws and regulations, in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts either by a check drawn on a bank
in The City of New York mailed to an address outside the United States furnished
by the holder or by wire transfer of immediately available funds to an account
maintained by the holder of this Note with a bank located outside the United
States if appropriate wire transfer instructions have been received by the
Fiscal and Paying Agent or any Paying Agent not less than 10 days prior to the
applicable payment date. Notwithstanding the foregoing, in the event that
payment in U.S. dollars of the full amount payable on this Note at the offices
of all Paying Agents would be illegal or effectively precluded as a result of
exchange controls or similar restrictions, payment on this Note will be made by
a paying agency in the United States, if such paying agency, under applicable
law and regulations, would be able to make such payment.
This Note is issued in the principal amount set forth on the face
hereof, but the total aggregate principal amount of the Series to which this
Note belongs is unlimited. The Company has the right, without the consent of
the holder of any Note or coupon appertaining thereto, to issue additional Notes
which form part of the Series to which this Note belongs.
<PAGE>
Page 4
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
<PAGE>
Page 5
Unless the certificate of authentication hereon has been executed by
the Fiscal and Paying Agent by manual signature, this Note shall not be entitled
to any benefit under the Fiscal Agency Agreement, as defined on the reverse
hereof, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed under its corporate seal.
DATED: GENERAL ELECTRIC CAPITAL
CORPORATION
[SEAL]
By:_________________________________________
Title:
Attest:
By:________________________________
Title:
CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred to
in the within-mentioned Fiscal Agency Agreement.
THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION),
as Fiscal and Paying Agent
By:________________________________________
Authorized Officer
<PAGE>
Page 6
[Form of Reverse of Note]
This Note is one of a duly authorized issue of [Euro Medium-Term Notes]/8/
[Debt Securities]/9/ of the Series specified on the face hereof, having
maturities of nine months or more from the date of issue (the "Notes") of the
Company. The Notes are issuable under an amended and restated fiscal and paying
agency agreement, dated as of July 2, 1996 among the Company, GE Capital
Australia Limited, General Electric Capital Canada Inc. and The Chase Manhattan
Bank (National Association), London Branch, as fiscal agent and as principal
paying agent (in such capacities, the "Fiscal and Paying Agent") (as amended and
supplemented from time to time, the "Fiscal Agency Agreement") to which Fiscal
Agency Agreement reference is hereby made for a statement of the respective
rights, limitations of rights, duties and immunities of the Company and holders
of the Notes and the terms upon which the Notes are, and are to be,
authenticated and delivered. The Chase Manhattan Bank (National Association) at
its office in London has been appointed the Exchange Rate Agent (the "Exchange
Rate Agent", which term includes any successor exchange rate agent) with respect
to the Notes. The terms of individual Notes may vary with respect to interest
rates, interest rate formulas, issue dates, maturity dates, or otherwise, all as
provided in the Fiscal Agency Agreement. To the extent not inconsistent
herewith, the terms of the Fiscal Agency Agreement are hereby incorporated by
reference herein.
[The Company has complied, as at the Issue Date of this permanent global
Note, with its obligations under the listing rules made by the London Stock
Exchange Limited (the "London Stock Exchange") pursuant to Section 142(6) of the
Financial Services Act 1986 in respect of its debt securities that have been
admitted to the Official List of the London Stock Exchange and, since the last
publication in compliance with such rules of information about the Company, the
Company, having made all reasonable enquiries, has not become aware of any
change in circumstances that could reasonably be regarded as significantly and
adversely affecting its ability to meet its obligations in respect of the Notes
represented by this permanent global Note as they fall due.]/10/
This Note will not be subject to any sinking fund and will not be
redeemable or subject to repayment at the option of the holder prior to
maturity, except as provided below.
Unless otherwise indicated on the face of this Note, this Note shall not be
subject to repayment at the option of the holder prior to the Maturity Date. If
so indicated on the face of this Note, this Note may be subject to repayment at
the option of the holder on the Optional Repayment Date or Dates specified on
the face hereof on the terms set forth herein. On any Optional Repayment Date,
this Note will be repayable in whole or in part in increments of 1,000 units of
the Specified Currency indicated on the face hereof (provided that any remaining
principal amount hereof shall not be less than the minimum authorized
denomination hereof) at the option of the holder hereof at a price equal to 100%
- ----------------------
/8/ To be inserted if the Note is denominated in pounds sterling and the Banking
Act 1987 (Exempt Transactions) regulations are applicable, or if the Note is
denominated in a currency other than pounds sterling.
/9/ To be inserted if the Note is denominated in pounds sterling and the Banking
Act 1987 (Exempt Transactions) regulations are not applicable.
/10/ To be inserted if the Note is denominated in pounds sterling and the
Banking Act 1987 (Exempt Transactions) regulations are applicable.
<PAGE>
Page 7
of the principal amount to be repaid, together with interest hereon payable to
the date of repayment. For this Note to be repaid in whole or in part at the
option of the holder hereof, the Company must receive at the corporate trust
office of the Fiscal and Paying Agent in the City of London, at least 30 days
but not more than 60 days prior to the repayment, (i) this Note with the form
entitled "Option to Elect Repayment" on the reverse hereof duly completed or
(ii) a telegram, facsimile transmission or a letter from a commercial bank or
trust company in Western Europe which must set forth the principal amount of
this Note, the principal amount of this Note to be repaid, the certificate
number or a description of the tenor and terms of this Note, a statement that
the option to elect repayment is being exercised thereby and a guarantee that
this Note to be repaid, together with the duly completed form entitled "Option
to Elect Repayment" on the reverse hereof, will be received by the Fiscal and
Paying Agent not later than the fifth Business Day after the date of such
telegram, facsimile transmission or letter; provided, however, that such
-------- -------
telegram, facsimile transmission or letter from a commercial bank or trust
company in Western Europe shall only be effective if in such case, this Note and
form duly completed are received by the Fiscal and Paying Agent by such fifth
Business Day. Exercise of such repayment option by the holder hereof shall be
irrevocable. In the event of repayment of this Note in part only, a new Note or
Notes for the amount of the unpaid portion hereof shall be issued in the name of
the holder hereof upon cancellation hereof, but only in an authorized
denomination.
Interest payments on this Note will include interest accrued to but
excluding the Interest Payment Dates or the Maturity Date (or earlier redemption
or repayment date), as the case may be. Interest payments for this Note, unless
otherwise specified on the face hereof, will be computed and paid on the basis
of a 360-day year of twelve 30-day months.
In the case where the Interest Payment Date or the Maturity Date (or any
redemption or repayment date) does not fall on a Business Day, payment of
interest, premium, if any, or principal otherwise payable on such date need not
be made on such date, but may be made on the next succeeding Business Day with
the same force and effect as if made on the Interest Payment Date or on the
Maturity Date (or any redemption or repayment date), and no interest shall
accrue for the period from and after the Interest Payment Date or the Maturity
Date (or any redemption or repayment date) to such next succeeding Business Day.
This Note is unsecured and ranks pari passu with all other unsecured and
---- -----
unsubordinated indebtedness of the Company.
This Note is issuable in bearer form (the "Bearer Notes"), without interest
coupons attached, and is exchangeable upon 30 days' written notice to the Fiscal
and Paying Agent, in whole or from time to time in part, for (i) Bearer Notes,
with interest coupons attached, in the denominations of 1,000 units, 10,000
units or 100,000 units of the Specified Currency indicated on the face hereof
(unless otherwise specified on the face hereof) or (ii) (if so specified on the
face hereof) Notes in fully registered form, without coupons ("Registered
Notes"), in denominations of 100,000 units of the Specified Currency indicated
on the face hereof or any integral multiple of 1,000 units of such Specified
Currency in excess thereof (unless otherwise specified on the face hereof) at
the office of the Fiscal and Paying Agent, upon the request of Morgan Guaranty
Trust Company of New York, Brussels office, as the Euroclear Operator or Cedel
Bank, acting on behalf of the owners of beneficial interests in the Note, and
upon Certification to the effect set forth in Exhibits B-1 and B-2 attached
hereto and upon compliance with the other procedures set forth in the Fiscal
Agency Agreement; provided, however, that no such exchange may occur during a
-------- -------
period beginning at the opening of business 15
<PAGE>
Page 8
days before the day of the first publication of a notice of redemption and
ending on the relevant redemption date. All expenses incurred as a result of any
such exchange shall be paid by the Company. Notwithstanding anything to the
contrary contained in this paragraph, the Fiscal and Paying Agent shall not be
required to exchange the entire aggregate principal amount of a permanent global
Bearer Note for definitive Bearer Notes in the event beneficial owners of less
than the entire aggregate principal amount of the permanent global Bearer Note
have requested definitive Bearer Notes, provided the operating rules and
regulations of the clearance system then in effect would permit less than the
entire aggregate principal amount of the permanent global Bearer Note to be so
exchanged. Upon exchange of any portion of this Note for a definitive Bearer
Note or definitive Bearer Notes, or a definitive Registered Note or definitive
Registered Notes, the Fiscal and Paying Agent shall cause Schedule A of this
Note to be endorsed to reflect the reduction of its principal amount by an
amount equal to the aggregate principal amount of such definitive Bearer Note or
Bearer Notes, or such definitive Registered Note or Registered Notes, whereupon
the principal amount hereof shall be reduced for all purposes by the amount so
exchanged and noted. The date of surrender of any Note delivered upon any
exchange or transfer of Notes shall be such that no gain or loss of interest
results from such exchange or transfer.
This Note may be transferred by delivery; provided, however, that this Note
-------- -------
may be transferred only to a common depositary outside the United States for the
Euroclear Operator or Cedel Bank, or to a nominee of such a depositary.
In case any Note shall at any time become mutilated, destroyed, lost or
stolen, or is apparently destroyed, lost or stolen, and such Note or evidence of
the loss, theft or destruction thereof (together with the indemnity hereinafter
referred to and such other documents or proof as may be required in the
premises) shall be delivered to the Fiscal and Paying Agent, a new Note of like
tenor will be issued by the Company in exchange for the Note so mutilated or
defaced, or in lieu of the Note so destroyed or lost or stolen, but, in the case
of any destroyed or lost or stolen Note only upon receipt of evidence
satisfactory to the Fiscal and Paying Agent and the Company that such Note was
destroyed or lost or stolen and, if required, upon receipt also of an indemnity
satisfactory to each of them. All expenses and reasonable charges associated
with procuring such indemnity and with the preparation, authentication and
delivery of a new Note shall be borne by the owner of the Note mutilated,
defaced, destroyed, lost or stolen.
The Fiscal Agency Agreement provides that if an Event of Default (as
defined in the Fiscal Agency Agreement) with respect to the Series of which this
Note forms a part, shall have occurred and be continuing, the holder hereof, by
notice in writing to the Company and to the Fiscal and Paying Agent, may declare
the principal of this Note and the interest accrued hereon to be due and payable
immediately.
If the face hereof indicates that this Note is subject to "Modified Payment
upon Acceleration or Redemption", then (i) if the principal hereof is declared
to be due and payable as described in the preceding paragraph, the amount of
principal due and payable with respect to this Note shall be limited to the sum
of the Issue Price specified on the face hereof plus the Amortized Amount, (ii)
for the purpose of any vote of noteholders taken pursuant to the Fiscal Agency
Agreement prior to the acceleration of payment of this Note, the principal
amount hereof shall equal the amount that would be due and payable hereon,
calculated as set forth in clause (i) above, if this Note were declared to be
due and payable on the date of any such vote and (iii) for the purpose of any
vote of noteholders taken
<PAGE>
Page 9
pursuant to the Fiscal Agency Agreement following the acceleration of payment of
this Note, the principal amount hereof shall equal the amount of principal due
and payable with respect to this Note, calculated as set forth in clause (i)
above.
Notes of the Series of which this Note forms a part may be redeemed, at the
option of the Company, as a whole but not in part, at any time prior to
maturity, upon the giving of a notice of redemption as described below, at a
redemption price equal to 100% of the principal amount thereof (except that if
this Note is subject to "Modified Payment upon Acceleration or Redemption", such
redemption price would be limited to the sum of the Issue Price plus the
Amortized Amount), together with accrued interest to the date fixed for
redemption, if the Company determines that, as a result of any change in or
amendment to the laws (or any regulations or rulings promulgated thereunder) of
the United States or of any political subdivision or taxing authority thereof or
therein affecting taxation, or any change in official position regarding the
application or interpretation of such laws, regulations or rulings, which change
or amendment becomes effective on or after the Tax Redemption Date specified on
the face hereof, the Company has or will become obligated to pay Additional
Amounts (as defined below) with respect to the Notes as described below. Prior
to the giving of any notice of redemption pursuant to this paragraph, the
Company shall deliver to the Fiscal and Paying Agent (i) a certificate stating
that the Company is entitled to effect such redemption and setting forth a
statement of facts showing that the conditions precedent to the right of the
Company to so redeem have occurred, and (ii) an opinion of counsel satisfactory
to the Fiscal and Paying Agent to such effect based on such statement of facts;
provided that no such notice of redemption shall be given earlier than 90 days
prior to the earliest date on which the Company would be obligated to pay such
Additional Amounts if a payment in respect of the Notes were then due.
Notice of redemption will be given not less than 30 nor more than 60 days
prior to the date fixed for redemption, which date and the applicable redemption
price will be specified in the notice. Such notice will be given in accordance
with "Notices" as defined below.
If the Company shall determine that any payment made outside the United
States by the Company or any Paying Agent of principal or interest[, including
original issue discount,]/11/ due in respect of any Bearer Notes of the Series
of which this Note forms a part would, under any present or future laws or
regulations of the United States, be subject to any certification,
identification or other information reporting requirement of any kind, the
effect of which requirement is the disclosure to the Company, any Paying Agent
or any governmental authority of the nationality, residence or identity of a
beneficial owner of such Bearer Note or interest coupon who is a United States
Alien (other than such a requirement (a) which would not be applicable to a
payment made by the Company or any one of its Paying Agents (i) directly to the
beneficial owner or (ii) to a custodian, nominee or other agent of the
beneficial owner, or (b) which can be satisfied by such custodian, nominee or
other agent certifying to the effect that such beneficial owner is a United
States Alien, provided that in each case referred to in clauses (a)(ii) and (b)
payment by such custodian, nominee or agent to such beneficial owner is not
otherwise subject to any such requirement), the Company shall redeem the Bearer
Notes, in whole, at a redemption price equal to 100% of the principal amount
thereof (except that if this Note is subject to "Modified Payment upon
Acceleration or Redemption", such redemption price would be limited to the sum
of the Issue Price plus the Amortized Amount), together with accrued interest to
the date fixed for
- ------------------
/11/ Include if Notes are original issue discount Notes.
<PAGE>
Page 10
redemption, or, at the election of the Company if the conditions of the next
succeeding paragraph are satisfied, pay the additional amounts specified in such
paragraph. The Company shall make such determination and election as soon as
practicable and publish prompt notice thereof (the "Determination Notice")
stating the effective date of such certification, identification or other
information reporting requirements, whether the Company will redeem the Bearer
Notes of such Series, or whether the Company has elected to pay the Additional
Amounts specified in the next succeeding paragraph, and (if applicable) the last
date by which the redemption of the Bearer Notes must take place, as provided in
the next succeeding sentence. If the Company redeems the Bearer Notes, such
redemption shall take place on such date, not later than one year after the
publication of the Determination Notice, as the Company shall elect by notice to
the Fiscal and Paying Agent at least 60 days prior to the date fixed for
redemption. Notice of such redemption of the Bearer Notes will be given to the
holders of the Bearer Notes not more than 60 nor less than 30 days prior to the
date fixed for redemption. Such redemption notice shall include a statement as
to the last date by which the Bearer Notes to be redeemed may be exchanged for
Registered Notes. Notwithstanding the foregoing, the Company shall not so redeem
the Bearer Notes if the Company shall subsequently determine, not less than 30
days prior to the date fixed for redemption, that subsequent payments would not
be subject to any such requirement, in which case the Company shall publish
prompt notice of such determination and any earlier redemption notice shall be
revoked and of no further effect. The right of any of the holders of Bearer
Notes called for redemption pursuant to this paragraph to exchange such Bearer
Notes for Registered Notes will terminate at the close of business of the Fiscal
and Paying Agent on the fifteenth day prior to the date fixed for redemption,
and no further exchanges of such Series of Bearer Notes for Registered Notes
shall be permitted.
If and so long as the certification, identification or other information
reporting requirements referred to in the preceding paragraph would be fully
satisfied by payment of a backup withholding tax or similar charge, the Company
may elect to pay as Additional Amounts such amounts as may be necessary so that
every net payment made outside the United States following the effective date of
such requirements by the Company or any Paying Agent of principal or interest[,
including original issue discount,]/12/ due in respect of any Bearer Note or any
interest coupon of which the beneficial owner is a United States Alien (but
without any requirement that the nationality, residence or identity of such
beneficial owner be disclosed to the Company, any Paying Agent or any
governmental authority, with respect to the payment of such additional amounts),
after deduction or withholding for or on account of such backup withholding tax
or similar charge (other than a backup withholding tax or similar charge which
(i) would not be applicable in the circumstances referred to in the second
parenthetical clause of the first sentence of the preceding paragraph, or (ii)
is imposed as a result of the presentation of such Bearer Note or interest
coupon for payment more than 15 calendar days after the date on which such
payment becomes due and payable or on which payment thereof is duly provided
for, whichever occurs later), will not be less than the amount provided for in
such Bearer Note or interest coupon to be then due and payable. In the event
the Company elects to pay any Additional Amounts pursuant to this paragraph, the
Company shall have the right to redeem the Bearer Notes of such Series in whole
at any time pursuant to the applicable provisions of the immediately preceding
paragraph and the redemption price of such Bearer Notes shall not be reduced for
applicable withholding taxes. If the Company elects to pay Additional Amounts
pursuant to this paragraph and the condition specified in the first sentence of
this paragraph should no longer be satisfied, then the Company shall redeem the
Bearer Notes of such Series in whole, pursuant to the applicable provisions of
the immediately preceding paragraph.
- ---------------------
/12/ Include if Notes are original issue discount Notes.
<PAGE>
Page 11
The Company will, subject to certain exceptions and limitations set forth
below, pay such additional amounts (the "Additional Amounts") to the holder of
any Note or of any coupon, if any, who is a United States Alien as may be
necessary in order that every net payment of the principal of, premium and
interest, including original issue discount, on such Note and any other amounts
payable on such Note, after withholding for or on account of any present or
future tax, assessment or governmental charge imposed upon or as a result of
such payment by the United States (or any political subdivision or taxing
authority thereof or therein), will not be less than the amount provided for in
such Note or coupon, if any, to be then due and payable. However, the Company
will not be required to make any payment of Additional Amounts to any such
holder for or on account of:
(a) any such tax, assessment or other governmental charge which
would not have been so imposed but for (i) the existence of any present or
former connection between such holder (or between a fiduciary, settlor,
beneficiary, member or shareholder of such holder, if such holder is an
estate, a trust, a partnership or a corporation) and the United States,
including, without limitation, such holder (or such fiduciary, settlor,
beneficiary, member or shareholder) being or having been a citizen or
resident thereof or being or having been engaged in a trade or business or
present therein or having, or having had, a permanent establishment therein
or (ii) the presentation by the holder of any such Note or coupon, if any,
for payment on a date more than 15 calendar days after the date on which
such payment became due and payable or on the date on which payment thereof
is duly provided for, whichever occurs later;
(b) any estate, inheritance, gift, sales, transfer or personal
property tax or any similar tax, assessment or governmental charge;
(c) any tax, assessment or other governmental charge imposed by
reason of such holder's past or present status as a personal holding
company or foreign personal holding company or controlled foreign
corporation or passive foreign investment company with respect to the
United States or as a corporation which accumulates earnings to avoid
United States federal income tax or as a private foundation or other tax-
exempt organization;
(d) any tax, assessment or other governmental charge which is
payable otherwise than by withholding from payments on or in respect of any
Note;
(e) any tax, assessment or other governmental charge required to
be withheld by any Paying Agent from any payment of principal of, or
interest on, any Note, if such payment can be made without such withholding
by any other Paying Agent in a city in Western Europe;
(f) any tax, assessment or other governmental charge which would
not have been imposed but for the failure to comply with certification,
information or other reporting requirements concerning the nationality,
residence or identity of the holder or beneficial owner of such Note, if
such compliance is required by statute or by regulation of the United
States or of any political subdivision or taxing authority thereof
<PAGE>
Page 12
or therein as a precondition to relief or exemption from such tax,
assessment or other governmental charge;
(g) any tax, assessment or other governmental charge imposed by
reason of such holder's past or present status as the actual or
constructive owner of 10% or more of the total combined voting power of all
classes of stock entitled to vote of the Company or as a direct or indirect
subsidiary of the Company; or
(h) any combination of items (a), (b), (c), (d), (e), (f) or (g);
nor shall Additional Amounts be paid with respect to any payment on a Note to a
United States Alien who is a fiduciary or partnership or other than the sole
beneficial owner of such payment to the extent such payment would be required by
the laws of the United States (or any political subdivision thereof) to be
included in the income, for tax purposes, of a beneficiary or settlor with
respect to such fiduciary or a member of such partnership or a beneficial owner
who would not have been entitled to the Additional Amounts had such beneficiary,
settlor, member or beneficial owner been the holder of such Note.
The Fiscal Agency Agreement provides that the Company will not merge or
consolidate with any other corporation or sell, convey, transfer or otherwise
dispose of all or substantially all of its properties to any other corporation,
unless (i) either the Company shall be the continuing corporation or the
successor corporation (if other than the Company) (the "successor corporation")
shall be a corporation organized under the laws of the United States of America
or of a state thereof and such successor corporation shall expressly assume the
due and punctual payments of all amounts due under this Note and the due and
punctual performance of all of the covenants and obligations of the Company
under this Note by supplemental agreement satisfactory to the Fiscal and Paying
Agent executed and delivered to such Fiscal and Paying Agent by the successor
corporation and the Company and (ii) the Company or such successor corporation,
as the case may be, shall not, immediately after such merger or consolidation,
or such sale, conveyance, transfer or other disposition, be in default in the
performance of any such covenant or obligation. Upon any such merger or
consolidation, sale, conveyance, transfer or other disposition, such successor
corporation shall succeed to and be substituted for, and may exercise every
right and power of and shall be subject to all the obligations of, the Company
under this Note, with the same effect as if such successor corporation had been
named as the Company herein, and the Company shall be released from its
liability under this Note and under the Fiscal Agency Agreement.
The Fiscal Agency Agreement permits the Company, when authorized by
resolution of the Board of Directors, and the Fiscal and Paying Agent, with the
consent of the holders of not less than a majority in aggregate principal amount
of the Notes of the Series of which this Note forms a part, to modify or amend
the Fiscal Agency Agreement or such Notes; provided, however, that no such
-------- -------
modification or amendment may, without the consent of the holders of each such
Note affected thereby, (i) change the stated maturity of the principal of any
such Note or extend the time for payment of interest thereon; (ii) change the
amount of the principal of an Original Issue Discount Note of such Series that
would be due and payable upon an acceleration of the maturity thereof; (iii)
reduce the amount of interest payable thereon or the amount payable thereon in
the event of redemption or acceleration; (iv) change the currency of payment of
principal of or any other amounts payable on any such Note; (v) impair the right
to institute suit for the enforcement of any such payment on or with
<PAGE>
Page 13
respect to any such Note; (vi) reduce the above-stated percentage of the
principal amount of Notes of such Series the consent of whose holders is
necessary to modify or amend the Fiscal Agency Agreement or the Notes of such
Series or reduce the percentage of the Notes of such Series required for the
taking of action or the quorum required at any such meeting of holders of Notes
of such Series; or (vii) modify the foregoing requirements to reduce the
percentage of outstanding Notes of such Series necessary to waive any future
compliance or past default.
Purchasers are required to pay for the Notes in the currency specified in
the applicable Pricing Supplement. Payment of principal, premium, if any, and
interest, if any, on each Note will be made in immediately available funds in
the Specified Currency unless otherwise specified in the applicable Pricing
Supplement and except as provided below.
Payments of principal, premium, if any, and interest, if any, on any Note
denominated in a Specified Currency other than U.S. dollars and ECU shall be
made in U.S. dollars if, on any payment date, such Specified Currency (a) is
unavailable due to imposition of exchange controls or other circumstances beyond
the Company's control or (b) is no longer used by the government of the country
issuing such currency or for the settlement of transactions by public
institutions in that country or within the international banking community.
Such payments shall be made in U.S. dollars on such payment date and on all
subsequent payment dates until such Specified Currency is again available or so
used as determined by the Company.
Amounts so payable on any such date in such Specified Currency shall be
converted into U.S. dollars at a rate determined by the Exchange Rate Agent on
the basis of the most recently available Market Exchange Rate or as otherwise
indicated in the applicable Pricing Supplement. The Exchange Rate Agent at the
date of the Fiscal Agency Agreement is The Chase Manhattan Bank (National
Association). Any payment required to be made on Notes denominated in a
Specified Currency other than U.S. dollars and ECU that is instead made in U.S.
dollars under the circumstances described above will not constitute a default of
any obligation of the relevant Issuer under such Notes. The "Market Exchange
Rate" with respect to any currency other than U.S. dollars means, for any day,
the noon dollar buying rate in The City of New York on such day for cable
transfers of such currency as published by the Federal Reserve Bank of New York,
or, if such rate is not published for such day, the equivalent rate as
determined by the Exchange Rate Agent.
The provisions of the two preceding paragraphs shall not apply in the event
of the introduction in the country issuing any Specified Currency other than ECU
of the Euro pursuant to European Monetary Union. All references herein or in
any Pricing Supplement to "Euro" shall be to the new single European currency to
be introduced pursuant to European Monetary Union, and all references to
"European Monetary Union" shall be to the third stage thereof. In this
situation, payments of principal, premium, if any, and interest, if any, on any
Note denominated in any such Specified Currency shall be effected in Euro at
such time as is required by, and otherwise in conformity with, legally
applicable measures adopted with reference to European Monetary Union.
[Payments of principal, premium, if any, and interest, if any, on any Note
denominated in ECU shall be made in U.S. dollars or a component currency of ECU
if, on or prior to any payment date, the ECU is not used as the unit of account
of the European Community ("EC") or if major banks in all member countries of
the EC shall have ceased to provide ECU accounts. Such payments shall be made
<PAGE>
Page 14
in U.S. dollars on such payment date and on all subsequent payment dates until
ECU is again so used or such bank accounts are again provided, as determined by
the Company.
Payments of principal, premium, if any, and interest, if any, on any Note
denominated in ECU shall be made in U.S. dollars if, on any payment date, ECU is
unavailable due to the imposition of exchange controls or other circumstances
beyond the Company's control. Such payments shall be made in U.S. dollars on
such payment date and on all subsequent payment dates until ECU is again
available as determined by the Company.
All payments made with respect to Notes denominated in ECU that are instead
made in U.S. dollars or a component currency of the ECU pursuant to the
provisions of the two preceding paragraphs shall be made in accordance with the
provisions set forth below. Any payment required to be made on Notes
denominated in ECU that is instead made in U.S. dollars or a component currency
of ECU under the circumstances described above will not constitute a default of
any obligation of the Company under such Notes.
The provisions of the three preceding paragraphs shall not apply in the
event of European Monetary Union. In this situation, payments of principal,
premium, if any, and interest, if any, on any Note denominated in ECU shall be
effected in Euro at such time as is required by, and otherwise in conformity
with, legally applicable measures adopted with reference to European Monetary
Union.
The following provisions relate to Notes denominated in ECU until such time
as European Monetary Union occurs. All references to "ECU" refer to the ECU
that is from time to time used as the unit of account of the EC. Should any
change to the composition of the ECU be adopted by the EC prior to the date of
European Monetary Union, principal, premium, if any, and interest, if any, on
Notes denominated in ECU shall continue to be payable in ECU without adjustment
to the timing or amount of any such payment.
With respect to each due date for the payment of principal of, premium, if
any, or interest on, Notes denominated in ECU, if, on or prior to such date, any
of the events described in the fourth and fifth preceding paragraphs shall have
occurred which would require the Company to pay in either U.S. dollars or a
component currency of the ECU, the Company or its agent shall (in the case of an
agent, without liability on its part but after consultation with the Company and
having regard to the availability to the Company of the relevant currency)
choose a substitute currency (the "Chosen Currency"), which shall be a component
currency of the ECU or U.S. dollars, in which all payments to be calculated by
reference to or made in ECU due on or after such date with respect to the Notes
shall be made. Notice of the Chosen Currency so selected shall be given to
holders of Registered Notes by mail, and shall be given to holders of Bearer
Notes by publication, in each case as set forth in "Notices" as defined below.
The amount of each payment calculated with reference to or made in such Chosen
Currency shall be computed on the basis of the equivalent of the ECU in that
currency, determined as described below, as of the fourth business day in
Luxembourg prior to the date on which such payment is due.
On or about the first business day in Luxembourg following the day on which
any of the events described in the fifth and sixth preceding paragraphs shall
have occurred which would require the Company to pay in either U.S. dollars or a
component currency of the ECU, the Company or its agent shall (in the case of an
agent, without liability on its part but after consultation with the Company and
having regard to the availability to the Company of the relevant currency)
choose a Chosen Currency in
<PAGE>
Page 15
which all payments to be calculated by reference to or made in ECU with respect
to Notes having a due date prior thereto but not yet presented for payment are
to be made. The amount of each payment calculated with reference to or made in
such Chosen Currency shall be computed on the basis of the equivalent of the ECU
in that currency, determined as described below, as of such first business day.
The equivalent of the ECU in the relevant Chosen Currency as of any date
(the "Day of Valuation") shall be determined by the Exchange Rate Agent on the
following basis. The amounts and components composing the ECU for this purpose
(the "Components") shall be the amounts and components which composed the ECU as
of the last date on which the ECU was used as the unit of account of the EC.
The equivalent of the ECU in the Chosen Currency shall be calculated by, first,
aggregating the U.S. dollar equivalents of the Components; and then, in the case
of a Chosen Currency other than U.S. dollars, using the rate used for
determining the U.S. dollar equivalents of the Components in the Chosen Currency
as set forth below, calculating the equivalent in the Chosen Currency of such
aggregate amount in U.S. dollars.
The U.S. dollar equivalent of each of the Components shall be middle spot
delivery quotations (or the average thereof, if more than one bank is
consulted), as determined by the Exchange Rate Agent to be prevailing at 2:30
p.m., Luxembourg time, on the Day of Valuation, as obtained by the Exchange Rate
Agent from one or more major banks, as selected by the Company or its agent, in
the country of issue of the component currency in question.
If for any reason no direct quotations are available for a Component as of
a Day of Valuation from any of the banks selected for this purpose, in computing
the U.S. dollar equivalent of such Component, the Exchange Rate Agent shall
(except as provided below) use the most recent direct quotations for such
Component obtained by it or on its behalf, provided that such quotations were
prevailing in the country of issue not more than two Business Days before such
Day of Valuation. If such most recent quotations were so prevailing in the
country of issue more than two Business Days before such Day of Valuation, the
Exchange Rate Agent shall determine the U.S. dollar equivalent of such Component
on the basis of cross rates derived from the middle spot delivery quotations for
such component currency and for the delivery quotations for such component
currency and for the U.S. dollar prevailing at 2:30 p.m. Luxembourg time on such
Day of Valuation, as obtained by, or on behalf of, the Exchange Rate Agent from
one or more major banks, as selected by the Company or its agent, in a country
other than the country of issue of such component currency. Notwithstanding the
foregoing, the Exchange Rate Agent shall determine the U.S. dollar equivalent of
such Component on the basis of such cross rates if the Company or its agent
judges that the equivalent so calculated is more representative than the U.S.
dollar equivalent calculated as provided in the first sentence of this
paragraph. Unless otherwise specified by the Company or its agent, if there is
more than one market for dealing in any component currency by reason of foreign
exchange regulations or for any other reason, the market to be referred to in
respect of such currency shall be that upon which a non-resident issuer of notes
denominated in such currency would purchase such currency in order to make
payments in respect of such notes.]/13/
- ---------------------
/13/ Include all of the above provisions relating to ECU only if Note is
denominated in ECU.
<PAGE>
Page 16
All determinations made by the Company or its agent shall be at such
person's sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on the Company and all holders of Notes.
So long as this Note or the Coupons shall be outstanding, the Company will
cause to be maintained an office or agency for the payment of the principal of
and premium, if any, and interest on this Note as herein provided in London,
England, [and in Luxembourg]/14/ [and in Paris, France]/15/ and an office or
agency in London for the transfer and exchange as aforesaid of the Notes. The
Company may designate other agencies for the payment of said principal, premium
and interest at such place or places outside the United States (subject to
applicable laws and regulations) as the Company may decide. So long as there
shall be any such agency, the Company shall keep the Fiscal and Paying Agent
advised of the names and locations of such agencies, if any are so designated.
With respect to moneys paid by the Company and held by the Fiscal and
Paying Agent or any Paying Agent for the payment of the principal of or interest
or premium, if any, on any Note that remain unclaimed at the end of three years
after such principal, interest or premium shall have become due and payable
(whether at maturity or upon call for redemption or otherwise), (i) the Fiscal
and Paying Agent or such Paying Agent shall notify the holders of such Notes
that such moneys shall be repaid to the Company and any person claiming such
moneys shall thereafter look only to the Company for payment thereof and (ii)
such moneys shall be so repaid to the Company. Upon such repayment all
liability of the Fiscal and Paying Agent or such Paying Agent with respect to
such moneys shall thereupon cease, without, however, limiting in any way any
obligation that the Company may have to pay the principal of or interest or
premium, if any, on this Note as the same shall become due.
No provision of this Note or of the Fiscal Agency Agreement shall alter or
impair the obligation of the Company, which is absolute and unconditional, to
pay the principal of, premium, if any, and interest on this Note at the time,
place, and rate, and in the coin or currency, herein and in the Fiscal Agency
Agreement prescribed unless otherwise agreed between the Company and the holder
of this Note.
No recourse shall be had for the payment of the principal of, or premium,
if any, or the interest on this Note, for any claim based hereon, or otherwise
in respect hereof, or based on or in respect of the Fiscal Agency Agreement or
any fiscal agency agreement supplemental thereto, against any incorporator,
shareholder, officer or director, as such, past, present or future, of the
Company or of any successor corporation, either directly or through the Company
or any successor corporation, whether by virtue of any constitution, statute or
rule of law or by the enforcement of any assessment or penalty or otherwise, all
such liability being, by the acceptance hereof and as part of the consideration
for the issue hereof, expressly waived and released.
This Note and the Coupons shall for all purposes be governed by, and
construed in accordance with, the laws of the State of New York.
- ------------------
/14/ Include if Note is listed on Luxembourg Stock Exchange.
/15/ Include if Note is denominated in French Francs and listed on Paris Bourse.
<PAGE>
Page 17
As used herein:
(a) the term "Amortized Amount" is the original issue discount
amortized from the Original Issue Date of the predecessor global Note to
the date of redemption or declaration, as the case may be, which
amortization shall be calculated using the "constant yield method"
(computed in accordance with the rules under the Internal Revenue Code of
1986, as amended, and the regulations thereunder, in effect on the date of
redemption or declaration, as the case may be);
(b) the term "Business Day" means, unless otherwise specified in
the applicable Pricing Supplement, any day other than a Saturday or Sunday
or any other day on which banking institutions are generally authorized or
obligated by law or regulation to close in (i) the principal financial
center of the country in which the Company is incorporated, (ii) the
principal financial center of the country of the currency in which the
Notes are denominated, (iii) the place at which payment on such Note or
coupon is to be made and (iv) London, England[; provided, however, that
with respect to Notes denominated in ECUs, such day is not a day that is a
non-ECU clearing day as determined by the ECU Banking Association in Paris,
France]/16/. For purposes of this definition, the principal financial
center of the United States is New York;
(c) the term "Notices" refers to:
(1) notices to holders of the Notes to be given by
publication in a daily newspaper in the English language of general
circulation in London and, if the Series of which this Note forms a
part is listed on the Luxembourg Stock Exchange and such Exchange so
requires, in a daily newspaper in Luxembourg or, if publication in
either London or Luxembourg is not practical, elsewhere in Western
Europe. Such publication is expected to be made in the Financial Times
---------------
and (if such Series is listed on the Luxembourg Stock Exchange) the
Luxemburger Wort. Such notices will be deemed to have been given on
----------------
the date of such publication, or if published in such newspapers on
different dates, on the date of the first such publication;
(2) notices to holders of any Notes denominated in French
francs or denominated in another currency or currencies that are
linked, directly or indirectly to French francs and that are listed on
the Paris Bourse, to be given by publication in a French language
daily newspaper of general circulation in Paris (which is expected to
be La Tribune Desfosses). Such notices will comply with the applicable
--------------------
rules of the Paris Bourse; and
(3) notices to holders of any Notes denominated in Dutch
guilder that are listed on the Amsterdam Stock Exchange to be given by
publication in a leading daily newspaper in the English language of
general circulation in Amsterdam and London and if such Notes are
listed on the Amsterdam Stock Exchange and such Exchange so
- --------------------
/16/ Include only if Note is denominated in ECU.
<PAGE>
Page 18
requires, also published in the Official Price List ("Officiele
Prijscourant"). If publication in London or Amsterdam, as the case may
be, is not practical, such publication shall be made elsewhere in
Western Europe. Such publication is expected to be made in the
Financial Times in London and the Het Financieele Dagblad in
Amsterdam. Such notices will be deemed to have been given on the date
of such publication or if published in such newspapers on different
dates, on the date of the first such publication;
(d) the term "United States" means the United States of America
(including the States and the District of Columbia), its territories, its
possessions and other areas subject to its jurisdiction;
(e) the term "United States Alien" means any person who, for United
States federal income tax purposes, is a foreign corporation, a non-
resident alien individual, a nonresident alien fiduciary of a foreign
estate or trust, or a foreign partnership, one or more of the members of
which is a foreign corporation, a non-resident alien individual or a non-
resident alien fiduciary of a foreign estate or trust;
(f) the term "Certification" means a certificate substantially in the
form of Exhibit B-2 hereto delivered by the Euroclear Operator or Cedel
Bank, as the case may be, which certificate is based on a certificate
substantially in the form of Exhibit B-1 hereto provided to it by its
account holders; and
(g) all other terms used in this Note which are defined in the Fiscal
Agency Agreement and not otherwise defined herein shall have the meanings
assigned to them in the Fiscal Agency Agreement.
<PAGE>
Page 19
OPTION TO ELECT REPAYMENT
The undersigned hereby irrevocably request(s) the Issuer to repay the within
Note (or portion thereof specified below) pursuant to its terms at a price equal
to the principal amount thereof, together with interest to the Optional
Repayment Date, to the undersigned, at ______________________ (Please print or
typewrite name and address of the undersigned).
If less than the entire principal amount of the within Note is to be repaid,
specify the portion thereof (which shall be increments of 1,000 units of the
Specified Currency indicated on the face hereof) which the holder elects to have
repaid: ____________________; and specify the denomination or denominations
(which shall not be less than the minimum authorized denomination) of the Notes
to be issued to the holder for the portion of the within Note not being repaid
(in the absence of any such specification, one such Note will be issued for the
portion not being repaid):
___________________________.
Date: __________________________
NOTICE: The signature on this Option to Elect
Repayment must correspond with the name as written
upon the face of the within instrument in every
particular without alteration or enlargement.
<PAGE>
[FORM OF CERTIFICATE TO BE GIVEN BY AN ACCOUNT
HOLDER OF THE EUROCLEAR OPERATOR AND CEDEL BANK]
EXHIBIT B-1
-----------
CERTIFICATE
---------------------------
General Electric Capital Corporation
[Euro Medium-Term Notes]/17/ [Debt Securities]/18/
Represented by Permanent Global Note No. __.
This is to certify that as of the date hereof, and except as set forth below,
the above-captioned Notes held by you for our account (i) are owned by person(s)
requesting definitive [Registered/Bearer] Notes in exchange for their interests
in the above-referenced permanent global Note and (ii) such persons desire to
exchange _____ principal amount of the above-captioned Notes for definitive
[Registered/Bearer] Notes.
We undertake to advise you promptly by tested telex on or prior to the date on
which you intend to submit your certification relating to the Notes held by you
for our account in accordance with your Operating Procedures if any applicable
statement herein is not correct on such date, and in the absence of any such
notification it may be assumed that this certification applies as of such date.
This certification excepts and does not relate to $________ of such interest
in the above Notes in respect of which we do not desire to exchange for
definitive Notes.
Dated: _______________, 19__
[Name of Account Holder]
- ----------------------
/17/ To be inserted if the Note is denominated in pounds sterling and the
Banking Act 1987 (Exempt Transactions) regulations are applicable, or if the
Note is denominated in a currency other than pounds sterling.
/18/ To be inserted if the Note is denominated in pounds sterling and the
Banking Act 1987 (Exempt Transactions) regulations are not applicable.
By:__________________________________
(Authorized Signatory)
Name:
Title:
<PAGE>
[FORM OF CERTIFICATE TO BE GIVEN BY
THE EUROCLEAR OPERATOR AND CEDEL BANK]
EXHIBIT B-2
-----------
CERTIFICATE
-----------------------
General Electric Capital Corporation
[Euro Medium-Term Notes]/19/ [Debt Securities]/20/
Represented by Permanent Global Note No. ____.
This is to certify that, based solely on certifications we have received in
writing, by tested telex or by electronic transmission from member organizations
appearing in our records as persons being entitled to a portion of the principal
amount set forth below (our "Member Organizations") substantially to the effect
set forth in Exhibit C-1 to the Fiscal and Paying Agency Agreement relating to
such Notes, as of the date hereof, _____________ principal amount of the above-
captioned Notes (i) is owned by person(s) requesting definitive
[Registered/Bearer] Notes in exchange for their interests in the above-
referenced permanent global Note and (ii) such persons desire to exchange ______
principal amount of the above-captioned Notes for definitive [Registered/Bearer]
Notes.
- -----------------------
/19/ To be inserted if the Note is denominated in pounds sterling and the
Banking Act 1987 (Exempt Transactions) regulations are applicable, or if the
Note is denominated in a currency other than pounds sterling.
/20/ To be inserted if the Note is denominated in pounds sterling and the
Banking Act 1987 (Exempt Transactions) regulations are not applicable.
<PAGE>
EXHIBIT B-2
-----------
Page 2
We further certify (i) that we are not making available herewith for exchange
all interests in the permanent global Note excepted as set forth herein and (ii)
that as of the date hereof we have not received any notification from any of our
Member Organizations to the effect that the statements made by such Member
Organizations with respect to any portion of the permanent global Note submitted
herewith are no longer true and cannot be relied upon as the date hereof.
Dated: __________________, 19__
[MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, BRUSSELS OFFICE,
as Operator of the Euroclear System]
[CEDEL BANK, SOCIETE ANONYME]
By:______________________________________________
<PAGE>
1
(Form effective July 2, 1996)[PRIVATE]
FORM OF [EMTN]/1/ [DEBT SECURITY]/2/ TEMP. GLOBAL
FLOATING RATE BEARER NOTE]
Temporary Global Floating Rate Bearer Note
BEARER BEARER
No. TGFL [ ]/3/
[ ]/4/
[EURO MEDIUM-TERM NOTE ISSUED IN ACCORDANCE WITH REGULATIONS MADE UNDER SECTION
4 OF THE BANKING ACT 1987. GENERAL ELECTRIC CAPITAL CORPORATION IS NOT AN
AUTHORIZED INSTITUTION UNDER THE BANKING ACT 1987. REPAYMENT OF THE PRINCIPAL
AND THE PAYMENT OF ANY INTEREST OR PREMIUM IN CONNECTION WITH THIS NOTE HAS NOT
BEEN GUARANTEED.]/5/
THIS SECURITY IS A TEMPORARY GLOBAL BEARER NOTE, WITHOUT COUPONS, EXCHANGEABLE
FOR AN INTEREST IN A PERMANENT GLOBAL BEARER NOTE, WITHOUT COUPONS, REPRESENTING
(AND EXCHANGEABLE FOR) DEFINITIVE BEARER NOTES OR IF SO PROVIDED HEREIN
REGISTERED NOTES. IF SO PROVIDED HEREIN, THIS GLOBAL NOTE MAY ALSO BE EXCHANGED
DIRECTLY FOR DEFINITIVE BEARER NOTES OR DEFINITIVE REGISTERED NOTES. THE RIGHTS
ATTACHING TO THIS NOTE AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE
ARE AS SPECIFIED IN THE FISCAL AGENCY AGREEMENT (AS DEFINED HEREIN).
ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO
LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS
PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR AN INTEREST IN A
PERMANENT GLOBAL BEARER NOTE OR FOR DEFINITIVE NOTES, THIS GLOBAL NOTE MAY NOT
BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE
DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER
NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.
- -------------------------
/1/ To be inserted if the Note is denominated in pounds sterling and the
Banking Act 1987 (Exempt Transactions) regulations are applicable, or if the
Note is denominated in a currency other than pounds sterling.
/2/ To be inserted if the Note is denominated in pounds sterling and the
Banking Act 1987 (Exempt Transactions) regulations are not applicable.
/3/ Insert Principal Amount.
/4/ Insert Optional Payment Amount if the Note has a dual-currency feature.
/5/ To be inserted if the Note is denominated in pounds sterling and the
Banking Act 1987 (Exempt Transactions) regulations are applicable.
<PAGE>
2
GENERAL ELECTRIC CAPITAL CORPORATION
[EURO MEDIUM-TERM NOTE]/1/ [DEBT SECURITY]/2/
(Floating Rate)
SERIES:
<TABLE>
<S> <C> <C> <C>
COMMON MINIMUM INTEREST RATE: INTEREST RESET PERIOD: INITIAL REDEMPTION
CODE: DATE:
INDEX MATURITY: INTEREST RESET DATES: INITIAL REDEMPTION
ISIN: PERCENTAGE:
OPTION ELECTION DATES: APPLICABILITY OF
ORIGINAL ISSUE DATE: MODIFIED PAYMENT UPON APPLICABILITY OF
ACCELERATION OR ANNUAL REDEMPTION
REDEMPTION: PERCENTAGE REDUCTION:
OPTIONAL PAYMENT
MATURITY DATE: CURRENCY: If yes, state Issue Price and each If yes, state Annual
redemption date and redemption Percentage Reduction:
SPECIFIED (FACE AMOUNT) DESIGNATED EXCHANGE price:
CURRENCY: RATE:
INTEREST PAYMENT OPTION VALUE INDEXED CURRENCY: OPTIONAL REPAYMENT
DATE(S): CALCULATION AGENT: DATE(S):
CURRENCY BASE RATE:
DENOMINATIONS OF
SPREAD (PLUS OR MINUS): DEFINITIVE NOTES (if not
INTEREST RATE BASIS: DETERMINATION AGENT: as set forth herein):
AVAILABILITY OF TAX REDEMPTION DATE:
REGISTERED NOTES:
ALTERNATE RATE EVENT
INITIAL INTEREST RATE: SPREAD:
INITIAL ACCRUAL DATE: SPREAD MULTIPLIER: IF THIS NOTE IS EXCHANGEABLE
DIRECTLY FOR DEFINITIVE NOTES,
MAXIMUM INTEREST INTEREST PAYMENT INDICATE FORM(S) OF DEFINITIVE
RATE: PERIOD: NOTES:
</TABLE>
- ---------------------------
/1/ To be inserted if the Note is denominated in pounds sterling and the
Banking Act 1987 (Exempt Transactions) regulations are applicable, or if the
Note is denominated in a currency other than pounds sterling.
/2/ To be inserted if the Note is denominated in pounds sterling and the
Banking Act 1987 (Exempt Transactions) regulations are not applicable.
<PAGE>
3
CALCULATION AGENT: IF INTEREST RATE BASIS IS LIBOR:
INDEX CURRENCY:_________________
DESIGNATED LIBOR PAGE:
[ ] Reuters Page: ____________
[ ] Telerate Page: __________
INTEREST CALCULATION: DAY COUNT CONVENTION
[ ] Regular Floating Rate Note [ ] Actual/360 for the period
[ ] Floating Rate/Fixed Rate from to
Fixed Rate Commencement Date: [ ] Actual/Actual to the period
Fixed Interest Rate: from to
[ ] Inverse Floating Rate Note
Fixed Interest Rate:
ADDENDUM ATTACHED:
[ ] Yes
[ ] No
OTHER PROVISIONS:
General Electric Capital Corporation, a New York corporation (together
with its successors and assigns, the "Company"), for value received, hereby
promises to pay to each of Morgan Guaranty Trust Company of New York, Brussels
Office, as operator of the Euroclear System (the "Euroclear Operator"), and
Cedel Bank, societe anonyme ("Cedel Bank"), or any other recognized or agreed
clearing system, with respect to that portion of this Note held for its account,
the principal sum (or Face Amount, if the Note has a dual-currency or index
feature) specified in Schedule A hereto, on the Maturity Date specified above
(except to the extent redeemed or repaid prior to the Maturity Date) and to pay
interest thereon at the Interest Rate per annum specified above from the
Original Issue Date specified above until the principal hereof is paid or duly
made available for payment (except as provided below), in arrears monthly,
quarterly, semiannually or annually as specified above as the Interest Payment
Period on each Interest Payment Date (as specified above), commencing with the
first Interest Payment Date next succeeding the Original Issue Date specified
above, and on the Maturity Date (or any redemption or repayment date).
Interest on this Note will accrue from the most recent Interest
Payment Date to which interest has been paid or duly provided for, or, if no
interest has been paid or duly provided for, from the Original Issue Date, until
the principal hereof has been paid or duly made available for payment, in each
case, upon Certification. Upon the payment of interest on this Note, the Fiscal
and Paying Agent (as defined below) shall cause Schedule A of this Note to be
endorsed to reflect such payment of interest and the amount of interest so paid
shall be noted. No payments on this Note will be made at any office or agency
maintained by the Company in the United States for the payment of principal of,
premium, if any, and interest, if any, on this Note, nor will any such payment
be made by mail to an address in the United States or by transfer to an account
maintained by the holder of this Note with a bank in the United States.
Notwithstanding the foregoing, if this Note is payable in U.S. dollars and if
payment in U.S. dollars of the full amount payable on this Note at the offices
of all paying agencies outside the United States would be illegal or effectively
precluded as a result of exchange controls or similar restrictions, payment on
this Note will be made by a paying agency in the United States, if such paying
agency, under applicable law and regulations, would be able to make such
payment.
<PAGE>
4
This Note is issued in bearer form and represents a portion of a duly
authorized issue of [Euro Medium-Term Notes]/1/ [Debt Securities]/2/ of the
Series specified above, issued under an amended and restated fiscal and paying
agency agreement, dated as of July 2, 1996 among the Company, GE Capital
Australia Limited, General Electric Capital Canada Inc. and The Chase Manhattan
Bank (National Association), London Branch, as fiscal agent and as principal
paying agent (in such capacities, the "Fiscal and Paying Agent") (as amended and
supplemented from time to time, the "Fiscal Agency Agreement"). The Notes are
issuable in bearer form (the "Bearer Notes"), with interest coupons attached
(except in the case of Bearer Notes in global form), and (if so provided above)
are also issuable in fully registered form, without coupons (the "Registered
Notes" and, together with the Bearer Notes, the "Notes"). Unless otherwise
specified above, the definitive Bearer Notes, with interest coupons attached,
are issuable in the denominations of 1,000 units, 10,000 units or 100,000 units
of the Specified Currency indicated on the face hereof and the definitive
Registered Notes are issuable in denominations of 100,000 units of the Specified
Currency indicated on the face hereof or any integral multiple of 1,000 units of
such Specified Currency in excess thereof.
[The Company has complied, as at the Issue Date of this temporary
global Note, with its obligations under the listing rules made by the London
Stock Exchange Limited (the "London Stock Exchange") pursuant to Section 142(6)
of the Financial Services Act 1986 in respect of its debt securities that have
been admitted to the Official List of the London Stock Exchange and since the
last publication in compliance with such rules of information about the Company,
the Company, having made all reasonable enquiries, has not become aware of any
change in circumstances that could reasonably be regarded as significantly and
adversely affecting its ability to meet its obligations in respect of the Notes
represented by this temporary global Note as they fall due.]/3/
Except as otherwise provided herein, this Note is governed by the
terms and conditions of the Permanent Global Floating Rate Bearer Note
(the"Permanent Global Floating Rate Bearer Note") (or if so specified above, the
definitive Floating Rate Bearer Notes or definitive Floating Rate Registered
Notes) to be issued in exchange for this Note, which terms and conditions are
hereby incorporated by reference herein mutatis mutandis and shall be binding on
------- --------
the Company and the holder hereof as if fully set forth herein.
This Note is exchangeable in whole or from time to time in part for
(i) an interest (equal to the principal amount of the Bearer Notes being
exchanged theretofore represented by this Note) in a single Permanent Global
Floating Rate Bearer Note or (ii) if so specified above, an equal principal
amount of definitive Floating Rate Bearer Notes and/or definitive Floating Rate
Registered Notes upon request of the Euroclear Operator or Cedel Bank, acting on
behalf of the owner of a beneficial interest in the Note, to the Fiscal and
Paying Agent only on or after the Exchange Date upon Certification to the effect
that the Notes to be issued upon such exchange are not being acquired by or on
behalf of a United States Person or, if a United States Person has a beneficial
interest in the Notes, that such person is (i) a Qualifying Foreign Branch
purchasing for its own account or for resale, (ii) a United States
- -------------------------
/1/ To be inserted if the Note is denominated in pounds sterling and the
Banking Act 1987 (Exempt Transactions) regulations are applicable, or if the
Note is denominated in a currency other than pounds sterling.
/2/ To be inserted if the Note is denominated in pounds sterling and the
Banking Act 1987 (Exempt Transactions) regulations are not applicable.
/3/ To be inserted if the Note is denominated in pounds sterling and the
Banking Act 1987 (Exempt Transactions) regulations are applicable.
<PAGE>
5
Person who acquires the Notes through a Qualifying Foreign Branch and who holds
the obligation through such financial institution on the date of Certification,
or (iii) a financial institution who acquires the Notes for purposes of resale
during the Restricted Period other than for purposes of resale directly or
indirectly to a United States Person or to a person within the United States.
Upon exchange of any portion of this Note for a Permanent Global Floating Rate
Bearer Note (or definitive Floating Rate Bearer Notes and/or definitive Floating
Rate Registered Notes), the Fiscal and Paying Agent shall cause Schedule A of
this Note to be endorsed to reflect the reduction of its principal amount by an
amount equal to the aggregate principal amount being so exchanged. Except as
otherwise provided herein, until exchanged for a Permanent Global Floating Rate
Bearer Note (or definitive Floating Rate Bearer Notes and/or definitive Floating
Rate Registered Notes), this Note shall in all respects be entitled to the same
benefits under the Fiscal Agency Agreement as a duly authenticated and delivered
definitive Note.
If this Note is subject to a tax redemption or if all or any portion
of the principal hereof is accelerated, each as described in the Fiscal Agency
Agreement, payment of the amount due upon any such redemption or acceleration
shall be subject to receipt of Certification.
Unless the certificate of authentication hereon has been executed by
the Fiscal and Paying Agent by manual signature, this Note shall not be entitled
to any benefit under the Fiscal Agency Agreement or be valid or obligatory for
any purpose.
As used herein:
(a) the term "Business Day" means, unless otherwise specified in the
applicable Pricing Supplement, any day other than a Saturday or Sunday or any
other day on which banking institutions are generally authorized or obligated by
law or regulation to close in (i) the principal financial center of the country
in which the Company is incorporated, (ii) the principal financial center of the
country of the currency in which the Notes are denominated, (iii) the place at
which payment on such Note or coupon is to be made and (iv) London, England[;
provided, however, that with respect to Notes denominated in ECUs, such day is
not a day that is a non-ECU clearing day as determined by the ECU Banking
Association in Paris, France]/1/. For purposes of this definition, the principal
financial center of the United States is New York;
(b) the term "Certification" means a certificate substantially in the
form of Exhibit B-2 hereto delivered by the Euroclear Operator or Cedel Bank, as
the case may be, which certificate is based on a certificate substantially in
the form of Exhibit B-1 hereto provided to it by its account holders;
(c) the term "Qualifying Foreign Branch" means a branch of a United
States financial institution, as defined in United States Treasury Regulations
Section 1.165-12(c)(1)(v), located outside the United States that is purchasing
for its own account or for resale and that has agreed, as a condition of
purchase, to comply with the requirements of Section 165(j)(3)(A), (B) or (C) of
the United States Internal Revenue Code of 1986, as amended and the regulations
thereunder;
- ------------------------
/1/ Include only if Note is denominated in ECU.
<PAGE>
6
(d) the term "Restricted Period" with respect to each issuance means
the period which begins on the earlier of the date on which the Company receives
the proceeds of the sale of this Note with respect to its issuance or the first
date on which this Note is offered to persons other than the Agents, and which
ends 40 days after the date on which the Company receives the proceeds of the
sale of this Note; provided that if this Note is held as part of an unsold
--------
allotment or subscription, any offer or sale of this Note shall be deemed to be
during the Restricted Period;
(e) the term "United States" means the United States of America
(including the States and the District of Columbia), its territories, its
possessions and other areas subject to its jurisdiction;
(f) the term "United States Person" means (i) a citizen or resident of
the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or (iii) an estate or trust
the income of which is subject to United States federal income taxation
regardless of its source; and
(g) all other terms used in this Note which are defined in the Fiscal
Agency Agreement and not otherwise defined herein shall have the meanings
assigned to them in the Fiscal Agency Agreement.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
under its corporate seal.
DATED: GENERAL ELECTRIC CAPITAL
CORPORATION
[SEAL] By:______________________________
Title:
Attest:
By:_________________________
Title
CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred
to in the within-mentioned Fiscal Agency Agreement.
THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION),
as Fiscal and Paying Agent
By:_____________________________
Authorized Officer
<PAGE>
SCHEDULE A
----------
SCHEDULE OF EXCHANGES
---------------------
The Initial Principal Amount of this Note is _____________. The following
payments of interest and exchanges of a part of this Note for an interest in a
single Permanent Global Floating Rate Bearer Note (or if so specified above, for
definitive Notes) have been made:
<TABLE>
<CAPTION>
=============================================================================================================
Date Payment of Principal (Face)/1/ Remaining Notation made by
of Exchange or Interest Amount Principal (Face)1 or on behalf of
Interest Payment Exchanged for Amount Fiscal and Paying
Permanent Global Outstanding Agent
Bearer Notes or Following Such
Definitive Notes Exchange
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ To be used instead of "Principal" if the Note has a dual-currency or index
feature.
<PAGE>
[FORM OF CERTIFICATE TO BE GIVEN BY AN ACCOUNT
----------------------------------------------
HOLDER OF THE EUROCLEAR OPERATOR AND CEDEL BANK]
------------------------------------------------
EXHIBIT B-1
-----------
CERTIFICATE
------------------------------------------
General Electric Capital Corporation
[Euro Medium-Term Notes]/1/ [Debt Securities]/1/
Represented by Temporary Global Note No. __.
This is to certify that as of the date hereof, and except as set forth
below, the above-captioned Notes held by you for our account (i) are owned by
person(s) that are not citizens or residents of the United States, domestic
partnerships, domestic corporations or any estate or trust the income of which
is subject to United States Federal income taxation regardless of its source
("United States person(s)"), (ii) are owned by United States person(s) that (a)
are foreign branches of United States financial institutions (as defined in U.S.
Treasury Regulations Section 1.165-12(c)(1)(v)) ("financial institutions")
purchasing for their own account or for resale, or (b) acquired the Notes
through foreign branches of United States financial institutions and who hold
the Notes through such United States financial institutions on the date hereof
(and in either case (a) or (b), each such United States financial institution
hereby agrees, on its own behalf or through its agent, that you may advise the
Issuer or the Issuer's agent that it will comply with the requirements of
Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder), or (iii) are owned by United States or
foreign financial institution(s) for purposes of resale during the restricted
period (as defined in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)),
and in addition if the owner of the Notes is a United States or foreign
financial institution described in clause (iii) above (whether or not also
described in clause (i) or (ii)) such financial institution has not acquired the
Notes for purposes of resale directly or indirectly to a United States person or
to a person within the United States or its possessions.
As used herein, "United States" means the United States of America
(including the States and the District of Columbia) and its "possessions"
including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake
Island and the Northern Mariana Islands.
- -----------------------
/1/ To be inserted if the Note is denominated in pounds sterling and the
Banking Act 1987 (Exempt Transactions) regulations are applicable, or if the
Note is denominated in a currency other than pounds sterling.
/2/ To be inserted if the Note is denominated in pounds sterling and the
Banking Act 1987 (Exempt Transactions) regulations are not applicable.
<PAGE>
We undertake to advise you promptly by tested telex on or prior to the date
on which you intend to submit your certification relating to the Notes held by
you for our account in accordance with your Operating Procedures if any
applicable statement herein is not correct on such date, and in the absence of
any such notification it may be assumed that this certification applies as of
such date.
<PAGE>
EXHIBIT B-1
-----------
Page 2
This certification excepts and does not relate to $________ of such
interest in the above Notes in respect of which we are not able to certify and
as to which we understand exchange and delivery of definitive Notes (or, if
relevant, exercise of any rights or collection of any interest) cannot be made
until we do so certify.
We understand that this certification is required in connection with
certain tax laws and, if applicable, certain securities laws of the United
States. In connection therewith, if administrative or legal proceedings are
commenced or threatened in connection with which this certification is or would
be relevant, we irrevocably authorize you to produce this certification to any
interested party in such proceedings.
Dated: _______________, 19__
[To be dated no earlier than the 10th day before
[insert date of Interest Payment Date prior to Exchange Date]
[insert date of redemption or acceleration prior to Exchange Date]
[insert Exchange Date]]
[Name of Account Holder]
By:__________________________________
(Authorized Signatory)
Name:
Title:
<PAGE>
[FORM OF CERTIFICATE TO BE GIVEN BY
THE EUROCLEAR OPERATOR AND CEDEL BANK]
EXHIBIT B-2
-----------
CERTIFICATE
----------------------------------------
General Electric Capital Corporation
[Euro Medium-Term Notes]/1/ [Debt Securities]/2/
Represented by Temporary Global Note No. ____.
This is to certify that, based solely on certifications we have received in
writing, by tested telex or by electronic transmission from member organizations
appearing in our records as persons being entitled to a portion of the principal
amount set forth below (our "Member Organizations") substantially to the effect
set forth in Exhibit B-1 to the Fiscal and Paying Agency Agreement, as of the
date hereof, _____________ principal amount of the above-captioned Notes (i) is
owned by persons that are not citizens or residents of the United States,
domestic partnerships, domestic corporations or any estate or trust the income
of which is subject to United States Federal income taxation regardless of its
source ("United States persons"), (ii) is owned by United States persons that
(a) are foreign branches of United States financial institutions (as defined in
U.S. Treasury Regulations Section 1.165-12(c)(1)(v) ("financial institutions")
purchasing for their own account or for resale, or (b) acquired the Notes
through foreign branches of United States financial institutions and who hold
the Notes through such United States financial institutions on the date hereof
(and in either case (a) or (b), each such United States financial institution
has agreed, on its own behalf or through its agent, that we may advise the
Issuer or the Issuer's agent that it will comply with the requirements of
Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder), or (iii) is owned by United States or
foreign financial institutions for purposes of resale during the restricted
period (as defined in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7),
and to the further effect that United States or foreign financial institutions
described in clause (iii) above (whether or not also described in clause (i) or
(ii)) have certified that they have not acquired the Notes for purposes of
resale directly or indirectly to a United States person or to a person within
the United States or its possessions.
- ---------------------------
/1/ To be inserted if the Note is denominated in pounds sterling and the
Banking Act 1987 (Exempt Transactions) regulations are applicable, or if the
Note is denominated in a currency other than pounds sterling.
/2/ To be inserted if the Note is denominated in pounds sterling and the
Banking Act 1987 (Exempt Transactions) regulations are not applicable.
<PAGE>
As used herein, "United States" means the United States of America
(including the States and the District of Columbia) and its "possessions"
including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake
Island and the Northern Mariana Islands.
<PAGE>
EXHIBIT B-2
-----------
Page 2
We further certify (i) that we are not making available herewith for
exchange any portion of the temporary global Note excepted as set forth herein
and (ii) that as of the date hereof we have not received any notification from
any of our Member Organizations to the effect that the statements made by such
Member Organizations with respect to any portion of the part submitted herewith
are no longer true and cannot be relied upon as the date hereof.
We understand that this certification is required in connection with
certain tax laws and, if applicable, certain securities laws of the United
States. In connection therewith, if administrative or legal proceedings are
commenced or threatened in connection with which this certification is or would
be relevant, we irrevocably authorize you to produce this certification to any
interested party in such proceedings.
Dated: __________________, 19__
[To be dated no earlier than
[insert date of Interest Payment Date prior to Exchange Date]
[insert date of redemption or acceleration prior to Exchange Date]
[insert Exchange Date]]
[MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, BRUSSELS OFFICE,
as Operator of the Euroclear System]
[CEDEL BANK, SOCIETE ANONYME]
By:___________________________
<PAGE>
Page 1
(Form effective July 2, 1996)
FORM OF [EMTN]/1/ [DEBT SECURITY]/2/ PERMANENT GLOBAL
FLOATING RATE BEARER NOTE
BEARER BEARER
No. PGFL [ ]/3/
[ ]/4/
[EURO MEDIUM-TERM NOTE ISSUED IN ACCORDANCE WITH REGULATIONS MADE UNDER SECTION
4 OF THE BANKING ACT 1987. GENERAL ELECTRIC CAPITAL CORPORATION IS NOT AN
AUTHORIZED INSTITUTION UNDER THE BANKING ACT 1987. REPAYMENT OF THE PRINCIPAL
AND THE PAYMENT OF ANY INTEREST OR PREMIUM IN CONNECTION WITH THIS NOTE HAS NOT
BEEN GUARANTEED.]/5/
THIS SECURITY IS A PERMANENT GLOBAL BEARER NOTE, WITHOUT COUPONS, EXCHANGEABLE
FOR THE RIGHTS ATTACHING TO THIS NOTE AND THE CONDITIONS AND PROCEDURES
GOVERNING ITS EXCHANGE FOR DEFINITIVE BEARER NOTES OR IF SO PROVIDED HEREIN
REGISTERED NOTES ARE AS SPECIFIED IN THE FISCAL AGENCY AGREEMENT (AS DEFINED
BELOW).
ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO
LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS
PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR DEFINITIVE BEARER NOTES
OR IF SO PROVIDED HEREIN REGISTERED NOTES, THIS GLOBAL NOTE MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY
OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR
A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.
- ----------------------
/1/ To be inserted if the Note is denominated in pounds sterling and the Banking
Act 1987 (Exempt Transactions) regulations are applicable, or if the Note is
denominated in a currency other than pounds sterling.
/2/ To be inserted if the Note is denominated in pounds sterling and the Banking
Act 1987 (Exempt Transactions) regulations are not applicable.
/3/ Insert Principal Amount.
/4/ Insert Optional Payment Amount if the Note has dual-currency feature.
/5/ To be inserted if the Note is denominated in pounds sterling and the Banking
Act 1987 (Exempt Transactions) regulations are applicable.
<PAGE>
Page 2
GENERAL ELECTRIC CAPITAL CORPORATION
[EURO MEDIUM-TERM NOTE]/6/ [DEBT SECURITY]/7/
(Floating Rate)
SERIES:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COMMON CODE: MINIMUM INTEREST RATE: INTEREST RESET PERIOD: INITIAL REDEMPTION DATE:
ISIN: INDEX MATURITY: INTEREST RESET DATES: INITIAL REDEMPTION
PERCENTAGE:
ORIGINAL ISSUE DATE: OPTION ELECTION DATES: APPLICABILITY OF MODIFIED PAYMENT APPLICABILITY OF ANNUAL
UPON ACCELERATION OR REDEMPTION: REDEMPTION
PERCENTAGE REDUCTION:
MATURITY DATE: OPTIONAL PAYMENT CURRENCY: If yes, state Issue Price and each If yes, state Annual
redemption date and redemption Percentage Reduction:
price:
SPECIFIED (FACE AMOUNT) CURRENCY: DESIGNATED EXCHANGE RATE:
OPTIONAL REPAYMENT
DATE(S):
INDEXED CURRENCY:
INTEREST PAYMENT DATE(S): OPTION VALUE CALCULATION AGENT:
DENOMINATIONS OF
DEFINITIVE NOTES
CURRENCY BASE RATE: (if not as set forth
herein):
INTEREST RATE BASIS: SPREAD (PLUS OR MINUS):
DETERMINATION AGENT: TAX REDEMPTION DATE:
INITIAL INTEREST RATE: ALTERNATE RATE EVENT SPREAD:
AVAILABILITY OF REGISTERED NOTES:
INTEREST ACCRUAL DATE: SPREAD MULTIPLIER:
MAXIMUM INTEREST RATE: INTEREST PAYMENT PERIOD:
</TABLE>
- --------------------
/6/ To be inserted if the Note is denominated in pounds sterling and the Banking
Act 1987 (Exempt Transactions) regulations are applicable, or if the Note is
denominated in a currency other than pounds sterling.
/7/ To be inserted if the Note is denominated in pounds sterling and the Banking
Act 1987 (Exempt Transactions) regulations are not applicable.
<PAGE>
Page 3
CALCULATION AGENT: IF INTEREST RATE BASIS IS LIBOR:
INDEX CURRENCY:_________________
DESIGNATED LIBOR PAGE:
[ ] Reuters Page: ____________
[ ] Telerate Page: __________
INTEREST CALCULATION: DAY COUNT CONVENTION
[ ] Regular Floating Rate Note [ ] Actual/360 for the period
[ ] Floating Rate/Fixed Rate from to
Fixed Rate Commencement Date: [ ] Actual/Actual to the period
Fixed Interest Rate: from to
[ ] Inverse Floating Rate Note
Fixed Interest Rate:
ADDENDUM ATTACHED:
[ ] Yes
[ ] No
OTHER PROVISIONS:
General Electric Capital Corporation, a New York corporation (together
with its successors and assigns, the "Company"), for value received, hereby
promises to pay to the holder hereof upon surrender hereof, the principal sum
(or Face Amount, if the Note has a dual-currency or index feature) specified in
Schedule A hereto on the Maturity Date specified above (except to the extent
redeemed or repaid prior to the Maturity Date) and to pay interest thereon to
the bearer at the interest rate per annum calculated in accordance with the
terms hereof from the Original Issue Date specified above until the principal
hereof is paid or duly made available for payment (except as provided below), in
arrears monthly, quarterly, semiannually or annually as specified above as the
Interest Payment Period on each Interest Payment Date (as specified above),
commencing with the first Interest Payment Date next succeeding the Original
Issue Date specified above, and on the Maturity Date (or any redemption or
repayment date); provided, however, that each of Morgan Guaranty Trust Company
-------- -------
of New York, Brussels Office, as operator of the Euroclear System, and Cedel
Bank, societe anonyme ("Cedel Bank"), or any other recognized or agreed clearing
system, shall be deemed a holder of this Note with respect to the portion hereof
held for its respective account; and provided further, however, that if the
-------- ------- -------
Original Issue Date occurs between a date that is 15 days prior to the next
succeeding Interest Payment Date and such Interest Payment Date, interest
payments will commence on the second Interest Payment Date succeeding the
Original Issue Date to the holder of this Note on such second Interest Payment
Date.
Payment of the principal of this Note and any premium due at the
Maturity Date (or any redemption or repayment date) will be made in immediately
available funds upon surrender of this Note at the office or agency of the
Fiscal and Paying Agent or at the office or agency of such other paying agents
outside the United States (this and certain other capitalized terms used herein
are defined on the reverse of this Note) as the Company may determine maintained
for that purpose (a "Paying Agent").
Interest on this Note will accrue from the most recent Interest
Payment Date to which interest has been paid or duly provided for, or, if no
interest has been paid or duly provided for, from the Original Issue Date, until
the principal hereof has been paid or duly made available for payment (except as
provided below). The interest so payable, and punctually paid or duly provided
for, on any Interest Payment Date, will be paid to the holder of this Note at
the office or agency of the Fiscal and Paying Agent or at the office of any
Paying Agent and the Fiscal and Paying Agent shall cause Schedule A of
<PAGE>
Page 4
this Note to be endorsed to reflect such payment of interest and the amount of
interest so paid will be noted.
If the Specified Currency is other than U.S. dollars, then, except as
provided on the reverse hereof, payment of the principal of and premium, if any,
and interest on this Note will be made in such Specified Currency either by a
check drawn on a bank in London, Luxembourg or a city in the country of such
Specified Currency or by wire transfer of immediately available funds if
appropriate wire transfer instructions in writing have been received by the
Fiscal and Paying Agent or any Paying Agent not less than 10 days prior to the
applicable Interest Payment Date.
If the Specified Currency indicated on the face hereof is U.S.
dollars, any payment of the principal of and premium, if any, and interest on
this Note will be made, subject to applicable laws and regulations, in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts either by a check drawn on a bank
in The City of New York mailed to an address outside the United States furnished
by the holder or by wire transfer of immediately available funds to an account
maintained by the holder of this Note with a bank located outside the United
States if appropriate wire transfer instructions have been received by the
Fiscal and Paying Agent or any Paying Agent not less than 10 days prior to the
applicable payment date. Notwithstanding the foregoing, in the event that
payment in U.S. dollars of the full amount payable on this Note at the offices
of all Paying Agents would be illegal or effectively precluded as a result of
exchange controls or similar restrictions, payment on this Note will be made by
a paying agency in the United States, if such paying agency, under applicable
law and regulations, would be able to make such payment.
This Note is issued in the principal amount set forth on the face
hereof, but the total aggregate principal amount of the Series to which this
Note belongs is unlimited. The Company has the right, without the consent of
the holder of any Note or coupon appertaining thereto, to issue additional Notes
which form part of the Series to which this Note belongs.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
<PAGE>
Page 5
Unless the certificate of authentication hereon has been executed by
the Fiscal and Paying Agent by manual signature, this Note shall not be entitled
to any benefit under the Fiscal Agency Agreement, as defined on the reverse
hereof, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed under its corporate seal.
DATED: GENERAL ELECTRIC CAPITAL
CORPORATION
[SEAL]
By:________________________________________
Title:
Attest:
By:________________________________
Title:
CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred to
in the within-mentioned Fiscal Agency Agreement.
THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION),
as Fiscal and Paying Agent
By:________________________________________
Authorized Officer
<PAGE>
Page 6
[Form of Reverse of Note]
This Note is one of a duly authorized issue of [Euro Medium-Term Notes]/8/
[Debt Securities]/9/ of the Series specified on the face hereof, having
maturities of nine months or more from the date of issue (the "Notes") of the
Company. The Notes are issuable under an amended and restated fiscal and paying
agency agreement, dated as of July 2, 1996 among the Company, GE Capital
Australia Limited, General Electric Capital Canada Inc. and The Chase Manhattan
Bank (National Association), London Branch, as fiscal agent and as principal
paying agent (in such capacities, the "Fiscal and Paying Agent") (as amended and
supplemented from time to time, the "Fiscal Agency Agreement") to which Fiscal
Agency Agreement reference is hereby made for a statement of the respective
rights, limitations of rights, duties and immunities of the Company and holders
of the Notes and the terms upon which the Notes are, and are to be,
authenticated and delivered. The Chase Manhattan Bank (National Association) at
its office in London has been appointed the Exchange Rate Agent (the "Exchange
Rate Agent", which term includes any successor exchange rate agent) with respect
to the Notes. The terms of individual Notes may vary with respect to interest
rates, interest rate formulas, issue dates, maturity dates, or otherwise, all as
provided in the Fiscal Agency Agreement. To the extent not inconsistent
herewith, the terms of the Fiscal Agency Agreement are hereby incorporated by
reference herein.
[The Company has complied, as at the Issue Date of this permanent global
Note, with its obligations under the listing rules made by the London Stock
Exchange Limited (the "London Stock Exchange") pursuant to Section 142(6) of the
Financial Services Act 1986 in respect of its debt securities that have been
admitted to the Official List of the London Stock Exchange and, since the last
publication in compliance with such rules of information about the Company, the
Company, having made all reasonable enquiries, has not become aware of any
change in circumstances that could reasonably be regarded as significantly and
adversely affecting its ability to meet its obligations in respect of the Notes
represented by this permanent global Note as they fall due.]/10/
This Note will not be subject to any sinking fund and will not be
redeemable or subject to repayment at the option of the holder prior to
maturity, except as provided below.
Unless otherwise indicated on the face of this Note, this Note shall not be
subject to repayment at the option of the holder prior to the Maturity Date. If
so indicated on the face of this Note, this Note may be subject to repayment at
the option of the holder on the Optional Repayment Date or Dates specified on
the face hereof on the terms set forth herein. On any Optional Repayment Date,
this Note will be repayable in whole or in part in increments of 1,000 units of
the Specified Currency indicated on the face hereof (provided that any remaining
principal amount hereof shall not be less than the minimum authorized
denomination hereof) at the option of the holder hereof at a price equal to 100%
of the principal amount to be repaid, together with interest hereon payable to
the date of repayment.
- --------------------------
/8/ To be inserted if the Note is denominated in pounds sterling and the Banking
Act 1987 (Exempt Transactions) regulations are applicable.
/9/ To be inserted if the Note is denominated in pounds sterling and the Banking
Act 1987 (Exempt Transactions) regulations are applicable, or if the Note is
denominated in a currency other than pounds sterling.
/10/ To be inserted if the Note is denominated in pounds sterling and the
Banking Act 1987 (Exempt Transactions) regulations are not applicable.
<PAGE>
Page 7
For this Note to be repaid in whole or in part at the option of the holder
hereof, the Company must receive at the corporate trust office of the Fiscal and
Paying Agent in the City of London, at least 30 days but not more than 60 days
prior to the repayment, (i) this Note with the form entitled "Option to Elect
Repayment" on the reverse hereof duly completed or (ii) a telegram, facsimile
transmission or a letter from a commercial bank or trust company in Western
Europe which must set forth the principal amount of this Note, the principal
amount of this Note to be repaid, the certificate number or a description of the
tenor and terms of this Note, a statement that the option to elect repayment is
being exercised thereby and a guarantee that this Note to be repaid, together
with the duly completed form entitled "Option to Elect Repayment" on the reverse
hereof, will be received by the Fiscal and Paying Agent not later than the fifth
Business Day after the date of such telegram, facsimile transmission or letter;
provided, however, that such telegram, facsimile transmission or letter from a
- -------- -------
commercial bank or trust company in Western Europe shall only be effective if in
such case, this Note and form duly completed are received by the Fiscal and
Paying Agent by such fifth Business Day. Exercise of such repayment option by
the holder hereof shall be irrevocable. In the event of repayment of this Note
in part only, a new Note or Notes for the amount of the unpaid portion hereof
shall be issued in the name of the holder hereof upon cancellation hereof, but
only in an authorized denomination.
This Note will bear interest at the rate determined as follows:
1. If this Note is designated as a Regular Floating Rate Note on
the face hereof, then, except as described below, this Note shall bear
interest at the rate determined by reference to the applicable Interest
Rate Basis shown on the face hereof (i) plus or minus the applicable
Spread, if any, and/or (ii) multiplied by the applicable Spread Multiplier,
if any, specified and applied in the manner described on the face hereof.
Commencing on the first Interest Reset Date (the "Initial Interest Reset
Date"), the rate at which interest on this Note is payable shall be reset
as of each Interest Reset Date specified on the face hereof; provided,
--------
however, that (i) the interest rate in effect for the period from the
-------
Original Issue Date to the Initial Interest Reset Date will be the Initial
Interest Rate, and (ii) unless otherwise specified on the face hereof, the
interest rate in effect hereon for the ten calendar days immediately prior
to a Maturity Date shall be that in effect on the tenth calendar day
preceding such Maturity Date.
2. If this Note is designated as a Floating Rate/Fixed Rate Note
on the face hereof, then, except as described below, this Note shall
initially bear interest at the rate determined by reference to the
applicable Interest Rate Basis shown on the face hereof (i) plus or minus
the applicable Spread, if any, and/or (ii) multiplied by the applicable
Spread Multiplier, if any, specified and applied in the manner described on
the face hereof. Commencing on the Initial Interest Reset Date, the rate
at which interest on this Note is payable shall be reset as of each
Interest Reset Date specified on the face hereof; provided, however, that
-------- -------
(i) the interest rate in effect for the period from the Original Issue Date
to the Initial Interest Reset Date will be the Initial Interest Rate; (ii)
unless otherwise specified on the face hereof, the interest rate in effect
hereon for the ten calendar days immediately prior to the Fixed Rate
Commencement Date shall be that in effect on the tenth calendar day
preceding the Fixed Rate Commencement Date; and (iii) the interest rate in
effect commencing on, and including, the Fixed Rate Commencement Date to
the Maturity Date shall be the Fixed Interest Rate, if such a rate is
specified on the face hereof, or if no such Fixed Interest Rate is
<PAGE>
Page 8
so specified, the interest rate in effect hereon on the day immediately
preceding the Fixed Rate Commencement Date.
3. If this Note is designated as an Inverse Floating Rate Note on
the face hereof, then, except as described below, this Note will bear
interest equal to the Fixed Interest Rate indicated on the face hereof
minus the rate determined by reference to the applicable Interest Rate
Basis shown on the face hereof (i) plus or minus the applicable Spread, if
any, and/or (ii) multiplied by the applicable Spread Multiplier, if any,
specified and applied in the manner described on the face hereof; provided,
--------
however, that the interest rate hereon will not be less than zero.
-------
Commencing on the Initial Interest Reset Date, the rate at which interest
on this Note is payable shall be reset as of each Interest Reset Date
specified on the face hereof; provided, however, that (i) the interest rate
-------- -------
in effect for the period from the Original Issue Date to the Initial
Interest Reset Date will be the Initial Interest Rate, and (ii) unless
otherwise specified on the face hereof, the interest rate in effect hereon
for the ten calendar days immediately prior to a Maturity Date shall be
that in effect on the tenth calendar day preceding such Maturity Date.
4. Notwithstanding the foregoing, if this Note is designated
above as having an Addendum attached, the Note shall bear interest in
accordance with the terms described in such Addendum.
Except as provided above, the interest rate in effect on each day shall be
(a) if such day is an Interest Reset Date, the interest rate determined on the
Interest Determination Date (as defined below) immediately preceding such
Interest Reset Date or (b) if such day is not an Interest Reset Date, the
interest rate determined on the Interest Determination Date immediately
preceding the next preceding Interest Reset Date. Each Interest Rate Basis
shall be the rate determined in accordance with the applicable provision below.
If any Interest Reset Date (which term includes the term Initial Interest Reset
Date unless the context otherwise requires) would otherwise be a day that is not
a Business Day, such Interest Reset Date shall be postponed to the next
succeeding day that is a Business Day, except that if an Interest Rate Basis
specified on the face hereof is LIBOR, PIBOR or AIBOR and such next Business Day
falls in the next succeeding calendar month, such Interest Reset Date shall be
the next preceding Business Day.
Unless otherwise specified on the face hereof, the Interest Determination
Date pertaining to an Interest Reset Date for Notes bearing interest calculated
by reference to the CD Rate, Commercial Paper Rate, Federal Funds Rate and Prime
Rate will be the second Business Day next preceding such Interest Reset Date.
The Interest Determination Date with respect to the Eleventh District Cost of
Funds Rate will be the last working day of the month immediately preceding each
Interest Reset Date on which the Federal Home Loan Bank of San Francisco (the
"FHLB of San Francisco") publishes the Index (as defined below). Unless
otherwise specified on the face hereof, the Interest Determination Date
pertaining to an Interest Reset Date for Notes bearing interest calculated by
reference to LIBOR shall be the second London Banking Day (as defined below)
preceding such Interest Reset Date. The Interest Determination Date with
respect to PIBOR and AIBOR Notes will be as specified below under "Determination
of PIBOR" and "Determination of AIBOR", respectively. The Interest
Determination Date pertaining to an Interest Reset Date for Notes bearing
interest calculated by reference to the Treasury Rate shall be the day of the
week in which such Interest Reset Date falls on which Treasury
<PAGE>
Page 9
bills normally would be auctioned; provided, however, that if an auction is held
-------- -------
on the Friday of the week preceding such Interest Reset Date, the related
Interest Determination Date shall be such preceding Friday; and provided,
--------
further, that if an auction shall fall on any Interest Reset Date, then the
- -------
Interest Reset Date shall instead be the first Business Day following the date
of such auction. "London Banking Day" means any day on which commercial banks
are open for business (including dealings in foreign exchange and foreign
currency deposits) in London, England.
The "Calculation Date" pertaining to any Interest Determination Date will
be the earlier of (i) the tenth calendar day after such Interest Determination
Date or, if such day is not a Business Day, the next succeeding Business Day or
(ii) the Business Day preceding the applicable Interest Payment Date or Maturity
Date, as the case may be.
With respect to each Series of French Franc Notes listed on the Paris
Bourse, the Calculation Agent will notify The Paris Bourse of the interest rate,
the interest amount, the interest period and the Interest Payment Date related
to each Interest Reset Date as soon as such information is available.
Determination of CD Rate. If the Interest Rate Basis specified on the face
------------------------
hereof is the CD Rate, the CD Rate with respect to this Note shall be determined
on each Interest Determination Date and shall be the rate on such date for
negotiable certificates of deposit having the Index Maturity specified on the
face hereof as published by the Board of Governors of the Federal Reserve System
in "Statistical Release H.15(519), Selected Interest Rates," or any successor
publication ("H.15(519)"), under the heading "CDs (Secondary Market)," or, if
not so published by 3:00 p.m., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the CD Rate will be the rate on
such Interest Determination Date for negotiable certificates of deposit of the
Index Maturity specified on the face hereof as published by the Federal Reserve
Bank of New York in its daily statistical release "Composite 3:30 P.M.
Quotations for U.S. Government Securities" or any successor publication
("Composite Quotations") under the heading "Certificates of Deposit." If such
rate is not yet published in either H.15(519) or the Composite Quotations by
3:00 P.M., New York City time, on such Calculation Date pertaining to such
Interest Determination Date, then the CD Rate on such Interest Determination
Date will be calculated by the Calculation Agent referred to on the face hereof
and will be the arithmetic mean of the secondary market offered rates as of
10:00 a.m., New York City time, on such Interest Determination Date, for
negotiable certificates of deposit of major United States money market banks
with a remaining maturity closest to the Index Maturity specified on the face
hereof in an amount that is representative for a single transaction in that
market at that time as quoted by three leading nonbank dealers in negotiable
U.S. dollar certificates of deposit in The City of New York selected by the
Calculation Agent; provided, however, that if the dealers selected as aforesaid
-------- -------
by the Calculation Agent are not quoting as mentioned in this sentence, the CD
Rate with respect to such Interest Determination Date shall be the CD Rate as in
effect on such Interest Determination Date.
Determination of Commercial Paper Rate. If the Interest Rate Basis
--------------------------------------
specified on the face hereof is the Commercial Paper Rate, the Commercial Paper
Rate with respect to this Note shall be determined on each Interest
Determination Date and shall be the Money Market Yield (as defined herein) of
the rate on such date for commercial paper having the Index Maturity specified
on the face hereof, as such rate shall be published in H.15(519) under the
heading "Commercial Paper," or if not so published prior to 3:00 p.m., New York
City time, on the Calculation Date pertaining to such Interest Determination
Date, the Commercial Paper Rate shall be the Money Market Yield of the rate on
such Interest Determination Date for commercial paper of the Index Maturity
specified on the face hereof as published in Composite
<PAGE>
Page 10
Quotations under the heading "Commercial Paper" (with an Index Maturity of one
month or three months being deemed to be equivalent to an Index Maturity of 30
days or 90 days, respectively). If such rate is not yet available in either
H.15(519) or Composite Quotations by 3:00 p.m., New York City time, on such
Calculation Date, then the Commercial Paper Rate on such Interest Determination
Date shall be calculated by the Calculation Agent and shall be the Money Market
Yield of the arithmetic mean of the offered rates as of 11:00 a.m., New York
City time, on such Interest Determination Date for commercial paper of the Index
Maturity specified on the face hereof, placed for an industrial issuer whose
bond rating is "AA," or the equivalent, from a nationally recognized rating
agency, as quoted by three leading dealers in commercial paper in The City of
New York selected by the Calculation Agent; provided, however, that if the
-------- -------
dealers selected as aforesaid by the Calculation Agent are not quoting offered
rates as set forth above, the Commercial Paper Rate with respect to such
Interest Determination Date shall be the Commercial Paper Rate in effect on such
Interest Determination Date.
"Money Market Yield" shall be a yield (expressed as a percentage)
calculated in accordance with the following formula:
Money Market Yield = D x 360
-------------- x 100
360 - (D x M)
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal and "M" refers to the actual
number of days in the period for which interest is being calculated.
Determination of Eleventh District Cost of Funds Rate. If the Interest
-----------------------------------------------------
Rate Basis for this Note is the Eleventh District Cost of Funds Rate, as
indicated above, the Eleventh District Cost of Funds Rate shall be determined on
each applicable Interest Determination Date and shall be the rate equal to the
monthly weighted average cost of funds for the calendar month preceding such
Interest Determination Date as set forth under the caption "11th District" on
Telerate Page 7058 as of 11:00 a.m., San Francisco time, on such Interest
Determination Date. If such rate does not appear on Telerate Page 7058 on any
such Interest Determination Date, the Eleventh District Cost of Funds Rate for
such Interest Determination Date shall be the monthly weighted average cost of
funds paid by member institutions of the Eleventh Federal Home Loan Bank
District that was most recently announced (the "Index") by the FHLB of San
Francisco as such cost of funds for the calendar month preceding the date of
such announcement. If the FHLB of San Francisco fails to announce such rate for
the calendar month next preceding such Interest Determination Date, then the
Eleventh District Cost of Funds Rate for such Interest Determination Date will
be the Eleventh District Cost of Funds Rate in effect on such Interest
Determination Date.
Determination of Federal Funds Rate. If the Interest Rate Basis specified
-----------------------------------
on the face hereof is the Federal Funds Rate, the Federal Funds Rate with
respect to this Note shall be determined on each Interest Determination Date and
shall be the rate on such date for Federal Funds as published in H.15(519) under
the heading "Federal Funds (Effective)," or, if not so published by 3:00 p.m.,
New York City time, on the Calculation Date pertaining to such Interest
Determination Date, the Federal Funds Rate will be the rate on such Interest
Determination Date as published in Composite Quotations under the heading
"Federal Funds/Effective Rate." If such rate is not yet published in either
H.15(519) or the Composite Quotations by 3:00 p.m., New York City time, on such
Calculation Date, the Federal Funds Rate for such Interest Determination Date
will be calculated by the Calculation Agent and will be
<PAGE>
Page 11
the arithmetic mean of the rates for the last transaction in overnight United
States dollar Federal funds as of 9:00 a.m., New York City time, on such
Interest Determination Date arranged by three leading brokers of Federal funds
transactions in The City of New York selected by the Calculation Agent;
provided, however, that if the brokers selected as aforesaid by the Calculation
- -------- -------
Agent are not quoting as mentioned in this sentence, the Federal Funds Rate with
respect to such Interest Determination Date shall be the Federal Funds Rate in
effect on such Interest Determination Date.
Determination of LIBOR. If the Interest Rate Basis specified on the face
----------------------
hereof is LIBOR, LIBOR with respect to this Note shall be determined on each
Interest Determination Date as follows:
(i) LIBOR will be either (a) if "LIBOR Telerate" is specified on
the face hereof or if the face hereof does not specify a source for LIBOR,
the rate for deposits in the London interbank market in the Index Currency
(as defined below) having the Index Maturity designated on the face hereof
commencing on the second Business Day immediately following such Interest
Determination Date that appears on Telerate Page 3750 (or such other page
as is specified on the face hereof) as of 11:00 a.m., London time, on such
Interest Determination Date, or (b) if "LIBOR Reuters" is specified on the
face hereof, the arithmetic mean of the offered rates (unless the specified
Designated LIBOR Page (as defined below) by its terms provides only for a
single rate, in which case such single rate shall be used) for deposits in
the London interbank market in the Index Currency having the Index Maturity
designated on the face hereof and commencing on the second Business Day
immediately following such Interest Determination Date, that appear on the
Designated LIBOR Page as of 11:00 a.m., London time, on such Interest
Determination Date, if at least two such offered rates appear (unless, as
aforesaid, only a single rate is required) on such Designated LIBOR Page.
If fewer than two offered rates appear, or no rate appears, as applicable,
LIBOR in respect of such Interest Determination Date will be determined as
if the parties had specified the rate described in clause (ii) below.
(ii) If fewer than two offered rates appear, or no rate appears,
as the case may be, on the applicable Designated LIBOR Page as specified in
clause (i) above, the Calculation Agent will request the principal London
offices of each of four major reference banks in the London interbank
market, as selected by the Calculation Agent, to provide the Calculation
Agent with its offered quotation for deposits in the Index Currency for the
period of the Index Maturity designated on the face hereof, commencing on
the second Business Day immediately following such Interest Determination
Date, to prime banks in the London interbank market at approximately 11:00
a.m., London time, on such Interest Determination Date and in a principal
amount that is representative for a single transaction in such Index
Currency in such market at such time. If at least two such quotations are
provided, LIBOR determined on such Interest Determination Date will be the
arithmetic mean of such quotations. If fewer than two quotations are
provided, LIBOR determined on such Interest Determination Date will be the
arithmetic mean of the rates quoted at approximately 11:00 a.m. (or such
other time specified on the face hereof) in the applicable Principal
Financial Center (as defined below), on such Interest Determination Date
for loans in the Index Currency to leading European banks having the Index
Maturity designated in the applicable Pricing Supplement and in a principal
amount that is representative for a
<PAGE>
Page 12
single transaction in such Index Currency in such market at such time by
three major banks in such Principal Financial Center selected by the
Calculation Agent; provided, however, that if the banks so selected by the
-------- -------
Calculation Agent are not quoting as mentioned in this sentence, LIBOR with
---
respect to such Interest Determination Date will be LIBOR in effect on such
Interest Determination Date.
"Index Currency" means the currency (including composite currencies)
--------------
specified on the face hereof as the currency with respect to which LIBOR shall
be calculated. If no such currency is specified on the face hereof, the Index
Currency shall be U.S. dollars.
"Designated LIBOR Page" means the display on the Dow Jones Telerate Service
---------------------
for the purpose of displaying the London interbank rates of major banks for the
applicable Index Currency, unless "LIBOR Reuters" is designated on the face
hereof, in which case the Designated LIBOR Page shall be the display on the
Reuters Monitor Money Rates Service for the purpose of displaying the London
interbank rates of major banks for the applicable Index Currency.
Unless provided otherwise on the face hereof, "Principal Financial Center"
will be the capital city of the country of the specified Index Currency, except
that with respect to U.S. dollars, Deutschemarks, and ECUs, the Principal
Financial Center shall be The City of New York, Frankfurt, and Luxembourg,
respectively.
Determination of PIBOR. If this Note is a part of a Series of French Franc
----------------------
Notes and the Interest Rate Basis specified on the face hereof is the Paris
interbank offered rate ("PIBOR"), PIBOR shall be determined as follows:
(i) On the first Paris Banking Day before the beginning of each
Interest Reset Period (each, an "FF Interest Determination Date"), the
Calculation Agent will obtain the rate as defined and calculated by the
Association Francaise des Banques and Telerate, respectively, on or about
---------------------------------
11:00 a.m. (Paris time), on the relevant FF Interest Determination Date for
deposits of the Designated Maturity in French francs in the Paris interbank
market; such rate is shown on the page designated as "Page 20041" on the
telerate information display service or such page as may replace such page
on that service or such other service as may be designated by the
Association Francaise des Banques as the information provider for the
---------------------------------
purpose of displaying Paris interbank offered rates for French Franc
deposits ("Telerate Page 20041").
(ii) If the rate provided for in (i) above has not been
calculated by the Association Francaise des Banques and does not appear on
---------------------------------
Telerate Page 20041, the Calculation Agent will request the principal Paris
office of four major banks in the Paris interbank market, as selected by
the Calculation Agent (the "Reference Banks") to provide the Calculation
Agent with their offered quotations to prime banks for deposits in Paris of
French Francs of the Designated Maturity as of 11:00 a.m. (Paris time) on
the relevant FF Interest Determination Date; PIBOR applicable to such
Interest Reset Period shall, subject as provided below, be the rate
determined by the Calculation Agent to be the arithmetic mean (rounded, if
necessary, up to the fifth decimal place) of such quotations (or such of
them, being at least two, as are so provided), as determined by the
Calculation Agent.
<PAGE>
Page 13
(iii) If fewer than two quotations are provided as requested,
PIBOR shall be the arithmetic mean of the rates quoted by major banks in
Paris selected by the Calculation Agent, at approximately 11:00 a.m., Paris
time, on the related PIBOR Interest Determination Date for loans in French
Francs to leading European banks for a period of the Designated Maturity
commencing on the Interest Reset Date and in an amount that is
representative for a single transaction in French Francs in such market at
such time; provided, however, that if the banks so selected by the
-------- -------
Calculation Agent are not quoting as mentioned in this subsection (iii),
then PIBOR with respect to such Interest Reset Date will be PIBOR in effect
on such Interest Reset Date.
As used herein, the term "Paris Banking Day" means a day on which
commercial banks are open for business (including dealings in foreign exchange
and foreign currency deposits) in Paris, France.
Determination of AIBOR. If the Interest Rate Basis specified on the face
----------------------
hereof is the Amsterdam interbank offered rate ("AIBOR"), AIBOR with respect to
this Note shall be determined as follows:
"AIBOR" means, with respect to any Interest Reset Date, the rate for
deposits in Dutch Guilders for the period of the Index Maturity which appears on
the Reuters Screen AIBO Page (as defined below) (Euro AIBO column) as of 11:00
a.m., Amsterdam time, two Amsterdam Banking Days (as defined below) prior to
such Interest Reset Date (each, an "AIBOR Interest Determination Date"). If
such rate does not appear on the Reuters Screen AIBO Page, the rate for such
Interest Reset Date will be the rate determined on the basis of the rates at
which deposits in Dutch Guilders are offered by the AIBOR Reference Banks (as
defined below) at approximately 11:00 a.m. on the related AIBOR Interest
Determination Date, to prime banks in the Amsterdam interbank market for a
period of six months commencing on the applicable Interest Reset Date and in an
amount that is representative for a single transaction in such market at such
time (such amount, a "Representative Amount"). The Calculation Agent will
request the principal Amsterdam office of each of the AIBOR Reference Banks to
provide a quotation of its rate. If at least two quotations are provided, the
rate for such Interest Reset Date will be the arithmetic mean of the quotations.
If fewer than two quotations are provided as requested, the rate for such
Interest Reset Date will be the arithmetic mean of the rates quoted by major
banks in Amsterdam, selected by the Calculation Agent, at approximately 11:00
a.m., Amsterdam time, on such Interest Reset Date for loans in Dutch Guilders to
leading European banks for the period of the Index Maturity commencing on such
Reset Date and in a representative Amount.
"Amsterdam Banking Day" means any day on which commercial banks are open
for business (including dealings in foreign exchange and foreign currency
deposits) in Amsterdam, The Netherlands.
"AIBOR Reference banks" mean four major banks in the Amsterdam interbank
market selected by the Calculation Agent.
"Reuters Screen AIBO Page" means the page designated as "AIBO" on the
Reuters Monitor Money Rates Service (or such other page as may replace that page
on that service for the purpose of displaying rates comparable to the Amsterdam
interbank offered rates.)
<PAGE>
Page 14
Determination of Prime Rate. If the Interest Rate Basis specified on the
---------------------------
face hereof is the Prime Rate, the Prime Rate with respect to this Note shall be
determined on each Interest Determination Date and shall be the rate on such
date as published in H.15(519) under the heading "Bank Prime Loan", or if not
so published by 3:00 p.m., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the Prime Rate will be the
arithmetic mean of the rates of interest publicly announced by each bank named
on the Reuters Screen U.S. Prime 1 Page (as defined below) as such bank's prime
rate or base lending rate as in effect for such Interest Determination Date as
quoted on the Reuters Screen U.S. Prime 1 Page on such interest Determination
Date, or, if fewer than four such rates appear on the Reuters Screen U.S. Prime
1 Page for such Interest Determination Date, the rate shall be the arithmetic
mean of the prime rates quoted on the basis of actual number of days in the year
divided by 360 as of the close of business on such Interest Determination Date
by at least two of the three major money center banks in The City of New York
selected by the Calculation Agent from which quotations are requested. For
purposes of making the foregoing determination, each change in the prime rate or
base lending rate of any bank so announced by such bank will be effective as of
the effective date of the announcement or, if no effective date is specified, as
of the date of the announcement. If fewer than two such quotations are
provided, the Prime Rate will be calculated by the Calculation Agent and will be
determined as the arithmetic mean on the basis of the prime rates or base
lending rates quoted in The City of New York by two substitute banks or trust
companies organized and doing business under the laws of the United States or
any state thereof, each having total equity capital of at least $500 million and
being subject to supervision or examination by a federal or state authority,
selected by the Calculation Agent to quote such rate or rates; provided,
--------
however, that if the banks or trust companies so selected by the Calculation
- -------
Agent are not quoting as mentioned in this sentence, the Prime Rate with respect
to such Interest Determination Date will be the Prime Rate in effect on such
Interest Determination Date.
Determination of Treasury Rate. If the Interest Rate Basis specified on
------------------------------
the face hereof is the Treasury Rate, the Treasury Rate with respect to this
Note shall be determined on each Interest Determination Date and shall be the
rate applicable to the most recent auction of direct obligations of the United
States ("Treasury Bills") having the Index Maturity specified on the face
hereof, as published in H.15(519) under the heading "Treasury Bills--auction
average (investment)," or if not so published by 3:00 p.m., New York City time,
on the Calculation Date pertaining to such Interest Determination Date, the
auction average rate on such Interest Determination Date (expressed as a bond
equivalent, on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) as otherwise announced by the United States Department
of the Treasury. In the event that the results of the auction of Treasury Bills
having the Index Maturity specified on the face hereof are not published or
reported as provided above by 3:00 p.m., New York City time, on such Calculation
Date, or if no such auction is held in the five Business Days preceding such
Interest Determination Date, then the Treasury Rate shall be calculated by the
Calculation Agent and shall be a yield to maturity (expressed as a bond
equivalent, on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) of the arithmetic mean of the secondary market bid
rates, as of approximately 3:30 p.m., New York City time, on such Interest
Determination Date, of three leading primary United States government securities
dealers selected by the Calculation Agent for the issue of Treasury Bills with a
remaining maturity closest to the Index Maturity specified on the face hereof;
provided, however, that if the dealers selected as aforesaid by the Calculation
- -------- -------
Agent are not quoting bid rates as mentioned in this sentence, the Treasury Rate
with respect to such Interest Determination Date will be the Treasury Rate in
effect on such Interest Determination Date.
<PAGE>
Page 15
Notwithstanding the foregoing, the interest rate hereon shall not be
greater than the Maximum Interest Rate, if any, or less than the Minimum
Interest Rate, if any, specified on the face hereof. The Calculation Agent
shall calculate the interest rate hereon in accordance with the foregoing on or
before each Calculation Date. The interest rate on this Note will in no event
be higher than the maximum rate permitted by New York law, as the same may be
modified by United States Federal law of general application.
At the request of the holder hereof, the Calculation Agent will provide to
the holder hereof the interest rate hereon then in effect and, if determined,
the interest rate that will become effective as of the next Interest Reset Date.
Interest payments on this Note will equal the amount of interest accrued
from and including the next preceding Interest Payment Date in respect of which
interest has been paid (or from and including the date of issue of the
predecessor global Note, if no interest has been paid) to but excluding the
related Interest Payment Date; provided, however, that if the Interest Reset
-------- -------
Period with respect to this Note is daily or weekly, each interest payment will
include interest accrued from and including the date of issue of the predecessor
global Note or from but excluding the fifteenth calendar day preceding the next
preceding Interest Payment Date (whether or not such fifteenth calendar day is a
Business Day) to which interest has been paid, as the case may be, through and
including the fifteenth calendar day preceding the applicable Interest Payment
Date (whether or not such fifteenth calendar day is a Business Day), unless
otherwise specified on the face hereof; and provided, further, that the interest
-------- -------
payment with respect to this Note made on the Maturity Date will include
interest accrued to but excluding such Maturity Date.
Accrued interest hereon shall be calculated by multiplying the face amount
hereof by an accrued interest factor. Such accrued interest factor is computed
by adding the interest factor calculated for each day from the date of issue of
the predecessor global Note, or from the last day to which interest has been
paid or duly provided for, to the date for which accrued interest is being
calculated. Unless otherwise specified on the face hereof, the interest factor
for each such day will be computed by dividing the interest rate applicable to
such day by 360, if the Interest Rate Basis specified on the face hereof is the
CD Rate, the Commercial Paper Rate, the Eleventh District Cost of Funds Rate,
the Federal Funds Rate, LIBOR, PIBOR, AIBOR or the Prime Rate, or by the actual
number of days in the year if the Interest Rate Basis specified on the face
hereof is the Treasury Rate.
All percentages resulting from any calculation will be to the nearest one
hundred-thousandth of a percentage point, with five one millionths of a
percentage point rounded upwards (e.g., 9.9876545% (or .09876545) would be
----
rounded to 9.87655% (or.0987655), and all dollar amounts used in or resulting
from such calculation will be rounded to the nearest cent (with one-half cent
being rounded upward).
In the case where the Interest Payment Date or the Maturity Date (or any
redemption or repayment date) does not fall on a Business Day, payment of
interest, premium, if any, or principal otherwise payable on such date need not
be made on such date, but may be made on the next succeeding Business Day with
the same force and effect as if made on the Interest Payment Date or on the
Maturity Date (or any redemption or repayment date), and no interest shall
accrue for the period from and after the Interest Payment Date or the Maturity
Date (or any redemption or repayment date) to such next succeeding Business Day.
<PAGE>
Page 16
This Note is unsecured and ranks pari passu with all other unsecured and
---- -----
unsubordinated indebtedness of the Company.
This Note is issuable in bearer form (the "Bearer Notes"), without interest
coupons attached, and is exchangeable upon 30 days' written notice to the Fiscal
and Paying Agent, in whole or from time to time in part, for (i) Bearer Notes,
with interest coupons attached, in the denominations of 1,000 units, 10,000
units or 100,000 units of the Specified Currency indicated on the face hereof
(unless otherwise specified on the face hereof) or (ii) (if so specified on the
face hereof) Notes in fully registered form, without coupons ("Registered
Notes"), in denominations of 100,000 units of the Specified Currency indicated
on the face hereof or any integral multiple of 1,000 units of such Specified
Currency in excess thereof (unless otherwise specified on the face hereof) at
the office of the Fiscal and Paying Agent, upon the request of Morgan Guaranty
Trust Company of New York, Brussels office, as the Euroclear Operator or Cedel
Bank, acting on behalf of the owners of beneficial interests in the Note, and
upon Certification to the effect set forth in Exhibits B-1 and B-2 attached
hereto and upon compliance with the other procedures set forth in the Fiscal
Agency Agreement; provided, however, that no such exchange may occur during a
-------- -------
period beginning at the opening of business 15 days before the day of the first
publication of a notice of redemption and ending on the relevant redemption
date. All expenses incurred as a result of any such exchange shall be paid by
the Company. Notwithstanding anything to the contrary contained in this
paragraph, the Fiscal and Paying Agent shall not be required to exchange the
entire aggregate principal amount of a permanent global Bearer Note for
definitive Bearer Notes in the event beneficial owners of less than the entire
aggregate principal amount of the permanent global Bearer Note have requested
definitive Bearer Notes, provided the operating rules and regulations of the
clearance system then in effect would permit less than the entire aggregate
principal amount of the permanent global Bearer Note to be so exchanged. Upon
exchange of any portion of this Note for a definitive Bearer Note or definitive
Bearer Notes, or a definitive Registered Note or definitive Registered Notes,
the Fiscal and Paying Agent shall cause Schedule A of this Note to be endorsed
to reflect the reduction of its principal amount by an amount equal to the
aggregate principal amount of such definitive Bearer Note or Bearer Notes, or
such definitive Registered Note or Registered Notes, whereupon the principal
amount hereof shall be reduced for all purposes by the amount so exchanged and
noted. The date of surrender of any Note delivered upon any exchange or
transfer of Notes shall be such that no gain or loss of interest results from
such exchange or transfer.
This Note may be transferred by delivery; provided, however, that this Note
-------- -------
may be transferred only to a common depositary outside the United States for the
Euroclear Operator or Cedel Bank, or to a nominee of such a depositary.
In case any Note shall at any time become mutilated, destroyed, lost or
stolen, or is apparently destroyed, lost or stolen, and such Note or evidence of
the loss, theft or destruction thereof (together with the indemnity hereinafter
referred to and such other documents or proof as may be required in the
premises) shall be delivered to the Fiscal and Paying Agent, a new Note of like
tenor will be issued by the Company in exchange for the Note so mutilated or
defaced, or in lieu of the Note so destroyed or lost or stolen, but, in the case
of any destroyed or lost or stolen Note only upon receipt of evidence
satisfactory to the Fiscal and Paying Agent and the Company that such Note was
destroyed or lost or stolen and, if required, upon receipt also of an indemnity
satisfactory to each of them. All expenses and reasonable charges associated
with procuring such indemnity and with the preparation, authen-
<PAGE>
Page 17
tication and delivery of a new Note shall be borne by the owner of the Note
mutilated, defaced, destroyed, lost or stolen.
The Fiscal Agency Agreement provides that if an Event of Default (as
defined in the Fiscal Agency Agreement) with respect to the Series of which this
Note forms a part, shall have occurred and be continuing, the holder hereof, by
notice in writing to the Company and to the Fiscal and Paying Agent, may declare
the principal of this Note and the interest accrued hereon to be due and payable
immediately.
If the face hereof indicates that this Note is subject to "Modified Payment
upon Acceleration or Redemption", then (i) if the principal hereof is declared
to be due and payable as described in the preceding paragraph, the amount of
principal due and payable with respect to this Note shall be limited to the sum
of the Issue Price specified on the face hereof plus the Amortized Amount, (ii)
for the purpose of any vote of noteholders taken pursuant to the Fiscal Agency
Agreement prior to the acceleration of payment of this Note, the principal
amount hereof shall equal the amount that would be due and payable hereon,
calculated as set forth in clause (i) above, if this Note were declared to be
due and payable on the date of any such vote and (iii) for the purpose of any
vote of noteholders taken pursuant to the Fiscal Agency Agreement following the
acceleration of payment of this Note, the principal amount hereof shall equal
the amount of principal due and payable with respect to this Note, calculated as
set forth in clause (i) above.
Notes of the Series of which this Note forms a part may be redeemed, at the
option of the Company, as a whole but not in part, at any time prior to
maturity, upon the giving of a notice of redemption as described below, at a
redemption price equal to 100% of the principal amount thereof (except that if
this Note is subject to "Modified Payment upon Acceleration or Redemption", such
redemption price would be limited to the sum of the Issue Price plus the
Amortized Amount), together with accrued interest to the date fixed for
redemption, if the Company determines that, as a result of any change in or
amendment to the laws (or any regulations or rulings promulgated thereunder) of
the United States or of any political subdivision or taxing authority thereof or
therein affecting taxation, or any change in official position regarding the
application or interpretation of such laws, regulations or rulings, which change
or amendment becomes effective on or after the Tax Redemption Date specified on
the face hereof, the Company has or will become obligated to pay Additional
Amounts (as defined below) with respect to the Notes as described below. Prior
to the giving of any notice of redemption pursuant to this paragraph, the
Company shall deliver to the Fiscal and Paying Agent (i) a certificate stating
that the Company is entitled to effect such redemption and setting forth a
statement of facts showing that the conditions precedent to the right of the
Company to so redeem have occurred, and (ii) an opinion of counsel satisfactory
to the Fiscal and Paying Agent to such effect based on such statement of facts;
provided that no such notice of redemption shall be given earlier than 90 days
prior to the earliest date on which the Company would be obligated to pay such
Additional Amounts if a payment in respect of the Notes were then due.
Notice of redemption will be given not less than 30 nor more than 60 days
prior to the date fixed for redemption, which date and the applicable redemption
price will be specified in the notice. Such notice will be given in accordance
with "Notices" as defined below.
<PAGE>
Page 18
If the Company shall determine that any payment made outside the United
States by the Company or any Paying Agent of principal or interest[, including
original issue discount,]/11/ due in respect of any Bearer Notes of the Series
of which this Note forms a part would, under any present or future laws or
regulations of the United States, be subject to any certification,
identification or other information reporting requirement of any kind, the
effect of which requirement is the disclosure to the Company, any Paying Agent
or any governmental authority of the nationality, residence or identity of a
beneficial owner of such Bearer Note or interest coupon who is a United States
Alien (other than such a requirement (a) which would not be applicable to a
payment made by the Company or any one of its Paying Agents (i) directly to the
beneficial owner or (ii) to a custodian, nominee or other agent of the
beneficial owner, or (b) which can be satisfied by such custodian, nominee or
other agent certifying to the effect that such beneficial owner is a United
States Alien, provided that in each case referred to in clauses (a)(ii) and (b)
payment by such custodian, nominee or agent to such beneficial owner is not
otherwise subject to any such requirement), the Company shall redeem the Bearer
Notes, in whole, at a redemption price equal to 100% of the principal amount
thereof (except that if this Note is subject to "Modified Payment upon
Acceleration or Redemption", such redemption price would be limited to the sum
of the Issue Price plus the Amortized Amount), together with accrued interest to
the date fixed for redemption, or, at the election of the Company if the
conditions of the next succeeding paragraph are satisfied, pay the additional
amounts specified in such paragraph. The Company shall make such determination
and election as soon as practicable and publish prompt notice thereof (the
"Determination Notice") stating the effective date of such certification,
identification or other information reporting requirements, whether the Company
will redeem the Bearer Notes of such Series, or whether the Company has elected
to pay the Additional Amounts specified in the next succeeding paragraph, and
(if applicable) the last date by which the redemption of the Bearer Notes must
take place, as provided in the next succeeding sentence. If the Company redeems
the Bearer Notes, such redemption shall take place on such date, not later than
one year after the publication of the Determination Notice, as the Company shall
elect by notice to the Fiscal and Paying Agent at least 60 days prior to the
date fixed for redemption. Notice of such redemption of the Bearer Notes will be
given to the holders of the Bearer Notes not more than 60 nor less than 30 days
prior to the date fixed for redemption. Such redemption notice shall include a
statement as to the last date by which the Bearer Notes to be redeemed may be
exchanged for Registered Notes. Notwithstanding the foregoing, the Company shall
not so redeem the Bearer Notes if the Company shall subsequently determine, not
less than 30 days prior to the date fixed for redemption, that subsequent
payments would not be subject to any such requirement, in which case the Company
shall publish prompt notice of such determination and any earlier redemption
notice shall be revoked and of no further effect. The right of any of the
holders of Bearer Notes called for redemption pursuant to this paragraph to
exchange such Bearer Notes for Registered Notes will terminate at the close of
business of the Fiscal and Paying Agent on the fifteenth day prior to the date
fixed for redemption, and no further exchanges of such Series of Bearer Notes
for Registered Notes shall be permitted.
If and so long as the certification, identification or other information
reporting requirements referred to in the preceding paragraph would be fully
satisfied by payment of a backup withholding tax or similar charge, the Company
may elect to pay as Additional Amounts such amounts as may be necessary so that
every net payment made outside the United States following the effective date of
such requirements by the Company or any Paying Agent of principal or interest,
including original issue
- -----------------
/11/ Include if Notes are original issue discount Notes.
<PAGE>
Page 19
discount,/12/ due in respect of any Bearer Note or any interest coupon of which
the beneficial owner is a United States Alien (but without any requirement that
the nationality, residence or identity of such beneficial owner be disclosed to
the Company, any Paying Agent or any governmental authority, with respect to the
payment of such additional amounts), after deduction or withholding for or on
account of such backup withholding tax or similar charge (other than a backup
withholding tax or similar charge which (i) would not be applicable in the
circumstances referred to in the second parenthetical clause of the first
sentence of the preceding paragraph, or (ii) is imposed as a result of the
presentation of such Bearer Note or interest coupon for payment more than 15
calendar days after the date on which such payment becomes due and payable or on
which payment thereof is duly provided for, whichever occurs later), will not be
less than the amount provided for in such Bearer Note or interest coupon to be
then due and payable. In the event the Company elects to pay Additional Amounts
pursuant to this paragraph, the Company shall have the right to redeem the
Bearer Notes of such Series in whole at any time pursuant to the applicable
provisions of the immediately preceding paragraph and the redemption price of
such Bearer Notes shall not be reduced for applicable withholding taxes. If the
Company elects to pay Additional Amounts pursuant to this paragraph and the
condition specified in the first sentence of this paragraph should no longer be
satisfied, then the Company shall redeem the Bearer Notes of such Series in
whole, pursuant to the applicable provisions of the immediately preceding
paragraph.
The Company will, subject to certain exceptions and limitations set forth
below, pay such additional amounts (the "Additional Amounts") to the holder of
any Note or of any coupon, if any, who is a United States Alien as may be
necessary in order that every net payment of the principal of, premium and
interest, including original issue discount, on such Note and any other amounts
payable on such Note, after withholding for or on account of any present or
future tax, assessment or governmental charge imposed upon or as a result of
such payment by the United States (or any political subdivision or taxing
authority thereof or therein), will not be less than the amount provided for in
such Note or coupon, if any, to be then due and payable. However, the Company
will not be required to make any payment of Additional Amounts to any such
holder for or on account of:
(a) any such tax, assessment or other governmental charge which
would not have been so imposed but for (i) the existence of any present or
former connection between such holder (or between a fiduciary, settlor,
beneficiary, member or shareholder of such holder, if such holder is an
estate, a trust, a partnership or a corporation) and the United States,
including, without limitation, such holder (or such fiduciary, settlor,
beneficiary, member or shareholder) being or having been a citizen or
resident thereof or being or having been engaged in a trade or business or
present therein or having, or having had, a permanent establishment therein
or (ii) the presentation by the holder of any such Note or coupon, if any,
for payment on a date more than 15 calendar days after the date on which
such payment became due and payable or on the date on which payment thereof
is duly provided for, whichever occurs later;
(b) any estate, inheritance, gift, sales, transfer or personal
property tax or any similar tax, assessment or governmental charge;
- --------------------
/12/ Include if Notes are original issue discount Notes.
<PAGE>
Page 20
(c) any tax, assessment or other governmental charge imposed by
reason of such holder's past or present status as a personal holding
company or foreign personal holding company or controlled foreign
corporation or passive foreign investment company with respect to the
United States or as a corporation which accumulates earnings to avoid
United States federal income tax or as a private foundation or other tax-
exempt organization;
(d) any tax, assessment or other governmental charge which is
payable otherwise than by withholding from payments on or in respect of any
Note;
(e) any tax, assessment or other governmental charge required to
be withheld by any Paying Agent from any payment of principal of, or
interest on, any Note, if such payment can be made without such withholding
by any other Paying Agent in a city in Western Europe;
(f) any tax, assessment or other governmental charge which would
not have been imposed but for the failure to comply with certification,
information or other reporting requirements concerning the nationality,
residence or identity of the holder or beneficial owner of such Note, if
such compliance is required by statute or by regulation of the United
States or of any political subdivision or taxing authority thereof or
therein as a precondition to relief or exemption from such tax, assessment
or other governmental charge;
(g) any tax, assessment or other governmental charge imposed by
reason of such holder's past or present status as the actual or
constructive owner of 10% or more of the total combined voting power of all
classes of stock entitled to vote of the Company or as a direct or indirect
subsidiary of the Company; or
(h) any combination of items (a), (b), (c), (d), (e), (f) or (g);
nor shall Additional Amounts be paid with respect to any payment on a Note to a
United States Alien who is a fiduciary or partnership or other than the sole
beneficial owner of such payment to the extent such payment would be required by
the laws of the United States (or any political subdivision thereof) to be
included in the income, for tax purposes, of a beneficiary or settlor with
respect to such fiduciary or a member of such partnership or a beneficial owner
who would not have been entitled to the Additional Amounts had such beneficiary,
settlor, member or beneficial owner been the holder of such Note.
The Fiscal Agency Agreement provides that the Company will not merge or
consolidate with any other corporation or sell, convey, transfer or otherwise
dispose of all or substantially all of its properties to any other corporation,
unless (i) either the Company shall be the continuing corporation or the
successor corporation (if other than the Company) (the "successor corporation")
shall be a corporation organized under the laws of the United States of America
or of a state thereof and such successor corporation shall expressly assume the
due and punctual payments of all amounts due under this Note and the due and
punctual performance of all of the covenants and obligations of the Company
under this Note by supplemental agreement satisfactory to the Fiscal and Paying
Agent executed and delivered to such Fiscal and Paying Agent by the successor
corporation and the Company and (ii) the
<PAGE>
Page 21
Company or such successor corporation, as the case may be, shall not,
immediately after such merger or consolidation, or such sale, conveyance,
transfer or other disposition, be in default in the performance of any such
covenant or obligation. Upon any such merger or consolidation, sale, conveyance,
transfer or other disposition, such successor corporation shall succeed to and
be substituted for, and may exercise every right and power of and shall be
subject to all the obligations of, the Company under this Note, with the same
effect as if such successor corporation had been named as the Company herein,
and the Company shall be released from its liability under this Note and under
the Fiscal Agency Agreement.
The Fiscal Agency Agreement permits the Company, when authorized by
resolution of the Board of Directors, and the Fiscal and Paying Agent, with the
consent of the holders of not less than a majority in aggregate principal amount
of the Notes of the Series of which this Note forms a part, to modify or amend
the Fiscal Agency Agreement or such Notes; provided, however, that no such
-------- -------
modification or amendment may, without the consent of the holders of each such
Note affected thereby, (i) change the stated maturity of the principal of any
such Note or extend the time for payment of interest thereon; (ii) change the
amount of the principal of an Original Issue Discount Note of such Series that
would be due and payable upon an acceleration of the maturity thereof; (iii)
reduce the amount of interest payable thereon or the amount payable thereon in
the event of redemption or acceleration; (iv) change the currency of payment of
principal of or any other amounts payable on any such Note; (v) impair the right
to institute suit for the enforcement of any such payment on or with respect to
any such Note; (vi) reduce the above-stated percentage of the principal amount
of Notes of such Series the consent of whose holders is necessary to modify or
amend the Fiscal Agency Agreement or the Notes of such Series or reduce the
percentage of the Notes of such Series required for the taking of action or the
quorum required at any such meeting of holders of Notes of such Series; or (vii)
modify the foregoing requirements to reduce the percentage of outstanding Notes
of such Series necessary to waive any future compliance or past default.
Purchasers are required to pay for the Notes in the currency specified in
the applicable Pricing Supplement. Payment of principal, premium, if any, and
interest, if any, on each Note will be made in immediately available funds in
the Specified Currency unless otherwise specified in the applicable Pricing
Supplement and except as provided below.
Payments of principal, premium, if any, and interest, if any, on any Note
denominated in a Specified Currency other than U.S. dollars and ECU shall be
made in U.S. dollars if, on any payment date, such Specified Currency (a) is
unavailable due to imposition of exchange controls or other circumstances beyond
the Company's control or (b) is no longer used by the government of the country
issuing such currency or for the settlement of transactions by public
institutions in that country or within the international banking community.
Such payments shall be made in U.S. dollars on such payment date and on all
subsequent payment dates until such Specified Currency is again available or so
used as determined by the Company.
Amounts so payable on any such date in such Specified Currency shall be
converted into U.S. dollars at a rate determined by the Exchange Rate Agent on
the basis of the most recently available Market Exchange Rate or as otherwise
indicated in the applicable Pricing Supplement. The Exchange Rate Agent at the
date of the Fiscal Agency Agreement is The Chase Manhattan Bank (National
Association). Any payment required to be made on Notes denominated in a
Specified Currency other than U.S. dollars and ECU that is instead made in U.S.
dollars under the circumstances described above
<PAGE>
Page 22
will not constitute a default of any obligation of the relevant Issuer under
such Notes. The "Market Exchange Rate" with respect to any currency other than
U.S. dollars means, for any day, the noon dollar buying rate in The City of New
York on such day for cable transfers of such currency as published by the
Federal Reserve Bank of New York, or, if such rate is not published for such
day, the equivalent rate as determined by the Exchange Rate Agent.
The provisions of the two preceding paragraphs shall not apply in the event
of the introduction in the country issuing any Specified Currency other than ECU
of the Euro pursuant to European Monetary Union. All references herein or in
any Pricing Supplement to "Euro" shall be to the new single European currency to
be introduced pursuant to European Monetary Union, and all references to
"European Monetary Union" shall be to the third stage thereof. In this
situation, payments of principal, premium, if any, and interest, if any, on any
Note denominated in any such Specified Currency shall be effected in Euro at
such time as is required by, and otherwise in conformity with, legally
applicable measures adopted with reference to European Monetary Union.
[Payments of principal, premium, if any, and interest, if any, on any Note
denominated in ECU shall be made in U.S. dollars or a component currency of ECU
if, on or prior to any payment date, the ECU is not used as the unit of account
of the European Community ("EC") or if major banks in all member countries of
the EC shall have ceased to provide ECU accounts. Such payments shall be made
in U.S. dollars on such payment date and on all subsequent payment dates until
ECU is again so used or such bank accounts are again provided, as determined by
the Company.
Payments of principal, premium, if any, and interest, if any, on any Note
denominated in ECU shall be made in U.S. dollars if, on any payment date, ECU is
unavailable due to the imposition of exchange controls or other circumstances
beyond the Company's control. Such payments shall be made in U.S. dollars on
such payment date and on all subsequent payment dates until ECU is again
available as determined by the Company.
All payments made with respect to Notes denominated in ECU that are instead
made in U.S. dollars or a component currency of the ECU pursuant to the
provisions of the two preceding paragraphs shall be made in accordance with the
provisions set forth below. Any payment required to be made on Notes
denominated in ECU that is instead made in U.S. dollars or a component currency
of ECU under the circumstances described above will not constitute a default of
any obligation of the Company under such Notes.
The provisions of the three preceding paragraphs shall not apply in the
event of European Monetary Union. In this situation, payments of principal,
premium, if any, and interest, if any, on any Note denominated in ECU shall be
effected in Euro at such time as is required by, and otherwise in conformity
with, legally applicable measures adopted with reference to European Monetary
Union.
The following provisions relate to Notes denominated in ECU until such time
as European Monetary Union occurs. All references to "ECU" refer to the ECU
that is from time to time used as the unit of account of the EC. Should any
change to the composition of the ECU be adopted by the EC prior to the date of
European Monetary Union, principal, premium, if any, and interest, if any, on
Notes denominated in ECU shall continue to be payable in ECU without adjustment
to the timing or amount of any such payment.
<PAGE>
Page 23
With respect to each due date for the payment of principal of, premium, if
any, or interest on, Notes denominated in ECU, if, on or prior to such date, any
of the events described in the fourth and fifth preceding paragraphs shall have
occurred which would require the Company to pay in either U.S. dollars or a
component currency of the ECU, the Company or its agent shall (in the case of an
agent, without liability on its part but after consultation with the Company and
having regard to the availability to the Company of the relevant currency)
choose a substitute currency (the "Chosen Currency"), which shall be a component
currency of the ECU or U.S. dollars, in which all payments to be calculated by
reference to or made in ECU due on or after such date with respect to the Notes
shall be made. Notice of the Chosen Currency so selected shall be given to
holders of Registered Notes by mail, and shall be given to holders of Bearer
Notes by publication, in each case as set forth in "Notices" as defined below.
The amount of each payment calculated with reference to or made in such Chosen
Currency shall be computed on the basis of the equivalent of the ECU in that
currency, determined as described below, as of the fourth business day in
Luxembourg prior to the date on which such payment is due.
On or about the first business day in Luxembourg following the day on which
any of the events described in the fifth and sixth preceding paragraphs shall
have occurred which would require the Company to pay in either U.S. dollars or a
component currency of the ECU, the Company or its agent shall (in the case of an
agent, without liability on its part but after consultation with the Company and
having regard to the availability to the Company of the relevant currency)
choose a Chosen Currency in which all payments to be calculated by reference to
or made in ECU with respect to Notes having a due date prior thereto but not yet
presented for payment are to be made. The amount of each payment calculated
with reference to or made in such Chosen Currency shall be computed on the basis
of the equivalent of the ECU in that currency, determined as described below, as
of such first business day.
The equivalent of the ECU in the relevant Chosen Currency as of any date
(the "Day of Valuation") shall be determined by the Exchange Rate Agent on the
following basis. The amounts and components composing the ECU for this purpose
(the "Components") shall be the amounts and components which composed the ECU as
of the last date on which the ECU was used as the unit of account of the EC.
The equivalent of the ECU in the Chosen Currency shall be calculated by, first,
aggregating the U.S. dollar equivalents of the Components; and then, in the case
of a Chosen Currency other than U.S. dollars, using the rate used for
determining the U.S. dollar equivalents of the Components in the Chosen Currency
as set forth below, calculating the equivalent in the Chosen Currency of such
aggregate amount in U.S. dollars.
The U.S. dollar equivalent of each of the Components shall be middle spot
delivery quotations (or the average thereof, if more than one bank is
consulted), as determined by the Exchange Rate Agent to be prevailing at 2:30
p.m., Luxembourg time, on the Day of Valuation, as obtained by the Exchange Rate
Agent from one or more major banks, as selected by the Company or its agent, in
the country of issue of the component currency in question.
If for any reason no direct quotations are available for a Component as of
a Day of Valuation from any of the banks selected for this purpose, in computing
the U.S. dollar equivalent of such Component, the Exchange Rate Agent shall
(except as provided below) use the most recent direct quotations for such
Component obtained by it or on its behalf, provided that such quotations were
prevailing in the country of issue not more than two Business Days before such
Day of Valuation. If such most recent quotations were so prevailing in the
country of issue more than two Business Days before such Day of Valuation, the
Exchange Rate Agent shall determine the U.S. dollar equivalent of
<PAGE>
Page 24
such Component on the basis of cross rates derived from the middle spot delivery
quotations for such component currency and for the delivery quotations for such
component currency and for the U.S. dollar prevailing at 2:30 p.m. Luxembourg
time on such Day of Valuation, as obtained by, or on behalf of, the Exchange
Rate Agent from one or more major banks, as selected by the Company or its
agent, in a country other than the country of issue of such component currency.
Notwithstanding the foregoing, the Exchange Rate Agent shall determine the U.S.
dollar equivalent of such Component on the basis of such cross rates if the
Company or its agent judges that the equivalent so calculated is more
representative than the U.S. dollar equivalent calculated as provided in the
first sentence of this paragraph. Unless otherwise specified by the Company or
its agent, if there is more than one market for dealing in any component
currency by reason of foreign exchange regulations or for any other reason, the
market to be referred to in respect of such currency shall be that upon which a
non-resident issuer of notes denominated in such currency would purchase such
currency in order to make payments in respect of such notes.]/13/
All determinations made by the Company or its agent shall be at such
person's sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on the Company and all holders of Notes.
So long as this Note shall be outstanding, the Company will cause to be
maintained an office or agency for the payment of the principal of and premium,
if any, and interest on this Note as herein provided in London, England, [and in
Luxembourg]/14/ [and in Paris, France]/15/ and an office or agency in London for
the transfer and exchange as aforesaid of the Notes. The Company may designate
other agencies for the payment of said principal, premium and interest at such
place or places outside the United States (subject to applicable laws and
regulations) as the Company may decide. So long as there shall be any such
agency, the Company shall keep the Fiscal and Paying Agent advised of the names
and locations of such agencies, if any are so designated.
With respect to moneys paid by the Company and held by the Fiscal and
Paying Agent or any Paying Agent for the payment of the principal of or interest
or premium, if any, on any Note that remain unclaimed at the end of three years
after such principal, interest or premium shall have become due and payable
(whether at maturity or upon call for redemption or otherwise), (i) the Fiscal
and Paying Agent or such Paying Agent shall notify the holders of such Notes
that such moneys shall be repaid to the Company and any person claiming such
moneys shall thereafter look only to the Company for payment thereof and (ii)
such moneys shall be so repaid to the Company. Upon such repayment all
liability of the Fiscal and Paying Agent or such Paying Agent with respect to
such moneys shall thereupon cease, without, however, limiting in any way any
obligation that the Company may have to pay the principal of or interest or
premium, if any, on this Note as the same shall become due.
- --------------------
/13/ Include all of the above provisions relating to ECU only if Note is
denominated in ECU.
/14/ Include if Note is listed on Luxembourg Stock Exchange.
/15/ Include if Note is denominated in French Francs and listed on Paris Bourse.
<PAGE>
Page 25
No provision of this Note or of the Fiscal Agency Agreement shall alter or
impair the obligation of the Company, which is absolute and unconditional, to
pay the principal of, premium, if any, and interest on this Note at the time,
place, and rate, and in the coin or currency, herein and in the Fiscal Agency
Agreement prescribed unless otherwise agreed between the Company and the holder
of this Note.
No recourse shall be had for the payment of the principal of, or premium,
if any, or the interest on this Note, for any claim based hereon, or otherwise
in respect hereof, or based on or in respect of the Fiscal Agency Agreement or
any fiscal agency agreement supplemental thereto, against any incorporator,
shareholder, officer or director, as such, past, present or future, of the
Company or of any successor corporation, either directly or through the Company
or any successor corporation, whether by virtue of any constitution, statute or
rule of law or by the enforcement of any assessment or penalty or otherwise, all
such liability being, by the acceptance hereof and as part of the consideration
for the issue hereof, expressly waived and released.
This Note shall for all purposes be governed by, and construed in
accordance with, the laws of the State of New York.
As used herein:
(a) the term "Amortized Amount" is the original issue discount
amortized from the Original Issue Date of the predecessor global Note to
the date of redemption or declaration, as the case may be, which
amortization shall be calculated using the "constant yield method"
(computed in accordance with the rules under the Internal Revenue Code of
1986, as amended, and the regulations thereunder, in effect on the date of
redemption or declaration, as the case may be);
(b) the term "Business Day" means, unless otherwise specified in
the applicable Pricing Supplement, any day other than a Saturday or Sunday
or any other day on which banking institutions are generally authorized or
obligated by law or regulation to close in (i) the principal financial
center of the country in which the Company is incorporated, (ii) the
principal financial center of the country of the currency in which the
Notes are denominated, (iii) the place at which payment on such Note or
coupon is to be made and (iv) London, England[; provided, however, that
with respect to Notes denominated in ECUs, such day is not a day that is a
non-ECU clearing day as determined by the ECU Banking Association in Paris,
France]/16/. For purposes of this definition, the principal financial
center of the United States is New York;
(c) the term "Notices" refers to:
(1) notices to holders of the Notes to be given by
publication in a daily newspaper in the English language of general
circulation in London and, if the Series of which this Note forms a
part is listed on the Luxembourg Stock Exchange and such
- ---------------------
/16/ Include only if Note is denominated in ECU.
<PAGE>
Page 26
Exchange so requires, in a daily newspaper in Luxembourg or, if
publication in either London or Luxembourg is not practical, elsewhere
in Western Europe. Such publication is expected to be made in the
Financial Times and (if such Series is listed on the Luxembourg Stock
---------------
Exchange) the Luxemburger Wort. Such notices will be deemed to have
----------- ----
been given on the date of such publication, or if published in such
newspapers on different dates, on the date of the first such
publication;
(2) notices to holders of any Notes denominated in
French francs or denominated in another currency or currencies that
are linked, directly or indirectly to French francs and that are
listed on the Paris Bourse, to be given by publication in a French
language daily newspaper of general circulation in Paris (which is
expected to be La Tribune Desfosses). Such notices will comply with
--------------------
the applicable rules of the Paris Bourse; and
(3) notices to holders of any Notes denominated in Dutch
guilder that are listed on the Amsterdam Stock Exchange to be given by
publication in a leading daily newspaper in the English language of
general circulation in Amsterdam and London and if such Notes are
listed on the Amsterdam Stock Exchange and such Exchange so requires,
also published in the Official Price List ("Officiele Prijscourant").
If publication in London or Amsterdam, as the case may be, is not
practical, such publication shall be made elsewhere in Western Europe.
Such publication is expected to be made in the Financial Times in
London and the Het Financieele Dagblad in Amsterdam. Such notices will
be deemed to have been given on the date of such publication or if
published in such newspapers on different dates, on the date of the
first such publication;
(d) the term "United States" means the United States of America
(including the States and the District of Columbia), its territories, its
possessions and other areas subject to its jurisdiction;
(e) the term "United States Alien" means any person who, for United
States federal income tax purposes, is a foreign corporation, a non-
resident alien individual, a nonresident alien fiduciary of a foreign
estate or trust, or a foreign partnership, one or more of the members of
which is a foreign corporation, a non-resident alien individual or a non-
resident alien fiduciary of a foreign estate or trust;
(f) the term "Certification" means a certificate substantially in the
form of Exhibit B-2 hereto delivered by the Euroclear Operator or Cedel
Bank, as the case may be, which certificate is based on a certificate
substantially in the form of Exhibit B-1 hereto provided to it by its
account holders; and
(g) all other terms used in this Note which are defined in the Fiscal
Agency Agreement and not otherwise defined herein shall have the meanings
assigned to them in the Fiscal Agency Agreement.
<PAGE>
Page 27
OPTION TO ELECT REPAYMENT
The undersigned hereby irrevocably request(s) the Issuer to repay the within
Note (or portion thereof specified below) pursuant to its terms at a price equal
to the principal amount thereof, together with interest to the Optional
Repayment Date, to the undersigned, at ______________________ (Please print or
typewrite name and address of the undersigned).
If less than the entire principal amount of the within Note is to be repaid,
specify the portion thereof (which shall be increments of 1,000 units of the
Specified Currency indicated on the face hereof) which the holder elects to have
repaid: ____________________; and specify the denomination or denominations
(which shall not be less than the minimum authorized denomination) of the Notes
to be issued to the holder for the portion of the within Note not being repaid
(in the absence of any such specification, one such Note will be issued for the
portion not being repaid):
___________________________.
Date: __________________________
NOTICE: The signature on this Option to Elect
Repayment must correspond with the name as written
upon the face of the within instrument in every
particular without alteration or enlargement.
<PAGE>
SCHEDULE A
----------
EXCHANGE FOR DEFINITIVE BEARER NOTES, DEFINITIVE
REGISTERED NOTES AND FROM TEMPORARY GLOBAL NOTE
The Initial Principal Amount of this Note is ________. The following
payments of interest and exchanges of a part of this Permanent Global Fixed Rate
Bearer Note for definitive Bearer Notes and Registered Notes, and from Temporary
Global Notes have been made:
<TABLE>
<CAPTION>
Principal Principal Remaining
Principal (Face)/9/ (Face)/9/ Principal
(Face)/9/ Amount Amount (Face)/9/ Notation
Amount Exchanged Exchanged Amount Made by or
Date of Exchanged For For Outstanding on behalf of
Exchange or From Definitive Definitive Following Fiscal and
Interest Payment of Temporary Bearer Registered Such Paying
Payment Interest Global Notes Notes Notes Exchange Agent
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
=======================================================================================================
</TABLE>
__________________________
/9/ To be used if Note has dual-currency or index feature.
<PAGE>
[FORM OF CERTIFICATE TO BE GIVEN BY AN ACCOUNT
HOLDER OF THE EUROCLEAR OPERATOR AND CEDEL BANK]
EXHIBIT B-1
-----------
CERTIFICATE
------------------------
General Electric Capital Corporation
[Euro Medium-Term Notes]/17/ [Debt Securities] /18/
Represented by Permanent Global Note No. __.
This is to certify that as of the date hereof, and except as set forth
below, the above-captioned Notes held by you for our account (i) are owned by
person(s) requesting definitive [Registered/Bearer] Notes in exchange for their
interests in the above-referenced permanent global Note and (ii) such persons
desire to exchange _____ principal amount of the above-captioned Notes for
definitive [Registered/Bearer] Notes.
We undertake to advise you promptly by tested telex on or prior to the
date on which you intend to submit your certification relating to the Notes held
by you for our account in accordance with your Operating Procedures if any
applicable statement herein is not correct on such date, and in the absence of
any such notification it may be assumed that this certification applies as of
such date.
This certification excepts and does not relate to $________ of such
interest in the above Notes in respect of which we do not desire to exchange for
definitive Notes.
Dated: _______________, 19__
[Name of Account Holder]
By:__________________________________
(Authorized Signatory)
Name:
Title:
- ------------------
/17/ To be inserted if the Note is denominated in pounds sterling and the
Banking Act 1987 (Exempt Transactions) regulations are applicable, or if the
Note is denominated in a currency other than pounds sterling.
/18/ To be inserted if the Note is denominated in pounds sterling and the
Banking Act 1987 (Exempt Transactions) regulations are not applicable.
<PAGE>
[FORM OF CERTIFICATE TO BE GIVEN BY
THE EUROCLEAR OPERATOR AND CEDEL BANK]
EXHIBIT B-2
-----------
CERTIFICATE
-------------------------------
General Electric Capital Corporation
[Euro Medium-Term Notes]/19/ [Debt Securities]/20/
Represented by Permanent Global Note No. ____.
This is to certify that, based solely on certifications we have received in
writing, by tested telex or by electronic transmission from member organizations
appearing in our records as persons being entitled to a portion of the principal
amount set forth below (our "Member Organizations") substantially to the effect
set forth in Exhibit C-1 to the Fiscal and Paying Agency Agreement relating to
such Notes, as of the date hereof, _____________ principal amount of the above-
captioned Notes (i) is owned by person(s) requesting definitive
[Registered/Bearer] Notes in exchange for their interests in the above-
referenced permanent global Note and (ii) such persons desire to exchange ______
principal amount of the above-captioned Notes for definitive [Registered/Bearer]
Notes.
We further certify (i) that we are not making available herewith for exchange
all interests in the permanent global Note excepted as set forth herein and (ii)
that as of the date hereof we have not received any notification from any of our
Member Organizations to the effect that the statements made by such Member
Organizations with respect to any portion of the permanent global Note submitted
herewith are no longer true and cannot be relied upon as the date hereof.
Dated: __________________, 19__
[MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, BRUSSELS OFFICE,
as Operator of the Euroclear System]
[CEDEL BANK, SOCIETE ANONYME]
By:___________________________________
- -------------------------
/19/ To be inserted if the Note is denominated in pounds sterling and the
Banking Act 1987 (Exempt Transactions) regulations are applicable, or if the
Note is denominated in a currency other than pounds sterling.
/20/ To be inserted if the Note is denominated in pounds sterling and the
Banking Act 1987 (Exempt Transactions) regulations are not applicable.
<PAGE>
EXHIBIT 4(g)
March 25, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Subject: General Electric Capital Corporation Annual Report on Form 10-K for
the fiscal year ended December 31, 1998 - File No. 1-6461
Dear Sirs:
Neither General Electric Capital Corporation (the "Corporation") nor any of its
subsidiaries has outstanding any instrument with respect to its long-term debt
that is not registered or filed with the Commission and under which the total
amount of securities authorized exceeds 10% of the total assets of the
registrant and its subsidiaries on a consolidated basis. In accordance with
paragraph (b) (4) (iii) of Item 601 of Regulation S-K (17 CFR ss.229.601), the
Corporation hereby agrees to furnish to the Securities and Exchange Commission,
upon request, a copy of each instrument which defines the rights of holders of
such long-term debt.
Very truly yours,
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ J.A. Parke
--------------------------------
J.A. Parke,
Senior Vice President, Finance
<PAGE>
EXHIBIT 12 (a)
<TABLE>
<CAPTION>
GENERAL ELECTRIC CAPITAL CORPORATION
AND CONSOLIDATED AFFILIATES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
YEARS ENDED DECEMBER 31
--------------------------------------------------------
(Dollar amounts in millions) 1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net earnings ....................................... $ 3,374 $ 2,729 $ 2,632 $ 2,261 $ 1,918
Provision for income taxes ......................... 1,185 997 1,172 1,071 896
Minority interest .................................. 49 40 86 81 109
-------- -------- -------- -------- --------
Earnings before income taxes and minority interest . 4,608 3,766 3,890 3,413 2,923
-------- -------- -------- -------- --------
Fixed charges:
Interest .......................................... 8,772 7,440 7,114 6,520 4,464
One-third of rentals .............................. 289 240 177 170 153
-------- -------- -------- -------- --------
Total fixed charges ................................ 9,061 7,680 7,291 6,690 4,617
-------- -------- -------- -------- --------
Less interest capitalized, net of amortization ..... 88 52 41 21 9
-------- -------- -------- -------- --------
Earnings before income taxes and minority
interest plus fixed charges ....................... $ 13,581 $ 11,394 $ 11,140 $ 10,082 $ 7,531
======== ======== ======== ======== ========
Ratio of earnings to fixed charges ................. 1.50 1.48 1.53 1.51 1.63
======== ======== ======== ======== ========
</TABLE>
<PAGE>
EXHIBIT 12 (b)
<TABLE>
<CAPTION>
GENERAL ELECTRIC CAPITAL CORPORATION
AND CONSOLIDATED AFFILIATES
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
YEARS ENDED DECEMBER 31
--------------------------------------------------------
(Dollar amounts in millions) 1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net earnings ....................................... $ 3,374 $ 2,729 $ 2,632 $ 2,261 $ 1,918
Provision for income taxes ......................... 1,185 997 1,172 1,071 896
Minority interest .................................. 49 40 86 81 109
-------- -------- -------- -------- --------
Earnings before income taxes and minority interest . 4,608 3,766 3,890 3,413 2,923
-------- -------- -------- -------- --------
Fixed charges:
Interest .......................................... 8,772 7,440 7,114 6,520 4,464
One-third of rentals .............................. 289 240 177 170 153
-------- -------- -------- -------- --------
Total fixed charges ................................ 9,061 7,680 7,291 6,690 4,617
-------- -------- -------- -------- --------
Less interest capitalized, net of amortization ..... 88 52 41 21 9
-------- -------- -------- -------- --------
Earnings before income taxes and minority
interest plus fixed charges ....................... $ 13,581 $ 11,394 $ 11,140 $ 10,082 $ 7,531
======== ======== ======== ======== ========
Preferred stock dividend requirements .............. $ 97 $ 78 $ 76 $ 57 $ 30
Ratio of earnings before provision for income
taxes to net earnings ............................. 1.35 1.37 1.45 1.47 1.47
-------- -------- -------- -------- --------
Preferred stock dividend factor on pre-tax basis ... 131 107 110 84 44
Fixed charges ...................................... 9,061 7,680 7,291 6,690 4,617
-------- -------- -------- -------- --------
Total fixed charges and preferred stock dividend
requirements ...................................... $ 9,192 $ 7,787 $ 7,401 $ 6,774 $ 4,661
======== ======== ======== ======== ========
Ratio of earnings to combined fixed charges and
preferred stock dividends ........................ 1.48 1.46 1.51 1.49 1.62
======== ======== ======== ======== ========
</TABLE>
<PAGE>
EXHIBIT 23 (ii)
To the Board of Directors
General Electric Capital Corporation:
We consent to incorporation by reference in the Registration Statements (Nos.
33-43420, 33-51793, 333-22265, 333-59707 and 333-59977) on Form S-3 of General
Electric Capital Corporation, and in the Registration Statement (No. 33-39596)
on Form S-3 jointly filed by General Electric Capital Corporation and General
Electric Company, of our report dated February 12, 1999, relating to the
statement of financial position of General Electric Capital Corporation and
consolidated affiliates as of December 31, 1998 and 1997, and the related
statements of earnings, changes in share owners' equity and cash flows for each
of the years in the three-year period ended December 31, 1998, and the related
schedule, which report appears in the December 31, 1998 annual report on Form
10-K of General Electric Capital Corporation.
/s/ KPMG LLP
Stamford, Connecticut
March 25, 1999
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, being directors
and/or officers of General Electric Capital Corporation, a New York corporation
(the "Corporation"), hereby constitutes and appoints Denis J. Nayden, James A.
Parke, Joan C. Amble and Nancy E. Barton, and each of them, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead in any and all capacities, to sign one
or more Annual Reports for the Corporation's fiscal year ended December 31,
1998, on Form 10-K under the Securities Exchange Act of 1934, as amended, or
such other form as such attorney-in-fact may deem necessary or desirable, any
amendments thereto, and all additional amendments thereto in such form as they
or any one of them may approve, and to file the same with all exhibits thereto
and other documents in connection therewith with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done to the end that such Annual Report or Annual
Reports shall comply with the Securities Exchange Act of 1934, as amended, and
the applicable Rules and Regulations of the Securities and Exchange Commission
adopted or issued pursuant thereto, as fully and to all intents and purposes as
he might or could in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them or their or his substitute or
resubstitute, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has hereunto set his hand this 25th
day of March, 1999.
/s/ Denis J. Nayden /s/ James A. Parke
- ----------------------------- -----------------------------
Denis J. Nayden, James A. Parke,
Director, President Director and Senior Vice
and Chief Executive Officer President, Finance
(Principal Executive Officer) (Principal Financial Officer)
/s/ Joan C. Amble
-----------------------------
Joan C. Amble,
Vice President and Controller
(Principal Accounting Officer)
(Page 1 of 2)
<PAGE>
/s/ Nigel D.T. Andrews /s/ John H. Myers
- ----------------------------- -----------------------------
Nigel D.T. Andrews, John H. Myers,
Director Director
/s/ Nancy E. Barton /s/ Robert L. Nardelli
- ----------------------------- -----------------------------
Nancy E. Barton, Robert L. Nardelli,
Director Director
/s/ James R. Bunt /s/ Michael A. Neal
- ----------------------------- -----------------------------
James R. Bunt, Michael A. Neal,
Director Director
/s/ David M. Cote /s/ John M. Samuels
- ----------------------------- -----------------------------
David M. Cote, John M. Samuels,
Director Director
/s/ Dennis D. Dammerman /s/ Keith S. Sherin
- ----------------------------- -----------------------------
Dennis D. Dammerman, Keith S. Sherin,
Director Director
/s/ Benjamin W. Heineman, Jr.
- ----------------------------- -----------------------------
Benjamin W. Heineman, Jr., Edward D. Stewart,
Director Director
/s/ Jeffrey R. Immelt /s/ John F. Welch, Jr.
- ----------------------------- -----------------------------
Jeffrey R. Immelt, John F. Welch, Jr.,
Director Director
/s/ W. James McNerney, Jr.
- -----------------------------
W. James McNerney, Jr.,
Director
A MAJORITY OF THE BOARD OF DIRECTORS
(Page 2 of 2)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED DECEMBER 31, 1998, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000040554
<NAME> GENERAL ELECTRIC CAPITAL CORPORATION
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 3,080
<SECURITIES> 57,275
<RECEIVABLES> 124,330
<ALLOWANCES> 3,272
<INVENTORY> 744
<CURRENT-ASSETS> 0
<PP&E> 32,492
<DEPRECIATION> 8,675
<TOTAL-ASSETS> 269,050
<CURRENT-LIABILITIES> 0
<BONDS> 58,183
0
2
<COMMON> 768
<OTHER-SE> 20,299
<TOTAL-LIABILITY-AND-EQUITY> 269,050
<SALES> 7,374
<TOTAL-REVENUES> 41,405
<CGS> 6,777
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 11,663
<LOSS-PROVISION> 1,601
<INTEREST-EXPENSE> 8,618
<INCOME-PRETAX> 4,559
<INCOME-TAX> 1,185
<INCOME-CONTINUING> 3,374
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,374
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
<PAGE>
F-1
ANNUAL REPORT PAGE 25
- ---------------------
FINANCIAL SECTION
CONTENTS
32 INDEPENDENT AUDITORS' REPORT
AUDITED FINANCIAL STATEMENTS
26 Earnings
26 Changes in Share Owners' Equity
28 Financial Position
30 Cash Flows
48 Notes to Consolidated Financial Statements
MANAGEMENT'S DISCUSSION
32 Financial Responsibility
33 Operations
33 Consolidated Operations
35 Segment Operations
40 International Operations
42 Financial Resources and Liquidity
46 Selected Financial Data
[CHART HERE]
CONSOLIDATED REVENUES
- -----------------------------------------------------------------------------
(IN BILLIONS) 1994 1995 1996 1997 1998
- -----------------------------------------------------------------------------
$60.109 $70.028 $79.179 $90.840 $100.469
- -----------------------------------------------------------------------------
[CHART HERE]
EARNINGS PER SHARE FROM CONTINUING OPERATIONS
- -----------------------------------------------------------------------------
(IN DOLLARS) 1994 1995 1996 1997 1998
- -----------------------------------------------------------------------------
$1.71 $1.93 $2.16 $2.46 $2.80
- -----------------------------------------------------------------------------
[CHART HERE]
DIVIDENDS DECLARED PER SHARE
- -----------------------------------------------------------------------------
(IN DOLLARS) 1994 1995 1996 1997 1998
- -----------------------------------------------------------------------------
$0.745 $0.845 $0.95 $1.08 $1.25
- -----------------------------------------------------------------------------
<PAGE>
F-2
ANNUAL REPORT PAGE 26
- ---------------------
<TABLE>
STATEMENT OF EARNINGS
<CAPTION>
General Electric Company
and consolidated affiliates
----------------------------------
For the years ended December 31 (In millions;
per-share amounts in dollars) 1998 1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Sales of goods $ 43,749 $ 40,675 $ 36,106
Sales of services 14,938 12,729 11,791
Other income (note 2) 649 2,300 638
Earnings of GECS -- -- --
GECS revenues from services (note 3) 41,133 35,136 30,644
----------------------------------
Total revenues 100,469 90,840 79,179
----------------------------------
COSTS AND EXPENSES (note 4)
Cost of goods sold 31,772 30,889 26,298
Cost of services sold 10,508 9,199 8,293
Interest and other financial charges 9,753 8,384 7,904
Insurance losses and policyholder and annuity benefits 9,608 8,278 6,678
Provision for losses on financing receivables (note 7) 1,609 1,421 1,033
Other costs and expenses 23,477 21,250 17,898
Minority interest in net earnings of consolidated affiliates 265 240 269
----------------------------------
Total costs and expenses 86,992 79,661 68,373
----------------------------------
EARNINGS BEFORE INCOME TAXES 13,477 11,179 10,806
Provision for income taxes (note 8) (4,181) (2,976) (3,526)
----------------------------------
NET EARNINGS $ 9,296 $ 8,203 $ 7,280
===================================================================================================
PER-SHARE AMOUNTS (note 9)
Diluted earnings per share $ 2.80 $ 2.46 $ 2.16
Basic earnings per share $ 2.84 $ 2.50 $ 2.20
- ---------------------------------------------------------------------------------------------------
DIVIDENDS DECLARED PER SHARE $ 1.25 $ 1.08 $ 0.95
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
F-3
ANNUAL REPORT PAGE 27
- ---------------------
<TABLE>
STATEMENT OF EARNINGS (continued)
<CAPTION>
GE GECS
For the years ended December 31 (In millions; ------------------------------ -------------------------------
per-share amounts in dollars) 1998 1997 1996 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Sales of goods $ 36,376 $ 36,059 $ 34,196 $ 7,374 $ 4,622 $ 1,926
Sales of services 15,170 12,893 11,923 -- -- --
Other income (note 2) 684 2,307 629 -- -- --
Earnings of GECS 3,796 3,256 2,817 -- -- --
GECS revenues from services (note 3) -- -- -- 41,320 35,309 30,787
------------------------------- -------------------------------
Total revenues 56,026 54,515 49,565 48,694 39,931 32,713
------------------------------- -------------------------------
COSTS AND EXPENSES (note 4)
Cost of goods sold 24,996 26,747 24,594 6,777 4,147 1,720
Cost of services sold 10,740 9,363 8,425 -- -- --
Interest and other financial charges 883 797 595 8,966 7,649 7,326
Insurance losses and policyholder and annuity benefits -- -- -- 9,608 8,278 6,678
Provision for losses on financing receivables (note 7) -- -- -- 1,609 1,421 1,033
Other costs and expenses 7,177 7,476 6,274 16,426 13,893 11,741
Minority interest in net earnings of consolidated affiliates 117 119 102 148 121 167
------------------------------- -------------------------------
Total costs and expenses 43,913 44,502 39,990 43,534 35,509 28,665
------------------------------- -------------------------------
EARNINGS BEFORE INCOME TAXES 12,113 10,013 9,575 5,160 4,422 4,048
Provision for income taxes (note 8) (2,817) (1,810) (2,295) (1,364) (1,166) (1,231)
------------------------------- -------------------------------
NET EARNINGS $ 9,296 $ 8,203 $ 7,280 $ 3,796 $ 3,256 $ 2,817
====================================================================================================================================
<FN>
In the consolidating data on this page, "GE" means the basis of consolidation as
described in note 1 to the consolidated financial statements; "GECS" means
General Electric Capital Services, Inc. and all of its affiliates and associated
companies. Transactions between GE and GECS have been eliminated from the
"General Electric Company and consolidated affiliates" columns on page 26.
1997 restructuring and other special charges are included in the following GE
captions: "Cost of goods sold" -- $1,364 million; "Cost of services sold" --
$250 million; and "Other costs and expenses" -- $708 million.
</FN>
</TABLE>
<TABLE>
CONSOLIDATED STATEMENT OF CHANGES IN SHARE OWNERS' EQUITY
<CAPTION>
-------------------------------
(In millions) 1998 1997 1996
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CHANGES IN SHARE OWNERS' EQUITY
Balance at January 1 $ 34,438 $ 31,125 $ 29,609
-------------------------------
Dividends and other transactions with share owners (note 25) (5,178) (5,615) (5,318)
-------------------------------
Changes other than transactions with share owners
Increases attributable to net earnings 9,296 8,203 7,280
Unrealized gains (losses) on investment securities-- net (note 25) 264 1,467 (329)
Currency translation adjustments (note 25) 60 (742) (117)
-------------------------------
Total changes other than transactions with share owners 9,620 8,928 6,834
-------------------------------
Balance at December 31 $ 38,880 $ 34,438 $ 31,125
======================================================================================================
<FN>
The notes to consolidated financial statements on pages 48-68 are an integral
part of these statements.
</FN>
</TABLE>
<PAGE>
F-4
ANNUAL REPORT PAGE 28
- ---------------------
<TABLE>
STATEMENT OF FINANCIAL POSITION
<CAPTION>
General Electric Company
and consolidated affiliates
---------------------------
At December 31 (In millions) 1998 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and equivalents $ 4,317 $ 5,861
Investment securities (note 10) 78,717 70,621
Current receivables (note 11) 8,224 8,924
Inventories (note 12) 6,049 5,895
Financing receivables (investments in time sales, loans and
financing leases) -- net (notes 7 and 13) 121,566 103,799
Other GECS receivables (note 14) 24,789 17,655
Property, plant and equipment (including equipment leased
to others) -- net (note 15) 35,730 32,316
Investment in GECS -- --
Intangible assets -- net (note 16) 23,635 19,121
All other assets (note 17) 52,908 39,820
---------------------------
TOTAL ASSETS $ 355,935 $ 304,012
===========================================================================================
LIABILITIES AND EQUITY
Short-term borrowings (note 19) $ 115,378 $ 98,075
Accounts payable, principally trade accounts 12,502 10,407
Progress collections and price adjustments accrued 2,765 2,316
Dividends payable 1,146 979
All other GE current costs and expenses accrued (note 18) 9,788 8,891
Long-term borrowings (note 19) 59,663 46,603
Insurance liabilities, reserves and annuity benefits (note 20) 77,259 67,270
All other liabilities (note 21) 24,939 22,700
Deferred income taxes (note 22) 9,340 8,651
---------------------------
Total liabilities 312,780 265,892
---------------------------
Minority interest in equity of consolidated
affiliates (note 23) 4,275 3,682
---------------------------
Accumulated unrealized gains on investment securities-- net (a) 2,402 2,138
Accumulated currency translation adjustments (a) (738) (798)
Common stock (3,271,296,000 and 3,264,592,000 shares outstanding
at year-end 1998 and 1997, respectively) 594 594
Other capital 6,808 4,434
Retained earnings 48,553 43,338
Less common stock held in treasury (18,739) (15,268)
---------------------------
Total share owners' equity (notes 25 and 26) 38,880 34,438
---------------------------
TOTAL LIABILITIES AND EQUITY $ 355,935 $ 304,012
===========================================================================================
<FN>
The notes to consolidated financial statements on pages 48-68 are an integral
part of this statement.
(a) The sum of accumulated unrealized gains on investment securities and
accumulated currency translation adjustments constitutes "Accumulated
nonowner changes other than earnings," as shown in note 25, and was $1,664
million and $1,340 million at year-end 1998 and 1997, respectively.
</FN>
</TABLE>
<PAGE>
F-5
ANNUAL REPORT PAGE 29
- ---------------------
<TABLE>
STATEMENT OF FINANCIAL POSITION (continued)
<CAPTION>
GE GECS
------------------------ ----------------------
At December 31 (In millions) 1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Cash and equivalents $ 1,175 $ 1,157 $ 3,342 $ 4,904
Investment securities (note 10) 259 265 78,458 70,356
Current receivables (note 11) 8,483 9,054 -- --
Inventories (note 12) 5,305 5,109 744 786
Financing receivables (investments in time sales, loans and
financing leases) -- net (notes 7 and 13) -- -- 121,566 103,799
Other GECS receivables (note 14) -- -- 25,973 18,332
Property, plant and equipment (including equipment leased
to others) -- net (note 15) 11,694 11,118 24,036 21,198
Investment in GECS 19,727 17,239 -- --
Intangible assets -- net (note 16) 9,996 8,755 13,639 10,366
All other assets (note 17) 18,031 14,729 35,539 25,667
------------------------ ----------------------
TOTAL ASSETS $ 74,670 $ 67,426 $ 303,297 $ 255,408
====================================================================================================================================
LIABILITIES AND EQUITY
Short-term borrowings (note 19) $ 3,466 $ 3,629 $ 113,162 $ 95,274
Accounts payable, principally trade accounts 4,845 4,779 8,815 6,490
Progress collections and price adjustments accrued 2,765 2,316 -- --
Dividends payable 1,146 979 -- --
All other GE current costs and expenses accrued (note 18) 9,708 8,763 -- --
Long-term borrowings (note 19) 681 729 59,038 45,989
Insurance liabilities, reserves and annuity benefits (note 20) -- -- 77,259 67,270
All other liabilities (note 21) 12,613 11,539 12,247 11,067
Deferred income taxes (note 22) (250) (315) 9,590 8,966
------------------------ ----------------------
Total liabilities 34,974 32,419 280,111 235,056
------------------------ ----------------------
Minority interest in equity of consolidated affiliates (note 23) 816 569 3,459 3,113
------------------------ ----------------------
Accumulated unrealized gains on investment securities -- net (a) 2,402 2,138 2,376 2,135
Accumulated currency translation adjustments (a) (738) (798) (215) (185)
Common stock (3,271,296,000 and 3,264,592,000 shares outstanding
at year-end 1998 and 1997, respectively) 594 594 1 1
Other capital 6,808 4,434 2,490 2,337
Retained earnings 48,553 43,338 15,075 12,951
Less common stock held in treasury (18,739) (15,268) -- --
------------------------ ----------------------
Total share owners' equity (notes 25 and 26) 38,880 34,438 19,727 17,239
------------------------ ----------------------
TOTAL LIABILITIES AND EQUITY $ 74,670 $ 67,426 $ 303,297 $ 255,408
====================================================================================================================================
<FN>
In the consolidating data on this page, "GE" means the basis of consolidation as
described in note 1 to the consolidated financial statements; "GECS" means
General Electric Capital Services, Inc. and all of its affiliates and associated
companies. Transactions between GE and GECS have been eliminated from the
"General Electric Company and consolidated affiliates" columns on page 28.
</FN>
</TABLE>
<PAGE>
F-6
ANNUAL REPORT PAGE 30
- ---------------------
<TABLE>
STATEMENT OF CASH FLOWS
<CAPTION>
General Electric Company
and consolidated affiliates
---------------------------------
For the years ended December 31 (In millions) 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 9,296 $ 8,203 $ 7,280
Adjustments to reconcile net earnings to cash provided
from operating activities
Depreciation and amortization of property, plant and equipment 4,377 4,082 3,785
Amortization of goodwill and other intangibles 1,483 1,187 983
Earnings retained by GECS -- -- --
Deferred income taxes 1,143 284 1,145
Decrease in GE current receivables 649 250 118
Decrease (increase) in inventories 150 (386) (134)
Increase (decrease) in accounts payable 1,576 200 641
Increase in insurance liabilities, reserves and annuity benefits 3,670 1,669 1,491
Provision for losses on financing receivables 1,609 1,421 1,033
All other operating activities (4,593) (2,670) 1,509
---------------------------------
CASH FROM OPERATING ACTIVITIES 19,360 14,240 17,851
---------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (8,982) (8,388) (7,760)
Dispositions of property, plant and equipment 4,043 2,251 1,363
Net increase in GECS financing receivables (6,301) (1,898) (2,278)
Payments for principal businesses purchased (18,610) (5,245) (5,516)
All other investing activities (10,283) (4,995) (6,021)
---------------------------------
CASH USED FOR INVESTING ACTIVITIES (40,133) (18,275) (20,212)
---------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in borrowings (maturities of 90 days or less) 16,881 13,684 11,827
Newly issued debt (maturities longer than 90 days) 42,008 21,249 23,153
Repayments and other reductions (maturities longer than 90 days) (32,814) (23,787) (25,906)
Net purchase of GE shares for treasury (2,819) (2,815) (2,323)
Dividends paid to share owners (3,913) (3,411) (3,050)
All other financing activities (114) 785 28
---------------------------------
CASH FROM (USED FOR) FINANCING ACTIVITIES 19,229 5,705 3,729
---------------------------------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS DURING YEAR (1,544) 1,670 1,368
Cash and equivalents at beginning of year 5,861 4,191 2,823
---------------------------------
Cash and equivalents at end of year $ 4,317 $ 5,861 $ 4,191
=========================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION
Cash paid during the year for interest $ (9,297) $ (8,264) $ (7,874)
Cash paid during the year for income taxes (2,098) (1,937) (1,392)
=========================================================================================================
<FN>
The notes to consolidated financial statements on pages 48-68 are an integral
part of this statement.
</FN>
</TABLE>
<PAGE>
F-7
ANNUAL REPORT PAGE 31
- ---------------------
<TABLE>
STATEMENT OF CASH FLOWS (continued)
<CAPTION>
GE GECS
----------------------------- -------------------------------
For the years ended December 31 (In millions) 1998 1997 1996 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 9,296 $ 8,203 $ 7,280 $ 3,796 $ 3,256 $ 2,817
Adjustments to reconcile net earnings to cash provided
from operating activities
Depreciation and amortization of property, plant and equipment 1,761 1,622 1,635 2,616 2,460 2,150
Amortization of goodwill and other intangibles 531 407 328 952 780 655
Earnings retained by GECS (2,124) (1,597) (1,836) -- -- --
Deferred income taxes 594 (514) 68 549 798 1,077
Decrease in GE current receivables 520 215 152 -- -- --
Decrease (increase) in inventories 69 (145) (76) 81 (244) (58)
Increase (decrease) in accounts payable 199 237 197 1,673 (64) 318
Increase in insurance liabilities, reserves and annuity benefits -- -- -- 3,670 1,669 1,491
Provision for losses on financing receivables -- -- -- 1,609 1,421 1,033
All other operating activities (814) 889 1,319 (3,991) (3,851) 284
----------------------------- -------------------------------
CASH FROM OPERATING ACTIVITIES 10,032 9,317 9,067 10,955 6,225 9,767
----------------------------- -------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (2,047) (2,191) (2,389) (6,935) (6,197) (5,371)
Dispositions of property, plant and equipment 6 39 30 4,037 2,212 1,333
Net increase in GECS financing receivables -- -- -- (6,301) (1,898) (2,278)
Payments for principal businesses purchased (1,455) (1,425) (1,122) (17,155) (3,820) (4,394)
All other investing activities 477 483 (106) (11,078) (5,646) (6,090)
----------------------------- -------------------------------
CASH USED FOR INVESTING ACTIVITIES (3,019) (3,094) (3,587) (37,432) (15,349) (16,800)
----------------------------- -------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in borrowings (maturities of 90 days or less) 1,015 809 974 16,288 13,594 11,026
Newly issued debt (maturities longer than 90 days) 509 424 252 41,440 20,825 22,901
Repayments and other reductions (maturities longer than 90 days) (1,787) (1,030) (1,250) (31,027) (22,757) (24,656)
Net purchase of GE shares for treasury (2,819) (2,815) (2,323) -- -- --
Dividends paid to share owners (3,913) (3,411) (3,050) (1,672) (1,653) (981)
All other financing activities -- -- -- (114) 785 28
----------------------------- -------------------------------
CASH FROM (USED FOR) FINANCING ACTIVITIES (6,995) (6,023) (5,397) 24,915 10,794 8,318
----------------------------- -------------------------------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS DURING YEAR 18 200 83 (1,562) 1,670 1,285
Cash and equivalents at beginning of year 1,157 957 874 4,904 3,234 1,949
----------------------------- -------------------------------
Cash and equivalents at end of year $ 1,175 $ 1,157 $ 957 $ 3,342 $ 4,904 $ 3,234
====================================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION
Cash paid during the year for interest $ (620) $ (467) $ (411) $ (8,677) $ (7,797) $ (7,463)
Cash paid during the year for income taxes (1,151) (1,596) (1,286) (947) (341) (106)
====================================================================================================================================
<FN>
In the consolidating data on this page, "GE" means the basis of consolidation as
described in note 1 to the consolidated financial statements; "GECS" means
General Electric Capital Services, Inc. and all of its affiliates and associated
companies. Transactions between GE and GECS have been eliminated from the
"General Electric Company and consolidated affiliates" columns on page 30.
</FN>
</TABLE>
<PAGE>
F-8
ANNUAL REPORT PAGE 32
- ---------------------
MANAGEMENT'S DISCUSSION OF FINANCIAL RESPONSIBILITY
The financial data in this report, including the audited financial statements,
have been prepared by management using the best available information and
applying judgment. Accounting principles used in preparing the financial
statements are those that are generally accepted in the United States.
Management believes that a sound, dynamic system of internal financial
controls that balances benefits and costs provides a vital ingredient for the
Company's Six Sigma quality program as well as the best safeguard for Company
assets. Professional financial managers are responsible for implementing and
overseeing the financial control system, reporting on management's stewardship
of the assets entrusted to it by share owners and maintaining accurate records.
GE is dedicated to the highest standards of integrity, ethics
and social responsibility. This dedication is reflected in written policy
statements covering, among other subjects, environmental protection, potentially
conflicting outside interests of employees, compliance with antitrust laws,
proper business practices, and adherence to the highest standards of conduct and
practices in transactions with the U.S. government. Management continually
emphasizes to all employees that even the appearance of impropriety can erode
public confidence in the Company. Ongoing education and communication programs
and review activities, such as those conducted by the Company's Policy
Compliance Review Board, are designed to create a strong compliance culture --
one that encourages employees to raise their policy questions and concerns and
that prohibits retribution for doing so.
KPMG LLP provides an objective, independent review of management's discharge
of its obligations relating to the fairness of reporting of operating results
and financial condition. Their report for 1998 appears below.
The Audit Committee of the Board (consisting solely of Directors from outside
GE) maintains an ongoing appraisal -- on behalf of share owners -- of the
activities and independence of the Company's independent auditors, the
activities of its internal audit staff, financial reporting process, internal
financial controls and compliance with key Company policies.
John F. Welch, Jr. Keith S. Sherin
Chairman of the Board and Senior Vice President, Finance, and
Chief Executive Officer Chief Financial Officer
February 12, 1999
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
TO SHARE OWNERS AND BOARD OF DIRECTORS OF
GENERAL ELECTRIC COMPANY
We have audited the financial statements of General Electric Company and
consolidated affiliates as listed in Item 14 (a)1 on page 22. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the aforementioned financial statements present fairly, in all
material respects, the financial position of General Electric Company and
consolidated affiliates at December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
KPMG LLP
Stamford, Connecticut
February 12, 1999
<PAGE>
F-9
ANNUAL REPORT PAGE 33
- ---------------------
MANAGEMENT'S DISCUSSION OF OPERATIONS
OVERVIEW
General Electric Company's consolidated financial statements represent the
combination of the Company's manufacturing and nonfinancial services businesses
("GE") and the accounts of General Electric Capital Services, Inc. ("GECS"). See
note 1 to the consolidated financial statements, which explains how the various
financial data are presented.
Management's Discussion of Operations is presented in three parts:
Consolidated Operations, Segment Operations and International Operations.
CONSOLIDATED OPERATIONS
GE achieved record revenues, earnings and cash generation in 1998. This year's
performance again demonstrated the benefits of GE's continuing emphasis on
growth in services, Six Sigma quality and globalization.
Revenues, including acquisitions, rose to a record $100.5 billion in 1998, up
11% from 1997. This increase was primarily attributable to continued growth from
global activities and product services. Revenues were $90.8 billion in 1997, a
15% increase from 1996 attributable primarily to increased global activities and
higher sales of product services.
Earnings increased to a record $9.296 billion, a 13% increase from $8.203
billion reported in 1997. Earnings per share increased to $2.80 during 1998, up
14% from the prior year's $2.46. Except as otherwise noted, earnings per share
are presented on a diluted basis. Earnings in 1997 rose 13% from $7.280 billion
reported in 1996. In 1997, earnings per share increased 14% from $2.16 per share
in 1996. Growth rates in earnings per share exceeded growth rates in earnings as
a result of the ongoing repurchase of shares under the six-year, $17 billion
share repurchase plan initiated in December 1994.
A consolidated statement of changes in share owners' equity is provided on
page 26, summarizing information about movements in equity from transactions
with share owners and other sources. Additional information about such changes
is provided in note 25.
NEW ACCOUNTING STANDARDS issued in 1998 are described below.
Statement of Financial Accounting Standards (SFAS) No. 133, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, requires that, upon adoption, all
derivative instruments (including certain derivative instruments embedded in
other contracts) be recognized in the balance sheet at fair value, and that
changes in such fair values be recognized in earnings unless specific hedging
criteria are met. Changes in the values of derivatives that meet these hedging
criteria will ultimately offset related earnings effects of the hedged items;
effects of certain changes in fair value are recorded in equity pending
recognition in earnings. GE will adopt the Statement on January 1, 2000. The
impact of adoption will be determined by several factors, including the specific
hedging instruments in place and their relationships to hedged items, as well as
market conditions. Management has not estimated the effects of adoption as it
believes that such determination will not be meaningful until closer to the
adoption date.
Statement of Position (SOP) 98-5, REPORTING ON THE COSTS OF START-UP
ACTIVITIES, provides guidance on accounting for start-up costs and organization
costs, which must be expensed as incurred. The SOP, which is consistent with
GE's previous accounting policy, is effective for financial statements beginning
January 1, 1999.
DIVIDENDS DECLARED IN 1998 AMOUNTED TO $4.081 BILLION. Per-share dividends of
$1.25 were up 16% from 1997, following a 14% increase from the preceding year.
GE has rewarded its share owners with 23 consecutive years of dividend growth.
The chart below illustrates that GE's dividend growth for the past five years
has significantly outpaced dividend growth of companies in the Standard & Poor's
500 stock index.
RETURN ON AVERAGE SHARE OWNERS' EQUITY reached 25.7% in 1998, up from 25.0% and
24.0% in 1997 and 1996, respectively.
[CHART HERE]
GE/S&P CUMULATIVE DIVIDEND GROWTH SINCE 1993
- -----------------------------------------------------------------------------
1994 1995 1996 1997 1998
- -----------------------------------------------------------------------------
GE 14.09% 26.41% 40.24% 58.25% 83.53%
S&P 500 4.77 9.62 18.44 23.21 28.78
- -----------------------------------------------------------------------------
<PAGE>
F-10
ANNUAL REPORT PAGE 34
- ---------------------
Except as otherwise noted, the analysis in the remainder of this section
presents GE results with GECS on an equity basis.
GE TOTAL REVENUES were $56.0 billion in 1998, compared with $54.5 billion in
1997 and $49.6 billion in 1996.
o GE sales of goods and services were $51.5 billion in 1998, an increase of 5%
from 1997, which in turn was 6% higher than in 1996. Volume was about 8%
higher in 1998, including acquisitions, reflecting growth in most businesses
during the year. While overall selling prices were down slightly in 1998,
the effects of selling prices on sales in various businesses differed
markedly. Revenues were also negatively affected by exchange rates for sales
denominated in other than U.S. dollars. Volume in 1997 was about 9% higher
than in 1996, with selling price and currency effects both slightly
negative.
For purposes of the required financial statement display of GE sales and
costs of sales on pages 26 and 27, "goods" refers to tangible products, and
"services" refers to all other sales, including broadcasting and information
services activities. An increasingly important element of GE sales relates
to product services, including both spare parts (goods) as well as repair
services. Sales of product services were $12.6 billion in 1998, including
acquisitions, a strong double-digit increase over 1997. Nearly all
businesses reported increases in product services revenues, led by
double-digit increases at Aircraft Engines, Transportation Systems and Power
Systems. Operating margin from product services was approximately $2.8
billion, up from $2.5 billion in 1997. This improvement was primarily
attributable to strong growth at Aircraft Engines and Power Systems.
o GE other income, earned from a wide variety of sources, was $0.7 billion in
1998, $2.3 billion in 1997 and $0.6 billion in 1996. The decrease in other
income in 1998 was primarily attributable to the lack of a current-year
counterpart to the $1,538 million after-tax gain realized in 1997 from
exchanging preferred stock in Lockheed Martin Corporation (Lockheed Martin)
for the stock of a newly formed subsidiary as described in note 2.
o Earnings of GECS were up 17% in 1998, following a 16% increase the year
before. See page 37 for an analysis of these earnings.
PRINCIPAL COSTS AND EXPENSES FOR GE are those classified as costs of goods and
services sold, and selling, general and administrative expenses.
The Six Sigma quality initiative is an important factor affecting GE's cost
structure. The benefits of Six Sigma quality are reflected in both variable and
base cost productivity (discussed on page 35) as well as in lower direct
material costs.
[CHART HERE]
GE OPERATING MARGIN AS A PERCENTAGE OF SALES
- -----------------------------------------------------------------------------
1994 1995 1996 1997 1998
- -----------------------------------------------------------------------------
AS REPORTED 13.6% 14.4% 14.8% 11.0% 16.7%
RESTRUCTURING AND
OTHER SPECIAL
CHARGES - - - 4.7 -
---------------------------------------------------
OPERATING MARGIN
BEFORE RESTRUCTURING
AND OTHER SPECIAL
CHARGES 13.6% 14.4% 14.8% 15.7% 16.7%
- -----------------------------------------------------------------------------
Comparisons between 1998 and 1997 costs and expenses are affected by
restructuring and other special charges amounting to $2,322 million recorded in
the fourth quarter of 1997. Aggregate restructuring charges of $1,243 million
covered certain costs of plans that will enhance GE's global competitiveness
through rationalization of certain production, service and administration
activities of its worldwide industrial businesses; among these charges were $577
million of special early retirement pension, health and life benefit costs,
including a one-time voluntary early retirement program that was provided to the
U.S. work force in the 1997 labor contracts. Also included in restructuring
charges were other severance costs as well as certain costs of exiting affected
properties, including site demolitions, asset write-offs and expected losses on
subleases.
Other special charges amounting to $1,079 million were also recorded in 1997,
principally associated with strategic decisions to enhance the long-term
competitiveness of certain industrial businesses and fourth-quarter developments
arising from past activities at several current and former manufacturing sites
not associated with any current business segments. Such special charges included
$275 million to reflect higher estimated manufacturing costs to fill firm
customer orders for an aircraft engine program and $261 million that related
principally to gas turbine warranty costs and costs arising from renegotiation
and resolution of certain disputes in the Power Systems business.
As discussed on page 35, restructuring and other special charges are not
allocated to segments for purposes of measuring segment profit.
OPERATING MARGIN is sales of goods and services less the costs of goods and
services sold, and selling, general and administrative expenses. GE operating
margin reached a record 16.7% of sales in 1998, compared with 15.7% achieved in
1997 before the effects of restructuring and other special charges, and 14.8% in
1996. Including restructuring and other special charges, GE reported operating
margin of 11.0% of sales in 1997. The improvement in ongoing operating margin in
<PAGE>
F-11
ANNUAL REPORT PAGE 35
- ---------------------
1998 was broad-based, with improvements in a majority of GE's businesses
reflecting the increasing benefits from GE's product services and Six Sigma
quality initiatives.
TOTAL COST PRODUCTIVITY (sales in relation to costs, both on a constant dollar
basis) has paralleled the significant improvement in GE's ongoing operating
margin. Total cost productivity in 1998 was 4.4%, reflecting benefits from the
Six Sigma quality initiative as well as higher volume. Three businesses --
Medical Systems, Power Systems and NBC -- achieved productivity in excess of 5%.
Total cost productivity was 4.2% in 1997, reflecting Six Sigma benefits and the
positive effects of higher volume. In 1997, three businesses -- Power Systems,
NBC and Plastics -- reported productivity in excess of 5%. The total
contribution of productivity in the last two years offset not only the negative
effects of total cost inflation, but also the effects of selling price
decreases.
GE INTEREST AND OTHER FINANCIAL CHARGES in 1998 amounted to $883 million,
compared with $797 million in 1997 and $595 million in 1996. Lower interest
rates in 1998 and 1997 were more than offset by higher average levels of
borrowings and other financing activities.
INCOME TAXES on a consolidated basis were 31.0% of pretax earnings in 1998,
compared with 26.6% in 1997 and 32.6% in 1996. The most significant factor
explaining 1997's lower effective tax rate was the 4.8% decrease attributable to
the realized gain on the tax-free exchange of Lockheed Martin Corporation
preferred stock. A more detailed analysis of the differences between the U.S.
federal statutory rate and the consolidated rate, as well as other information
about income tax provisions, is provided in note 8.
RETURN ON AVERAGE TOTAL CAPITAL INVESTED was 23.9% at year-end 1998, compared
with 23.6% in 1997 and 22.2% in 1996.
SEGMENT OPERATIONS
REVENUES AND SEGMENT PROFIT FOR OPERATING SEGMENTS are shown on page 36. At
year-end 1998, GE adopted SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION, which requires segment data to be measured
and analyzed on a basis that is consistent with how business activities are
reported internally to management. The most significant change from previous
Annual Reports is that restructuring and other special charges are not included
in the measure of segment profit. Previously reported data have been restated as
required by SFAS No. 131. For additional information, including a description of
the products and services included in each segment, see note 28.
AIRCRAFT ENGINES achieved a 32% increase in revenues in 1998, following a 24%
increase in 1997, on higher volume in commercial engines and product services,
including acquisitions, in both years. Operating profit increased 30% in 1998,
and 13% in 1997, largely as a result of strong growth in product services as
well as good volume growth in commercial engines.
In 1998, $1.6 billion of Aircraft Engines revenues were from sales to the
U.S. government, an increase of $0.1 billion from 1997, which was $0.3 billion
lower than in 1996.
Aircraft Engines received orders of $10.8 billion in 1998, up $1.9 billion
from 1997. The backlog at year-end 1998 was $9.7 billion ($9.5 billion at the
end of 1997). Of the total, $7.5 billion related to products, about 52% of which
was scheduled for delivery in 1999, and the remainder related to 1999 product
services.
APPLIANCES revenues were 3% lower than a year ago, reflecting primarily selling
price decreases and, to a lesser extent, lower volume. Operating profit was 2%
lower as the decreases in selling prices and volume more than offset
productivity from Six Sigma. Revenues in 1997 were 4% higher than in 1996,
reflecting primarily acquisition-related volume. Operating profit increased 3%
in 1997, primarily as a result of productivity and higher volume, partially
offset by lower selling prices.
INDUSTRIAL PRODUCTS AND SYSTEMS revenues increased 2% in 1998, primarily as a
result of volume increases at Transportation Systems and Industrial Systems that
were partially offset by lower selling prices across most businesses in the
segment. Operating profit increased 5%, reflecting productivity from Six Sigma
and the improvement in volume, which more than offset the effects of selling
price decreases. Revenues rose 6% in 1997 as improved volume more than offset
weaker pricing across all businesses in the segment. Operating profit increased
13% in 1997, the result of Six Sigma-based productivity and volume improvements
across the segment, which more than offset the effects of lower selling prices.
Transportation Systems received orders of $2.4 billion in 1998, about the
same as in 1997. The backlog at year-end 1998 was $2.3 billion ($2.0 billion at
the end of 1997). Of the total, $2.1 billion related to products, about 83% of
which was scheduled for shipment in 1999, and the remainder related to 1999
product services.
NBC revenues increased 2% in 1998, reflecting higher revenues in NBC's
owned-and-operated stations, including revenues from station acquisitions and
growth in cable operations, the combination of which more than offset lower
network revenues. Operating profit was 11% higher than a year ago as improved
results in international, cable operations and owned-and-operated stations, as
well as cost reductions across NBC, more than offset higher license fees for
certain prime-time programs that were renewed. Revenues decreased 2% in 1997 as
a strong advertising marketplace was more than offset by the absence of a 1997
counterpart to NBC's broadcast of the 1996 Summer Olympic Games. Operating
profit increased 19% in 1997, reflecting improved prime-time pricing, strong
<PAGE>
F-12
ANNUAL REPORT PAGE 36
- ---------------------
<TABLE>
SUMMARY OF OPERATING SEGMENTS
<CAPTION>
General Electric Company and consolidated affiliates
------------------------------------------------------------------
For the years ended December 31 (In millions) 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUES
GE
Aircraft Engines $ 10,294 $ 7,799 $ 6,302 $ 6,098 $ 5,830
Appliances 5,619 5,801 5,586 5,137 5,204
Industrial Products and Systems 11,222 10,984 10,401 10,209 9,375
NBC 5,269 5,153 5,232 3,919 3,361
Plastics 6,633 6,695 6,509 6,647 5,681
Power Systems 8,466 7,915 7,643 6,962 6,357
Technical Products and Services 5,323 4,861 4,700 4,430 4,285
All Other 264 308 291 292 253
Eliminations (1,367) (1,176) (1,032) (1,082) (1,068)
------------------------------------------------------------------
Total GE segment revenues 51,723 48,340 45,632 42,612 39,278
Corporate items <F1> 507 2,919 1,116 1,154 1,135
GECS net earnings from continuing operations 3,796 3,256 2,817 2,415 2,085
------------------------------------------------------------------
Total GE revenues 56,026 54,515 49,565 46,181 42,498
GECS segment revenues 48,694 39,931 32,713 26,492 19,875
Eliminations <F2> (4,251) (3,606) (3,099) (2,645) (2,264)
------------------------------------------------------------------
CONSOLIDATED REVENUES $ 100,469 $ 90,840 $ 79,179 $ 70,028 $ 60,109
====================================================================================================================================
SEGMENT PROFIT
GE
Aircraft Engines $ 1,769 $ 1,366 $ 1,214 $ 1,135 $ 987
Appliances 755 771 748 682 704
Industrial Products and Systems 1,880 1,789 1,587 1,488 1,305
NBC 1,349 1,216 1,020 797 540
Plastics 1,584 1,500 1,443 1,435 981
Power Systems 1,306 1,203 1,124 782 1,354
Technical Products and Services 1,109 988 855 810 806
All Other 271 310 282 285 245
------------------------------------------------------------------
Total GE operating profit 10,023 9,143 8,273 7,414 6,922
GECS net earnings from continuing operations 3,796 3,256 2,817 2,415 2,085
------------------------------------------------------------------
Total segment profit 13,819 12,399 11,090 9,829 9,007
Corporate items and eliminations <F3> (823) (1,589) (920) (548) (800)
GE interest and other financial charges (883) (797) (595) (649) (410)
GE provision for income taxes (2,817) (1,810) (2,295) (2,059) (1,882)
------------------------------------------------------------------
CONSOLIDATED NET EARNINGS FROM
CONTINUING OPERATIONS $ 9,296 $ 8,203 $ 7,280 $ 6,573 $ 5,915
====================================================================================================================================
<FN>
The notes to consolidated financial statements on pages 48-68 are an integral
part of this statement. "GE" means the basis of consolidation as described in
note 1 to the consolidated financial statements; "GECS" means General Electric
Capital Services, Inc. and all of its affiliates and associated companies.
<F1> Includes revenues of $944 million, $789 million, $796 million and $761
million in 1997, 1996, 1995 and 1994, respectively, from an appliance
distribution affiliate that was deconsolidated in 1998. Also includes
$1,538 million in 1997 from an exchange of preferred stock in Lockheed
Martin Corporation for the stock of a newly formed subsidiary.
<F2> Principally the elimination of GECS net earnings.
<F3> Includes 1997 restructuring and other special charges of $2,322 million. Of
the total, restructuring and other special charges that relate to
activities of GE operating segments were as follows: Aircraft Engines --
$342 million, Appliances -- $330 million, Industrial Products and Systems
-- $352 million, NBC -- $161 million, Plastics -- $63 million, Power
Systems -- $437 million and Technical Products and Services -- $157
million. Also included in 1997 is $1,538 million associated with the
Lockheed Martin Corporation transaction described in (F1) above.
</FN>
</TABLE>
<PAGE>
F-13
ANNUAL REPORT PAGE 37
- ---------------------
growth in both owned-and-operated stations and cable operations, and increased
international distribution of programming, the combination of which more than
offset the absence of a 1997 counterpart to the Olympics broadcast and higher
license fees for certain prime-time programs that were renewed.
PLASTICS revenues decreased 1% in 1998 as lower selling prices and adverse
currency exchange rates offset slightly higher volume. Operating profit in 1998
improved by 6% as lower material costs and productivity from Six Sigma more than
offset lower selling prices. Revenues grew 3% in 1997, reflecting an increase in
volume that was largely offset by lower selling prices and adverse currency
exchange rates. Operating profit increased 4% as Six Sigma-based productivity
and higher volume more than offset lower selling prices.
POWER SYSTEMS revenues increased 7% in 1998, reflecting primarily higher volume
in product services, including acquisitions, which was partially offset by lower
selling prices. Operating profit increased 9% in 1998 as growth in product
services and productivity more than offset the effects of lower selling prices.
Revenues in 1997 were 4% higher than in 1996, primarily as a result of higher
volume in gas turbines and product services. Operating profit increased by 7%,
the result of strong productivity and higher volume, which more than offset
lower selling prices.
Power Systems orders were $10.5 billion for 1998, an increase of more than
50% over 1997, reflecting strong U.S. market growth. The backlog of unfilled
orders at year-end 1998 was $12.4 billion ($10.5 billion at the end of 1997). Of
the total, $11.3 billion related to products, about 45% of which was scheduled
for delivery in 1999, and the remainder related to 1999 product services.
TECHNICAL PRODUCTS AND SERVICES revenues rose 10% in 1998, following a 3%
increase in 1997. The improvement in revenues in both years was primarily
attributable to growth at Medical Systems, the result of higher equipment volume
and continued growth in product services, partially offset by lower selling
prices across the segment. Operating profit increased 12% in 1998 as
productivity from Six Sigma and volume increases, particularly at Medical
Systems, more than offset lower selling prices. Operating profit increased 16%
in 1997 as productivity and higher volume more than offset the effects of lower
selling prices.
Orders received by Medical Systems in 1998 were $4.8 billion, up $0.5 billion
from 1997. The backlog of unfilled orders at year-end 1998 was $2.6 billion
($2.4 billion at the end of 1997). Of the total, $1.5 billion related to
products, about 80% of which was scheduled for delivery in 1999, and the
remainder related to 1999 product services.
[CHART HERE]
OPERATING PROFIT OF GE SEGMENTS
- -----------------------------------------------------------------------------
(IN BILLIONS) 1994 1995 1996 1997 1998
- -----------------------------------------------------------------------------
$6.922 $7.414 $8.273 $9.143 $10.023
- -----------------------------------------------------------------------------
ALL OTHER GE revenues and operating profit consist primarily of residual royalty
payments and other fees earned from licensing the use of GE technology to
others. Effective January 1, 1999, GE transferred certain licenses and
intellectual property pursuant to an agreement to sell the former RCA Consumer
Electronics business. Details of licensing income derived from these assets is
provided in note 2.
GECS consists of 28 businesses that, for purposes of the analysis that follows,
are grouped into five operating activities: consumer services, equipment
management, mid-market financing, specialized financing and specialty insurance.
GECS net earnings were $3.796 billion in 1998, up 17% from $3.256 billion in
1997, which increased 16% from 1996. Each operating activity achieved a
double-digit earnings increase in 1998. The improvement in earnings in both 1998
and 1997 was largely attributable to the effects of continued asset growth,
principally from acquisitions of businesses and portfolios and higher
origination volume.
o GECS total revenues increased 22% to $48.7 billion in 1998, following a 22%
increase to $39.9 billion in 1997. The increases in both years reflected
the contributions of businesses acquired as well as growth in core volume.
o GECS cost of goods sold is associated with activities of its computer
equipment distribution businesses. This cost amounted to $6.8 billion in
1998, compared with $4.1 billion in 1997 and $1.7 billion in 1996,
principally the result of acquisition-related growth.
o GECS interest on borrowings in 1998 was $9.0 billion, 17% higher than in
1997, which was 4% higher than in 1996. The increases in 1998 and 1997 were
caused by higher average borrowings used to finance asset growth, partially
offset by the effects of lower average interest rates. The composite
<PAGE>
F-14
ANNUAL REPORT PAGE 38
- ---------------------
interest rate was 5.92% in 1998, compared with 6.07% in 1997 and 6.24% in
1996. See page 43 for a discussion of interest rate risk management.
o GECS insurance losses and policyholder and annuity benefits increased to
$9.6 billion in 1998, compared with $8.3 billion in 1997 and $6.7 billion
in 1996, reflecting effects of business acquisitions and growth in premium
volume throughout the period.
o GECS provision for losses on financing receivables increased to $1.6
billion in 1998, compared with $1.4 billion in 1997 and $1.0 billion in
1996. These provisions principally related to private-label credit cards,
bank credit cards, auto loans and auto leases in the consumer services
operations, all of which are discussed on page 39 under financing
receivables. The increases principally reflected higher average receivable
balances and the effects of delinquency rates -- higher during 1997 and
lower during 1998 -- consistent with industry experience.
o GECS other costs and expenses were $16.4 billion in 1998, an increase from
$13.9 billion in 1997 and $11.7 billion in 1996. The increase in both 1998
and 1997 primarily reflected costs associated with acquired businesses and
portfolios, higher investment levels and increases in insurance commissions
and other costs that vary directly with increased revenues. Financing
spreads (the excess of yields over interest rates on borrowings) were
essentially flat in 1998, 1997 and 1996, reflecting slightly lower yields
offset by decreases in borrowing rates.
Revenues and net earnings from operating activities within the GECS segment
for the past three years are summarized and discussed below.
----------------------------------------
(In millions) 1998 1997 1996
----------------------------------------
REVENUES
Consumer services $ 15,948 $ 13,550 $ 11,109
Equipment management 14,869 11,326 7,725
Mid-market financing 3,751 3,009 2,781
Specialized financing 3,368 2,828 2,944
Specialty insurance 10,594 8,836 8,185
All other 164 382 (31)
----------------------------------------
Total revenues $ 48,694 $ 39,931 $ 32,713
----------------------------------------
NET EARNINGS
Consumer services $ 797 $ 544 $ 791
Equipment management 806 708 603
Mid-market financing 478 391 362
Specialized financing 745 593 563
Specialty insurance 1,166 973 852
All other (196) 47 (354)
----------------------------------------
Total net earnings $ 3,796 $ 3,256 $ 2,817
================================================================================
[CHART HERE]
GECS REVENUES
- -----------------------------------------------------------------------------
(IN BILLIONS) 1994 1995 1996 1997 1998
- -----------------------------------------------------------------------------
$19.875 $26.492 $32.713 $39.931 $48.694
- -----------------------------------------------------------------------------
CONSUMER SERVICES revenues increased 18% in 1998 and 22% in 1997. This
growth -- largely acquisition related -- was led by higher premium and
investment income at GE Financial Assurance, the consumer savings and insurance
business of GECS. Asset growth in several of the other consumer services
businesses also contributed to the increase in 1998. Net earnings increased 47%
in 1998, following a 31% decrease in 1997. Comparisons of revenues and net
earnings throughout the period were affected by the operating results of
Montgomery Ward Holding Corp., which are discussed on page 40. Net earnings in
1998 also reflected acquisition and core volume growth, led by the Global
Consumer Finance and GE Financial Assurance businesses. Overall gains on asset
sales, including securitizations, were higher in 1997 than in 1998; gains in
1998 included the sale of certain bankcard assets. Net earnings in 1997 were
affected by increased automobile residual losses, partially offset by
acquisition and core growth, principally at GE Financial Assurance. A higher
provision for losses on financing receivables also affected earnings in both
years, as discussed previously.
EQUIPMENT MANAGEMENT revenues grew 31% in 1998, following a 47% increase in
1997, primarily as a result of acquisitions by IT Solutions and, to a lesser
extent, asset growth. Net earnings increased 14% in 1998, following a 17%
increase in 1997. Increases in both years reflected higher volumes in most
businesses resulting from origination growth and acquisitions of businesses and
portfolios, with those effects in 1998 partially offset by lower earnings at IT
Solutions and Modular Space, primarily the result of lower pricing from
competitive market conditions and higher operating expenses.
<PAGE>
F-15
ANNUAL REPORT PAGE 39
- ---------------------
MID-MARKET FINANCING revenues increased 25% in 1998, compared with an 8%
increase in 1997. Net earnings for these businesses grew 22% and 8% in 1998 and
1997, respectively. Asset growth resulting from higher volumes and acquisitions
of businesses and portfolios was the most significant contributing factor in
both years. Revenues and net earnings were also favorably affected in 1998 by
the disposition of certain assets.
SPECIALIZED FINANCING revenues rose 19% and net earnings increased 26% in
1998. The increase in revenues reflected asset growth and a higher level of
asset gains, while the increase in net earnings included those factors as well
as the effects of certain tax-advantaged transactions and higher levels of tax
credits. Revenues decreased 4% in 1997, primarily as a result of lower
investment levels. Net earnings increased 5% in 1997, reflecting asset gains and
lower levels of asset write-offs.
SPECIALTY INSURANCE revenues and net earnings both increased 20% in 1998,
following 8% revenue growth and 14% net earnings growth in 1997. The increases
in both years resulted from increased premium and investment income associated
with origination volume, acquisitions and continued growth in the investment
portfolios, as well as a higher level of realized gains on investment
securities. Net earnings in both years were also favorably affected by improved
conditions in the Mortgage Insurance business, the result of improvements in
loss experience.
Within GE Global Insurance, the principal subsidiary of which is Employers
Reinsurance Corporation, net premiums earned increased in 1998, primarily as a
result of core and acquisition growth in both the property and casualty and life
businesses. GE Global Insurance property and casualty underwriting results
improved in 1998, reflecting a general reduction in incurred losses caused by a
decline in both the frequency and overall severity of claims, partially offset
by the effects of hurricane and other weather-related catastrophe losses. GE
Global Insurance net premiums earned on U.S. business increased in 1997 -- the
result of strong growth in the life reinsurance business -- while net premiums
earned on European business declined, reflecting the effects of currency
translation and market conditions. Property and casualty underwriting results at
GE Global Insurance decreased in 1997, reflecting increased underwriting and
operating expenses and adverse European market conditions, offset by growth in
the life reinsurance business.
ALL OTHER GECS revenues and net earnings in 1997 included asset gains, the
largest of which was $284 million (net of tax) from a transaction that included
the reduction of the GECS investment in the common stock of Paine Webber Group
Inc.
[CHART HERE]
GECS NET EARNINGS FROM CONTINUING OPERATIONS
- -----------------------------------------------------------------------------
(IN BILLIONS) 1994 1995 1996 1997 1998
- -----------------------------------------------------------------------------
$2.085 $2.415 $2.817 $3.256 $3.796
- -----------------------------------------------------------------------------
FINANCING RECEIVABLES are the largest GECS asset and one of its primary
sources of revenues. The portfolio of financing receivables, before allowance
for losses, increased to $124.9 billion at the end of 1998 from $106.6 billion
at the end of 1997, principally reflecting acquisition growth and origination
volume that were partially offset by securitizations and other sales of
receivables. The related allowance for losses at the end of 1998 amounted to
$3.3 billion ($2.8 billion at the end of 1997) and, in management's judgment, is
appropriate given the risk profile of the portfolio.
A discussion of the quality of certain elements of the financing receivable
portfolio follows. "Nonearning" receivables are those that are 90 days or more
delinquent (or for which collection has otherwise become doubtful) and
"reduced-earning" receivables are commercial receivables whose terms have been
restructured to a below-market yield. The following discussion of the nonearning
and reduced-earning receivable balances and write-off amounts excludes amounts
related to Montgomery Ward Holding Corp. and affiliates, which are separately
discussed on page 40.
Consumer financing receivables at year-end 1998 and 1997 are shown in the
following table.
-----------------------
(In millions) 1998 1997
- --------------------------------------------------------------------------------
Credit card and personal loans $28,064 $25,773
Auto loans 9,496 8,973
Auto financing leases 14,063 13,346
-----------------------
Total consumer financing receivables $51,623 $48,092
-----------------------
Nonearning $ 1,250 $ 1,049
-- As percentage of total 2.4% 2.2%
Receivable write-offs for the year $ 1,357 $ 1,298
================================================================================
The increase in credit card and personal loan portfolios primarily resulted
from acquisition growth and origination volume, partially offset by
securitizations and other sales of receivables. Both the auto loan and financing
<PAGE>
F-16
ANNUAL REPORT PAGE 40
- ---------------------
lease portfolios increased primarily as a result of acquisition growth; however,
the increase in auto financing leases was partially offset by decreases in U.S.
lease volume. A substantial amount of the nonearning consumer receivables were
private-label credit card loans that were subject to various loss-sharing
agreements that provide full or partial recourse to the originating retailer.
Increased write-offs of consumer receivables were primarily attributable to the
impact of higher average receivable balances.
Other financing receivables, totaling $73.3 billion at December 31, 1998,
consisted of a diverse commercial, industrial and equipment loan and lease
portfolio. This portfolio increased $14.8 billion during 1998, reflecting the
combination of acquisition growth and increased origination volume, partially
offset by sales of receivables. Related nonearning and reduced-earning
receivables were $354 million at year-end 1998, compared with $353 million at
year-end 1997.
As discussed in note 13, Montgomery Ward Holding Corp. (MWHC) filed a
bankruptcy petition for reorganization in 1997. The GECS after-tax share of the
losses of MWHC and affiliates was $49 million in 1998 and $380 million in 1997.
The GECS investment in MWHC and affiliates at year-end was $622 million in 1998
and $795 million in 1997 (of which $578 million and $617 million, respectively,
were classified as financing receivables). GECS also provides revolving credit
card financing directly to customers of MWHC and affiliates; such receivables
totaled $3.4 billion at December 31, 1998, including $1.6 billion that had been
sold with recourse. The obligations of customers with respect to these
receivables are not affected by the bankruptcy filing. On February 1, 1999, MWHC
announced that it plans to emerge from bankruptcy protection in mid-1999 as a
result of an agreement reached with the creditors' committee.
GECS loans and leases to commercial airlines amounted to $10.2 billion at the
end of 1998, up from $9.0 billion at the end of 1997. GECS commercial aircraft
positions also included financial guarantees, funding commitments and aircraft
orders as discussed in note 17.
INTERNATIONAL OPERATIONS
Estimated results of international activities include the results of GE and GECS
operations located outside the United States, plus all U.S. exports. Certain
GECS operations that cannot meaningfully be associated with specific geographic
areas are classified as "other international" for this purpose.
[CHART HERE]
CONSOLIDATED INTERNATIONAL REVENUES
- -----------------------------------------------------------------------------
(IN BILLIONS) 1994 1995 1996 1997 1998
- -----------------------------------------------------------------------------
INTERNATIONAL
OPERATIONS $14.205 $20.768 $25.447 $29.328 $33.756
EXPORTS AND LICENSING
INCOME 6.755 7.480 7.846 9.199 9.001
- -----------------------------------------------------------------------------
International revenues in 1998 were $42.8 billion (43% of consolidated
revenues), compared with $38.5 billion in 1997 and $33.3 billion in 1996. The
chart above depicts the growth in international revenues over the past five
years.
- --------------------------------------------------------------------------------
CONSOLIDATED INTERNATIONAL REVENUES
-------------------------------
(In millions) 1998 1997 1996
- --------------------------------------------------------------------------------
Europe (a) $21,665 $18,166 $15,964
Pacific Basin 5,166 4,742 4,343
Americas 5,030 4,632 3,443
Other 1,895 1,788 1,697
-------------------------------
33,756 29,328 25,447
RCA residual licensing income 250 287 265
Exports from the U.S. to
external customers 8,751 8,912 7,581
-------------------------------
$42,757 $38,527 $33,293
================================================================================
(a) Includes $944 million and $789 million in 1997 and 1996, respectively, from
an appliance distribution affiliate that was deconsolidated in 1998.
- --------------------------------------------------------------------------------
GE international revenues were $24.6 billion in 1998, an increase of $0.7
billion from the comparable figure in 1997, which was $2.9 billion higher than
in 1996. Over the three-year period, international revenues were slightly less
than half of total revenues. The increase in revenues during 1998 reflected
sales growth in operations based outside the United States, partially offset by
lower U.S. exports. European revenues were 11% higher in 1998, reflecting
increases in both local operations and in exports to the region, with
particularly strong growth at Aircraft Engines. As expected, Pacific Basin
revenues were 6% lower in 1998, reflecting primarily a decrease in exports to
the region. Further information about the activities of GE and GECS in Asia is
provided on page 41. International revenues from the Americas (North and South
America, except for the United States) increased 8%, primarily as a result of
strong growth in exports, particularly at Transportation Systems and Power
Systems, and slightly higher revenues from local operations.
<PAGE>
F-17
ANNUAL REPORT PAGE 41
- ---------------------
[CHART HERE]
CONSOLIDATED INTERNATTIONAL REVENUES BY REGION
- -----------------------------------------------------------------------------
(IN BILLIONS) 1994 1995 1996 1997 1998
- -----------------------------------------------------------------------------
EUROPE $9.043 $14.062 $18.030 $20.634 $24.353
PACIFIC BASIN 5.976 7.183 7.573 7.981 8.058
AMERICAS 3.441 4.110 4.706 6.196 6.907
OTHER 2.500 2.893 2.984 3.716 3.439
- -----------------------------------------------------------------------------
GECS international revenues were $18.2 billion in 1998, an increase of 33%
from $13.7 billion in 1997. International assets grew 36%, from $79.2 billion at
year-end 1997 to $107.8 billion at the end of 1998. Revenues in Europe increased
38% in 1998, reflecting a mix of acquisition and core growth across all GECS
operating activities. At the same time, revenues in the Pacific Basin grew 51%,
principally in Japan, and principally as a result of consumer financing
acquisitions by Global Consumer Finance and the acquisition of Toho Mutual
Life's infrastructure and sales force by GE Financial Assurance. International
revenues from the Americas increased 21% in 1998, largely as a result of
acquisitions and core growth in Canada and Latin America. Overall, these
increases reflect the continued expansion of GECS as a global provider of a wide
range of services.
Consolidated international operating profit was $5.4 billion in 1998,
compared with $5.1 billion in 1997 and $3.8 billion in 1996. International
activities accounted for 36% of consolidated operating profit, about the same as
in 1997 on a comparable basis. Additional information is provided in note 29.
Total assets of international operations were $128.8 billion in 1998 (36% of
consolidated assets), an increase of 32% over 1997, reflecting double-digit
growth in both GE and GECS activities outside the United States. The increase
reflected sharp growth in Asia, where current economic conditions continue to
provide a favorable environment for strategic investments. GE and GECS also had
strong asset growth in operations based in Europe and the Americas.
The activities of GE and GECS span all global regions and primarily
encompass manufacturing for local and export markets, import and sale of
products produced in other regions, leasing of aircraft, sourcing for GE plants
domiciled in other global regions and provision of financial services within
these regional economies. As such, when certain countries such as Russia or
regions such as the Pacific Basin and Latin America experience currency and/or
economic stress, GE may have increased exposure to certain risks but also may
have new profit opportunities. Increased risks include, among other things,
higher receivables delinquencies and bad debts, delays or cancellation of sales
and orders principally related to power and aircraft-related equipment, higher
local currency financing costs and a slowdown in established financial services
activities. New profit opportunities include, among other things, lower costs of
goods sourced from countries with weakened currencies, more opportunities for
lower cost outsourcing, expansion of industrial and financial services
activities through purchases of companies or assets at reduced prices and lower
U.S. debt financing costs. Thus, while GE's global activities warrant close
monitoring and significant management attention, regional economic disruptions
had only a modest adverse effect on the overall financial position, results of
operations and liquidity of GE and GECS in 1998, and there is little change in
the outlook for 1999.
As discussed previously, GE's international activities are diverse. Financial
results of those activities reported in U.S. dollars are affected by currency
exchange. A number of techniques are used to manage the effects of currency
exchange, including selective borrowings in local currencies and selective
hedging of significant cross-currency transactions. Principal currencies are the
major European currencies, including the euro, as well as the Japanese yen and
the Canadian dollar.
[CHART HERE]
TOTAL ASSETS OF INTERNATTIONAL OPERATIONS
- -----------------------------------------------------------------------------
(IN BILLIONS) 1994 1995 1996 1997 1998
- -----------------------------------------------------------------------------
EUROPE $21.5869 $44.1072 $55.1956 $66.7401 $84.5179
PACIFIC BASIN 4.4908 6.4424 8.1245 8.8814 18.4266
AMERICAS 5.6118 6.5591 7.2265 8.6168 11.2481
OTHER 11.6541 12.2167 12.4287 13.3090 14.6307
- -----------------------------------------------------------------------------
<PAGE>
F-18
ANNUAL REPORT PAGE 42
- ---------------------
MANAGEMENT'S DISCUSSION OF FINANCIAL RESOURCES AND LIQUIDITY
OVERVIEW
This discussion of financial resources and liquidity addresses the Statement of
Financial Position (page 28) and the Statement of Cash Flows (page 30).
GECS is not a "captive finance company" or a vehicle for "off-balance-sheet
financing" for GE. Only a small portion of GECS business is directly related to
other GE operations. The fundamental differences between GE and GECS are
reflected in the measurements commonly used by investors, rating agencies and
financial analysts. These differences will become clearer in the discussion that
follows with respect to the more significant items in the financial statements.
STATEMENT OF FINANCIAL POSITION
Because GE and GECS share certain significant elements of their Statements of
Financial Position -- property, plant and equipment, and borrowings, for example
- -- the following discussion addresses significant captions in the "consolidated"
statement. Within the following discussions, however, distinction is drawn
between GE and GECS activities in order to permit analysis of each individual
statement.
INVESTMENT SECURITIES for each of the past two years comprised mainly
investment-grade debt securities held by the specialty insurance and annuity and
investment businesses of GECS in support of obligations to policyholders and
annuitants. GE investment securities were $259 million at year-end 1998, about
the same as at the end of 1997. The increase of $8.1 billion at GECS during 1998
was principally related to acquisitions and investment of premiums received. A
breakdown of the investment securities portfolio is provided in note 10.
CURRENT RECEIVABLES for GE were $8.5 billion at the end of 1998, a decrease of
$0.6 billion from year-end 1997, and included $5.4 billion due from customers at
the end of 1998, which was $0.7 billion lower than the amount due at the end of
1997. As a measure of asset management, turnover of customer receivables from
sales of goods and services was 8.8 in 1998, compared with 7.7 in 1997. Other
current receivables are primarily amounts that did not originate from sales of
GE goods or services, such as advances to suppliers in connection with large
contracts.
INVENTORIES for GE were $5.3 billion at December 31, 1998, up $0.2 billion from
the end of 1997. GE inventory turnover improved to 8.3 in 1998, compared with
7.8 in 1997, reflecting continuing improvements in inventory management.
Last-in, first-out (LIFO) revaluations decreased $87 million in 1998, compared
with decreases of $119 million in 1997 and $128 million in 1996. Included in
these changes were decreases of $29 million, $59 million and $58 million in
1998, 1997 and 1996, respectively, that resulted from lower LIFO inventory
levels. There were net cost decreases in each of the last three years.
[CHART HERE]
GE INVENTORY TURNOVER
- -----------------------------------------------------------------------------
1994 1995 1996 1997 1998
- -----------------------------------------------------------------------------
6.86 6.90 7.57 7.75 8.25
- -----------------------------------------------------------------------------
Inventories (at FIFO) and customer receivables from sales of goods or
services are two key components of GE's working capital turnover measurement.
Working capital turnover increased from 6.3 turns in 1996 to 7.4 and 9.2 turns
in 1997 and 1998, respectively. Working capital also includes trade accounts
payable and progress collections.
GECS inventories were $744 million and $786 million at December 31, 1998 and
1997, respectively. The decrease in 1998 primarily reflected improved inventory
management in the computer equipment distribution businesses.
FINANCING RECEIVABLES of GECS were $121.6 billion at year-end 1998, net of
allowance for doubtful accounts, up $17.8 billion over 1997. These receivables
are discussed on pages 39 and 40 and in notes 7 and 13.
OTHER RECEIVABLES of GECS were $26.0 billion and $18.3 billion at December 31,
1998 and 1997, respectively. Of the 1998 increase, $3.6 billion was attributable
to acquisitions and the remainder resulted from core growth.
PROPERTY, PLANT AND EQUIPMENT (including equipment leased to others) was $35.7
billion at December 31, 1998, up $3.4 billion from 1997. GE property, plant and
equipment consists of investments for its own productive use, whereas the
largest element for GECS is in equipment provided to third parties on operating
leases. Details by category of investment can be found in note 15.
GE total expenditures for new plant and equipment during 1998 totaled $2.0
billion, down $0.2 billion from 1997. Total expenditures for the past five years
were $10.2 billion, of which 38% was investment for growth through new capacity
and product development; 32% was investment in productivity through new
<PAGE>
F-19
ANNUAL REPORT PAGE 43
- ---------------------
equipment and process improvements; and 30% was investment for such other
purposes as improvement of research and development facilities and safety and
environmental protection.
GECS additions to equipment leased to others, including business
acquisitions, were $7.2 billion during 1998 ($6.8 billion during 1997),
primarily reflecting acquisitions of vehicles and aircraft.
INTANGIBLE ASSETS were $23.6 billion at year-end 1998, up from $19.1 billion at
year-end 1997. GE intangibles increased to $10.0 billion from $8.8 billion at
the end of 1997, principally as a result of goodwill from a number of
acquisitions, the largest of which was the equipment services division of
Stewart & Stevenson. The $3.3 billion increase in GECS intangibles also related
primarily to goodwill from acquisitions, the largest of which were the consumer
finance business of Lake Corporation (Lake) in Japan and Metlife Capital in the
United States.
ALL OTHER ASSETS totaled $52.9 billion at year-end 1998, an increase of $13.1
billion from the end of 1997. GE other assets increased $3.3 billion,
principally reflecting an increase in the prepaid pension asset and investments
in certain newly acquired affiliates that were not yet consolidated. The
increase in GECS other assets of $9.9 billion related principally to additional
investments in associated companies, increases in assets acquired for resale,
primarily residential mortgages, and increases in "separate accounts," which are
investments controlled by policyholders and are associated with identical
amounts reported as insurance liabilities.
CONSOLIDATED BORROWINGS aggregated $175.0 billion at December 31, 1998, compared
with $144.7 billion at the end of 1997. The major debt-rating agencies evaluate
the financial condition of GE and of GE Capital (the major public borrowing
entity of GECS) differently because of their distinct business characteristics.
Using criteria appropriate to each and considering their combined strength,
those major rating agencies continue to give the highest ratings to debt of both
GE and GE Capital.
[CHART HERE]
GE WORKING CAPITAL TURNOVER
- -----------------------------------------------------------------------------
1994 1995 1996 1997 1998
- -----------------------------------------------------------------------------
5.75 5.56 6.30 7.42 9.22
- -----------------------------------------------------------------------------
GE has committed to contribute capital to GE Capital in the event of either a
decrease below a specified level in the ratio of GE Capital's earnings to fixed
charges, or a failure to maintain a specified debt-to-equity ratio in the event
certain GE Capital preferred stock is redeemed. GE also has guaranteed
subordinated debt of GECS with a face amount of $1.0 billion at December 31,
1998 and 1997. Management believes the likelihood that GE will be required to
contribute capital under either the commitments or the guarantees is remote.
GE total borrowings were $4.1 billion at year-end 1998 ($3.4 billion
short-term, $0.7 billion long-term), a decrease of $0.3 billion from year-end
1997. GE total debt at the end of 1998 equaled 9.5% of total capital, down from
11.1% at the end of 1997.
GECS total borrowings were $172.2 billion at December 31, 1998, of which
$113.2 billion is due in 1999 and $59.0 billion is due in subsequent years.
Comparable amounts at the end of 1997 were $141.3 billion total, $95.3 billion
due within one year and $46.0 billion due thereafter. A large portion of GECS
borrowings ($87.0 billion and $71.2 billion at the end of 1998 and 1997,
respectively) was issued in active commercial paper markets that management
believes will continue to be a reliable source of short-term financing. Most of
this commercial paper was issued by GE Capital. The average remaining terms and
interest rates of GE Capital commercial paper were 45 days and 5.35% at the end
of 1998, compared with 44 days and 5.83% at the end of 1997. The GE Capital
ratio of debt to equity was 7.86 to 1 at the end of 1998 and 7.45 to 1 at the
end of 1997.
INTEREST RATE AND CURRENCY RISK MANAGEMENT is important in the normal
operations of both GE and GECS. The following discussion presents an overview of
such management. A related discussion of recent developments in the global
economy is provided on page 41.
GE and GECS use various financial instruments, particularly interest rate and
currency swaps, but also futures, options and currency forwards, to manage their
respective interest rate and currency risks. GE and GECS are exclusively end
users of these instruments, which are commonly referred to as derivatives;
neither GE nor GECS engages in trading, market-making or other speculative
activities in the derivatives markets. Established practices require that
derivative financial instruments relate to specific asset, liability or equity
transactions or to currency exposures. More detailed information about these
financial instruments, as well as the strategies and policies for their use, is
provided in notes 1, 19 and 30.
The U.S. Securities and Exchange Commission requires that registrants
include information about potential effects of changes in interest rates and
currency exchange in their financial statements. Although the rules offer
alternatives for presenting this information, none of the alternatives is
<PAGE>
F-20
ANNUAL REPORT PAGE 44
- ---------------------
without limitations. The following discussion is based on so-called "shock
tests," which model effects of interest rate and currency shifts on the
reporting company. Shock tests, while probably the most meaningful analysis
permitted, are constrained by several factors, including the necessity to
conduct the analysis based on a single point in time and by their inability to
include the complex market reactions that normally would arise from the market
shifts modeled. While the following results of shock tests for interest rates
and currencies may have some limited use as benchmarks, they should not be
viewed as forecasts.
o One means of assessing exposure to interest rate changes is a
duration-based analysis that measures the potential loss in net earnings
resulting from a hypothetical increase in interest rates of 100 basis
points across all maturities (sometimes referred to as a "parallel shift in
the yield curve"). Under this model, it is estimated that, all else
constant, such an increase, including repricing effects in the securities
portfolio, would reduce the 1999 net earnings of GECS based on year-end
1998 positions by approximately $111 million; the pro forma effect for GE
was approximately $17 million. Based on conditions at year-end 1997, the
effect on 1998 net earnings of such an increase in interest rates was
estimated to be approximately $112 million for GECS.
o As shown in the chart above right, the geographic distribution of GE and
GECS operations is diverse. One means of assessing exposure to changes in
currency exchange rates is to model effects on reported earnings using a
sensitivity analysis. Year-end 1998 consolidated currency exposures,
including financial instruments designated and effective as hedges, were
analyzed to identify GE and GECS assets and liabilities denominated in
other than their relevant functional currency. Net unhedged exposures in
each currency were then remeasured assuming a 10% decrease (substantially
greater decreases for hyperinflationary currencies) in currency exchange
rates compared with the U.S. dollar. Under this model, it is estimated
that, all else constant, such a decrease would reduce the 1999 net earnings
of GE based on year-end 1998 positions by approximately $11 million; the
pro forma effect for GECS was insignificant. Based on conditions at
year-end 1997, the effect on 1998 net earnings of such a decrease in
exchange rates was estimated to be approximately $10 million for GE.
INSURANCE LIABILITIES, RESERVES AND ANNUITY BENEFITS were $77.3 billion, $10.0
billion higher than in 1997. The increase was primarily attributable to
acquisitions and the increase in separate accounts. For additional information
on these liabilities, see note 20.
[CHART HERE]
CONSOLIDATED TOTAL ASSETS
- -----------------------------------------------------------------------------
(IN BILLIONS) 1994 1995 1996 1997 1998
- -----------------------------------------------------------------------------
UNITED STATES $142.527 $158.710 $189.427 $206.465 $227.112
INTERNATIONAL 43.344 69.325 82.975 97.547 128.823
- -----------------------------------------------------------------------------
YEAR 2000 will test the capability of business processes to function correctly.
GE and GECS have undertaken a global effort to identify and mitigate Year 2000
issues in their information systems, products, facilities and suppliers. Each
business has a Year 2000 leader who oversees a multifunctional remediation
project team responsible for applying a Six Sigma quality approach in four
phases: (1) DEFINE/MEASURE - identify and inventory possible sources of Year
2000 issues; (2) ANALYZE - determine the nature and extent of Year 2000 issues
and develop project plans to address those issues; (3) IMPROVE - execute project
plans and perform a majority of the testing; and (4) CONTROL - complete testing,
continue monitoring readiness and complete necessary contingency plans. The
progress of this program is monitored at each business, and Company-wide reviews
with senior management are conducted quarterly. The first three phases of the
program have been completed for a substantial majority of mission-critical
activities. Management plans to have nearly all significant information systems,
products and facilities through the control phase of the program by mid-1999.
The scope of the global Year 2000 effort encompasses approximately 170,000
applications and computer programs; 8,000 types of installed-base products and
services; up to 35,000 pieces of equipment in facilities; and 30,000 direct
suppliers. Business operations are also affected by the Year 2000 readiness of
customers and infrastructure suppliers in areas such as utilities,
communications, transportation and other services. In this environment, there
will likely be instances of failure that could cause disruptions in business
processes for GE and GECS businesses, affect their customers' ability to repay
amounts owed or result in an increased level of insurance claims activity. The
likelihood and effects of failures in the customer base, infrastructure systems
and in the supply chain cannot be estimated. However, with respect to operations
<PAGE>
F-21
ANNUAL REPORT PAGE 45
- ---------------------
under its direct control, management does not expect, in view of its Year 2000
program efforts and the diversity of its businesses, suppliers and customers,
that occurrences of Year 2000 failures will have a material adverse effect on
the financial position, results of operations or liquidity of GE or GECS.
Including amounts attributable to recent acquisitions, total Year 2000
remediation expenditures are expected to be approximately $575 million, of which
60% was spent by the end of 1998. Substantially all of the remainder is expected
to be spent in 1999. Most of these costs are not likely to be incremental costs,
but rather will represent the redeployment of existing resources. The activities
involved in the Year 2000 effort necessarily involve estimates and projections
of activities and resources that will be required in the future. These estimates
and projections could change as work progresses.
STATEMENT OF CASH FLOWS
Because cash management activities of GE and GECS are separate and distinct, it
is more useful to review their cash flows separately.
GE CASH AND EQUIVALENTS aggregated $1.2 billion at the end of 1998, about the
same as at year-end 1997. During 1998, GE generated a record $10.0 billion in
cash from operating activities, an increase of $0.7 billion over 1997. The
increase reflected improvements in earnings and working capital, including cash
from monetization of receivables. The 1998 cash generation provided most of the
resources needed to repurchase $3.6 billion of GE common stock under the share
repurchase program, to pay $3.9 billion in dividends to share owners, to invest
$2.0 billion in new plant and equipment and to make $1.5 billion in
acquisitions.
Operating activities are the principal source of GE's cash flows. Over the
past three years, operating activities have provided more than $28 billion of
cash. The principal application of this cash was distributions of approximately
$21 billion to share owners, both through payment of dividends ($10.4 billion)
and through the share repurchase program ($10.4 billion) described below. Other
applications included investment in new plant and equipment ($6.6 billion) and
acquisitions ($4.0 billion).
The GE Board of Directors has authorized repurchase of $17 billion of common
stock under the share repurchase program. This buyback will continue through the
year 2000 at an annual rate of about $2 billion. Funds used for the share
repurchase are expected to be generated largely from operating cash flow.
[CHART HERE]
GE CUMULATIVE CASH FLOWS SINCE 1993
- -----------------------------------------------------------------------------
(IN BILLIONS) 1994 1995 1996 1997 1998
- -----------------------------------------------------------------------------
CASH FLOWS FROM
OPERATING
ACTIVITIES $6.071 $12.136 $21.203 $30.520 $40.552
SHARES REPURCHASED 1.073 4.175 7.441 10.933 14.579
DIVIDENDS PAID 2.462 5.232 8.282 11.693 15.606
- -----------------------------------------------------------------------------
Based on past performance and current expectations, in combination with the
financial flexibility that comes with a strong balance sheet and the highest
credit ratings, management believes that GE is in a sound position to complete
the share repurchase program, to grow dividends in line with earnings, and to
continue making selective investments for long-term growth. Expenditures for new
plant and equipment are expected to be about $2.0 billion in 1999, principally
for productivity and growth. The expected level of expenditures was moderated by
the Six Sigma quality program's success in freeing capacity.
GECS CASH AND EQUIVALENTS aggregated $3.3 billion at the end of 1998, down from
$4.9 billion at year-end 1997. One of the primary sources of cash for GECS is
financing activities involving the continued rollover of short-term borrowings
and appropriate addition of borrowings with a reasonable balance of maturities.
Over the past three years, GECS borrowings with maturities of 90 days or less
have increased by $40.9 billion. New borrowings of $85.2 billion having
maturities longer than 90 days were added during those years, while $78.4
billion of such longer-term borrowings were retired. GECS also generated $26.9
billion from continuing operating activities.
The principal use of cash by GECS has been investing in assets to grow its
businesses. Of the $69.6 billion that GECS invested over the past three years,
$10.5 billion was used for additions to financing receivables; $18.5 billion was
used to invest in new equipment, principally for lease to others; and $25.4
billion was used for acquisitions of new businesses, the largest of which were
Metlife Capital and Lake in 1998.
With the financial flexibility that comes with excellent credit ratings,
management believes that GECS should be well positioned to meet the global needs
of its customers for capital and to continue providing GE share owners with good
returns.
<PAGE>
F-22
ANNUAL REPORT PAGE 46
- ---------------------
MANAGEMENT'S DISCUSSION OF SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA summarizes on the following page some data frequently
requested about General Electric Company. The data are divided into three
sections: upper portion -- consolidated data; middle portion -- GE data that
reflect various conventional measurements for such enterprises; and lower
portion -- GECS data that reflect key information pertinent to financial
services businesses.
GE'S TOTAL RESEARCH AND DEVELOPMENT expenditures were $1,930 million in 1998, up
slightly from 1997 and 1996. In 1998, expenditures from GE's own funds were
$1,537 million, an increase of 4% over 1997, reflecting continuing research and
development work related to new product, service and process technologies.
Product technology efforts in 1998 included continuing development work on the
next generation of gas turbines, further advances in state-of-the-art diagnostic
imaging technologies, and development of more fuel-efficient, cost-effective
aircraft engine designs. Services technologies include advances in diagnostic
applications, including remote diagnostic capabilities related to repair and
maintenance of medical equipment, aircraft engines, power generation equipment
and locomotives. Process technologies -- vital to Six Sigma quality programs --
provided improved product quality and performance and increased capacity for
manufacturing engineered materials. Expenditures from funds provided by
customers (mainly the U.S. government) were $393 million in 1998, down $18
million from 1997.
GE'S TOTAL BACKLOG of firm unfilled orders at the end of 1998 was $28.5 billion,
compared with $26.4 billion at the end of 1997. Of the total, $23.9 billion
related to products, about 56% of which was scheduled for delivery in 1999.
Services orders are included in this reported backlog for only the succeeding 12
months; such backlog at the end of 1998 was $4.6 billion. Orders constituting
this backlog may be canceled or deferred by customers, subject in certain cases
to cancellation penalties. See Segment Operations beginning on page 35 for
further discussion on unfilled orders of relatively long-cycle manufacturing
businesses.
REGARDING ENVIRONMENTAL MATTERS, GE's operations, like operations of other
companies engaged in similar businesses, involve the use, disposal and cleanup
of substances regulated under environmental protection laws.
In 1998, GE expended about $81 million for capital projects related to the
environment. The comparable amount in 1997 was $80 million. These amounts
exclude expenditures for remediation actions, which are principally expensed and
are discussed below. Capital expenditures for environmental purposes have
included pollution control devices -- such as wastewater treatment plants,
groundwater monitoring devices, air strippers or separators, and incinerators --
at new and existing facilities constructed or upgraded in the normal course of
business. Consistent with policies stressing environmental responsibility,
average annual capital expenditures other than for remediation projects are
presently expected to be about $85 million over the next two years. This level
is in line with existing levels for new or expanded programs to build facilities
or modify manufacturing processes to minimize waste and reduce emissions.
GE also is involved in a sizable number of remediation actions to clean up
hazardous wastes as required by federal and state laws. Such statutes require
that responsible parties fund remediation actions regardless of fault, legality
of original disposal or ownership of a disposal site. Expenditures for site
remediation actions amounted to approximately $127 million in 1998, compared
with $84 million in 1997. It is presently expected that such remediation actions
will require average annual expenditures in the range of $90 million to $170
million over the next two years.
[CHART HERE]
YEAR-END MARKET CAPITALIZATION
- -----------------------------------------------------------------------------
(IN BILLIONS) 1994 1995 1996 1997 1998
- -----------------------------------------------------------------------------
$87.004 $119.989 $162.604 $239.539 $333.762
- -----------------------------------------------------------------------------
[CHART HERE]
GE SHARE PRICE ACTIVITY
- ------------------------------------------------------------------------------
(IN DOLLARS) 1994 1995 1996 1997 1998
- ------------------------------------------------------------------------------
HIGH $27 7/16 $36 9/16 $53 1/16 $76 9/16 $103 15/16
LOW 22 1/2 24 1/2 34 3/4 47 15/16 69
CLOSE 25 1/2 36 49 7/16 73 3/8 102
- ------------------------------------------------------------------------------
<PAGE>
F-23
ANNUAL REPORT PAGE 47
- ---------------------
<TABLE>
SELECTED FINANCIAL DATA
<CAPTION>
------------------------------------------------------------------------
(Dollar amounts in millions; per-share amounts in dollars) 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
Revenues $ 100,469 $ 90,840 $ 79,179 $ 70,028 $ 60,109
Earnings from continuing operations 9,296 8,203 7,280 6,573 5,915
Loss from discontinued operations -- -- -- -- (1,189)
Net earnings 9,296 8,203 7,280 6,573 4,726
Dividends declared 4,081 3,535 3,138 2,838 2,546
Earned on average share owners' equity 25.7% 25.0% 24.0% 23.5% 18.1%
Per share
Earnings from continuing operations-- basic $ 2.84 $ 2.50 $ 2.20 $ 1.95 $ 1.73
Loss from discontinued operations -- -- -- -- (0.35)
Net earnings-- basic 2.84 2.50 2.20 1.95 1.38
Net earnings-- diluted 2.80 2.46 2.16 1.93 1.37
Dividends declared 1.25 1.08 0.95 0.845 0.745
Stock price range 103 5/16-69 76 9/16- 53 1/16- 36 9/16- 27 7/16-
47 15/16 34 3/4 24 15/16 22 1/2
Year-end closing stock price 102 73 3/8 49 7/16 36 25 1/2
Total assets of continuing operations 355,935 304,012 272,402 228,035 185,871
Long-term borrowings 59,663 46,603 49,246 51,027 36,979
Shares outstanding-- average (in thousands) 3,268,998 3,274,692 3,307,394 3,367,624 3,417,476
Share owner accounts-- average 534,000 509,000 486,000 460,000 458,000
Employees at year end
United States 163,000 165,000 155,000 150,000 156,000
Other countries 130,000 111,000 84,000 72,000 60,000
Discontinued operations (primarily U.S.) -- -- -- -- 5,000
------------------------------------------------------------------------
Total employees 293,000 276,000 239,000 222,000 221,000
====================================================================================================================================
GE DATA
Short-term borrowings $ 3,466 $ 3,629 $ 2,339 $ 1,666 $ 906
Long-term borrowings 681 729 1,710 2,277 2,699
Minority interest 816 569 477 434 382
Share owners' equity 38,880 34,438 31,125 29,609 26,387
------------------------------------------------------------------------
Total capital invested $ 43,843 $ 39,365 $ 35,651 $ 33,986 $ 30,374
========================================================================
Return on average total capital invested 23.9% 23.6% 22.2% 21.3% 15.9%
Borrowings as a percentage of total capital invested 9.5% 11.1% 11.4% 11.6% 11.9%
Working capital (a) $ 5,038 $ 5,990 $ 6,598 $ 7,405 $ 6,552
Additions to property, plant and equipment 2,047 2,191 2,389 1,831 1,743
====================================================================================================================================
GECS DATA
Revenues $ 48,694 $ 39,931 $ 32,713 $ 26,492 $ 19,875
Earnings from continuing operations 3,796 3,256 2,817 2,415 2,085
Loss from discontinued operations -- -- -- -- (1,189)
Net earnings 3,796 3,256 2,817 2,415 896
Share owner's equity 19,727 17,239 14,276 12,774 9,380
Minority interest 3,459 3,113 2,530 2,522 1,465
Borrowings from others 172,200 141,263 125,621 111,598 91,399
Ratio of debt to equity at GE Capital 7.86:1 7.45:1 7.84:1 7.59:1 8.43:1
Total assets of continuing operations $ 303,297 $ 255,408 $ 227,419 $ 185,729 $ 144,967
Insurance premiums written 11,865 9,396 8,185 6,158 3,962
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
Discontinued operations reflect the results of Kidder, Peabody, the discontinued
GECS securities broker-dealer, in 1994. Transactions between GE and GECS have
been eliminated from the consolidated information. (a) Working capital is
defined as the sum of receivables from the sales of goods and services plus
inventories less trade accounts payable and progress collections.
</FN>
</TABLE>
<PAGE>
F-24
ANNUAL REPORT PAGE 48
- ---------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION. The consolidated financial statements represent the adding
together of all affiliates -- companies that General Electric directly or
indirectly controls. Results of associated companies -- generally companies that
are 20% to 50% owned and over which GE, directly or indirectly, has significant
influence -- are included in the financial statements on a "one-line" basis.
FINANCIAL STATEMENT PRESENTATION. Financial data and related measurements are
presented in the following categories.
o GE. This represents the adding together of all affiliates other than
General Electric Capital Services, Inc. (GECS), whose operations are
presented on a one-line basis.
o GECS. This affiliate owns all of the common stock of General Electric
Capital Corporation (GE Capital) and GE Global Insurance Holding
Corporation (GE Global Insurance). GE Capital, GE Global Insurance and
their respective affiliates are consolidated in the GECS columns and
constitute its business.
o CONSOLIDATED. This represents the adding together of GE and GECS.
The effects of transactions among related companies within and between each of
the above-mentioned groups are eliminated. Transactions between GE and GECS are
not material.
Certain prior-year amounts have been reclassified to conform to the 1998
presentation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts and related disclosures. Actual results
could differ from those estimates.
SALES OF GOODS AND SERVICES. A sale is recorded when title passes to the
customer or when services are performed in accordance with contracts.
GECS REVENUES FROM SERVICES (EARNED INCOME). Income on all loans is recognized
on the interest method. Accrual of interest income is suspended at the earlier
of the time at which collection of an account becomes doubtful or the account
becomes 90 days delinquent. Interest income on impaired loans is recognized
either as cash is collected or on a cost-recovery basis as conditions warrant.
Financing lease income is recorded on the interest method so as to produce a
level yield on funds not yet recovered. Estimated unguaranteed residual values
of leased assets are based primarily on periodic independent appraisals of the
values of leased assets remaining at expiration of the lease terms.
Operating lease income is recognized on a straight-line basis over the terms
of underlying leases.
Origination, commitment and other nonrefundable fees related to fundings are
deferred and recorded in earned income on the interest method. Commitment fees
related to loans not expected to be funded and line-of-credit fees are deferred
and recorded in earned income on a straight-line basis over the period to which
the fees relate. Syndication fees are recorded in earned income at the time
related services are performed unless significant contingencies exist.
Premium income from insurance activities is discussed under GECS insurance
accounting policies on page 49.
DEPRECIATION AND AMORTIZATION. The cost of most of GE's manufacturing plant and
equipment is depreciated using an accelerated method based primarily on a
sum-of-the-years digits formula.
The cost of GECS equipment leased to others on operating leases is amortized,
principally on a straight-line basis, to estimated residual value over the lease
term or over the estimated economic life of the equipment. Depreciation of
property and equipment used by GECS is recorded on either a sum-of-the-years
digits formula or a straight-line basis over the lives of the assets.
RECOGNITION OF LOSSES ON FINANCING RECEIVABLES AND INVESTMENTS. The allowance
for losses on small-balance receivables is determined principally on the basis
of actual experience during the preceding three years. Further allowances are
provided to reflect management's judgment of additional probable losses. For
other receivables, principally the larger loans and leases, the allowance for
losses is determined primarily on the basis of management's judgment of net
probable losses, including specific allowances for known troubled accounts.
All accounts or portions thereof deemed to be uncollectible or to require
an excessive collection cost are written off to the allowance for losses.
Small-balance accounts generally are written off when 6 to 12 months delinquent,
although any such balance judged to be uncollectible, such as an account in
bankruptcy, is written down immediately to estimated realizable value.
Large-balance accounts are reviewed at least quarterly, and those accounts with
amounts that are judged to be uncollectible are written down to estimated
realizable value.
When collateral is repossessed in satisfaction of a loan, the receivable is
written down against the allowance for losses to estimated fair value of the
asset less costs to sell, transferred to other assets and subsequently carried
at the lower of cost or estimated fair value less costs to sell. This accounting
method has been employed principally for specialized financing transactions.
<PAGE>
F-25
ANNUAL REPORT PAGE 49
- ---------------------
CASH AND EQUIVALENTS. Debt securities with original maturities of three months
or less are included in cash equivalents unless designated as available for sale
and classified as investment securities.
INVESTMENT SECURITIES. Investments in debt and marketable equity securities are
reported at fair value. Substantially all investment securities are designated
as available for sale, with unrealized gains and losses included in share
owners' equity, net of applicable taxes and other adjustments. Unrealized losses
that are other than temporary are recognized in earnings. Realized gains and
losses are accounted for on the specific identification method.
INVENTORIES. All inventories are stated at the lower of cost or realizable
values. Cost for virtually all of GE's U.S. inventories is determined on a
last-in, first-out (LIFO) basis. Cost of other GE inventories is primarily
determined on a first-in, first-out (FIFO) basis.
GECS inventories consist primarily of finished products held for sale. Cost
is primarily determined on a FIFO basis.
INTANGIBLE ASSETS. Goodwill is amortized over its estimated period of benefit on
a straight-line basis; other intangible assets, including internal-use software,
are amortized on appropriate bases over their estimated lives. No amortization
period exceeds 40 years. Goodwill in excess of associated expected operating
cash flows is considered to be impaired and is written down to fair value, which
is determined based on either discounted future cash flows or appraised values,
depending on the nature of the asset.
INTEREST RATE AND CURRENCY RISK MANAGEMENT. As a matter of policy, neither GE
nor GECS engages in derivatives trading, derivatives market-making or other
speculative activities.
GE and GECS use swaps primarily to optimize funding costs. To a lesser
degree, and in combination with options and limit contracts, GECS uses swaps to
stabilize cash flows from mortgage-related assets.
Interest rate and currency swaps that modify borrowings or designated assets,
including swaps associated with forecasted commercial paper renewals, are
accounted for on an accrual basis. Both GE and GECS require all other swaps, as
well as futures, options and currency forwards, to be designated and accounted
for as hedges of specific assets, liabilities or committed transactions;
resulting payments and receipts are recognized contemporaneously with effects of
hedged transactions. A payment or receipt arising from early termination of an
effective hedge is accounted for as an adjustment to the basis of the hedged
transaction.
Instruments used as hedges must be effective at reducing the risk associated
with the exposure being hedged and must be designated as a hedge at the
inception of the contract. Accordingly, changes in market values of hedge
instruments must be highly correlated with changes in market values of
underlying hedged items, both at inception of the hedge and over the life of the
hedge contract.
As a matter of policy, any derivative that is either not designated as a
hedge, or is so designated but is ineffective, is marked to market and
recognized in operations immediately.
GECS INSURANCE ACCOUNTING POLICIES. Accounting policies for GECS insurance
businesses follow.
PREMIUM INCOME. Insurance premiums are reported as earned income as follows:
o For short-duration insurance contracts (including property and casualty,
accident and health, and financial guaranty insurance), premiums are
reported as earned income, generally on a pro rata basis, over the terms of
the related agreements. For retrospectively rated reinsurance contracts,
premium adjustments are recorded based on estimated losses and loss
expenses, taking into consideration both case and incurred-but-not-reported
reserves.
o For traditional long-duration insurance contracts (including term and whole
life contracts and annuities payable for the life of the annuitant),
premiums are reported as earned income when due.
o For investment contracts and universal life contracts, premiums received
are reported as liabilities, not as revenues. Universal life contracts are
long-duration insurance contracts with terms that are not fixed and
guaranteed; for these contracts, revenues are recognized for assessments
against the policyholder's account, mostly for mortality, contract
initiation, administration and surrender. Investment contracts are
contracts that have neither significant mortality nor significant morbidity
risk, including annuities payable for a determined period; for these
contracts, revenues are recognized on the associated investments and
amounts credited to policyholder accounts are charged to expense.
DEFERRED POLICY ACQUISITION COSTS. Costs that vary with and are primarily
related to the acquisition of new and renewal insurance and investment contracts
are deferred and amortized over the respective policy terms. For short-duration
insurance contracts, acquisition costs consist primarily of commissions,
<PAGE>
F-26
ANNUAL REPORT PAGE 50
- ---------------------
brokerage expenses and premium taxes. For long-duration insurance contracts,
these costs consist primarily of first-year commissions in excess of recurring
renewal commissions, certain variable sales expenses and certain support costs
such as underwriting and policy issue expenses.
o For short-duration insurance contracts, these costs are amortized pro rata
over the contract periods in which the related premiums are earned.
o For traditional long-duration insurance contracts, these costs are
amortized over the respective contract periods in proportion to either
anticipated premium income or, in the case of limited-payment contracts,
estimated benefit payments.
o For investment contracts and universal life contracts, these costs are
amortized on the basis of anticipated gross profits.
Periodically, deferred policy acquisition costs are reviewed for recoverability;
anticipated investment income is considered in recoverability evaluations.
PRESENT VALUE OF FUTURE PROFITS. The actuarially determined present value of
anticipated net cash flows to be realized from insurance, annuity and investment
contracts in force at the date of acquisition of life insurance enterprises is
recorded as the present value of future profits and is amortized over the
respective policy terms in a manner similar to deferred policy acquisition
costs. Unamortized balances are adjusted to reflect experience and impairment,
if any.
2 GE OTHER INCOME
------------------------------------
(In millions) 1998 1997 1996
- --------------------------------------------------------------------------------
Residual licensing and
royalty income
RCA Licensing $ 250 $ 287 $ 265
Other 51 54 60
Associated companies (9) 50 50
Marketable securities and
bank deposits 114 78 72
Customer financing 19 26 29
Other investments
Dividends 8 62 79
Interest 8 1 18
Other items 243 1,749 56
------------------------------------
$ 684 $ 2,307 $ 629
================================================================================
Effective January 1, 1999, GE transferred certain licenses and intellectual
property pursuant to an agreement to sell the former RCA Consumer Electronics
business. Licensing income from these assets is shown under the caption "RCA
Licensing" in the table above.
Included in the "Other items" caption for 1997 is a gain of $1,538 million
related to a tax-free exchange between GE and Lockheed Martin Corporation
(Lockheed Martin). In exchange for its investment in Lockheed Martin Series A
preferred stock, GE acquired a Lockheed Martin subsidiary containing two
businesses, an equity interest and cash to the extent necessary to equalize the
value of the exchange, a portion of which was subsequently loaned to Lockheed
Martin.
3 GECS REVENUES FROM SERVICES
-----------------------------------
(In millions) 1998 1997 1996
- --------------------------------------------------------------------------------
Time sales, loan and
other income $14,682 $12,211 $11,310
Operating lease rentals 5,402 4,819 4,341
Financing leases 4,267 3,499 3,485
Investment income 5,617 5,512 3,506
Premium and commission
income of insurance
businesses 11,352 9,268 8,145
------------------------------------
$41,320 $35,309 $30,787
================================================================================
For insurance businesses, the effects of reinsurance on premiums written and
premium and commission income were as follows:
---------------------------------------
(In millions) 1998 1997 1996
- --------------------------------------------------------------------------------
PREMIUMS WRITTEN
Direct $ 6,237 $ 5,206 $ 3,926
Assumed 7,470 5,501 5,455
Ceded (1,842) (1,311) (1,196)
---------------------------------------
$ 11,865 $ 9,396 $ 8,185
=======================================
PREMIUM AND COMMISSION
INCOME
Direct $ 6,063 $ 5,138 $ 3,850
Assumed 7,151 5,386 5,353
Ceded (1,862) (1,256) (1,058)
---------------------------------------
$ 11,352 $ 9,268 $ 8,145
================================================================================
Reinsurance recoveries recognized as a reduction of insurance losses and
policyholder and annuity benefits amounted to $1,594 million, $903 million and
$937 million for the years ended December 31, 1998, 1997 and 1996, respectively.
<PAGE>
F-27
ANNUAL REPORT PAGE 51
- ---------------------
4 SUPPLEMENTAL COST DETAILS
Total expenditures for research and development were $1,930 million, $1,891
million and $1,886 million in 1998, 1997 and 1996, respectively. The
Company-funded portion aggregated $1,537 million in 1998, $1,480 million in 1997
and $1,421 million in 1996.
Rental expense under operating leases is shown below.
----------------------------------
(In millions) 1998 1997 1996
- --------------------------------------------------------------------------------
GE $568 $536 $512
GECS 889 734 547
- --------------------------------------------------------------------------------
At December 31, 1998, minimum rental commitments under noncancelable
operating leases aggregated $2,479 million and $5,168 million for GE and GECS,
respectively. Amounts payable over the next five years follow.
------------------------------------------------
(In millions) 1999 2000 2001 2002 2003
- --------------------------------------------------------------------------------
GE $453 $375 $296 $223 $187
GECS 720 636 582 519 468
- --------------------------------------------------------------------------------
GE's selling, general and administrative expense totaled $7,177 million in
1998, $7,476 million in 1997 and $6,274 million in 1996. Insignificant amounts
of interest were capitalized by GE and GECS in 1998, 1997 and 1996.
5 PENSION BENEFITS
GE and its affiliates sponsor a number of pension plans. Principal pension plans
are discussed below; other pension plans are not significant individually or in
the aggregate.
PRINCIPAL PENSION PLANS are the GE Pension Plan and the GE Supplementary Pension
Plan.
The GE Pension Plan covers substantially all GE employees in the United
States as well as approximately two-thirds of GECS employees in the United
States. Generally, benefits are based on the greater of a formula recognizing
career earnings or a formula recognizing length of service and final average
earnings. Benefit provisions are subject to collective bargaining. At the end of
1998, the GE Pension Plan covered approximately 466,000 participants, including
127,000 employees, 149,000 former employees with vested rights to future
benefits, and 190,000 retirees and beneficiaries receiving benefits.
The GE Supplementary Pension Plan is a pay-as-you-go plan providing
supplementary retirement benefits primarily to higher-level, longer-service U.S.
employees.
The effect on operations of principal pension plans is as follows:
- --------------------------------------------------------------------------------
EFFECT ON OPERATIONS
--------------------------------
(In millions) 1998 1997 1996
- --------------------------------------------------------------------------------
Expected return on plan assets $ 3,024 $ 2,721 $ 2,587
Service cost for benefits earned (a) (625) (596) (550)
Interest cost on benefit obligation (1,749) (1,686) (1,593)
Prior service cost (153) (145) (99)
SFAS No. 87 transition gain 154 154 154
Net actuarial gain recognized 365 295 210
Special early retirement cost -- (412) --
--------------------------------
Total pension plan income $ 1,016 $ 331 $ 709
================================================================================
(a) Net of participant contributions.
- --------------------------------------------------------------------------------
FUNDING POLICY for the GE Pension Plan is to contribute amounts sufficient to
meet minimum funding requirements as set forth in employee benefit and tax laws
plus such additional amounts as GE may determine to be appropriate. GE has not
made contributions since 1987 because the fully funded status of the GE Pension
Plan precludes current tax deduction and because any GE contribution would
require payment of annual excise taxes.
Changes in the projected benefit obligation for principal pension plans
follow.
- --------------------------------------------------------------------------------
PROJECTED BENEFIT OBLIGATION
-------------------------
December 31 (In millions) 1998 1997
- --------------------------------------------------------------------------------
Balance at January 1 $ 25,874 $ 23,251
Service cost for benefits earned (a) 625 596
Interest cost on benefit obligation 1,749 1,686
Participant contributions 112 120
Plan amendments -- 136
Actuarial loss 1,050 1,388
Benefits paid (1,838) (1,715)
Special early retirement cost -- 412
-------------------------
Balance at December 31 $ 27,572 $ 25,874
================================================================================
(a) Net of participant contributions.
- --------------------------------------------------------------------------------
Changes in the fair value of assets for principal pension plans follow.
- --------------------------------------------------------------------------------
FAIR VALUE OF ASSETS
---------------------------
December 31 (In millions) 1998 1997
- --------------------------------------------------------------------------------
Balance at January 1 $ 38,742 $ 33,686
Actual return on plan assets 6,363 6,587
Employer contributions 68 64
Participant contributions 112 120
Benefits paid (1,838) (1,715)
---------------------------
Balance at December 31 $ 43,447 $ 38,742
================================================================================
Plan assets are held in trust and consist mainly of common stock and
fixed-income investments. GE common stock represented about 7% and 6% of trust
assets at year-end 1998 and 1997, respectively.
<PAGE>
F-28
ANNUAL REPORT PAGE 52
- ---------------------
GE recorded assets and liabilities for principal pension plans as follows:
- --------------------------------------------------------------------------------
PREPAID PENSION ASSET
---------------------------
December 31 (In millions) 1998 1997
- --------------------------------------------------------------------------------
Fair value of plan assets $ 43,447 $ 38,742
Add (deduct) unrecognized balances
SFAS No. 87 transition gain (308) (462)
Net actuarial gain (9,462) (7,538)
Prior service cost 850 1,003
Projected benefit obligation (27,572) (25,874)
Pension liability 797 703
---------------------------
Prepaid pension asset $ 7,752 $ 6,574
================================================================================
ACTUARIAL ASSUMPTIONS used to determine costs and benefit obligations for
principal pension plans follow.
- --------------------------------------------------------------------------------
ACTUARIAL ASSUMPTIONS
-------------------------------
December 31 1998 1997 1996
- --------------------------------------------------------------------------------
Discount rate 6.75% 7.0% 7.5%
Compensation increases 5.0 4.5 4.5
Return on assets for the year 9.5 9.5 9.5
================================================================================
Experience gains and losses, as well as the effects of changes in actuarial
assumptions and plan provisions, are amortized over the average future service
period of employees.
6 RETIREE HEALTH AND LIFE BENEFITS
GE and its affiliates sponsor a number of retiree health and life insurance
benefit plans. Principal retiree benefit plans are discussed below; other such
plans are not significant individually or in the aggregate.
PRINCIPAL RETIREE BENEFIT PLANS generally provide health and life insurance
benefits to employees who retire under the GE Pension Plan (see note 5) with 10
or more years of service. Retirees share in the cost of health care benefits.
Benefit provisions are subject to collective bargaining. At the end of 1998,
these plans covered approximately 250,000 retirees and dependents.
The effect on operations of principal retiree benefit plans is shown in the
following table.
- --------------------------------------------------------------------------------
EFFECT ON OPERATIONS
------------------------------
(In millions) 1998 1997 1996
- --------------------------------------------------------------------------------
RETIREE HEALTH PLANS
Service cost for benefits earned $ 79 $ 90 $ 77
Interest cost on benefit obligation 205 183 166
Prior service cost 14 (3) (20)
Net actuarial loss recognized 28 16 20
Special early retirement cost -- 152 --
------------------------------
Retiree health plan cost 326 438 243
------------------------------
RETIREE LIFE PLANS
Expected return on plan assets (149) (137) (132)
Service cost for benefits earned 17 17 16
Interest cost on benefit obligation 114 116 106
Prior service cost (6) (8) (11)
Net actuarial loss recognized 11 16 23
Special early retirement cost -- 13 --
------------------------------
Retiree life plan cost (income) (13) 17 2
------------------------------
Total cost $ 313 $ 455 $ 245
================================================================================
FUNDING POLICY for retiree health benefits is generally to pay covered expenses
as they are incurred. GE funds retiree life insurance benefits at its
discretion.
Changes in the accumulated postretirement benefit obligation for retiree
benefit plans follow.
- --------------------------------------------------------------------------------
ACCUMULATED POSTRETIREMENT
BENEFIT OBLIGATION Health plans Life plans
-------------------- --------------------
December 31 (In millions) 1998 1997 1998 1997
- --------------------------------------------------------------------------------
Balance at January 1 $ 3,098 $ 2,415 $ 1,677 $ 1,539
Service cost for
benefits earned 79 90 17 17
Interest cost on
benefit obligation 205 183 114 116
Participant
contributions 24 21 -- --
Plan amendments -- 325 -- 44
Actuarial loss 177 245 91 56
Benefits paid (363) (333) (112) (108)
Special early
retirement cost -- 152 -- 13
-------------------- --------------------
Balance at
December 31 $ 3,220 $ 3,098 $ 1,787 $ 1,677
================================================================================
Changes in the fair value of assets for retiree benefit plans follow.
- --------------------------------------------------------------------------------
FAIR VALUE OF ASSETS Health plans Life plans
-------------------- --------------------
December 31 (In millions) 1998 1997 1998 1997
- --------------------------------------------------------------------------------
Balance at January 1 $ -- $ -- $ 1,917 $ 1,682
Actual return on plan
assets -- -- 316 343
Employer
contributions 339 312 -- --
Participant
contributions 24 21 -- --
Benefits paid (363) (333) (112) (108)
-------------------- --------------------
Balanace at
December 31 $ -- $ -- $ 2,121 $ 1,917
================================================================================
<PAGE>
F-29
ANNUAL REPORT PAGE 53
- ---------------------
Plan assets are held in trust and consist mainly of common stock and
fixed-income investments. GE common stock represented about 5% and 4% of trust
assets at year-end 1998 and 1997, respectively.
GE recorded assets and liabilities for retiree benefit plans as follows:
- --------------------------------------------------------------------------------
RETIREE BENEFIT LIABILITY/ASSET Health plans Life plans
-------------------- --------------------
December 31 (In millions) 1998 1997 1998 1997
- --------------------------------------------------------------------------------
Accumulated
postretirement
benefit obligation $ 3,220 $ 3,098 $ 1,787 $ 1,677
Add (deduct)
unrecognized
balances
Net actuarial
gain/(loss) (572) (423) 214 127
Prior service cost (157) (171) 49 55
Fair value of
plan assets -- -- (2,121) (1,917)
-------------------- --------------------
Retiree benefit liability/
(asset) $ 2,491 $ 2,504 $ (71) $ (58)
================================================================================
ACTUARIAL ASSUMPTIONS used to determine costs and benefit obligations for
principal retiree benefit plans are shown below.
- --------------------------------------------------------------------------------
ACTUARIAL ASSUMPTIONS
-------------------------------
December 31 1998 1997 1996
- --------------------------------------------------------------------------------
Discount rate 6.75% 7.0% 7.5%
Compensation increases 5.0 4.5 4.5
Health care cost trend (a) 7.8 7.8 8.0
Return on assets for the year 9.5 9.5 9.5
================================================================================
(a) For 1998, gradually declining to 5.0% after 2003.
- --------------------------------------------------------------------------------
Increasing or decreasing the health care cost trend rates by one percentage
point would not have had a material effect on the December 31, 1998, accumulated
postretirement benefit obligation or the annual cost of retiree health plans.
Experience gains and losses, as well as the effects of changes in actuarial
assumptions and plan provisions, are amortized over the average future service
period of employees.
7 GECS ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES
----------------------------------
(In millions) 1998 1997 1996
- -------------------------------------------------------------------------------
Balance at January 1 $ 2,802 $ 2,693 $ 2,519
Provisions charged to operations 1,609 1,421 1,033
Net transfers primarily related to
companies acquired or sold 388 127 139
Amounts written off-- net (1,511) (1,439) (998)
----------------------------------
Balance at December 31 $ 3,288 $ 2,802 $ 2,693
================================================================================
8 PROVISION FOR INCOME TAXES
----------------------------------
(In millions) 1998 1997 1996
- --------------------------------------------------------------------------------
GE
Estimated amounts payable $ 2,227 $ 2,332 $ 2,235
Deferred tax expense (benefit)
from temporary differences 590 (522) 60
----------------------------------
2,817 1,810 2,295
----------------------------------
GECS
Estimated amounts payable 815 368 164
Deferred tax expense from
temporary differences 549 798 1,067
----------------------------------
1,364 1,166 1,231
----------------------------------
CONSOLIDATED
Estimated amounts payable 3,042 2,700 2,399
Deferred tax expense from
temporary differences 1,139 276 1,127
----------------------------------
$ 4,181 $ 2,976 $ 3,526
================================================================================
GE includes GECS in filing a consolidated U.S. federal income tax return. The
GECS provision for estimated taxes payable includes its effect on the
consolidated return.
Estimated consolidated amounts payable includes amounts applicable to U.S.
federal income taxes of $1,459 million, $1,176 million and $971 million in 1998,
1997 and 1996, respectively, and amounts applicable to non-U.S. jurisdictions of
$1,335 million, $1,298 million and $1,204 million in 1998, 1997 and 1996,
respectively. Deferred tax expense related to U.S. federal income taxes was $971
million, $354 million and $1,081 million in 1998, 1997 and 1996, respectively.
Deferred income tax balances reflect the impact of temporary differences
between the carrying amounts of assets and liabilities and their tax bases and
are stated at enacted tax rates expected to be in effect when taxes are actually
paid or recovered. See note 22 for details.
Except for certain earnings that GE intends to reinvest indefinitely,
provision has been made for the estimated U.S. federal income tax liabilities
applicable to undistributed earnings of affiliates and associated companies. It
is not practicable to determine the U.S. federal income tax liability, if any,
that would be payable if such earnings were not reinvested indefinitely.
Consolidated U.S. income before taxes was $9.7 billion in 1998, $8.2 billion
in 1997 and $8.0 billion in 1996. The corresponding amounts for non-U.S.-based
operations were $3.8 billion in 1998, $3.0 billion in 1997 and $2.8 billion in
1996.
A reconciliation of the U.S. federal statutory tax rate to the actual tax
rate is provided on the following page.
<PAGE>
F-30
ANNUAL REPORT PAGE 54
- ---------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
RECONCILIATION OF U.S. FEDERAL
STATUTORY TAX RATE TO ACTUAL RATE Consolidated GE GECS
------------------------- -------------------------- -------------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Statutory U.S. federal income tax rate 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0%
========================= ========================== =========================
Increase (reduction) in rate
resulting from:
Inclusion of after-tax earnings
of GECS in before-tax
earnings of GE -- -- -- (11.0) (11.4) (10.3) -- -- --
Lockheed Martin exchange (note 2) -- (4.8) -- -- (5.4) -- -- -- --
Amortization of goodwill 1.1 1.1 1.1 0.7 0.8 0.8 1.0 1.1 1.2
Tax-exempt income (1.8) (1.9) (2.0) -- -- -- (4.7) (4.9) (5.4)
Foreign Sales Corporation
tax benefits (1.2) (1.0) (0.7) (1.0) (0.9) (0.6) (0.6) (0.5) (0.3)
Dividends received, not fully taxable (0.4) (0.5) (0.6) -- (0.2) (0.2) (1.0) (0.9) (1.1)
All other -- net (1.7) (1.3) (0.2) (0.4) 0.2 (0.7) (3.3) (3.4) 1.0
------------------------- -------------------------- -------------------------
(4.0) (8.4) (2.4) (11.7) (16.9) (11.0) (8.6) (8.6) (4.6)
------------------------- -------------------------- -------------------------
Actual income tax rate 31.0% 26.6% 32.6% 23.3% 18.1% 24.0% 26.4% 26.4% 30.4%
====================================================================================================================================
</TABLE>
9 Earnings Per Share Information
<TABLE>
<CAPTION>
1998 1997 1996
------------------- ------------------- -------------------
(In millions; per-share amounts in dollars) Diluted Basic Diluted Basic Diluted Basic
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED OPERATIONS
Net earnings available to common share owners $9,296 $9,296 $8,203 $8,203 $7,280 $7,280
Dividend equivalents -- net of tax 13 -- 10 -- 9 --
------------------- ------------------- -------------------
Net earnings available for per-share calculation $9,309 $9,296 $8,213 $8,203 $7,289 $7,280
------------------- ------------------- -------------------
AVERAGE EQUIVALENT SHARES
Shares of GE common stock outstanding 3,269 3,269 3,275 3,275 3,307 3,307
Employee compensation-related shares,
including stock options 61 -- 70 -- 64 --
------------------- ------------------- -------------------
Total average equivalent shares 3,330 3,269 3,345 3,275 3,371 3,307
------------------- ------------------- -------------------
Net earnings per share $ 2.80 $ 2.84 $ 2.46 $ 2.50 $ 2.16 $ 2.20
====================================================================================================================================
</TABLE>
<PAGE>
F-31
ANNUAL REPORT PAGE 55
- ---------------------
10 INVESTMENT SECURITIES
----------------------------------------------
Gross Gross
Amortized unrealized unrealized Estimated
(In millions) cost gains losses fair value
- --------------------------------------------------------------------------------
DECEMBER 31, 1998
GE
Equity securities $ 233 $ 26 $ -- $ 259
----------------------------------------------
GECS
Debt securities
U.S. corporate 27,888 1,293 (325) 28,856
State and municipal 12,483 727 (8) 13,202
Mortgage-backed 11,641 413 (109) 11,945
Corporate-- non-U.S 8,692 409 (90) 9,011
Government
-- non-U.S 5,415 258 (9) 5,664
U.S. government and
federal agency 2,706 207 (7) 2,906
Equity securities 5,651 1,415 (192) 6,874
----------------------------------------------
74,476 4,722 (740) 78,458
----------------------------------------------
CONSOLIDATED TOTALS $ 74,709 $ 4,748 $ (740) $ 78,717
================================================================================
DECEMBER 31, 1997
GE
Equity securities $ 257 $ 13 $ (5) $ 265
----------------------------------------------
GECS
Debt securities
U.S. corporate 24,580 1,028 (53) 25,555
State and municipal 10,780 636 (2) 11,414
Mortgage-backed 12,074 341 (30) 12,385
Corporate-- non-U.S 7,683 310 (12) 7,981
Government
-- non-U.S 3,714 150 (3) 3,861
U.S. government and
federal agency 2,413 103 (4) 2,512
Equity securities 5,414 1,336 (102) 6,648
----------------------------------------------
66,658 3,904 (206) 70,356
----------------------------------------------
CONSOLIDATED TOTALS $ 66,915 $ 3,917 $ (211) $ 70,621
================================================================================
The majority of mortgage-backed securities shown in the table above are
collateralized by U.S. residential mortgages.
At December 31, 1998, contractual maturities of debt securities, other than
mortgage-backed securities, were as follows:
- --------------------------------------------------------------------------------
CONTRACTUAL MATURITIES OF DEBT SECURITIES
(EXCLUDING MORTGAGE-BACKED SECURITIES)
----------------------------
Amortized Estimated
(In millions) cost fair value
- --------------------------------------------------------------------------------
Due in
1999 $ 5,370 $ 5,574
2000-2003 14,145 14,497
2004-2008 13,068 13,538
2009 and later 24,601 26,030
================================================================================
It is expected that actual maturities will differ from contractual maturities
because borrowers have the right to call or prepay certain obligations. Proceeds
from sales of investment securities by GE and GECS in 1998 were $16,707 million
($14,728 million in 1997 and $11,868 million in 1996). Gross realized gains were
$1,126 million in 1998 ($1,018 million in 1997 and $638 million in 1996). Gross
realized losses were $308 million in 1998 ($173 million in 1997 and $190 million
in 1996).
11 GE CURRENT RECEIVABLES
-------------------------
December 31 (In millions) 1998 1997
- --------------------------------------------------------------------------------
Aircraft Engines $ 1,722 $ 2,118
Appliances 299 300
Industrial Products and Systems 1,274 1,645
NBC 261 362
Plastics 1,070 1,037
Power Systems 2,620 2,376
Technical Products and Services 904 786
All Other 141 130
Corporate 495 538
-------------------------
8,786 9,292
Less allowance for losses (303) (238)
-------------------------
$ 8,483 $ 9,054
================================================================================
Receivables balances at December 31, 1998 and 1997, before allowance for
losses, included $5,447 million and $6,125 million, respectively, from sales of
goods and services to customers, and $350 million and $285 million,
respectively, from transactions with associated companies.
Current receivables of $305 million at year-end 1998 and $303 million at
year-end 1997 arose from sales, principally of aircraft engine goods and
services, on open account to various agencies of the U.S. government, which is
GE's largest single customer. About 4% of GE's sales of goods and services were
to the U.S. government in 1998 and 1997, compared with about 5% in 1996.
12 INVENTORIES
-------------------------
December 31 (In millions) 1998 1997
- --------------------------------------------------------------------------------
GE
Raw materials and work in process $ 3,154 $ 3,070
Finished goods 2,967 2,895
Unbilled shipments 195 242
-------------------------
6,316 6,207
Less revaluation to LIFO (1,011) (1,098)
-------------------------
5,305 5,109
-------------------------
GECS
Finished goods 744 786
-------------------------
$ 6,049 $ 5,895
================================================================================
LIFO revaluations decreased $87 million in 1998, compared with decreases of
$119 million in 1997 and $128 million in 1996. Included in these changes were
decreases of $29 million, $59 million and $58 million in 1998, 1997 and 1996,
respectively, that resulted from lower LIFO inventory levels. There were net
cost decreases in each of the last three years. As of December 31, 1998, GE is
obligated to acquire certain raw materials at market prices through the year
2008 under various take-or-pay or similar arrangements. Annual minimum
commitments under these arrangements are insignificant.
<PAGE>
F-32
ANNUAL REPORT PAGE 56
- ---------------------
13 GECS FINANCING RECEIVABLES (INVESTMENTS IN TIME SALES, LOANS AND FINANCING
LEASES)
---------------------------
December 31 (In millions) 1998 1997
- --------------------------------------------------------------------------------
TIME SALES AND LOANS
Consumer services $ 44,680 $ 42,270
Mid-market financing 20,240 11,401
Specialized financing 16,811 13,974
Equipment management 1,066 469
Specialty insurance 103 202
---------------------------
82,900 68,316
Deferred income (5,617) (3,484)
---------------------------
Time sales and loans-- net 77,283 64,832
---------------------------
INVESTMENT IN FINANCING LEASES
Direct financing leases 43,730 38,616
Leveraged leases 3,841 3,153
---------------------------
Investment in financing leases 47,571 41,769
---------------------------
124,854 106,601
Less allowance for losses (3,288) (2,802)
---------------------------
$ 121,566 $ 103,799
================================================================================
Time sales and loans represents transactions in a variety of forms, including
time sales, revolving charge and credit, mortgages, installment loans,
intermediate-term loans and revolving loans secured by business assets. The
portfolio includes time sales and loans carried at the principal amount on which
finance charges are billed periodically, and time sales and loans carried at
gross book value, which includes finance charges. At year-end 1998 and 1997,
specialized financing and consumer services loans included $12,980 million and
$10,503 million, respectively, for commercial real estate loans. Note 17
contains information on airline loans and leases.
At December 31, 1998, contractual maturities for time sales and loans were
$31,014 million in 1999; $14,865 million in 2000; $9,448 million in 2001; $6,675
million in 2002; $5,465 million in 2003; and $15,433 million thereafter --
aggregating $82,900 million. Experience has shown that a substantial portion of
receivables will be paid prior to contractual maturity. Accordingly, the
maturities of time sales and loans are not to be regarded as forecasts of future
cash collections.
Investment in financing leases consists of direct financing and leveraged
leases of aircraft, railroad rolling stock, autos, other transportation
equipment, data processing equipment and medical equipment, as well as other
manufacturing, power generation, commercial real estate, and commercial
equipment and facilities.
As the sole owner of assets under direct financing leases and as the equity
participant in leveraged leases, GECS is taxed on total lease payments received
and is entitled to tax deductions based on the cost of leased assets and tax
deductions for interest paid to third-party participants. GECS generally is
entitled to any residual value of leased assets.
Investment in direct financing and leveraged leases represents net unpaid
rentals and estimated unguaranteed residual values of leased equipment, less
related deferred income. GECS has no general obligation for principal and
interest on notes and other instruments representing third-party participation
related to leveraged leases; such notes and other instruments have not been
included in liabilities but have been offset against the related rentals
receivable. The GECS share of rentals receivable on leveraged leases is
subordinate to the share of other participants who also have security interests
in the leased equipment.
At December 31, 1998, contractual maturities for net rentals receivable under
financing leases were $14,093 million in 1999; $12,087 million in 2000; $8,947
million in 2001; $4,362 million in 2002; $2,759 million in 2003; and $9,104
million thereafter -- aggregating $51,352 million. As with time sales and loans,
experience has shown that a portion of these receivables will be paid prior to
contractual maturity, and these amounts should not be regarded as forecasts of
future cash flows.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT IN FINANCING LEASES
Total financing leases Direct financing leases Leveraged leases
---------------------- ----------------------- ---------------------
December 31 (In millions) 1998 1997 1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total minimum lease payments receivable $ 66,528 $ 58,543 $ 47,451 $ 42,901 $ 19,077 $ 15,642
Less principal and interest on third-party nonrecourse debt (15,176) (12,097) -- -- (15,176) (12,097)
---------------------- ----------------------- ---------------------
Net rentals receivable 51,352 46,446 47,451 42,901 3,901 3,545
Estimated unguaranteed residual value of leased assets 6,826 5,591 5,011 4,244 1,815 1,347
Less deferred income (10,607) (10,268) (8,732) (8,529) (1,875) (1,739)
---------------------- ----------------------- ---------------------
INVESTMENT IN FINANCING LEASES (as shown above) 47,571 41,769 43,730 38,616 3,841 3,153
Less amounts to arrive at net investment
Allowance for losses (619) (656) (519) (575) (100) (81)
Deferred taxes (8,593) (7,909) (5,147) (4,671) (3,446) (3,238)
---------------------- ----------------------- ---------------------
NET INVESTMENT IN FINANCING LEASES $ 38,359 $ 33,204 $ 38,064 $ 33,370 $ 295 $ (166)
====================================================================================================================================
</TABLE>
<PAGE>
F-33
ANNUAL REPORT PAGE 57
- ---------------------
GECS has a noncontrolling interest in Montgomery Ward Holding Corp. (MWHC)
which, together with certain of its affiliates, filed a bankruptcy petition for
reorganization in 1997. Loans to MWHC, which are considered impaired (as defined
below), were $578 million and $617 million at year-end 1998 and 1997,
respectively. These amounts are excluded from the nonearning and reduced-earning
receivable and impaired loan discussions below. GECS also provides revolving
credit card financing directly to customers of MWHC and affiliates; such
receivables totaled $3.4 billion at December 31, 1998, including $1.6 billion
that had been sold with recourse. The obligations of customers with respect to
these receivables are not affected by the bankruptcy filing.
Nonearning consumer receivables were $1,250 million and $1,049 million at
December 31, 1998 and 1997, respectively, a substantial amount of which were
private-label credit card loans subject to various loss-sharing agreements that
provide full or partial recourse to the originating retailer. Nonearning and
reduced-earning receivables other than consumer receivables were $354 million
and $353 million at year-end 1998 and 1997, respectively.
"Impaired" loans are defined by generally accepted accounting principles as
loans for which it is probable that the lender will be unable to collect all
amounts due according to original contractual terms of the loan agreement. That
definition excludes, among other things, leases or large groups of
smaller-balance homogenous loans and therefore applies principally to commercial
loans held by GECS. An analysis of impaired loans follows.
----------------
December 31 (In millions) 1998 1997
- --------------------------------------------------------------------------------
Loans requiring allowance for losses $346 $339
Loans expected to be fully recoverable 158 167
----------------
$504 $506
----------------
Allowance for losses $109 $170
Average investment during year 512 647
Interest income earned while impaired (a) 39 32
================================================================================
(a) Principally on the cash basis.
- --------------------------------------------------------------------------------
14 OTHER GECS RECEIVABLES
At year-end 1998 and 1997, this account included reinsurance recoverables of
$6,124 million and $5,027 million and insurance-related receivables of $7,109
million and $4,932 million, respectively. Premium receivables, funds on deposit
with reinsurers and policy loans are included in insurance-related receivables.
Also in "Other GECS receivables" are trade receivables, accrued investment
income, operating lease receivables and a variety of sundry items.
15 PROPERTY, PLANT AND EQUIPMENT (INCLUDING EQUIPMENT LEASED TO OTHERS)
----------------------
December 31 (In millions) 1998 1997
- --------------------------------------------------------------------------------
ORIGINAL COST
GE
Land and improvements $ 459 $ 459
Buildings, structures and related
equipment 6,579 6,375
Machinery and equipment 19,491 18,376
Leasehold costs and manufacturing
plant under construction 1,757 1,621
Other 24 24
----------------------
28,310 26,855
----------------------
GECS
Buildings and equipment 4,828 3,987
Equipment leased to others
Vehicles 9,825 9,144
Aircraft 9,321 7,686
Railroad rolling stock 2,804 2,367
Marine shipping containers 2,565 2,774
Other 3,447 2,844
----------------------
32,790 28,802
----------------------
$61,100 $55,657
======================
ACCUMULATED DEPRECIATION
AND AMORTIZATION
GE $16,616 $15,737
GECS
Buildings and equipment 1,733 1,478
Equipment leased to others 7,021 6,126
----------------------
$25,370 $23,341
================================================================================
Amortization of GECS equipment leased to others was $2,185 million, $2,102
million and $1,848 million in 1998, 1997 and 1996, respectively. Noncancelable
future rentals due from customers for equipment on operating leases at year-end
1998 totaled $12,808 million and are due as follows: $3,377 million in 1999;
$2,540 million in 2000; $1,841 million in 2001; $1,318 million in 2002; $897
million in 2003; and $2,835 million thereafter.
<PAGE>
F-34
ANNUAL REPORT PAGE 58
- ---------------------
16 INTANGIBLE ASSETS
--------------------
December 31 (In millions) 1998 1997
- --------------------------------------------------------------------------------
GE
Goodwill $ 9,203 $ 8,046
Other intangibles 793 709
--------------------
9,996 8,755
--------------------
GECS
Goodwill 11,469 8,090
Present value of future profits (PVFP) 1,618 1,824
Other intangibles 552 452
--------------------
13,639 10,366
--------------------
$23,635 $19,121
================================================================================
GE intangible assets are shown net of accumulated amortization of $2,923
million in 1998 and $2,976 million in 1997. GECS intangible assets are net of
accumulated amortization of $3,396 million in 1998 and $2,615 million in 1997.
PVFP amortization, which is on an accelerated basis and net of interest, is
projected to range from 15% to 8% of the year-end 1998 unamortized balance for
each of the next five years.
17 ALL OTHER ASSETS
-------------------------
December 31 (In millions) 1998 1997
- --------------------------------------------------------------------------------
GE
Investments
Associated companies (a) $ 2,336 $ 1,692
Other 474 735
-------------------------
2,810 2,427
Prepaid pension asset 7,752 6,574
Long-term receivables, including notes 2,379 2,389
Prepaid broadcasting rights 929 595
Other 4,161 2,744
-------------------------
18,031 14,729
-------------------------
GECS
Investments
Assets acquired for resale 6,167 4,403
Associated companies (a) 7,670 4,695
Real estate ventures 3,131 2,326
Other 3,473 2,452
-------------------------
20,441 13,876
Separate accounts 6,563 4,926
Servicing assets 1,625 1,713
Deferred insurance acquisition costs 3,326 2,521
Other 3,584 2,631
-------------------------
35,539 25,667
-------------------------
ELIMINATIONS (662) (576)
-------------------------
$ 52,908 $ 39,820
================================================================================
(a) Includes advances
- --------------------------------------------------------------------------------
In line with industry practice, sales of commercial jet aircraft engines
often involve long-term customer financing commitments. In making such
commitments, it is GE's general practice to require that it have or be able to
establish a secured position in the aircraft being financed. Under such airline
financing programs, GE had issued loans and guarantees (principally guarantees)
amounting to $1,473 million at year-end 1998 and $1,590 million at year-end
1997; and it had entered into commitments totaling $1,519 million and $1,794
million at year-end 1998 and 1997, respectively, to provide financial assistance
on future aircraft engine sales. Estimated fair values of the aircraft securing
these receivables and associated guarantees exceeded the related account
balances and guaranteed amounts at December 31, 1998. GECS acts as a lender and
lessor to the commercial airline industry. At December 31, 1998 and 1997, the
balance of such GECS loans, leases and equipment leased to others was $10,170
million and $8,980 million, respectively. In addition, at December 31, 1998,
GECS had issued financial guarantees and funding commitments of $74 million
($123 million at year-end 1997) and had placed multiyear orders for various
Boeing and Airbus aircraft with list prices of approximately $9.4 billion ($6.2
billion at year-end 1997).
At year-end 1998, the National Broadcasting Company had $9,376 million of
commitments to acquire broadcast material and the rights to broadcast television
programs, including U.S. television rights to future Olympic Games, and
commitments under long-term television station affiliation agreements that
require payments through the year 2009.
In connection with numerous projects, primarily power generation bids and
contracts, GE had issued various bid and performance bonds and guarantees
totaling $3,740 million at year-end 1998 and $2,895 million at year-end 1997.
Separate accounts represent investments controlled by policyholders and are
associated with identical amounts reported as insurance liabilities in note 20.
18 GE ALL OTHER CURRENT COSTS AND EXPENSES ACCRUED
At year-end 1998 and 1997, this account included taxes accrued of $3,415 million
and $2,866 million and compensation and benefit accruals of $1,487 million and
$1,321 million, respectively. Also included are amounts for product warranties,
restructuring, estimated costs on shipments billed to customers and a variety of
sundry items.
An analysis of changes in the restructuring liability follows.
----------------------------------------
Termination Exit
(In millions) benefits costs Total
- --------------------------------------------------------------------------------
1997 provision $ 778 $ 465 $ 1,243
Charges (672) (395) (1,067)
Reversed to operations -- (28) (28)
----------------------------------------
Balance at December 31, 1998 $ 106 $ 42 $ 148
================================================================================
Substantially all of the 1997 provision is expected to be utilized by
year-end 1999.
<PAGE>
F-35
ANNUAL REPORT PAGE 59
- ---------------------
19 BORROWINGS
- --------------------------------------------------------------------------------
SHORT-TERM BORROWINGS
----------------------------------------------
1998 1997
----------------------- ---------------------
Average Average
December 31 (In millions) Amount rate (a) Amount rate (a)
- --------------------------------------------------------- ---------------------
GE
Commercial paper (U.S.) $ 2,339 5.29% $ 1,835 5.88%
Payable to banks,
principally non-U.S 465 11.15 348 8.38
Current portion of
long-term debt 50 5.08 1,099 5.85
Other 612 347
----------------------------------------------
3,466 3,629
----------------------------------------------
GECS
Commercial paper
U.S 83,044 5.38 67,355 5.93
Non-U.S 3,953 4.80 3,879 4.18
Current portion of
long-term debt 14,645 5.66 15,101 6.30
Other 11,520 8,939
----------------------------------------------
113,162 95,274
----------------------------------------------
ELIMINATIONS (1,250) (828)
----------------------------------------------
$115,378 $98,075
================================================================================
- --------------------------------------------------------------------------------
LONG-TERM BORROWINGS
----------------------------------------------
1998
Average --------------------
December 31 (In millions) rate (a) Maturities 1998 1997
- --------------------------------------------------------------------------------
GE
Industrial development/
pollution control bonds 3.78% 2003-2027 $ 327 $ 270
Payable to banks,
principally non-U.S 9.56 2000-2006 230 195
Other (b) 124 264
---------------------
681 729
---------------------
GECS
Senior notes 6.07 2000-2055 58,042 44,993
Subordinated notes (c) 7.88 2006-2035 996 996
---------------------
59,038 45,989
---------------------
ELIMINATIONS (56) (115)
---------------------
$59,663 $ 46,603
================================================================================
(a) Based on year-end balances and local currency interest rates, including the
effects of interest rate and currency swaps, if any, directly associated
with the original debt issuance.
(b) A variety of obligations having various interest rates and maturities,
including certain borrowings by parent operating components and affiliates.
(c) Guaranteed by GE.
- --------------------------------------------------------------------------------
Borrowings of GE and GECS are addressed below from two perspectives --
liquidity and interest rate management. Additional information about borrowings
and associated swaps can be found in note 30.
LIQUIDITY requirements of GE and GECS are principally met through the credit
markets. Maturities of long-term borrowings during the next five years follow.
---------------------------------------------------
(In millions) 1999 2000 2001 2002 2003
- --------------------------------------------------------------------------------
GE $ 50 $ 137 $ 132 $ 33 $ 48
GECS 14,645 13,889 10,925 7,059 4,794
- --------------------------------------------------------------------------------
Confirmed credit lines of $4.0 billion had been extended to GE by 23 banks
at year-end 1998. Substantially all of GE's credit lines are available to GECS
and its affiliates in addition to their own credit lines.
At year-end 1998, GECS and its affiliates held committed lines of credit
aggregating $26.7 billion, including $11.8 billion of revolving credit
agreements pursuant to which it has the right to borrow funds for periods
exceeding one year. Amounts drawn by GECS under these lines at December 31,
1998, were not significant. A total of $1.5 billion of GE Capital credit lines
is available for use by GE. Both GE and GECS compensate certain banks for credit
facilities in the form of fees, which were insignificant in each of the past
three years.
INTEREST RATES ARE MANAGED by GECS in light of the anticipated behavior,
including prepayment behavior, of assets in which debt proceeds are invested. A
variety of instruments, including interest rate and currency swaps and currency
forwards, are employed to achieve management's interest rate objectives.
Effective interest rates are lower under these "synthetic" positions than could
have been achieved by issuing debt directly.
The following table shows GECS borrowing positions considering the effects of
swaps.
- --------------------------------------------------------------------------------
EFFECTIVE BORROWINGS (INCLUDING SWAPS)
-----------------------
December 31 (In millions) 1998 1997
- --------------------------------------------------------------------------------
Short-term $ 72,143 $ 56,961
-----------------------
Long-term (including current portion)
Fixed rate (a) $ 74,226 $ 59,329
Floating rate 25,831 24,973
-----------------------
Total long-term $100,057 $ 84,302
================================================================================
(a) Includes the notional amount of long-term interest rate swaps that
effectively convert the floating-rate nature of short-term borrowings to
fixed rates of interest.
- --------------------------------------------------------------------------------
At December 31, 1998, swap maturities ranged from 1999 to 2048, and average
interest rates for fixed-rate borrowings (including "synthetic" fixed-rate
borrowings) were 6.03% (6.32% at year-end 1997).
<PAGE>
F-36
ANNUAL REPORT PAGE 60
- ---------------------
20 GECS INSURANCE LIABILITIES, RESERVES AND ANNUITY BENEFITS
-----------------------
December 31 (In millions) 1998 1997
- --------------------------------------------------------------------------------
Investment contracts and universal
life benefits $29,266 $28,266
Life insurance benefits and other (a) 16,104 14,356
Unpaid claims and claims adjustment
expenses (b) 19,611 14,654
Unearned premiums 5,715 5,068
Separate accounts (see note 17) 6,563 4,926
-----------------------
$77,259 $67,270
================================================================================
(a) Life insurance benefits are accounted for mainly by a net-level-premium
method using estimated yields generally ranging from 5% to 9% in both 1998
and 1997.
(b) Principally property and casualty reserves; includes amounts for both
reported and incurred-but-not-reported claims, reduced by anticipated
salvage and subrogation recoveries. Estimates of liabilities are reviewed
and updated continually, with changes in estimated losses reflected in
operations.
- --------------------------------------------------------------------------------
When GECS cedes insurance to third parties, it is not relieved of its
primary obligation to policyholders. Losses on ceded risks give rise to claims
for recovery; allowances are established for such receivables from reinsurers.
The insurance liability for unpaid claims and claims adjustment expenses
related to policies that may cover environmental, asbestos and Year 2000-related
exposures is based on known facts and an assessment of applicable law and
coverage litigation. Liabilities are recognized for both known and unasserted
claims (including the cost of related litigation) when sufficient information
has been developed to indicate that a claim has been incurred and a range of
potential losses can be reasonably estimated. Developed case law and adequate
claim history do not exist for certain claims, particularly with respect to Year
2000-related exposures, principally due to significant uncertainties as to both
the level of ultimate losses that will occur and what portion, if any, will be
deemed to be insured amounts.
A summary of activity affecting unpaid claims and claims adjustment expenses
follows.
-------------------------------------
(In millions) 1998 1997 1996
- -------------------------------------------------------------------------------
Balance at January 1 -- gross $ 14,654 $ 13,184 $ 12,662
Less reinsurance recoverables (2,246) (1,822) (1,853)
-------------------------------------
Balance at January -- net 12,408 11,362 10,809
Claims and expenses incurred
Current year 6,330 4,494 4,087
Prior years (162) 146 104
Claims and expenses paid
Current year (2,400) (1,780) (1,357)
Prior years (3,692) (2,816) (2,373)
Claim reserves related to
acquired companies 3,476 1,360 309
Other 168 (358) (217)
-------------------------------------
Balance at December 31 -- net 16,128 12,408 11,362
Add reinsurance recoverables 3,483 2,246 1,822
-------------------------------------
Balance at December 31 -- gross $ 19,611 $ 14,654 $ 13,184
================================================================================
Prior-year claims and expenses incurred in the preceding table resulted
principally from settling claims established in earlier accident years for
amounts that differed from expectations.
Financial guarantees and credit life risk of insurance affiliates are
summarized below.
--------------------------
December 31 (In millions) 1998 1997
- --------------------------------------------------------------------------------
Guarantees, principally on municipal
bonds and structured finance issues $ 171,020 $ 144,647
Mortgage insurance risk in force 43,941 46,245
Credit life insurance risk in force 31,018 26,593
Less reinsurance (37,205) (33,528)
--------------------------
$ 208,774 $ 183,957
================================================================================
21 GE ALL OTHER LIABILITIES
This account includes noncurrent compensation and benefit accruals at year-end
1998 and 1997 of $5,594 million and $5,484 million, respectively. Also included
are amounts for deferred incentive compensation, deferred income, product
warranties and a variety of sundry items.
GE is involved in numerous remediation actions to clean up hazardous wastes
as required by federal and state laws. Liabilities for remediation costs at each
site are based on management's best estimate of undiscounted future costs,
excluding possible insurance recoveries. When there appears to be a range of
possible costs with equal likelihood, liabilities are based on the lower end of
such range. Uncertainties about the status of laws, regulations, technology and
information related to individual sites make it difficult to develop a
meaningful estimate of the reasonably possible aggregate environmental
remediation exposure. However, even in the unlikely event that remediation costs
amounted to the high end of the range of costs for each site, the resulting
additional liability would not be material to GE's financial position, results
of operations or liquidity.
<PAGE>
F-37
ANNUAL REPORT PAGE 61
- ---------------------
22 DEFERRED INCOME TAXES
Aggregate deferred tax amounts are summarized below.
------------------------
December 31 (In millions) 1998 1997
- --------------------------------------------------------------------------------
ASSETS
GE $ 5,309 $ 4,891
GECS 5,305 4,320
------------------------
10,614 9,211
------------------------
LIABILITIES
GE 5,059 4,576
GECS 14,895 13,286
------------------------
19,954 17,862
------------------------
NET DEFERRED TAX LIABILITY $ 9,340 $ 8,651
================================================================================
Principal components of the net deferred tax balances for GE and GECS are as
follows:
-------------------------
December 31 (In millions) 1998 1997
- --------------------------------------------------------------------------------
GE
Provisions for expenses (a) $(3,809) $(3,367)
Retiree insurance plans (847) (856)
Prepaid pension asset 2,713 2,301
Depreciation 935 955
Other-- net 758 652
-------------------------
(250) (315)
-------------------------
GECS
Financing leases 8,593 7,909
Operating leases 2,419 2,156
Net unrealized gains
on securities 1,369 1,264
Allowance for losses (1,386) (1,372)
Insurance reserves (1,022) (1,000)
AMT credit carryforwards (903) (354)
Other -- net 520 363
-------------------------
9,590 8,966
-------------------------
NET DEFERRED TAX LIABILITY $ 9,340 $ 8,651
================================================================================
(a) Represents the tax effects of temporary differences related to expense
accruals for a wide variety of items, such as employee compensation and
benefits, interest on tax deficiencies, product warranties and other
provisions for sundry losses and expenses that are not currently
deductible.
- --------------------------------------------------------------------------------
23 GECS MINORITY INTEREST IN EQUITY OF CONSOLIDATED AFFILIATES
Minority interest in equity of consolidated GECS affiliates includes preferred
stock issued by GE Capital and by an affiliate of GE Capital. The preferred
stock pays cumulative dividends at variable rates. Value of the preferred shares
is summarized below.
-----------------------
December 31 (In millions) 1998 1997
- --------------------------------------------------------------------------------
GE Capital $2,300 $2,230
GE Capital affiliate 860 660
================================================================================
Dividend rates on the preferred stock ranged from 3.9% to 5.2% during 1998
and from 3.8% to 5.2% during 1997 and 1996.
24 RESTRICTED NET ASSETS OF GECS AFFILIATES
Certain GECS consolidated affiliates are restricted from remitting funds to GECS
in the form of dividends or loans by a variety of regulations, the purpose of
which is to protect affected insurance policyholders, depositors or investors.
At year-end 1998, net assets of regulated GECS affiliates amounted to $25.1
billion, of which $21.9 billion was restricted.
At December 31, 1998 and 1997, the aggregate statutory capital and surplus of
the insurance businesses totaled $14.4 billion and $12.4 billion, respectively.
Accounting practices prescribed by statutory authorities are used in preparing
statutory statements.
25 SHARE OWNERS' EQUITY
-----------------------------------
(In millions) 1998 1997 1996
- -------------------------------------------------------------------------------=
COMMON STOCK ISSUED $ 594 $ 594 $ 594
===================================
ACCUMULATED NONOWNER
CHANGES OTHER THAN EARNINGS
Balance at January 1 $ 1,340 $ 615 $ 1,061
Unrealized gains (losses) on
investment securities -- net
of deferred taxes of $430,
$860 and ($204) 795 1,467 (329)
Currency translation
adjustments -- net of deferred
taxes of ($13), ($58) and ($9) 60 (742) (117)
Reclassification adjustments--
net of deferred taxes of ($291) (531) -- --
-----------------------------------
Balance at December 31 $ 1,664 $ 1,340 $ 615
===================================
OTHER CAPITAL
Balance at January 1 $ 4,434 $ 2,554 $ 1,602
Gains on treasury stock
dispositions (a) 2,374 1,880 952
-----------------------------------
Balance at December 31 $ 6,808 $ 4,434 $ 2,554
===================================
RETAINED EARNINGS
Balance at January 1 $ 43,338 $ 38,670 $ 34,528
Net earnings 9,296 8,203 7,280
Dividends (a) (4,081) (3,535) (3,138)
-----------------------------------
Balance at December 31 $ 48,553 $ 43,338 $ 38,670
===================================
COMMON STOCK HELD IN TREASURY
Balance at January 1 $ 15,268 $ 11,308 $ 8,176
Purchases (a) 6,475 6,392 4,842
Dispositions (a) (3,004) (2,432) (1,710)
-----------------------------------
Balance at December 31 $ 18,739 $ 15,268 $ 11,308
================================================================================
(a) Total dividends and other transactions with share owners reduced equity by
$5,178 million, $5,615 million and $5,318 million in 1998, 1997 and 1996,
respectively.
- --------------------------------------------------------------------------------
The GE Board of Directors has authorized repurchase of $17 billion of
common stock under the share repurchase program. This buyback will continue
through the year 2000 at an annual rate of about $2 billion. Funds used for the
share repurchase are expected to be generated largely from operating cash flow.
<PAGE>
F-38
ANNUAL REPORT PAGE 62
- ---------------------
Through year-end 1998, a total of 287 million shares having an aggregate cost of
$13.6 billion had been repurchased under this program and placed into treasury.
Common shares issued and outstanding are summarized in the following table.
- --------------------------------------------------------------------------------
SHARES OF GE COMMON STOCK
------------------------------------------
December 31 (In thousands) 1998 1997 1996
- --------------------------------------------------------------------------------
Issued 3,714,068 3,714,026 3,714,026
In treasury (442,772) (449,434) (424,942)
------------------------------------------
Outstanding 3,271,296 3,264,592 3,289,084
================================================================================
GE has 50 million authorized shares of preferred stock ($1.00 par value), but
no such shares have been issued.
The effects of translating to U.S. dollars the financial statements of
non-U.S. affiliates whose functional currency is the local currency are included
in share owners' equity. Asset and liability accounts are translated at year-end
exchange rates, while revenues and expenses are translated at average rates for
the period.
26 OTHER STOCK-RELATED INFORMATION
- --------------------------------------------------------------------------------
Average per share
------------------------------------
Shares
subject Exercise Market
(Shares in thousands) to option price price
- --------------------------------------------------------------------------------
Balance at December 31, 1995 144,874 $21.60 $36.00
Options granted 19,034 42.39 42.39
Replacement options 8,622 26.34 26.34
Options exercised (18,278) 17.70 43.25
Options terminated (4,707) 26.18 --
------------------------------------
Balance at December 31, 1996 149,545 24.86 49.44
Options granted (a) 13,795 68.07 68.07
Replacement options 30 24.16 24.16
Options exercised (21,746) 18.47 61.22
Options terminated (2,721) 31.10 --
------------------------------------
Balance at December 31, 1997 138,903 30.03 73.38
Options granted 7,707 79.86 79.86
Options exercised (23,955) 20.76 84.45
Options terminated (2,727) 44.46 --
------------------------------------
Balance at December 31, 1998 119,928 34.76 102.00
================================================================================
(a) Without adjusting for the effect of the 2-for-1 stock split in April 1997,
the number of options granted during 1997 would have been 13,476.
- --------------------------------------------------------------------------------
Stock option plans, stock appreciation rights (SARs), restricted stock and
restricted stock units are described in GE's current Proxy Statement. With
certain restrictions, requirements for stock option shares can be met from
either unissued or treasury shares.
The replacement options replaced canceled SARs and have identical terms
thereto. At year-end 1998, there were 1.4 million SARs outstanding at an average
exercise price of $22.14. There were 9.2 million restricted stock shares and
restricted stock units outstanding at year-end 1998.
There were 121.0 million and 92.8 million additional shares available for
grants of options, SARs, restricted stock and restricted stock units at December
31, 1998 and 1997, respectively. Under the 1990 Long-Term Incentive Plan, 0.95%
of the Company's issued common stock (including treasury shares) as of the first
day of each calendar year during which the Plan is in effect becomes available
for granting awards in such year. Any unused portion, in addition to shares
allocated to awards that are canceled or forfeited, is available for later
years.
Outstanding options and SARs expire on various dates through December 18,
2008. Restricted stock grants vest on various dates up to normal retirement of
grantees.
The following table summarizes information about stock options outstanding at
December 31, 1998.
- --------------------------------------------------------------------------------
STOCK OPTIONS OUTSTANDING
(Shares in thousands)
Outstanding Exercisable
----------------------------- --------------------
Average Average
Exercise Average exercise exercise
price range Shares life (a) price Shares price
- --------------------------------------------------------------------------------
$12 1/8 - 21 9/16 20,690 2.7 $ 17.80 20,690 $ 17.80
$21 5/8 - 31 15/16 61,600 5.5 25.72 47,372 25.16
$36 3/16 - 51 1/2 17,565 7.6 42.65 4,436 41.19
$51 3/4 - 73 12,475 8.8 68.88 75 60.15
$77 1/2 - 96 7/8 7,598 9.7 79.88 22 78.30
----------------------------------------------------
Total 119,928 5.9 34.76 72,595 24.09
================================================================================
At year-end 1997, options with an average exercise price of $21.11 were
exercisable on 72 million shares; at year-end 1996, options with an average
exercise price of $19.58 were exercisable on 81 million shares.
(a) Average contractual life remaining in years.
- --------------------------------------------------------------------------------
Stock options expire 10 years from the date they are granted; options vest
over service periods that range from one to five years.
Disclosures required by Statement of Financial Accounting Standards (SFAS)
No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, are as follows:
- --------------------------------------------------------------------------------
OPTION VALUE INFORMATION (a)
-----------------------------------
(In dollars) 1998 1997 1996
- --------------------------------------------------------------------------------
Fair value per option (b) $18.98 $17.81 $9.34
Valuation assumptions
Expected option term (years) 6.2 6.3 6.2
Expected volatility 21.7% 20.0% 20.1%
Expected dividend yield 1.8% 1.5% 2.3%
Risk-free interest rate 4.9% 6.1% 6.6%
================================================================================
(a) Weighted averages of option grants during each period.
(b) Estimated using Black-Scholes option pricing model.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRO FORMA EFFECTS (a)
December 31 (In millions;
per-share amounts in dollars) -----------------------------------
1998 1997 1996
- --------------------------------------------------------------------------------
Net earnings $9,196 $8,129 $7,235
Earnings per share -- diluted 2.77 2.43 2.15
-- basic 2.81 2.48 2.19
================================================================================
(a) Valuations only of grants made after January 1, 1995; thus, the pro forma
effect increased over the periods presented.
- --------------------------------------------------------------------------------
<PAGE>
F-39
ANNUAL REPORT PAGE 63
- ---------------------
27 SUPPLEMENTAL CASH FLOWS INFORMATION
Changes in operating assets and liabilities are net of acquisitions and
dispositions of principal businesses.
"Payments for principal businesses purchased" in the Statement of Cash Flows
is net of cash acquired and includes debt assumed and immediately repaid in
acquisitions.
"All other operating activities" in the Statement of Cash Flows consists
primarily of adjustments to current and noncurrent accruals and deferrals of
costs and expenses, increases and decreases in progress collections, adjustments
for gains and losses on assets, increases and decreases in assets held for sale,
and adjustments to assets.
Noncash transactions include the 1998 acquisition of Marquette Medical
Systems for 9.4 million shares of GE common stock valued at $829 million and the
1997 exchange transaction described in note 2. Other noncash transactions did
not have a significant effect on the investing or financing activities of GE or
GECS.
Certain supplemental information related to GE and GECS cash flows is shown
below.
<TABLE>
<CAPTION>
---------------------------------
For the years ended December 31 (In millions) 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GE
NET PURCHASE OF GE SHARES FOR TREASURY
Open market purchases under share repurchase program $ (3,646) $ (3,492) $ (3,266)
Other purchases (2,829) (2,900) (1,576)
Dispositions (mainly to employee and dividend reinvestment plans) 3,656 3,577 2,519
---------------------------------
$ (2,819) $ (2,815) $ (2,323)
=================================
GECS
FINANCING RECEIVABLES
Increase in loans to customers $(76,142) $(55,689) $(49,890)
Principal collections from customers -- loans 65,573 50,679 49,923
Investment in equipment for financing leases (20,299) (16,420) (14,427)
Principal collections from customers -- financing leases 15,467 13,796 11,158
Net change in credit card receivables (4,705) (4,186) (3,068)
Sales of financing receivables 13,805 9,922 4,026
---------------------------------
$ (6,301) $ (1,898) $ (2,278)
=================================
ALL OTHER INVESTING ACTIVITIES
Purchases of securities by insurance and annuity businesses $(23,897) $(19,274) $(15,925)
Dispositions and maturities of securities by insurance and annuity businesses 20,639 17,280 14,018
Proceeds from principal business dispositions -- 241 --
Other (7,820) (3,893) (4,183)
---------------------------------
$(11,078) $ (5,646) $ (6,090)
=================================
NEWLY ISSUED DEBT HAVING MATURITIES LONGER THAN 90 DAYS
Short-term (91 to 365 days) $ 5,881 $ 3,502 $ 5,061
Long-term (longer than one year) 33,453 15,566 17,245
Proceeds -- nonrecourse, leveraged lease debt 2,106 1,757 595
---------------------------------
$ 41,440 $ 20,825 $ 22,901
=================================
REPAYMENTS AND OTHER REDUCTIONS OF DEBT HAVING MATURITIES LONGER THAN 90 DAYS
Short-term (91 to 365 days) $(25,901) $(21,320) $(23,355)
Long-term (longer than one year) (4,739) (1,150) (1,025)
Principal payments -- nonrecourse, leveraged lease debt (387) (287) (276)
---------------------------------
$(31,027) $(22,757) $(24,656)
=================================
ALL OTHER FINANCING ACTIVITIES
Proceeds from sales of investment contracts $ 5,149 $ 4,717 $ 2,561
Preferred stock issued by GECS affiliates 270 605 155
Redemption of investment contracts (5,533) (4,537) (2,688)
---------------------------------
$ (114) $ 785 $ 28
====================================================================================================================
</TABLE>
<PAGE>
F-40
ANNUAL REPORT PAGE 64
- ---------------------
28 OPERATING SEGMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
REVENUES
For the years ended December 31
Total revenues Intersegment revenues External revenues
-------------------------------- ------------------------ ------------------------------
(In millions) 1998 1997 1996 1998 1997 1996 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GE
Aircraft Engines $ 10,294 $ 7,799 $ 6,302 $ 292 $ 101 $ 86 $ 10,002 $ 7,698 $ 6,216
Appliances 5,619 5,801 5,586 12 12 5 5,607 5,789 5,581
Industrial Products and Systems 11,222 10,984 10,401 479 491 453 10,743 10,493 9,948
NBC 5,269 5,153 5,232 -- -- -- 5,269 5,153 5,232
Plastics 6,633 6,695 6,509 20 24 22 6,613 6,671 6,487
Power Systems 8,466 7,915 7,643 166 80 67 8,300 7,835 7,576
Technical Products and Services 5,323 4,861 4,700 14 18 23 5,309 4,843 4,677
All Other 264 308 291 -- -- -- 264 308 291
Eliminations (1,367) (1,176) (1,032) (983) (726) (656) (384) (450) (376)
-------------------------------- ------------------------ ------------------------------
Total GE segment revenues 51,723 48,340 45,632 -- -- -- 51,723 48,340 45,632
Corporate items <F1> 507 2,919 1,116 -- -- -- 507 2,919 1,116
GECS net earnings 3,796 3,256 2,817 -- -- -- 3,796 3,256 2,817
-------------------------------- ------------------------ ------------------------------
Total GE 56,026 54,515 49,565 -- -- -- 56,026 54,515 49,565
GECS 48,694 39,931 32,713 -- -- -- 48,694 39,931 32,713
Eliminations (4,251) (3,606) (3,099) -- -- -- (4,251) (3,606) (3,099)
-------------------------------- ------------------------ ------------------------------
CONSOLIDATED REVENUES $100,469 $90,840 $79,179 $ -- $ -- $ -- $100,469 $90,840 $79,179
====================================================================================================================================
<FN>
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.
<F1> Includes revenues of $944 million and $789 million in 1997 and 1996,
respectively, from an appliance distribution affiliate that was
deconsolidated in 1998. Also includes $1,538 million in 1997 from exchanging
preferred stock in Lockheed Martin Corporation for the stock of a newly
formed subsidiary.
- --------------------------------------------------------------------------------
</FN>
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS PROPERTY, PLANT AND DEPRECIATION AND
EQUIPMENT ADDITIONS AMORTIZATION (INCLUDING
(INCLUDING EQUIPMENT GOODWILL AND OTHER
LEASED TO OTHERS) INTANGIBLES)
For the years ended For the years ended
At December 31 December 31 December 31
---------------------------------- ------------------------ -----------------------
(In millions) 1998 1997 1996 1998 1997 1996 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GE
Aircraft Engines $ 8,866 $ 8,895 $ 5,423 $ 480 $ 729 $ 551 $ 398 $ 292 $ 282
Appliances 2,436 2,354 2,399 150 83 168 137 131 123
Industrial Products and Systems 6,466 6,672 6,574 428 487 450 440 408 362
NBC 3,264 3,050 3,007 105 116 176 127 142 121
Plastics 9,813 8,890 9,130 722 618 748 591 494 552
Power Systems 7,253 6,182 6,322 246 215 185 215 199 184
Technical Products and Services 3,858 2,438 2,245 254 189 154 143 137 123
All Other 189 224 239 -- -- -- 52 46 40
---------------------------------- ------------------------ -----------------------
Total GE segments 42,145 38,705 35,339 2,385 2,437 2,432 2,103 1,849 1,787
Investment in GECS 19,727 17,239 14,276 -- -- -- -- -- --
Corporate items and eliminations (a) 12,798 11,482 10,310 158 129 114 189 180 176
---------------------------------- ------------------------ -----------------------
Total GE 74,670 67,426 59,925 2,543 2,566 2,546 2,292 2,029 1,963
GECS 303,297 255,408 227,419 8,110 7,320 5,762 3,568 3,240 2,805
Eliminations (22,032) (18,822) (14,942) -- -- -- -- -- --
---------------------------------- ------------------------ -----------------------
CONSOLIDATED TOTALS $ 355,935 $ 304,012 $ 272,402 $10,653 $9,886 $8,308 $5,860 $5,269 $4,768
====================================================================================================================================
<FN>
Additions to property, plant and equipment include amounts relating to principal
businesses purchased.
(a) Depreciation and amortization includes $64 million of unallocated RCA
goodwill amortization in 1998, 1997 and 1996 that relates to NBC.
- --------------------------------------------------------------------------------
</FN>
</TABLE>
At year=end 1998, GE adopted SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION. Prior-period amounts have been restated in
accordance with the requirements of the new standard.
BASIS FOR PRESENTATION. The Company's operating businesses are organized based
on the nature of products and services provided. Certain GE businesses do not
meet the definition of a reportable operating segment and have been aggregated.
The Industrial Products and Systems segment consists of Industrial Systems,
Lighting, Transportation Systems and GE Supply. The Technical Products and
Services segment consists of Medical Systems and Information Services.
Segment accounting policies are the same as policies described in note 1.
<PAGE>
F-41
ANNUAL REPORT PAGE 65
- ---------------------
Details of segment profit by operating segment can be found on page 36 of this
report. A description of operating segments for General Electric Company and
consolidated affiliates follows.
AIRCRAFT ENGINES. Jet engines and replacement parts and repair and maintenance
services for all categories of commercial aircraft (short/medium, intermediate
and long-range); for a wide variety of military aircraft, including fighters,
bombers, tankers and helicopters; and for executive and commuter aircraft. Sold
worldwide to airframe manufacturers, airlines and government agencies. Also
includes aircraft engine derivatives, reported both in this segment and in Power
Systems, used as marine propulsion and industrial power sources.
APPLIANCES. Major appliances and related services for products such as
refrigerators, freezers, electric and gas ranges, dishwashers, clothes washers
and dryers, microwave ovens, room air conditioners and residential water system
products. Sold in North America and in global markets under various GE and
private-label brands. Distributed to retail outlets, mainly for the replacement
market, and to building contractors and distributors for new installations.
INDUSTRIAL PRODUCTS AND SYSTEMS. Lighting products (including a wide variety of
lamps, lighting fixtures, wiring devices and quartz products); electrical
distribution and control equipment (including power delivery and control
products such as transformers, meters, relays, capacitors and arresters);
transportation systems products (including diesel-electric locomotives, transit
propulsion equipment and motorized wheels for off-highway vehicles); electric
motors and related products; a broad range of electrical and electronic
industrial automation products (including drive systems); installation,
engineering and repair services, which includes management and technical
expertise for large projects such as process control systems; and GE Supply, a
network of electrical supply houses. Markets are extremely diverse. Products are
sold to commercial and industrial end users, including utilities, to original
equipment manufacturers, to electrical distributors, to retail outlets, to
railways and to transit authorities. Increasingly, products are developed for
and sold in global markets.
NBC. Principal businesses are the furnishing of U.S. network television services
to more than 200 affiliated stations, production of television programs,
operation of 13 VHF and UHF television broadcasting stations, operation of six
cable/satellite networks around the world, and investment and programming
activities in the Internet, multimedia and cable television.
PLASTICS. High-performance engineered plastics used in applications such as
automobiles and housings for computers and other business equipment; ABS resins;
silicones; superabrasive industrial diamonds; and laminates. Sold worldwide to a
diverse customer base consisting mainly of manufacturers.
POWER SYSTEMS. Power plant products and services, including design,
installation, operation and maintenance services. Markets and competition are
global. Gas turbines are sold separately and as part of packaged power plants
for electric utilities, independent power producers and for industrial
cogeneration and mechanical drive applications. Steam turbine-generators are
sold to electric utilities and, for cogeneration, to industrial and other power
customers. Also includes nuclear reactors and fuel and support services for GE's
new and installed boiling water reactors and aircraft engine derivatives, also
reported in the Aircraft Engines segment, used as industrial power sources.
TECHNICAL PRODUCTS AND SERVICES. Medical imaging systems such as magnetic
resonance (MR) and computed tomography (CT) scanners, x-ray, nuclear imaging and
ultrasound, as well as diagnostic cardiology and patient monitoring devices;
related services, including equipment monitoring and repair, computerized data
management and customer productivity services. Products and services are sold
worldwide to hospitals and medical facilities. Also includes a full range of
computer-based information and data interchange services for both internal and
external use to commercial and industrial customers.
GECS. The operating activities of the GECS segment follow.
CONSUMER SERVICES -- private-label and bank credit card loans, personal
loans, time sales and revolving credit and inventory financing for retail
merchants, auto leasing and inventory financing, mortgage servicing, and
consumer savings and insurance services.
EQUIPMENT MANAGEMENT -- leases, loans, sales and asset management services
for portfolios of commercial and transportation equipment, including aircraft,
trailers, auto fleets, modular space units, railroad rolling stock, data
processing equipment, containers used on ocean-going vessels, and satellites.
MID-MARKET FINANCING -- loans, financing and operating leases and other
services for middle-market customers, including manufacturers, distributors and
end users, for a variety of equipment that includes vehicles, corporate
aircraft, data processing equipment, medical and diagnostic equipment, and
equipment used in construction, manufacturing, office applications, electronics
and telecommunications activities.
SPECIALIZED FINANCING -- loans and financing leases for major capital assets,
including industrial facilities and equipment, and energy-related facilities;
commercial and residential real estate loans and investments; and loans to and
investments in public and private entities in diverse industries.
SPECIALTY INSURANCE -- U.S. and international multiple-line property and
casualty reinsurance; certain directly written specialty insurance and life
reinsurance; financial guaranty insurance, principally on municipal bonds and
structured finance issues; private mortgage insurance; and creditor insurance
covering international customer loan repayments.
Very few of the products financed by GECS are manufactured by GE.
<PAGE>
F-42
ANNUAL REPORT PAGE 66
- ---------------------
29 GEOGRAPHIC SEGMENT INFORMATION (CONSOLIDATED)
The table below presents data by geographic region. Operating profit data by
geographic segment have been restated on a basis consistent with operating
segment information presented on page 36.
Revenues and operating profit shown below are classified according to their
country of origin (including exports from such areas). Revenues and operating
profit classified under the caption "United States" include royalty and
licensing income from non-U.S. sources.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
REVENUES
For the years ended December 31
Total revenues Intersegment revenues External revenues
- --------------------------------------------------------------- ---------------------------------- -------------------------------
(In millions) 1998 1997 1996 1998 1997 1996 1998 1997 1996
---------------------------------- ---------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States $ 71,799 $ 66,330 $ 58,110 $ 2,608 $ 2,471 $ 2,292 $ 69,191 $ 63,859 $ 55,818
Europe <F1> 21,665 18,166 15,964 837 787 714 20,828 17,379 15,250
Pacific Basin 5,166 4,742 4,343 951 880 796 4,215 3,862 3,547
Other <F2> 6,925 6,420 5,140 690 680 576 6,235 5,740 4,564
Intercompany eliminations (5,086) (4,818) (4,378) (5,086) (4,818) (4,378) -- -- --
---------------------------------- ---------------------------------- -------------------------------
Total $ 100,469 $ 90,840 $ 79,179 $ -- $ -- $ -- $ 100,469 $ 90,840 $ 79,179
====================================================================================================================================
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATING PROFIT <F3> ASSETS LONG-LIVED ASSETS <F4>
For the years ended
December 31 At December 31 At December 31
----------------------------- ---------------------------------- -------------------------------
(In millions) 1998 1997 1996 1998 1997 1996 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States $ 11,558 $ 10,249 $ 9,745 $ 227,311 $ 206,655 $ 189,593 $ 18,048 $ 17,074 $ 15,016
Europe 2,393 2,271 1,724 84,518 66,740 55,196 6,334 5,180 4,483
Pacific Basin 431 355 269 18,427 8,881 8,125 1,326 971 881
Other <F2> 810 713 576 25,878 21,926 19,655 10,057 9,119 8,442
Intercompany eliminations (9) (23) 7 (199) (190) (167) (35) (28) (26)
----------------------------- ---------------------------------- -------------------------------
Total $ 15,183 $ 13,565 $12,321 $ 355,935 $ 304,012 $ 272,402 $ 35,730 $ 32,316 $ 28,796
====================================================================================================================================
<FN>
<F1> Includes $944 million and $789 million in 1997 and 1996, respectively, from
an appliance distribution affiliate that was deconsolidated in 1998.
<F2> 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).
<F3> Excludes GECS income taxes of $1,364 million, $1,166 million and $1,231
million in 1998, 1997 and 1996, respectively, which are included in the
measure of segment profit reported on page 36.
<F4> Property, plant and equipment (including equipment leased to others).
- --------------------------------------------------------------------------------
</FN>
</TABLE>
30 ADDITIONAL INFORMATION ABOUT FINANCIAL INSTRUMENTS
This note contains estimated fair values of certain financial instruments to
which GE and GECS are parties. Apart from borrowings by GE and GECS and certain
marketable securities, relatively few of these instruments are actively traded.
Thus, fair values must often be determined by using one or more models that
indicate value based on estimates of quantifiable characteristics as of a
particular date. Because this undertaking is, by its nature, difficult and
highly judgmental, for a limited number of instruments, alternative valuation
techniques may have produced disclosed values different from those that could
have been realized at December 31, 1998 or 1997. Assets and liabilities that, as
a matter of accounting policy, are reflected in the accompanying financial
statements at fair value are not included in the following disclosures; such
items include cash and equivalents, investment securities and separate accounts.
A description of how values are estimated follows.
BORROWINGS. Based on quoted market prices or market comparables. Fair values of
interest rate and currency swaps on borrowings are based on quoted market prices
and include the effects of counterparty creditworthiness.
TIME SALES AND LOANS. Based on quoted market prices, recent transactions and/or
discounted future cash flows, using rates at which similar loans would have been
made to similar borrowers.
INVESTMENT CONTRACT BENEFITS. Based on expected future cash flows, discounted at
currently offered discount rates for immediate annuity contracts
or cash surrender values for single premium deferred annuities.
FINANCIAL GUARANTEES AND CREDIT LIFE. Based on future cash flows, considering
expected renewal premiums, claims, refunds and servicing costs, discounted at a
market rate.
ALL OTHER INSTRUMENTS. Based on comparable transactions, market comparables,
discounted future cash flows, quoted market prices, and/or estimates of the cost
to terminate or otherwise settle obligations to counterparties.
<PAGE>
F-43
ANNUAL REPORT PAGE 67
- ---------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL INSTRUMENTS
---------------------------------------- ---------------------------------------
1998 1997
---------------------------------------- ---------------------------------------
Assets (liabilities) Assets (liabilities)
------------------------------- -----------------------------
Estimated Estimated
Carrying fair value Carrying fair value
Notional amount ------------------ Notional amount ------------------
December 31 (In millions) amount (net) High Low amount (net) High Low
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GE
Investment related
Investments and notes receivable $ <F1> $ 1,764 $ 1,810 $ 1,793 $ <F1> $ 1,909 $ 1,915 $ 1,908
Cancelable interest rate swap 1,221 17 1 1 1,421 25 19 19
Borrowings and related instruments
Borrowings<F2><F3> <F1> (4,147) (4,155) (4,155) <F1> (4,358) (4,377) (4,377)
Interest rate swaps 951 -- (60) (60) 531 -- (12) (12)
Recourse obligations for receivables sold 441 (32) (32) (32) 427 (23) (23) (23)
Financial guarantees 2,172 -- -- -- 2,141 -- -- --
Other firm commitments
Currency forwards and options 7,914 72 114 114 6,656 82 270 270
Financing commitments 1,519 -- -- -- 1,794 -- -- --
GECS
Assets
Time sales and loans <F1> 74,616 75,474 74,293 <F1> 62,712 63,105 61,171
Integrated interest rate swaps 14,135 16 (102) (102) 12,323 19 (125) (125)
Purchased options 11,195 146 158 158 1,992 64 39 39
Mortgage-related positions
Mortgage purchase commitments 1,983 -- 15 15 2,082 -- 11 11
Mortgage sale commitments 3,276 -- (9) (9) 2,540 -- (9) (9)
Mortgages held for sale <F1> 4,405 4,457 4,457 <F1> 2,378 2,379 2,379
Options, including "floors" 21,433 91 181 181 30,347 51 141 141
Interest rate swaps and futures 6,662 -- 49 49 3,681 -- 23 23
Other cash financial instruments <F1> 3,205 3,433 3,231 <F1> 2,242 2,592 2,349
Liabilities
Borrowings and related instruments
Borrowings<F2> <F3> <F1> (172,200) (174,492) (174,492) <F1> (141,263) (141,828)(141,828)
Interest rate swaps 46,325 -- (1,449) (1,449) 42,531 -- (250) (250)
Currency swaps 29,645 -- 252 252 23,382 -- (1,249) (1,249)
Currency forwards 23,409 -- (389) (389) 15,550 -- 371 371
Investment contract benefits <F1> (23,893) (23,799) (23,799) <F1> (23,045) (22,885) (22,885)
Insurance -- financial guarantees and credit life 208,774 (3,135) (3,339) (3,446) 183,957 (2,897) (2,992) (3,127)
Credit and liquidity support -- securitizations 21,703 (29) (29) (29) 13,634 (46) (46) (46)
Performance guarantees -- principally
letters of credit 2,684 -- -- -- 2,699 (34) -- (67)
Other 2,888 (1,921) (1,190) (1,190) 3,147 (1,134) (1,282) (1,303)
Other firm commitments
Currency forwards 5,072 -- (52) (52) 1,744 -- 11 11
Currency swaps 915 72 72 72 1,073 192 192 192
Ordinary course of business
lending commitments 9,839 -- (12) (12) 7,891 -- (62) (62)
Unused revolving credit lines
Commercial 6,401 -- -- -- 4,850 -- -- --
Consumer -- principally credit cards 132,475 -- -- -- 134,123 -- -- --
====================================================================================================================================
<FN>
<F1> Not applicable.
<F2> Includes effects of interest rate and currency swaps, which also are listed
separately.
<F3> See note 19.
- --------------------------------------------------------------------------------
</FN>
</TABLE>
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.
<PAGE>
F-44
ANNUAL REPORT PAGE 68
- ---------------------
OPTIONS AND INSTRUMENTS CONTAINING OPTION FEATURES that behave based on limits
("caps," "floors" or "collars") on interest rate movement are used primarily to
hedge prepayment risk in certain GECS business activities, such as mortgage
servicing and annuities.
SWAPS OF INTEREST RATES AND CURRENCIES are used by GE and GECS to optimize
borrowing costs for a particular funding strategy (see note 19). A cancelable
interest rate swap was used by GE to hedge an investment position. Interest rate
and currency swaps, along with purchased options and futures, are used by GECS
to establish specific hedges of mortgage-related assets and to manage net
investment exposures. Credit risk of these positions is evaluated by management
under the credit criteria discussed below. As part of its ongoing customer
activities, GECS also enters into swaps that are integrated into investments in
or loans to particular customers and do not involve assumption of third-party
credit risk. Such integrated swaps are evaluated and monitored like their
associated investments or loans and are not therefore subject to the same credit
criteria that would apply to a stand-alone position.
COUNTERPARTY CREDIT RISK -- risk that counterparties will be financially unable
to make payments according to the terms of the agreements -- is the principal
risk associated with swaps, purchased options and forwards. Gross market value
of probable future receipts is one way to measure this risk, but is meaningful
only in the context of net credit exposure to individual counterparties. At
December 31, 1998 and 1997, this gross market risk amounted to $2.3 billion and
$2.0 billion, respectively. Aggregate fair values that represent associated
probable future obligations, normally associated with a right of offset against
probable future receipts, amounted to $3.6 billion and $2.9 billion at December
31, 1998 and 1997, respectively.
Except as noted above for positions that are integrated into financings, all
swaps, purchased options and forwards are carried out within the following
credit policy constraints.
o Once a counterparty exceeds credit exposure limits (see table below), no
additional transactions are permitted until the exposure with that
counterparty is reduced to an amount that is within the established limit.
Open contracts remain in force.
- --------------------------------------------------------------------------------
COUNTERPARTY CREDIT CRITERIA
-----------------------------
Credit rating
-----------------------------
Moody's Standard & Poor's
- --------------------------------------------------------------------------------
Term of transaction
Between one and five years Aa3 AA-
Greater than five years Aaa AAA
Credit exposure limits
Up to $50 million Aa3 AA-
Up to $75 million Aaa AAA
================================================================================
o All swaps are executed under master swap agreements containing mutual credit
downgrade provisions that provide the ability to require assignment or
termination in the event either party is downgraded below A3 or A-.
More credit latitude is permitted for transactions having original maturities
shorter than one year because of their lower risk.
31 QUARTERLY INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
First quarter Second quarter Third quarter Fourth quarter
(Dollar amounts in millions; ------------------ ------------------ ------------------ ------------------
per-share amounts in dollars) 1998 1997 1998 1997 1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED OPERATIONS
Net earnings $ 1,891 $ 1,677 $ 2,450 $ 2,162 $ 2,284 $ 2,014 $ 2,671 $ 2,350
Earnings per share -- diluted 0.57 0.50 0.74 0.65 0.69 0.60 0.80 0.70
-- basic 0.58 0.51 0.75 0.66 0.70 0.62 0.82 0.72
SELECTED DATA
GE
Sales of goods and services 11,408 10,522 13,217 12,620 12,075 11,698 14,846 14,112
Gross profit from sales 3,366 2,970 4,216 3,886 3,630 3,368 4,598 2,618
GECS
Total revenues 11,151 9,544 11,801 9,317 12,016 10,182 13,726 10,888
Operating profit 1,252 1,081 1,219 1,138 1,584 1,229 1,105 974
Net earnings 881 754 933 798 1,082 938 900 766
====================================================================================================================================
</TABLE>
For GE, gross profit from sales is sales of goods and services less costs of
goods and services sold. For GECS, operating profit is "Earnings before income
taxes."
Fourth-quarter gross profit from sales in 1997 was reduced by restructuring
and other special charges. Such charges, including amounts shown in "Other costs
and expenses," were $2,322 million before tax. Also in the fourth quarter of
1997, GE completed an exchange transaction with Lockheed Martin as described in
note 2.
Earnings-per-share amounts for each quarter are required to be computed
independently. As a result, with the exception of 1998 diluted earnings per
share, their sum does not equal the total year earnings-per-share amounts for
1998 and 1997.
<PAGE>
<TABLE>
EXHIBIT 12
GENERAL ELECTRIC COMPANY
RATIO OF EARNINGS TO FIXED CHARGES
<CAPTION>
(DOLLARS IN MILLIONS) Year ended December 31
--------------------------------------------------------
1994 1995 1996 1997 1998
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
GE EXCEPT GECS
Earnings <F1> $ 7,828 $ 8,696 $ 9,677 $ 10,132 $ 12,230
Less: Equity in undistributed earnings of General Electric
Capital Services, Inc. <F2> (1,181) (1,324) (1,836) (1,597) (2,124)
Plus: Interest and other financial
charges included in expense 410 649 595 797 883
One-third of rental expense <F3> 171 174 171 179 189
-------- -------- -------- -------- --------
Adjusted "earnings" $ 7,228 $ 8,195 $ 8,607 $ 9,511 $ 11,178
======== ======== ======== ======== ========
Fixed Charges:
Interest and other financial charges $ 410 $ 649 $ 595 $ 797 $ 883
Interest capitalized 21 13 19 31 38
One-third of rental expense <F3> 171 174 171 179 189
-------- -------- -------- -------- --------
Total fixed charges $ 602 $ 836 $ 785 $ 1,007 $ 1,110
======== ======== ======== ======== ========
Ratio of earnings to fixed charges 12.01 9.80 10.96 9.44 10.07
======== ======== ======== ======== ========
GENERAL ELECTRIC COMPANY AND CONSOLIDATED AFFILIATES
Earnings <F1> $ 8,831 $ 9,941 $ 11,075 $ 11,419 $ 13,742
Plus: Interest and other financial charges
included in expense 4,994 7,336 7,939 8,445 9,821
One-third of rental expense <F3> 327 349 353 423 486
-------- -------- -------- -------- --------
Adjusted "earnings" $ 14,152 $ 17,626 $ 19,367 $ 20,287 $ 24,049
======== ======== ======== ======== ========
Fixed Charges:
Interest and other financial charges $ 4,994 $ 7,336 $ 7,939 $ 8,445 $ 9,821
Interest capitalized 30 34 60 83 126
One-third of rental expense <F3> 327 349 353 423 486
-------- -------- -------- -------- --------
Total fixed charges $ 5,351 $ 7,719 $ 8,352 $ 8,951 $ 10,433
======== ======== ======== ======== ========
Ratio of earnings to fixed charges 2.64 2.28 2.32 2.27 2.31
======== ======== ======== ======== ========
<FN>
<F1> Earnings before income taxes and minority interest.
<F2> Earnings after income taxes, net of dividends.
<F3> Considered to be representative of interest factor in rental expense.
</FN>
</TABLE>
