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                                  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 September 30, 2002

                                       OR

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

                  For the transition period from _____ to _____

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                        Commission File Number: 001-31369

                                 CIT Group Inc.
             (Exact name of registrant as specified in its charter)

             Delaware                                           65-1051192
  (State or other jurisdiction                                 (IRS Employer
of incorporation or organization)                           Identification No.)

1 CIT Drive, Livingston, New Jersey                                07039
(Address of registrant's principal                               (Zip Code)
       executive offices)

       (Registrant's telephone number including area code): (973) 740-5000

                                   ----------

           Securities registered pursuant to Section 12(b) of the Act:

                                                       Name of each exchange on
      Title of each class                                  which registered
      -------------------                              ------------------------
Common Stock, par value $0.01 per share ...........    New York Stock Exchange
5 7/8% Notes due October 15, 2008 .................    New York Stock Exchange

                                   ----------

           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. |_|

      The aggregate  market value of voting common stock held by  non-affiliates
of the  registrant,  based on the most recent New York Stock Exchange  Composite
Transaction closing price of Common Stock ($20.61 per share,  211,447,100 common
stock outstanding), which occurred on November 15, 2002, was $4,357,924,731. For
purposes of this  computation,  all officers and directors of the registrant are
deemed to be  affiliates.  Such  determination  shall not be deemed an admission
that such officers and directors are, in fact, affiliates of the registrant.  At
November 15, 2002, 211,573,200 shares of CIT's common stock, par value $0.01 per
share, were outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

      List here under the following  documents if  incorporated by reference and
the Part of the Form 10-K (e.g.,  Part 1, Part II, etc.) into which the document
is  incorporated:  (1) Any annual report to security  holders;  (2) Any proxy or
information statement;  and (3) Any prospectus filed pursuant to Rule 424 (b) or
(c) under the  Securities Act of 1933.  The listed  documents  should be clearly
described for identification  purposes (e.g.,  annual report to security holders
for fiscal year ended December 24, 1980).

                   See pages 99 to 103 for the exhibit index.

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                                TABLE OF CONTENTS
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Form 10-K
 Item No.                         Name of Item                              Page
 --------                         ------------                              ----
                                     Part I
Item 1.  Business .........................................................    1
Item 2.  Properties .......................................................    6
Item 3.  Legal Proceedings ................................................    6
Item 4.  Submission of Matters to a Vote of Security Holders ..............    6

                                   Part II
Item 5.  Market for Registrant's Common Equity and Related Stockholder
           Matters ........................................................    7
Item 6.  Selected Financial Data ..........................................    7
Item 7.  Management's Discussion and Analysis of Financial Condition
           and Results of Operations and ..................................   10
Item 7A. Quantitative and Qualitative Disclosure about Market Risk ........   10
Item 8.  Financial Statements and Supplementary Data ......................   38
Item 9.  Changes in and Disagreements with Accountants on Accounting and
           Financial Disclosure ...........................................   83

                                  Part III
Item 10. Directors and Executive Officers of the Registrant ...............   84
Item 11. Executive Compensation ...........................................   87
Item 12. Security Ownership of Certain Beneficial Owners and Management ...   96
Item 13. Certain Relationships and Related Transactions ...................   97
Item 14. Controls and Procedures ..........................................   99

                                   Part IV
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K ..  100
Signatures ................................................................  105


                                       i


                                     PART I

Item 1. Business

Overview

      CIT Group Inc., a Delaware  corporation  ("we,"  "CIT" or the  "Company"),
formerly known as Tyco Capital Corporation,  and previously The CIT Group, Inc.,
is a leading  independent  commercial  and consumer  finance  company.  We are a
source of  financing  and leasing  capital for  companies  in a wide  variety of
industries,   including  many  of  today's   leading   industries  and  emerging
businesses,  offering vendor, equipment,  commercial,  factoring,  consumer, and
structured financing capabilities.

      On July 8, 2002, our former parent, Tyco International Ltd. ("Tyco"), sold
100%  of  CIT's  outstanding   common  stock  in  an  initial  public  offering.
Immediately prior to the offering,  a restructuring was effectuated  whereby our
predecessor,  CIT Group Inc., a Nevada corporation, was merged with and into its
parent Tyco Capital  Holding,  Inc. ("TCH") and that combined entity was further
merged with and into CIT Group Inc. (Del), a Delaware corporation. In connection
with the  reorganization,  CIT Group Inc.  (Del) was renamed CIT Group Inc. As a
result of the reorganization,  CIT is the successor to CIT Group Inc. (Nevada)'s
business, operations and obligations.

      On June 1, 2001,  The CIT Group,  Inc. was acquired by TCH, a wholly-owned
subsidiary  of Tyco,  in a  purchase  business  combination  recorded  under the
"push-down" method of accounting, resulting in a new basis of accounting for the
"successor"  period  beginning  June  2,  2001.   Information  relating  to  all
"predecessor"  periods  prior  to  the  acquisition  is  presented  using  CIT's
historical basis of accounting.

      Following  the  acquisition  by Tyco,  we changed our fiscal year end from
December 31 to September 30 to conform to Tyco's. On November 5, 2002, our board
of directors approved  returning to a calendar year end for financial  reporting
effective December 31, 2002.

      Founded in 1908,  we have a broad  array of  "franchise"  businesses  that
focus on specific  industries,  asset types and  markets,  which are balanced by
client,  industry  and  geographic  diversification.  Managed  assets were $47.6
billion, owned financing and leasing assets were $36.4 billion and stockholders'
equity was $4.8 billion at September 30, 2002.

      We offer commercial  lending and leasing services,  providing a wide range
of financing and leasing products to small,  midsize and larger companies across
a   wide   variety   of   industries,   including   manufacturing,    retailing,
transportation,  aerospace, construction, technology, communication, and various
service-related  industries. The secured lending, leasing and factoring products
include direct loans and leases, operating leases, leveraged and single investor
leases,  secured  revolving lines of credit and term loans,  credit  protection,
accounts    receivable     collection,     import    and    export    financing,
debtor-in-possession  and turnaround  financing,  and  acquisition and expansion
financing.  Consumer  lending is conducted in our Specialty  Finance segment and
consists  primarily  of home  equity  lending to  consumers  originated  largely
through a network of brokers and correspondents.

      Transactions are generated  through direct calling efforts with borrowers,
lessees,  equipment  end-users,  vendors,  manufacturers  and  distributors  and
through referral sources and other  intermediaries.  In addition,  our strategic
business units jointly  structure  certain  transactions and refer or cross-sell
transactions  to other CIT units to best meet our customers'  overall  financing
needs.  We also buy and  sell  participations  in and  syndications  of  finance
receivables  and/or lines of credit.  From time to time in the normal  course of
business, we purchase finance receivables in bulk to supplement our originations
and sell select finance  receivables and equipment  under  operating  leases for
risk and other balance sheet management purposes, or to improve profitability.

      We conduct our  operations  through  strategic  business units that market
products  and  services to satisfy the  financing  needs of specific  customers,
industries,  vendors/manufacturers,  and markets. Our four business segments are
as follows:

      o     Equipment Financing and Leasing

      o     Specialty Finance

      o     Commercial Finance

      o     Structured Finance


                                       1


Equipment Financing and Leasing Segment

      Our Equipment  Financing and Leasing  operations  had total  financing and
leasing  assets of $14.3  billion at September 30, 2002,  representing  39.2% of
total  financing  and leasing  assets.  Total  Equipment  Financing  and Leasing
managed assets were $18.7 billion or 39.2% of total managed  assets.  We conduct
our Equipment  Financing and Leasing  operations  through two strategic business
units:

      o     Equipment  Financing offers secured equipment  financing and leasing
            and  focuses  on the  broad  distribution  of its  products  through
            manufacturers,   dealers/distributors,   intermediaries  and  direct
            calling  efforts  primarily  in  manufacturing,  construction,  food
            services/stores, transportation and other industries.

      o     Capital  Finance offers secured  equipment  financing and leasing by
            directly marketing  customized  transactions of commercial  aircraft
            and rail equipment.

      Equipment Financing and Capital Finance personnel have extensive expertise
in  managing  equipment  over its full  life  cycle,  including  purchasing  new
equipment,  maintaining  equipment,  estimating residual values and re-marketing
via re-leasing or selling equipment. Equipment Financing's and Capital Finance's
equipment and industry  expertise  enables them to effectively  manage equipment
risk.  For  example,  Capital  Finance can  reacquire  commercial  aircraft,  if
necessary,  obtain any required  maintenance  and repairs for such  aircraft and
recertify such aircraft with appropriate  authorities.  We manage the equipment,
the residual value and the risk of equipment remaining idle for extended periods
of time  and,  where  appropriate,  we  locate  alternative  equipment  users or
purchasers.

Equipment Financing

      Equipment Financing had total financing and leasing assets of $8.4 billion
at September  30, 2002,  representing  23.1% of our total  financing and leasing
assets. On a managed asset basis,  Equipment Financing  represents $12.8 billion
or 26.8% of total managed assets.  Equipment  Financing offers secured equipment
financing and leasing products,  including loans,  leases,  wholesale and retail
financing for distributors and manufacturers, loans guaranteed by the U.S. Small
Business  Administration,  operating  leases,  sale and leaseback  arrangements,
portfolio  acquisitions,  revolving  lines of credit  and  in-house  syndication
capabilities.

      Equipment  Financing is a diversified,  middle-market,  secured  equipment
lender with a global presence and strong North American marketing  coverage.  At
September 30, 2002,  its portfolio  included  significant  financing and leasing
assets to  customers  in a number of different  industries,  with  manufacturing
being the largest as a percentage of financing and leasing  assets,  followed by
construction and transportation, including business aircraft.

      Products are  originated  through  direct calling on customers and through
relationships with manufacturers,  dealers, distributors and intermediaries that
have leading or significant marketing positions in their respective  industries.
This provides Equipment  Financing with efficient access to equipment  end-users
in many industries across a variety of equipment types.

Capital Finance

      Capital  Finance  had  financing  and  leasing  assets of $5.9  billion at
September 30, 2002, which  represented  16.1% of our total financing and leasing
assets and 12.3% of managed  assets.  Capital  Finance  specializes in providing
customized  leasing and secured  financing  primarily to end-users of commercial
aircraft and railcars,  including  operating  leases,  single  investor  leases,
equity portions of leveraged leases, sale and leaseback arrangements, as well as
loans  secured  by  equipment.   Typical   customers  are  major   domestic  and
international  airlines,  North American railroad companies and middle-market to
larger-sized companies. New business is generated through direct calling efforts
supplemented with transactions  introduced by intermediaries  and other referral
sources.

      Capital  Finance has provided  financing to  commercial  airlines for over
thirty  years,  and the  commercial  aerospace  portfolio  includes  most of the
leading U.S. and foreign  commercial  airlines.  As of September  30, 2002,  the
commercial  aerospace  financing  and leasing  asset  balance was $4.0  billion,
consisting of 77 accounts and 193 aircraft with an average age of  approximately
7.4 years, and all comply with Stage III noise regulations.


                                       2


      Capital Finance has developed strong direct  relationships with most major
airlines and major  aircraft and aircraft  engine  manufacturers.  This provides
Capital Finance with access to technical  information,  which enhances  customer
service,   and   provides   opportunities   to   finance   new   business.   See
"Concentrations"  section of Item 7.  Management's  Discussion  and  Analysis of
Financial  Condition  and Results of  Operations  for further  discussion of our
aerospace portfolio.

      Capital  Finance has over 25 years of  experience  in  financing  the rail
industry,  contributing  to its  knowledge  of asset  values,  industry  trends,
product  structuring  and customer  needs.  Capital Finance has a dedicated rail
equipment   group,   maintains   relationships   with  several  leading  railcar
manufacturers and has a significant  direct calling effort on railroads and rail
shippers in the United States. The Capital Finance rail portfolio includes loans
and/or  leases to all of the U.S.  and  Canadian  Class I  railroads  (which are
railroads with annual revenues of at least $250 million) and numerous  shippers.
The operating  lease fleet includes  primarily  covered hopper cars used to ship
grain and agricultural  products,  plastic pellets and cement;  gondola cars for
coal,  steel coil and mill  service;  open hopper cars for coal and  aggregates;
center beam flat cars for lumber; and boxcars for paper and auto parts.  Capital
Finance owns and manages a fleet totaling in excess of 35,000 railcars.  Capital
Finance's  owned railcars are relatively  young with 62% built in 1994 or later.
Capital Finance also has a fleet of over 460 locomotives.

Specialty Finance Segment

      At September 30, 2002, the Specialty  Finance financing and leasing assets
totaled $10.1 billion, representing 27.8% of total financing and leasing assets.
Specialty Finance managed assets were $17.0 billion, representing 35.6% of total
managed  assets.  These assets  include  small ticket  commercial  financing and
leasing assets,  vendor programs and consumer home equity. As part of our review
of non-strategic  businesses,  in fiscal 2001 we sold approximately $1.4 billion
of our  manufactured  housing loan portfolio,  and are liquidating the remaining
assets.  We also  exited  the  recreational  vehicle  finance  market by selling
approximately $700 million of receivables and placed the remaining  portfolio in
liquidation  status.  The primary focus of the ongoing consumer business is home
equity lending.

      Specialty  Finance forms  relationships  with  industry-leading  equipment
vendors,   including  manufacturers,   dealers  and  distributors,   to  deliver
customized  asset-based sales and financing  solutions in a wide array of vendor
programs.  These  alliances  allow our vendor  partners to better  utilize  core
competencies, reduce capital needs and drive incremental sales volume. As a part
of these programs, we offer (i) credit financing to the manufacturer's customers
for the  purchase or lease of the  manufacturer's  products,  and (ii)  enhanced
sales tools to manufacturers  and vendors,  such as asset  management  services,
efficient  loan  processing  and  real-time  credit  adjudication.  Higher-level
partnership  programs provide  integration with the vendor's  business  planning
process and  product  offering  systems to improve  execution  and reduce  cycle
times.   Specialty  Finance  has  significant  vendor  programs  in  information
technology  and  telecommunications  equipment and serves many other  industries
through its global network.

      These vendor alliances feature traditional vendor finance programs,  joint
ventures,  profit  sharing and other  transaction  structures  entered into with
large,  sales-oriented corporate vendor partners. In the case of joint ventures,
Specialty Finance and the vendor combine financing activities through a distinct
legal entity that is jointly owned. Generally,  these arrangements are accounted
for on an equity  basis,  with profits and losses  distributed  according to the
joint venture  agreement,  and Specialty Finance  purchases finance  receivables
originated by the joint venture. Two of the key joint venture  relationships are
with Dell Computer Corporation and Snap-on Incorporated.  Specialty Finance also
utilizes  "virtual  joint  ventures,"  whereby  the  assets  are  originated  on
Specialty  Finance's balance sheet, while profits and losses are shared with the
vendor.  These types of  strategic  alliances  are a key source of business  for
Specialty  Finance.  New vendor  alliance  business  is also  generated  through
intermediaries  and other referral  sources,  as well as through direct end-user
relationships.

      The Specialty  Finance  small-ticket  commercial  loan business is engaged
mainly in the leasing of  office  products,  computers,  point-of-sale equipment
and other  technology  products in the United  States and Canada.  Products  are
originated  through direct calling on customers and through  relationships  with
manufacturers, dealers, distributors and other intermediaries.

      Home equity products include both fixed and variable-rate closed-end loans
and variable-rate lines of credit. This unit primarily originates, purchases and
services  loans  secured by first or second  liens on  detached,  single-family,
residential properties. Customers borrow for the purpose of consolidating debts,
refinancing an existing mortgage,  funding home  improvements,  paying education
expenses  and, to a lesser  extent,  purchasing  a home,


                                       3


among other  reasons.  Specialty  Finance  primarily  originates  loans  through
brokers and  correspondents  with a high proportion of home equity  applications
processed  electronically  over the internet via BrokerEdgeSM  using proprietary
systems.  Through  experienced lending  professionals and automation,  Specialty
Finance provides rapid  turnaround time from application to loan funding,  which
is critical to broker relationships.

      Specialty Finance sells individual loans and portfolios of loans to banks,
thrifts and other  originators  of consumer  loans to maximize  the value of its
origination network and to improve overall profitability. Contract servicing for
securitization  trusts and other third parties is provided through a centralized
consumer  Asset  Service  Center.  Commercial  assets are  serviced  via several
centers in the United  States,  Canada and  internationally.  Our Asset  Service
Center  centrally  services  and  collects  substantially  all of  our  consumer
receivables,  including loans  originated or purchased by our Specialty  Finance
segment,  as well as loans originated or purchased and subsequently  securitized
with servicing  retained.  The servicing  portfolio also includes loans owned by
third parties that are serviced by our Specialty  Finance segment for a fee on a
"contract" basis. These third-party portfolios totaled $2.9 billion at September
30, 2002.

Commercial Finance Segment

      At September 30, 2002,  the financing and leasing assets of our Commercial
Finance segment totaled $8.9 billion,  representing 24.5% of total financing and
leasing assets and 18.7% of managed  assets.  We conduct our Commercial  Finance
operations through two strategic business units, both of which focus on accounts
receivable  and  inventories as the primary source of security for their lending
transactions.

      o     Commercial  Services  provides  factoring and  receivable/collection
            management  products and secured  financing to companies in apparel,
            textile, furniture, home furnishings and other industries.

      o     Business  Credit  provides  secured  financing  to a full  range  of
            borrowers from small to larger-sized companies.

Commercial Services

      Commercial Services had total financing and leasing assets of $5.0 billion
at September  30,  2002,  which  represented  13.9% of our total  financing  and
leasing assets and 10.6% of managed  assets.  Commercial  Services offers a full
range of domestic and international  customized credit  protection,  lending and
outsourcing  services that include  working  capital and term loans,  factoring,
receivable management outsourcing, bulk purchases of accounts receivable, import
and export financing and letter of credit programs.

      Financing  is  provided  to  clients  through  the  purchase  of  accounts
receivable  owed to  clients  by  their  customers,  as well as by  guaranteeing
amounts due under letters of credit issued to the clients' suppliers,  which are
collateralized by accounts receivable and other assets. The purchase of accounts
receivable is  traditionally  known as "factoring" and results in the payment by
the client of a factoring fee which is commensurate  with the underlying  degree
of credit risk and recourse, and which is generally a percentage of the factored
receivables  or  sales  volume.   When  Commercial   Services  "factors"  (i.e.,
purchases) a customer invoice from a client, it records the customer  receivable
as an asset and also  establishes  a  liability  for the funds due to the client
("credit balances of factoring  clients").  Commercial Services also may advance
funds to its clients prior to collection of receivables,  typically in an amount
up to 80% of eligible  accounts  receivable  (as defined for that  transaction),
charging  interest on such  advances  (in  addition to any  factoring  fees) and
satisfying such advances from receivables collections.

      Clients  use  Commercial  Services'  products  and  services  for  various
purposes,  including  improving  cash flow,  mitigating  or reducing the risk of
charge-offs,  increasing sales and improving  management  information.  Further,
with the TotalSourceSM product,  clients can outsource  bookkeeping,  collection
and other  receivable  processing  activities.  These services are attractive to
industries   outside   the   typical   factoring   markets,   providing   growth
opportunities.

      Commercial  Services  generates  business  regionally  from a  variety  of
sources,  including  direct calling efforts and referrals from existing  clients
and other referral sources.


                                       4


Business Credit

      Financing and leasing  assets of Business  Credit  totaled $3.9 billion at
September  30, 2002 and  represented  10.6% of our total  financing  and leasing
assets and 8.1% of managed  assets.  Business  Credit offers  revolving and term
loans secured by accounts  receivable,  inventories  and fixed assets to smaller
through  larger-sized  companies.  Clients use such loans  primarily for working
capital, growth,  expansion,  acquisitions,  refinancings,  debtor-in-possession
financing,   reorganization  and  restructurings,   and  turnaround  financings.
Business Credit sells and purchases participation interests in such loans to and
from other lenders.

      Through  its  variable  interest  rate  senior  revolving  and  term  loan
products,  Business  Credit  meets  its  customers'  financing  needs  that  are
otherwise  not met  through  bank or  other  unsecured  financing  alternatives.
Business Credit typically structures financings on a secured basis, though, from
time to time, it may look to a customer's  cash flow to support a portion of the
credit facility.  Revolving and term loans are made on a variable  interest rate
basis based on published indexes, such as LIBOR or the prime rate of interest.

      Business is originated through direct calling efforts and intermediary and
referral sources, as well as through sales and regional offices. Business Credit
has focused on increasing  the  proportion  of direct  business  origination  to
improve  its  ability  to  capture or retain  refinancing  opportunities  and to
enhance finance income.  Business Credit has developed  long-term  relationships
with  selected  banks,  finance  companies  and  other  lenders  and  with  many
diversified referral sources.

Structured Finance Segment

      Structured  Finance  had  financing  and leasing  assets of $3.1  billion,
comprising  8.5% of our total  financing and leasing  assets and 6.5% of managed
assets at  September  30,  2002.  Structured  Finance  operates  internationally
through operations in the United States,  Canada and Europe.  Structured Finance
provides specialized investment banking services to the international  corporate
finance and institutional finance markets by providing asset-based financing for
large ticket  asset  acquisitions  and project  financing  and related  advisory
services to  equipment  manufacturers,  corporate  clients,  regional  airlines,
governments   and   public   sector    agencies.    Communications    (including
telecommunication),  transportation,  and the power and  utilities  sectors  are
among the industries that Structured Finance serves.

      Structured  Finance also serves as an  origination  conduit to its lending
partners  by  seeking  out and  creating  investment  opportunities.  Structured
Finance has established relationships with insurance companies and institutional
investors and can arrange financing  opportunities that meet asset class, yield,
duration and credit quality requirements.  Accordingly,  syndication  capability
and fee generation are key  characteristics  of Structured  Finance's  business.
Structured  Finance utilizes special purpose entities ("SPEs") to record certain
individual  structured leasing  transactions,  including leveraged leases. These
SPEs are generally accounted for as consolidated entities of CIT.

      The segment has direct and private fund venture capital equity investments
totaling  $341.7  million at September  30, 2002.  In 2001, we ceased making new
venture  capital   investments  beyond  existing   commitments,   which  totaled
approximately $176.6 million at September 30, 2002.

Other Segment and Concentration Data

      The  percentage  of total  segment  operating  margin for the period ended
September  30, 2002 by segment is as follows:  Equipment  Financing  and Leasing
(27%), Specialty Finance (44%),  Commercial Finance (23%) and Structured Finance
(6%).  For the year ended  September 30, 2002,  81% of our revenues were derived
from  U.S.   financing  and  leasing   activities   and  19%  was  derived  from
International financing and leasing activities.

      Further  segment data,  including  certain  income  related  balances,  is
disclosed in Item 8. Financial Statements and Supplementary Data, Note 24.

      See Item 8. Financial  Statements and  Supplementary  Data, Note 7 and the
"Concentrations"  section of Item 7.  Management's  Discussion  and  Analysis of
Financial  Condition and Results of  Operations  and Item 7A.  Quantitative  and
Qualitative  Disclosures  about  Market  Risk,  for  a  discussion  on  industry
concentration.

Competition

      Our markets are highly  competitive and are  characterized  by competitive
factors that vary based upon product and geographic region.  Competitors include
captive  and  independent   finance  companies,   commercial  banks  and


                                       5


thrift  institutions,  industrial banks,  leasing  companies,  manufacturers and
vendors with global reach. Substantial financial services operations with global
reach have been formed by bank holding, leasing, finance and insurance companies
that compete with us. On a local level,  community banks and smaller independent
finance and mortgage  companies are a competitive  force.  Some competitors have
substantial local market positions.  Many of our competitors are large companies
that have substantial capital,  technological and marketing  resources.  Some of
these  competitors  are larger  than we are and may have  access to capital at a
lower cost than we do.  Competition  has been  enhanced  in recent  years by the
acquisition of many of our competitors by large financial institutions.  Despite
the  consolidation  in the  industry,  the markets for many of our  products are
characterized by a large number of competitors. However, with respect to some of
our products, competition is more concentrated.

      We compete  primarily on the basis of pricing,  terms and structure.  From
time to time, our competitors seek to compete aggressively on the basis of these
factors and we may lose  market  share to the extent we are  unwilling  to match
competitor pricing and terms in order to maintain interest margins and/or credit
standards.

      Other primary  competitive  factors include  industry  experience,  client
service and relationships.  In addition, demand for our products with respect to
certain  industries will be affected by demand for such industry's  services and
products and by industry regulations.

Regulation

      Our  operations are subject,  in certain  instances,  to  supervision  and
regulation by state,  federal and various foreign  governmental  authorities and
may be  subject  to  various  laws and  judicial  and  administrative  decisions
imposing various  requirements and restrictions,  which, among other things, (i)
regulate   credit  granting   activities,   including   establishing   licensing
requirements,  if any,  in  applicable  jurisdictions,  (ii)  establish  maximum
interest  rates,  finance charges and other charges,  (iii) regulate  customers'
insurance coverages,  (iv) require disclosures to customers,  (v) govern secured
transactions, (vi) set collection, foreclosure, repossession and claims handling
procedures  and other trade  practices,  (vii)  prohibit  discrimination  in the
extension of credit and administration of loans, and (viii) regulate the use and
reporting of information related to a borrower's credit experience.  In addition
to the foregoing,  CIT Bank, a Utah industrial loan corporation  wholly owned by
CIT, is subject to regulation and examination by the Federal  Deposit  Insurance
Corporation and the Utah Department of Financial Institutions.

Employees

      CIT employed  approximately  5,850 people at September  30, 2002, of which
approximately  4,425 were  employed in the United  States and 1,425 were outside
the United States.

Item 2. Properties

      CIT conducts its operations in the United States,  Canada,  Europe,  Latin
America,  Australia and the Asia-Pacific region. CIT occupies  approximately 2.5
million square feet of office space,  substantially all of which is leased. Such
leased  office space is suitable  and adequate for our needs and we utilize,  or
plan to utilize, substantially all of our leased office space.

Item 3. Legal Proceedings

      We are a defendant in various  lawsuits  arising in the ordinary course of
our business.  We  aggressively  manage our litigation and evaluate  appropriate
responses  to our  lawsuits  in light  of a number  of  factors,  including  the
potential impact of the actions on the conduct of our operations. In the opinion
of  management,  none of the  pending  matters  is  expected  to have a material
adverse effect on our financial  condition,  results of operations or liquidity.
However,  there can be no assurance  that an adverse  decision in one or more of
such lawsuits will not have a material adverse effect.

Item 4. Submission of Matters to a Vote of Security Holders

      We did not submit any  matters to a vote of  security  holders  during the
fourth fiscal quarter of 2002.


                                       6


                                     PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

      Our  common  stock is listed on the New York  Stock  Exchange.  During the
period July 2, 2002 (the first day of trading  subsequent to our initial  public
offering) through September 30, 2002, the high and low last reported sales price
for our common stock was $23.80 and $17.98, respectively.

      Following  our initial  public  offering in November 1997 and prior to the
acquisition by Tyco, we paid a quarterly dividend of $0.10 per share, except for
the first  quarter of 1998.  During Tyco's  ownership  from June 2001 until July
2002, there were no cash dividends on our common stock.  Following our July 2002
initial public offering,  our policy will be to pay a dividend while retaining a
strong  capital base. On October 28, 2002,  our board of directors  declared the
first such quarterly  dividend of $0.12 per share,  payable on November 27, 2002
to shareholders of record on November 15, 2002.  Future dividends are subject to
the discretion of our board of directors. Any determination as to the payment of
dividends, including the level of dividends, will depend on, among other things,
general economic and business  conditions,  our strategic and operational plans,
our  financial  results  and  condition,   contractual,   legal  and  regulatory
restrictions  on the payment of dividends  by us, and such other  factors as the
board of directors may consider to be relevant.

      As of November 15, 2002, there were 25 stockholders of record of CIT.

      At  September  30,  2002,  all  equity  compensation  plans  had  received
shareholder  approval,  and 15,494,009  options to purchase shares of CIT common
stock had been awarded under such plans,  with 9,980,944  options  available for
future issuance.  We had no equity  compensation plans that were not approved by
shareholders.  For further  information  on such plans,  including  the weighted
average exercise price, see Item 8. Financial Statements and Supplementary Data,
Note 18.

Item 6. Selected Financial Data

      On  June  1,  2001,  The  CIT  Group,  Inc.  ("CIT")  was  acquired  by  a
wholly-owned  subsidiary of Tyco, resulting in a new basis of accounting for the
"successor"  period  beginning  June  2,  2001.   Information  relating  to  all
"predecessor"  periods  prior  to  the  acquisition  is  presented  using  CIT's
historical basis of accounting.  To assist in the comparability of our financial
results  and  discussions,  results  of  operations  for the nine  months  ended
September 30, 2001 include  results for five months of the  predecessor and four
months of the successor and are designated as "combined".

      On July 8, 2002,  our former parent,  Tyco  International  Ltd.  ("Tyco"),
completed a sale of 100% of CIT's outstanding  common stock in an initial public
offering. Immediately prior to the offering, CIT was merged with its parent Tyco
Capital  Holding,  Inc. (TCH), a company used to acquire CIT. As a result of the
reorganization,  the historical  financial statements of TCH are included in the
historical  consolidated  CIT financial  statements.  Prior to the IPO of CIT on
July 8, 2002, the activity of TCH consisted  primarily of interest expense to an
affiliate  of Tyco,  and the TCH  accumulated  net  deficit was  relieved  via a
capital contribution from Tyco. There was no TCH activity subsequent to June 30,
2002.  The results for both 2002 and 2001  include  activity of TCH.  Therefore,
certain  previously  reported CIT data may differ from the data presented below,
due  primarily  to the debt and the  related  interest  expense  payable to Tyco
subsidiaries and general operating expenses of TCH.


                                       7


      The following tables set forth selected consolidated financial information
regarding our results of operations and balance sheets.

      The data  presented  below  should  be read in  conjunction  with  Item 7.
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations and Item 7A.  Quantitative and Qualitative  Disclosures  about Market
Risk and Item 8. Financial Statements and Supplementary Data.



                                                        At or
                                          At or        for the
                                         for the      Nine Months           At or For the Years Ended
                                       Year Ended       Ended                      December 31,
                                      September 30,  September 30, -------------------------------------------
                                          2002           2001           2000           1999           1998
                                       -----------    ----------   -------------   ---------------------------
($ in millions)                        (successor)    (combined)   (predecessor)   (predecessor) (predecessor)
--------------
                                                                                  
Results of Operations

Net finance margin ..................   $ 1,662.5      $ 1,318.8     $ 1,469.4     $   917.4     $   804.8
Provision for credit losses .........       788.3          332.5         255.2         110.3          99.4
Operating margin ....................     1,806.5        1,558.9       2,126.2       1,157.9         960.8
Salaries and general operating
   expenses .........................       946.4          794.5       1,035.2         516.0         407.7
Goodwill impairment .................     6,511.7             --            --            --            --
Goodwill amortization ...............          --           97.6          86.3          25.7          10.1
Acquisition related costs ...........          --           54.0            --            --            --
Intercompany interest
  expense -- TCH ....................       662.6           98.8            --            --            --
Net (loss) income ...................    (6,698.7)         263.3         611.6         389.4         338.8
Net (loss) income per
   share(1)-- basic and diluted .....      (31.66)          1.24          2.89          1.84          1.60
Dividends per share(1) ..............          --           0.25          0.50          0.31          0.23

Balance Sheet Data

Total finance receivables ...........   $28,459.0      $31,879.4     $33,497.5     $31,007.1     $19,856.0
Reserve for credit losses ...........       777.8          492.9         468.5         446.9         263.7
Operating lease equipment, net ......     6,567.4        6,402.8       7,190.6       6,125.9       2,774.1
Goodwill, net .......................       384.4        6,547.5       1,964.6       1,850.5         216.5
Total assets ........................    42,710.5       51,349.3      48,689.8      45,081.1      24,303.1
Commercial paper ....................     4,654.2        8,869.2       9,063.5       8,974.0       6,144.1
Variable-rate bank credit facilities      4,037.4             --            --            --            --
Variable-rate senior notes ..........     5,379.0        9,614.6      11,130.5       7,147.2       4,275.0
Fixed-rate senior notes .............    18,385.4       17,113.9      17,571.1      19,052.3       8,032.3
Subordinated fixed-rate notes .......          --          100.0         200.0         200.0         200.0
Company-obligated mandatorily
   redeemable preferred securities of
   subsidiary trust holding solely
   debentures of the Company ........       257.7          260.0         250.0         250.0         250.0
Stockholders' equity ................     4,757.8        5,947.6       6,007.2       5,554.4       2,701.6

Selected Data and Ratios
Profitability

Net finance margin as a percentage
   of average earning assets
   ("AEA")(2) .......................        4.64%          4.34%         3.61%         3.59%         3.93%
Ratio of earnings to fixed charges(4)          (9)          1.37x         1.39x         1.45x         1.49x
Salaries and general operating
   expenses (excluding goodwill
   amortization) as a percentage
   of average managed assets
   ("AMA")(5) .......................        2.01%          2.09%         2.01%         1.75%         1.78%
Efficiency ratio (excluding goodwill
   amortization)(6) .................        36.5%          42.0%         43.8%         41.3%         39.2%



                                       8




                                                            At or
                                              At or        for the
                                             for the      Nine Months           At or For the Years Ended
                                           Year Ended       Ended                      December 31,
                                          September 30,  September 30, -------------------------------------------
                                              2002           2001           2000           1999           1998
                                           -----------    ----------   -------------   ---------------------------
($ in millions)                            (successor)    (combined)   (predecessor)   (predecessor) (predecessor)
--------------
                                                                                      
Credit Quality

60+ days contractual delinquency as a
   percentage of finance receivables ....        3.76%         3.46%         2.98%         2.71%         1.75%
Non-accrual loans as a percentage
   of finance receivables ...............        3.43%         2.67%         2.10%         1.65%         1.06%
Net credit losses as a percentage of
   average finance receivables ..........        1.67%         1.20%         0.71%         0.42%         0.42%
Reserve for credit losses as a
   percentage of finance receivables ....        2.73%         1.55%         1.40%         1.44%         1.33%

Leverage

Total debt (net of overnight deposits) to
   tangible stockholders' equity(3)(7) ..        6.54x         8.20x         8.78x         8.75x         6.82x
Tangible stockholders' equity(3) to
   managed assets(8) ....................         9.9%          8.6%          7.8%          7.7%         10.4%

Other

Total managed assets(8) .................   $47,622.3     $50,877.1     $54,900.9     $51,433.3     $26,216.3
Employees ...............................       5,850         6,785         7,355         8,255         3,230


--------------------------------------------------------------------------------
(1)   Net (loss) income and dividend per share  calculations  assume that common
      shares  outstanding  as a  result  of the July  2002 IPO were  outstanding
      during all historical periods presented.

(2)   "AEA"  means  average  earning  assets  which is the  average  of  finance
      receivables,  operating lease equipment, finance receivables held for sale
      and certain investments, less credit balances of factoring clients.

(3)   Tangible  stockholders'  equity  excludes  goodwill  and other  intangible
      assets and excludes TCH results.

(4)   For  purposes  of  determining  the ratio of  earnings  to fixed  charges,
      earnings  consist of income before income taxes and fixed  charges.  Fixed
      charges  consist  of  interest  on  indebtedness,   minority  interest  in
      subsidiary trust holding solely debentures of the Company and one-third of
      rent expense which is deemed representative of an interest factor.

(5)   "AMA" means average managed  assets,  which is average earning assets plus
      the  average  of  finance  receivables  previously  securitized  and still
      managed by us.

(6)   Efficiency ratio is the ratio of salaries and general  operating  expenses
      to the sum of operating revenue less minority interest in subsidiary trust
      holding solely debentures of CIT.

(7)   Total  debt  excludes,   and  tangible   stockholders'   equity  includes,
      Company-obligated   mandatorily   redeemable   preferred   securities   of
      subsidiary trust holding solely debentures of the Company.

(8)   "Managed assets" means owned assets and assets previously  securitized and
      still  managed by us and include (i) financing  and leasing  assets,  (ii)
      certain investments and (iii) off-balance sheet finance receivables.

(9)   Earnings were  insufficient to cover fixed charges by $6,331.1  million in
      the twelve months ended September 30, 2002. Earnings for the twelve months
      ended September 30, 2002 included a non-cash goodwill impairment charge of
      $6,511.7  million in  accordance  with SFAS No. 142,  "Goodwill  and Other
      Intangible  Assets." The ratio of earnings to fixed charges included fixed
      charges of $1,471.8  million and a loss before  provision for income taxes
      of $6,331.1  million  resulting in a total loss provision for income taxes
      and fixed charges of $(4,859.3) million.


                                       9


Item 7. Management's Discussion and Analysis of Financial Condition and Results
        of Operations
        and
Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Overview

      The   accompanying   Consolidated   Financial   Statements   include   the
consolidated  accounts of CIT Group Inc., a Delaware corporation ("we," "CIT" or
the  "Company"),  formerly  known as CIT Group Inc., a Nevada  corporation,  and
previously  The CIT  Group,  Inc.  On July 8,  2002,  our  former  parent,  Tyco
International  Ltd.  ("Tyco"),  completed  a sale of 100% of  CIT's  outstanding
common stock in an initial public  offering  ("IPO").  Immediately  prior to the
offering, our predecessor, CIT Group Inc., a Nevada corporation, was merged with
and into its parent Tyco Capital Holding,  Inc. ("TCH") and that combined entity
was further merged with and into CIT Group Inc.  (Del), a Delaware  corporation.
In  connection  with the  reorganization,  CIT Group Inc.  (Del) was renamed CIT
Group Inc. As a result of the reorganization,  CIT is the successor to CIT Group
Inc.  (Nevada)'s  business,  operations  and  obligations.  As a  result  of the
reorganization,  the financial  results of TCH are included in the  consolidated
CIT financial statements.

      Prior to the IPO of CIT on July 8, 2002,  the  activity  of TCH  consisted
primarily of interest  expense to an affiliate of Tyco, and the TCH  accumulated
net deficit was relieved via a capital  contribution  from Tyco. The activity of
TCH consisted  primarily of interest  expense to an affiliate of Tyco during the
period from June 1, 2001 to June 30, 2002.  TCH had no operations  subsequent to
June 30,  2002.  Although the audited  financial  statements  and notes  thereto
include the activity of TCH in conformity with accounting  principles  generally
accepted in the U.S.,  management believes that it is most meaningful to discuss
our  financial  results  excluding  TCH, due to its  temporary  status as a Tyco
acquisition company with respect to CIT. Therefore,  throughout this section, in
order to provide  comparability  with current quarter and  prospective  results,
current  year to date and prior year  comparisons  exclude  the  results of TCH.
Consolidating  balance  sheets  and  income  statements  for  CIT,  TCH  and CIT
consolidated are displayed in Note 2 to the financial statements.

      On June 1,  2001,  The CIT  Group,  Inc.  ("CIT")  was  acquired  by Tyco,
resulting in a new basis of accounting for the "successor" period beginning June
2,  2001.  Information  relating  to  all  "predecessor"  periods  prior  to the
acquisition is presented using CIT's historical  basis of accounting.  To assist
in the  comparability  of our  financial  results  and  discussions,  results of
operations for the nine months ended September 30, 2001 include results for five
months of the predecessor and four months of the successor and are designated as
"combined".  Following the  acquisition  by Tyco, we changed our fiscal year end
from  December  31 to  September  30, to conform to Tyco's  fiscal  year end. On
November 5, 2002,  the CIT Board of Directors  approved the return to a calendar
year end effective December 31, 2002. To further assist in the comparability and
the analysis of results for the year ended  September 30, 2002,  results for the
twelve months ended  September 30, 2001 are shown in addition to results for the
nine-month  transition  period ended September 30, 2001. The data for the twelve
months ended  September 30, 2001 is derived from the quarters ended December 31,
2000, March 31, 2001 and September 30, 2001 plus the combined three months ended
June 30, 2001, which reflects CIT results  subsequent to the purchase by Tyco on
June 1, 2001.

Key Business Initiatives and Trends

      In late 2000,  we initiated  our plan to sell or  liquidate  approximately
$4.5 billion of lower return non-strategic assets. This followed the integration
of the 1999 acquisition of Newcourt Credit Group, which significantly  increased
the company's  size,  broadened our asset and product base and  established  our
substantial  international  reach.  Further,  management  set  forth its plan to
strengthen its capital ratios.

      In mid-2001,  the  initiative to sell or liquidate  targeted  lower return
non-strategic  assets and improve leverage was broadened and accelerated because
the June 2001  acquisition  by Tyco provided  additional  capital and support in
this regard.  Management also initiated further business line  consolidation and
operating  expense cost  reductions both in the corporate staff areas and in the
business  units.  In early to mid-2001,  the e-commerce  and  telecommunications
industry downturns in the economy became evident. In light of this downturn,  we
recognized  impairment  charges against earnings prior to the Tyco  acquisition,
including equity interests related to e-commerce and telecommunications.


                                       10


      The targeted non-strategic business lines and products were sold or placed
in  liquidation  status  to  maximize  value  to  the  company,  and  we  ceased
originating  new business in these areas.  Severance and other costs  associated
with these  initiatives  were  identified  in plans that were approved by senior
management.  These costs plus any  adjustments to reduce the carrying  values of
the targeted assets to fair value were provided for primarily  through  purchase
accounting (Tyco's acquisition of CIT, with the purchase accounting  adjustments
"pushed  -down"  to CIT  financials).  In  support  of these  initiatives,  Tyco
provided  nearly $900  million of  additional  capital to CIT from June  through
December  of  2001.  We  also  decided  to  cease  making  new  venture  capital
investments and to run-off our existing portfolio.

      As a result, the targeted lower return assets were as follows:



                                                                                    Balance Outstanding at
                                                                                      September 30, 2002
           Portfolio                               Status                             ($ in billions)(1)
           ---------                               ------                             ------------------
                                                                                       
Manufactured housing ..........   $1.4 billion sold June 2001, remaining                     $0.6
                                  portfolio placed in liquidation

Recreational vehicle ..........   $700 million sold October 2001, remaining                  $0.1
                                  portfolio placed in liquidation

Recreational marine ...........   $600 million placed in liquidation                         $0.1

Wholesale inventory finance ...   $250 million placed in liquidation                         $ --

Franchise finance .............   $750 million placed in liquidation, with                   $0.4
                                  $200 million subsequently sold in August 2002

Owner-operator trucking .......   approximately $60 million of repossessed assets            $0.3
                                  rapidly liquidated in July-August 2001 and
                                  $500 million of receivables placed in liquidation

Venture capital ...............   $350 million placed in run-off status                      $0.3
                                                                                             ----
                                                                                             $1.8
                                                                                             ====


--------------------------------------------------------------------------------
(1)   On-balance sheet financing and leasing assets.

      In early 2002,  Tyco  announced  its break-up  plan and intent to sell its
interest in CIT. Subsequent  developments at Tyco prior to the separation of CIT
resulted  in credit  rating  downgrades  of Tyco and  similar  but more  limited
actions for CIT.  These rating  actions  caused  significant  disruption  to our
historical  funding base. As a result,  the Company's  access to the  commercial
paper market was  hindered,  and the Company  drew down on its  existing  backup
lines of credit to meet its  financing  requirements.  Consequently,  management
focused   primarily  on   liquidity   and  capital  as  opposed  to  growth  and
profitability.  As a result of this focus,  senior  management  met regularly to
discuss  such  topics  as  daily  cash  flow,   forecasts  and  funding   needs,
prioritization of liquidity to existing customers and tempering  acquisition and
portfolio  purchases.  Significant  initiatives  were  undertaken to fortify the
Company's  liquidity position,  to address bond holder protections,  to reaccess
the  commercial  paper and term debt  markets and to improve  our balance  sheet
strength. The steps taken are outline below.

      In February  2002 we amended our bond  indentures  to prohibit or restrict
transactions  with Tyco for as long as CIT was owned by Tyco.  CIT  completed  a
$1.2 billion conduit  financing backed by trade accounts  receivable in order to
broaden funding access and repay term debt at the scheduled maturities. In March
2002, we completed a $1.0 billion securitization  facility backed by home equity
loans to further  broaden  funding  access.  In April 2002,  we completed a $2.5
billion  unsecured  debt  offering  comprised of $1.25  billion of 7.375% senior
notes due in April 2007,  and $1.25  billion  senior notes due in April 2012. In
May 2002, we executed a $1.1 billion public asset backed transaction, secured by
equipment  collateral.  In June  2002,  we  extended  our  existing  $3  billion
equipment conduit facility and increased the facility size to $3.5 billion. Also
in June, we executed a $1 billion  public asset backed  transaction,  secured by
Home Equity assets.

      In July,  we completed  our 100% IPO, with the proceeds paid to our former
parent.  CIT received over $250 million of additional  capital shortly following
the IPO as the underwriters  elected to exercise their  over-allotment or "green
shoe" option, which enhanced our capital base.


                                       11


      Immediately following the Company's IPO and complete separation from Tyco,
debt  credit  ratings  were  upgraded  by  Standard & Poor's and Fitch.  Shortly
thereafter, the Company commenced repayment of its drawn bank facilities,  which
facilitated our re-entrance  into the commercial  paper markets.  We re-launched
our  commercial  paper  program,  and  achieved   significant   outstandings  at
attractive  pricing levels. We continued to pay down existing credit facilities,
maintaining back-stop liquidity to fully cover all outstanding commercial paper.
In October 2002, we made further  improvements to our maturity profile. In July,
2002, we entered into an agreement  with a financial  institution  to provide us
with an additional $250 million in backstop liquidity.  The terms and conditions
of that agreement are substantially identical to those contained in our existing
credit  agreements.  We retired the $3.7 billion  364-day credit facility due in
March 2003 and negotiated a new $2.3 billion 364-day  committed  credit facility
which will expire in October  2003.  Proceeds  from the new facility  along with
other  liquidity  sources  were  utilized  to pay down the prior  facility.  The
Company  had  aggregate  committed  credit  facilities  of  approximately  $7.35
billion,  with $4.735 billion  available at September 30, 2002.  Please refer to
Note 10 - Debt, for more detail on our credit facilities.

      We demonstrated  successful access to the term debt markets as well. Since
the IPO, we have issued in  aggregate  $3.8  billion in  unsecured  senior debt,
comprised of $2.7 billion in fixed-rate  debt and $1.1 billion in  floating-rate
debt. In October 2002, we established a retail debt program and have issued $0.6
billion under that program as of December 9, 2002. The weighted  average rate on
the fixed rate issuance has been 5.85%, which is lower than the weighted average
of our outstanding debt portfolio,  although the relative  borrowing spreads are
higher  than  comparable   borrowing  spreads  prior  to  the  onset  of  events
surrounding  our  separation  from Tyco.  Further,  in early  December  2002, we
completed a 5 year-fixed  rate  transaction  for $800 million at a spread of 235
basis points over U.S. Treasuries. In general, the spreads on interest rates for
corporate  bonds  have  risen  over  the past  year.  We may use  interest  rate
derivatives to swap some of the aforementioned  debt to floating to better match
our asset base and to minimize funding costs.

      The events described resulted in an increased cost of funds due to sources
of financing being more expensive than our traditional  financing  sources,  and
due to the Company maintaining excess cash liquidity levels.  Management expects
that  margin  and  earnings  will  continue  to be  similarly  impacted  for the
foreseeable  future,  as  results  in  prospective  quarters  will  reflect  the
continued impact of the more expensive funding sources and excess liquidity.

      The following table summarizes the trend in our quality spreads  (interest
rate cost over U.S.  Treasury rates) in relation to 5 year  treasuries.  Amounts
are in basis points and represent the average spread during the period ended:



                                     September 30,    June 30,    September 30,   December 31,    December 31,
                                         2002           2002          2001            2000            1999
                                     -------------    --------    -------------   ------------    ------------
                                                                                        
Spread over U.S. Treasuries .....         313            255           147             154             105


      As management  was executing its plan to dispose of targeted  assets while
improving   liquidity  and  capital,   the  U.S.  and  world  economies   slowed
drastically.  The slowing economy dampened demand for new borrowings,  which was
reflected in lower loan  origination  levels.  In conjunction  with the emphasis
placed on liquidating or selling targeted assets, and securitizing higher levels
of assets to meet liquidity needs, our on balance sheet owned assets  decreased,
which in turn led to lower levels of net interest margin.

      As the economy continued its slowdown,  market interest rates continued to
decline in line with the  various  rate-easing  moves  effected  by the  Federal
Reserve Bank. However,  given the weak economy, and difficult atmosphere created
by numerous  corporate  bankruptcies  and  financial  reporting  irregularities,
corporate bond quality spreads continued to increase, or "widen out", leading to
increased  borrowing  costs  relative to U.S.  Treasury  securities  and various
floating rate indexes for corporate borrowers, including CIT.

      The poor economy also  resulted in worsening  borrower  performance  and a
decline in equipment  values,  leading to higher loss  frequency  and  severity,
which lowered  earnings.  In response to increasing past due and  non-performing
loan levels,  management  increased our balance sheet reserve for credit losses,
even  as  portfolio  asset  levels  continued  to  decline.   Our  exposures  to
telecommunications and Argentina were evaluated, with specific reserving actions
taken in the June 2002 quarter.  These  reserves were added to the balance sheet
reserve  for  credit  losses  and  are  separately  identified  and  tracked  in
relationship to the performance of the corresponding portfolios. These reserving
actions were consistent with our focus to improve balance sheet strength.


                                       12


      Management's current principle focus is on improving the credit quality of
our  portfolio,  lowering  our quality  spreads to  decrease  our cost of funds,
continuing to broaden our funding access, including  securitization,  increasing
new business origination volumes and prudently seeking opportunities to grow our
earning assets, while maintaining our expense discipline.

      The following portions of the Management's Discussion and Analysis provide
greater  detail  regarding the effects on our  financial  results of the various
management initiatives, events and economic factors outlined above.

Income Statement and Balance Sheet Overview

      The following  table  summarizes the effect for the  respective  reporting
periods of certain reserving  actions and other charges,  and TCH losses as well
as goodwill related items that affect the comparability of our financial results
under GAAP ($ in millions).



                                                                Twelve Months Ended            Nine Months
                                                                    September 30,                 Ended         Year Ended
                                                           ------------------------------      September 30,    December 31,
                                                              2002                2001             2001            2000
                                                           -----------         ----------       ----------     -------------
                                                           (successor)         (combined)       (combined)     (predecessor)
                                                                                                      
Net (loss) income ..................................        $(6,698.7)          $  423.4         $  263.3         $  611.6
Charges included in net (loss) income:
   Goodwill impairment .............................          6,511.7                 --               --               --
   Goodwill amortization ...........................               --              112.4             92.5             75.4
   Reserving actions and other charges .............            242.5              158.0            158.0               --
   TCH losses ......................................            723.5               70.5             70.5               --
                                                            ---------           --------         --------         --------
Net income -- before charges .......................        $   779.0           $  764.3         $  584.3         $  687.0
                                                            =========           ========         ========         ========


      The  reserving  actions and other charges of $242.5  million  includes the
following:  a  $136.4  million,  after  tax,  provision  to  establish  reserves
primarily relating to the telecommunications  portfolio, notably CLEC exposures;
a $83.7 million after tax provision for the  devaluation  of the Argentine  peso
brought on by economic  reforms  instituted  by the  Argentine  government  that
converted dollar-denominated receivables into peso denominated obligations and a
$22.4 million charge related to the run-off venture capital business, reflecting
continued  deterioration  in  valuations,  particularly  investments  in private
equity funds.  The venture capital charge  consisted of both realized losses and
write-downs  for other than  temporary  declines  in value and is  included as a
reduction  to other  revenue.  As a  result  of the  adoption  of  Statement  of
Financial  Accounting Standards No. ("SFAS") 142, "Goodwill and Other Intangible
Assets" on October 1, 2001,  there was no goodwill  amortization for the current
year.

      Net income for the nine months ended  September 30, 2001 included a charge
of $221.6 million  ($158.0  million  after-tax)  consisting of the following:  a
provision of $89.5 million for certain  under-performing  equipment  leasing and
loan portfolios,  primarily in the telecommunications  industry;  write-downs of
$78.1 million for certain equity investments in the telecommunications  industry
and  e-commerce  markets;  and  acquisition-related  transaction  costs of $54.0
million incurred by CIT prior to and in connection with its acquisition by Tyco.
The $78.1  million  write-down  is netted in other  revenue in the  Consolidated
Statement of Income and the  impairment of portfolio  assets of $89.5 million is
included in the  provision  for credit  losses.  The  impairment  and  valuation
charges above relate to loans, leases and investments that are being liquidated.

      Managed assets totaled $47.6 billion at September 30, 2002,  $50.9 billion
at September 30, 2001, and $54.9 billion at December 31, 2000,  while  financing
and leasing  portfolio  assets totaled $36.4 billion,  $40.7 billion,  and $43.8
billion at September 30, 2002 and 2001, and December 31, 2000, respectively. The
decreases in both managed and portfolio  assets during these periods reflect the
factors  discussed in the key business  initiatives and trends  section,  namely
lower origination  volume brought upon by the slow economic  conditions,  growth
constraints caused by the disruption to our funding base in 2002 which increased
our funding  costs (see Net Finance  Margin and  Liquidity  sections for further
discussion),  and the sales and continued  liquidation  of several  product line
portfolios. See "Financing and Leasing Assets" for additional information.


                                       13


Net Finance Margin

      A comparison of finance  income and net finance  margin is set forth below
($ in millions).



                                                                Twelve Months Ended            Nine Months
                                                                    September 30,                 Ended         Year Ended
                                                           ------------------------------      September 30,    December 31,
                                                              2002                2001             2001            2000
                                                           -----------         ----------       ----------     -------------
                                                           (successor)         (combined)       (combined)     (predecessor)
                                                                                                     
Finance income .......................................      $  4,342.8         $  5,366.5      $  3,975.3        $  5,248.4
Interest expense .....................................         1,439.3            2,272.0         1,619.8           2,497.7
                                                            ----------         ----------      ----------        ----------
   Net finance income ................................         2,903.5            3,094.5         2,355.5           2,750.7
Depreciation on operating lease equipment ............         1,241.0            1,385.1         1,036.7           1,281.3
                                                            ----------         ----------      ----------        ----------
   Net finance margin ................................      $  1,662.5         $  1,709.4      $  1,318.8        $  1,469.4
                                                            ==========         ==========      ==========        ==========
Average earning assets ("AEA") .......................      $ 35,796.4         $ 40,644.5      $ 40,442.0        $ 40,682.5
                                                            ==========         ==========      ==========        ==========

As a % of AEA
Finance income .......................................           12.13%             13.20%          13.10%            12.90%
Interest expense .....................................            4.02%              5.59%           5.34%             6.14%
                                                            ----------         ----------      ----------        ----------
   Net finance income ................................            8.11%              7.61%           7.76%             6.76%
Depreciation on operating lease equipment ............            3.47%              3.40%           3.42%             3.15%
                                                            ----------         ----------      ----------        ----------
Net finance margin ...................................            4.64%              4.21%           4.34%             3.61%
                                                            ==========         ==========      ==========        ==========


      The net finance  margin as a percentage of AEA was  favorably  impacted in
2002 by the  liquidation  or  disposal  of  non-strategic  and  under-performing
businesses,  the  decline  in market  interest  rates,  the effect of fair value
adjustments in the new basis of accounting to reflect  market  interest rates on
debt and assets (including  liquidating  portfolios) and lower leverage. For the
twelve  months ended  September  30, 2002 and 2001,  the impact on risk adjusted
interest  margin due to fair value  adjustments to mark  receivables and debt to
market in conjunction  with the Tyco  acquisition  was  approximately  45 and 16
basis points, respectively. The favorable effect of this adjustment will decline
prospectively  unless our debt quality spreads return to historical  levels. See
the Key Business  Initiatives  and Trends section for further  discussion of our
quality spreads. These favorable items were mitigated by the higher funding cost
associated  with the draw down of bank  facilities to pay off commercial  paper,
the issuance of term debt at wider credit  spreads in 2002 and higher  levels of
excess cash maintained for liquidity  purposes.  AEA declined during 2002 due to
the factors  discussed  previously  in the Key Business  Initiatives  and Trends
section.  The 2001 results  reflect  asset levels  comparable to 2000 and stable
yields,  coupled with lower interest  expense.  Excluding higher operating lease
rentals,  which were  offset by higher  depreciation  expense,  2001 net finance
income as a percentage  of AEA was  essentially  flat with 2000  reflecting  the
disposition  of  non-strategic  and lower  margin  businesses,  the  lower  2001
interest rate  environment  and the impact of the new basis method of accounting
to reflect  market  interest  rates on debt and  receivables  at the time of the
acquisition.

      Finance  income  (interest on loans and lease  rentals) for the year ended
September 30, 2002 decreased 19.1%, which primarily reflected a decline of 11.9%
in AEA for the year ended September 30, 2002 compared to the twelve months ended
September  30, 2001.  The decline in 2002  reflects the impact of portfolio  mix
changes  resulting  from  the sale and  liquidation  activities,  as well as the
favorable  impact  of the new  basis of  accounting,  which  were  offset by the
effects  of lower  market  interest  rates and lower  rentals  in the  aerospace
portfolio due to the  commercial  airline  industry  downturn in 2001.  Although
market  interest  rates  were  rising in 2000 and  declining  in 2001,  the 2001
increase in yield over 2000  primarily  reflects  changes in product mix and the
sale or liquidation of non-strategic, lower yielding assets.

      The 2002 lower interest expense both in dollars and as a percentage of AEA
compared  to the same  period of 2001  reflects  the lower  current  period debt
levels  associated  with a lower asset base,  decreased  leverage,  lower market
interest  rates,  and the effect of fair value  adjustments  in the new basis of
accounting,  partially offset by higher credit spreads  following the disruption
to our funding base.  The 2001 decrease over 2000  reflected the decline in 2001
market  interest  rates,  in contrast to the rising  interest  rate  environment
throughout most of 2000.


                                       14


We  seek  to   mitigate   interest   rate  risk  by  matching   the   re-pricing
characteristics  of our  assets  with our  liabilities,  which  is in part  done
through portfolio  management and the use of derivative  financial  instruments,
principally interest rate swaps. For further discussion, see "Risk Management."

      The operating lease equipment  portfolio was $6.6 billion at September 30,
2002,  $6.4 billion at September 30, 2001 and $7.2 billion at December 31, 2000,
respectively. The decline in 2001 resulted from the growth constraints discussed
previously in the "Key Business  Initiatives  and Trends." The reduction  during
2001  is due to a $0.4  billion  rail  sale-leaseback  transaction,  as  well as
declining  balances  in  various  small  ticket  portfolios.   The  table  below
summarizes operating lease margin for the respective periods.



                                                                Twelve Months Ended            Nine Months
                                                                    September 30,                 Ended         Year Ended
                                                           ------------------------------      September 30,    December 31,
                                                              2002                2001             2001            2000
                                                           -----------         ----------       ----------     -------------
                                                           (successor)         (combined)       (combined)     (predecessor)
                                                                                                      
As a % of Average Operating Lease Equipment:

Rental income ......................................           26.4%              27.8%           27.6%             27.9%
Depreciation expense ...............................           18.9%              19.5%           19.4%             19.5%
                                                             ------             ------          ------            ------
Operating lease margin .............................            7.5%               8.3%            8.2%              8.4%
                                                             ======             ======          ======            ======


      The  decline in rental  income and  depreciation  expense  from prior year
levels reflects a greater proportion of longer-term  aircraft and rail assets in
the  current  period.   Our  depreciable   assets  range  from   smaller-ticket,
shorter-term leases (e.g. computers) to larger-ticket,  longer-term leases (e.g.
commercial aircraft and rail assets).

Net Finance Margin after Provision for Credit Losses

      The net finance  margin after  provision for credit losses (risk  adjusted
interest  margin)  declined to $874.2  million for the year ended  September 30,
2002 and was $1,313.1  million for the twelve  months ended  September 30, 2001,
$986.3 million for the nine months ended September 30, 2001 and $1,214.2 for the
year ended  December 31,  2000.  The 2002  decline is due to  additional  credit
provisions  to  establish  reserves  for the  telecommunications  and  Argentine
exposures.  Excluding  these  2002  reserving  actions  and  certain  prior year
provisions,  risk adjusted  interest margin was $1,209.2  million (3.38% of AEA)
for the twelve months ended September 30, 2002 and $1,402.6  million (3.45%) for
the corresponding 2001 period. On this basis,  excluding reserving actions,  net
finance  margin after  provision  for credit  losses as a percentage  of AEA was
3.54% for the nine months ended  September 30, 2001 and 2.98% for the year ended
December 31, 2000.

      We used  discounted  cash flow  projection  analysis to estimate  the fair
value of our various liquidating  portfolios by modeling the portfolio revenues,
credit  costs,  servicing  costs and other  related  expenses over the remaining
lives of the portfolios, at the date of the Tyco acquisition. The resulting cash
flows were  discounted to determine the estimated fair value of each  portfolio,
which typically  resulted in discounted  values to the previously  recorded book
values.  These  discounts  are being  accreted  into  income  as the  portfolios
liquidate.  As  loans in  these  liquidating  portfolios  are  charged-off,  the
corresponding  reduction to the reserve for credit losses is replenished via the
provision for credit losses which is charged  against current  earnings.  Actual
performance of the portfolios,  including revenue,  credit losses, and expenses,
is  compared  on  a  quarterly  basis  to  the  original  discounted  cash  flow
projections  to monitor  portfolio  performance to determine  whether  scheduled
accretion should be modified. The impact on risk-adjusted margin due to purchase
accounting fair value adjustments related to the liquidating portfolios for 2002
and 2001 was 13 and 5 basis points respectively.

Other Revenue

      We continue to emphasize growth and  diversification of other "non-spread"
revenues to improve  our  overall  profitability.  For the twelve  months  ended
September 30, 2002,  other revenue  increased  18.0% to $932.3  million from the
comparable  period  in 2001.  The  venture  capital  impairment  valuations  and
write-downs  in  2002,  as well as  specific  charges  in  2001,  consisting  of
write-downs for other than temporary impairment of certain equity investments in
the  telecommunications  industry  and  e-commerce  markets,  were  recorded  as
reductions  to other  revenue.  Excluding  these  charges in both  years,  other
revenue improved 12.1% from the comparable  twelve-month period in 2001. On this
basis, other revenue as a percentage of AEA was 2.72% for the year ended


                                       15


September 30, 2002,  2.14% for the twelve months ended September 30, 2001, 2.15%
(annualized) for the nine months ended September 30, 2001 and 2.24% for the year
ended  December 31, 2000.  The  components of other revenue are set forth in the
following table ($ in millions).



                                                                Twelve Months Ended            Nine Months
                                                                    September 30,                 Ended         Year Ended
                                                           ------------------------------      September 30,    December 31,
                                                              2002                2001             2001            2000
                                                           -----------         ----------       ----------     -------------
                                                           (successor)         (combined)       (combined)     (predecessor)
                                                                                                      
Fees and other income ................................       $644.5             $498.8          $387.2            $480.9
Factoring commissions ................................        165.5              150.7           111.9             154.7
Gains on securitizations .............................        149.0              138.3            97.7             109.5
Gains on sales of leasing equipment ..................         13.6               80.3            47.9             113.2
(Loss) gains on venture capital investments ..........        (40.3)              (0.1)            6.0              53.7
Specific charges .....................................           --              (78.1)          (78.1)               --
                                                             ------             ------          ------            ------
   Total .............................................       $932.3             $789.9          $572.6            $912.0
                                                             ======             ======          ======            ======


      Fees and other income,  which includes servicing fees miscellaneous  fees,
syndication  fees and gains  from  asset  sales,  outpaced  the 2001  amounts on
stronger  fee income and  commissions  primarily in the  Commercial  Finance and
Equipment  Financing  and Leasing  segments,  as well as increased  accretion on
securitization  retained interests in 2002. Gains on equipment decreased in 2001
due to the impact of new basis  accounting  during the successor  period,  while
weaker  economic  conditions in 2002 resulted in  significantly  reduced venture
capital and equipment gains compared to 2001 and 2000.

      The following table presents  information  regarding  securitization gains
included in the table above ($ in millions):



                                                                Twelve Months Ended            Nine Months
                                                                    September 30,                 Ended         Year Ended
                                                           ------------------------------      September 30,    December 31,
                                                              2002                2001             2001            2000
                                                           -----------         ----------       ----------     -------------
                                                           (successor)         (combined)       (combined)     (predecessor)
                                                                                                      
Volume securitized(1) ...................................    $ 7,668.5          $ 4,497.5       $ 3,293.3         $ 4,129.2
Gains ...................................................        149.0              138.3            97.7             109.5
Gains as a percentage of volume securitized .............         1.94%              3.08%           2.97%             2.65%


--------------------------------------------------------------------------------
(1)   Excludes  short-term trade receivables  securitized for liquidity purposes
      during the quarter  ended March 31,  2002 and  subsequently  repaid in the
      quarter ended June 30, 2002.

      During the year ended  September 30, 2002, we securitized  $2.7 billion of
home equity loans and $4.9 billion of equipment  loans.  The increased  level of
securitizations  were  primarily to meet funding and liquidity  needs.  2001 and
2000 volume securitized was entirely equipment loans. The reduction in the gains
as a percentage of volume during 2002 reflects the lower gain characteristics of
the 2002 home equity securitizations done for liquidity purposes, as well as mix
changes  of  commercial  receivables  securitized,  including  the  sale of more
seasoned receivables in 2002.

Salaries and General Operating Expenses

      The  efficiency  ratio and the ratio of  salaries  and  general  operating
expenses to average managed assets "AMA" are two metrics that management uses to
monitor  productivity  and are set forth in the following  table. The efficiency
ratio measures the level of expenses in relation to revenue earned,  whereas the
AMA relationship measures expenses in relation to our managed asset base.



                                                                Twelve Months Ended            Nine Months
                                                                    September 30,                 Ended         Year Ended
                                                           ------------------------------      September 30,    December 31,
                                                              2002                2001             2001            2000
                                                           -----------         ----------       ----------     -------------
                                                           (successor)         (combined)       (combined)     (predecessor)
                                                                                                      
Efficiency ratio(1) ..................................          35.6%               41.8%          40.2%              43.8%
Salaries and general operating expenses
   as a percentage of AMA(2) .........................          1.96%               2.05%          2.07%              2.01%
Salaries and general operating expenses ..............       $ 923.4            $1,044.2        $ 784.9           $1,035.2


--------------------------------------------------------------------------------
(1)   Efficiency ratio is the ratio of salaries and general  operating  expenses
      to operating margin, excluding the provision for credit losses.

(2)   "AMA" means average managed  assets,  which is average earning assets plus
      the  average  of  finance  receivables  previously  securitized  and still
      managed by us.


                                       16


      The decreased  expenses in 2002 are due to corporate staff  reductions and
business restructurings effected in association with the 2001 acquisition of CIT
by Tyco, which were partially offset by higher collection  repossession and loan
workout  expenses in the latter  part of 2001  through  2002.  During the fourth
quarter of fiscal 2002,  expenses  rose by  approximately  $5 million due to our
return to public company  status,  including  investor  relations,  advertising,
corporate  governance,  increased insurance premiums,  and costs associated with
rebuilding our income tax function.  These public  company-related  expenses are
expected to continue.  Personnel  decreased to approximately  5,850 at September
30, 2002 from 6,785 at September 30, 2001 and 7,355 at December 31, 2000.

      The  improvement in the efficiency  ratio in 2002 over 2001 is a result of
strong fee income and cost reductions. We continue to target an efficiency ratio
in the mid 30% area.  The lower  efficiency  (higher ratio) in 2000 reflects the
impact of the Newcourt acquisition,  as historically,  that company's efficiency
ratio was significantly higher than CIT's. The efficiency ratio improved in 2001
compared to 2000 because of integration cost savings and efficiency enhancements
implemented during the last two quarters of fiscal 2001.

      Expenses  are  monitored  closely  by  business  unit  management  and are
reviewed  monthly  with our senior  management  as to trends and  forecasts.  To
ensure  overall  project cost  control,  an approval and review  procedure is in
place for major capital  expenditures,  such as computer equipment and software,
including post-implementation evaluations.

Goodwill and Other Intangible Assets Impairment and Amortization

      The Company  periodically  reviews and  evaluates  its  goodwill and other
intangible  assets for  potential  impairment.  Effective  October 1, 2001,  the
beginning of CIT's 2002 fiscal year, the Company adopted SFAS No. 142, "Goodwill
and Other  Intangible  Assets," under which goodwill is no longer  amortized but
instead is assessed for impairment at least  annually.  As part of the adoption,
the Company allocated its existing goodwill to each of our reporting units as of
October 1, 2001.  Under the transition  provisions of SFAS No. 142, there was no
goodwill  impairment  as of October 1, 2001.  Prior  period  goodwill  and other
intangible  assets  amortization  (pretax) was $97.6 million for the nine months
ended September 30, 2001 and $86.3 million for the year ended December 31, 2000.

      During  the  quarter  ended  March 31,  2002,  our  former  parent,  Tyco,
experienced disruptions to its business surrounding its announced break-up plan,
downgrades  in its  credit  ratings,  and a  significant  decline  in its market
capitalization. As a result of these events at Tyco, CIT also experienced credit
downgrades  and a disruption  to our funding base and ability to access  capital
markets.   Further,   market-based  information  used  in  connection  with  our
preliminary  consideration  of an  initial  public  offering  for  100%  of  CIT
indicated  that CIT's book value  exceeded its estimated  fair value as of March
31,  2002.  As a  result,  management  performed  a Step 1 SFAS  142  impairment
analysis  as of March 31,  2002 and  concluded  that an  impairment  charge  was
warranted at that date.

      Management's  objective in performing  the Step 1 SFAS 142 analysis was to
obtain  relevant  market-based  data to  calculate  the  fair  value of each CIT
reporting  unit as of March 31, 2002 based on each  reporting  unit's  projected
earnings  and  market  factors  that  would be used by  market  participants  in
ascribing value to each of these  reporting  units in the planned  separation of
CIT from Tyco.  Management  obtained  relevant  market  data from our  financial
advisors regarding the range of price to earnings multiples and market discounts
applicable to each  reporting  unit as of March 31, 2002 and applied this market
data to the individual  reporting  unit's  projected annual earnings as of March
31, 2002 to calculate a fair value of each reporting  unit. The fair values were
compared to the corresponding carrying value of each reporting unit at March 31,
2002, resulting in a $4.512 billion impairment charge as of March 31, 2002.

      SFAS 142 requires a second step analysis  whenever the reporting unit book
value exceeds its fair value.  This  analysis  required the Company to determine
the fair value of each reporting  unit's  individual  assets and  liabilities to
complete the analysis of goodwill  impairment  as of March 31, 2002.  During the
quarter ended June 30, 2002 we completed  this analysis for each  reporting unit
and determined  that an additional Step 2 goodwill  impairment  charge of $132.0
million was required based on reporting unit level valuation data.


                                       17


      Subsequent to March 31, 2002, CIT  experienced  credit  downgrades and the
business  environment  and other  factors  continued  to  negatively  impact the
expected CIT IPO  proceeds.  As a result,  we  performed  both Step 1 and Step 2
analysis as of June 30, 2002 in a manner  consistent with the March 2002 process
described  above.  This  analysis  was based upon  updated  market data from our
financial advisors regarding the individual  reporting units, and other relevant
market data at June 30, 2002 and through the period  immediately  following  the
IPO of the  Company,  including  the  total  amount  of the IPO  proceeds.  This
analysis resulted in Step 1 and Step 2 incremental  goodwill  impairment charges
of $1.719 billion and $148.0 million,  respectively,  as of June 30, 2002, which
was recorded during the June quarter. Our remaining goodwill is substantially in
our commercial finance segment businesses.

Provision for Credit Losses

      The  provision  for credit  losses was $788.3  million  for the year ended
September 30, 2002,  $396.3  million for the twelve  months ended  September 30,
2001,  $332.5 million for the combined nine months ended September 30, 2001, and
$255.2 million for the year ended December 31, 2000. The increased  provision in
2002 reflects higher charge-off levels and reserving actions relating  primarily
to   Competitive   Local   Exchange   Carriers   ("CLEC")   exposures   in   the
telecommunications  portfolio  ($200  million) and our Argentine  exposure ($135
million)  (detailed further below).  The 2001 provision includes a provision for
credit  losses  of  $89.5  million   relating  to  the   impairment  of  certain
under-performing  equipment  leasing  and  loan  portfolios,  primarily  in  the
Structured Finance telecommunications portfolio. Such under-performing loans and
leases are being liquidated, as collection efforts continue.

      Our provision for credit losses and reserve for credit losses is presented
in the following table ($ in millions).



                                                                   For the         For the
                                                 For the         Nine Months        Year
                                               Year Ended           Ended           Ended
                                              September 30,     September 30,    December 31,
                                                  2002              2001            2000
                                               -----------       ----------     -------------
                                               (successor)       (combined)     (predecessor)
                                                                          
Balance beginning of period .................    $ 492.9           $ 468.5         $ 446.9
                                                 -------           -------         -------
Provision for credit losses .................      453.3             243.0           255.2
Provision for credit losses - specific
  reserving actions(1) ......................      335.0              89.5              --
Reserves relating to dispositions,
  acquisitions, other .......................      (11.1)            (16.3)            2.0
                                                 -------           -------         -------
   Additions to reserve for credit
     losses .................................      777.2             316.2           257.2
                                                 -------           -------         -------
Net credit losses:
Equipment Financing and Leasing .............      258.9              82.8           102.9
Specialty Finance - commercial ..............       80.3              57.0            31.7
Commercial Finance ..........................       88.2              38.9            46.2
Structured Finance ..........................       18.5              64.8             0.4
Specialty Finance - consumer ................       46.4              48.3            54.4
                                                 -------           -------         -------
   Total net credit losses ..................      492.3             291.8           235.6
                                                 -------           -------         -------
Balance end of period .......................    $ 777.8           $ 492.9         $ 468.5
                                                 =======           =======         =======
Reserve for credit losses as a
  percentage of finance receivables .........       2.73%             1.55%           1.40%
                                                 =======           =======         =======
Reserve for credit losses as a
  percentage of past due receivables
  (sixty days or more)(2) ...................       72.7%             44.7%           46.9%
                                                 =======           =======         =======


--------------------------------------------------------------------------------
(1)   The   2002   amounts   consist   of   reserving    actions   relating   to
      telecommunication   ($200.0  million)  and  Argentine   exposures  ($135.0
      million)   while   the  2001   amount   consists   of  a   provision   for
      under-performing  loans and leases,  primarily  in the  telecommunications
      portfolio.

(2)   The  September   2002   percentage  is  45.3%   excluding  the  impact  of
      telecommunication and Argentine reserves and delinquency.


                                       18


      The following table sets forth our net charge-off experience in amount and
as a percent of average finance receivables by business segment ($ in millions):



                                                                               For the             For the
                                                          For the           Twelve Months        Nine Months             For the
                                                        Year Ended              Ended               Ended              Year Ended
                                                       September 30,        September 30,       September 30,         December 31,
                                                           2002                 2001                2001                  2000
                                                     ----------------     ----------------     ----------------     ---------------
                                                       (successor)           (combined)          (combined)           (predecessor)
                                                                                                       
Equipment Financing and Leasing ................     $258.9     2.51%     $104.8     0.85%     $ 82.8     0.91%     $102.9     0.71%
Specialty Finance-commercial ...................       80.3     1.26%       74.9     1.07%       57.0     1.11%       31.7     0.54%
Commercial Finance .............................       88.2     1.13%       50.3     0.63%       38.9     0.66%       46.2     0.60%
Structured Finance .............................       18.5     0.75%       64.8     3.59%       64.8     4.40%        0.4     0.03%
                                                     ------               ------               ------               ------
   Total Commercial Segments ...................      445.9     1.65%      294.8     1.01%      243.5     1.13%      181.2     0.62%
Specialty Finance-consumer .....................       46.4     1.78%       57.1     1.55%       48.3     1.72%       54.4     1.32%
                                                     ------               ------               ------               ------
Total ..........................................     $492.3     1.67%     $351.9     1.08%     $291.8     1.20%     $235.6     0.71%
                                                     ======               ======               ======               ======


      The  increased  net  charge-offs  in 2002 from  2001,  both in amount  and
percentage,  reflect general economic weakness leading to higher net charge-offs
in virtually all of our business segments. In particular, soft collateral values
in the  equipment  financing  and leasing  segment  have  resulted in  increased
frequency  and  severity  of  losses.  The higher  loss rates in the  commercial
finance  segment in 2002 reflect the bankruptcy of one large retailer and weaker
economic trends. The higher net charge-off  percentages in relation to the prior
year also reflect higher  charge-off  rates associated with  approximately  $1.5
billion of  receivables in  liquidation  status as of September 30, 2002,  which
include  owner-operator  trucking,  franchise,  inventory finance,  manufactured
housing and  recreational  vehicle  receivables.  The increase in commercial net
charge-offs  during  2001  includes  $79.5  million in  charge-offs  relating to
certain underperforming  equipment leasing and loan portfolios as well as higher
charge-offs across a wide number of industries, including trucking, construction
and technology, as the economy slowed and non-performing assets increased.

      Net  charge-offs,  both in amount and as a percentage  of average  finance
receivables, are shown for the liquidating and telecommunication, as well as all
other,  portfolios for the year ended  September 30, 2002 in the following table
($ in millions):



                                                                        Year Ended September 30, 2002
                                            -------------------------------------------------------------------------------
                                                   Excluding
                                                 Liquidating &               Liquidating &
                                              Telecommunications          Telecommunications                  Total
                                            ---------------------        ---------------------        ---------------------
                                                                                                    
Equipment Financing and Leasing ........     $168.6         1.83%         $ 90.3         8.02%         $258.9         2.51%
Specialty Finance-commercial ...........       70.7         1.14%            9.6         5.62%           80.3         1.26%
Commercial Finance .....................       88.2         1.13%             --           --            88.2         1.13%
Structured Finance .....................        0.1         0.01%           18.4         2.78%           18.5         0.75%
                                             ------                       ------                       ------
   Total Commercial Segments ...........      327.6         1.31%          118.3         6.04%          445.9         1.65%
Specialty Finance-consumer .............       24.4         1.33%           22.0         2.86%           46.4         1.78%
                                             ------                       ------                       ------
   Total ...............................     $352.0         1.32%         $140.3         5.15%         $492.3         1.67%
                                             ======                       ======                       ======


Reserve for Credit Losses

      Excluding the 2002  specific  Argentine  and  telecommunication  reserving
action  discussed below, the reserve for credit losses was $473.7 million (1.72%
of finance receivables) at September 30, 2002 compared to $492.9 million (1.55%)
at September 30, 2001 and $468.5  million  (1.40%) at December 31, 2000. On this
basis,  excluding the specific reserving actions,  the reserve declined in total
dollars but  increased as a  percentage  of finance  receivables  in 2002 due to
weaker  economic   conditions  and  lower  2002  asset  levels.   Although  2002
charge-offs  excluding liquidating assets and  telecommunications,  increased to
1.32% of average  finance  receivables  from 0.85% in 2001, 60 days or more past
due loans declined slightly from 2001 to 2002 and have remained at stable levels
in total dollars over recent 2002 quarters.  Impairment  included in the reserve
relating to SFAS 114 impaired loans (excluding telecommunications and Argentina)
declined to $109.0 million at September 30, 2002 from


                                       19


$122.3 million at September 30, 2001.  Management  continues to believe that the
credit risk  characteristics of the portfolio are well diversified by geography,
industry,  borrower  and  equipment  type.  Refer to  "Concentrations"  for more
information.

      The 2002 reserve  increase,  both on a dollar basis and as a percentage of
finance  receivables,  compared to the prior year  periods is  primarily  due to
reserving actions taken during the current year in two areas. First, in light of
the continued deterioration in the telecommunications sector,  particularly with
respect to our CLEC portfolio, we added $200.0 million to the reserve for credit
losses during the quarter ended June 30, 2002.  This reserving  action was based
on a review of the telecommunications portfolio, which totaled $707.2 million at
September  30,  2002,  including  $275.2  million in CLEC  exposure.  During the
quarter ended  September 30, 2002 charges were taken totaling $30.9 million that
we   considered   in   originally   establishing   this   reserve  as   follows:
telecommunication  loan  charge-offs  ($18.4 million) and equipment  write-downs
($12.5 million).  Second, following the Argentine government's action to convert
dollar-denominated  loans to pesos,  and  continued  weakness  in the  peso,  we
recorded a $135.0  million  provision in 2002. The increase in the 2001 ratio of
reserve to receivables from the preceding year is commensurate with management's
assessment  of the relative  risk of loss in the portfolio in light of weakening
economic fundamentals and higher past due loans.

      Our  consolidated  reserve for credit losses is periodically  reviewed for
adequacy based on portfolio  collateral  values and credit  quality  indicators,
including charge-off  experience and levels of past due loans and non-performing
assets and economic  conditions.  We review finance receivables  periodically to
determine the probability of loss, and record charge-offs after considering such
factors as  delinquencies,  the  financial  condition of obligors,  the value of
underlying  collateral,  as well as  third  party  credit  enhancements  such as
guarantees  and  recourse  from  manufacturers.  This  information  is  reviewed
formally on a quarterly  basis with senior  management,  including the CEO, CFO,
Chief Risk Officer and Controller among others,  in conjunction with setting the
reserve for credit losses.

      The reserve for credit losses is developed  based on three key  components
(1) specific  reserves for loans which are impaired under SFAS 114, (2) reserves
for estimated  losses  inherent in the portfolio  based upon  historical  credit
trends  adjusted  for trend and loss  outlook  and,  (3)  general  reserves  for
estimation  and economic  risk.  The level and trends over time of each of these
components  are also  reviewed  with  senior  management  as part of the  formal
quarterly credit loss reserve process  described  above.  The quarterly  reserve
evaluation  starts with our quarterly asset quality review (AQR) meetings led by
our Chief Risk Officer.  Each business unit reviews its portfolio credit trends,
credit quality,  exposures and risk mitigation  strategies.  Credit surveillance
loans greater than $500 thousand are  individually  reviewed and evaluated as to
risk of loss. We also consider the effect of purchase accounting  discounts that
decrease the carrying value of the  liquidating  portfolios.  It is management's
judgment that the consolidated  reserve for credit losses is adequate to provide
for credit losses inherent in the portfolios.

      The  following  table  presents the  components  of the reserve for credit
losses,  both  in  amount  and as a  percentage  of  finance  receivables  ($ in
millions):



                            At September 30, 2002     At September 30, 2001    At December 31, 2000
                            ---------------------     ---------------------    --------------------
                                                                          
Finance receivables .....      $473.7     1.72%          $492.9     1.55%        $468.5     1.40%
Telecommunications ......       169.1    24.77%(1)           --       --%            --       --%
Argentina ...............       135.0    71.85%(2)           --       --%            --       --%
                               ------                    ------                  ------
Total ...................      $777.8     2.73%          $492.9     1.55%        $468.5     1.40%
                               ======                    ======                  ======


--------------------------------------------------------------------------------
(1)   Percentage of finance receivables in telecommunications portfolio.

(2)   Percentage of finance receivables in Argentina.

      The  consolidated  reserve  for credit  losses is  intended to provide for
losses  inherent in the portfolio,  which requires the  application of estimates
and significant  judgment as to the ultimate  outcome of collection  efforts and
realization of collateral,  among other things.  Therefore,  changes in economic
conditions  or other  events  affecting  specific  obligors  or  industries  may
necessitate  additions  or  deductions  to the  consolidated  reserve for credit
losses.


                                       20


Past Due and Non-performing Assets

      The following table sets forth certain information concerning our past due
(sixty  days  or  more)  and  non-performing   assets  (finance  receivables  on
non-accrual status and assets received in satisfaction of loans) and the related
percentages  of finance  receivables at September 30, 2002 and 2001 and December
31, 2000 ($ in millions).



                                                         At September 30,           At September 30,         At December 31,
                                                               2002                       2001                    2000
                                                         ----------------           ----------------         ---------------
                                                            (successor)                (successor)           (predecessor)
                                                                                                     
Finance receivables, past due 60 days or more:
   Equipment Financing and Leasing ................     $  452.2     5.02%          $  466.5    4.08%        $399.8    2.88%
   Specialty Finance-commercial ...................        215.4     3.54%             259.5    3.97%         184.9    3.07%
   Commercial Finance .............................        209.4     2.35%             151.4    1.75%         107.9    1.40%
   Structured Finance .............................         65.8     2.45%              38.3    1.75%          96.2    5.59%
                                                        --------                    --------                 ------
   Total Commercial Segments ......................        942.8     3.53%             915.7    3.18%         788.8    2.69%
   Specialty Finance-consumer .....................        127.2     7.20%             188.2    6.12%         211.1    5.03%
                                                        --------                    --------                 ------
   Total ..........................................     $1,070.0     3.76%          $1,103.9    3.46%        $999.9    2.98%
                                                        ========                    ========                 ======
Non-performing assets:
   Equipment Financing and Leasing ................     $  548.5     6.09%          $  459.1    4.02%        $351.0    2.53%
   Specialty Finance-commercial ...................        103.1     1.69%             124.2    1.90%          93.9    1.56%
   Commercial Finance .............................        176.1     1.98%             106.0    1.22%          65.3    0.85%
   Structured Finance .............................        172.2     6.40%             110.4    5.05%         118.6    6.90%
                                                        --------                    --------                 ------
   Total Commercial Segments ......................        999.9     3.75%             799.7    2.78%         628.8    2.15%
   Specialty Finance-consumer .....................        139.9     7.92%             170.0    5.53%         199.3    4.75%
                                                        --------                    --------                 ------
   Total ..........................................     $1,139.8     4.01%          $  969.7    3.04%        $828.1    2.47%
                                                        ========                    ========                 ======
Non accrual loans .................................     $  976.6                    $  851.6                 $704.2
Repossessed assets ................................        163.2                       118.1                  123.9
                                                        --------                    --------                 ------
   Total non-performing assets ....................     $1,139.8                    $  969.7                 $828.1
                                                        ========                    ========                 ======


      Past  due  loans  decreased  slightly  during  2002 to  $1,070.0  million,
notwithstanding  the  U.S.  economy  slowing  to  recessionary  levels.  Due  to
increased  securitization activity and declining asset levels, the percentage of
past due loans increased to 3.76% of finance receivables.  Non-performing assets
increased  during  2002,  both  in  dollars  and  as  a  percentage  of  finance
receivables,   due  to:  (1)  increased   telecommunications   (CLEC   exposure)
non-accrual  accounts in Structured Finance (which were considered in a specific
reserving  action),  (2) one  large  transaction  placed  on  nonaccrual  status
collateralized  by a municipal  waste-to-energy  project and underlying  revenue
contracts in Equipment Financing and Leasing (3) increased  non-accrual accounts
in the SBL unit of Equipment Financing and Leasing and (4) increased repossessed
assets in Equipment  Financing  and Leasing.  Non-performing  telecommunications
accounts  totaled  $137.0  million at September  30, 2002, up from $70.4 million
last year,  of which CLEC accounts  totaled  $108.1  million and $43.8  million,
respectively.

      After  peaking in March 31, 2002, we have seen steady  improvement  in the
Specialty  Finance - commercial  Segment  past dues over the past two  quarters.
Similarly,  non-performing  accounts have trended downwards since December 2001,
reflecting  improvement  across the majority of our small-ticket  businesses and
runoff of our liquidating  portfolio assets. Two large customer balances account
for  most  of the  increases  during  2002  over  2001  in  both  past  due  and
non-performing   assets  of  the  Commercial  Finance  segment.   The  Specialty
Finance-consumer  past due portfolio metrics are down in dollar terms, but up in
percentage to finance  receivables  due to the continued  runoff of  liquidating
portfolios  and the home equity  securitization  activity,  which  lowered asset
levels during the year.

      The increases in past due and non-performing  assets at September 30, 2001
from December 31, 2000 was due to broad-based  economic slowdown in 2001, led by
sharp downturns in telecommunications and technology,  resulting in increases in
both past due loans and  non-performing  assets. The increase in commercial past
due loans and non-performing assets included trucking, construction,  retail and
technology,  as well as  manufacturing-steel  and machine  tools.  In  Specialty
Finance-consumer,  past due and  non-performing  loans  declined.  However,  the
corresponding 2001 percentage of past due loans to finance receivables increased
due to significant sales and liquidation of non-strategic receivables.


                                       21


      Managed past due loans, which also include  securitized  loans,  increased
slightly to 3.78% of managed  financial  assets  (managed  assets less operating
leases and venture  capital  investments)  from 3.72% at  September  30, 2001 as
shown in the table below ($ in  millions).  Managed  past dues  declined to $1.5
billion in total dollars, but increased as a percentage of managed assets due to
lower 2002 asset levels. The increase in managed  delinquency as a percentage of
managed  assets at September 30, 2002 is more modest than the  comparable  owned
delinquency  trends due to the higher level of  securitized  assets at September
30, 2002.



                                                               September 30, 2002    September 30, 2001     December 31, 2000
                                                               ------------------    ------------------     -----------------
                                                                  (successor)            (successor)           (predecessor)
                                                                                                       
Managed Financial Assets, past due 60 days or more:
   Equipment Financing and Leasing .......................    $  710.6     5.27%     $  810.5     5.06%     $  661.3     3.21%
   Specialty Finance-commercial ..........................       303.3     2.94%        386.4     3.57%        424.3     4.44%
   Commercial Finance ....................................       209.4     2.35%        151.4     1.75%        113.3     1.47%
   Structured Finance ....................................        65.8     2.45%         38.3     1.75%         96.2     4.10%
                                                              --------               --------               --------
   Total Commercial ......................................     1,289.1     3.64%      1,386.6     3.63%      1,295.1     3.22%
   Specialty Finance-consumer ............................       249.5     4.71%        253.2     4.32%        264.0     3.65%
                                                              --------               --------               --------
   Total .................................................    $1,538.6     3.78%     $1,639.8     3.72%     $1,559.1     3.29%
                                                              ========               ========               ========


      In light of the weakness in the aerospace  sector,  and the  circumstances
surrounding  particular  carriers as  discussed  in  "Concentrations,"  past due
finance  receivables and  non-performing  assets may increase from September 30,
2002 amounts.

Income Taxes

      The provision for income taxes totaled  $374.0  million for the year ended
September 30, 2002,  $341.6  million for the twelve  months ended  September 30,
2001,  $242.2 million for the combined nine months ended September 30, 2001, and
$381.2  million for the year ended December 31, 2000. The effective tax rate for
the twelve months ended  September  30, 2002 and 2001,  the combined nine months
ended September 30, 2001 and the year ended December 31, 2000 was (5.9)%, 44.0%,
47.1% and  37.9%,  respectively.  The  effective  tax rate,  excluding  the 2002
goodwill  impairment,  goodwill  amortization and TCH expenses was 38.1% for the
year ended  September 30, 2002,  38.5% for the twelve months ended September 30,
2001 and 39.6% for the  combined  nine months  ended  September  30,  2001.  The
increases in 2001 were primarily the result of increased non-deductible goodwill
amortization, resulting from our acquisition by Tyco in 2001 and our acquisition
of Newcourt in November 1999.  Management expects the prospective  effective tax
rate to  approximate  39% due to higher  state and local and  international  tax
provisions in relation to 2002.

      As of September 30, 2002 we had approximately $1,559.0 million of tax loss
carry-forwards, primarily related to U.S. Federal and state jurisdictions, which
expire at  various  dates  beginning  in 2010.  These  loss  carry-forwards  are
available to offset current federal income tax  liabilities,  subject to certain
limitations.

      In  connection  with the June 2001  acquisition  by Tyco,  our  income tax
compliance,  reporting  and  planning  function  was  transferred  to  Tyco.  In
connection  with our 2002 IPO and separation from Tyco we are rebuilding our tax
functions, including hiring personnel, and rebuilding systems and processes.

Results by Business Segment

      The  tables  that  follow  summarize  selected  financial  information  by
business  segment,  based upon a fixed leverage ratio across business units, the
allocation  of most  corporate  expenses and the exclusion of TCH expenses ($ in
millions).



                                                        Twelve Months Ended            Nine Months
                                                            September 30,                  Ended           Year Ended
                                                    -----------------------------       September 30,     December 31,
                                                        2002              2001              2001              2000
                                                    -----------        ----------        ----------       -------------
                                                    (successor)        (combined)        (combined)       (predecessor)
                                                                                                 
Net Income
Equipment Financing and Leasing ..............      $   202.0            $278.0            $215.1            $287.8
Specialty Finance ............................          349.8             262.2             196.7             222.2
Commercial Finance ...........................          198.9             174.1             134.8             161.8
Structured Finance ...........................           65.2              20.1              45.8              65.4
                                                    ---------            ------            ------            ------
   Total Segments ............................          815.9             734.4             592.4             737.2
Corporate, including certain charges ..........       (6,791.1)           (240.5)           (258.6)           (125.6)
                                                    ---------            ------            ------            ------
   Total .....................................      $(5,975.2)           $493.9            $333.8            $611.6
                                                    =========            ======            ======            ======



                                       22




                                                        Twelve Months Ended            Nine Months
                                                            September 30,                  Ended           Year Ended
                                                    -----------------------------       September 30,     December 31,
                                                        2002              2001              2001              2000
                                                    -----------        ----------        ----------       -------------
                                                    (successor)        (combined)        (combined)       (predecessor)
                                                                                                 
Return on AEA
Equipment Financing and Leasing ................      1.32%               1.51%            1.64%             1.42%
Specialty Finance ..............................      2.98%               1.89%            1.83%             1.73%
Commercial Finance .............................      3.41%               3.05%            3.14%             3.03%
Structured Finance .............................      2.47%               0.82%            2.37%             3.25%
   Total Segments ..............................      2.29%               1.82%            1.97%             1.82%
Corporate, including certain charges ...........    (18.98)%             (0.60)%          (0.87)%           (0.32)%
   Total .......................................    (16.69)%              1.22%            1.10%             1.50%


      Net income sharply  improved in the Specialty  Finance segment during 2002
based on  stronger  margins  and higher  securitization  gains.  The  Commercial
Finance  segment  also showed  improvement  from 2001 due to stronger  factoring
revenues on increased  business  volume.  The  Equipment  Financing  and Leasing
segment reported reduced net income and return on assets due to a decline of 11%
in portfolio assets,  higher charge-offs in the Equipment Financing business and
lower aerospace rentals in the Capital Finance business.

      The corporate  segment  included the following items in 2002: (1) Goodwill
impairment of $6,511.7 million, (2) provision for  telecommunications  of $200.0
million  ($124.0  million after tax), (3) Argentine  provision of $135.0 million
($83.7  million after tax),  (4) funding costs of $85.9 million  ($53.2  million
after tax), and (5) unallocated  corporate operating items totaling $7.2 million
pre-tax  (income)  or $3.9  million  after tax. In 2001 and prior  periods,  the
corporate  segment  included funding costs and unallocated  corporate  operating
expenses.  Corporate segment funding costs increased  significantly in 2002 from
2001  reflecting  management's  decision to not allocate the  incremental  costs
relating to the disruption to our funding base and credit downgrades,  discussed
previously.  Such 2002  additional  funding costs  included  higher debt quality
spreads,  use of bank line versus commercial paper borrowings,  incremental cost
of liquidity  facilities,  and excess cash held to enhance  liquidity.  Although
management  chose to not  allocate  these  incremental  costs  because they were
viewed as relating to temporary  conditions,  this  allocation will be evaluated
prospectively.  For all periods  shown,  corporate  includes  the results of the
Equity Investment/Venture Capital business.

      All business  segments reported improved earnings in 2001 compared to 2000
as a percentage  of AEA,  with the  exception of  Structured  Finance.  The 2001
returns in Equipment  Financing  and Leasing and  Specialty  Finance were driven
predominantly by stronger margins and other revenue, while the Specialty Finance
trends also reflected the  reorganization of the higher return Vendor Technology
business  into  this  segment  and the  exiting  of  non-strategic  lower-return
businesses as described  previously in the Key Business  Initiatives  and Trends
section.  The Commercial Finance  improvement over 2000 was primarily the result
of stronger results in factoring. The lower Structured Finance income in 2001 is
attributable primarily to significantly lower venture capital gains.

Financing and Leasing Assets

      Managed  assets,  comprised  of financing  and leasing  assets and finance
receivables  securitized  that we continue to manage,  totaled  $47.6 billion at
September  30, 2002,  compared to $50.9  billion at September 30, 2001 and $54.9
billion at December 31,  2000.  Owned  financing  and leasing  portfolio  assets
totaled  $36.4  billion at  September  30,  2002,  compared to $40.7  billion at
September 30, 2001, and $43.8 billion at December 31, 2000.

      The 2002 trend of declining asset levels reflects the previously discussed
factors in the "Key Business  Initiatives and Trends"  section.  The liquidating
portfolios totaled $1.5 billion at September 30, 2002, down from $3.1 billion at
September 30, 2001. The September 30, 2002 liquidating  portfolio  balances were
as follows:  manufactured housing $0.6 billion,  franchise finance $0.4 billion,
owner-operator  trucking $0.3 billion and other $0.2 billion. In addition,  $7.7
billion of equipment and home equity  receivables  were  securitized  during the
year in the Equipment  Financing  business unit and Specialty Finance segment as
part of our program to broaden funding access and utilize cost effective funding
alternatives.  While we did see  improvement  in fiscal  fourth  quarter  volume
trends in comparison to 2001, new origination volume for the twelve months ended
September 30, 2002 (excluding  factoring) was down by approximately 12% from the
comparable  2001 period.  Within the Equipment  Financing  and Leasing  segment,
Capital  Finance  grew  during  2002 due to  demand  for its rail and  aerospace
products,  including placements of newly ordered commercial aircraft.  The lower
asset levels at September 30, 2001 compared to


                                       23


December 31, 2000 reflect the  disposition of  non-strategic  businesses and our
focus on managing down our leverage ratios, coupled with disciplined pricing and
lower  originations.   The  increase  in  Commercial  Services  assets  reflects
short-term,  seasonal calendar third quarter growth. Additionally, the trends by
business unit reflect the transfer of certain assets from  Equipment  Finance to
Specialty Finance-commercial in 2001.

      The  managed  assets  of  our  business  segments  and  the  corresponding
strategic business units are presented in the following table ($ in millions).



                                                          At September 30,         At December 31,          % Change
                                                    --------------------------     ---------------   -----------------------
Dollars in Millions                                   2002              2001            2000         '02 vs '01   '01 vs '00
                                                    ---------        ---------        ---------      ----------   ----------
                                                                                                      
Equipment Financing:
   Finance receivables ........................     $ 7,633.0        $ 9,782.0        $12,153.7        (22.0)%       (19.5)%
   Operating lease equipment, net .............         765.8          1,281.7          2,280.7        (40.3)        (43.8)
                                                    ---------        ---------        ---------
     Total ....................................       8,398.8         11,063.7         14,434.4        (24.1)        (23.4)
                                                    ---------        ---------        ---------
Capital Finance:
   Finance receivables ........................       1,479.5          1,773.0          2,049.0        (16.6)        (13.5)
   Operating lease equipment, net .............       4,388.9          3,272.4          3,594.6         34.1          (9.0)
                                                    ---------        ---------        ---------
     Total ....................................       5,868.4          5,045.4          5,643.6         16.3         (10.6)
                                                    ---------        ---------        ---------
     Total Equipment Financing
       and Leasing Segment ....................      14,267.2         16,109.1         20,078.0        (11.4)        (19.8)
                                                    ---------        ---------        ---------
Specialty Finance:
Commercial:
   Finance receivables ........................       6,620.2          6,791.6          6,864.5         (2.5)         (1.1)
   Operating lease equipment, net .............       1,353.2          1,796.1          1,256.5        (24.7)         42.9
                                                    ---------        ---------        ---------
     Total commercial .........................       7,973.4          8,587.7          8,121.0         (7.2)          5.7
                                                    ---------        ---------        ---------
Consumer:
   Home equity ................................       1,314.2          2,760.2          2,451.7        (52.4)         12.6
   Other(1) ...................................         831.8          1,443.2          2,748.3        (42.4)        (47.5)
                                                    ---------        ---------        ---------
     Total consumer ...........................       2,146.0          4,203.4          5,200.0        (48.9)        (19.2)
                                                    ---------        ---------        ---------
     Total Specialty Finance Segment ..........      10,119.4         12,791.1         13,321.0        (20.9)        (4.0)
                                                    ---------        ---------        ---------
Commercial Services ...........................       5,040.4          5,112.2          4,277.9         (1.4)         19.5
Business Credit ...............................       3,869.8          3,544.9          3,415.8          9.2           3.8
                                                    ---------        ---------        ---------
     Total Commercial Finance Segment .........       8,910.2          8,657.1          7,693.7          2.9          12.5
                                                    ---------        ---------        ---------
Structured Finance:
   Finance receivables ........................       2,689.6          2,777.1          2,347.3         (3.2)         18.3
   Operating lease equipment, net .............          59.5             52.6             58.8         13.1         (10.5)
   Equity investments .........................         341.7            342.2            285.8         (0.1)         19.7
                                                    ---------        ---------        ---------
     Total Structured Finance Segment .........       3,090.8          3,171.9          2,691.9         (2.6)         17.8
                                                    ---------        ---------        ---------
     TOTAL FINANCING AND
       LEASING PORTFOLIO ASSETS ...............      36,387.6         40,729.2         43,784.6        (10.7)         (7.0)
                                                    ---------        ---------        ---------
Finance receivables securitized:
   Equipment Financing ........................       4,384.1          4,464.8          6,387.2         (1.8)        (30.1)
   Specialty Finance-commercial ...............       3,703.1          4,023.2          2,688.7         (8.0)         49.6
   Specialty Finance- consumer ................       3,147.5          1,659.9          2,040.4         89.6         (18.6)
                                                    ---------        ---------        ---------
     Total ....................................      11,234.7         10,147.9         11,116.3         10.7          (8.7)
                                                    ---------        ---------        ---------
     TOTAL MANAGED ASSETS(1) ..................     $47,622.3        $50,877.1        $54,900.9         (6.4)%        (7.3)%
                                                    =========        =========        =========


--------------------------------------------------------------------------------
(1)   Managed assets is compromised  of on-balance  sheet  financing and leasing
      assets and finance receivables securitized that we continue to manage.


                                       24


Concentrations

      Our ten largest  financing  and leasing  asset  accounts in the  aggregate
represented 4.8% of our total financing and leasing assets at September 30, 2002
(with the largest account  representing  less than 1%) and 3.7% at September 30,
2001.  All ten  accounts  were  commercial  accounts  and were secured by either
equipment, accounts receivable or inventory.

Geographic Composition

      At September  30, 2002 and 2001 and December 31, 2000,  our managed  asset
geographic   diversity  did  not  differ  significantly  from  our  owned  asset
geographic composition.

      The following table summarizes state concentrations  greater than 5.0% and
foreign  concentrations  in excess of 1.0% of  financing  and leasing  portfolio
assets at September 30, 2002 and 2001 and December 31, 2000.

                               At September 30,
                             ----------------------     At December 31,
                               2002           2001           2000
                             -------        -------     ---------------
State
California ..............     10.0%           10.4%          10.4%
New York ................      7.8%            8.8%           6.9%
Texas ...................      7.1%            7.7%           7.9%

Country
Canada ..................      4.6%            4.8%           5.4%
England .................      3.1%            2.1%           2.8%
Australia ...............      1.3%               (1)            (1)
Germany .................      1.2%               (1)            (1)
China ...................      1.1%               (1)            (1)

--------------------------------------------------------------------------------
(1)   The applicable balances are less than 1.0%.

Industry Composition

      At September 30, 2002 our  commercial  aerospace  portfolio in the Capital
Finance  business  unit  consists of  financing  and leasing  assets of $3,986.7
million covering 193 aircraft,  with an average age of approximately  7.4 years.
The  portfolio is spread over 77 accounts,  with the majority  placed with major
carriers. The commercial aircraft all comply with stage III noise regulations.

      The following table summarizes the composition of the commercial aerospace
portfolio as of September 30, 2002 ($ in millions):

                                                        Net         Number of
                                                    Investment       Planes
                                                    ----------      ---------
By Geography:
   Europe ..................................         $1,586.9            55
   North America ...........................          1,025.9            76
   Asia Pacific ............................            813.4            31
   Latin America ...........................            483.3            27
   Africa / Middle East ....................             77.2             4
                                                     --------           ---
Total ......................................         $3,986.7           193
                                                     ========           ===
By Manufacturer:
   Boeing ..................................         $2,439.6           137
   Airbus ..................................          1,507.7            38
   Other ...................................             39.4            18
                                                     --------           ---
Total ......................................         $3,986.7           193
                                                     ========           ===
By Body Type(1):
   Narrow body .............................         $2,723.3           141
   Intermediate ............................            849.0            16
   Wide body ...............................            375.0            18
   Other ...................................             39.4            18
                                                     --------           ---
Total ......................................         $3,986.7           193
                                                     ========           ===

--------------------------------------------------------------------------------
(1)   Narrow body are single  aisle  design and consist  primarily of Boeing 737
      and 757 series and Airbus  A320  series  aircraft.  Intermediate  body are
      smaller twin aisle  design and consist  primarily of Boeing 767 series and
      Airbus A330  series  aircraft.  Wide body are large twin aisle  design and
      consist primarily of Boeing 747 and 777 series and McDonnell Douglass DC10
      series aircraft.


                                       25


      Operating leases represent  approximately  74% of the portfolio,  with the
remainder  consisting of capital  leases or loans.  Of the 193  aircraft,  9 are
off-lease, 4 of which have been remarketed and have leases pending.

      The  regional  aircraft  portfolio at  September  30, 2002  consists of 94
planes and a net  investment  of $301.0  million,  primarily  in the  Structured
Finance segment.  The planes are primarily  located in North America and Europe.
Operating  leases account for about 19% of the portfolio,  with the rest capital
leases or loans. There are 5 aircraft in this portfolio that are off-lease.

      On August 11,  2002,  U.S.  Airways  announced  its Chapter 11  bankruptcy
filing.  CIT's  outstandings are approximately $70 million to this carrier as of
September 30, 2002,  secured primarily by five narrow-body 737's. On November 6,
2002  National  Airlines  announced  that it would  cease  operations  effective
November 6, 2002,  after the carrier,  which was  operating in  bankruptcy,  was
unable to complete a previously  announced agreement to the satisfaction of it's
senior  management,  board of directors,  lessors and other key  creditors.  Our
outstandings to National  Airlines are approximately $39 million as of September
30, 2002 secured by two narrow-body Boeing 757 aircraft. We have repossessed the
two aircraft  and are pursuing  remarketing  efforts.  On December 9, 2002,  UAL
Corp.,  the parent of United  Airlines,  announced  its  Chapter  11  bankruptcy
filing. Under existing agreements,  CIT has capital leases where United Airlines
is the  lessee of four  narrow  body (2 Boeing  757  aircraft  and 2 Boeing  737
aircraft),   CIT-owned   aircraft,   for  a  total   exposure  of  $96  million.
Additionally, CIT holds $41 million in Senior A tranche Enhanced Equipment Trust
Certificates  (EETCs)  issued by  United  Airlines,  which are debt  instruments
collateralized  by  aircraft  operated  by United  Airlines.  CIT also  leases a
variety of other equipment to UAL,  aggregating $4.6 million. In connection with
United Airlines' filing under Chapter 11, CIT is a co-arranger in a $1.2 billion
secured revolving and term loan facility with a commitment of $300 million. This
debtor-in-possession   facility   is  secured  by,   among   other   collateral,
unencumbered  aircraft.  The credit  facility is subject to court  approval  and
other  conditions.  Future revenues and aircraft values could be impacted by the
actions of the carriers,  management's  actions with respect to re-marketing the
aircraft, airline industry performance and aircraft utilization.

      Our  telecommunications  portfolio is included in  "Communications" in the
industry composition table included in the Note 7 to the Consolidated  Financial
Statements.  This portfolio totals approximately $707.2 million at September 30,
2002, or approximately 1.9% of total financing and leasing assets. The portfolio
consists of 52 accounts with an average balance of approximately  $13.6 million.
The 10 largest  accounts in the  portfolio  aggregate  $265.3  million  with the
largest single account totaling $34.1 million.  Non-performing  accounts totaled
$137.0 million (11 accounts) or 19.4% of this portfolio.  The telecommunications
portfolio includes CLECs, wireless, and towers with the largest group being CLEC
accounts,  which  totaled  $275.2  million,  or 38.9% of the  telecommunications
portfolio at September 30, 2002.  Non-performing accounts totaled $108.1 million
(7 accounts)  or 39.3% of the CLEC  portfolio.  Many of these CLEC  accounts are
still in the  process  of  building  out their  networks  and  developing  their
customer bases. Our  telecommunications  transactions are  collateralized by the
assets of the customer  (equipment,  receivables,  cash, etc.) and typically are
also secured by a pledge of the stock of  non-public  companies.  Weak  economic
conditions and industry  overcapacity have driven down values in this sector. As
discussed  in  "Provision  and Reserve  for Credit  Losses,"  $169.1  million of
previously  recorded  reserves  remain,  for  telecommunication   exposures.  As
management  continues the evaluation and work out of the individual  accounts in
this  portfolio,  charge-offs  will likely be recorded  against  this reserve in
subsequent periods. Continued weakness in this sector could result in additional
losses or require additional reserves.

      Direct and private fund venture capital equity investments  totaled $341.7
million at September 30, 2002. This portfolio is comprised of direct investments
of approximately $196.6 million in 60 companies and $145.1 million in 52 private
equity funds.  These investments are principally in emerging growth  enterprises
in selected  industries,  including industrial buyout,  information  technology,
life  science  and  consumer  products.  In 2001,  we ceased  making new venture
capital  investments beyond existing  commitments,  which totaled  approximately
$176.6  million at September 30, 2002.  These  commitments,  which are mainly to
private equity funds,  may, or may not, be drawn.  Performance of our direct and
fund  investments  will depend upon  individual  performance  of the  underlying
companies, the economy and the venture capital and private equity markets.

      At  September  30,  2002,  we  had  approximately  $180  million  of  U.S.
dollar-denominated  loans and assets  outstanding to customers  located or doing
business in Argentina. During 2002, the Argentine government instituted economic
reforms,  including  the  conversion  of certain  dollar-denominated  loans into
pesos.  Due to these  actions and the  weakness of the peso,  we  established  a
reserve of $135.0 million during the year. The underlying portfolio continues to
perform as to collection, but payments are now in pesos. Therefore, our exposure
is primarily currency related.


                                       26


      Management  strives to maximize the  profitability  of the lease equipment
portfolio by balancing equipment utilization levels with market rental rates and
lease  term.  Substantially  all  equipment  was  subject  to  lease  agreements
throughout  2002, 2001 and 2000.  Equipment not subject to lease agreements were
$267.3  million,  $247.2  million  and $351.0  million at  September  30,  2002,
September 30, 2001, and December 31, 2000, respectively. The current weakness in
the commercial  airline  industry and the slower economy could adversely  impact
both rental and utilization rates going forward.

      See  Note  7 --  "Concentrations"  of  Item  8.  Financial  Statements and
Supplementary Data for further discussion on concentrations.

Other Assets

      Other  assets  totaled  $4.8  billion,  $3.8  billion and $3.0  billion at
September 30, 2002 and 2001 and December 31, 2000.  The increase in other assets
at  September  2002 from  September  2001 was  primarily  due to a $0.3  billion
increase  in   securitization   assets,   reflecting   the   increased   use  of
securitization,  and a $0.3  billion  increase in  receivables  from  derivative
counterparties.

      Other assets  primarily  consisted of the following at September 30, 2002:
securitization  assets,  including  interest-only strips,  retained subordinated
securities,  cash  reserve  accounts  and  servicing  assets  of  $1.4  billion,
investments  in and  receivables  from  non-consolidated  subsidiaries  of  $0.7
billion, accrued interest and receivables from derivative counterparties of $0.7
billion,  deposits on  commercial  aerospace  flight  equipment of $0.3 billion,
direct and private fund equity  investments of $0.3 billion,  repossessed assets
of $0.2 billion,  prepaid  expenses of $0.1 billion and  investment in aerospace
securities  of $0.1  billion.  The  remaining  balance  includes  furniture  and
fixtures, miscellaneous receivables and other assets.

Risk Management

      We performed additional risk management procedures in 2002 in light of the
factors  discussed  previously  in the "Key  Business  Initiatives  and  Trends"
section. Our ongoing risk management activities,  beyond these special liquidity
and capital measures, are described more fully in the sections that follow.

      Our business  activities involve various elements of risk. We consider the
principal  types of risk to be credit risk  (including  credit,  collateral  and
equipment risk) and market risk (including  interest rate,  foreign currency and
liquidity risk.)

      We consider the  management of risk essential to conducting our commercial
and consumer businesses and to maintaining profitability.  Accordingly, our risk
management systems and procedures are designed to identify and analyze risks, to
set appropriate  policies and limits and to continually  monitor these risks and
limits by means of reliable  administrative  and  information  systems and other
policies and programs.

      We review and monitor  credit  exposures,  both owned and  managed,  on an
ongoing basis to identify,  as early as possible,  those  customers  that may be
experiencing   declining   creditworthiness   or   financial   difficulty,   and
periodically evaluate our finance receivables across the entire organization. We
monitor  concentrations by borrower,  industry,  geographic region and equipment
type,  and we adjust  limits  as  conditions  warrant  to  minimize  the risk of
substantial credit loss. We have maintained a standard practice of reviewing our
aerospace  portfolio  regularly and, in accordance  with SFAS 13 and SFAS 144 we
test for asset  impairment  based upon projected cash flows and relevant  market
data,  with any  impairment  in value charged to operating  earnings.  Given the
developments in the aerospace sector during the year, performance, profitability
and residual values  relating to aerospace  assets were reviewed more frequently
with the Executive Credit Committee during 2002.

      Our Asset  Quality  Review  Committee  is  comprised  of members of senior
management,  including the Chief Risk Officer,  the Chief Financial Officer, the
Controller and the Director of Credit Audit.  Periodically,  the Committee meets
with senior executives of our strategic business units and corporate credit risk
management  group to review  portfolio  status and  performance,  as well as the
status of  individual  financing  and  leasing  assets,  owned and  managed,  to
obligors with higher risk profiles.  In addition,  this  committee  periodically
meets with the Chief  Executive  Officer of CIT to review  overall  credit risk,
including geographic, industry and customer concentrations,  and the reserve for
credit losses.


                                       27


Credit Risk Management

      We have developed systems  specifically  designed to manage credit risk in
each of our business  segments.  We evaluate  financing  and leasing  assets for
credit and collateral risk during the credit granting  process and  periodically
after the  advancement of funds.  The Corporate  credit risk  management  group,
which  reports to the Chief Risk  Officer,  oversees  and  manages  credit  risk
throughout CIT. This group includes senior credit  executives  aligned with each
of the business units, as well as a senior executive with  corporate-wide  asset
recovery  and  work-out  responsibilities.  In addition,  our  Executive  Credit
Committee,  which includes the Chief Executive Officer,  the Chief Risk Officer,
members of the corporate  credit risk management group and group Chief Executive
Officers,  approve  large  transactions  and  transactions  which are outside of
established  target market  definitions  and risk  acceptance  criteria or which
exceed  the  strategic  business  units'  credit  authority.   The  credit  risk
management group also includes an independent credit audit function.

      Each of our  strategic  business  units has  developed  and  implemented a
formal credit  management  process in accordance with formal uniform  guidelines
established by the credit risk management group. These guidelines set forth risk
acceptance criteria for:

      o     acceptable maximum credit lines;

      o     selected target markets and products;

      o     creditworthiness of borrowers,  including credit history,  financial
            condition,  adequacy of cash flow, financial performance and quality
            of management; and

      o     the  type  and  value  of  underlying   collateral   and  guarantees
            (including recourse from dealers and manufacturers).

      Compliance  with  established  corporate  policies and  procedures and the
credit management  processes at each strategic business unit are reviewed by the
credit audit group.  The credit audit group examines  adherence with established
credit  policies and procedures and tests for  inappropriate  credit  practices,
including  whether potential problem accounts are being detected and reported on
a timely basis.

Commercial

      The  commercial  credit   management   process  starts  with  the  initial
evaluation of credit risk and  underlying  collateral at the time of origination
and  continues  over the life of the  finance  receivable  or  operating  lease,
including collecting past due balances and liquidating underlying collateral.

      Credit personnel  review each potential  borrower's  financial  condition,
results  of  operations,   management,   industry,  customer  base,  operations,
collateral  and other data,  such as third party credit  reports,  to thoroughly
evaluate the customer's  borrowing and repayment  ability.  Borrowers are graded
according to credit quality based upon our uniform credit grading system,  which
considers both the borrower's financial condition and the underlying collateral.
Credit facilities are subject to approval within our overall credit approval and
underwriting  guidelines and are issued  commensurate with the credit evaluation
performed on each borrower.

Consumer and Small Ticket Leasing

      We employ proprietary automated credit scoring models by loan type that
include both customer demographics and credit bureau characteristics in our
Specialty Finance segment. The profiles emphasize, among other things, occupancy
status, length of residence, length of employment, debt to income ratio (ratio
of total installment debt and housing expenses to gross monthly income), bank
account references, credit bureau information and combined loan to value ratio.
The models are used to assess a potential borrower's credit standing and
repayment ability considering the value or adequacy of property offered as
collateral. Our credit criteria include reliance on credit scores, including
those based upon both our proprietary internal credit scoring model and external
credit bureau scoring, combined with judgment. The credit scoring models are
regularly reviewed for effectiveness utilizing statistical tools. We regularly
evaluate the consumer loan portfolio using past due, vintage curve and other
statistical tools to analyze trends and credit performance by loan type,
including analysis of specific credit characteristics and other selected subsets
of the portfolios. Adjustments to credit scorecards and lending programs are
made when deemed appropriate. Individual underwriters are assigned credit
authority based


                                       28


upon  their  experience,  performance  and  understanding  of  the  underwriting
policies and procedures of our consumer and small-ticket  leasing operations.  A
credit  approval  hierarchy  also  exists to ensure  that all  applications  are
reviewed by an underwriter with the appropriate level of authority.

      See "Provision for Credit Losses."

Equipment/Residual Risk Management

      We have developed systems, processes and expertise to manage the equipment
and  residual  risk in our  commercial  segments.  Our  process  consists of the
following:  1) setting residual value at deal inception;  2) systematic residual
reviews; and 3) monitoring of residual realizations.  Reviews for impairment are
performed  at  least  annually.  Residual  realizations,  by  business  unit and
product, are reviewed as part of our ongoing financial and asset quality review,
both within the business units and by senior management.

Market Risk Management

      Market  risk  is the  risk of loss  arising  from  changes  in  values  of
financial  instruments,  including  interest rate risk,  foreign  exchange risk,
derivative  credit risk and  liquidity  risk. We engage in  transactions  in the
normal course of business that expose us to market risks.  However,  we maintain
what we believe are appropriate  management  practices and policies  designed to
effectively  mitigate such risks.  The objectives of our market risk  management
efforts are to preserve  company value by hedging changes in future expected net
cash flows and to decrease the cost of capital.  Strategies for managing  market
risks  associated with changes in interest rates and foreign  exchange rates are
an integral  part of the process,  because  those  strategies  affect our future
expected cash flows as well as our cost of capital.

      Our Capital Committee sets policies, oversees and guides the interest rate
and currency risk management process,  including establishment and monitoring of
risk metrics,  and ensures the  implementation  of those  policies.  Other risks
monitored by the Capital Committee include  derivative credit risk and liquidity
risk. The Capital  Committee meets  periodically  and includes members of senior
management,  including the Chief Executive Officer, the Chief Financial Officer,
the Treasurer,  and the Controller,  with business unit executives  serving on a
rotating basis.

      Interest Rate and Foreign  Exchange Risk  Management -- We offer a variety
of financing products to our customers,  including fixed and floating-rate loans
of  various  maturities  and  currency  denominations,  and a variety of leases,
including  operating  leases.  Changes in market interest  rates,  relationships
between short-term and long-term market interest rates, or relationships between
different interest rate indices (i.e., basis risk) can affect the interest rates
charged on  interest-earning  assets differently than the interest rates paid on
interest-bearing  liabilities, and can result in an increase in interest expense
relative to finance income. We measure our asset/liability  position in economic
terms through duration  measures and sensitivity  analysis,  and we measure it's
periodic effect on earnings using maturity gap analysis.

      A  matched  asset/liability  position  is  generally  achieved  through  a
combination of financial  instruments,  including commercial paper,  medium-term
notes,  long-term  debt,  interest  rate and currency  swaps,  foreign  exchange
contracts, and through asset syndication and securitization. We do not speculate
on interest  rates or foreign  exchange  rates,  but rather seek to mitigate the
possible  impact of such rate  fluctuations  encountered in the normal course of
business.  This process is ongoing due to prepayments,  refinancings  and actual
payments varying from contractual terms, as well as other portfolio dynamics.

      We  periodically  enter into  structured  financings  (involving  both the
issuance of debt and an interest rate swap with corresponding notional principal
amount and  maturity) to manage  liquidity  and reduce  interest  rate risk at a
lower overall funding cost than could be achieved by solely issuing debt.

      CIT uses  derivatives  for hedging  purposes only, and does not enter into
derivative financial instruments for trading or speculative purposes. As part of
managing the exposure to changes in market interest rates,  CIT, as an end-user,
enters into various  interest  rate swap  transactions  in the  over-the-counter
markets, with other financial  institutions acting as principal  counterparties.
To ensure both  appropriate use as a hedge and hedge accounting  treatment,  all
derivatives entered into are designated according to a hedge objective against a
specified  liability,  including  long term debt,  bank credit  facilities,  and
commercial  paper.  CIT's primary  hedge  objectives  include the  conversion of
variable-rate  liabilities  to fixed rates,  and the  conversion  of  fixed-rate
liabilities  to  variable  rates.  The  notional  amounts,  rates,  indices  and
maturities of CIT's  derivatives are required to closely match the related terms
of CIT's hedged liabilities.


                                       29


      Interest  rate swaps with  notional  principal  amounts of $7.1 billion at
September  30,  2002,  $6.9  billion at  September  30, 2001 and $9.9 billion at
December 31, 2000 were  designated as hedges against  outstanding  debt and were
principally  used  to  convert  the  interest  rate on  variable-rate  debt to a
fixed-rate,  establishing a fixed-rate  term debt borrowing cost for the life of
the swap.  These hedges reduce our exposure to rising interest  rates,  but also
reduce the benefits of lower interest rates.

      A comparative  analysis of the weighted average principal  outstanding and
interest rates on our debt before and after the effect of interest rate swaps is
shown in the following table ($ in millions).



                                                           Year Ended             Nine Months Ended             Year Ended
                                                          September 30,             September 30,              December 31,
                                                              2002                      2001                       2000
                                                      --------------------      --------------------      ---------------------
                                                          (successor)                (combined)               (predecessor)
                                                                                                       
Before Swaps
Commercial paper, variable-rate senior notes
   and bank credit facilities .....................   $17,087.2      2.34%      $20,373.6      4.91%      $19,848.6      6.53%
Fixed-rate senior and subordinated notes ..........    16,764.8      6.11%       17,078.6      4.63%       17,689.7      6.72%
                                                      ---------                 ---------                 ---------
Composite .........................................   $33,852.0      4.21%      $37,452.2      4.14%      $37,538.3      6.62%
                                                      =========                 =========                 =========
After Swaps
Commercial paper, variable-rate senior notes
   and bank credit facilities .....................   $14,813.2      2.55%      $14,209.8      4.97%      $14,762.1      6.74%
Fixed-rate senior and subordinated notes ..........    19,038.8      5.90%       23,242.4      4.71%       22,776.2      6.67%
                                                      ---------                 ---------                 ---------
Composite .........................................   $33,852.0      4.43%      $37,452.2      4.34%      $37,538.3      6.70%
                                                      =========                 =========                 =========


      The weighted  average  composite  interest rate after swaps in each of the
years  presented  increased  from  the  composite  interest  rate  before  swaps
primarily  because a larger  proportion  of our  debt,  after  giving  effect to
interest rate swaps, was subject to a fixed interest rate. However, the weighted
average  interest  rates  before swaps do not  necessarily  reflect the interest
expense that would have been  incurred  over the life of the  borrowings  had we
chosen to manage  interest rate risk without the use of such swaps.  Derivatives
are discussed further in Note 10 -- "Derivative  Financial  Instruments" of Item
8. Financial Statements and Supplementary Data.

      We regularly  monitor and simulate through computer modeling our degree of
interest  rate  sensitivity  by  measuring  the  repricing   characteristics  of
interest-sensitive assets, liabilities,  and derivatives.  The Capital Committee
reviews the results of this modeling periodically. The interest rate sensitivity
modeling  techniques  employed by us include the creation of prospective  twelve
month "baseline" and "rate shocked" net interest income simulations. At the date
that interest rate  sensitivity is modeled,  "baseline"  net interest  income is
derived considering the current level of  interest-sensitive  assets and related
run-off  (including  both  contractual   repayment  and  historical   prepayment
experience),  the current level of  interest-sensitive  liabilities  and related
maturities  and the current  level of  derivatives.  The  "baseline"  simulation
assumes that, over the next successive twelve months,  market interest rates (as
of the date of simulation) are held constant and that no new loans or leases are
extended. Once the "baseline" net interest income is calculated, market interest
rates,  which  were  previously  held  constant,  are  raised  100 basis  points
instantaneously and parallel across the entire yield curve, and a "rate shocked"
simulation is run.  Interest rate sensitivity is then measured as the difference
between  calculated  "baseline"  and "rate  shocked"  net  interest  income.  An
immediate  hypothetical  100 basis point  parallel  change in the yield curve on
October 1, 2002 would  affect net income by an estimated  $12 million  after-tax
over the next twelve months.  A similar 100 basis point change in yield curve on
October 1, 2001 would have affected net income by an estimated $17 million after
tax.  Although  management  believes  that this  measure  provides a  meaningful
estimate of our interest  rate  sensitivity,  it does not account for  potential
changes in the credit quality, size, composition and prepayment  characteristics
of the  balance  sheet and other  business  developments  that could  affect net
income.  Accordingly,  no assurance  can be given that actual  results would not
differ materially from the potential outcome simulated by our computer modeling.
Further, it does not necessarily  represent  management's current view of future
market interest rate movements.

      We also  utilize  foreign  currency  exchange  forward  contracts to hedge
currency risk  underlying our net  investments  in foreign  operations and cross
currency  interest  rate swaps to hedge both foreign  currency and interest rate
risk  underlying  foreign debt. At September 30, 2002,  CIT was party to foreign
currency  exchange forward contracts with notional amounts totaling $3.1 billion
and  maturities  ranging from 2003 to 2006. CIT was also party to cross currency
interest rate swaps with notional  amounts  totaling $1.7 billion and maturities
ranging  from 2003


                                       30


to 2027. At September  30, 2001,  $3.3 billion in notional  principal  amount of
foreign  currency  exchange  forward  contracts  and $1.7  billion  in  notional
principal  amount of  cross-currency  swaps were designated as  currency-related
debt hedges. At December 31, 2000, $2.9 billion in notional  principal amount of
foreign  currency  exchange  forward  contracts  and $1.2  billion  in  notional
principal  amount of  cross-currency  swaps were designated as  currency-related
debt  hedges.  Translation  gains  and  losses  of the  underlying  foreign  net
investment,  as well as  offsetting  derivative  gains and losses on  designated
hedges, are reflected in other comprehensive  income in the Consolidated Balance
Sheet.

      Derivative  Risk  Management  -- We enter into  interest rate and currency
swaps and foreign exchange forward  contracts as part of our overall market risk
management  practices.  We assess and manage the  external  and  internal  risks
associated  with these  derivative  instruments  in accordance  with the overall
operating goals established by our Capital  Committee.  External risk is defined
as those risks  outside of our direct  control,  including  counterparty  credit
risk,  liquidity risk,  systemic risk, legal risk and market risk. Internal risk
relates to those operational risks within the management oversight structure and
includes actions taken in contravention of CIT policy.

      The primary external risk of derivative instruments is counterparty credit
exposure,  which is defined  as the  ability of a  counterparty  to perform  its
financial obligations under a derivative contract. We control the credit risk of
our derivative agreements through counterparty credit approvals, pre-established
exposure limits and monitoring procedures.

      The Capital Committee approves each counterparty and establishes  exposure
limits based on credit analysis and market value. All derivative  agreements are
with  major  money  center  financial  institutions  rated  investment  grade by
nationally  recognized rating agencies,  with the majority of our counterparties
rated "AA" or better. Credit exposures are measured based on the market value of
outstanding derivative instruments. Exposures are calculated for each derivative
contract to monitor counterparty credit exposure.

      Liquidity  Risk  Management  --  Liquidity  risk refers to the risk of CIT
being unable to meet  potential  cash  outflows  promptly and cost  effectively.
Factors  that  could  cause  such a risk to  arise  might be a  disruption  of a
securities  market or other  source of funds.  We actively  manage and  mitigate
liquidity  risk by  maintaining  diversified  sources of  funding.  The  primary
funding sources are commercial paper (U.S.) long term debt (U.S., International)
and  asset-backed  securities  (U.S.  and  Canada).  Included  as  part  of  our
securitization  programs are committed asset-backed commercial paper programs in
the U.S. and Canada. We also maintain  committed bank lines of credit to provide
back-stop support of commercial paper borrowings and local bank lines to support
our international operations. Additional sources of liquidity are loan and lease
payments from customers, whole loan asset sales and loan syndications.

      We also  target and  monitor  certain  liquidity  metrics to ensure both a
balanced liability profile and adequate alternate liquidity availability.  Among
the target ratios are maximum  percentage  of  outstanding  commercial  paper to
total debt and minimum percentage of committed bank line coverage to outstanding
commercial paper.

Liquidity

      We successfully  launched our dealer based commercial paper program during
the final fiscal quarter of 2002 and quickly reached $4.7 billion outstanding at
September  30,  2002.  In addition,  existing  bank  facilities  were paid down,
maintaining back-stop liquidity to fully cover all outstanding commercial paper.
These  events  followed  the draw  down in  February  2002 of our  $8.5  billion
unsecured  credit  facilities,   which  have  historically  been  maintained  as
liquidity  support for our commercial paper programs.  The proceeds were used to
satisfy our outstanding commercial paper obligations as they came due.

      At September 30, 2002, we had $4,037.4 million in drawn credit facilities.
We  renegotiated a new 364-day credit  facility during October 2002 and used the
proceeds from the new facility,  along with other liquidity sources, to pay down
the prior  364-day  facility.  As of October  15,  2002,  we have  total  credit
facilities  of $7,350.0  million.  Of this total,  we have undrawn and available
credit facilities of $4,735.0  million,  of which $3,720.0 million expires March
2005,  and the  remainder  expires  periodically  during  2003.  We have drawn a
$2,300.0  million  364-day  facility  expiring  October 2003 and a C$500 million
facility (approximately $315.0 million U.S. dollar) maturing March 2003.

      To further strengthen our funding flexibility, we maintain committed asset
backed  facilities  which cover a range of assets from  equipment to real estate
assets, and trade accounts receivable.  While these facilities are


                                       31


predominately  in the U.S., we also maintain  facilities for Canadian  domiciled
assets.  As of September 30, 2002, we had in aggregate $7.9 billion in committed
facilities.

      In addition to the commercial  paper markets,  CIT maintains access to the
unsecured  term debt markets.  During the fiscal year ended  September  2002, we
issued $4.6 billion of term debt and  securitized  $7.7 billion of financing and
leasing assets.

      From time to time, CIT files registration  statements for debt securities,
which it may sell in the future.  At September 30, 2002, we had $10.6 billion of
registered,  but unissued,  debt securities available under a shelf registration
statement.  In addition,  we have  approximately $2.0 billion of availability in
our  committed  asset-backed  facilities  and $4.4  billion of  registered,  but
unissued,  securities  available  under  public  shelf  registration  statements
relating to our asset-backed securitization program.

      Our credit  ratings are shown for  September  30, 2002,  June 30, 2002 and
September 30, 2001 in the following table.



                        At September 30, 2002   At June 30, 2002  At September 30, 2001  At December 31, 2000
                        ---------------------   ----------------  ---------------------  --------------------
                            Short     Long      Short     Long       Short     Long        Short     Long
                            Term      Term      Term      Term       Term      Term        Term      Term
                            -----     ----      -----     ----       -----     ----        -----     ----
                                                                              
Moody's ..............       P-1       A2        P-1       A2         P-1       A2          P-1       A1
Standard & Poor's ....       A-1        A        A-2      BBB+        A-1       A+          A-1       A+
Fitch ................       F1         A        F2       BBB         F1        A+          F1        A+


      The security ratings stated above are not a recommendation to buy, sell or
hold  securities  and may be subject to revision or  withdrawal by the assigning
rating organization.  Each rating should be evaluated independently of any other
rating.

      In early 2002, in order to protect our bondholders,  we amended our public
indenture agreements to prohibit or restrict  transactions with Tyco, our former
parent. While we have minimal material covenants within our legal documents that
govern our funding sources, some do exist. The most significant covenant in CITs
indentures and credit agreements is a negative pledge provision which allows for
exceptions  for certain  ordinary  course  liens  needed in order to operate our
business.  Various  credit  agreements  also contain a minimum net worth test of
$3.75 billion.

      The following tables summarize various contractual  obligations,  selected
contractual  cash receipts and contractual  commitments as of September 30, 2002
($ in millions).



                                                                          Payments by Period
                                                   -------------------------------------------------------------
                                                    Due in        Due in       Due in       Due in     Due After
Contractual Obligations                              2003          2004         2005         2006        2006        Total
-----------------------                             ------        ------       ------       ------     ---------     -----
                                                                                                 
Commercial paper .............................     $ 4,654.2   $      --    $      --     $     --     $     --    $ 4,654.2
Bank credit facilities .......................       4,037.4          --           --           --           --      4,037.4
Variable-rate term debt ......................       3,910.3     1,247.0         23.4         25.0        173.3      5,379.0
Fixed-rate term debt .........................       2,784.9     4,321.5      4,704.1      1,179.1      5,395.8     18,385.4
Lease rental expense .........................          67.1        56.7         49.4         37.9         66.4        277.5
                                                   ---------   ---------    ---------     --------     --------    ---------
   Total contractual obligations .............      15,453.9     5,625.2      4,776.9      1,242.0      5,635.5     32,733.5
                                                   ---------   ---------    ---------     --------     --------    ---------
Finance receivables(1) .......................      13,136.8     3,541.2      2,624.5      1,751.2      7,405.3     28,459.0
Operating lease rental income ................       1,177.6       736.7        447.4        279.9        638.0      3,279.6
Finance receivables held for sale(2) .........       1,019.5          --           --           --           --      1,019.5
Cash-- current balance .......................       2,274.4          --           --           --           --      2,274.4
                                                   ---------   ---------    ---------     --------     --------    ---------
   Total projected cash availability(3) ......      17,608.3     4,277.9      3,071.9      2,031.1      8,043.3     35,032.5
                                                   ---------   ---------    ---------     --------     --------    ---------
Net projected cash inflow (outflow) ..........     $ 2,154.4   $(1,347.3)   $(1,705.0)    $  789.1     $2,407.8    $ 2,299.0
                                                   =========   =========    =========     ========     ========    =========


--------------------------------------------------------------------------------
(1)   Based upon contractual cash flows; amount could differ due to prepayments,
      chargeoffs and other factors.

(2)   Based upon management's intent to sell rather than contractual  maturities
      of underlying assets.

(3)   Excludes  projected  proceeds  from  sale  of  operating  lease  equipment
      portfolio,  interest  revenue  from  finance  receivables,  debt  interest
      expense and other items.


                                       32




                                                         Commitment Expiration by Period
                                           ---------------------------------------------------------
                                            Due in      Due in      Due in      Due in     Due After
Contractual Commitments                      2003        2004        2005        2006        2006        Total
-----------------------                     ------      ------      ------      ------      ------       -----
                                                                                      
Credit extensions .......................  $2,395.0   $   64.3    $   27.9       $13.7      $167.4      $2,668.3
Letters of credit .......................   1,105.5        4.4          --          --          --       1,109.9
Acceptances .............................       8.4         --          --          --          --           8.4
Guarantees ..............................     724.5         --          --          --          --         724.5
Venture capital fund commitments ........        --         --          --          --       176.6         176.6
Aircraft purchases ......................     660.0      979.0     1,444.0       640.0       184.0       3,907.0
                                           --------   --------    --------      ------      ------      --------
   Total Commitments ....................  $4,893.4   $1,047.7    $1,471.9      $653.7      $528.0      $8,594.7
                                           ========   ========    ========      ======      ======      ========


      See the "-- Overview" and "-- Net Finance Margin" sections for information
regarding  the impact of our  liquidity  and  capitalization  plan on results of
operations.

Securitization Program

      We fund asset  originations  on our  balance  sheet by  accessing  various
sectors of the capital  markets,  including the term debt and  commercial  paper
markets.  In an effort to broaden  funding  sources and to provide an additional
source of liquidity,  we use an array of securitization  programs to access both
the public and private asset-backed  securitization markets. Current products in
these programs  include  receivables  and leases secured by equipment as well as
consumer loans secured by residential real estate.  During the fiscal year ended
September 30, 2002, we securitized  $7.7 billion of financing and leasing assets
and the  outstanding  securitized  asset balance at September 30, 2002 was $11.2
billion or 23.6% of our total  managed  assets.  Beginning in the quarter  ended
March 31, 2002,  we  experienced  a disruption  to our funding  base,  which was
prompted by Tyco's  announcement to dispose of CIT and subsequent  credit rating
downgrades  of both Tyco and CIT. As a result,  during  the March and  June 2002
quarters,  we relied more  heavily on  securitization  as a funding  source.  In
addition  to our  conventional  securitization  programs,  we also  completed  a
conduit facility backed by trade accounts receivable in order to further broaden
our funding access.

      Under our typical asset-backed securitization, we sell a "pool" of secured
loans  or  leases  to  a   special-purpose   entity,   typically  a  trust.  The
special-purpose  entity,  in turn,  issues  certificates  and/or  notes that are
collateralized  by the pool and entitle the holders  thereof to  participate  in
certain pool cash flows. We retain the servicing of the  securitized  contracts,
for which we earn a servicing  fee. We also  participate  in certain  "residual"
cash flows (cash flows after  payment of principal  and interest to  certificate
and/or note holders, servicing fees and other credit-related disbursements).  At
the date of securitization, we estimate the "residual" cash flows to be received
over the life of the  securitization,  record  the  present  value of these cash
flows as a retained  interest  in the  securitization  (retained  interests  can
include bonds issued by the  special-purpose  entity,  cash reserve  accounts on
deposit  in  the  special-purpose  entity  or  interest  only  receivables)  and
typically recognize a gain.

      In estimating residual cash flows and the value of the retained interests,
we make a variety  of  financial  assumptions,  including  pool  credit  losses,
prepayment  speeds and discount rates.  These  assumptions are supported by both
our historical  experience  and  anticipated  trends  relative to the particular
products securitized.  Subsequent to recording the retained interests, we review
them quarterly for impairment  based on estimated fair value.  These reviews are
performed  on a  disaggregated  basis.  Fair  values of retained  interests  are
estimated   utilizing  current  pool   demographics,   actual   note/certificate
outstandings,  current and  anticipated  credit  losses,  prepayment  speeds and
discount rates.

      During  the  twelve   months  ended   September   30,  2002,  we  recorded
securitization  gains of $149.0 million on $7.7 billion of financing and leasing
assets securitized,  which equates to 16.9% of pretax income,  excluding TCH and
goodwill  impairment  charges.  During  the same  period  in 2001,  we  recorded
securitization  gains of $138.3 million on $4.5 billion of financing and leasing
assets  securitized,  which  equated to 15.6% of pretax  income  (excluding  TCH
losses). Absent funding source disruptions,  management targets a maximum of 15%
of pre-tax  income from  securitization  gains.  Our  retained  interests  had a
carrying value at September 30, 2002 of $1,313.7 million, including interests in
commercial  securitized  assets of  $1,039.7  million and  consumer  securitized
assets of $274.0 million.  The total retained  interest as of September 30, 2002
is  comprised of $658.9  million in  over-collateralization,  $362.2  million of
interest  only strips,  and $292.6  million of cash reserve  accounts.  Retained
interests are subject to credit and prepayment  risk. Our interests  relating to
commercial  securitized  assets are


                                       33


generally  subject to lower prepayment risk because of the contractual  terms of
the underlying receivables. These assets are subject to the same credit granting
and  monitoring  processes  which are described in the "Credit Risk  Management"
section.

Capitalization

      On July 2, 2002, the  underwriters  sold 200 million shares of CIT's stock
in the Company's  initial public  offering.  The net proceeds were paid to Tyco,
the  selling  stockholder.  On  July  12,  2002,  as  part  of  CIT's  IPO,  the
underwriters  exercised a portion of their over-allotment  option to purchase an
additional 11.6 million shares of CIT stock from the Company, increasing capital
by approximately $255 million.

      During the year ended  September 30, 2002, our managed assets  declined by
$3.3 billion (6.4%) and our owned assets  declined by $4.3 billion  (10.7%).  We
continued to sell or  liquidate  various  portfolios  we had  previously  ceased
originating new business in: owner-operator  trucking,  franchise,  manufactured
housing,  recreational  vehicle and inventory finance.  In all, these portfolios
declined from  approximately  $3.1 billion at September 30, 2001 to $1.5 billion
at September 30, 2002 due to  liquidation  and sales.  Our additions to retained
earnings  and our asset  runoff  continued  to improve  our  capitalization  and
leverage ratios. The following table presents information  regarding our capital
structure ($ in millions).



                                                        September 30, 2002   September 30, 2001    December 31, 2000
                                                        ------------------   ------------------    -----------------
                                                            (successor)          (successor)         (predecessor)

                                                                                              
Commercial paper .......................................    $ 4,654.2            $ 8,869.2             $ 9,063.5
Bank credit facilities .................................      4,037.4                   --                    --
Term debt ..............................................     23,764.4             26,828.5              28,901.6
Company-obligated mandatorily redeemable preferred
   securities of subsidiary trust holding solely
   debentures of the Company ("Preferred
   Capital Securities") ................................        257.7                260.0                 250.0
Stockholders' equity(1) ................................      4,857.3             10,661.4(2)            6,007.2
                                                            ---------            ---------             ---------
Total capitalization ...................................     37,571.0             46,619.1              44,222.3
Goodwill and other intangible assets ...................       (384.4)            (6,569.5)             (1,964.6)
                                                            ---------            ---------             ---------
Total tangible capitalization ..........................    $37,186.6            $40,049.6             $42,257.7
                                                            =========            =========             =========
Tangible stockholders' equity(1) and Preferred Capital
   Securities to managed assets ........................         9.93%                8.55%(2)              7.82%
Total debt (excluding overnight deposits) to tangible
   stockholders' equity(1) and Preferred Capital
   Securities ..........................................         6.54x                8.20x(2)              8.78x


--------------------------------------------------------------------------------
(1)   Stockholders'  equity  excludes  the impact of the  accounting  change for
      derivative financial  instruments described in Note 10 to the Consolidated
      Financial  Statements and certain  unrealized  gains or losses on retained
      interests and investments.

(2)   Excludes  equity  deficit  relating to TCH that was  relieved  via capital
      contributed  from  Tyco  as  of  June  30,  2002.

      The  Company-obligated  mandatorily  redeemable  preferred  securities are
7.70%  Preferred  Capital  Securities  issued in 1997 by CIT Capital  Trust I, a
wholly-owned subsidiary. CIT Capital Trust I invested the proceeds of that issue
in Junior  Subordinated  Debentures  of CIT having  identical  rates and payment
dates.

      See `Liquidity  Risk  Management'  for  discussion on risks  impacting our
liquidity and capitalization.

Securitization and Joint Venture Activities

      We utilize  special  purpose  entities  (SPE's) and joint  ventures in the
normal  course of business to execute  securitization  transactions  and conduct
business in key vendor relationships.

      Securitization  Transactions  -- SPE's are used to achieve "true sale" and
bankruptcy  remote  requirements for these  transactions in accordance with SFAS
No. 140,  "Accounting  for  Transfers  and  Servicing  of  Financial  Assets and
Extinguishment  of  Liabilities."  Pools of assets  are  originated  and sold to
special  purpose  entities,  which in turn issue debt  securities  to  investors
solely backed by asset pools. Accordingly, CIT has no legal obligations to repay
the investment  certificates in the event of a default by the Trust. CIT retains
the servicing  rights and  participates in certain cash flows of the pools.  The
present  value of expected  net cash flows that  exceeds the  estimated  cost of
servicing  is  recorded  in  other  assets  as  a  "retained  interest."  Assets
securitized  are shown in our managed  assets and our  capitalization  ratios on
managed assets.


                                       34


      Joint  Ventures  --  We  utilize  joint  ventures  to  conduct   financing
activities with certain strategic vendor partners. Receivables are originated by
the joint  venture and  purchased  by CIT.  These  distinct  legal  entities are
jointly owned by the vendor  partner and CIT, and there is no  third-party  debt
involved.  These  arrangements  are accounted for using the equity method,  with
profits and losses distributed according to the joint venture agreement.

Critical Accounting Policies

      The  preparation  of financial  statements  in conformity  with  generally
accepted  accounting  principles  requires  management to use judgment in making
estimates and assumptions that affect reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported  amounts of income and expenses during the reporting
period.   The  following   accounting   policies   include  inherent  risks  and
uncertainties   related  to  judgments  and  assumptions   made  by  management.
Management's  estimates are based on the relevant  information  available at the
end of each period.

      Investments -- Investments for which the Company does not have the ability
to  exercise  significant  influence  and  for  which  there  is  not a  readily
determinable  market value are accounted  for under the cost method.  Management
uses judgment in determining  when an unrealized loss is deemed to be other than
temporary, in which case such loss is charged to earnings.

      Charge-off  of Finance  Receivables  -- Finance  receivables  are reviewed
periodically to determine the  probability of loss.  Charge-offs are taken after
considering such factors as the borrower's  financial condition and the value of
underlying   collateral  and  guarantees  (including  recourse  to  dealers  and
manufacturers).

      Impaired Loans -- Loan impairment is defined as any shortfall  between the
estimated  value and the recorded  investment  in the loan,  with the  estimated
value determined using the fair value of the collateral and other cash flows, if
the loan is collateral  dependent,  or the present value of expected future cash
flows discounted at the loan's effective interest rate.

      Reserve for Credit Losses -- On a quarterly  basis, the reserve for credit
losses  is set and  reviewed  by  senior  management  for  adequacy  considering
economic conditions,  collateral values and credit quality indicators, including
historical and expected  charge-off  experience and levels of past-due loans and
non-performing assets.  Management uses judgment in determining the level of the
consolidated  reserve for credit  losses and in  evaluating  the adequacy of the
reserve.  The  reserve  for  credit  losses  is set and  recorded  based  on the
establishment of three components - specific  reserves for collateral  dependent
loans which are impaired under SFAS 114,  reserves for estimated losses inherent
in the  portfolio  based upon historic  credit  trends and general  reserves for
"estimation"  risk. As of September 30, 2002,  the reserve for credit losses was
$777.8  million  or  2.73%  of  finance   receivables  and  72.7%  of  past  due
receivables.  A $10.0 million change in the reserve for credit losses equates to
the following variances: 4 basis points (0.04%) in the percentage of reserves to
finance  receivables;  93 basis points  (0.93%) in the percentage of reserves to
past due receivables and $0.03 in earnings per share.

      Retained   Interests   in   Securitizations   --   Significant   financial
assumptions,  including loan pool credit losses,  prepayment speeds and discount
rates, are utilized to determine the fair values of retained interests,  both at
the date of the  securitization  and in the subsequent  quarterly  valuations of
retained  interests.  Any resulting losses,  representing the excess of carrying
value over estimated fair value, are recorded against current earnings. However,
unrealized  gains  are  reflected  in  stockholders'  equity  as part  of  other
comprehensive income.

      Lease Residual Values -- Operating lease equipment is carried at cost less
accumulated  depreciation  and is depreciated to estimated  residual value using
the straight-line  method over the lease term or projected  economic life of the
asset.  Direct  financing  leases are recorded at the aggregated  future minimum
lease  payments plus estimated  residual  values less unearned  finance  income.
Management  performs  periodic reviews of the estimated  residual  values,  with
impairment,  other than  temporary,  recognized  in the  current  period.  As of
September  30, 2002,  our direct  financing  lease  residual  balance was $2,273
million and our operating lease equipment balance was $6,567 million. A 10 basis
points (0.1%)  fluctuation in the  combination of these amounts equates to $0.02
in earnings per share.


                                       35


      Goodwill  -- CIT  adopted  SFAS No. 142,  "Goodwill  and Other  Intangible
Assets"  effective  October 1, 2001,  the  beginning of CIT's  fiscal 2002.  The
Company  determined that there was no impact of adopting this new standard under
the transition provisions of SFAS No. 142. Since adoption, goodwill is no longer
amortized, but instead will be assessed for impairment at least annually. During
this assessment,  management relies on a number of factors  including  operating
results,  business plans, economic  projections,  anticipated future cash flows,
and  transactions  and market place data. See "--Goodwill  and Other  Intangible
Assets Amortization" above for a discussion of our recent impairment analysis.

Accounting and Technical Pronouncements

      In June  2001,  the  FASB  issued  SFAS No.  143,  "Accounting  for  Asset
Retirement  Obligations."  SFAS No. 143 addresses  accounting  and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement  costs. This statement is effective for fiscal years
beginning after June 15, 2002. We are currently assessing the impact of this new
standard.

      In July 2001,  the FASB issued SFAS No.  144,  "Impairment  or Disposal of
Long-Lived Assets," which is effective for fiscal years beginning after December
15, 2001. The provisions of this statement provide a single accounting model for
impairment  of  long-lived  assets and retain  the  requirements  of SFAS 121 to
recognize an impairment loss when the carrying amount of a long-lived  asset can
not be recovered from its undiscounted  cash flows and to measure the loss based
upon fair values.  Because the provisions of this  pronouncement with respect to
individual asset impairment are consistent with our current  accounting  policy,
the  adoption of SFAS 144 is not  expected to have a  significant  impact on our
financial position or results of operations.

      In  April  2002,  the  FASB  issued  SFAS  No.  145,  "Rescission  of FASB
Statements  No. 4, 44 and 64,  Amendment of FASB Statement No. 13, and Technical
Corrections,"  which is effective for fiscal years beginning after May 15, 2002.
This statement rescinds the above mentioned statements and amends other existing
authoritative  pronouncements  to make various  technical  corrections,  clarify
meanings, or describe their applicability under changed conditions.  SFAS 145 is
not expected to have a significant  impact on our financial  position or results
of operations.

      In July  2002,  the  FASB  issued  SFAS  No.  146  "Accounting  for  Costs
Associated with Exit or Disposal." This statement addresses financial accounting
and reporting for costs  associated  with exit or disposal  activities  that are
initiated  after  December  31,  2002.  SFAS  146  is  not  expected  to  have a
significant impact on our financial position or results of operations.

      On October 1, 2002, the FASB issued SFAS No. 147, "Acquisitions of Certain
Financial Institutions." SFAS No. 147 supercedes specialized accounting guidance
in SFAS No. 72 in order to conform the  accounting for certain  acquisitions  of
Banking or Thrift  institutions to SFAS No. 142,  "Goodwill and Other Intangible
Assets." SFAS 147 is not expected to impact our financial position or results of
operations.

Forward-Looking Statements

      Certain  statements   contained  in  this  document  are  "forward-looking
statements" within the meaning of the U.S. Private Securities  Litigation Reform
Act of 1995. All statements  contained herein that are not clearly historical in
nature are  forward-looking  and the words  "anticipate,"  "believe,"  "expect,"
"estimate"  and  similar   expressions   are  generally   intended  to  identify
forward-looking  statements. Any forward-looking statements contained herein, in
press releases,  written statements or other documents filed with the Securities
and Exchange  Commission or in communications and discussions with investors and
analysts in the normal  course of business  through  meetings,  webcasts,  phone
calls and conference calls, concerning our operations,  economic performance and
financial  condition are subject to known and unknown risks,  uncertainties  and
contingencies.  Forward-looking  statements  are included,  for example,  in the
discussions about:

      o     our liquidity risk management,

      o     our credit risk management,

      o     our asset/liability risk management,


                                       36


      o     our capital, leverage and credit ratings,

      o     our operational and legal risks,

      o     our commitments to extend credit or purchase equipment, and

      o     how we may be affected by legal proceedings.

      All  forward-looking  statements involve risks and uncertainties,  many of
which are beyond our control,  which may cause actual  results,  performance  or
achievements  to differ  materially  from  anticipated  results,  performance or
achievements.  Also,  forward-looking  statements  are based  upon  management's
estimates  of  fair  values  and of  future  costs,  using  currently  available
information.   Therefore,  actual  results  may  differ  materially  from  those
expressed  or  implied  in those  statements.  Factors  that  could  cause  such
differences include, but are not limited to:

      o     risks of economic slowdown, downturn or recession,

      o     industry cycles and trends,

      o     risks  inherent  in changes  in market  interest  rates and  quality
            spreads,

      o     funding opportunities and borrowing costs,

      o     changes in funding markets,  including  commercial  paper, term debt
            and the asset-backed securitization markets,

      o     uncertainties  associated with risk  management,  including  credit,
            prepayment, asset/liability, interest rate and currency risks,

      o     adequacy of reserves for credit losses,

      o     risks  associated  with  the  value  and  recoverability  of  leased
            equipment and lease residual values,

      o     changes  in  laws  or   regulations   governing   our  business  and
            operations,

      o     changes in competitive factors, and

      o     future   acquisitions   and  dispositions  of  businesses  or  asset
            portfolios.


                                       37


Item 8. Financial Statements and Supplementary Data.

                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
CIT Group Inc.

      In  our  opinion,  the  accompanying  consolidated  balance  sheets  as of
September 30, 2002 and 2001, and the related consolidated  statements of income,
of  stockholders'  equity  and of cash flows  present  fairly,  in all  material
respects,  the  financial  position  of CIT Group Inc.  (formerly  Tyco  Capital
Corporation)  and its  subsidiaries  at  September  30,  2002 and 2001,  and the
results of their  operations  and their  cash  flows for the  fiscal  year ended
September  30, 2002 and for the period from June 2, 2001 through  September  30,
2001 in conformity with accounting  principles  generally accepted in the United
States of America.  These  financial  statements are the  responsibility  of the
Company's  management;  our  responsibility  is to  express  an opinion on these
financial  statements  based on our  audits.  We  conducted  our audits of these
statements  in  accordance  with auditing  standards  generally  accepted in the
United  States of America,  which  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,  assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for our opinion.

      As discussed in Note 1 to the financial statements, on January 1, 2001 the
Company adopted Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities," on June 2, 2001, the Company
changed its basis of accounting  for purchased  assets and  liabilities,  and on
October 1, 2001 the Company implemented the provisions of Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets."

PricewaterhouseCoopers LLP
New York, New York
October 29, 2002


                                       38


                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
CIT Group Inc.

      In our opinion,  the accompanying  consolidated  statements of income,  of
stockholder's equity and of cash flows present fairly, in all material respects,
the  results  of  operations  and cash flows of CIT Group  Inc.  (formerly  Tyco
Capital  Corporation)  and its  subsidiaries for the period from January 1, 2001
through June 1, 2001 in conformity with accounting principles generally accepted
in  the  United  States  of  America.   These   financial   statements  are  the
responsibility of the Company's management;  our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with auditing standards  generally accepted in
the United  States of America,  which 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,  assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall  financial  statement  presentation.  We believe that our
audit provides a reasonable basis for our opinion.

      As discussed in Note 1 to the financial statements, on January 1, 2001 the
Company adopted Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities."

PricewaterhouseCoopers LLP
New York, New York
October 18, 2001, except as to
the fifth paragraph of Note 23
and first paragraph of Note 1,
which are as of February 11, 2002
and July 1, 2002, respectively.


                                       39


                          INDEPENDENT AUDITORS' REPORT

The Stockholders and Board of Directors of
The CIT Group, Inc.:

      We have  audited  the  accompanying  consolidated  statements  of  income,
changes in  shareholders'  equity,  and cash flows of The CIT  Group,  Inc.  and
subsidiaries for the year ended December 31, 2000. These consolidated  financial
statements are the responsibility of CIT's management.  Our responsibility is to
express an  opinion  on these  consolidated  financial  statements  based on our
audit.

      We conducted our audit in accordance  with  auditing  standards  generally
accepted in the United States of America.  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  audit  provides  a
reasonable basis for our opinion.

      In our opinion,  the consolidated  financial  statements referred to above
present fairly, in all material respects, the results of operations and the cash
flows of The CIT Group,  Inc. and  subsidiaries  for the year ended December 31,
2000, in conformity with accounting  principles generally accepted in the United
States of America.

KPMG LLP
Short Hills, New Jersey
January 25, 2001


                                       40


                         CIT GROUP INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                      ($ in millions -- except share data)



                                                                                     September 30,     September 30,
                                                                                         2002              2001
                                                                                     -------------     -------------
                                                                                                   
                                     ASSETS

Financing and leasing assets:
   Finance receivables .........................................................       $28,459.0         $31,879.4
   Reserve for credit losses ...................................................          (777.8)           (492.9)
                                                                                       ---------         ---------
   Net finance receivables .....................................................        27,681.2          31,386.5
   Operating lease equipment, net ..............................................         6,567.4           6,402.8
   Finance receivables held for sale ...........................................         1,019.5           2,014.9
Cash and cash equivalents ......................................................         2,274.4             808.0
Goodwill, net ..................................................................           384.4           6,547.5
Receivables from Tyco affiliates ...............................................              --             362.7
Other assets ...................................................................         4,783.6           3,826.9
                                                                                       ---------         ---------
Total Assets ...................................................................       $42,710.5         $51,349.3
                                                                                       =========         =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Debt:
   Commercial paper ............................................................       $ 4,654.2         $ 8,869.2
   Variable-rate bank credit facilities ........................................         4,037.4                --
   Variable-rate senior notes ..................................................         5,379.0           9,614.6
   Fixed-rate senior notes .....................................................        18,385.4          17,113.9
   Subordinated fixed-rate notes ...............................................              --             100.0
                                                                                       ---------         ---------
Total debt .....................................................................        32,456.0          35,697.7
Note payable to Tyco affiliates ................................................              --           5,017.3
Credit balances of factoring clients ...........................................         2,513.8           2,392.9
Accrued liabilities and payables ...............................................         2,725.2           2,033.8
                                                                                       ---------         ---------
Total Liabilities ..............................................................        37,695.0          45,141.7
                                                                                       ---------         ---------
Commitments and contingencies (Note 21)
Company-obligated mandatorily redeemable preferred securities of subsidiary
  trust holding solely debentures of the Company ...............................           257.7             260.0
Stockholders' Equity:
   Preferred stock, $0.01 par value, 100,000,000 authorized, none issued .......              --                --
   Common stock, $0.01 par value, 600,000,000 authorized 211,573,200
    issued and outstanding .....................................................             2.1                --
   Paid-in capital, net of deferred compensation of $6.4 .......................        10,674.8                --
   Contributed capital .........................................................              --           5,842.5
   Accumulated (deficit) earnings ..............................................        (5,722.8)            181.9
   Accumulated other comprehensive loss ........................................          (196.3)            (76.8)
                                                                                       ---------         ---------
Total Stockholders' Equity .....................................................         4,757.8           5,947.6
                                                                                       ---------         ---------
Total Liabilities and Stockholders' Equity .....................................       $42,710.5         $51,349.3
                                                                                       =========         =========


                See Notes to Consolidated Financial Statements.


                                       41


                        CIT GROUP INC. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME
                    ($ in millions -- except per share data)



                                                          Year Ended      June 2 through     January 1 through      Year Ended
                                                        September 30,     September 30,           June 1,          December 31,
                                                             2002              2001                 2001               2000
                                                        -------------     --------------      ----------------     ------------
                                                         (successor)        (successor)         (predecessor)      (predecessor)

                                                                                                         
Finance income ......................................     $ 4,342.8          $1,676.5             $2,298.8           $5,248.4
Interest expense ....................................       1,439.3             597.1              1,022.7            2,497.7
                                                          ---------          --------             --------           --------
Net finance income ..................................       2,903.5           1,079.4              1,276.1            2,750.7
Depreciation on operating lease equipment ...........       1,241.0             448.6                588.1            1,281.3
                                                          ---------          --------             --------           --------
Net finance margin ..................................       1,662.5             630.8                688.0            1,469.4
Provision for credit losses .........................         788.3             116.1                216.4              255.2
                                                          ---------          --------             --------           --------
Net finance margin after provision for
   credit losses ....................................         874.2             514.7                471.6            1,214.2
Other revenue .......................................         932.3             335.1                237.5              912.0
                                                          ---------          --------             --------           --------
Operating margin ....................................       1,806.5             849.8                709.1            2,126.2
                                                          ---------          --------             --------           --------
Salaries and general operating expenses .............         946.4             348.5                446.0            1,035.2
Intercompany interest expense - TCH .................         662.6              97.7                  1.1                 --
Goodwill impairment .................................       6,511.7                --                   --                 --
Goodwill amortization ...............................            --              59.8                 37.8               86.3
Acquisition-related costs ...........................            --                --                 54.0                 --
                                                          ---------          --------             --------           --------
Operating expenses ..................................       8,120.7             506.0                538.9            1,121.5
                                                          ---------          --------             --------           --------
(Loss) income before provision for
   income taxes .....................................      (6,314.2)            343.8                170.2            1,004.7
Provision for income taxes ..........................        (374.0)           (157.4)               (84.8)            (381.2)
Minority interest in subsidiary trust holding
   solely debentures of the Company, after tax ......         (10.5)             (3.6)                (4.9)             (11.9)
                                                          ---------          --------             --------           --------
Net (loss) income ...................................     $(6,698.7)          $ 182.8               $ 80.5            $ 611.6
                                                          =========          ========             ========           ========
Net (loss) income per basic share ...................     $  (31.66)          $  0.86               $ 0.38            $  2.89
                                                          =========          ========             ========           ========
Net (loss) income per diluted share .................     $  (31.66)          $  0.86               $ 0.38            $  2.89
                                                          =========          ========             ========           ========


Note: Per share  calculations  assume that current period shares are outstanding
      for all periods presented.

                See Notes to Consolidated Financial Statements.


                                       42


                        CIT GROUP INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                 ($ in millions)



                                                                                          Accumulated      Total
                                             Common    Paid-in   Contributed   Treasury   Earnings    Comprehensive   Stockholders'
                                             Stock     Capital     Capital       Stock    (Deficit)   Income (Loss)      Equity
                                             ------    -------   -----------   --------  -----------  -------------   -------------
                                                                                                   
December 31, 1999 (predecessor) ..........   $ 2.7    $ 3,521.8  $       --    $ (70.5)   $ 2,097.6      $   2.8        $ 5,554.4
Net income ...............................                                                    611.6                         611.6
Foreign currency translation
  adjustments ............................                                                                   4.3              4.3
Unrealized gain on equity and
  securitization investments, net ........                                                                   4.6              4.6
                                                                                                                        ---------
Total comprehensive income ...............                                                                                  620.5
                                                                                                                        ---------
Cash dividends ...........................                                                   (105.9)                       (105.9)
Repurchase of common stock ...............                                       (67.2)                                     (67.2)
Restricted common stock grants ...........                  5.4                                                               5.4
                                             -----    ---------  ----------    -------    ---------      -------        ---------
December 31, 2000 (predecessor) ..........     2.7      3,527.2          --     (137.7)     2,603.3         11.7          6,007.2
Net income ...............................                                                     80.5                          80.5
Foreign currency translation
  adjustments ............................                                                                 (33.7)           (33.7)
Cumulative effect of new accounting
  principle ..............................                                                                (146.5)          (146.5)
Change in fair values of derivatives
  qualifying as cash flow hedges .........                                                                   0.6              0.6
                                                                                                                         --------
Total comprehensive loss .................                                                                                  (99.1)
                                                                                                                         --------
Cash dividends ...........................                                                    (52.9)                        (52.9)
Issuance of treasury stock ...............                                        27.6                                       27.6
Restricted common stock grants ...........                 12.4                                                              12.4
Merger of TCH ............................                         (4,579.9)                                             (4,579.9)
                                             -----    ---------  ----------    -------    ---------      -------        ---------
June 1, 2001 (predecessor) ...............     2.7      3,539.6    (4,579.9)    (110.1)     2,630.9       (167.9)         1,315.3
Recapitalization at acquisition ..........      --     (3,539.6)    3,539.6         --           --           --               --
Effect of push-down accounting of
  Tyco's purchase price on CIT's
  net assets .............................    (2.7)          --     5,945.1      110.1     (2,631.7)       167.9          3,588.7
                                             -----    ---------  ----------    -------    ---------      -------        ---------
June 1, 2001 (successor) .................      --           --     4,904.8         --         (0.8)          --          4,904.0
Net income ...............................                                                    182.8                         182.8
Foreign currency translation
  adjustments ............................                                                                 (13.4)           (13.4)
Change in fair values of derivatives
  qualifying as cash flow hedges .........                                                                 (63.4)           (63.4)
                                                                                                                         --------
Total comprehensive income ...............                                                                                  106.0
                                                                                                                         --------
Cash dividends ...........................                                                     (0.1)                         (0.1)
Tax benefit on stock transactions ........                             39.4                                                  39.4
Capital contribution from Tyco ...........      --                    898.3                                                 898.3
                                             -----    ---------  ----------    -------    ---------      -------        ---------
September 30, 2001 (successor) ...........      --           --     5,842.5    $    --        181.9        (76.8)         5,947.6
Net loss .................................                                                 (6,698.7)                     (6,698.7)
Foreign currency translation
  adjustments ............................                                                                 (62.4)           (62.4)
Change in fair values of derivatives
  qualifying as cash flow hedges .........                                                                 (57.1)           (57.1)
Unrealized gain on equity and
  securitization investments, net ........                                                                  21.0             21.0
Minimum pension liability
  adjustment .............................                                                                 (21.0)           (21.0)
                                                                                                                         --------
Total comprehensive loss .................                                                                               (6,818.2)
                                                                                                                         --------
Issuance of common stock in connection
  with the initial public offering .......     2.0     10,420.4   (10,422.4)                                                   --
Common stock issued - overallotment ......     0.1        249.2                                                             249.3
Capital contribution from Tyco for TCH ...                          4,579.9                   794.0                       5,373.9
Restricted common stock grants ...........      --          5.2          --         --           --           --              5.2
                                             -----    ---------  ----------    -------    ---------      -------        ---------
September 30, 2002 .......................   $ 2.1    $10,674.8  $       --    $    --    $(5,722.8)     $(196.3)       $ 4,757.8
                                             =====    =========  ==========    =======    =========      =======        =========

                See Notes to Consolidated Financial Statements.


                                       43


                         CIT GROUP INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 ($ in millions)



                                                         Year Ended         June 2 through     January 1 through      Year Ended
                                                     September 30, 2002   September 30, 2001     June 1, 2001      December 31,2000
                                                     ------------------   ------------------   -----------------   ----------------
                                                         (successor)         (successor)         (predecessor)       (predecessor)
                                                                                                           
Cash Flows From Operations:
Net (loss) income .................................      $ (6,698.7)          $    182.8           $     80.5          $   611.6
Adjustments to reconcile net (loss) income to
   net cash flows from operations:
   Goodwill impairment ............................         6,511.7                   --                   --                 --
   Provision for credit losses ....................           788.3                116.1                216.4              255.2
   Depreciation and amortization ..................         1,286.5                521.3                642.4            1,408.7
   Provision for deferred federal income
     taxes ........................................           276.9                113.6                 63.7              211.5
   Gains on equipment, receivable and
     investment sales, net ........................          (203.1)              (119.1)               (18.2)            (371.8)
   (Decrease) increase in accrued liabilities
     and payables .................................            57.0               (349.8)               (28.2)             449.0
   (Increase) decrease in other assets ............          (626.7)              (429.7)                69.9             (690.9)
   Other ..........................................           (32.3)               (70.6)                36.0               31.9
                                                         ----------           ----------           ----------         ----------
Net cash flows provided by (used for)
   operations .....................................         1,359.6                (35.4)             1,062.5            1,905.2
                                                         ----------           ----------           ----------         ----------
Cash Flows From Investing Activities:
Loans extended ....................................       (48,300.6)           (15,493.1)           (20,803.0)         (49,275.8)
Collections on loans ..............................        42,584.2             12,750.6             18,520.2           41,847.5
Proceeds from asset and receivable sales ..........        10,992.4              5,213.0              2,879.6            7,055.4
Purchases of assets to be leased ..................        (1,877.2)              (756.9)              (694.0)          (2,457.6)
Purchases of finance receivable portfolios ........          (372.7)                  --                   --           (1,465.6)
Net increase in short-term factoring
   receivables ....................................          (651.9)              (471.2)              (131.0)            (175.4)
Other .............................................           (52.5)                 3.2                (24.4)             (79.4)
                                                         ----------           ----------           ----------         ----------
Net cash flows provided by (used for)
   investing activities ...........................         2,321.7              1,245.6               (252.6)          (4,550.9)
                                                         ----------           ----------           ----------         ----------
Cash Flows From Financing Activities:
Proceeds from the issuance of variable and
   fixed rate notes ...............................        13,093.4              1,000.0              6,246.6           12,645.3
Repayments of variable and fixed-rate notes .......       (12,148.8)            (3,272.2)            (6,491.5)         (10,143.2)
Net (decrease) increase in commercial paper .......        (4,186.2)            (1,007.8)               813.6               89.5
Net repayments of non-recourse
   leveraged lease debt ...........................          (187.7)               (26.6)                (8.7)             (31.2)
Capital contributions from former Parent ..........           923.5                744.7                  0.8                 --
Proceeds from issuance of common stock ............           254.6
Cash dividends paid ...............................              --                   --                (52.9)            (105.9)
Issuance (purchase) of treasury stock .............              --                   --                 27.6              (67.2)
                                                         ----------           ----------           ----------         ----------
Net cash flows (used for) provided by
   financing activities ...........................        (2,251.2)            (2,561.9)               535.5            2,387.3
                                                         ----------           ----------           ----------         ----------
Net increase (decrease) in cash and cash
   equivalents ....................................         1,430.1             (1,351.7)             1,345.4             (258.4)
Exchange rate impact on cash ......................            36.3                  3.3                 (1.1)              (2.9)
Cash and cash equivalents, beginning of
   period .........................................           808.0              2,156.4                812.1            1,073.4
                                                         ----------           ----------           ----------         ----------
Cash and cash equivalents, end of period ..........      $  2,274.4           $    808.0           $  2,156.4         $    812.1
                                                         ==========           ==========           ==========         ==========
Supplementary Cash Flow Disclosure:
Interest paid .....................................      $  1,713.9           $    652.9           $  1,067.6         $  2,449.7
Federal, foreign and state and local income
   taxes (refunded) paid - net ....................      $    (43.9)          $     31.4           $     14.7         $     28.4
Supplementary Non-cash Disclosure:
Push-down of purchase price by Parent .............              --           $  9,484.7                   --                 --


                See Notes to Consolidated Financial Statements.


                                       44


                         CIT GROUP INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 -- Business and Summary of Significant Accounting Policies

      CIT Group Inc., a Delaware  corporation  ("we,"  "CIT" or the  "Company"),
formerly known as Tyco Capital Corporation,  and previously The CIT Group, Inc.,
is a leading  independent  source of financing and leasing capital for companies
in a wide variety of industries,  including many of today's  leading  industries
and emerging  businesses,  offering vendor,  equipment,  commercial,  factoring,
consumer, and structured financing capabilities. CIT operates primarily in North
America, with locations in Europe, Latin America, Australia and the Asia-Pacific
region.

Basis of Presentation

      The Consolidated  Financial  Statements include the results of CIT and its
subsidiaries and have been prepared in U.S. dollars, unless indicated otherwise,
in  accordance  with  accounting  principles  generally  accepted  in the United
States.  Prior period amounts have been  reclassified  to conform to the current
presentation.  On  June  1,  2001,  The  CIT  Group,  Inc.  was  acquired  by  a
wholly-owned  subsidiary  of Tyco  International  Ltd.  ("Tyco"),  in a purchase
business  combination  recorded  under the  "push-down"  method  of  accounting,
resulting in a new basis of accounting for the "successor" period beginning June
2,  2001.  Information  relating  to  all  "predecessor"  periods  prior  to the
acquisition is presented using CIT's historical basis of accounting.  On July 8,
2002, our former parent,  Tyco  International  Ltd. ("Tyco") completed a sale of
100% of CIT's  outstanding  common stock in an initial public offering  ("IPO").
Immediately  prior to the offering,  CIT was merged with its parent Tyco Capital
Holding,  Inc. (TCH), a company used to acquire CIT. As a result, the historical
financial  results  of TCH  are  included  in the  historical  consolidated  CIT
financial statements.

      CIT  consolidates  entities in which it owns or  controls  more than fifty
percent of the voting shares, unless control is likely to be temporary. Entities
that are twenty to fifty  percent  owned by CIT are included in other assets and
presented at the corresponding share of equity plus loans and advances. Entities
in which CIT owns less than twenty percent of the voting shares,  and over which
the Company has no significant influence,  are included in other assets at cost,
less declines in value that are other than  temporary.  In accordance  with SFAS
140,   "Accounting   for  Transfers  and  Servicing  of  Financial   Assets  and
Extinguishment  of Liabilities",  Qualifying  Special Purpose Entities  (QSPE's)
utilized in securitizations  are not consolidated.  Interests in securitizations
are included in other assets.  All significant  intercompany  transactions  have
been eliminated.

Financing and Leasing Assets

      CIT  provides  funding  through  a  variety  of  financing   arrangements,
including  term  loans,  lease  financing  and  operating  leases.  The  amounts
outstanding on loans and leases are referred to as finance receivables and, when
combined  with finance  receivables  held for sale,  net book value of operating
lease  equipment,  and  certain  investments,  represent  financing  and leasing
assets.

      At the time of  designation  for sale,  securitization  or  syndication by
management,  assets are classified as finance  receivables  held for sale. These
assets are carried at the lower of aggregate cost or market value.

Income Recognition

      Finance  income  includes  interest on loans,  the  accretion of income on
direct financing leases, and rents on operating leases.  Related origination and
other nonrefundable fees and direct origination costs are deferred and amortized
as  an  adjustment  of  finance  income  over  the   contractual   life  of  the
transactions.  Income on  finance  receivables  other than  leveraged  leases is
recognized on an accrual  basis  commencing  in the month of  origination  using
methods that generally  approximate the interest method.  Leveraged lease income
is recognized  on a basis  calculated  to achieve a constant  after-tax  rate of
return for periods in which CIT has a positive  investment  in the  transaction,
net of related  deferred tax  liabilities.  Rental income on operating leases is
recognized on an accrual basis.

      The  accrual  of  finance  income on  commercial  finance  receivables  is
generally  suspended and an account is placed on non-accrual status when payment
of principal or interest is  contractually  delinquent  for 90 days or more,  or
earlier when, in the opinion of management, full collection of all principal and
interest due is doubtful. Given


                                       45


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

the nature of revolving  credit  facilities,  including those combined with term
loan facilities (advances and interest accruals increase revolving loan balances
and payments reduce revolving loan balances),  the placement of revolving credit
facilities on non-accrual  status  includes the review of other  qualitative and
quantitative  credit-related  factors,  and  generally  does not  result  in the
reversal of significant amounts of accrued interest. To the extent the estimated
fair  value of  collateral  does not  satisfy  both the  principal  and  accrued
interest outstanding, accrued but uncollected interest at the date an account is
placed on non-accrual status is reversed and charged against income.  Subsequent
interest  received is applied to the  outstanding  principal  balance until such
time as the account is collected, charged-off or returned to accrual status. The
accrual of finance income on consumer finance receivables is suspended,  and all
previously accrued but uncollected income is reversed, when payment of principal
and/or interest is contractually delinquent for 90 days or more.

      Other  revenue  includes the  following:  (1) factoring  commissions,  (2)
commitment,  facility,  letters of credit and  syndication  fees,  (3) servicing
fees,  (4) gains and losses  from sales of leasing  equipment,  venture  capital
investments and sales and securitizations of finance receivables, and (5) equity
in earnings of joint ventures and unconsolidated subsidiaries.

Lease Financing

      Direct financing leases are recorded at the aggregate future minimum lease
payments plus estimated residual values less unearned finance income.  Operating
lease  equipment  is  carried  at  cost  less  accumulated  depreciation  and is
depreciated to estimated residual value using the straight-line  method over the
lease term or  projected  economic  life of the  asset.  Equipment  acquired  in
satisfaction of loans and subsequently  placed on operating lease is recorded at
the lower of  carrying  value or  estimated  fair  value  when  acquired.  Lease
receivables  include leveraged leases,  for which a major portion of the funding
is provided by third party  lenders on a nonrecourse  basis,  with CIT providing
the balance and acquiring title to the property.  Leveraged  leases are recorded
at the aggregate value of future minimum lease payments plus estimated  residual
value, less nonrecourse third party debt and unearned finance income. Management
performs  periodic  reviews of the estimated  residual  values with  impairment,
other than temporary, recognized in the current period.

Reserve for Credit Losses on Finance Receivables

      The  consolidated  reserve for credit losses is periodically  reviewed for
adequacy considering  economic conditions,  collateral values and credit quality
indicators,  including historical and expected charge-off  experience and levels
of and trends in past due loans and non-performing  assets.  Changes in economic
conditions  or other  events  affecting  specific  obligors  or  industries  may
necessitate  additions  or  deductions  to the  consolidated  reserve for credit
losses. In management's  judgment, the consolidated reserve for credit losses is
adequate to provide for credit losses inherent in the portfolio.

Charge-off of Finance Receivables

      Finance receivables are reviewed periodically to determine the probability
of loss.  Charge-offs are taken after considering such factors as the borrower's
financial  condition  and the  value of  underlying  collateral  and  guarantees
(including recourse to dealers and manufacturers). Such charge-offs are deducted
from the carrying value of the related finance  receivables.  To the extent that
an  unrecovered  balance  remains due, a final  charge-off  is taken at the time
collection  efforts are deemed no longer  useful.  Charge-offs  are  recorded on
consumer and certain small ticket commercial  finance  receivables  beginning at
180  days of  contractual  delinquency  based  upon  historical  loss  severity.
Collections on accounts  previously charged off are recorded as increases to the
reserve for credit losses.

Impaired Loans

      Impaired loans include any loans for $500 thousand or greater,  outside of
homogeneous  pools of  loans,  that are  placed  on  non-accrual  status  or any
troubled debt  restructuring  that is subject to periodic  individual  review by
CIT's Asset Quality  Review  Committee  ("AQR").  The AQR, which is comprised of
members of senior management,  reviews overall portfolio performance, as well as
individual  accounts  meeting certain credit risk grading  parameters.  Excluded
from impaired loans are: 1) certain individual commercial non-accrual loans for


                                       46


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

which the collateral value supports the outstanding balance and the continuation
of earning status, 2) consumer loans, which are subject to automatic  charge-off
procedures,  and 3) short-term factoring customer  receivables,  which generally
have terms of no more than 30 days.  Loan impairment is defined as any shortfall
between the estimated  value and the recorded  investment in the loan,  with the
estimated value determined using the fair value of the collateral and other cash
flows if the loan is  collateral  dependent,  or the  present  value of expected
future cash flows discounted at the loan's effective interest rate.

Long-Lived Assets

      A review for  impairment of  long-lived  assets,  such as operating  lease
equipment,  is  performed at least  annually  and whenever  events or changes in
circumstances  indicate that the carrying amount of long-lived assets may not be
recoverable.  Recoverability  of assets is measured by  comparing  the  carrying
amount  of an  asset  to  future  undiscounted  net cash  flows  expected  to be
generated  by the asset.  If such  assets are  considered  to be  impaired,  the
impairment  to be  recognized  is measured  by the amount by which the  carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying  amount or fair value less costs to
sell.

Goodwill and Other Identified Intangibles

      Goodwill  represents  the excess of the purchase price over the fair value
of identifiable assets acquired, less the fair value of liabilities assumed from
business combinations.  CIT adopted SFAS No. 142, "Goodwill and Other Intangible
Assets"  effective  October 1, 2001.  The Company  determined  that there was no
impact of adopting this new standard under the transition provisions of SFAS No.
142. Since adoption,  goodwill is no longer  amortized,  but instead is assessed
for impairment at least annually. During this assessment, management relies on a
number  of  factors,  including  operating  results,  business  plans,  economic
projections,  anticipated  future cash flows,  and transactions and market place
data. See Note 16-Accounting Change-Goodwill.

Securitizations

      Pools of assets are originated and sold to special purpose entities which,
in turn,  issue debt  securities  or sell  undivided  interests in the assets to
investors  backed by the asset  pools.  CIT  retains  the  servicing  rights and
participates in certain cash flows from the pools. The present value of expected
net cash flows (after  payment of principal and interest to  certificate  and/or
note holders and credit-related  disbursements)  that exceeds the estimated cost
of servicing is recorded at the time of sale as a "retained  interest." Retained
interests in  securitized  assets are included in other assets and classified as
available-for-sale  securities  under SFAS 115. CIT, in its  estimation of those
net  cash  flows  and  retained  interests,   employs  a  variety  of  financial
assumptions,  including loan pool credit losses,  prepayment speeds and discount
rates.  These  assumptions  are supported by both CIT's  historical  experience,
market trends and  anticipated  performance  relative to the  particular  assets
securitized. Subsequent to the recording of retained interests, CIT reviews such
values  quarterly.  Fair values of retained  interests are calculated  utilizing
current and anticipated credit losses,  prepayment speeds and discount rates and
are  then  compared  to  the  respective  carrying  values.  Unrealized  losses,
representing the excess of carrying value over estimated current fair value, are
recorded as an impairment. Unrealized gains are not credited to current earnings
but are reflected in stockholders' equity as part of other comprehensive income.

Other Assets

      Assets  received  in  satisfaction  of loans are  carried  at the lower of
carrying value or estimated fair value less selling costs,  with  write-downs at
the time of receipt recognized by recording a charge-off. Subsequent write-downs
of such assets,  which may be required due to a decline in estimated fair market
value after receipt, are reflected in general operating expenses.

      Realized and  unrealized  gains (losses) on marketable  equity  securities
included in CIT's venture capital investment  companies are recognized currently
in operations.  Unrealized gains and losses, representing the difference between
carrying value and estimated  current fair market value,  for all other debt and
marketable  equity  securities  are recorded in other  comprehensive  income,  a
separate component of equity.


                                       47


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      Investments  in joint  ventures are accounted for using the equity method,
whereby  the  investment  balance  is  carried  at  cost  and  adjusted  for the
proportionate share of undistributed earnings or losses. Unrealized intercompany
profits and losses are eliminated  until realized,  as if the joint venture were
consolidated.

      Investments  in debt and equity  securities  of  non-public  companies are
carried at cost. These valuations are periodically  reviewed and a write-down is
recorded if a decline in value is  considered  other than  temporary.  Gains and
losses  are  recognized  upon  sale or  write-down  of  these  investments  as a
component of other revenues.

Derivative Financial Instruments

      CIT uses interest rate swaps,  currency swaps and foreign exchange forward
contracts as part of a worldwide market risk management program to hedge against
the effects of future  interest  rate and  currency  fluctuations.  CIT does not
enter into derivative financial instruments for trading or speculative purposes.

      On January 1, 2001,  CIT  adopted  SFAS 133,  "Accounting  for  Derivative
Instruments and Hedging  Activities."  Derivative  instruments are recognized in
the balance  sheet at their fair values in other assets and accrued  liabilities
and payables, and changes in fair values are recognized immediately in earnings,
unless the derivatives  qualify as hedges of future cash flows.  For derivatives
qualifying as hedges of future cash flows,  the effective  portion of changes in
fair value is recorded  temporarily in accumulated other comprehensive income as
a separate  component  of equity,  and  contractual  cash flows,  along with the
related impact of the hedged items,  continue to be recognized in earnings.  Any
ineffective  portion  of a  hedge  is  reported  in  current  earnings.  Amounts
accumulated in other  comprehensive  income are  reclassified to earnings in the
same period that the hedged transaction impacts earnings.

      The net interest  differential,  including  premiums paid or received,  if
any, on interest rate swaps,  is recognized on an accrual basis as an adjustment
to finance income or as interest expense to correspond with the hedged position.
In the event that early termination of a derivative  instrument occurs, the gain
or loss  remains in  accumulated  other  comprehensive  income  until the hedged
transaction is recognized in earnings.

      CIT utilizes foreign exchange forward contracts or cross-currency swaps to
convert U.S. dollar  borrowings into local currency in such instances that local
borrowings  are not cost  effective  or  available.  CIT also  utilizes  foreign
exchange forward  contracts to hedge its net investments in foreign  operations.
These  instruments  are designated as hedges and resulting  gains and losses are
reflected in accumulated other  comprehensive  income as a separate component of
equity.

Stock-Based Compensation

      Stock  option  plans  are  accounted  for in  accordance  with  Accounting
Principles  Board Opinion 25,  "Accounting for Stock Issued to Employees"  ("APB
25"). In accordance with APB 25, no compensation expense is recognized for stock
options issued.  Compensation expense associated with restricted stock awards is
recognized over the associated vesting periods.

Foreign Currency Translation

      CIT has  operations  in Canada,  Europe and other  countries  outside  the
United States.  The functional  currency for these foreign operations is usually
the local currency.  The value of the assets and liabilities of these operations
is translated into U.S. dollars at the rate of exchange in effect at the balance
sheet date.  Revenue and expense items are  translated  at the average  exchange
rates  effective  during the year. The resulting  foreign  currency  translation
gains  and  losses,  as well as  offsetting  gains  and  losses on hedges of net
investments  in  foreign   operations,   are  reflected  in  accumulated   other
comprehensive (loss) income.

Income Taxes

      Deferred tax liabilities and assets are recognized for the expected future
tax  consequences  of  events  that  have  been  reflected  in the  Consolidated
Financial  Statements.  Deferred tax liabilities and assets are determined based
on the  differences  between  the book  values  and the tax basis of  particular
assets  and  liabilities,  using tax rates in effect  for the years in which the
differences are expected to reverse. A valuation allowance is provided to offset
any net deferred tax assets if, based upon the  available  evidence,  it is more
likely  than  not  that  some or all of the  deferred  tax  assets  will  not be
realized.


                                       48


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Consolidated Statements of Cash Flows

      Cash and cash  equivalents  includes cash and  interest-bearing  deposits,
which  generally  represent  overnight  money market  investments of excess cash
borrowed in the commercial  paper market and maintained for liquidity  purposes.
Cash inflows and outflows from  commercial  paper  borrowings and most factoring
receivables  are presented on a net basis in the  Statements  of Cash Flows,  as
their original term is generally less than 90 days.

Other Comprehensive Income/Loss

      Other   comprehensive    income/loss    includes   unrealized   gains   on
securitization  retained  interests  and  other  investments,  foreign  currency
translation  adjustments  pertaining  to both  the  net  investment  in  foreign
operations and the related derivatives designated as hedges of such investments,
and the changes in fair values of derivative instruments designated as hedges of
future cash flows and minimum pension liability adjustments.

Use of Estimates

      The  preparation  of financial  statements in conformity  with  accounting
principles   generally  accepted  in  the  United  States  of  America  requires
management to make  extensive use of estimates and  assumptions  that affect the
reported  amounts of assets and liabilities and disclosure of contingent  assets
and liabilities at the date of the financial statements and the reported amounts
of income and expenses during the reporting period.  Actual results could differ
from those estimates.

Accounting Pronouncements

      In June 2001, the Financial  Accounting  Standards  Board ("FASB")  issued
Statement  of  Financial   Accounting   Standard  ("SFAS")  No.  141,  "Business
Combinations,"  and SFAS No. 142,  "Goodwill and Other Intangible  Assets." SFAS
No. 141 requires all business  combinations  initiated after June 30, 2001 to be
accounted for using the purchase method. In addition,  companies are required to
review  goodwill  and  intangible  assets  reported  in  connection  with  prior
acquisitions,  possibly disaggregate and report separately previously identified
intangible  assets  and  possibly  reclassify  certain  intangible  assets  into
goodwill.  SFAS No. 142  establishes  new guidelines for accounting for goodwill
and other intangible  assets.  CIT implemented the provisions of SFAS No. 142 on
October 1, 2001.  Since adoption,  existing  goodwill is no longer amortized but
instead is assessed for  impairment at least  annually.  See Note  16-Accounting
Change-Goodwill.

      In June  2001,  the  FASB  issued  SFAS No.  143,  "Accounting  for  Asset
Retirement  Obligations."  SFAS No. 143 addresses  accounting  and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement  costs. This statement is effective for fiscal years
beginning after June 15, 2002. CIT is currently assessing the impact of this new
standard.

      In July 2001,  the FASB issued SFAS No.  144,  "Impairment  or Disposal of
Long-Lived Assets," which is effective for fiscal years beginning after December
15, 2001. The provisions of this statement provide a single accounting model for
impairment  of  long-lived  assets and retain  the  requirements  of SFAS 121 to
recognize an impairment loss when the carrying amount of a long-lived  asset can
not be recovered from its undiscounted  cash flows and to measure the loss based
upon fair values.  Because the provisions of this  pronouncement with respect to
individual asset impairment are consistent with our current  accounting  policy,
the  adoption of SFAS 144 is not  expected to have a  significant  impact on our
financial position or results of operations.

      In  April  2002,  the  FASB  issued  SFAS  No.  145,  "Rescission  of FASB
Statements  No. 4, 44 and 64,  Amendment of FASB Statement No. 13, and Technical
Corrections,"  which is effective for fiscal years beginning after May 15, 2002.
This statement rescinds the above mentioned statements and amends other existing
authoritative  pronouncements  to make various  technical  corrections,  clarify
meanings, or describe their applicability under changed conditions.  SFAS 145 is
not expected to have a significant  impact on our financial  position or results
of operations.

      In July 2002, the FASB issue SFAS No. 146 "Accounting for Costs Associated
with Exit or  Disposal."  This  statement  addresses  financial  accounting  and
reporting  for  costs  associated  with  exit or  disposal  activities  that are
initiated  after  December  31,  2002.  SFAS  146  is  not  expected  to  have a
significant impact on our financial position or results of operations.


                                       49


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      On October 1, 2002, the FASB issued SFAS No. 147, "Acquisitions of Certain
Financial Institutions." SFAS No. 147 supercedes specialized accounting guidance
in SFAS No. 72 in order to conform the  accounting for certain  acquisitions  of
Banking or Thrift  institutions to SFAS No. 142,  "Goodwill and Other Intangible
Assets." SFAS 147 is not expected to impact CIT.

Note 2 -- Consolidating  Financial Statements -- Tyco Capital Holding Inc. (TCH)
(unaudited)



                                                                                    September 30, 2001 (1)
                                                               --------------------------------------------------------------
                                                                  CIT               TCH        Eliminations      Consolidated
                                                                  ---               ---        ------------      ------------
                                                                                                      
                                                           ASSETS

Financing and leasing assets:
   Finance receivables ...................................     $31,879.4         $      --      $       --        $31,879.4
   Reserve for credit losses .............................        (492.9)               --              --           (492.9)
                                                               ---------         ---------      ----------        ---------
   Net finance receivables ...............................      31,386.5                --              --         31,386.5
   Operating lease equipment, net ........................       6,402.8                --              --          6,402.8
   Finance receivables held for sale .....................       2,014.9                --              --          2,014.9
Cash and cash equivalents ................................         808.0                --              --            808.0
Goodwill, net ............................................       6,547.5                --              --          6,547.5
Receivables from Tyco affiliates .........................         200.0             362.7          (200.0)           362.7
Investment in subsidiaries ...............................            --          10,598.0       (10,598.0)              --
Other assets .............................................       3,627.3             199.6              --          3,826.9
                                                               ---------         ---------      ----------        ---------
Total Assets .............................................     $50,987.0         $11,160.3      $(10,798.0)       $51,349.3
                                                               =========         =========      ==========        =========

                                            LIABILITIES AND STOCKHOLDERS' EQUITY

Debt:
   Commercial paper ......................................     $ 8,869.2         $      --      $       --        $ 8,869.2
   Variable-rate senior notes ............................       9,614.6                --              --          9,614.6
   Fixed-rate senior notes ...............................      17,113.9                --              --         17,113.9
   Subordinated fixed-rate notes .........................         100.0                --              --            100.0
                                                               ---------         ---------      ----------        ---------
Total debt ...............................................      35,697.7                --              --         35,697.7
Notes and payables to Tyco affiliates ....................           7.6           5,209.7          (200.0)         5,017.3
Credit balances of factoring clients .....................       2,392.9                --              --          2,392.9
Accrued liabilities and payables .........................       2,030.8               3.0              --          2,033.8
                                                               ---------         ---------      ----------        ---------
Total Liabilities ........................................      40,129.0           5,212.7          (200.0)        45,141.7
Company-obligated mandatorily redeemable
   preferred securities of subsidiary trust holding
   solely debentures of the Company ......................         260.0                --              --            260.0
Stockholders' Equity:
   Contributed capital ...................................      10,422.4           5,842.5       (10,422.4)         5,842.5
   Accumulated (deficit) earnings ........................         252.4             181.9          (252.4)           181.9
   Accumulated other comprehensive (loss) income .........         (76.8)            (76.8)           76.8            (76.8)
                                                               ---------         ---------      ----------        ---------
Total Stockholders' Equity ...............................      10,598.0           5,947.6       (10,598.0)         5,947.6
                                                               ---------         ---------      ----------        ---------
Total Liabilities and Stockholders' Equity ...............     $50,987.0         $11,160.3      $(10,798.0)       $51,349.3
                                                               =========         =========      ==========        =========


--------------------------------------------------------------------------------
(1)   The  2001  balance  sheet   includes  the  activity  of  TCH.  TCH  was  a
      wholly-owned  subsidiary of a Tyco affiliate  domiciled in Bermuda.  TCH's
      activity was in  connection  with its capacity as the holding  company for
      the  acquisition of CIT by Tyco,  which included an outstanding  loan from
      and related interest expense payable to an affiliate of Tyco.  Immediately
      prior to the IPO of CIT on July 8, 2002, the activity of TCH  (accumulated
      net deficit) was relieved via a capital contribution from Tyco.


                                       50


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



                                                         For the Year Ended                       For the Nine Months Ended
                                                         September 30, 2002                           September 30, 2001
                                             -----------------------------------------      --------------------------------------
                                                CIT           TCH(1)      Consolidated         CIT         TCH(1)     Consolidated
                                                ---           ------      ------------         ---         ------     ------------
                                                             (successor)                                   (combined)
                                                                                                      
Finance income .........................     $ 4,342.8       $    --       $ 4,342.8        $3,975.3      $    --       $3,975.3
Interest expense .......................       1,439.3            --         1,439.3         1,619.8           --        1,619.8
                                             ---------       -------       ---------        --------      -------       --------
Net finance income .....................       2,903.5            --         2,903.5         2,355.5           --        2,355.5
Depreciation on operating lease
   equipment ...........................       1,241.0            --         1,241.0         1,036.7           --        1,036.7
                                             ---------       -------       ---------        --------      -------       --------
Net finance margin .....................       1,662.5            --         1,662.5         1,318.8           --        1,318.8
Provision for credit losses ............         788.3            --           788.3           332.5           --          332.5
                                             ---------       -------       ---------        --------      -------       --------
Net finance margin after provision
   for credit losses ...................         874.2            --           874.2           986.3           --          986.3
Other revenue ..........................         932.3            --           932.3           572.6           --          572.6
                                             ---------       -------       ---------        --------      -------       --------
Operating margin .......................       1,806.5            --         1,806.5         1,558.9           --        1,558.9
                                             ---------       -------       ---------        --------      -------       --------
Salaries and general operating
   expenses ............................         923.4          23.0           946.4           784.9          9.6          794.5
Inter-company interest
   expense-- TCH .......................            --         662.6           662.6              --         98.8           98.8
Goodwill impairment ....................       6,511.7            --         6,511.7              --           --             --
Goodwill amortization ..................            --            --              --            97.6           --           97.6
Acquisition related costs ..............            --            --              --            54.0           --           54.0
                                             ---------       -------       ---------        --------      -------       --------
Operating expenses .....................       7,435.1         685.6         8,120.7           936.5        108.4        1,044.9
                                             ---------       -------       ---------        --------      -------       --------
(Loss) income before provision for
   income taxes ........................      (5,628.6)       (685.6)       (6,314.2)          622.4       (108.4)         514.0
(Provision) benefit for income taxes ...        (336.1)        (37.9)         (374.0)         (280.1)        37.9         (242.2)
Minority interest in subsidiary trust
   holding solely debentures of the
   Company, after tax ..................         (10.5)           --           (10.5)           (8.5)          --           (8.5)
                                             ---------       -------       ---------        --------      -------       --------
Net (loss) income ......................     $(5,975.2)      $(723.5)      $(6,698.7)       $  333.8      $ (70.5)      $  263.3
                                             =========       =======       =========        ========      =======       ========


--------------------------------------------------------------------------------
(1)   TCH was a wholly-owned subsidiary of a Tyco affiliate domiciled in Bermuda
      and was the holding  company  for the  acquisition  of CIT by Tyco,  which
      included an outstanding  loan from and related interest expense payable to
      an affiliate of Tyco. Immediately prior to the IPO of CIT on July 8, 2002,
      the prior  activity of TCH  (accumulated  net  deficit) was relieved via a
      capital  contribution from Tyco. The consolidated  financial statements of
      CIT were not impacted by TCH subsequent to June 30, 2002. The  eliminating
      entries,  including  TCH's  investment in CIT, are included within the TCH
      column.

Note 3-- Initial Public Offering and Acquisition by Tyco International Ltd.

      On July 8, 2002,  our former  parent,  Tyco  International  Ltd.  ("Tyco")
completed a sale of 100% of CIT's outstanding  common stock in an initial public
offering ("IPO"). All proceeds from the IPO were collected by Tyco.  Immediately
prior to the offering,  a restructuring was effectuated whereby our predecessor,
CIT Group Inc., a Nevada  corporation,  was merged with and into its parent Tyco
Capital  Holding,  Inc. ("TCH") and that combined entity was further merged with
and into CIT Group Inc.  (Del), a Delaware  corporation.  In connection with the
reorganization,  CIT Group Inc.  (Del) was renamed CIT Group Inc. As a result of
the reorganization,  CIT is the successor to CIT Group Inc. (Nevada)'s business,
operations,  and  obligations.  On July 12, 2002,  the  underwriters  of the IPO
exercised a portion of their  over-allotment  option to  purchase an  additional
11.6 million  shares of the Company's  Common Stock from CIT at the IPO price of
$23.00 per share,  before underwriting  discounts and commissions.  CIT received
the funds from this sale.

      The purchase price paid by Tyco for CIT was valued at  approximately  $9.5
billion.  The $9.5 billion  value  consisted of the  following:  the issuance of
approximately  133.0 million Tyco common  shares  valued at $6,650.5  million on
June 1, 2001 in exchange for  approximately  73% of the  outstanding  CIT common
stock (including  exchangeable  shares of CIT Exchangeco,  Inc.); the payment of
$2,486.4 million in cash to the Dai-Ichi Kangyo Bank, Limited ("DKB") on June 1,
2001 for approximately 27% of the outstanding CIT common stock; options for Tyco
common shares valued at $318.6 million issued in exchange for CIT stock options;
and


                                       51


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

$29.2 million in acquisition-related  costs incurred by Tyco. In addition, $22.3
million in  acquisition-related  costs  incurred by Tyco were paid and have been
reflected in CIT's equity as an additional capital contribution. The purchase of
the CIT common stock held by DKB, which was contingent upon the  satisfaction of
the conditions of the merger, took place immediately prior to the closing of the
merger on June 1, 2001.  Additionally,  Tyco made capital contributions totaling
$898.3 million for the period June 2, 2001 through September 30, 2001, including
a note receivable of $200.0 million paid by Tyco during the first fiscal quarter
of 2002. Except for the capital contribution used to unwind the activity of TCH,
there were no further  capital  contributions  from Tyco subsequent to September
30, 2001.

      In connection with the  acquisition by Tyco, CIT recorded  acquired assets
and  liabilities at their  estimated June 1, 2001 fair values.  During the first
six months of fiscal 2002, CIT recorded additions to goodwill of $348.6 million.
Goodwill  adjustments  related to fair value adjustments to purchased assets and
liabilities,  and accruals  relating to severance,  facilities or other expenses
incurred as a result of the purchase  transaction.  The accruals recorded during
the six months  ended  March 31,  2002  related to  finalizing  integration  and
consolidation plans for the elimination of additional  corporate  administrative
and other  personnel  located  primarily  in North  America  and  Europe.  These
accruals  resulted in additional  purchase  accounting  liabilities,  which also
increased goodwill and deferred tax assets. The severance reserve established at
the acquisition date was primarily related to corporate administrative personnel
in  North  America.  The  other  reserve  established   consisted  primarily  of
acquisition-related  costs incurred by Tyco.

      The following table summarizes purchase accounting  liabilities  (pre-tax)
related to  severance  of  employees  and closing  facilities  and current  year
utilization  that were recorded in connection with the acquisition by Tyco ($ in
millions).



                                                             Severance                              Facilities
                                                ------------------------------------      -------------------------------
                                                Number of                  Number of                   Other       Total
                                                Employees     Reserve     Facilities      Reserve     Reserve     Reserve
                                                ---------     -------     ----------      -------     -------     -------
                                                                                                     
Reserves established ........................      671        $ 45.8          --           $  --      $ 55.9       $101.7
Fiscal 2001 utilization .....................     (408)        (20.2)         --              --       (51.5)       (71.7)
                                                  ----        ------         ---           -----      ------       ------
Ending balance at September 30, 2001 ........      263          25.6          --              --         4.4         30.0
Fiscal 2002 acquisition reserves ............      826          58.4          29            20.7          --         79.1
Fiscal 2002 utilization .....................     (808)        (60.8)         (5)           (6.5)       (4.4)       (71.7)
                                                  ----        ------         ---           -----      ------       ------
Balance September 30, 2002 ..................      281        $ 23.2          24           $14.2      $   --       $ 37.4
                                                  ====        ======         ===           =====      ======       ======


Note 4 -- Finance Receivables

      The following table presents the breakdown of finance receivables by loans
and lease receivables ($ in millions).

                                               September 30,      September 30,
                                                   2002               2001
                                               -------------      -------------
Loans ......................................     $19,886.2          $23,590.9
Leases(1) ..................................       8,572.8            8,288.5
                                                 ---------          ---------
  Finance receivables ......................     $28,459.0          $31,879.4
                                                 =========          =========

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

(1)   Includes  $2.3 billion and $2.6 billion in  equipment  residual  values at
      September 30, 2002 and 2001.

      Included in lease receivables at September 30, 2002 and 2001 are leveraged
leases of $1.1 billion and $1.0 billion, respectively.  Leveraged leases exclude
the portion funded by third party  non-recourse  debt payable of $3.6 billion at
September 30, 2002 and $2.4 billion at September 30, 2001.

      Additionally,   at  September  30,  2002  and  2001,  finance  receivables
previously  securitized totaling $11.2 billion and $10.1 billion,  respectively,
were still managed by CIT.


                                       52


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      The  following  table sets  forth the  contractual  maturities  of finance
receivables ($ in millions).



                                                             At September 30,              At September 30,
                                                                   2002                          2001
                                                       -------------------------    --------------------------
                                                          Amount         Percent        Amount         Percent
                                                          ------         -------        ------         -------
                                                                                            
Due within one year ...............................     $13,136.8          46.2%      $14,212.6         44.6%
Due within one to two years .......................       3,541.2          12.4         5,233.5         16.4
Due within two to four years ......................       4,375.7          15.4         4,515.2         14.2
Due after four years ..............................       7,405.3          26.0         7,918.1         24.8
                                                        ---------         -----       ---------        -----
    Total .........................................     $28,459.0         100.0%      $31,879.4        100.0%
                                                        =========         =====       =========        =====


      Non-performing  assets  reflect both finance  receivables  on  non-accrual
status  (primarily  loans that are ninety  days or more  delinquent)  and assets
received in satisfaction of loans (repossessed assets). The following table sets
forth the information regarding total non-performing assets ($ in millions):



                                                                            At September 30,  At September 30,
                                                                                  2002              2001
                                                                            ----------------  ----------------
                                                                                             
Non-accrual finance receivables .........................................       $  976.6           $851.6
Assets received in satisfaction of loans ................................          163.2            118.1
                                                                                --------           ------
  Total non-performing assets ...........................................       $1,139.8           $969.7
                                                                                --------           ------
Percentage of finance receivables .......................................           4.01%            3.04%
                                                                                ========           ======


      At  September  30,  2002  and  2001,  the  recorded  investment  in  loans
considered  for  impairment   totaled   $1,001.2  million  and  $555.3  million,
respectively.  Loans  whose  estimated  fair market  value is less than  current
recorded  value totaled  $449.8 million and $304.1 million at September 30, 2002
and 2001, respectively,  and have corresponding specific reserve for credit loss
allocations  of $197.4  million  (or  $111.7  million  excluding  $85.7  million
relating to  telecommunications)  and $122.3 million included in the reserve for
credit loss. The average  monthly  recorded  investment in loans  considered for
impairment  was  $818.9   million   (including   $185.5   million   relating  to
telecommunications),  $409.8  million  and  $256.6  million  for the year  ended
September 30, 2002,  combined nine months ended  September 30, 2001 and the year
ended December 31, 2000, respectively. After being classified as impaired, there
was no finance  income  recognized on these loans  because our  definition of an
impaired  loan is linked to  non-accrual  classification.  The amount of finance
income that would have been recorded under  contractual terms for impaired loans
would have been $65.2  million,  $46.1  million,  and $38.1 million for the year
ended  September 30, 2002, the nine months ended September 30, 2001, and for the
year ended December 31, 2000, respectively.

Note 5 -- Reserve for Credit Losses

      The following  table presents  changes in the reserve for credit losses ($
in millions).



                                                   Twelve               June 2           January 1          Twelve
                                                Months Ended            through           through        Months Ended
                                             September 30, 2002   September 30, 2001   June 1, 2001    December 31, 2000
                                             ------------------   ------------------   ------------    -----------------
                                                 (successor)          (successor)      (predecessor)     (predecessor)
                                                                                                
Balance, beginning of period ..................    $492.9               $462.7            $468.5            $446.9
                                                   ------               ------            ------            ------
Provision for credit losses ...................     453.3                116.1             126.9             255.2
Provision for credit losses - specific
  reserving actions(1) ........................     335.0                   --              89.5                --
Reserves relating to dispositions,
  acquisitions, other .........................     (11.1)                 0.9             (17.2)              2.0
                                                   ------               ------            ------            ------
  Additions to the reserve for credit losses ..     777.2                117.0             199.2             257.2
                                                   ------               ------            ------            ------
Finance receivables charged-off ...............    (539.1)               (93.7)           (215.8)           (255.8)
Recoveries on finance receivables
  previously charged-off ......................      46.8                  6.9              10.8              20.2
                                                   ------               ------            ------            ------
  Net credit losses ...........................    (492.3)               (86.8)           (205.0)           (235.6)
                                                   ------               ------            ------            ------
Balance, end of period ........................    $777.8               $492.9            $462.7            $468.5
                                                   ======               ======            ======            ======
Reserve for credit losses as a percentage of
  finance receivables .........................      2.73%                1.55%             1.50%             1.40%
                                                   ======               ======            ======            ======


----------
(1)   The   2002   amounts   consist   of   reserving    actions   relating   to
      telecommunications   ($200.0  million)  and  Argentine  exposures  ($135.0
      million),   while  the  2001   amount   consists   of  a   provision   for
      under-performing  loans and leases,  primarily  in the  telecommunications
      portfolio.



                                       53


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 6 -- Operating Lease Equipment

      The  following  table  provides  an analysis of the net book value (net of
accumulated  depreciation  of  approximately  $1.2 billion and $0.4  billion) of
operating lease equipment by equipment type at September 30, 2002 and 2001 ($ in
millions).

                                         At September 30,     At September 30,
                                               2002                 2001
                                         ----------------     ----------------
Commercial aircraft ..................       $3,005.5             $2,017.2
Railcars and locomotives .............        1,373.9              1,242.5
Communications .......................          554.5                799.5
Information technology ...............          370.3                702.1
Business aircraft ....................          341.3                359.6
Other ................................          921.9              1,281.9
                                             --------             --------
  Total ..............................       $6,567.4             $6,402.8
                                             ========             ========

      Included in the  preceding  table is equipment  not  currently  subject to
lease  agreements of $267.3 million and $247.2 million at September 30, 2002 and
2001, respectively.

      Rental income on operating  leases,  which is included in finance  income,
totaled $1.7 billion for the year ended September 30, 2002, $1.5 billion for the
nine combined  months ended  September  30, 2001,  and $1.8 billion for the year
ended  December 31, 2000.  The following  table  presents  future  minimum lease
rentals on  non-cancelable  operating leases as of September 30, 2002.  Excluded
from this table are  variable  rentals  calculated  on the level of asset usage,
re-leasing rentals, and expected sales proceeds from remarketing operating lease
equipment at lease  expiration,  all of which are components of operating  lease
profitability ($ in millions).

    Years Ended September 30,                                      Amount
                                                                  --------
    2003 ......................................................   $1,177.6
    2004 ......................................................      736.7
    2005 ......................................................      447.4
    2006 ......................................................      279.9
    2007 ......................................................      212.0
    Thereafter ................................................      426.0
                                                                  --------
     Total ....................................................   $3,279.6
                                                                  ========

Note 7 -- Concentrations

      The following table summarizes the geographic and industry compositions of
financing  and leasing  portfolio  assets at  September  30, 2002 and 2001 ($ in
millions):



                                                       At September 30, 2002           At September 30, 2001
                                                       ---------------------           ---------------------
Geographic (by obligor)                                 Amount       Percent            Amount      Percent
                                                        ------       -------            ------      -------
   North America:
                                                                                           
   Northeast ......................................   $ 8,047.0         22.1%           $9,117.9       22.4%
   West ...........................................     6,339.1         17.4             7,561.7       18.6
   Midwest ........................................     5,941.0         16.3             6,957.3       17.0
   Southeast ......................................     4,854.1         13.3             5,505.4       13.5
   Southwest ......................................     3,932.0         10.8             4,708.1       11.6
   Canada .........................................     1,688.4          4.7             1,952.4        4.8
                                                      ---------        -----           ---------      -----
   Total North America ............................    30,801.6         84.6            35,802.8       87.9
   Other foreign ..................................     5,586.0         15.4             4,926.4       12.1
                                                      ---------        -----           ---------      -----
   Total ..........................................   $36,387.6        100.0%          $40,729.2      100.0%
                                                      =========        =====           =========      =====



                                       54


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



                                                       At September 30, 2002           At September 30, 2001
                                                       ---------------------           ---------------------
Industry (by obligor)                                   Amount       Percent            Amount      Percent
                                                        ------       -------            ------      -------
                                                                                           
   Manufacturing(1) (no industry greater
   than 3.5%) ....................................... $ 7,446.2         20.5%          $ 8,442.2       20.7%
   Retail(2) ........................................   4,939.4         13.6             5,020.9       12.3
   Commercial airlines (including regional
     airlines) ......................................   4,285.3         11.8             3,412.3        8.4
   Transportation(3) ................................   2,665.8          7.3             2,675.8        6.6
   Communications(4) ................................   1,840.1          5.1             1,590.3        3.9
   Construction equipment ...........................   1,760.2          4.8             2,273.7        5.6
   Services .........................................   1,533.4          4.2             1,755.3        4.3
   Home mortgage ....................................   1,314.2          3.6             2,760.2        6.8
   Wholesaling ......................................   1,245.5          3.4             1,435.7        3.5
   Other (no industry greater than 3.1%)(5)..........   9,357.5         25.7            11,362.8       27.9
                                                      ---------        -----           ---------      -----
     Total .......................................... $36,387.6        100.0%          $40,729.2      100.0%
                                                      =========        =====           =========      =====


--------------------------------------------------------------------------------
(1)   Includes  manufacturers of textiles and apparel,  industrial machinery and
      equipment, electrical and electronic equipment and other industries.

(2)   Includes retailers of apparel (5.3%) and general  merchandise  (4.4%).

(3)   Includes  rail,  bus,   over-the-road  trucking  industries  and  business
      aircraft.

(4)   Includes  $707.2 million and $637.7 million of  telecommunication  related
      assets at September 30, 2002 and 2001, respectively.

(5)   Included in "Other" above are financing and leasing  assets in the energy,
      power and utilities sectors, which totaled $869.2 million or 2.4% of total
      financing and leasing assets at September 30, 2002.  This amount  includes
      approximately  $520 million in project  financing and $225 million in rail
      cars on lease.

Note 8 -- Investments in Debt and Equity Securities

      Investments in debt and equity securities designated as available for sale
totaled  $1,410.4  million and $972.6  million at  September  30, 2002 and 2001,
respectively,  and are  included  in other  assets in the  Consolidated  Balance
Sheets.  Such investments  include retained interests in commercial  securitized
loans of $1,039.7  million and consumer  securitized  loans of $274.0 million at
September  30,  2002 and  commercial  securitized  loans of $843.6  million  and
consumer  securitized  loans of $126.5  million at September 30, 2001.  Retained
interests include interest-only strips,  retained subordinated  securities,  and
cash reserve accounts related to securitizations as of September 30, 2002. These
components   were  $362.2   million,   $658.9   million,   and  $292.6  million,
respectively. The carrying value of the retained interests in securitized assets
is  reviewed  quarterly  for  valuation  impairment.  During  fiscal  2002,  net
accretion of $97.1 million was recognized in pretax  earnings,  including  $49.9
million of impairment charges. Unrealized gains of $25.8 million net of tax were
recorded  during 2002 and are  reflected  in  stockholders'  equity as a part of
other comprehensive income.

      The securitization  programs cover a wide range of products and collateral
types with significantly  different prepayment and credit risk  characteristics.
The prepayment speed, in the tables below, is based on Constant  Prepayment Rate
("CPR") which expresses  payments as a function of the declining amount of loans
at a compound annual rate. Weighted average expected credit losses are expressed
as annual loss rates.

      The key assumptions  used in measuring the retained  interests at the date
of securitization for transactions completed during 2002 were as follows:



                                                                          Commercial Equipment
                                                                  -------------------------------------
                                                                                      Equipment Finance     Consumer
                                                                  Specialty Finance       & Leasing        Home Equity
                                                                  -----------------   -----------------    -----------
                                                                                                    
Weighted average prepayment speed .............................         19.49%             13.65%            26.09%
Weighted average expected credit losses .......................          0.75%              1.01%             1.03%
Weighted average discount rate ................................         11.01%              9.00%            11.25%
Weighted average life (in years) ..............................          1.40               1.66              2.86



                                       55


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      Key  assumptions  used in  calculating  the  fair  value  of the  retained
interests in  securitized  assets by product type at September  30, 2002 were as
follows:



                                                        Commercial Equipment                   Consumer
                                                      ------------------------     ------------------------------
                                                                     Equipment      Manufactured     Recreational
                                                      Specialty    Financing &     Housing  & Home     Vehicle &
                                                       Finance       Leasing           Equity             Boat
                                                      ---------    -----------     ---------------   ------------
                                                                                             
Weighted average prepayment speed ..................    19.91%        12.27%           26.38%            17.87%
Weighted average expected credit losses ............     1.26%         2.44%            0.99%             0.62%
Weighted average discount rate .....................    11.39%        12.68%           12.83%            14.30%
Weighted average life (in years) ...................     1.09          1.49             3.09              3.26


The impact of 10 percent and 20 percent  adverse  changes to the key assumptions
on the fair value of retained interests as of September 30, 2002 is shown in the
following tables ($ in millions).



                                                                                              Consumer
                                                                                   ------------------------------
                                                                                     Manufactured
                                                                       Commercial     Housing &      Recreational
                                                                        Equipment    Home Equity    Vehicle & Boat
                                                                        ---------    -----------    --------------
                                                                                               
Prepayment speed:
   10 percent adverse change .....................................       $ (8.3)       $ (8.7)          $(1.7)
   20 percent adverse change .....................................        (15.3)        (16.2)           (3.3)
Expected credit losses:
   10 percent adverse change .....................................        (16.9)         (4.6)           (1.7)
   20 percent adverse change .....................................        (33.7)         (9.2)           (3.4)
Weighted average discount rate:
   10 percent adverse change .....................................        (11.9)         (4.5)           (2.2)
   20 percent adverse change .....................................        (23.5)         (8.9)           (4.3)


      These  sensitivities  are  hypothetical  and should be used with  caution.
Changes in fair value based on a 10 percent  variation in assumptions  generally
cannot be extrapolated  because the relationship of the change in assumptions to
the change in fair value may not be linear. Also, in this table, the effect of a
variation in a particular  assumption on the fair value of the retained interest
is calculated without changing any other assumption.  In reality, changes in one
factor  may  result in changes in  another  (for  example,  increases  in market
interest rates may result in lower  prepayments  and increased  credit  losses),
which might magnify or counteract the sensitivities.

      The following tables summarize static pool credit losses,  which represent
the sum of actual  losses  (life-to-date)  and projected  future credit  losses,
divided by the original  balance of each pool of the  respective  assets for the
securitizations during the periods.



                                                                 Commercial Equipment Securitizations During
                                                                 -------------------------------------------
                                                                      2002         2001            2000
                                                                      ----         ----            ----
                                                                  (successor)   (combined)     (predecessor)
                                                                                           
Actual and projected losses at:
September 30, 2002 ..........................................        1.92%         2.87%            4.34%
September 30, 2001 ..........................................          --          1.92%            3.43%
December 31, 2000 ...........................................          --            --             1.83%





                                                                      Home Equity Securitizations During
                                                                 -------------------------------------------
                                                                      2002         2001            2000
                                                                      ----         ----            ----
                                                                  (successor)   (combined)     (predecessor)
                                                                                           
Actual and projected losses at:
September 30, 2002 ...........................................      2.68%           --               --
September 30, 2001 ...........................................        --            --               --
December 31, 2000 ............................................        --            --               --



                                       56


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      The tables that follow  summarize the  roll-forward  of retained  interest
balances and certain cash flows received from and paid to securitization  trusts
for the twelve months ended September 30, 2002 ($ in millions).

Retained Interests                                                      Amount
------------------                                                      ------
Retained interest at September 30, 2001 ...........................   $  970.1
New sales .........................................................      792.9
Distributions from Trusts .........................................     (512.6)
Other, including net accretion, and clean-up calls ................       20.2
Unrealized gains ..................................................       43.1
                                                                      --------
Retained interest at September 30, 2002 ...........................   $1,313.7
                                                                      ========



Cash Flows During the Twelve Months Ended September 30, 2002           Amount
------------------------------------------------------------           ------
Proceeds from new securitizations .................................   $6,603.9
Other cash flows received on retained interests ...................      551.5
Servicing fees received ...........................................       72.3
Repurchases of delinquent or foreclosed assets
  and ineligible contracts ........................................     (104.7)
Purchases of contracts through clean up calls .....................     (456.9)
Reimbursable servicing advances, net ..............................      (21.9)
Guarantee draws ...................................................       (1.2)
                                                                      --------
  Total, net ......................................................   $6,643.0
                                                                      ========

      Total  charge-offs  for the twelve months ended September 30, 2002 and the
combined nine months ended September 30, 2001, and receivables  past due 60 days
or more at  September  30, 2002 and 2001 are set forth  below,  for both finance
receivables and managed receivables. In addition to finance receivables, managed
receivables include finance receivables previously securitized and still managed
by us, but exclude operating leases and equity investments ($ in millions).



                                              Charge-offs for the                   Charge-offs for the Combined
                                    Twelve Months Ended September 30, 2002       Nine Months Ended September 30, 2001
                                  -----------------------------------------   -----------------------------------------
                                  Finance Receivables   Managed Receivables   Finance Receivables   Managed Receivables
                                  -------------------   -------------------   -------------------   -------------------
                                   Amount    Percent      Amount   Percent      Amount   Percent     Amount   Percent
                                   ------    -------      ------   -------      ------   -------     ------   -------
                                                                                       
Commercial .....................   $445.9     1.65%       $701.6    2.71%       $243.5    1.13%      $351.6    1.87%
Consumer .......................     46.4     1.78%         78.8    1.35%         48.3    1.72%        71.5    1.04%
                                   ------                 ------                ------               ------
  Total ........................   $492.3     1.67%       $780.4    1.94%       $291.8    1.19%      $423.1    1.64%
                                   ======                 ======                ======               ======




                                              Past Due 60 Days or                         Past Due 60 Days or
                                           More at September 30, 2002                 More at September 30, 2001
                                  -----------------------------------------   -----------------------------------------
                                  Finance Receivables   Managed Receivables   Finance Receivables   Managed Receivables
                                  -------------------   -------------------   -------------------   -------------------
                                   Amount    Percent      Amount   Percent      Amount   Percent     Amount   Percent
                                   ------    -------      ------   -------      ------   -------     ------   -------
                                                                                       
Commercial ..................... $  942.8     3.53%      $1,289.1   3.64%      $  915.7   3.18%     $1,386.6   3.63%
Consumer .......................    127.2     7.20%         249.5   4.71%         188.2   6.12%        253.2   4.32%
                                 --------                --------              --------             --------
  Total ........................ $1,070.0     3.76%      $1,538.6   3.78%      $1,103.9   3.46%     $1,639.8   3.72%
                                 ========                ========              ========             ========



Note 9 -- Debt

      The following  table  presents data on commercial  paper  borrowings ($ in
millions).



                                                           At September 30,   At September 30,    At December 31,
                                                                 2002               2001               2000
                                                           ----------------   ----------------    ---------------
                                                              (successor)       (successor)       (predecessor)
                                                                                            
Borrowings outstanding ..................................      $4,654.2           $8,869.2           $9,063.5
Weighted average interest rate ..........................          1.87%              3.37%              6.57%
Weighted average remaining days to maturity .............       37 days            31 days            37 days



                                       57


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



                                                For the Year Ended       For the Nine Months     For the Year Ended
                                                September 30, 2002    Ended September 30, 2001    December 31, 2000
                                                ------------------    ------------------------    -----------------
                                                    (successor)               (combined)            (predecessor)
                                                                                             
Daily average borrowings .....................      $ 4,564.7                $10,142.5                $10,565.1
Maximum amount outstanding ...................      $10,713.5                $11,726.4                $12,868.2
Weighted average interest rate ...............           2.25%                    4.67%                    6.23%


      The consolidated  weighted average interest rates on variable-rate  senior
notes at  September  30,  2002 and  September  30,  2001 were  2.31% and  3.49%,
respectively.  Fixed-rate  senior debt outstanding at September 30, 2002 matures
at various dates through 2028,  with interest rates ranging from 3.25% to 8.26%.
The consolidated  weighted-average  interest rates on fixed-rate  senior debt at
September  30,  2002  and 2001  were  6.82%  and  6.72%,  respectively.  Foreign
currency-denominated  debt (stated in U.S.  Dollars) totaled $1,627.9 million at
September 30, 2002, of which $1,290.5  million was fixed-rate and $337.4 million
was  variable-rate  debt.  Foreign  currency-denominated  debt  (stated  in U.S.
Dollars)  totaled  $1,306.1  million at September  30, 2001,  of which  $1,286.1
million was fixed rate and $20.0 million was  variable-rate  debt. The following
tables present fiscal year contractual  maturities and the current year high and
low interest  rates for total variable and fixed rate debt at September 30, 2002
and 2001 ($ in millions).



                                                                         At September 30, 2002
                                                         ---------------------------------------------------
                                                         Commercial    Variable-rate   Bank Credit               At September 30,
Variable-Rate                                               Paper      Senior Notes    Facilities     Total             2001
-------------                                            ----------    -------------   -----------  ---------    ----------------
                                                                                                      
Due in 2002 ............................................  $     --      $     --        $     --    $      --        $14,594.2
Due in 2003 (rates ranging from 1.72% to 4.55%) ........   4,654.2       3,910.3         4,037.4     12,601.9          3,889.6
Due in 2004 (rates ranging from 2.00% to 3.32%) ........        --       1,247.0              --      1,247.0               --
Due in 2005 (rates ranging from 2.61% to 2.63%) ........        --          23.4              --         23.4               --
Due in 2006 (rates ranging from 2.61% to 2.63%) ........        --          25.0              --         25.0               --
Due in 2007 and thereafter (rates ranging
 from 2.61% to 2.63%) ..................................        --         173.3              --        173.3               --
                                                          --------      --------        --------    ---------        ---------
                                                          $4,654.2      $5,379.0        $4,037.4    $14,070.6        $18,483.8
                                                          ========      ========        ========    =========        =========




                                                                                         At September 30,
                                                                                    -------------------------
Fixed-Rate                                                                             2002            2001
----------                                                                          ---------       ---------
                                                                                              
Due in 2002 .....................................................................   $      --       $ 2,456.4
Due in 2003 (rates ranging from 4.90% to 8.25%) .................................     2,784.9         2,889.0
Due in 2004 (rates ranging from 4.41% to 7.13%) .................................     4,321.5         4,391.9
Due in 2005 (rates ranging from 5.50% to 8.26%) .................................     4,704.1         4,593.6
Due in 2006 (rates ranging from 3.25% to 6.80%) .................................     1,179.1         1,175.8
Due in 2007 (rates ranging from 5.75% to 7.38%) .................................     2,307.1            86.8
Due after 2007 (rates ranging from 5.88% to 8.25%) ..............................     3,088.7         1,620.4
                                                                                    ---------       ---------
  Total .........................................................................   $18,385.4       $17,213.9
                                                                                    =========       =========


      At September 30, 2002,  there remained  $10.6 billion of  registered,  but
unissued debt securities under a shelf registration statement.


                                       58


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      The following table represents information on unsecured committed lines of
credit to support  commercial  paper  borrowings  at  September  30,  2002 ($ in
millions).



                                                                  Maturity Date for
Expiration of Commitment                                 Total      Drawn Amounts     Drawn        Available
------------------------                                 -----    -----------------   -----        ---------
                                                                                        
March 2002(1) ......................................   $4,037.4     March 2003       $4,037.4      $     --
April 2003 .........................................      765.0     April 2003             --         765.0
July 2003 ..........................................      250.0     July 2003              --         250.0
March 2005 .........................................    3,720.0     March 2005             --       3,720.0
                                                       --------                      --------      --------
  Total credit lines ...............................   $8,772.4                      $4,037.4      $4,735.0
                                                       ========                      ========      ========


----------
(1)   The facilities commitment expired in March 2002 and no additional sums may
      be borrowed under the facilities  after that date. All sums outstanding at
      the time of  expiration  are due and  payable  one year after  expiration,
      March 2003.

      The credit line agreements  contain clauses that permit  extensions of the
commitments   beyond  the  expiration   dates  upon  written  consent  from  the
participating  lenders.  Certain  foreign  operations  utilize  local  financial
institutions to fund operations.  At September 30, 2002, local credit facilities
totaled $201.0 million, of which $169.4 million was undrawn and available.

Note 10 -- Derivative Financial Instruments

      CIT adopted SFAS 133 on January 1, 2001 and recorded a $146.5 million, net
of tax,  cumulative effect adjustment to Accumulated Other  Comprehensive  Loss,
for  derivatives  qualifying as hedges of future cash flows,  in accordance with
this accounting standard.  The components of the adjustment to Accumulated Other
Comprehensive Loss for derivatives  qualifying as hedges of future cash flows as
of  September  30,  2002 and 2001 are  presented  in the  following  table ($ in
millions).



                                                                        Adjustment of
                                                                        Fair Value of    Income Tax   Total Unrealized
                                                                         Derivatives       Effects          Loss
                                                                         -----------     ----------   ----------------
                                                                                                  
Balance at September 30, 2001 ........................................     $102.3          $(38.9)          $ 63.4
Changes in values of derivatives qualifying as cash flow hedges ......       92.1           (35.0)            57.1
                                                                           ------          ------           ------
Balance at September 30, 2002 ........................................     $194.4          $(73.9)          $120.5
                                                                           ======          ======           ======


      The unrealized  loss as of September 30, 2002,  presented in the preceding
table,   primarily   reflects  our  use  of  interest   rate  swaps  to  convert
variable-rate  debt to fixed-rate debt, and lower market interest rates. For the
twelve months ended  September 30, 2002, the  ineffective  portion of changes in
the  fair  value of cash  flow  hedges  amounted  to $1.4  million  and has been
recorded  as an increase  to  interest  expense.  Assuming no change in interest
rates,  $70.8 million,  net of tax, of Accumulated Other  Comprehensive  Loss is
expected  to be  reclassified  to  earnings  over  the  next  twelve  months  as
contractual  cash payments are made. The Accumulated  Other  Comprehensive  Loss
(along  with the  corresponding  swap  liability)  will be  adjusted  as  market
interest rates change over the remaining life of the swaps.

      As part of managing the exposure to changes in market interest rates, CIT,
as an end-user,  enters into various  interest  rate swap  transactions,  all of
which  are  transacted  in   over-the-counter   markets  with  other   financial
institutions acting as principal counterparties.  We use derivatives for hedging
purposes  only,  and do not enter  into  derivative  financial  instruments  for
trading or speculative  purposes.  To ensure both appropriate use as a hedge and
hedge accounting treatment, derivatives entered into are designated according to
a hedge objective against a specific liability, including commercial paper, or a
specifically  underwritten debt issue. The notional amounts,  rates, indices and
maturities of our derivatives are required to closely match the related terms of
our hedged  liabilities.  CIT exchanges  variable-rate  interest on certain debt
instruments for fixed-rate amounts.  These interest rate swaps are designated as
cash flow hedges.  We also exchange  fixed-rate  interest on certain of our debt
for  variable-rate  amounts.  These  interest rate swaps are  designated as fair
value hedges.


                                       59


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      The following  table presents the notional  principal  amounts of interest
rate swaps by class and the corresponding hedged liability position at September
30, 2002.



                                          Notional Amount
Interest Rate Swaps                         in Millions                          Comments
-------------------                         -----------                          --------
                                                      
Floating to fixed-rate swaps - cash                         Effectively converts the interest rate on an equivalent
  flow hedges ...........................    $3,585.8       amount of commercial paper and variable-rate notes to a fixed rate.

Fixed to floating-rate swaps - fair                         Effectively converts the interest rate on an equivalent
  value hedges ..........................     3,479.8       amount of fixed-rate notes to a variable rate.
                                             --------
Total interest rate swaps ...............    $7,065.6
                                             ========


      Foreign exchange  forward  contracts or  cross-currency  swaps are used to
convert  U.S.  dollar  borrowings  into local  currency to the extent that local
borrowings  are not cost  effective or available.  We also use foreign  exchange
forward contracts to hedge our net investment in foreign operations.

      CIT is exposed to credit risk to the extent that the counterparty fails to
perform under the terms of a derivative instrument. This risk is measured as the
market value of interest rate swaps or foreign exchange forwards with a positive
fair value,  which totaled $532.7 million at September 30, 2002,  reduced by the
effects of master  netting  agreements as presented in Note  22-"Fair  Values of
Financial  Instruments."  We  manage  this  credit  risk by  requiring  that all
derivative  transactions be conducted with counterparties rated investment grade
by   nationally   recognized   rating   agencies,   with  the  majority  of  the
counterparties  rated "AA" or higher, and by setting limits on the exposure with
any individual counterparty.  Accordingly, counterparty credit risk at September
30, 2002 is not considered significant.

      The following table presents the maturity,  notional principal amounts and
the  weighted  average  interest  rates  expected to be received or paid of U.S.
dollar interest rate swaps at September 30, 2002 ($ in millions).



Maturity                                     Weighted Average                        Weighted Average
--------                            ---------------------------------        --------------------------------
                                          Floating to Fixed-rate                  Fixed to Floating-rate
                                    ---------------------------------        --------------------------------
Years Ending                        Notional       Receive        Pay        Notional       Receive       Pay
September 30,                        Amount         Rate         Rate         Amount         Rate        Rate
-------------                       --------       -------      -----        --------       -------      ----
                                                                                       
2003 ............................   $1,345.4       1.81%        5.99%            11.0       7.85%        2.56%
2004 ............................      342.6       1.83%        4.75%           311.0       7.15%        3.73%
2005 ............................      357.6       1.83%        4.42%           257.8       6.92%        2.97%
2006 ............................      111.5       1.88%        4.63%              --         --           --
2007 ............................       78.9       1.91%        5.72%         1,250.0       7.38%        5.31%
2008 - Thereafter ...............    1,018.8       1.84%        6.21%         1,650.0       7.30%        3.42%
                                    --------                                 --------
  Total .........................   $3,254.8       1.83%        5.70%        $3,479.8       7.29%        4.09%
                                    ========                                 ========


      The following table presents the maturity,  notional principal amounts and
the weighted  average  interest rates expected to be received or paid of foreign
currency  interest rate swaps that  converted  floating-rate  debt to fixed rate
debt at September 30, 2002 ($ in million).



                                                                    Weighted Average
                                             ---------------------------------------------------------------
Foreign Currency                             Notional Amount   Received Rate    Pay Rate      Maturity Range
----------------                             ---------------   -------------    --------      --------------
                                                                                        
Canadian Dollar ..........................        $240.6          3.00%          6.21%          2003 - 2009
Australian Dollar ........................         $75.4          5.18%          6.05%          2003 - 2006
British Pound ............................         $15.0          3.94%          5.43%                 2024


      Variable  rates are based on the  contractually  determined  rate or other
market rate indices and may change significantly, affecting future cash flows.


                                       60


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      The following table presents the maturity,  notional  principal amounts of
foreign exchange forwards,  and cross currency swaps at September 30, 2002 ($ in
millions).

                                                 Notional Principal Amount
                                            -----------------------------------
Maturity Years Ended                        Foreign Exchange     Cross-Currency
September 30,                                   Forwards              Swaps
--------------------                        ----------------     --------------
2003 .....................................      $2,704.2             $  124.0
2004 .....................................         376.3                127.5
2005 .....................................          38.5              1,361.4
2006 .....................................          12.4                 51.2
2007 .....................................             -                 10.9
2008 - Thereafter ........................             -                 65.5
                                                --------             --------
  Total ..................................      $3,131.4             $1,740.5
                                                ========             ========

Note 11 -- Preferred Capital Securities

      In  February  1997,  CIT Capital  Trust I (the  "Trust"),  a  wholly-owned
subsidiary of CIT, issued in a private offering $250.0 million liquidation value
of 7.70% Preferred  Capital  Securities (the "Capital  Securities"),  which were
subsequently  registered with the Securities and Exchange Commission pursuant to
an exchange offer.  Each capital security was recorded at the liquidation  value
of $1,000.  The Trust  subsequently  invested  the  offering  proceeds in $250.0
million principal amount Junior  Subordinated  Debentures (the  "Debentures") of
CIT, having  identical rates and payment dates.  The Debentures of CIT represent
the sole assets of the Trust.  Holders of the Capital Securities are entitled to
receive  cumulative  distributions at an annual rate of 7.70% through either the
redemption  date or maturity of the  Debentures  (February 15,  2027).  Both the
Capital  Securities  issued by the Trust and the  Debentures of CIT owned by the
Trust are redeemable in whole or in part on or after February 15, 2007 or at any
time in  whole  upon  changes  in  specific  tax  legislation,  bank  regulatory
guidelines or securities law at the option of CIT at their  liquidation value or
principal  amount.  The securities are redeemable at a specified premium through
February  15,  2007,  at which time the  redemption  price will be at par,  plus
accrued interest. Distributions by the Trust are guaranteed by CIT to the extent
that the Trust has funds available for distribution.  CIT records  distributions
payable on the Capital  Securities as an operating  expense in the  Consolidated
Statements of Income.  The Capital  Securities  were valued at $260.0 million on
June 1, 2001, the date of  acquisition by Tyco, in new basis  accounting and the
current balance reflects accretion of the premium.

Note 12 -- Other Revenue

      The  following  table sets  forth the  components  of other  revenue ($ in
millions).



                                              Year Ended         June 2 through     January 1 through        Year Ended
                                          September 30, 2002  September 30, 2001      June 1,  2001      December 31, 2000
                                          ------------------  ------------------      ---------------    -----------------
                                              (successor)         (successor)         (predecessor)        (predecessor)
                                                                                                  
Fees and other income .................         $644.5              $212.3                $174.9              $480.9
Factoring commissions .................          165.5                50.7                  61.2               154.7
Gains on securitizations ..............          149.0                59.0                  38.7               109.5
Gains on sales of leasing equipment ...           13.6                14.2                  33.7               113.2
(Losses) gains on venture capital
  investments .........................          (40.3)               (1.1)                  7.1                53.7
Write-down of equity investments(1) ...             --                  --                 (78.1)                 --
                                                ------              ------                ------              ------
  Total ...............................         $932.3              $335.1                $237.5              $912.0
                                                ======              ======                ======              ======


----------
(1)   During the period  January 1 through  June 1, 2001,  the Company  recorded
      write-downs  of  $78.1  million  for  certain  equity  investments  in the
      telecommunications industry and e-commerce markets.



                                       61


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 13 -- Earnings Per Share

      Basic EPS is  computed  by  dividing  net  income by the  weighted-average
number of common shares  outstanding  for the period.  The  computation  is also
relevant  for the quarter  ended  September  30,  2002,  given the timing of the
Initial  Public  Offering and is shown in addition to the annual and  transition
periods  below.  The diluted EPS  computation  includes the potential  impact of
dilutive  securities,  including stock options and restricted stock grants.  The
dilutive  effect of stock options is computed  using the treasury  stock method,
which assumes the repurchase of common shares by CIT at the average market price
for the period.  Options that have an  anti-dilutive  effect are not included in
the  denominator  and averaged  approximately  15.6 million  shares for the year
ended September 30, 2002.

      The reconciliation of the numerator and denominator of basic EPS with that
of diluted EPS is  presented  for the  quarter  ended  September  30, 2002 ($ in
millions, except per share amounts).



                                                                   Income        Shares      Per Share
                                                                 (Numerator)  (Denominator)   Amount
                                                                 -----------  -------------  --------
For the quarter  ended September 30, 2002
Basic EPS:
                                                                                      
  Income available to common shareholders .....................     $134.7       211,573       $0.64
Effect of Dilutive Securities:
  Restricted shares ...........................................       --             122          --
  Stock options ...............................................       --              --          --
                                                                    ------       -------       -----
Diluted EPS ...................................................     $134.7       211,695       $0.64
                                                                    ======       =======       =====


      The following table summarizes the earnings per share amounts for the year
ended  September 30, 2002,  the period June 2 through  September  30, 2001,  the
period  January 1 through  June 1, 2001 and the year ended  December  31,  2000,
assuming that the current  period  shares were  outstanding  for all  historical
periods ($ in millions except per share amounts).



                                                                   Net (Loss)                         Diluted
                                                                    Income         Basic EPS            EPS
                                                                  ---------         -------           ------
                                                                                             
Year ended September 30, 2002 (successor) ....................    $(6,698.7)        $(31.66)          $(31.66)
June 2 through September 30, 2001 (successor) ................    $   182.8         $  0.86           $  0.86
January 1 through June 1, 2001 (predecessor) .................    $    80.5         $  0.38           $  0.38
Year ended December 31, 2000 (predecessor) ...................    $   611.6         $  2.89           $  2.89


Note 14 -- Salaries and General Operating Expenses

      The  following  table sets forth the  components  of salaries  and general
operating expenses (excluding goodwill amortization) ($ in millions).



                                            Year Ended         June 2 through    January 1 through      Year Ended
                                        September 30, 2002   September 30, 2001     June 1, 2001    December 31, 2000
                                        ------------------   ------------------  -----------------  -----------------
                                            (successor)          (successor)       (predecessor)      (predecessor)

                                                                                              
Salaries and employee benefits ............   $517.4                $204.7            $262.0              $ 600.7
Other operating expenses-- CIT .............   406.0                 134.2             184.0                434.5
Other operating expenses-- TCH .............    23.0                   9.6                --                   --
                                              ------                ------            ------             --------
  Total ....................................  $946.4                $348.5            $446.0             $1,035.2
                                              ======                ======            ======             ========


Note 15 -- Acquisition-Related Costs

      For the combined nine months ended September 30, 2001, acquisition-related
costs of $54.0  million,  consisting  primarily of investment  banking and other
professional  fees,  were  incurred by CIT prior to and in  connection  with the
acquisition of CIT by Tyco.

Note 16 -- Accounting Change-Goodwill

      The Company  periodically  reviews and  evaluates  its  goodwill and other
intangible  assets for  potential  impairment.  Effective  October 1, 2001,  the
beginning of CIT's 2002 fiscal year, the Company adopted SFAS No. 142, "Goodwill
and Other  Intangible  Assets," under which goodwill is no longer  amortized but
instead is


                                       62


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

assessed for impairment at least annually. As part of the adoption,  the Company
allocated its existing  goodwill to each of the reporting units as of October 1,
2001.  Under the  transition  provisions of SFAS No. 142,  there was no goodwill
impairment  as of October 1, 2001.  Prior period  goodwill and other  intangible
assets  amortization  (pretax) was $97.6  million for the  combined  nine months
ended September 30, 2001 and $86.3 million for the year ended December 31, 2000.

      During  the  quarter  ended  March 31,  2002,  our  former  parent,  Tyco,
experienced disruptions to its business surrounding its announced break-up plan,
downgrades  in its  credit  ratings,  and a  significant  decline  in its market
capitalization. As a result of these events at Tyco, CIT also experienced credit
downgrades  and a disruption  to our funding base and ability to access  capital
markets.   Further,   market-based  information  used  in  connection  with  our
preliminary  consideration  of an  initial  public  offering  for  100%  of  CIT
indicated  that CIT's book value  exceeded its estimated  fair value as of March
31,  2002.  As a  result,  management  performed  a Step 1 SFAS  142  impairment
analysis  as of March 31,  2002 and  concluded  that an  impairment  charge  was
required at that date.

      Management's  objective in performing  the Step 1 SFAS 142 analysis was to
obtain  relevant  market-based  data to  calculate  the  fair  value of each CIT
reporting  unit as of March 31, 2002 based on each  reporting  unit's  projected
earnings  and  market  factors  that  would be used by  market  participants  in
ascribing value to each of these  reporting  units in the planned  separation of
CIT from Tyco.  Management  obtained  relevant  market  data from our  financial
advisors regarding the range of price to earnings multiples and market discounts
applicable to each  reporting  unit as of March 31, 2002 and applied this market
data to the individual  reporting  unit's  projected annual earnings as of March
31, 2002 to calculate a fair value of each reporting  unit. The fair values were
compared to the corresponding carrying value of each reporting unit at March 31,
2002, resulting in a $4.513 billion impairment charge as of March 31, 2002.

      SFAS 142 requires a second step analysis  whenever the reporting unit book
value exceeds its fair value.  This  analysis  required the Company to determine
the fair value of each reporting  unit's  individual  assets and  liabilities to
complete the analysis of goodwill  impairment  as of March 31, 2002.  During the
quarter ended June 30, 2002 we completed  this analysis for each  reporting unit
and determined  that an additional Step 2 goodwill  impairment  charge of $132.0
million was required based on reporting unit level valuation data.

      Subsequent to March 31, 2002, CIT  experienced  credit  downgrades and the
business  environment  and other  factors  continued  to  negatively  impact the
expected CIT IPO  proceeds.  As a result,  we  performed  both Step 1 and Step 2
analysis as of June 30, 2002 in a manner  consistent with the March 2002 process
described  above.  This  analysis  was based upon  updated  market data from our
financial advisors regarding the individual  reporting units, and other relevant
market data at June 30, 2002 and through the period  immediately  following  the
IPO of the  Company,  including  the  total  amount  of the IPO  proceeds.  This
analysis resulted in Step 1 and Step 2 incremental goodwill impairment of $1.719
billion  and  $148.0  million,  respectively,  as of June 30,  2002,  which  was
recorded during the June quarter.  Our remaining  goodwill is substantially  all
allocated to our commercial finance segment businesses.

      The changes in the carrying amount of goodwill for the twelve months ended
September 30, 2002 are as follows ($ in millions):



                                                Equipment
                                              Financing and     Specialty      Commercial     Structured
                                                 Leasing         Finance         Finance        Finance       Total
                                                 -------         -------         -------        -------       -----
                                                                                            
Balance as of September 30, 2001 ...........    $2,070.7       $2,572.3        $1,863.1        $63.4       $6,569.5
Reclassification of intangible assets
  to other assets ..........................          --             --           (22.0)          --          (22.0)
                                               ---------      ---------       ---------       ------      ---------
Balances as of September 30, 2001
  after reclassification ...................     2,070.7        2,572.3         1,841.1         63.4        6,547.5
Goodwill adjustments related to our
  acquisition by Tyco ......................       163.8          178.0             4.1          2.7          348.6
Goodwill impairment ........................    (2,234.5)      (2,736.3)       (1,474.8)       (66.1)      (6,511.7)
                                               ---------      ---------       ---------       ------      ---------
Balance as of September 30, 2002 ...........   $      --      $    14.0       $   370.4       $   --      $   384.4
                                               =========      =========       =========       ======      =========



                                       63


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      Following is a  reconciliation  of  previously  reported net income to net
income excluding goodwill amortization ($ in millions):



                                            Year Ended         June 2 through    January 1 through      Year Ended
                                        September 30, 2002   September 30, 2001     June 1, 2001    December 31, 2000
                                        ------------------   ------------------  -----------------  -----------------
                                            (successor)          (successor)       (predecessor)      (predecessor)
                                                                                              
Net (loss) income as reported .........     $(6,698.7)              $182.8            $ 80.5             $611.6
Goodwill amortization, net of tax .....            --                 59.8              32.7               75.4
                                            ---------               ------            ------             ------
Net (loss) income as adjusted .........     $(6,698.7)              $242.6            $113.2             $687.0
                                            =========               ======            ======             ======
Net (loss) income as adjusted per
  share -- basic and fully diluted ....     $  (31.66)              $ 1.15            $ 0.53             $ 3.25
                                            =========               ======            ======             ======


      Other intangible assets, net, comprised primarily of proprietary  computer
software and related  transaction  processes,  totaled  $17.6  million and $22.0
million at September  30, 2002 and  September  30, 2001,  respectively,  and are
included in Other Assets on the  Consolidated  Balance Sheets.  These assets are
being amortized over a five year period on a straight-line  basis,  resulting in
an annual amortization of $4.4 million.

Note 17 -- Income Taxes

      The effective tax rate varied from the statutory  federal corporate income
tax rate as follows.



                                                                        Percentage of Pretax Income
                                                       --------------------------------------------------------------
                                                        Year Ended     June 2 through     January 1      Year Ended
                                                       September 30,   September 30,       through      December 31,
                                                           2002             2001        June 1, 2001        2000
                                                       -------------   --------------   ------------    ------------
                                                        (successor)     (successor)     (predecessor)   (predecessor)
                                                                                                
Federal income tax rate .............................      35.0%            35.0%          35.0%            35.0%
Increase (decrease) due to:
Goodwill impairment .................................     (36.1)              --             --               --
Intercompany interest expense-- TCH .................      (4.2)              --             --               --
Goodwill amortization ...............................        --              6.2            7.8              3.0
Foreign income taxes ................................      (0.4)             2.2            2.2              2.0
State and local income taxes, net of
 federal income tax benefit .........................      (0.3)             2.2            2.2              1.6
Other ...............................................       0.1              0.2            2.6             (3.7)
                                                           ----             ----           ----             ----
Effective tax rate ..................................      (5.9)%           45.8%          49.8%            37.9%
                                                           ====             ====           ====             ====


      The  provision  for  income  taxes is  comprised  of the  following  ($ in
millions):


                                                        Year Ended     June 2 through     January 1      Year Ended
                                                       September 30,   September 30,       through      December 31,
                                                           2002             2001        June 1, 2001        2000
                                                       -------------   --------------   ------------    ------------
                                                        (successor)     (successor)     (predecessor)   (predecessor)
                                                                                                
Current federal income tax provision ...............       $   --         $   --          $  --            $ 31.9
Deferred federal income tax provision ..............        276.9          113.6           63.7             211.5
                                                           ------         ------          -----            ------
  Total federal income taxes .......................        276.9          113.6           63.7             243.4
Foreign income taxes ...............................         66.7           32.1           15.4             113.2
State and local income taxes .......................         30.4           11.7            5.7              24.6
                                                           ------         ------          -----            ------
  Total provision for income taxes .................       $374.0         $157.4          $84.8            $381.2
                                                           ======         ======          =====            ======



                                       64


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      The tax effects of  temporary  differences  that give rise to  significant
portions of the deferred  federal and foreign income tax assets and  liabilities
are presented below.



                                                         At September 30,
                                                    ---------------------------
                                                       2002            2001
                                                    (successor)     (successor)
Assets:
                                                              
Accrued liabilities and reserves ................   $   310.7       $   282.8
Net operating loss carryforwards ................       612.4           524.2
Purchase price adjustments ......................       778.8           877.9
Provision for credit losses .....................       206.2            95.5
Alternative minimum tax credits .................        85.7            85.7
Other ...........................................       267.3            83.5
                                                    ---------       ---------
  Total deferred tax assets .....................     2,261.1         1,949.6
                                                    ---------       ---------

Liabilities:
Leasing transactions ............................    (2,007.8)       (1,679.2)
Securitization transactions .....................      (419.7)         (371.4)
Market discount income ..........................       (36.2)          (35.2)
                                                    ---------       ---------
  Total deferred tax liabilities ................    (2,463.7)       (2,085.8)
                                                    ---------       ---------
Net deferred tax(liability) ...............         $  (202.6)      $  (136.2)
                                                    =========       =========


      The classification of deferred tax assets and liabilities at September 30,
2001 has been adjusted to reflect the change of certain  assumptions  previously
made by our former  parent that were changed to reflect our  independent  public
company status.

      At  September  30,  2002,   the  Company  had  net  operating   losses  of
approximately  $1,559.0  million,  primarily  related  to US  Federal  and state
jurisdictions.  Utilization  of net operating  losses,  which begin to expire at
various  times  starting in 2010,  may be subject to certain  limitations  under
Section  382 of the  Internal  Revenue  Code of  1986,  as  amended,  and  other
limitations under state tax laws.

Note 18 -- Postretirement and Other Benefit Plans

      Retirement and Postretirement Medical and Life Insurance Benefit Plans

      CIT has a number of defined benefit  retirement  plans covering certain of
its U.S. and non-U.S.  employees,  designed in accordance  with  conditions  and
practices in the countries concerned.  The retirement benefits under the defined
benefit  plans are based on the  employee's  age,  years of benefit  service and
qualifying compensation.  Funded plans' assets consist of marketable securities,
including  common stock and  government  and corporate  debt  securities.  CIT's
funding policy is to make contributions to the extent such contributions are tax
deductible as actuarially determined.  Contributions are charged to the salaries
and employee  benefits  expense on a systematic  basis over the expected average
remaining service period of employees expected to receive benefits.

      The largest plan is the CIT Group Inc. Retirement Plan (the "Plan"), which
accounts for 77% of the total Benefit Obligation at September 30, 2002. The Plan
covers U.S.  employees  of CIT who have  completed  one year of service and have
attained the age of 21. The Company  also  maintains a  Supplemental  Retirement
Plan for  employees  whose  benefit  in the  Retirement  Plan is  subject to the
Internal Revenue Code limitations.

      The Plan was  revised  with a new  "cash  balance"  formula  which  became
effective January 1, 2001.  Certain eligible members had the option of remaining
under the Plan  formula as in effect  prior to  January  1, 2001.  Under the new
formula, the member's accrued benefits as of December 31, 2000 were converted to
a lump sum amount and each year  thereafter the balance is to be credited with a
percentage (5% to 8%) of the member's  "Benefits Pay" (comprised of base salary,
plus certain annual bonuses, sales incentive and commissions) depending on years
of service.


                                       65


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      These balances also receive annual  interest  credits,  subject to certain
government  limits.  For 2001, the interest  credit was 7.00% and for 2002 it is
5.76%. Upon termination after five years of employment or retirement, the amount
credited to a member is to be paid in a lump sum or converted into an annuity.

      CIT also  provides  certain  health  care and life  insurance  benefits to
eligible retired employees.  Salaried participants generally become eligible for
retiree  health care benefits  after reaching age 55 with 11 years of continuous
CIT service immediately prior to retirement.  Generally, the medical plans pay a
stated percentage of most medical expenses reduced by a deductible as well as by
payments made by  government  programs and other group  coverage.  The plans are
funded on a pay as you go basis.


                                       66


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      The  following  tables set forth the change in  benefit  obligation,  plan
assets and funded  status of the plans as well as the net periodic  benefit cost
($ in millions). Prior periods presented have been conformed to the current year
presentation,  which include  amounts and  assumptions  relating to the Plan, as
well as the unfunded  Supplemental  Retirement  Plans and various  international
plans.



                                                                            Retirement Benefits
                                                             ------------------------------------------------------
                                                              Year Ended      June 2 through     January 1 through
                                                             September 30,     September 30,          June 1,
                                                                 2002              2001                2001
                                                             -------------    --------------     -----------------
                                                              (successor)       (successor)        (predecessor)
                                                                                             
Change in Benefit Obligations
Benefit obligation at beginning
  of period .............................................        $184.4            $185.2             $176.3
Service cost ............................................          12.6               4.1                5.5
Interest cost ...........................................          13.0               4.3                5.1
Actuarial loss (gain) ...................................          15.6              (1.6)               3.4
Benefits paid ...........................................          (4.2)             (1.2)              (1.2)
Plan settlements ........................................          (7.1)             (6.8)              (8.5)
Plan curtailments .......................................          (0.5)               --                 --
Plan amendments .........................................            --                --                5.5
Other ...................................................           0.6               0.4               (0.9)
                                                                 ------            ------             ------
Benefit obligation at end of period .....................        $214.4            $184.4             $185.2
                                                                 ======            ======             ======
Change in Plan Assets
Fair value of plan assets at
  beginning of period ...................................        $126.5            $145.4             $154.4
Actual return on plan assets ............................         (12.7)            (13.9)               1.0
Employer contributions ..................................          16.9               2.8                0.3
Plan settlements ........................................          (7.1)             (6.8)              (8.5)
Benefits paid ...........................................          (4.2)             (1.2)              (1.2)
Other ...................................................           0.2               0.2               (0.6)
                                                                 ------            ------             ------
Fair value of plan assets at
  end of period .........................................        $119.6            $126.5             $145.4
                                                                 ======            ======             ======
Reconciliation of Funded Status
Funded status ...........................................        $(94.8)           $(57.9)            $(39.9)
Unrecognized net loss ...................................          54.7              15.1               13.2
Unrecognized net transition obligation ..................            --                --               11.2
Unrecognized prior service cost .........................            --                --                 --
                                                                 ------            ------             ------
Prepaid (accrued) benefit cost ..........................        $(40.1)           $(42.8)            $(15.5)
                                                                 ======            ======             ======
Amounts Recognized in the Statement
  of Financial Position
Prepaid benefit cost ....................................        $   --            $   --             $  2.3
Accrued benefit liability ...............................         (75.0)            (42.8)             (24.0)
Intangible asset ........................................            --                --                3.5
Accumulated other comprehensive
  income ................................................          34.9                --                2.7
                                                                 ------            ------             ------
Net amount recognized ...................................        $(40.1)           $(42.8)            $(15.5)
                                                                 ======            ======             ======
Weighted-average Assumptions
Discount rate ...........................................          6.68%             7.40%              7.40%
Rate of compensation increase ...........................          4.22%             4.70%              4.56%
Expected return on plan assets ..........................          7.90%             9.93%              9.93%
Components of Net Periodic
  Benefit Cost
Service cost ............................................        $ 12.6            $  4.2             $  5.5
Interest cost ...........................................          13.0               4.3                5.1
Expected return on plan assets ..........................         (11.9)             (4.6)              (5.7)
Amortization of losses (gains) ..........................           0.3                --                0.4
Amortization of prior service cost ......................            --                --                0.4
                                                                 ------            ------             ------
Total net periodic expense ..............................        $ 14.0            $  3.9             $  5.7
                                                                 ======            ======             ======



                                       67


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      The projected benefit obligation, accumulated benefit obligation, and fair
value of plan assets for U.S. pension plans with accumulated benefit obligations
in excess of plan assets were $202.0 million, $172.7 million and $114.6 million,
respectively, at September 30, 2002.

      The projected benefit obligation, accumulated benefit obligation, and fair
value of plan  assets  for  non-U.S.  pension  plans  with  accumulated  benefit
obligations in excess of plan assets were $12.4 million,  $11.9 million and $5.0
million, respectively, at September 30, 2002.



                                                                             Postretirement Benefits
                                                             -----------------------------------------------------
                                                              Year Ended      June 2 through     January 1 through
                                                             September 30,     September 30,          June 1,
                                                                 2002              2001                2001
                                                             -------------    --------------     -----------------
                                                              (successor)       (successor)        (predecessor)
                                                                                             
Change in Benefit Obligations
Benefit obligation at beginning of period .................      $ 39.5            $ 37.0             $ 36.3
Service cost ..............................................         1.2               0.4                0.5
Interest cost .............................................         2.9               0.9                1.1
Actuarial loss ............................................         5.3               2.1                0.1
Net benefits paid .........................................        (2.2)             (0.9)              (1.0)
Plan amendments ...........................................          --                --                 --
                                                                 ------            ------             ------
Benefit obligation at end of period .......................      $ 46.7            $ 39.5             $ 37.0
                                                                 ======            ======             ======
Change in Plan Assets
Fair value of plan assets at beginning
  of period ...............................................      $   --            $   --             $   --
Benefits paid .............................................        (2.2)             (0.9)              (1.0)
Employer contributions ....................................         2.2               0.9                1.0
                                                                 ------            ------             ------
Fair value of plan assets at end of period ................      $   --            $   --             $   --
                                                                 ======            ======             ======
Reconciliation of Funded Status
Funded status .............................................      $(46.7)           $(39.5)            $(37.0)
Unrecognized net loss (gain) ..............................         5.2                --               (2.9)
Unrecognized net transition obligation ....................          --                --               11.4
                                                                 ------            ------             ------
Prepaid (accrued) benefit cost ............................      $(41.5)           $(39.5)            $(28.5)
                                                                 ======            ======             ======
Weighted-average Assumptions
Discount rate .............................................        6.75%             7.50%              7.50%
Rate of compensation increase .............................        4.25%             4.50%              4.50%
Components of Net Periodic Benefit Cost
Service cost ..............................................      $  1.2             $ 0.4             $  0.5
Interest cost .............................................         2.9               0.9                1.1
Amortization of transition obligation .....................          --                --                0.4
Amortization of gains .....................................         0.1                --                 --
                                                                 ------            ------             ------
Total net periodic expense ................................      $  4.2             $ 1.3             $  2.0
                                                                 ======            ======             ======


      For the period  ended  September  30, 2002,  the assumed  health care cost
trend rates decline to an ultimate level of 5.00% in 2008 for all retirees;  for
the period ended September 30, 2001, 5.00% in 2008; for the period ended June 1,
2001, 5.25% in 2006; and for the period ended December 31, 2000, 5.25% in 2006.



                                       68


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      Assumed  healthcare  cost  trend  rates have a  significant  effect on the
amounts  reported for the  healthcare  plans. A  one-percentage  point change in
assumed  health  care cost trend rates  would have the  following  effects ($ in
millions).



                                                                       Postretirement Benefits
                                             ------------------------------------------------------
                                              Year Ended      June 2 through     January 1 through
                                             September 30,     September 30,          June 1,
                                                 2002              2001                2001
                                             -------------    --------------     -----------------
                                              (successor)       (successor)        (predecessor)
                                                                             
Effect of One-percentage Point
  Increase on:
Period end benefit obligation ..............    $ 2.2             $ 1.2                $ 1.4
Total of service and interest
  cost components ..........................    $ 0.1             $ 0.1                $ 0.2
Effect of One-percentage Point
  Decrease on:
Period end benefit obligation ..............    $(2.1)            $(1.1)               $(1.3)
Total of service and interest
  cost components ..........................    $(0.1)            $(0.1)               $(0.1)


Savings Incentive Plan

      Certain  employees of CIT  participate in the CIT Group Savings  Incentive
Plan. This plan qualifies under section 401(k) of the Internal Revenue Code. CIT
expense is based on  specific  percentages  of employee  contributions  and plan
administrative costs and aggregated $14.5 million and $13.7 million for the year
ended September 30, 2002 and the combined nine months ended September 30, 2001.

Corporate Annual Bonus Plan

      The CIT Group Bonus Plan ("Bonus  Plan") is an annual bonus plan  covering
certain executive officers and other employees. The amount of awards depend on a
variety of factors,  including corporate performance and individual  performance
during the fiscal period for which awards are made and is subject to approval by
the  Compensation  Committee of the Board of  Directors.  For the fiscal  period
ended September 30, 2002, expenses for the Bonus Plan amounted to $25.0 million.
Certain senior executive officers received a portion of their corporate bonus in
the form of  restricted  stock based on the  closing  price of CIT shares on the
date of  approval.  Such  restricted  shares vest over a one-year  period.  Cash
bonuses  were  also  paid  under a  quarterly  corporate  bonus  plan  that  was
discontinued after the CIT IPO. The initial measurement period for the CIT Bonus
Plan will be for the six months ended December 31, 2002.

Long-Term Equity Compensation Plan

      CIT sponsors a Long-Term  Equity  Compensation  Plan (the "ECP").  The ECP
allows CIT to issue to employees up to 26,000,000 shares of common stock through
grants of annual incentive awards,  incentive and  non-qualified  stock options,
stock appreciation rights,  restricted stock, performance shares and performance
units.  Common stock issued under the ECP may be either  authorized but unissued
shares,  treasury  shares or any combination  thereof.  All options granted have
10-year terms from the original grant dates and are issued with exercise  prices
equal to the  market  value of the  common  stock on the date of grant.  Options
granted  in 2002 as part of the IPO have a one to four  year  vesting  schedule,
depending on the level of the recipient in the organization.


                                       69


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      Data for the stock option plans is summarized as follows.

                                                       For the Year Ended
                                                       September 30, 2002
                                                 -------------------------------
                                                                    Weighted
                                                                 Average Option
                                                   Shares        Price Per Share
                                                 ----------      ---------------
Outstanding at beginning of year                         --               --
Converted Tyco Options ......................     4,808,585           $56.20
Granted-- IPO ...............................    10,823,631           $23.00
Granted-- other .............................        52,258           $22.20
Exercised ...................................            --               --
Forfeited ...................................      (190,465)          $35.50
                                                 ----------
Outstanding at end of year ..................    15,494,009           $33.15
                                                 ==========
Options exercisable at end of year ..........     4,020,790           $59.06
                                                 ==========

      In July 2002, 10,823,631 IPO options were granted to all employees as part
of a  broad-based  incentive  program.  In addition,  4,808,585 CIT options were
granted in replacement  of Tyco options  forfeited upon the date of the CIT IPO.
The conversion formula was such that the intrinsic values of the CIT options and
the former Tyco  options  were  converted  at equal value as of the IPO. The CIT
options  that were  granted to  replace  Tyco  options  will  become  vested and
exercisable in accordance with the original grant schedules.

      The weighted  average fair value of new options  granted in 2002 is $5.77.
The fair  value of new  options  granted in 2002 was  determined  at the date of
grant using the Black-Scholes option-pricing model, which assumed the following.
Due to limited Company history, no forfeiture rate was used.



        Option                             Expected           Average          Expected            Risk Free
       Issuance                       Option Life Range   Dividend Yield   Volatility Range   Interest Rate Range
       --------                       -----------------   --------------   ----------------   -------------------
                                                                                     
July, 2002 (Tyco replacement) .....     3.6-5.6 years         2.09%          32.3%-33.2%         3.43%-4.11%
July, 2002 (IPO) ..................       3-6 years           2.09%          32.3%-33.2%         3.24%-4.22%
July, 2002 (other) ................       10 years            2.09%             27.8%               5.21%
August, 2002 (other) .............        3-5 years           2.09%          32.5%-33.2%         2.47%-3.19%
August, 2002 (other) ..............       10 years            2.16%             27.8%               4.57%


      The following table summarizes information about stock options outstanding
and options exercisable at September 30, 2002.



                                             Options Outstanding                      Options Exercisable
                               -----------------------------------------------   -------------------------------
         Range of                                Remaining         Weighted                          Weighted
         Exercise                Number         Contractual         Average         Number            Average
           Price               Outstanding         Life         Exercise Price    Exercisable      Exercise Price
           -----               -----------     -----------      --------------    -----------      --------------
                                                                                       
      $ 22.20 - $ 33.30        10,747,669          9.8              $ 23.00            1,850          $ 23.00
      $ 33.31 - $ 49.96         1,722,555          8.6              $ 36.98          995,155          $ 34.87
      $ 49.97 - $ 74.95         2,795,937          6.1              $ 62.78        2,795,937          $ 62.78
      $ 74.96 - $112.44            61,152          6.5              $ 88.37           61,152          $ 88.37
      $112.45 - $168.67           166,696          5.3              $130.71          166,696          $130.71
                               ----------                                          ---------
        Totals                 15,494,009                                          4,020,790
                               ==========                                          =========


Employee Stock Purchase Plan

      In October  2002,  CIT's  Employee  Stock  Purchase  Plan (the "ESPP") was
effective for all employees customarily employed at least 20 hours per week. The
ESPP is available to employees in the United States and to certain international
employees.  Under the ESPP, CIT is authorized to issue up to 1,000,000 shares of
common stock to eligible employees.  Employees can choose to have between 1% and
10% of their base salary  withheld to


                                       70


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

purchase  shares  quarterly at a purchase  price equal to 85% of the fair market
value of our common stock on either the first  business day or the last business
day of the quarterly  offering period,  whichever is lower. The amount of common
stock that may be  purchased  by a  participant  through  the plan is  generally
limited to $25,000 per year.  The first purchase will take place on December 31,
2002.

Restricted Stock

      In August 2002,  CIT issued  204,617  restricted  shares in lieu of a cash
payment to certain  senior  executives  in  connection  with the Bonus Plan.  In
addition, two outside members of the Board of Directors,  who elected to receive
shares in lieu of cash compensation for their retainer,  were each granted 2,064
shares.  All  shares  were  issued  at a fair  market  value  of  $22.20.  These
restricted shares vest on the first anniversary of the grant (August 2003).

      On July 2, 2002,  CIT issued 316,302  restricted  shares in replacement of
forfeited Tyco shares.  The shares were issued at market value equivalent to the
canceled  shares  based on the closing  price of Tyco shares on the day prior to
the IPO ($13.75 per share).  All restricted  shares under this grant vest 50% on
each of the second and third  anniversary of the June 1, 2001 grant date, except
for 179,348 shares, which vest 100% on the third anniversary date of the June 1,
2001 grant date.

      The holder of restricted  stock  generally has the rights of a stockholder
of CIT,  including the right to vote and to receive cash  dividends.  Restricted
stock of 525,047 shares was outstanding at September 30, 2002.

Accounting for Stock-Based Compensation Plans

      CIT has elected to apply Accounting Principles Board Opinion 25 ("APB 25")
rather than the optional  provisions of SFAS No. 123 "Accounting for Stock-Based
Compensation"  ("SFAS 123").  in  accounting  for its  stock-based  compensation
plans. Under APB 25, CIT does not recognize compensation expense on the issuance
of its stock options  because the option terms are fixed and the exercise  price
equals the market price of the  underlying  stock on the grant date. As required
by  SFAS  123,  CIT  has  determined  the pro  forma  information  as if CIT had
accounted for stock options granted under the fair value method of SFAS 123. Had
the compensation  cost of CIT's stock-based  compensation  plans been determined
based on the operational provisions of SFAS 123, CIT's net loss for 2002 and net
loss per  diluted  share would have been  $(6,704.4)  million,  or $(31.69)  per
share, compared to $(6,698.7) million, or $(31.66) per share, as reported.

Note 19 -- Lease Commitments

      The following table presents  future minimum rentals under  noncancellable
long-term  lease  agreements for premises and equipment at September 30, 2002 ($
in millions).

Years Ended September 30,                                               Amount
-------------------------                                               ------
      2003 ......................................................      $ 67.1
      2004 ......................................................        56.7
      2005 ......................................................        49.4
      2006 ......................................................        37.9
      2007 ......................................................        32.6
      Thereafter ................................................        33.8
                                                                       ------
         Total ..................................................      $277.5
                                                                       ======

      In addition to fixed lease rentals,  leases  generally  require payment of
maintenance  expenses and real estate  taxes,  both of which are subject to rent
escalation  provisions.  Minimum  payments  have not  been  reduced  by  minimum
sublease  rentals  of  $65.1  million  due in the  future  under  noncancellable
subleases.


                                       71


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      Rental expense,  net of sublease income on premises and equipment,  was as
follows ($ in millions).



                                        For the Twelve
                                         Months Ended       June 2 through     January 1 through      Years Ended
                                      September 30, 2002  September 30, 2001      June 1, 2001     December 31, 2000
                                      ------------------  ------------------      ------------     -----------------
                                          (successor)        (successor)          (predecessor)      (predecessor)
                                                                                             
Premises                                    $38.4              $14.8                  $19.0              $47.7
Equipment                                     8.4                3.0                    3.7               11.1
Less sublease income                         (9.0)              (2.7)                  (3.4)              (5.7)
                                            -----              -----                  -----              -----
  Total                                     $37.8              $15.1                  $19.3              $53.1
                                            =====              =====                  =====              =====


Note 20 -- Legal Proceedings

      In the ordinary  course of business,  there are various legal  proceedings
pending against CIT. Management believes that the aggregate liabilities, if any,
arising  from  such  actions  will not have a  material  adverse  effect  on the
consolidated financial position, results of operations or liquidity of CIT.

Note 21 -- Commitments and Contingencies

      In the normal course of meeting the financing needs of its customers,  CIT
enters into various  credit-related  commitments.  These  financial  instruments
generate fees and involve, to varying degrees, elements of credit risk in excess
of the  amounts  recognized  in the  Consolidated  Balance  Sheets.  To minimize
potential   credit  risk,   CIT   generally   requires   collateral   and  other
credit-related   terms  and   conditions   from  the   customer.   At  the  time
credit-related  commitments  are  granted,  the  fair  value  of the  underlying
collateral  and guarantees  typically  approximates  or exceeds the  contractual
amount of the  commitment.  In the event a customer  defaults on the  underlying
transaction,  the  maximum  potential  loss will  generally  be  limited  to the
contractual amount  outstanding less the value of all underlying  collateral and
guarantees.

      The   accompanying   table   summarizes   the   contractual   amounts   of
credit-related commitments ($ in millions).



                                                                                                       At
                                                                                                  September 30,
                                                               At September 30, 2002                  2001
                                                    -----------------------------------------     -------------
                                                           Due to Expire
                                                    -------------------------
                                                     Within            After          Total           Total
                                                    One Year         One Year      Outstanding     Outstanding
                                                    --------         --------      -----------     -----------
                                                                                   (successor)     (successor)
                                                                                         
Unused commitments to extend credit:
  Financing and leasing assets ..................    $2,395.0        $273.3          $2,668.3        $2,386.8
Letters of credit and
  acceptances:
  Standby letters of credit .....................       465.3           3.7             469.0           196.5
  Other letters of credit .......................       640.2           0.7             640.9           437.8
  Acceptances ...................................         8.4            --               8.4             9.1
Guarantees ......................................       724.5            --             724.5           714.5
Venture capital fund commitments ................          --         176.6             176.6           225.2


      As of September 30, 2002, commitments to purchase commercial aircraft from
both Airbus  Industries and The Boeing Company  totaled 82 units through 2007 at
an approximate value of $3.9 billion as detailed below.

Calendar Year:                                               Amount    Number
--------------                                               ------    ------
2002 - Fourth quarter .....................................   $0.1        3
2003 ......................................................    0.8       19
2004 ......................................................    1.2       25
2005 ......................................................    1.2       25
2006 ......................................................    0.5        9
2007 ......................................................    0.1        1
                                                              ----       --
Total .....................................................   $3.9       82
                                                              ====       ==


                                       72


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      The order  amounts  are  based on  current  appraised  values in 2002 base
dollars and exclude CIT's options to purchase 10 planes ($0.6 billion). The 2002
and eleven of the 2003 units have lessees in place.

      Outstanding  commitments  to  purchase  equipment,  other  than the planes
described above, and railcars totaled $76.3 million.

Note 22 -- Fair Values of Financial Instruments

      SFAS No.  107  "Disclosures  About Fair  Value of  Financial  Instruments"
requires disclosure of the estimated fair value of CIT's financial  instruments,
excluding  leasing  transactions  accounted  for under  SFAS 13.  The fair value
estimates  are  made at a  discrete  point  in time  based  on  relevant  market
information and information  about the financial  instrument,  assuming adequate
market liquidity. Because no established trading market exists for a significant
portion  of CIT's  financial  instruments,  fair  value  estimates  are based on
judgments   regarding   future  expected  loss   experience,   current  economic
conditions,  risk  characteristics of various financial  instruments,  and other
factors. These estimates are subjective in nature,  involving  uncertainties and
matters of  significant  judgment  and,  therefore,  cannot be  determined  with
precision. Changes in assumptions or estimation methods may significantly affect
the estimated fair values. Because of these limitations,  management provides no
assurance that the estimated fair values presented would necessarily be realized
upon disposition or sale.

      Actual fair values in the  marketplace  are affected by other  significant
factors,  such as supply and demand,  investment  trends and the  motivations of
buyers  and  sellers,  which  are  not  considered  in the  methodology  used to
determine the estimated fair values presented. In addition, fair value estimates
are based on existing financial  instruments  without attempting to estimate the
value of future  business  transactions  and the value of assets and liabilities
that  are  part  of  CIT's  overall  value  but  are  not  considered  financial
instruments.   Significant  assets  and  liabilities  that  are  not  considered
financial instruments include customer base, operating lease equipment, premises
and  equipment,  assets  received in  satisfaction  of loans,  and  deferred tax
balances.  In addition,  tax effects relating to the unrealized gains and losses
(differences  in  estimated  fair  values  and  carrying  values)  have not been
considered in these  estimates  and can have a significant  effect on fair value
estimates.  The carrying amounts for cash and cash equivalents  approximate fair
value because they have short maturities and do not present  significant  credit
risks.  Credit-related  commitments,  as disclosed in Note  19-"Commitments  and
Contingencies", are primarily short-term floating-rate contracts whose terms and
conditions are individually negotiated, taking into account the creditworthiness
of the customer and the nature,  accessibility and quality of the collateral and
guarantees.   Therefore,  the  fair  value  of  credit-related  commitments,  if
exercised, would approximate their contractual amounts.


                                       73


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      Estimated fair values,  recorded  carrying values and various  assumptions
used in valuing CIT's  financial  instruments at September 30, 2002 and 2001 are
set forth below ($ in millions).



                                                            2002                            2001
                                                 ---------------------------    ----------------------------
                                                      Asset (Liability)               Asset (Liability)
                                                 ---------------------------    ----------------------------
                                                  Carrying        Estimated       Carrying         Estimated
                                                    Value        Fair Value         Value         Fair Value
                                                 ----------      ----------     -----------       ----------
                                                         (successor)                      (successor)
                                                                                       
Finance receivables-loans(1) ...................  $19,342.7       $19,456.2       $23,226.2        $23,683.9
Finance receivables held for sale ..............    1,019.5         1,019.5         2,014.9          2,014.9
Other assets(2) ................................    2,747.8         2,768.8         2,474.8          2,474.8
Commercial paper(3) ............................   (4,654.2)       (4,654.2)       (8,869.2)        (8,869.2)
Fixed-rate senior notes and subordinated
  fixed-rate notes(4) ..........................  (18,718.8)      (18,844.7)      (17,471.4)       (17,937.9)
Variable-rate bank credit facilities(4) ........   (4,040.0)       (4,040.0)             --               --
Variable-rate senior notes(4) ..................   (5,392.4)       (5,361.5)       (9,672.9)        (9,658.5)
Credit balances of factoring clients and
  other liabilities(4)(5) ......................   (4,682.1)       (4,682.1)       (4,024.4)        (4,024.4)
Company-obligated mandatorily redeemable
  preferred securities of
  subsidiary trust holding solely debentures
  of the Company(6) ............................     (257.7)         (262.7)         (260.0)          (260.0)
Derivative financial instruments:(7)
  Interest rate swaps, net .....................      (16.3)          (16.3)         (243.5)          (243.5)
  Cross-currency swaps, net ....................      142.2           142.2            93.0             93.0
  Foreign exchange forwards, net ...............      (43.3)          (43.3)          111.8            111.8


--------------------------------------------------------------------------------
(1)   The fair value of performing  fixed-rate  loans was estimated based upon a
      present value  discounted  cash flow  analysis,  using interest rates that
      were being  offered at the end of the year for loans with similar terms to
      borrowers of similar  credit  quality.  Discount rates used in the present
      value  calculation  range  from 4.91% to 7.52% for 2002 and 7.26% to 8.57%
      for 2001. The maturities used represent the average contractual maturities
      adjusted for prepayments.  For floating-rate loans that reprice frequently
      and have no significant change in credit quality,  fair value approximates
      carrying  value.  The net carrying value of lease finance  receivables not
      subject to fair value  disclosure  totaled  $8.3  billion in 2002 and $8.2
      billion in 2001.

(2)   Other assets subject to fair value  disclosure  include  accrued  interest
      receivable,   retained   interests  in   securitizations   and  investment
      securities.   The   carrying   amount  of  accrued   interest   receivable
      approximates  fair  value.  Investment  securities  actively  traded  in a
      secondary  market  were  valued  using  quoted  available  market  prices.
      Investments not actively traded in a secondary  market include our venture
      capital portfolio with a book value that reflects both realized losses and
      unrealized  losses that are other than  temporary.  The carrying  value of
      other  assets not  subject to fair value  disclosure  totaled  $2,035.8 at
      September 30, 2002 and $1,352.1 million at September 30, 2001.

(3)   The estimated fair value of commercial paper  approximates  carrying value
      due to the relatively short maturities.

(4)   The carrying value of fixed-rate senior notes and subordinated  fixed-rate
      notes includes  $333.4  million and $257.5 million of accrued  interest at
      September 30, 2002 and 2001,  respectively.  The variable-rate bank credit
      facilities include $2.6 million of accrued interest at September 30, 2002.
      The variable-rate  senior notes include $13.4 million and $58.3 million of
      accrued  interest  at  September  30, 2002 and 2001,  respectively.  These
      amounts are excluded  from the other  liabilities  balances in this table.
      Fixed-rate  notes were valued using a present value  discounted  cash flow
      analysis  with a discount  rate  approximating  current  market  rates for
      issuances  by CIT of  similar  term debt at the end of the year.  Discount
      rates used in the present value calculation  ranged from 2.23% to 7.61% in
      2002 and 2.59% to 5.89% in 2001.

(5)   The  estimated  fair  value  of  credit  balances  of  factoring   clients
      approximates  carrying value due to their short  settlement  terms.  Other
      liabilities include accrued liabilities and deferred federal income taxes.
      Accrued  liabilities  and  payables  with  no  stated  maturities  have an
      estimated fair value that approximates  carrying value. The carrying value
      of other  liabilities not subject to fair value disclosure  totaled $207.5
      million in 2002 and $86.5 million in 2001.

(6)   Company-obligated  mandatorily  redeemable preferred capital securities of
      subsidiary  trust  holding  solely  debentures  of the Company were valued
      using a present value  discounted  cash flow analysis with a discount rate
      approximating  current market rates of similar issuances at the end of the
      year.

(7)   CIT enters into  derivative  financial  instruments  for hedging  purposes
      only.  The  estimated  fair values are  obtained  from  dealer  quotes and
      represent the net amount receivable or payable to terminate the agreement,
      taking into account current market interest rates and counter-party credit
      risk.  See  Note  10-"Derivative   Financial   Instruments"  for  notional
      principal amounts associated with the instruments.

Note 23 -- Certain Relationships and Related Transactions

      On  September  30, 2002,  certain  subsidiaries  of Tyco sold  receivables
totaling  $350.0  million to CIT in a factoring  transaction.  At various  times
during  the year  ended  September  30,  2002 CIT and Tyco  engaged  in  similar
factoring transactions, the highest amount of which was $384.4 million.


                                       74


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      We  have  entered  into a  number  of  equipment  loans  and  leases  with
affiliates of Tyco.  Lease terms  generally  range from 3 to 12 years.  Tyco has
guaranteed  payment  and  performance  obligations  under  each  loan and  lease
agreement.  At September 30, 2002, the aggregate amount  outstanding under these
equipment loans and leases was approximately $29.3 million.

      On May 1,  2002,  CIT  assumed  a  third-party  corporate  aircraft  lease
obligation  from Tyco.  The assumed  lease  obligation  is  approximately  $16.0
million  and extends for 134 months  beginning  on May 1, 2002.  Prior to Tyco's
acquisition  of the  Company,  CIT had an agreement  to purchase  this  aircraft
directly from the previous owner.

      On September 30, 2001,  CIT sold at net book value  certain  international
subsidiaries to a non-U.S.  subsidiary of Tyco. As a result of this sale,  there
were receivables from affiliates  totaling  $1,440.9  million,  representing the
debt investment in these  subsidiaries.  CIT charged arm's length,  market-based
interest  rates on these  receivables,  and recorded  $19.0  million of interest
income, as an offset to interest expense, related to those notes for the quarter
ended  December  31,  2001.  A note  receivable  issued  at  the  time  of  this
transaction of approximately $295 million was collected.

      Following  Tyco's  announcement  on  January  22,  2002 that it planned to
separate into four independent,  publicly traded  companies,  CIT repurchased at
net  book  value  the  international  subsidiaries  on  February  11,  2002.  In
conjunction  with this  repurchase,  the receivables from affiliates of $1,588.1
million at December 31, 2001 was satisfied.

      While CIT was an indirect  subsidiary of Tyco,  certain of CIT's expenses,
such as third party  consulting and legal fees,  were paid by Tyco and billed to
CIT. The payables were subsequently satisfied.

      CIT is a partner with Dell Computer Corporation ("Dell") in Dell Financial
Services L.P.  ("DFS"),  a joint venture which offers Dell  customers  financing
services.   The  joint  venture   provides  Dell  with   financing  and  leasing
capabilities  that are  complementary to its product  offerings and provides CIT
with a  steady  source  of  new  financings.  CIT  regularly  purchases  finance
receivables from DFS at a premium,  a portion of which are normally  securitized
within 90 days of purchase  from DFS. CIT has recourse back to DFS on delinquent
contracts. In accordance with the joint venture agreement,  net income generated
by DFS is  allocated  70% to Dell and 30% to CIT,  after CIT has  recovered  any
cumulative  losses. Any losses generated by DFS are allocated to CIT. DFS is not
consolidated in CIT's financial statements and is accounted for under the equity
method.  Financing and leasing  assets and managed assets related to receivables
originated by DFS were $1.5 billion and $3.3 billion at September 30, 2002,  and
$1.4 billion and $3.2 billion at September 30, 2001.

      CIT  also  has a  joint  venture  arrangement  with  Snap-on  Incorporated
("Snap-on") that has a similar business purpose and model to the DFS arrangement
described  above,  including  credit  recourse  on  delinquent  receivables.  In
accordance with the joint venture agreement,  net income / loss is allocated 50%
to CIT and 50% to Snap-on.  The Snap-on joint venture is accounted for under the
equity method and is not consolidated in CIT's financial statements. The related
financing  and  leasing  assets and managed  assets  were $0.9  billion and $1.0
billion at September  30,  2002,  and $0.8 billion and $0.9 billion at September
30, 2001.

Note 24 -- Business Segment Information

Management's Policy in Identifying Reportable Segments

      CIT's  reportable  segments  are  comprised of  strategic  business  units
aggregated   into  segments  based  upon  the  commonality  of  their  products,
customers,  distribution  methods,  operations and servicing,  and the nature of
their regulatory environment.

Types of Products and Services

      CIT  has  four  reportable  segments:  Equipment  Financing  and  Leasing,
Specialty  Finance,   Commercial  Finance  and  Structured  Finance.   Equipment
Financing and Leasing,  Specialty  Finance and Structured  Finance offer secured
lending and leasing products to midsize and larger companies across a variety of
industries,


                                       75


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

including  aerospace,  construction,  rail,  machine  tool,  business  aircraft,
technology,  manufacturing and  transportation.  The Commercial  Finance segment
offers secured  lending and  receivables  collection as well as other  financial
products to small and midsize  companies.  These include secured revolving lines
of credit and term loans,  credit protection,  accounts  receivable  collection,
import and export financing and factoring,  debtor-in-possession  and turnaround
financing.  The Specialty  Finance  segment also offers home equity  products to
consumers  primarily  through a  network  of  brokers  and  correspondents.  The
Specialty  Finance  segment  resulted from the  combination of the former Vendor
Technology  Finance and Consumer  segments in fiscal 2001,  consistent  with how
activities  are reported  internally to management  since June 30, 2001. CIT has
reclassified  comparative prior period information to reflect this change.  Also
in fiscal 2001,  CIT  transferred  financing and leasing  assets from  Equipment
Financing  to  Specialty  Finance.  Prior year  segment  balances  have not been
restated to conform to the current year asset  transfers as it is impractical to
do so.

Segment Profit and Assets

      Because CIT  generates a majority of its revenue from  interest,  fees and
asset sales,  management  relies  primarily on operating  revenues to assess the
performance of the segment.  CIT also  evaluates  segment  performance  based on
profit after income taxes,  as well as asset growth,  credit risk management and
other factors.

      The  following  table  presents  reportable  segment  information  and the
reconciliation  of segment  balances  to the  consolidated  financial  statement
totals  and the  consolidated  managed  asset  totals  at or for the year  ended
September 30, 2002, at or for the combined nine months ended  September 30, 2001
and at or for the year ended December 31, 2000. The results  presented are based
upon a fixed leverage ratio across  business units and the allocation of most of
the corporate  expenses.  The  additional  borrowing  costs  resulting  from the
disruption to our funding base was not allocated to business segments. Corporate
and Other  includes the  telecommunication  and Argentine  reserving  actions in
fiscal 2002, and other portfolio  write-downs  recorded in conjunction  with the
Tyco acquisition in fiscal 2001, as well as goodwill  impairment  charges (2002)
and goodwill amortization (2001 and 2000). Corporate and Other also includes the
results of the Equity Investment/Venture  Capital business for all periods shown
($ in millions).



                                      Equipment                                               Corporate
                                      Financing   Specialty  Commercial Structured   Total        and
                                      & Leasing    Finance    Finance    Finance    Segments     Other     Consolidated
                                      ---------    -------    -------    -------    --------     -----     ------------
September 30, 2002
  (successor)
                                                                                       
Operating margin .................   $   563.6   $   932.1   $  474.9   $  132.8   $ 2,103.4  $  (296.9)    $ 1,806.5
Income taxes .....................       123.9       214.4      121.9       40.0       500.2     (126.2)        374.0
Net income .......................       202.0       349.8      198.9       65.2       815.9   (7,514.6)     (6,698.7)
Total financing and leasing assets    14,267.2    10,119.4    8,910.2    3,090.8    36,387.6         --      36,387.6
Total managed assets .............    18,651.3    16,970.0    8,910.2    3,090.8    47,622.3         --      47,622.3
September 30, 2001
  (combined)
Operating margin .................   $   552.3   $   649.4   $  343.2   $   36.0   $ 1,580.9  $   (22.0)    $ 1,558.9
Income taxes .....................       111.1       119.7       86.3       26.0       343.1     (100.9)        242.2
Net income .......................       215.1       196.7      134.8       45.8       592.4     (329.1)        263.3
Total financing and leasing assets    16,109.1    12,791.1    8,657.1    3,171.9    40,729.2         --      40,729.2
Total managed assets .............    20,573.9    18,474.2    8,657.1    3,171.9    50,877.1         --      50,877.1
December 31, 2000
  (predecessor)
Operating margin .................   $   897.7   $   668.3   $  449.8   $  128.8   $ 2,144.6  $   (18.4)    $ 2,126.2
Income taxes .....................       147.3       139.9      109.2       35.9       432.3      (51.1)        381.2
Net income .......................       287.8       222.2      161.8       65.4       737.2     (125.6)        611.6
Total financing and leasing assets    20,078.0    13,321.0    7,693.7    2,691.9    43,784.6         --      43,784.6
Total managed assets .............    26,465.2    18,050.1    7,693.7    2,691.9    54,900.9         --      54,900.9


      Finance  income  and other  revenues  derived  from  United  States  based
financing  and leasing  assets were  $4,284.8  million,  $3,718.7  million,  and
$5,215.6 million for the year ended September 30, 2002, the combined nine months
ended  September 30, 2001 and the year ending  December 31, 2000,  respectively.
Finance  income and other  revenues  derived from foreign  based  financing  and
leasing assets were $990.3 million,  $829.2 million,  and $944.8 million for the
year ended September 30, 2002, the combined nine months ended September 30, 2001
and the year ending December 31, 2000, respectively.


                                       76


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      Note 25 -- Summarized Financial Information of Subsidiaries (Unaudited)

      The following presents condensed  consolidating  financial information for
CIT Holdings LLC and its wholly-owned  subsidiary,  Capita Corporation (formerly
AT&T Capital Corporation).  CIT has guaranteed on a full and unconditional basis
the existing  registered debt securities and certain other indebtedness of these
subsidiaries.  Therefore,  CIT has not presented related financial statements or
other information for these subsidiaries on a stand-alone basis ($ in millions).

                          CONSOLIDATING BALANCE SHEET
                               September 30, 2002
                                  (successor)



                                                                          CIT
                                                 CIT        Capita     Holdings      Other
                                             Group Inc.   Corporation     LLC     Subsidiaries   Eliminations     Total
                                             ----------   -----------  --------   ------------   ------------     -----
($ in millions)
                                                             ASSETS
                                                                                             
Net finance receivables ..............      $    864.3    $2,504.8   $   893.5     $23,418.6      $      --    $27,681.2
Operating lease equipment, net .......              --       797.2       185.3       5,584.9             --      6,567.4
Assets held for sale .................              --       156.7        47.7         815.1             --      1,019.5
Cash and cash equivalents ............         1,737.8       225.8       330.3         (19.5)            --      2,274.4
Other assets .........................         4,855.0       444.4       452.5       4,173.9       (4,757.8)     5,168.0
                                            ----------    --------   ---------     ---------      ---------    ---------
  Total Assets .......................      $  7,457.1    $4,128.9   $ 1,909.3     $33,973.0      $(4,757.8)   $42,710.5
                                            ==========    ========   =========     =========      =========    =========

                                              LIABILITIES AND STOCKHOLDERS' EQUITY

Debt .................................      $ 28,409.3    $1,858.0   $ 2,147.6       $  41.1      $      --    $32,456.0
Credit balances of factoring clients .              --          --          --       2,513.8             --      2,513.8
Other liabilities ....................       (25,710.0)    1,785.1    (1,342.5)     27,992.6             --      2,725.2
                                            ----------    --------   ---------     ---------      ---------    ---------
  Total Liabilities ..................         2,699.3     3,643.1       805.1      30,547.5             --     37,695.0
Preferred securities .................              --          --          --         257.7             --        257.7
Equity ...............................         4,757.8       485.8     1,104.2       3,167.8       (4,757.8)     4,757.8
                                            ----------    --------   ---------     ---------      ---------    ---------
  Total Liabilities and
    Stockholders' Equity .............      $  7,457.1    $4,128.9   $ 1,909.3     $33,973.0      $(4,757.8)   $42,710.5
                                            ==========    ========   =========     =========      =========    =========



                                       77


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                          CONSOLIDATING BALANCE SHEET
                               September 30, 2001
                                   (successor)



                                                                          CIT
                                                 CIT        Capita     Holdings      Other
                                             Group Inc.   Corporation     LLC     Subsidiaries   Eliminations     Total
                                             ----------   -----------  --------   ------------   ------------     -----
($ in millions)
                                                             ASSETS
                                                                                             
Net finance receivables ..............      $  1,834.6    $3,074.4   $ 1,506.1     $24,971.4      $      --    $31,386.5
Operating lease equipment, net .......              --     1,203.2       273.4       4,926.2             --      6,402.8
Assets held for sale .................              --        32.9       157.5       1,824.5             --      2,014.9
Cash and cash equivalents ............           440.0       107.0         4.2         256.8             --        808.0
Other assets .........................         5,499.8       291.4       302.8      10,590.7       (5,947.6)    10,737.1
                                            ----------    --------   ---------     ---------      ---------    ---------
  Total Assets .......................      $  7,774.4    $4,708.9   $ 2,244.0     $42,569.6      $(5,947.6)   $51,349.3
                                            ==========    ========   =========     =========      =========    =========

                                             LIABILITIES AND STOCKHOLDERS' EQUITY

Debt .................................      $ 30,218.0    $2,879.2   $ 1,972.3     $   628.2      $      --    $35,697.7
Credit balances of factoring clients .              --          --          --       2,392.9             --      2,392.9
Other liabilities ....................       (28,391.2)    1,275.7    (1,656.1)     35,822.7             --      7,051.1
                                            ----------    --------   ---------     ---------      ---------    ---------
  Total Liabilities ..................         1,826.8     4,154.9       316.2      38,843.8             --     45,141.7
Preferred securities .................              --          --          --         260.0             --        260.0
Equity ...............................         5,947.6       554.0     1,927.8       3,465.8       (5,947.6)     5,947.6
                                            ----------    --------   ---------     ---------      ---------    ---------
  Total Liabilities and
    Stockholders' Equity .............      $  7,774.4    $4,708.9   $ 2,244.0     $42,569.6      $(5,947.6)   $51,349.3
                                            ==========    ========   =========     =========      =========    =========



                                       78


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                       CONSOLIDATING STATEMENT OF INCOME
                         Year Ended September 30, 2002
                                  (successor)



                                                                          CIT
                                                 CIT        Capita     Holdings      Other
                                             Group Inc.   Corporation     LLC     Subsidiaries   Eliminations     Total
                                             ----------   -----------  --------   ------------   ------------     -----
($ in millions)
                                                                                             
Finance income ............................  $   200.4    $1,050.1      $233.2      $2,859.1         $   --    $ 4,342.8
Interest expense ..........................       (3.7)      401.3         4.8       1,036.9             --      1,439.3
                                             ---------    --------      ------      --------         ------    ---------
Net finance income ........................      204.1       648.8       228.4       1,822.2             --      2,903.5
Depreciation on operating lease equipment .         --       503.0       105.5         632.5             --      1,241.0
                                             ---------    --------      ------      --------         ------    ---------
Net finance margin ........................      204.1       145.8       122.9       1,189.7             --      1,662.5
Provision for credit losses ...............      308.3       197.9        24.9         257.2             --        788.3
                                             ---------    --------      ------      --------         ------    ---------
Net finance margin, after provision for
  credit losses ...........................     (104.2)      (52.1)       98.0         932.5             --        874.2
Equity in net income of subsidiaries ......      (77.8)         --          --            --           77.8           --
Other revenue .............................       20.7       124.0        93.0         694.6             --        932.3
                                             ---------    --------      ------      --------         ------    ---------
Operating margin ..........................     (161.3)       71.9       191.0       1,627.1           77.8      1,806.5
Operating expenses ........................    6,588.0       188.7        65.9       1,278.1             --      8,120.7
                                             ---------    --------      ------      --------         ------    ---------
Income before provision for income taxes ..   (6,749.3)     (116.8)      125.1         349.0           77.8     (6,314.2)
(Benefit) Provision for income taxes ......      (50.6)      (60.0)       54.4         430.2             --        374.0
Minority interest, after tax ..............         --          --          --         (10.5)            --        (10.5)
                                             ---------    --------      ------      --------         ------    ---------
Net income ................................  $(6,698.7)   $  (56.8)     $ 70.7      $  (91.7)        $ 77.8    $(6,698.7)
                                             =========    ========      ======      ========         ======    =========



                                       79


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                       CONSOLIDATING STATEMENT OF INCOME
                      Nine Months Ended September 30, 2001
                                   (combined)



                                                                          CIT
                                                 CIT        Capita     Holdings      Other
                                             Group Inc.   Corporation     LLC     Subsidiaries   Eliminations     Total
                                             ----------   -----------  --------   ------------   ------------     -----
($ in millions)
                                                                                              
Finance income .............................    $226.4      $998.0      $219.1      $2,531.8        $    --     $3,975.3
Interest expense ...........................     178.9       305.4        23.1       1,112.4             --      1,619.8
                                                ------      ------      ------      --------        -------     --------
Net finance income .........................      47.5       692.6       196.0       1,419.4             --      2,355.5
Depreciation on operating lease equipment ..        --       460.5       103.4         472.8             --      1,036.7
                                                ------      ------      ------      --------        -------     --------
Net finance margin .........................      47.5       232.1        92.6         946.6             --      1,318.8
Provision for credit losses ................      54.7        88.9        15.1         173.8             --        332.5
                                                ------      ------      ------      --------        -------     --------
Net finance margin after provision
  for credit losses ........................      (7.2)      143.2        77.5         772.8             --        986.3
Equity in net income of subsidiaries .......     527.8          --          --            --         (527.8)          --
Other revenue ..............................     (80.6)       67.6        68.1         517.5             --        572.6
                                                ------      ------      ------      --------        -------     --------
Operating margin ...........................     440.0       210.8       145.6       1,290.3         (527.8)     1,558.9
Operating expenses .........................     216.9       160.0        78.4         589.6             --      1,044.9
                                                ------      ------      ------      --------        -------     --------
Income before provision for income taxes ...     223.1        50.8        67.2         700.7         (527.8)       514.0
Provision for income taxes .................     (40.2)       19.3        25.5         237.6             --        242.2
Minority interest, after tax ...............        --          --          --          (8.5)            --         (8.5)
                                                ------      ------      ------      --------        -------     --------
Net income .................................    $263.3      $ 31.5      $ 41.7      $  454.6        $(527.8)    $  263.3
                                                ======      ======      ======      ========        =======     ========



                                       80


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                      CONSOLIDATING STATEMENT OF CASH FLOWS
                          Year Ended September 30, 2002
                                   (successor)



                                                                          CIT
                                                 CIT        Capita     Holdings      Other
                                             Group Inc.   Corporation     LLC     Subsidiaries   Eliminations     Total
                                             ----------   -----------  --------   ------------   ------------     -----
($ in millions)
                                                                                               
Cash Flows From Operating Activities:
Net cash flows provided by (used for)
  operations ..............................  $   401.0   $  (283.7)    $(693.8)    $ 1,936.1        $    --    $ 1,359.6
                                             ---------   ---------     -------     ---------        -------    ---------
Cash Flows From Investing Activities:
Net increase in financing and
  leasing assets ..........................      662.0       211.9       721.3         779.0             --      2,374.2
Decrease in intercompany loans
  and investments .........................      865.4          --          --            --         (865.4)          --
Other .....................................         --          --          --         (52.5)            --        (52.5)
                                             ---------   ---------     -------     ---------        -------    ---------
Net cash flows provided by investing
  activities ..............................    1,527.4       211.9       721.3         726.5         (865.4)     2,321.7
                                             ---------   ---------     -------     ---------        -------    ---------
Cash Flows From Financing Activities:
Net increase (decrease)  in debt ..........   (1,808.7)   (1,021.2)      175.3        (774.7)            --     (3,429.3)
Intercompany financing ....................         --     1,211.8       123.3      (2,200.5)         865.4           --
Capital contributions from Tyco ...........      923.5          --          --            --             --        923.5
Cash dividends paid .......................         --          --          --            --             --           --
Issuance of common stock ..................      254.6          --          --            --             --        254.6
                                             ---------   ---------     -------     ---------        -------    ---------
Net cash flows (used for) provided by
  financing activities ....................     (630.6)      190.6       298.6      (2,975.2)         865.4     (2,251.2)
                                             ---------   ---------     -------     ---------        -------    ---------
Net increase (decrease) in cash
  and cash equivalents ....................    1,297.8       118.8       326.1        (312.6)            --      1,430.1
Exchange rate impact on cash . ............         --          --          --          36.3             --         36.3
Cash and cash equivalents, beginning
  of period ...............................      440.0       107.0         4.2         256.8             --        808.0
                                             ---------   ---------     -------     ---------        -------    ---------
Cash and cash equivalents, end of
  period ..................................  $ 1,737.8   $   225.8     $ 330.3     $   (19.5)       $    --    $ 2,274.4
                                             =========   =========     =======     =========        =======    =========



                                       81


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                      CONSOLIDATING STATEMENT OF CASH FLOWS
                      Nine Months Ended September 30, 2001
                                   (combined)



                                                                          CIT
                                                 CIT        Capita     Holdings      Other
                                             Group Inc.   Corporation     LLC     Subsidiaries   Eliminations     Total
($ in millions)                              ----------   -----------  --------   ------------   ------------     -----
                                                                                               
Cash Flows From Operating Activities:
Net cash flows (used for)  provided by
  operations .............................   $   (48.9)  $   275.1     $ 128.4       $ 672.5      $      --    $ 1,027.1
                                             ---------   ---------     -------       -------      ---------    ---------
Cash Flows From Investing Activities:
Net increase (decrease) in financing
  and leasing assets .....................       335.0       440.4       (36.7)        275.5             --      1,014.2
Decrease in intercompany loans
  and investments ........................    (2,228.2)         --          --            --        2,228.2           --
Other ....................................          --          --          --         (21.2)            --        (21.2)
                                             ---------   ---------     -------       -------      ---------    ---------
Net cash flows (used for) provided
  by investing activities ................    (1,893.2)      440.4       (36.7)        254.3        2,228.2        993.0
                                             ---------   ---------     -------       -------      ---------    ---------
Cash Flows From Financing Activities:
Net increase (decrease) in debt ..........       586.6    (2,872.5)     (247.4)       (213.3)            --     (2,746.6)
Intercompany financing ...................          --     2,134.7       240.6        (147.1)      (2,228.2)          --
Capital contributions ....................       675.0          --          --          70.5             --        745.5
Cash dividends paid ......................          --          --          --         (52.9)            --        (52.9)
Issuance of treasury stock ...............          --          --          --          27.6             --         27.6
                                             ---------   ---------     -------       -------      ---------    ---------
Net cash flows provided by (used for)
  financing activities ...................     1,261.6      (737.8)       (6.8)       (315.2)      (2,228.2)    (2,026.4)
                                             ---------   ---------     -------       -------      ---------    ---------
Net (decrease) increase in cash and
  cash equivalents .......................      (680.5)      (22.3)       84.9         611.6             --         (6.3)
Exchange rate impact on cash .............          --          --          --           2.2             --          2.2
Cash and cash equivalents, beginning
  of period ..............................     1,120.5       129.3       (80.7)       (357.0)            --        812.1
                                             ---------   ---------     -------       -------      ---------    ---------
Cash and cash equivalents, end of
  period .................................   $   440.0   $   107.0     $   4.2       $ 256.8      $      --    $   808.0
                                             =========   =========     =======       =======      =========    =========


Note 26 -- Selected Quarterly Financial Data (Unaudited)

      Summarized  quarterly  financial  data are  presented  below.  The  second
quarter  of 2001  includes  predecessor  operations  through  June 1,  2001  and
successor operations for June 2 through June 30, 2001 ($ in millions).



                                                               Year Ended September 30, 2002
                                                 ---------------------------------------------------------
                                                  First         Second             Third           Fourth
                                                 Quarter        Quarter           Quarter          Quarter
                                                 -------        -------           -------          -------
                                                                                        
Net finance margin ...........................   $487.5       $   448.2         $   356.0           $370.8
Provision for credit losses ..................    112.9           195.0             357.7            122.7
Other revenue ................................    245.1           232.1             246.1            209.0
Salaries and general operating expenses ......    238.7           234.2             237.9            235.6
Intercompany interest expense -- TCH .........     76.3           305.0             281.3               --
Goodwill impairment ..........................       --         4,512.7           1,999.0
Provision for income taxes ...................    118.2            50.4             121.3             84.1
Minority interest in subsidiary trust
  holding solely debentures
  of the Company, after tax ..................      2.4             2.7               2.7              2.7
Net income (loss) ............................   $184.1       $(4,619.7)        $(2,397.8)          $134.7
Net income (loss) per diluted share(1) .......   $ 0.87       $  (21.84)        $  (11.33)          $ 0.64



                                       82


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



                                                                              Nine Months Ended
                                                                             September 30, 2001
                                                                ---------------------------------------------
                                                                    First          Second            Third
                                                                   Quarter         Quarter          Quarter
                                                                -------------    ----------       -----------
                                                                (predecessor)    (combined)       (successor)
                                                                                           
Net finance margin ...........................................      $404.7          $429.4          $484.7
Provision for credit losses ..................................        68.3           166.7            97.5
Other revenue ................................................       211.6           121.8           239.2
Salaries and general operating expenses ......................       263.5           267.9           263.1
Goodwill amortization ........................................        22.5            29.7            45.4
Intercompany interest expense -- TCH .........................          --            25.0            73.8
Acquisition-related costs ....................................          --            54.0              --
Provision for income taxes ...................................        99.0            30.5           112.7
Minority interest in subsidiary trust holding solely
  debentures of the Company, after tax .......................         2.9             2.8             2.8
Net income (loss) ............................................      $160.1         $ (25.4)         $128.6
Net income (loss) per diluted share(1) .......................      $ 0.75         $ (0.12)         $ 0.61


--------------------------------------------------------------------------------
(1)   Per share  calculations  assume that current period shares are outstanding
      for all periods shown.


Item 9.  Changes  in  and  Disagreements  with  Accountants  on  Accounting  and
         Financial Disclosure.

      Prior to Tyco's acquisition of CIT, the independent  auditor for CIT Group
Inc. (fomerly The CIT Group, Inc.) was KPMG LLP. The independent accountants for
Tyco were  PricewaterhouseCoopers  LLP ("PwC").  On June 1, 2001,  in connection
with the acquisition,  Tyco and CIT jointly  determined that CIT would terminate
its audit  engagement with KPMG LLP and enter into an audit engagement with PwC,
in order to facilitate the auditing of Tyco's Consolidated Financial Statements.
CIT's Board of Directors  approved  the  appointment  of PwC as the  independent
accountants for CIT.

      In connection  with the audit of the year ended December 31, 2000, and the
subsequent interim period through June 1, 2001, there were no disagreements with
KPMG  LLP on  any  matter  of  accounting  principles  or  practices,  financial
statement disclosure or auditing scope or procedures, which disagreements if not
resolved  to their  satisfaction  would have caused  them to make  reference  in
connection with their opinion to the subject matter of the disagreement.

      The audit report of KPMG LLP on the Consolidated  Financial  Statements of
CIT Group Inc. and  subsidiaries as of and for the year ended December 31, 2000,
did not  contain  any  adverse  opinion or  disclaimer  of opinion nor were they
qualified or modified as to uncertainty, audit scope or accounting principles.


                                       83


                                    PART III

Item 10. Directors and Executive Offices of the Registrant.

Directors

      The following table sets forth information concerning CIT's six directors,
including  information  as to each  director's  age as of  December  1, 2002 and
business experience during the past five years. This information was provided to
CIT by the directors.  CIT knows of no family  relationship among the directors.
Certain directors are also directors or trustees of privately held businesses or
not-for-profit entities that are not referred to below.

Name                     Age                         Position
----                     ---  -------------------------------------------------
Albert R. Gamper, Jr. ..  60   Chairman, President & Chief Executive Officer of
                                 CIT
John S. Chen ...........  46   Chairman, President and Chief Executive Officer
                                 of Sybase, Inc.
William A. Farlinger ...  73   Chairman of Ontario Power Generation Inc.
Hon. Thomas H. Kean ....  67   President, Drew University and Former Governor
                                 of New Jersey
Edward J. Kelly, III ...  49   President and Chief Executive Officer, Mercantile
                                 Bankshares Corporation.
Peter J. Tobin .........  58   Dean, Peter J. Tobin College of Business, St.
                                 John's University

      ALBERT  R.  GAMPER,  JR.  has  served  as  Chairman,  President  and Chief
Executive  Officer since July 1, 2002, as President and Chief Executive  Officer
from June 2001 to June 2002, as Chairman,  President and Chief Executive Officer
from January 2000 to May 2001,  as President  and Chief  Executive  Officer from
December 1989 to January 2000 and as a Director since May 1984. From May 1987 to
December 1989, Mr. Gamper served as Chairman and Chief Executive Officer.  Prior
to December  1989,  Mr.  Gamper  also held a number of  executive  positions  at
Manufacturers  Hanover  Corporation,  a prior  owner  of CIT,  where he had been
employed since 1962. Mr. Gamper is a director of Public Service Enterprise Group
Incorporated, Chairman of the Board of Directors of St. Barnabas Corporation and
a member of the Board of Trustees of Rutgers University.

      JOHN S. CHEN has  served as a  Director  of CIT since  July 1,  2002,  and
previously  from October 2000 to June 1, 2001.  Mr. Chen has served as Chairman,
President and Chief  Executive  Officer of Sybase,  Inc., a software  developer,
since August 1997.  From 1991 to 1997, Mr. Chen served in a variety of positions
with Siemens Nixdorf and with Pyramid Technology Corporation, which was acquired
by Siemens Nixdorf in 1995,  including as Executive Vice President of Pyramid in
1991, as President and Chief Operating Officer and a director of Pyramid in 1993
and  as  President  and  Chief  Executive  Officer  of  Siemens  Nixdorf's  Open
Enterprise  Computing  Division in 1996.  Mr. Chen is also a director of Sybase,
Inc.

      WILLIAM A.  FARLINGER  has served as a Director of CIT since July 1, 2002,
and previously  from November 1999 to June 1, 2001. Mr.  Farlinger has served as
Chairman  of Ontario  Power  Generation  Inc.  (formerly  Ontario  Hydro)  since
November 1995, including as Chairman, President and Chief Executive Officer from
August 1997 to March 1998.  Prior to joining Ontario Hydro,  Mr. Farlinger spent
his entire business career with the accounting and management consulting firm of
Ernst & Young, Canada, including serving as Chairman and Chief Executive Officer
from 1987 to 1994. Mr. Farlinger is also a director of Laidlaw Inc.

      HON.  THOMAS H. KEAN has served as a  Director  of CIT since July 1, 2002,
and  previously  from  November  1999 to June 1,  2001.  Mr.  Kean has served as
President of Drew  University  since February 1990, and is a former  Governor of
the State of New  Jersey.  He is also a director  of Amerada  Hess  Corporation,
ARAMARK Corporation, Fiduciary Trust Co. International, The Pepsi Bottling Group
and  UnitedHealth  Group Inc.  Mr.  Kean is also a director  of The Robert  Wood
Johnson Foundation, a non-profit foundation.

      EDWARD J.  KELLY,  III has served as a Director of CIT since July 1, 2002.
Mr. Kelly has served as President and Chief Executive  Officer and a Director of
Mercantile Bankshares Corporation since March 2001. Mr. Kelly served as Managing
Director of J.P. Morgan Chase, and one of its  predecessors,  J.P. Morgan,  from
February 1996


                                       84


to February 2001, as General  Counsel and Secretary of J.P. Morgan from November
1994 to January 1996,  and is a former partner in the New York law firm of Davis
Polk &  Wardwell.  Mr.  Kelly is also a director  of Adams  Express  Company and
Petroleum & Resources  Corporation,  both of which are closed-end  mutual funds,
and of  Constellation  Energy Group,  CSX  Corporation,  and Hartford  Financial
Services Group.

      PETER J.  TOBIN has served as a  Director  of CIT since July 1, 2002,  and
previously  from May 1984 to June 1,  2001.  Additionally,  the Board  named Mr.
Tobin as lead  Director,  and in such  capacity,  he will  preside at  executive
sessions of the independent  directors.  Mr. Tobin has been Dean of the Peter J.
Tobin College of Business at St. John's University since August 1998. From March
1996 to  December  1997,  Mr.  Tobin was Chief  Financial  Officer  of The Chase
Manhattan  Corporation.  From  January  1992 to March 1996,  Mr. Tobin served as
Chief Financial  Officer of Chemical Banking  Corporation,  a predecessor of The
Chase  Manhattan  Corporation,  and  prior  to that he  served  in a  number  of
executive  positions at  Manufacturers  Hanover  Corporation,  a predecessor  of
Chemical Banking  Corporation.  He is a director of AXA Financial  (formerly The
Equitable  Companies  Incorporated),   Alliance  Capital  Management,   L.P.,  a
subsidiary  of AXA  Financial  that manages  mutual funds,  and H.W.  Wilson,  a
publishing company.

Board Committees

      Our  board  of  directors  has   established  an  audit  committee  and  a
compensation and governance committee. The audit committee is comprised of three
independent directors and the compensation and governance committee is comprised
of two  independent  directors.  The board of directors  may appoint  additional
committees at its discretion.

Audit Committee

      The audit committee conducts its duties consistent with a written charter,
which includes:

      o     retain and  determine the  compensation  of the  independent  public
            accountants;

      o     monitoring  the integrity of our financial  accounting and reporting
            process and systems of internal controls;

      o     reviewing  our   corporate   compliance   policies  and   monitoring
            compliance  with our Code of Business  Conduct and other  compliance
            policies,  including  reviewing  any  significant  case of  employee
            conflict of interest or misconduct; and

      o     reporting to our board of directors as appropriate.

      PETER J. TOBIN  (Chairman),  WILLIAM A. FARLINGER and EDWARD J. KELLY, III
serve as members of the audit  committee.  The charter  for our audit  committee
complies with SEC and New York Stock Exchange requirements. On November 5, 2002,
the  Board of  Directors  determined  that  Mr.  Tobin  meets  the  standard  of
"Financial Expert" as proposed by the SEC.

Compensation and Governance Committee

      The compensation and governance  committee  conducts its duties consistent
with a written charter, which includes:

      o     considering   and  approving   salaries,   bonuses  and  stock-based
            compensation for certain executive officers;

      o     administering   and  making  awards  under  the   Long-Term   Equity
            Compensation Plan;

      o     identifying and recommending  qualified candidates to fill CIT board
            of directors and committee positions;

      o     overseeing corporate governance,  including reviewing the structure,
            duties,  membership  and  functions  of the  board of  directors  as
            appropriate.

      HON.  THOMAS H. KEAN  (Chairman)  and JOHN S. CHEN serve as members of the
compensation  and  governance   committee.   The  Board  anticipates  naming  an
additional  member  to  the  compensation  and  governance   committee  when  an
additional independent director is appointed to the Board.


                                       85


Compensation and Governance Committee Interlocks and Insider Participation

      There  are  no  interlocking  relationships  between  any  member  of  our
compensation  and  governance  committee and any of our executive  officers that
would require disclosure under the rules of the SEC.

Executive Officers

      The  following  table  sets  forth  information  as of  December  1,  2002
regarding our executive officers,  other than Mr. Gamper, who is listed above as
director.  The  executive  officers  were  appointed  by and hold  office at the
discretion  of the  board of  directors.  Certain  executive  officers  are also
directors or trustees of privately held or not-for-profit organizations that are
not referred to below.

Name                     Age                      Position
----                     ---  --------------------------------------------------
Thomas L. Abbate ......  57   Executive Vice President and Chief Risk Officer
John D. Burr ..........  59   Group Chief Executive Officer, Equipment Rental
                                and Finance
Thomas B. Hallman .....  49   Group Chief Executive Officer, Specialty Finance
Robert J. Ingato ......  42   Executive Vice President, General Counsel &
                                Secretary
Joseph M. Leone .......  49   Executive Vice President and Chief Financial
                                Officer
Lawrence A. Marsiello .  52   Group Chief Executive Officer, Commercial Finance
David D. McKerroll ....  43   Group Chief Executive Officer, Structured Finance
Nikita Zdanow .........  65   Group Chief Executive Officer, Capital Finance

      THOMAS L. ABBATE has served as CIT's  Executive  Vice  President and Chief
Risk Officer since July 2000.  Previously,  Mr. Abbate served as Executive  Vice
President of Credit Risk  Management  of CIT since October 1999 and as Executive
Vice President and Chief Credit Officer of Equipment Financing,  a business unit
of CIT,  since August 1991.  Prior to August 1991,  Mr.  Abbate held a number of
executive positions with CIT and with Manufacturers  Hanover Corporation,  where
he had been employed since 1973.

      JOHN D.  BURR  has  served  as  Group  Chief  Executive  Officer  of CIT's
Equipment Rental and Finance Group since June 2001. Mr. Burr served as President
of Equipment  Financing/North  American Construction and Transportation division
since 1999 and Executive Vice President of Equipment  Financing  since 1983, and
held a number of other management and executive positions at CIT since 1967.

      THOMAS B.  HALLMAN  has served as Group Chief  Executive  Officer of CIT's
Specialty Finance Group since July 2001. Previously, Mr. Hallman served as Chief
Executive Officer of the Consumer Finance business unit, the home equity unit of
Specialty  Finance,  since  joining  CIT in 1995,  and held a number  of  senior
management positions with other financial services firms prior to 1995.

      ROBERT J. INGATO has served as CIT's  Executive Vice President and General
Counsel since June 2001, and  additionally  as Secretary  since August 14, 2002.
Previously,  Mr. Ingato served as Executive  Vice  President and Deputy  General
Counsel since  November  1999, as Executive  Vice  President of Newcourt  Credit
Group,  Inc.,  which was acquired by CIT,  since January 1988, as Executive Vice
President and General  Counsel of AT&T Capital  Corporation,  a  predecessor  of
Newcourt, since 1996, and in a number of other legal positions with AT&T Capital
since 1988.

      JOSEPH M. LEONE has served as CIT's  Executive  Vice  President  and Chief
Financial  Officer  since July 1995.  Previously,  Mr. Leone served as Executive
Vice  President  of Sales  Financing,  a business  unit of CIT,  from June 1991,
Senior Vice President and Controller  since March 1986, and in a number of other
executive positions with Manufacturers Hanover Corporation since May 1983.

      LAWRENCE A. MARSIELLO has served as Group Chief Executive Officer of CIT's
Commercial Finance Group since August 1999. Previously,  Mr. Marsiello served as
Chief Executive Officer of the Commercial  Services business unit, the factoring
unit of  Commercial  Finance,  since  August  1990,  and in a  number  of  other
executive positions with CIT and Manufacturers Hanover Corporation, where he had
been employed since 1974.


                                       86


      DAVID D.  MCKERROLL has served as Group Chief  Executive  Officer of CIT's
Structured Finance Group since November 1999.  Previously,  Mr. McKerroll served
as President of Newcourt Capital,  a division of Newcourt Credit Group Inc., and
was one of the founders of Newcourt Credit Group Inc.,  which he joined in 1987.
Mr. McKerroll is also a director of Cossette Communication Group Inc.

      NIKITA ZDANOW has served as Group Chief Executive Officer of CIT's Capital
Finance  Group  since  1985,  and has  served  in a number  of  other  executive
positions since joining CIT in 1960.

Director Compensation

      Director  remuneration  consists principally of cash and an award of stock
options.

      Non-employee directors of CIT are paid an annual retainer of $50,000. Each
year the  non-employee  directors may make an election to receive some or all of
this annual cash remuneration in one or more of the following forms:

      o     Cash

      o     Stock Options

      o     Restricted Stock

      The number of shares of common  stock  underlying  options a director  may
elect  to  recieve  instead  of  cash   remuneration  is  calculated  using  the
Black-Scholes  option pricing model. The options that directors elect to recieve
in lieu of cash component of their compensation are immediately  vested, but not
exercisable until one year following the date of grant.  These options will have
a term of ten years.  Any amount elected to be received in restricted stock will
be  converted to shares of common stock with a market value equal to the closing
price of common stock on the day awarded.  The  restrictions  on the  restricted
stock will lapse on the first anniversary of the grant date.

      The option  component of remuneration  provides for annual grants of stock
options having a Black-Scholes value of $35,000 for directors generally,  except
that the committee chairman are entitled to grants with a $45,000 valuation.  At
the time of  appointment to the board of directors,  non-employee  directors are
each  awarded a grant of stock  option to  acquire  10,000  shares of our common
stock.  The option  component of director and the options granted at the time of
appointment become vested and exercisable in three equal,  annual  installments.
These options will have a term of ten years.

      Directors  who are also our  employees  do not  receive  any fees or other
compensation  for service on our board of directors or its  committees.  We will
reimburse directors for reasonable  out-of-pocket expenses incurred in attending
board or committee meetings.

Compliance with Section 16(a) of the Securities Exchange Act

      Based on CIT's  records  and  other  information,  CIT  believes  that its
directors  and  executive  officers  complied  with the  applicable  SEC  filing
requirements for reporting  beneficial  ownership of CIT's equity securities for
the fiscal year ended  September  30, 2002,  except that Mr. Kean  inadvertently
failed to report  in his Form 4 filed  for July  2002 that he  purchased  10,000
shares of CIT common stock in CIT's IPO and Mr. Zdanow inadvertently reported in
his Form 4 filed for July 2002 that he purchased  1,200 shares of common  stock,
rather than the 1,500 shares  actually  purchased.  Mr. Kean and Mr. Zdanow each
filed amended Form 4s in August 2002.


                                       87


Item 11. Executive Compensation

      The table below sets forth the annual compensation,  including bonuses and
deferred compensation,  of the Named Executive Officers for services rendered in
all capacities to CIT during the fiscal year ended  September 30, 2002, the nine
months  ended  September  30,  2001,  and the years ended  December 31, 2000 and
December 31, 1999.

                           SUMMARY COMPENSATION TABLE
                                 (U.S. Dollars)


                                                                  Annual Compensation           Long Term Compensation Awards
                                                          --------------------------------  ------------------------------------
                                                                                  Other                                  All
                                                                                  Annual    Restricted    Securities    Other
Name and Principal                                                               Compen-      Stock       Underlying   Compen-
Positions                                Period            Salary     Bonus(1)   sation(2)   Awards(3)    Options(4)   sation(5)
------------------                       ------            ------     --------   ---------  ----------    ----------   ---------
                                                                                                   
Albert R. Gamper, Jr.              Oct 2001-Sept 2002     $900,000   $1,668,832   $15,000   $         0   1,519,560     $10,000
Chairman, President                  Jan-Sept 2001        $680,769   $3,120,434   $40,958   $16,949,070     717,360     $ 8,250
and Chief Executive                  Jan-Dec2000          $878,847   $  800,000   $98,188   $ 2,946,500     185,805     $41,954
Officer                              Jan-Dec 1999         $761,534   $1,237,503   $57,577   $         0     206,450     $36,861
Thomas B. Hallman                  Oct 2001-Sept 2002     $430,000   $  356,000   $ 1,209   $         0     379,890     $ 9,197
Group CEO                            Jan-Sept 2001        $288,846   $  605,000   $ 8,475   $ 1,490,275     119,560     $ 8,500
Specialty Finance                    Jan-Dec2000          $333,076   $  325,000   $16,692   $ 1,057,500      45,419     $20,123
                                     Jan-Dec1999          $277,115   $  292,188   $ 9,210   $         0      61,935     $17,485
Joseph M. Leone                    Oct 2001-Sept 2002     $405,000   $  390,500   $ 1,346   $         0     454,890     $ 9,237
Executive Vice President             Jan-Sept 2001        $302,308   $  580,000   $ 8,886   $ 1,659,596     119,560     $ 8,500
and Chief Financial                  Jan-Dec2000          $358,088   $  300,000   $21,168   $   785,625      37,161     $21,124
Officer                              Jan-Dec1999          $299,695   $  433,007   $12,267   $         0      74,322     $18,388
David D. McKerroll (6)             Oct 2001-Sept 2002     $435,928   $  398,356   $   916   $         0     293,681     $ 1,943
Group CEO                            Jan-Sept 2001        $326,483   $  295,731   $ 7,136   $ 1,128,978      74,725     $ 2,456
Structured Finance                   Jan-Dec2000          $395,959   $  554,343   $ 6,151   $ 1,003,125      41,290     $     0
                                     Nov-Dec1999          $ 49,458   $1,416,459   $     0   $         0      81,341     $     0
Nikita Zdanow                      Oct 2001-Sept 2002     $460,204   $  296,000   $ 1,539   $         0     379,890     $ 5,799
Group CEO                            Jan-Sept 2001        $344,615   $  525,000   $ 8,968   $ 1,896,657      74,725     $ 5,100
Capital Finance                      Jan-Dec2000          $409,238   $  400,000   $22,711   $ 1,057,500      47,484     $23,170
                                     Jan-Dec1999          $356,741   $  425,011   $14,437   $         0      64,000     $20,670


--------------------------------------------------------------------------------
(1)   Bonus  payments made to the Messrs.  Gamper,  Hallman,  Leone,  and Zdanow
      under CIT's  Annual  Corporate  Bonus plan during the twelve  months ended
      September 30, 2002 were for performance  during the period from October 1,
      2001 through June 30, 2002.  Based on performance for the period from July
      1, 2002 to December 31, 2002, Messrs. Gamper,  Hallman,  Leone, and Zdanow
      may be entitled  to an  additional  bonus,  which will be payable in early
      2003.

      For the period  from  October  2001  through  June 2002,  Messrs.  Gamper,
      Hallman,  Leone, and Zdanow received a portion of their corporate bonus as
      CIT  restricted  stock.  The  amounts  shown  include  the  value  of  the
      restricted stock. The number of shares was based on a price of $22.20, the
      closing  price of CIT  common  stock on August 13,  2002,  the date of the
      grant. All shares were issued with a one-year restriction.  The number and
      value of  shares  awarded  are as  follows:  Mr.  Gamper  - 50,675  shares
      ($1,124,985),  Mr. Hallman - 12,162 shares ($269,996),  Mr. Leone - 15,765
      shares ($349,983),  and Mr. Zdanow - 11,261 shares ($249,994). The balance
      of the  listed  bonus  amounts  relate to cash  bonuses  paid under a Tyco
      quarterly corporate bonus plan, which was discontinued after the CIT IPO.

      Of the  $1,668,832  in corporate  bonus that Mr.  Gamper  received for the
      period from October 2001 through September 2002,  $918,832 was awarded for
      his performance under the Tyco corporate bonus plan, of which $750,000 was
      paid out in two  quarterly  payments,  $375,000  paid in cash and $375,000
      paid in CIT restricted  stock as mentioned above, and $168,832 was awarded
      in  unrestricted  Tyco  shares  (3,521  shares  at a Tyco  share  price of
      $47.95).  The additional  $750,000 was awarded by CIT for his  performance
      from  January 1 through  June 30, 2002 of which  $749,985  was paid in CIT
      restricted stock as mentioned above and $15 was paid in cash.

      For the nine months ended  September  2001, Mr. Gamper received a bonus of
      $3,120,434,  of which  $2,002,040 was paid in cash and $1,118,394 was paid
      as a grant of 25,020 Tyco  common  shares,  based on the closing  price of
      Tyco common stock of $44.70 per share on October 1, 2001,  the date of the
      grant.

      The  amounts  shown in the Bonus  column for 2001 and 2000 (other than for
      Mr.  Gamper as  described  above),  represent  the cash amounts paid under
      CIT's Annual  Corporate  Bonus Plan. The amounts shown in the Bonus column
      for 1999 represent the cash amounts paid under CIT's annual bonus plan and
      the value of CIT Common  Stock or common  stock units  received in lieu of
      cash.  Pursuant to the CIT  Long-Term  Equity  Compensation  Plan ("ECP"),
      Executive  Officers  could  elect to receive  between 10% and 50% of their
      1999  annual   bonus  awards  in  Common  Stock  or  Common  Stock  Units,
      respectively, rather than cash. The cash portion deferred was converted to
      shares of Common  Stock or Common Stock Units with a market value equal to
      125% of the deferred  amount.  CIT paid  dividends on the shares of Common
      Stock or Common Stock Units awarded to each Named Executive Officer at the
      same rate  applicable  to all other  issued and  outstanding  shares.  The
      amounts  included in the bonus column for shares issued in 1999  represent
      the fair  market  value on  January  26,  2000  (the date of grant) of the
      shares of CIT Common Stock awarded,  based on the closing price of $19.625
      per share of CIT Common Stock. The value of restricted stock taken in lieu
      of cash is as follows:  Mr. Gamper - $687,503,  Mr. Hallman - $85,938, Mr.
      Leone - $165,007, and Mr. Zdanow - $125,011.

                                              (footnotes continued on next page)


                                       88


(footnotes continued from previous page)

(2)   The  payments  set forth in each period  under Other  Annual  Compensation
      represent  the dividends  paid on  restricted  stock held in each of those
      years.  Such  dividends  were payable at the same rate  applicable  to all
      other issued and outstanding shares.

(3)   Restricted   Stock  Awards  include  grants  of  Performance   Accelerated
      Restricted  Shares  (PARS) made in January 2000 under The CIT Group,  Inc.
      Long-Term Equity  Compensation Plan and grants of restricted stock made in
      June  2001  under  the  Tyco  International  Ltd.  1994  Restricted  Stock
      Ownership  Plan for Key Employees in conjunction  with the  acquisition of
      CIT by Tyco.

      The 2001  grants  vest 100% at the end of three  years for Mr.  Gamper and
      one-third on each anniversary for the others. In addition, shares may vest
      earlier  under other  conditions  as  described  in the  individual  Award
      Agreements.  The Tyco  Restricted  Shares were converted to CIT Restricted
      Shares  based on the IPO  offering  price.  Recipients  of shares have the
      right to vote such shares and receive dividends.

      The PARS awarded  under CIT's prior plan vested on June 1, 2001 due to the
      change of control associated with CIT's acquisition by Tyco International.
      The shares were issued at a fair  market  value of $20.75.  Awards were as
      follows:  Mr. Gamper - 142,000  shares;  Mr. Hallman - 30,000 shares;  Mr.
      Leone - 30,000 shares;  Mr.  McKerroll - 30,000  shares;  and Mr. Zdanow -
      30,000 shares.

      For the year 2000, Restricted Stock Awards also included grants made under
      a Special Stock Award Program to Mr. Hallman, Mr. Leone, Mr. McKerroll and
      Mr. Zdanow. Payments under this plan were based on the achievement of 2000
      company performance measures.  Awards were in the form of restricted stock
      grants  recommended  and  approved on January 24,  2001.  50% of the award
      vested on this date and the remaining 50% was subject to restriction until
      January  24,  2002,  except  that these  shares  vested on June 1, 2001 in
      conjunction  with the  acquisition  of CIT by Tyco.  The  values  of these
      grants are included in the  Restricted  Stock  Awards  column based on the
      share  price on the grant date of January  24, 2001 of $21.75 per share of
      CIT common stock. Awards were as follows: Mr. Hallman - 20,000 shares; Mr.
      Leone - 7,500  shares;  Mr.  McKerroll - 17,500  shares;  and Mr. Zdanow -
      20,000 shares.

      The number and value at September  30, 2002 of restricted  stock  holdings
      based  upon the  closing  market  price of $17.98 per share for CIT common
      shares was as  follows:  Mr.  Gamper - 230,023  shares  ($4,135,814),  Mr.
      Hallman - 22,675 shares ($407,697),  Mr. Leone - 27,473 shares ($493,965),
      Mr.  McKerroll  7,964 shares  ($143,193),  and Mr.  Zdanow - 24,641 shares
      ($443,045). A portion of this stock was granted as part of their corporate
      bonus for the period from October 2001 through June 2002. For more details
      see footnote (1).

(4)   Two new  option  awards  were  granted  during  the  twelve  months  ended
      September 30, 2002.  The first grant was awarded on February 5, 2002 under
      the  Tyco  International  Ltd.  Long  Term  Incentive  Plan  and the  Tyco
      International  Ltd.  Long  Term  Incentive  Plan II.  These  options  were
      converted to options to purchase  shares of CIT at the time of the CIT IPO
      from Tyco  based on a  conversion  rate of  .5978.  The  second  grant was
      awarded  under the CIT Group Inc.  Long Term Equity  Compensation  Plan on
      July 2, 2002 to coincide with the CIT IPO from Tyco.  For more details see
      the table below "Option Grants In Last Fiscal Year".

      All options  issued  either in Tyco options or in CIT options prior to the
      Tyco acquisition are reported in the table as current CIT options based on
      a  conversion  rate of .5978  from Tyco  options to CIT  Options.  Options
      granted  between  January and  September  2001 were awarded under the Tyco
      International  Ltd. Long Term  Incentive  Plan and the Tyco  International
      Ltd. Long Term Incentive Plan II. The 2001 grants vested one-third on each
      anniversary date for Mr. Gamper and 100% at the end of three years for the
      others. At the time of the CIT IPO from Tyco, all unvested options granted
      between January and September 2001 were cancelled.

      For Mr.  Gamper,  800,000  unvested Tyco options were  cancelled and 8,994
      vested options were forfeited.  Additionally, Mr. Gamper, retained 400,000
      vested Tyco  options  that were awarded on June 1, 2001 and vested on June
      1, 2002.  These  options did not convert to options to purchase  shares of
      CIT and remained as options to purchase  shares of Tyco. For Mr.  Hallman,
      200,000  unvested  Tyco options were  cancelled.  For Mr.  Leone,  200,000
      unvested Tyco options were cancelled. For Mr. McKerroll,  125,000 unvested
      Tyco options were cancelled. For Mr. Zdanow, 125,000 unvested Tyco options
      were cancelled.  The numbers shown in the table have been converted to CIT
      shares at a rate of .5978.  Options for 2000 and 1999 were  awarded  under
      The CIT Group Inc.  Long Term Equity  Compensation  Plan and represent CIT
      options that were  converted to options to purchase  shares of Tyco at the
      time of the  acquisition of CIT by Tyco based on an exchange rate of .6907
      and then converted to options to purchase new shares of CIT at the time of
      the CIT IPO from Tyco based on an exchange rate of .5978.

(5)   For the  twelve  months  ended  September  30,  2002,  nine  months  ended
      September  30,  2001,  and the years ended  December 31, 2000 and 1999 the
      payments  set forth under "All Other  Compensation"  for  Messrs.  Gamper,
      Hallman,  Leone, and Zdanow include the matching employer  contribution to
      each  participant's  account and the employer flexible  retirement account
      contribution to each participant's  flexible  retirement account under the
      CIT Group  Inc.  Savings  Incentive  Plan (the "CIT  Savings  Plan").  The
      matching  employer  contribution  was  made  pursuant  to  a  compensation
      deferral  feature  of the CIT  Savings  Plan under  Section  401(k) of the
      Internal  Revenue Code of 1986. For the period ending September 2002, they
      were as follows:  Mr. Gamper - $10,000,  Mr. Hallman - $9,197, Mr. Leone -
      $9,237,  and Mr. Zdanow - $5,799. For January through September 2001, they
      were as follows:  Mr. Gamper - $8,250,  Mr. Hallman - $8,500,  Mr. Leone -
      $8,500, and Mr. Zdanow - $5,100. In 2000 Messrs. Gamper,  Hallman,  Leone,
      and Zdanow  received a contribution of $6,800 under the employer match and
      a contribution of $6,800 under the employer flexible  retirement  account.
      In 1999 Messrs. Gamper, Hallman, Leone, and Zdanow received a contribution
      of $6,400 under the employer match and a contribution  of $6,400 under the
      employer flexible  retirement  account.  The payments set forth under "All
      Other Compensation" also included contributions to the accounts of Messrs.
      Gamper,  Hallman,  Leone, and Zdanow under The CIT Group Inc. Supplemental
      Savings Plan (the "CIT Supplemental  Savings Plan"),  which is an unfunded
      non-qualified plan. For 2000, they were as follows:  Mr. Gamper - $28,354,
      Mr.  Hallman - $6,523,  Mr. Leone - $7,524,  and Mr. Zdanow - $9,570.  For
      1999,  they were as follows:  Mr. Gamper - $24,061,  Mr. Hallman - $4,685,
      Mr. Leone - $5,588, and Mr. Zdanow - $7,870.

      For the twelve  months ended  September 30, 2001 and the nine months ended
      September 30, 2001, "All Other  Compensation"  reported for Mr.  McKerroll
      includes  the  matching   employer   contribution   under  the  Registered
      Retirement Savings Plan (RRSP), a Canadian-based,  government program. The
      Contribution was paid out in Canadian dollars and has been converted to US
      dollars using a .6462 conversion rate.

(6)   For the  twelve  months  ended  September  30,  2002,  nine  months  ended
      September 30, 2001,  and the years ended  December 31, 2000 and 1999,  Mr.
      McKerroll's employment contract states his base salary and bonus guarantee
      in US dollars.  Mr.  McKerroll  is a resident of Canada and is paid in the
      local currency  (Canadian  dollars).  Therefore,  minor  variations in his
      compensation  may  occur due to  currency  fluctuations.  Mr.  McKerroll's
      payments in Canadian  dollars,  for the period  ending  September 30, 2002
      were C$687,367 in base salary and C$628,123 in bonus and C$505,235 in base
      salary and  C$457,646 in bonus for the period  ending  September 30, 2001.
      Mr. McKerroll's payout in Canadian dollars, for the period ending December
      31, 2000 was C$588,000 in base salary and C$823,200 in bonus. The balances
      were converted to U.S. Dollars using an average annual  conversion rate of
      .6342 for 2002, .6462 for 2001 and .6734 for 2000.

      Mr. McKerroll  received a pro-rated portion of compensation for the period
      from November 15, 1999 to December 31, 1999.  Mr.  McKerroll  became a CIT
      employee on November  15,  1999 as part of CIT's  acquisition  of Newcourt
      Credit Group, Inc.  Compensation  received by Mr. McKerroll for the period
      prior to the  acquisition  date was not  included  in these  numbers.  His
      compensation in Canadian  dollars for this pay period was C$73,500 in base
      salary and C$2,105,007 in bonus. Mr.  McKerroll's 1999 bonus  compensation
      includes C$1,944,222,  ($1,308,275), which reflects a portion of the bonus
      paid  to him  for  the  period  prior  to  November  15,  1999.  All  1999
      compensation  for Mr.  McKerroll was  converted to U.S.  dollars using the
      average annual rate of .6729.


                                       89


Stock Option Awards During Fiscal 2002

      The following  table sets out awards of stock  options to Named  Executive
Officers in fiscal  2002.  All stock  options  awarded  during  fiscal 2002 were
awarded under the CIT Group Inc. Long Term Equity  Compensation  Plan,  the Tyco
International Ltd. Long Term Incentive Plan, or the Tyco International Ltd. Long
Term Incentive Plan II and represent options to acquire CIT common shares.

                        OPTION GRANTS IN LAST FISCAL YEAR



                                            Number of   Percent of Total
                                           Securities     Options/SARs    Exercise
                                           Underlying      Granted to      or Base                     Grant Date
                             Date of      Options/SARs    Employees in      Price      Expiration        Present
        Name                 Grant(1)      Granted(2)    Fiscal Year(3)   ($/Sh)(4)       Date           Value(5)
        ----                ----------    ------------   --------------   ---------    ----------      ----------
                                                                                  
Albert R. Gamper Jr.        07/02/2002     1,400,000         8.93%         $23.00      07/02/2012      $8,694,000
President and               02/05/2002       119,560         0.76%         $39.87      02/04/2012      $  316,436
Chief Executive Officer     03/05/1999        82,580         0.53%         $74.47      03/05/2009      $  104,464
                            11/13/1997       255,668         1.63%         $65.39      11/13/2007      $  329,300
Thomas B. Hallman           07/02/2002       350,000         2.23%         $23.00      07/02/2012      $2,173,500
Group CEO                   02/05/2002        29,890         0.19%         $39.87      02/05/2012      $   79,109
Specialty Finance
Joseph M. Leone             07/02/2002       425,000         2.71%         $23.00      07/02/2012      $2,639,250
Executive Vice President    02/05/2002        29,890         0.19%         $39.87      02/04/2012      $   79,109
and Chief Financial         03/05/1999        41,290         0.26%         $74.47      03/05/2009      $   52,232
Officer                     11/13/1997        47,318         0.30%         $65.39      11/13/2007      $   60,946
David D. McKerroll          07/02/2002       275,000         1.75%         $23.00      07/02/2012      $1,707,750
Group CEO                   02/05/2002        18,681         0.12%         $39.87      02/04/2012      $   49,442
Structured Finance          10/26/2000        41,290         0.26%         $34.06      10/26/2010      $  225,072
                            11/18/1999        20,645         0.13%         $51.92      11/18/2009      $   59,354
                            07/28/1999        24,568         0.16%         $51.05      07/28/2009      $   68,938
                            03/07/1999        36,129         0.23%         $89.33      03/07/2009      $   22,436
                            05/02/1997        82,579         0.53%         $62.43      02/06/2007      $   89,268
Nikita Zdanow               07/02/2002       350,000         2.23%         $23.00      07/02/2012      $2,173,500
Group CEO                   02/05/2002        29,890         0.19%         $39.87      02/04/2012      $   79,109
Capital Finance             10/26/2000        23,572         0.15%         $34.06      10/26/2010      $   54,216
                            11/18/1999        33,032         0.21%         $51.92      11/18/2009      $   22,792
                            03/05/1999        30,968         0.20%         $74.47      03/05/2009      $    4,986
                            11/13/1997        53,099         0.34%         $65.39      11/13/2007      $   15,877

--------------------------------------------------------------------------------
(1)   All  options  listed  represent  options to  purchase  CIT  common  stock.
      However,  except for options  originally granted in July 2002, all options
      listed were  converted to CIT options from Tyco option and, in some cases,
      from earlier CIT options which Tyco  converted to Tyco options.  Each Date
      of Grant  represents the date of original grant of a current CIT option or
      a converted  Tyco option or earlier CIT option.  The vesting  schedule and
      expiration date for each option is based upon the original Date of Grant.

(2)   Options  granted  in July 2002  were  granted  under  the CIT  Group  Inc.
      Long-Term  Equity  Compensation  Plan.  For this grant,  the stock options
      fully  vest  on the  fourth  anniversary  of the  date  of the  grant.  In
      addition,  these  options  may vest  earlier  under  other  conditions  as
      described in the individual award agreements.  Options granted in February
      2002 were granted as options to purchase shares of Tyco Common Stock under
      the  Tyco  International  Ltd.  Long  Term  Incentive  Plan  and the  Tyco
      International  Ltd.  Long Term  Incentive  Plan II. At the time of the CIT
      IPO,  these  options were  converted to options to purchase  shares of CIT
      based on a conversion  rate of .5978.  For this grant,  the stock  options
      vest fully on the third anniversary of the date of the grant. In addition,
      these options may vest earlier under other  conditions as described in the
      individual award  agreements.  Options granted prior to February 2002 were
      originally granted as options to purchase shares of CIT Common Stock under
      the CIT Long-Term Equity  Compensation Plan (prior to CIT's acquisition by
      Tyco).  These options were converted to options to purchase shares of Tyco
      at the time of the acquisition of CIT by Tyco based on an exchange rate of
      .6907 and then  converted  to options to purchase new shares of CIT at the
      time of the CIT IPO from Tyco  based on an  exchange  rate of  .5978.  For
      Messrs. Gamper, Leone and Zdanow, the options granted on November 13, 1997
      in the exhibit include three separate grants Gamper  (109,584;  54,792 and
      91,292), Leone (23,370;  12,263 and 11,685) and Zdanow (15,690; 24,939 and
      12,470).

(3)   Represents the percentage of all options  granted in fiscal 2002 under the
      CIT Group Inc. Long-Term Equity Compensation Plan.

(4)   The July 2002 options  were issued as part of a firm-wide  IPO grant at an
      exercise  price equal to the initial  offering price of CIT on the date of
      grant.  The February  2002 options were  originally  granted by Tyco at an
      exercise  price equal to the closing  price of Tyco's  common stock on the
      date of grant. The remaining options were originally  granted by CIT prior
      to its acquisition by Tyco at an exercise price equal to the closing price
      of CIT's  common  stock on the date of grant.  The  exercise  price of the
      earlier CIT options were adjusted at the time of CIT's acquisition by Tyco
      based on a conversion  rate of .6907,  and the exercise  price of all Tyco
      options, including those converted from earlier CIT options, were adjusted
      based on a conversion rate of .5978. The exercise price for each converted
      option  represents  the  current  values  after  applying  all  applicable
      conversion formulas.

                                              (footnotes continued on next page)


                                       90


(footnotes continued from previous page)

(5)   The ultimate  value of the options will depend on the future  market price
      of CIT's common shares, which cannot be forecast with reasonable accuracy.
      The actual  value,  if any, an optionee  will realize upon  exercise of an
      option  will  depend on the  excess of the  market  value of CIT's  common
      shares over the exercise  price on the date the option is  exercised.  The
      values shown are based on the Black-Scholes option-pricing model, which is
      a method of  calculating a  theoretical  value of the options based upon a
      mathematical formula using certain assumptions.  For the calculation,  the
      following  assumptions were used: an assumed life of three to eight years;
      interest rate of 3.2% to 4.9%,  which represents the risk free rate with a
      maturity  date  similar to the assumed  exercise  period;  assumed  annual
      volatility of underlying  shares of 27.8% to 33.2%,  calculated based on a
      historical  share  price  movement  analysis  of peer  organizations  over
      periods  generally  commensurate  with the  expected  life of the  option;
      quarterly  dividend  payment of $0.12 per share;  and the vesting schedule
      indicated for the grant.

      The following table gives additional  information on options  exercised in
fiscal  2002 by the Named  Executive  Officers  and on the  number  and value of
options held by Named Executive Officers on September 30, 2002.

                 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                        AND FISCAL YEAR-END OPTION VALUES
                                 (U.S. Dollars)




                                                            Number of Securities       Value of Unexercised In-
                                                            Underlying Unexercised       the-Money Options at
                                                           Options at 09/30/2002(1)            09/30/2002
                                   Shares                  ------------------------    ------------------------
                                 Acquired on      Value         Exercisable /               Exercisable /
 Name                             Exercise      Realized        Unexercisable               Unexercisable
---------------------------      -----------    --------      -------------------           -------------
                                                                                   
Albert R. Gamper, Jr.                 0            $0         338,248 / 1,519,560              $0 / $0
President and
Chief Executive Officer

Thomas B. Hallman                     0            $0             0 / 379,890                  $0 / $0
Group CEO
Consumer Finance

Joseph M. Leone                       0            $0          88,608 / 454,890                $0 / $0
Executive Vice President
and Chief Financial Officer

David McKerroll                       0            $0          205,211 / 293,681               $0 / $0
Group CEO
Structured Finance

Nikita Zdanow                         0            $0         140,671 / 379,890                $0 / $0
Group CEO
Capital Finance


--------------------------------------------------------------------------------
(1)   Does not include  400,000  exercisable  options to purchase shares of Tyco
      granted to Al Gamper on June 1, 2001. These options remained as options to
      purchase shares of Tyco and were not substituted  with options to purchase
      shares of CIT. The options  reported are  non-qualified  stock  options to
      purchase  CIT common  shares  awarded  under the CIT Group Inc.  Long-Term
      Equity Compensation Plan including all options converted from Tyco options
      or prior CIT options. The exercise price of the options ranges from $23.00
      to $89.33 per share and the  closing  trading  price on the New York Stock
      Exchange of Common Stock at September 30, 2002 was $17.98.

                              RETENTION AGREEMENTS

General

      Mr. Gamper has a retention  agreement that extends until June 1, 2004. Mr.
Gamper's agreement provides that he will serve as the Chief Executive Officer of
CIT. The agreement provides for the payment of an annual base salary of not less
than  $1,000,000  (which Mr.  Gamper  voluntarily  reduced to $900,000  from the
inception  of his  contract  through the current  date) and an annual cash bonus
based on performance  targets.  Pursuant to his employment  agreement,  his base
salary shall be reviewed at the time all executive officers of CIT are reviewed.
Provided CIT achieves at least fifteen percent growth in its net income from the
prior  annual  period,  Mr.  Gamper  is  entitled  to a  Special  Cash  Bonus of
$3,000,000 for the fiscal year ending September 30, 2002.

      The  agreement  also  provided  for grants of  restricted  stock and stock
options,  which are detailed in the Summary  Compensation  Table.  The retention
agreement   provides  for  participation  in  all  employee  pension,   welfare,
perquisites,  fringe benefit and other benefit plans generally applicable to the
most senior  executives of CIT and continued  participation  in CIT's  Executive
Retirement Program and all other supplemental and excess retirement plans during
the retention  agreement on terms no less  favorable  than provided  immediately
prior to the effective date of the agreement.  Mr. Gamper is eligible to receive
benefits under the CIT retiree medical and life insurance plan for the remainder
of his life and the life of his spouse.  In addition,  Mr. Gamper is entitled to
receive


                                       91


expense  reimbursement and certain additional  benefits provided to him pursuant
to a prior employment  agreement between Mr. Gamper and CIT dated as of November
1,  1999,  which  shall be  provided  on the same  basis as such  benefits  were
provided to Mr. Gamper prior to the effective date of the agreement.

      In  addition,  Messrs.  Hallman,  Leone,  McKerroll  and Zdanow  also have
retention  agreements that extend until June 1, 2004. Their  agreements  provide
for the payment of an annual  base  salary of not less than the amount  received
prior to the  acquisition  by Tyco,  to be  reviewed  at the time all  executive
officers of CIT are reviewed. Further, with the exception of Mr. McKerroll, they
are  entitled  to an  annual  bonus  opportunity,  as  determined  by the  Chief
Executive  Officer of CIT.  Mr.  McKerroll  has a  guaranteed  minimum  bonus of
$400,000 per year through  December 31, 2002,  after which he will be subject to
the  same  bonus  provision  as the  other  executive  officers.  The  retention
agreements  for  Messrs.  Hallman,  Leone,  McKerroll  and  Zdanow  provide  for
participation in all employee pension, welfare, perquisites,  fringe benefit and
other benefit plans generally available to senior executives.  In addition,  the
agreements  for  Messrs.  Hallman,  Leone,  and  Zdanow  provide  for  continued
participation in CIT's Executive  Retirement  Program and all other supplemental
and excess retirement plans on terms no less favorable than provided immediately
prior to the effective date of the agreement. Messrs. Hallman, Leone, and Zdanow
are also  eligible to receive  benefits  under the CIT retiree  medical and life
insurance plan.

      Messrs. Hallman, Leone, McKerroll and Zdanow's agreements also provide for
grants of restricted  stock and stock options,  details of which are provided in
the Summary Compensation Table.

Termination and Change-In-Control Arrangements

      If Mr.  Gamper's  employment  is terminated by him for "good reason" or by
CIT without  "cause" (in each case,  as these terms are defined in the retention
agreement),  then he is entitled to a cash  payment  equal to (i) the sum of his
unpaid base salary through the date of termination  and $1,000,000 pro rated for
the portion of the year he completed in the year of his termination,  (ii) three
times the sum of Mr.  Gamper's  annual  base  salary  plus  $1,000,000,  paid in
accordance  with normal payroll periods in equal  installments  over a period of
three  years,   provided   that  Mr.   Gamper   continues  to  comply  with  the
confidentiality and non-compete provisions of the retention agreement and, (iii)
if not already paid, the special cash bonus (without  regard to CIT's  financial
performance).  Also in such event,  the restricted  stock and options  described
above, as well as any other stock incentives then held by Mr. Gamper,  will vest
immediately.  In addition,  Mr. Gamper will be paid or provided with any amounts
or benefits he is eligible to receive  under any benefit plan of CIT,  including
the retiree medical benefits  described above, and to the extent permitted under
law he will  be  credited  with  age  and  service  credit  under  the  relevant
retirement plans through June 1, 2004.

      Mr.  Gamper's  retention  agreement  provides that he will not, during the
retention period and for two years after the date of termination (three years in
the case of  termination  by CIT  without  "cause"  or by Mr.  Gamper  for "good
reason" (in each case, as these terms are defined in the retention  agreement)),
without the written  consent of the board of  directors  of CIT (A) engage or be
interested in any business in the U.S. which is in competition with any lines of
business  actively being conducted by CIT on the date of  termination;  (B) hire
any person who was employed by CIT or its affiliates within the six-month period
preceding  the date of such  hiring or solicit,  entice,  persuade or induce any
person or entity doing  business with CIT or its  affiliates  to terminate  such
relationship or to refrain from extending or renewing the same, or (C) disparage
or publicly criticize Tyco or CIT or any of their affiliates.

      The retention  agreements of Messrs.  Hallman,  Leone,  and Zdanow provide
that, under certain circumstances, upon a termination of employment each will be
entitled  to  receive:  (i) the sum of (1) his annual  base  salary  through the
termination  date and (2) a pro-rated  average  annual  bonus (as defined in the
agreement) based on the number of days in the fiscal year until termination; and
(ii) the sum of (1) the greater of (x) the annual  base  salary  payable for the
remainder of the retention  agreement,  or (y) two times the annual base salary,
and (2) two times the average  annual  bonus.  The  retention  agreement  of Mr.
McKerroll  provides  that,  under certain  circumstances,  upon a termination of
employment  he will be  entitled  to receive  the sum of his annual  base salary
through the termination date and $3,000,000. Further, the options and restricted
stock  granted in  consideration  of the retention  agreement  shall vest at the
earlier of the vesting dates  specified in the award  agreements,  or subject to
compliance  with the  Confidentiality  and Competitive  Activity  Section of the
retention  agreement,  the second  anniversary of the termination.  Each of them
will also receive life insurance and medical, dental and disability benefits for
up to two years after termination,  any other amounts or benefits required to be
paid or provided  (to the extent not paid) and  outplacement  services.  Messrs.
Hallman,  Leone,  and Zdanow will also receive two  additional  years of age and
service credit under all relevant company retirement plans.


                                       92


      With  respect  to  Messrs.  Hallman,  Leone,  McKerroll  and  Zdanow,  the
retention  agreements  provide that each of them will not, while employed by CIT
under the retention  agreement and for one year after  termination (two years in
the case of  termination  by CIT without  "cause" or by the  executive for "good
reason" (in each case, as these terms are defined in the retention agreements)),
without the written  consent of the board of  directors  of CIT (A) engage or be
interested in any business in the world which is in  competition  with any lines
of business actively being conducted by CIT on the date of termination; (B) hire
any person who was employed by CIT within the  six-month  period  preceding  the
date of such hiring or solicit,  entice, persuade or induce any person or entity
doing  business with the Company to terminate  such  relationship  or to refrain
from extending or renewing the same, or (C) disparage or publicly  criticize CIT
or any of their affiliates.

      In the event  Mr.  Gamper or the other  Named  Executive  Officers  become
subject to excise taxes under Section 4999 of the Internal  Revenue  Code,  each
retention  agreement  provides  a gross up  payment  equal to the amount of such
excise taxes.

      At its  meeting on  November  5, 2002,  the  compensation  and  governance
committee of the board of directors  approved  certain  changes to the retention
agreements of Messrs.  Gamper,  Hallman, Leone and Zdanow. These changes will go
into effect upon the execution of amendment  agreements by such executives.  The
board of directors  ratified the  amendments to Mr.  Gamper's  agreement.  These
changes  include:  (1) extending the term of the agreements from June 1, 2004 to
December 31, 2004;  and (2)  establishing a minimum annual bonus for purposes of
calculating severance benefits. In addition, the following changes were approved
with respect to the retention agreements for Messrs.  Hallman, Leone and Zdanow:
(A) a reduction in the officer's post-termination  non-compete agreements to one
year from the date of termination for any reason;  (B) providing for the payment
of an  enhanced  severance  payment  in a lump sum if the  executive  officer is
terminated  without  "cause" or resigns his  employment for "good reason" during
the two-year extension period, and (C) providing that the term of the agreements
would  extend for a two year period  after a "change in control"  (as defined in
the agreements).  The enhanced  severance payment applies a multiplier of 2.5 to
the  officer's  base and bonus  compensation,  as opposed to the 2.0  multiplier
described in the formula  summarized  above.  Mr. Gamper's  retention  agreement
provides that he is entitled to his regular contractual  severance payment if he
is terminated  without "cause" or he resigns for "good reason" during the 90-day
period following a "Change in Control".

Retirement Plan and Supplemental Retirement Plan

      The CIT Group Inc. Retirement Plan (the "Retirement Plan") covers officers
and salaried employees who have one year of service and have attained age 21. We
also maintain a Supplemental  Retirement Plan for employees whose benefit in the
Retirement  Plan is  subject  to the  Internal  Revenue  Code  limitations.  Mr.
McKerroll is not a participant in either the Retirement Plan or the Supplemental
Retirement Plan.

      The Retirement Plan was revised in 2000 with a new "cash balance" formula,
which became effective  January 1, 2001.  Under this new formula,  each member's
accrued  benefits as of December 31, 2000 was converted to a lump sum amount and
each year  thereafter  the balance is to be credited  with a  percentage  of the
member's "Benefits Pay" (comprised of base salary,  plus certain annual bonuses,
sales incentives and commissions) depending on years of service as follows:

                     Years of Service            % Of "Benefits Pay"
                      --------------              ------------------
                          1 - 9                          5
                         10 - 19                         6
                         20 - 29                         7
                       30 or more                        8

      These balances are also to receive  annual  interest  credits,  subject to
certain  government limits. For 2001, the interest credit was 7.00% and for 2002
it will be 5.76%.  Upon  termination  after 5 years of employment or retirement,
the amount credited to a member is to be paid in a lump sum or converted into an
annuity.  Certain  eligible  members had the option of remaining  under the Plan
formula as in effect prior to January 1, 2001.

      Messrs. Gamper,  Hallman, Leone, and Zdanow are earning benefits under the
"cash balance" formula  effective January 1, 2001. The following table shows the
estimated  annual   retirement   benefits   (including  the  benefit  under  the
Supplemental  Retirement  Plan) which would be payable to each  individual if he
retired at normal retirement age (age 65) at his normalized 2002 "benefits pay."
The projected amounts include annual interest credits at 5.76%.


                                       93


                                              Year of            Estimated
                     Name                 Normal Retirement    Annual Benefit
                    ------                -----------------    --------------
              Albert R. Gamper, Jr .....        2007               $575,400
              Thomas B. Hallman ........        2017               $151,200
              Joseph M. Leone ..........        2018               $214,900
              Nikita Zdanow ............        2002               $169,700

Executive Retirement Plan

      The Named Executive  Officers,  excluding Mr. McKerroll,  are participants
under the Executive  Retirement  Plan.  The benefit  provided is life  insurance
equal to  approximately  three  times  base  salary  during  such  participant's
employment,  with a life annuity option payable  monthly by us upon  retirement.
The participant pays a portion of the annual premium,  which is calculated based
on the provided life insurance  benefit.  We are entitled to recoup our payments
from the  proceeds  of the  policy  in excess  of the  death  benefit.  Upon the
participant's  retirement,  a life  annuity  will be payable  out of our current
income and we  anticipate  recovering  the cost of the life  annuity  out of the
proceeds  of  the  insurance  policy  payable  to  CIT  upon  the  death  of the
participant.

      In  addition  to  the  table  of  pension  benefits  shown  above,  we are
conditionally  obligated to make annual payments under the Executive  Retirement
Plan in the amounts indicated to the Named Executive Officers at retirement: Mr.
Gamper,  $463,100;  Mr. Hallman,  $155,500; Mr. Leone, $222,600; and Mr. Zdanow,
$225,300.

Other Employee Benefits

      We  maintain  a  defined  contribution  plan  with a  401(k)  feature.  In
addition,  we maintain a supplemental  unfunded  defined  contribution  plan for
employees in a grandfathered  defined  benefit plan.  Retiree medical and dental
coverage is offered on a contributory  basis to certain  eligible  employees who
meet the age and service requirements.

Long-Term Equity Compensation Plan

      We adopted  the CIT Group Inc.  Long-Term  Equity  Compensation  Plan (the
"ECP"),  covering  directors and employees of the Company and its  subsidiaries.
The ECP is administered by the board of directors  and/or the  compensation  and
governance committee of the board of directors (the "Administrator").

      The ECP provides for the grant of annual incentive  awards,  incentive and
non-qualified  stock  options,  stock  appreciation  rights,  restricted  stock,
performance  shares  and  performance  units   (individually,   an  "Award,"  or
collectively,  "Awards").  The  terms  of the  awards  are set  forth  in  award
agreements (Award Agreements").  The Administrator of the ECP has the discretion
to select the participants to whom Awards will be granted and the type, size and
terms and conditions  applicable to each Award,  and the authority to interpret,
construe and implement the provisions of the ECP. The Administrator's  decisions
will be binding  at all times.  All  awards  under the ECP will be  intended  to
constitute  deductible  "qualified  performance-based  compensation"  within the
meaning  of  Section  162(m),   provided,   however,   that  in  the  event  the
Administrator  determines that such compliance is not desired with respect to an
Award of  Restricted  Stock (as defined  below),  compliance  with Code  Section
162(m) will not be required.

      The total  number of shares of common  stock that may be subject to Awards
under the ECP is 26,000,000 shares. Any shares of common stock under Awards that
terminate  or lapse will again be  available  under the ECP, and any shares that
are  transferred or  relinquished to the Company in satisfaction of the exercise
price or any  withholding  obligation with respect to an Award will be deemed to
be available for Awards under the ECP. In addition,  if any Awards granted under
another equity compensation plan are converted into Awards granted under the ECP
in  connection  with a merger  or other  business  transaction  approved  by the
Company's stockholders, the number of shares of common stock that may be subject
to Awards under the ECP will be increased by the number of shares covered by the
converted Awards. Common stock issued under the ECP may be either authorized but
unissued shares, treasury shares or any combination thereof.

      The maximum  aggregate payout with respect to an annual incentive award in
any fiscal year to any one participant  shall not exceed 3% of the  consolidated
pre-tax  earnings  of the  Company.  The maximum  aggregate  number of shares of
common  stock  that  may  be  granted  in  the  form  of  stock  options,  stock
appreciation  rights,  restricted stock, or performance  units/shares in any one
fiscal year to any one  participant  is 100% of the shares  available  under the
ECP.


                                       94


      With  respect  to any  Awards  based in  whole  or in part on  performance
objectives,  prior to the end of the performance period during which performance
will be measured (the  "Performance  Period"),  the Administrator of the ECP, in
its discretion,  may adjust the performance  objectives to reflect an event that
may materially  affect CIT's performance  including,  but not limited to, market
conditions,  changes in accounting  policies or  practices,  an  acquisition  or
disposition  of assets or other  property by CIT, or other  unusual or unplanned
events.

      Set forth below is a brief  description  of the Awards that may be granted
under the ECP:

      Annual  Incentive  Awards.  An annual  incentive award ("Annual  Incentive
Award") may be granted  under the ECP upon such terms and  conditions  as may be
established by the Administrator. Annual Incentive Awards may be granted in cash
or in shares of equivalent value, or in a combination thereof.

      Stock  Options.  Options  (each an "Option") to purchase  shares of common
stock,  which may be incentive or  non-qualified  stock options,  may be granted
under the ECP at an  exercise  price  (the  "Option  Price")  determined  by the
Administrator  of the ECP in its discretion.  The Option Price generally may not
be less than the fair market  value of the common  stock on the date of grant of
an Option; however, an Option granted in connection with a corporate transaction
may have an Option  Price equal to the value  attributed  to the common stock in
such  transaction,  and an Option  granted  to  substitute  for  another  Option
(including  a Tyco  option)  may have an  Option  Price  equal  to the  economic
equivalent of the exercise price of the replaced Option.  Each Option represents
the right to purchase one share of common stock at the specified Option Price.

      Options  will  expire no later than ten years after the date on which they
were granted and will become  exercisable at such times and in such installments
as  determined  by the  Administrator  of the ECP.  Payment of the Option Price,
except as set forth below,  must be made in full at the time of exercise in cash
or by certified or bank check.  As determined by the  Administrator  of the ECP,
payment in full or in part may also be made by tendering to CIT shares of common
stock  having a fair  market  value equal to the Option  Price (or such  portion
thereof).  The Administrator may also allow a cashless exercise of such options.
No  incentive  stock  option  granted  to a 10%  stockholder  of  CIT  shall  be
exercisable later than the fifth anniversary of the date of the grant.

      Stock Appreciation  Rights. An Award of a stock appreciation right ("SAR")
may be granted under the ECP with respect to shares of common stock.  Generally,
one SAR is granted with respect to one share of common  stock.  The SAR entitles
the participant, upon the exercise of the SAR, to receive an amount equal to the
appreciation in the underlying  share of common stock. The appreciation is equal
to the  difference  between (i) the "base value" of the SAR (which is determined
with  reference to the fair market value of the common stock on the date the SAR
is granted)  and (ii) fair market  value of the common stock on the date the SAR
is exercised. Upon the exercise of a vested SAR, the exercising participant will
be  entitled  to receive  the  appreciation  in the value of one share of common
stock as so determined,  payable at the  discretion of the  participant in cash,
shares of common stock, or some combination thereof,  subject to availability of
shares of common stock to CIT.

      SARs will  expire no later than ten years after the date on which they are
granted.  SARs  become  exercisable  at such times and in such  installments  as
determined by the Administrator of the ECP.

      Tandem  Options/SARs.  An Option and a SAR may be granted "in tandem" with
each other (a "Tandem Option/SAR").  An Option and a SAR are considered to be in
tandem with each other  because the exercise of the Option  aspect of the tandem
unit automatically cancels the right to exercise the SAR of the tandem unit, and
vice versa. The Option may be an incentive stock option or  non-qualified  stock
option,  and the  Option  may be  coupled  with one SAR,  more than one SAR or a
fractional SAR in any proportionate  relationship selected by the Administrator.
Descriptions  of the  terms  of the  Option  and the  SAR  aspects  of a  Tandem
Option/SAR are provided above.

      Restricted Stock. An Award of restricted stock ("Restricted  Stock") is an
Award of common stock that is subject to such  restrictions as the Administrator
of the ECP deems appropriate,  including forfeiture  conditions and restrictions
against  transfer  for a  period  specified  by the  Administrator  of the  ECP.
Restricted Stock Awards may be granted under the ECP for services and/or payment
of cash.  Restrictions on Restricted  Stock may lapse in  installments  based on
factors selected by the Administrator of the ECP. Prior to the expiration of the
restricted  period,  except as and only if provided by the  Administrator of the
ECP, a grantee  who has  received a  Restricted  Stock Award  generally  has the
rights of a stockholder of CIT,  including the right to vote and to receive cash
dividends  on the shares  subject  to the Award.  Stock  dividends  issued  with
respect to a Restricted  Stock Award may be treated as  additional  shares under
such Award with respect to which such dividends are issued.


                                       95


      Performance  Shares and  Performance  Units.  A  performance  share  Award
("Performance  Shares") and/or a performance  unit Award (a "Performance  Unit")
may be granted under the ECP. Each  Performance  Unit will have an initial value
that is established by the  Administrator of the ECP at the time of grant.  Each
Performance  Share will have an initial  value equal to the fair market value of
one share of common stock on the date of grant.  Such Awards may be earned based
upon satisfaction of certain  specified  performance  criteria,  subject to such
other terms and conditions as the  Administrator  of the ECP deems  appropriate.
Performance  objectives  will be established  before,  or as soon as practicable
after, the commencement of the Performance Period. The extent to which a grantee
is  entitled  to  payment  in  settlement  of  such  an  Award  at the  end of a
Performance  Period will be  determined by the  Administrator  of the ECP in its
sole  discretion,  based on whether the  performance  criteria have been met and
payment will be made in cash or in shares of common stock,  or some  combination
thereof, subject to availability of shares of common stock of CIT, in accordance
with the terms of the applicable Award Agreements.

      Performance Measures.  The Administrator may grant Awards under the ECP to
eligible  participants  subject to the  attainment of specified  pre-established
performance measure.  The number of  performance-based  Awards granted under the
ECP in any fiscal year is determined  by the  Administrator.  The  Administrator
will adopt in writing each year,  within 90 days of the  beginning of such year,
the  applicable  performance  goals  that must be  achieved  in order to receive
annual performance-based Awards and, if applicable,  shares of Restricted Stock,
Performance Units and Performance Shares. At the time that performance goals are
established by the Administrator for a year, the Administrator will establish an
individual   performance-based   Award   opportunity  for  such  year  for  each
participant  or  group  of  participants.   A  participant's  individual  annual
performance-based Award opportunity is based on the participant's achievement of
his or her  performance  goals during such year and may be expressed in dollars,
as  a  percentage  of  base  salary,  or  by  formula.  A  participant's  actual
performance-based  Award  may be paid in  cash,  shares  of  common  stock  or a
combination thereof.

      The value of performance-based Awards may be based on absolute measures or
on a comparison of CIT's measures during a Performance  Period to the comparable
measures of a group of competitors. Measures selected by the Administrator shall
be one or more of the following and, where applicable, may be measured before or
after interest,  depreciation,  amortization,  service fees, extraordinary items
and/or special items: pre-tax earnings,  operating earnings, after-tax earnings,
return on investment,  revenues or income, net income,  absolute and/or relative
return on equity,  capital invested or assets,  earnings per share, cash flow or
cash  flow  on  investments,   profits,  earnings  growth,  share  price,  total
shareholder   return,   economic  value  added,   expense  reduction,   customer
satisfaction,  or any combination of the foregoing measures as the Administrator
deems appropriate.

      Change  of  Control.  Upon a Change  of  Control  of CIT (as  defined  for
purposes  of the  ECP):  (i) all  outstanding  Options  and  SARs  shall  become
immediately  exercisable  and will remain  exercisable  until the earlier of the
expiration  of their  initial term or the second  anniversary  of the  grantee's
termination of employment with CIT; (ii) all restrictions on outstanding  shares
of Restricted Stock shall lapse; (iii) the performance goals with respect to all
outstanding awards of Restricted Stock, Performance Shares and Performance Units
will be deemed to have been fully attained for the Performance  Period; and (iv)
the  vesting  of all  Awards  denominated  in  shares of  common  stock  will be
accelerated.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

Security Ownership of Certain Beneficial Owners

      The table below shows,  as of the most recent  practicable  date, the name
and address of each person known to CIT that  beneficially  owns in excess of 5%
of any class of voting stock.  Information  in this table is as of September 30,
2002.

                                                                      Percentage
                                                                          of
Title of Class     Name and Address of          Amount and Nature of    Common
   of Stock         Beneficial Owner            Beneficial Ownership     Stock
--------------     -------------------          --------------------  ----------
Common Stock ... Dodge & Cox (1)                     20,803,700          10.4
                 One Sansome Street, 35th Floor
                 San Francisco, CA 94104

--------------------------------------------------------------------------------
(1)   Dodge & Cox has sole voting power for  19,217,000  shares,  shared  voting
      power  for  453,800  shares,  and sole  dispositive  power  for all of the
      shares.


                                       96


Security Ownership of Directors and Executive Officers

      The table below shows,  as of November  15, 2002,  the number of shares of
CIT Common Stock owned by each  director,  by Messrs.  Gamper,  Hallman,  Leone,
McKerroll, and Zdanow (the "Named Executive Officers"), and by the directors and
executive officers as a group.

                                            Amount and Nature
                                         of Beneficial Ownership
                                          (CIT Common Stock and       Percentage
  Name of Individual                  Exchangeable Shares)(1)(2)(3)    of Class
  ------------------                  -----------------------------   ----------
Albert R. Gamper, Jr. ...............            608,371                   *
John S. Chen ........................             10,249                   *
William A. Farlinger ................              1,156                   *
Thomas H. Kean ......................             21,416                   *
Edward J. Kelly, III ................              4,064                   *
Peter J. Tobin ......................              7,891                   *
Thomas B. Hallman ...................             32,675                   *
Joseph M. Leone .....................            126,081                   *
David D. McKerroll ..................            248,175                   *
Nikita Zdanow .......................            166,812                   *
All Directors and Executive
Officers as a group (14 persons) ....          1,532,497                   *

--------------------------------------------------------------------------------
*     Represents less than 1% of the total outstanding Common Stock.

(1)   Includes  shares of  Restricted  Stock issued under the  Long-Term  Equity
      Compensation Plan, for which the holders have voting rights, but for which
      ownership has not vested, in the following  amounts:  Mr. Gamper - 230,023
      shares,  Mr. Chen - 2,064 shares,  Mr. Kelly - 2,064 shares, Mr. Hallman -
      22,675 shares,  Mr. Leone - 27,473 shares,  Mr.  McKerroll - 7,964 shares,
      and Mr. Zdanow - 24,641 shares.

(2)   Includes shares of stock issuable  pursuant to stock options awarded under
      the  Long-Term  Equity  Compensation  Plan that  have  vested or will vest
      within 60 days after  November  15,  2002 in the  following  amounts:  Mr.
      Gamper - 338,248 shares,  Mr. Chen - 8,185 shares,  Mr.  Farlinger - 1,156
      shares,  Mr. Kean - 11,416 shares,  Mr. Tobin - 7,891 shares,  Mr. Leone -
      88,608 shares, Mr. McKerroll- 205,211 shares, Mr. Zdanow - 140,671shares.

(3)   Includes  390,817  shares of  Restricted  Stock issued under the Long-Term
      Equity  Compensation  Plan, for which all executive officers and directors
      as a group have voting rights, but for which ownership has not vested, and
      1,015,580 shares of stock issuable pursuant to stock options awarded under
      the  Long-Term  Equity  Compensation  Plan to all  executive  officers and
      directors  as a group that have  vested or will vest  within 60 days after
      November 15, 2002,  including  Restricted  Stock issued and stock  options
      awarded to the spouse of one executive officer, who is also an employee of
      CIT.

Item 13. Certain Relationships and Related Transactions.

      We have in the past and may in the future enter into certain  transactions
with affiliates.  Such  transactions  have been, and it is anticipated that such
transactions  will  continue to be,  entered into as a fair market value for the
transaction.

General

      Tyco  acquired  us in June 2001 and we became an  indirect,  wholly  owned
subsidiary. On July 2, 2002, Tyco sold 100% of our issued and outstanding common
stock in an initial public  offering.  Prior to the offering  date,  some of our
directors and executive officers were also directors,  officers and employees of
Tyco and/or its other subsidiaries.

      In the ordinary course of business, we entered into a number of agreements
with Tyco and its subsidiaries relating to our historical business and our prior
relationship  with the Tyco group of companies,  the material terms of which are
described  below.  In  addition,  in  connection  with our IPO, we entered  into
agreements  with Tyco  relating  to our  separation  from  Tyco and the  ongoing
relationship of the two companies after the offering date, as described below.

Agreements Relating to the Offering

Separation Agreement

      We entered  into a separation  agreement to address  claims that may arise
with respect to our respective businesses. The separation agreement provides for
cross-indemnification   and  mutual  releases  designed   principally  to  place
financial  responsibility  for  possible  third-party  claims  relating  to  our
business with us and financial  responsibility  for possible  third-party claims
relating to Tyco's businesses with Tyco. The cross-indemnification


                                       97


includes  liabilities  for  misstatements  relating to the  registration  of our
common  stock  in  the  IPO.  In  addition,  Tyco  has  indemnified  us  against
liabilities for  misstatements in filings and press releases made to comply with
the securities laws, unless the misstatements are solely attributable to us. The
separation  agreement  also  provides  for the parties'  access to  information,
insurance,  cooperation  in the event of litigation  and avoidance of conduct or
statements that would be injurious to one another.

Tax Agreement

      We entered into an agreement pursuant to which Tyco has indemnified us for
any  income-based  tax  liabilities,  determined  on a  non-consolidated  basis,
imposed on any of our  predecessors  for periods or partial periods ending on or
prior to the date such predecessors merged into us. Tyco also indemnified us for
any liability of ours or of our predecessors for any income-based  taxes imposed
as a result of the merger of our  predecessors  with us. We are also indemnified
for any penalties imposed on us resulting from the late filing of federal income
tax returns that were  prepared by or under the direction for Tyco on our behalf
and from late payments  related to those returns.  Tyco has also  indemnified us
for any  liability for U.S.  federal  income taxes and income taxes of New York,
New Jersey and any other  state for which a unitary  return was filed  resulting
from a tax position reflected on any applicable income tax return prepared by or
under the  direction  of Tyco on our behalf  which was taken by Tyco in a manner
inconsistent  with our past practices.  Tyco did not indemnify us, however,  for
any tax liability resulting from a claim for refund filed by or on behalf of our
predecessor  on May 30, 2002.  The agreement  further  provides that we will pay
Tyco for the use of any tax attributes of Tyco Capital  Holding Inc., one of our
predecessors,  existing as of the date of the merger with us. We believe that as
of the date of the merger,  the tax  attributes  of Tyco  Capital  Holding  Inc.
consisted  of net  operating  losses.  The payments to Tyco will be based on the
actual tax  benefits  that we realize  from the Tyco  Capital  Holding  Inc. tax
attributes.

Financial Services Cooperation Agreement

      We entered into an agreement  with Tyco  pursuant to which we may have the
opportunity  to  provide  financing  for Tyco  customers  after  this  offering.
Pursuant to this  agreement,  Tyco may offer us the  opportunity  in appropriate
circumstances  to develop  financing  programs  under  which we could offer Tyco
customers  financing,   leasing,  rental  and  related  financial  services  and
products.  We may also have the opportunity to provide other financial  services
in  connection  with the  acquisition  of products and services from third party
suppliers. This agreement will remain in effect until terminated by either party
on 90 days' notice.

Operating Agreement

      When Tyco  acquired us, CIT and Tyco entered into an Operating  Agreement,
dated as of June 1, 2001,  that  provided that (i) CIT and Tyco would not engage
in  transactions,  including  finance,  underwriting  and asset  management  and
servicing  transactions,  unless the  transactions  were at arm's-length and for
fair value,  (ii) CIT would have sole discretion and  decision-making  authority
for  underwriting,  managing and  servicing  assets in  transactions  originated
through Tyco, (iii) dividends and distributions from CIT to Tyco were limited to
(x) fifteen percent (15%) of our cumulative net income, plus (y) the net capital
contributions  by Tyco to CIT,  and (iv) CIT  would at all  times  maintain  our
books,  records  and  assets  separately  from  Tyco.  The  Operating  Agreement
terminated upon completion of our IPO.

Other Transactions

      On September  30, 2001,  we sold at net book value  certain  international
subsidiaries to a non-U.S.  subsidiary of Tyco. As a result of this sale, we had
receivables from affiliates  totaling  $1,440.9  million,  representing our debt
investment  in  these  subsidiaries.  CIT  charged  arm's  length,  market-based
interest  rates on these  receivables,  and recorded  $19.0  million of interest
income, as an offset to interest expense, related to those notes for the quarter
ended  December  31,  2001.  A note  receivable  issued  at  the  time  of  this
transaction of approximately $295 million was collected.

      Following  Tyco's  announcement  on  January  22,  2002 that it planned to
separate into four independent, publicly traded companies, we repurchased at net
book value the  international  subsidiaries on February 11, 2002. In conjunction
with this repurchase, the receivables from affiliates of $1,588.1 million on the
Consolidated Balance Sheet at December 31, 2001 was satisfied.


                                       98


      We  have  entered  into a  number  of  equipment  loans  and  leases  with
affiliates of Tyco.  Lease terms  generally  range from 3 to 12 years.  Tyco has
guaranteed  payment  and  performance  obligations  under  each  loan and  lease
agreement.  At September 30, 2002, the aggregate amount  outstanding under these
equipment loans and leases was approximately $29.3 million.

      While CIT was an indirect  subsidiary of Tyco,  certain of CIT's expenses,
such as third party  consulting and legal fees,  were paid by Tyco and billed to
CIT. The payables were subsequently satisfied.

      On  May 1,  2002,  we  assumed  a  third-party  corporate  aircraft  lease
obligation  from Tyco.  The assumed  lease  obligation  is  approximately  $16.0
million  and extends for 134 months  beginning  on May 1, 2002.  Prior to Tyco's
acquisition  of us, we had an agreement to purchase this aircraft  directly from
the previous owner.

      On  September  30, 2002,  certain  subsidiaries  of Tyco sold  receivables
totaling  $350.0  million to CIT in a factoring  transaction.  At various  times
during  the year  ended  September  30,  2002 CIT and Tyco  engaged  in  similar
factoring transactions, the highest amount of which was $384.4 million.

Item 14. Controls and Procedures.

      Within 90 days  before  filing this  report,  the  Company  evaluated  the
effectiveness  of the  design  and  operation  of its  disclosure  controls  and
procedures.  The Company's  disclosure  controls and  procedures are designed to
ensure that the information  that the Company must disclose in its reports filed
under the  Securities  Exchange Act is  communicated  and  processed in a timely
manner.  Albert R. Gamper Jr. Chairman,  President and Chief Executive  Officer,
and Joseph M. Leone,  Executive  Vice  President  and Chief  Financial  Officer,
participated in this evaluation.

      Based on this evaluation,  Messrs.  Gamper and Leone concluded that, as of
the date of their evaluation,  the Company's  disclosure controls and procedures
were  effective,  except as noted in the next  paragraph.  Since the date of the
evaluation  described above, there have not been any significant  changes in the
Company's internal controls or in other factors that could significantly  affect
those controls.

      During  our  fiscal  2002  financial  reporting  process,  management,  in
consultation with the Company's independent accountants, identified a deficiency
in our tax financial  reporting  process relating to the calculation of deferred
tax assets and  liabilities  which  constitutes a "Reportable  Condition"  under
standards established by the American Institute of Certified Public Accountants.
Management  believes  that this  matter has not had any  material  impact on our
financial  statements.  Management  has  initiated the design,  development  and
implementation  of  processes  and  controls  to address  this  deficiency,  the
completion of which will extend into 2003.


                                       99


                                     PART IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

      (a) The  following  documents are filed with the  Securities  and Exchange
Commission as part of this report (see Item 8):

      1.    The following financial statements of CIT and Subsidiaries:

            Reports of Independent Accountants

            Consolidated  Balance  Sheets-September  30, 2002 and  September 30,
            2001

            Consolidated Statements of Income for the fiscal year ended
            September 30, 2002, for the period from June 2 through September 30,
            2001, for the period January 1 through June 1, 2001, and for the
            fiscal year ended December 31, 2000

            Consolidated  Statements of Stockholders' Equity for the fiscal year
            ended  September  30,  2002,  for the  period  from  June 2  through
            September 30, 2001,  for the period  January 1 through June 1, 2001,
            and for the fiscal year ended December 31, 2001

            Consolidated  Statements  of Cash  Flows for the  fiscal  year ended
            September 30, 2002, for the period from June 2 through September 30,
            2001,  for the period  January 1 through  June 1, 2001,  and for the
            fiscal year ended December 31, 2001

            Notes to Consolidated Financial Statements

      2.    All schedules are omitted because they are not applicable or because
            the  required  information  appears  in the  Consolidated  Financial
            Statements or the notes thereto.

      (b)  Current  Report on Form 8-K,  filed on July 1,  2002,  reporting  the
pricing of its initial  public  offering and the  assumption  by CIT of all debt
obligations of its predecessor, and filing certain exhibits.

            Current Report on Form 8-K, filed on July 12, 2002, reporting CIT's
            announcement of the underwriters exercise of the overallotment
            option with respect to CIT's initial public offering.

            Current Report on Form 8-K, dated July 23, 2002, reporting CIT's
            announcement of financial results for the quarter ended June 30,
            2002.

      (c) Exhibits

            2.1   Agreement and Plan of Merger, dated as of July 2, 2002, by and
                  between Tyco Capital Holding, Inc., a Nevada corporation,  and
                  CIT  Group  Inc.,  a  Nevada   corporation   (incorporated  by
                  reference  to Exhibit 2.1 to Form 8-K filed by CIT on July 10,
                  2002).

            2.2   Agreement and Plan of Merger, dated as of July 2, 2002, by and
                  between CIT Group Inc. (Del), a Delaware corporation, and Tyco
                  Capital Holding,  Inc., a Nevada corporation  (incorporated by
                  reference  to Exhibit 2.2 to Form 8-K filed by CIT on July 10,
                  2002).

            3.1   Restated   Certificate   of   Incorporation   of  the  Company
                  (incorporated by reference to Exhibit 3.1 to Form 8-K filed by
                  CIT on July 10, 2002).

            3.2   Certificate   of   Amendment   of  Restated   Certificate   of
                  Incorporation  of the Company  (incorporated  by  reference to
                  Exhibit 3.2 to Form 8-K filed by CIT on July 10, 2002).

            3.3   Certificate  of  Ownership  and Merger  merging  Tyco  Capital
                  Holding,  Inc.  and CIT  Group  Inc.  (Del)  (incorporated  by
                  reference  to Exhibit 3.3 to Form 8-K filed by CIT on July 10,
                  2002).


                                      100


            3.4   By-laws of the Company  (incorporated  by reference to Exhibit
                  3.4 to Form 8-K filed by CIT on July 10, 2002).

            4.1   Form of  Certificate of Common Stock of CIT  (incorporated  by
                  reference   to  Exhibit  4.1  to   Amendment   No.  3  to  the
                  Registration  Statement on Form S-1 filed June 26, 2002).  4.2
                  Indenture  dated as of  September  24, 1998 by and between CIT
                  (formerly   known  as  Tyco  Capital   Corporation   and  Tyco
                  Acquisition  Corp.  XX (NV) and  successor  to The CIT  Group,
                  Inc.) and The Bank of New York,  as trustee,  for the issuance
                  of unsecured and unsubordinated debt securities  (Incorporated
                  by  reference  to an  Exhibit  to  Form  S-3  filed  by CIT on
                  September 24, 1998).

            4.3   First  Supplemental  Indenture  dated as of June 1, 2001 among
                  CIT  (formerly  known  as Tyco  Capital  Corporation  and Tyco
                  Acquisition  Corp.  XX (NV) and  successor  to The CIT  Group,
                  Inc.),  CIT Holdings  (NV) Inc.  and The Bank of New York,  as
                  trustee, for the issuance of unsecured and unsubordinated debt
                  securities  (Incorporated  by  reference  to  Exhibit  4.2g to
                  Amendment No. 1 to Form S-3 filed by CIT on August 8, 2001).

            4.4   Second Supplemental Indenture dated as of February 14, 2002 to
                  an Indenture  dated as of September 24, 1998, as  supplemented
                  by the First Supplemental  Indenture dated as of June 1, 2001,
                  by and between CIT Group Inc.  (formerly  know as Tyco Capital
                  Corporation and Tyco  Acquisition  Corp. XX (NV) and successor
                  to The CIT Group,  Inc.) and The Bank of New York, as trustee,
                  for  the  issuance  of  unsecured  and   unsubordinated   debt
                  securities  (Incorporated  by reference to Exhibit 4.1 to Form
                  8-K filed by CIT on February 22, 2002).

            4.5   Indenture  dated as of  September  24, 1998 by and between CIT
                  (formerly   known  as  Tyco  Capital   Corporation   and  Tyco
                  Acquisition  Corp.  XX (NV) and  successor  to The CIT  Group,
                  Inc.) and Bank One Trust  Company,  N.A., as trustee,  for the
                  issuance  of  unsecured  and  unsubordinated  debt  securities
                  (Incorporated  by reference to an Exhibit to Form S-3 filed by
                  CIT on September 24, 1998).

            4.6   First Supplemental Indenture dated as of May 9, 2001 among CIT
                  (formerly   known  as  Tyco  Capital   Corporation   and  Tyco
                  Acquisition  Corp.  XX (NV) and  successor  to The CIT  Group,
                  Inc.), Bank One Trust Company,  N.A., as trustee, and Bank One
                  NA,  London   Branch,   as  London  Paying  Agent  and  London
                  Calculation  Agent  (Incorporated by reference to Exhibit 4.2d
                  to Post-Effective  Amendment No. 1 to Form S-3 filed by CIT on
                  May 11, 2001).

            4.7   Second  Supplemental  Indenture dated as of June 1, 2001 among
                  CIT  (formerly  known  as Tyco  Capital  Corporation  and Tyco
                  Acquisition  Corp.  XX (NV) and  successor  to The CIT  Group,
                  Inc.),  CIT  Holdings  (NV) Inc.  and Bank One Trust  Company,
                  N.A., as trustee (Incorporated by reference to Exhibit 4.2e to
                  Form S-3 filed by CIT on June 7, 2001).

            4.8   Third Supplemental  Indenture dated as of February 14, 2002 to
                  an Indenture  dated as of September 24, 1998, as  supplemented
                  by the First  Supplemental  Indenture  dated as of May 9, 2001
                  and the  Second  Supplemental  Indenture  dated  as of June 1,
                  2001,  by and between CIT Group Inc.  (formerly  known as Tyco
                  Capital  Corporation  and Tyco  Acquisition  Corp. XX (NV) and
                  successor to The CIT Group,  Inc.) and Bank One Trust Company,
                  N.A.,   as  trustee,   for  the  issuance  of  unsecured   and
                  unsubordinated  debt securities  (Incorporated by reference to
                  Exhibit 4.2 to Form 8-K filed by CIT on February 22, 2002).

            4.9   Fourth  Supplemental  Indenture dated as of July 2, 2002 to an
                  Indenture  dated as of September 24, 1998, as  supplemented by
                  the First  Supplemental  Indenture dated as of May 9, 2001 and
                  the Second Supplemental Indenture dated as of June 1, 2001 and
                  the Third  Supplemental  Indenture  dated as of  February  14,
                  2002,  by and between CIT Group Inc.  (formerly  known as Tyco
                  Capital  Corporation  and Tyco  Acquisition  Corp. XX (NV) and
                  successor to The CIT Group,  Inc.) and Bank One Trust Company,
                  N.A.,   as  trustee,   for  the  issuance  of  unsecured   and
                  unsubordinated  debt securities  (Incorporated by reference to
                  Exhibit 4.1 to Form 8-K filed by CIT on July 10, 2002).


                                      101


            4.9   Indenture  dated as of  September  24, 1998 by and between CIT
                  (formerly   known  as  Tyco  Capital   Corporation   and  Tyco
                  Acquisition  Corp.  XX (NV) and  successor  to The CIT  Group,
                  Inc.) and The Bank of New York,  as trustee,  for the issuance
                  of  unsecured   and  senior   subordinated   debt   securities
                  (Incorporated  by reference to an Exhibit to Form S-3 filed by
                  CIT September 24, 1998).

            4.10  First  Supplemental  Indenture  dated as of June 1, 2001 among
                  CIT  (formerly  known  as Tyco  Capital  Corporation  and Tyco
                  Acquisition  Corp.  XX (NV) and  successor  to The CIT  Group,
                  Inc.),  CIT Holdings  (NV) Inc.  and The Bank of New York,  as
                  trustee, for the issuance of unsecured and senior subordinated
                  debt securities  (Incorporated by reference to Exhibit 4.2f to
                  Form S-3 filed by CIT on June 7, 2001).

            4.11  Second Supplemental Indenture dated as of February 14, 2002 to
                  an Indenture  dated as of September 24, 1998, as  supplemented
                  by the First Supplemental  Indenture dated as of June 1, 2001,
                  by and between CIT Group Inc.  (formerly known as Tyco Capital
                  Corporation and Tyco  Acquisition  Corp. XX (NV) and successor
                  to The CIT Group,  Inc.) and The Bank of New York, as trustee,
                  for  the  issuance  of  unsecured  senior   subordinated  debt
                  securities  (Incorporated  by reference to Exhibit 4.3 to Form
                  8-K filed by CIT on February 22, 2002).

            4.12  Third  Supplemental  Indenture  dated as of July 2, 2002 to an
                  Indenture  dated as of September 24, 1998, as  supplemented by
                  the First Supplemental  Indenture dated as of June 1, 2001 and
                  the Second  Supplemental  Indenture  dated as of February  14,
                  2002,  by and between CIT Group Inc.  (formerly  known as Tyco
                  Capital  Corporation  and Tyco  Acquisition  Corp. XX (NV) and
                  successor to The CIT Group, Inc.) and The Bank of New York, as
                  trustee,  for the  issuance of unsecured  senior  subordinated
                  debt securities  (Incorporated  by reference to Exhibit 4.2 to
                  Form 8-K filed by CIT on July 10, 2002).

            4.13  Certain  instruments  defining  the rights of holders of CIT's
                  long-term  debt,  none of which  authorize  a total  amount of
                  indebtedness in excess of 10% of the total amounts outstanding
                  of CIT and its  subsidiaries on a consolidated  basis have not
                  been filed as exhibits.  CIT agrees to furnish a copy of these
                  agreements to the Commission upon request.

            10.1  Agreement  dated as of June 1, 2001 between CIT Holdings  (NV)
                  Inc., a wholly-owned  subsidiary of Tyco  International  Ltd.,
                  and CIT (formerly  known as Tyco Capital  Corporation and Tyco
                  Acquisition  Corp.  XX (NV) and  successor  to The CIT  Group,
                  Inc.), a Nevada corporation,  regarding  transactions  between
                  CIT  Holdings  and CIT  (incorporated  by reference to Exhibit
                  10.13 to Form 8-K filed by CIT on June 7, 2001).

            10.2  Form of Separation Agreement by and between Tyco International
                  Ltd.  and CIT  (incorporated  by  reference to Exhibit 10.2 to
                  Amendment  No.  3 to the  Registration  Statement  on Form S-1
                  filed June 26, 2002).

            10.3  Form  of  Financial  Services  Cooperation  Agreement  by  and
                  between  Tyco  International  Ltd.  and CIT  (incorporated  by
                  reference   to   Exhibit  10.3  to  Amendment  No.  2  to  the
                  Registration Statement on Form S-1 filed June 12, 2002).

            10.4  5-Year Credit Agreement, dated as of March 28, 2000, among CIT
                  Group Inc. (formerly known as Tyco Capital Corporation and The
                  CIT  Group,  Inc.),  the  banks  party  thereto,  J.P.  Morgan
                  Securities Inc.  (formerly known as Chase Securities Inc.), as
                  Arranger,  Barclays Bank PLC, Bank of America, N.A., Citibank,
                  N.A. and The Dai-Ichi  Kangyo Bank,  Limited,  as  Syndication
                  Agents,  and JP Morgan Chase Bank (formerly known as The Chase
                  Manhattan  Bank),  as  Administrative  Agent (`'5 Year  Credit
                  Agreement  ")  (Incorporated  by  reference to Exhibit 10.6 to
                  Form 10-Q filed by CIT on February 14, 2002).

            10.5  Assumption  Agreement,  dated  as of June 1,  2001,  to 5 Year
                  Credit Agreement (Incorporated by reference to Exhibit 10.7 to
                  Form 10-Q filed by CIT on February 14, 2002).


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            10.6  Additional  Bank  Agreement,  dated as of August 1, 2000, to 5
                  Year Credit  Agreement  (Incorporated  by reference to Exhibit
                  10.8 to Form 10-Q filed by CIT on February 14, 2002).

            10.7  $765,000,000  Credit  Agreement,  dated as of April 13,  1998,
                  among  Capita  Corporation  (formerly  known  as AT&T  Capital
                  Corporation),  as Borrower,  CIT Group Inc. (formerly known as
                  Tyco  Capital   Corporation  and  The  CIT  Group,  Inc.),  as
                  Guarantor,  the banks party thereto (the `'Banks"),  JP Morgan
                  Chase Bank (formerly known as Morgan Guaranty Trust Company of
                  New York), as Administrative  Agent, Canadian Imperial Bank of
                  Commerce, as Syndication Agent, JP Morgan Chase Bank (formerly
                  known as The Chase  Manhattan  Bank) and Deutsche Bank AG, New
                  York  Branch,  as  Co-Documentation  Agents,  and J.P.  Morgan
                  Securities  Inc.  and CIBC  Oppenheimer  Corp.,  as  Arrangers
                  ("Capita  Corporation  Credit  Agreement")   (incorporated  by
                  reference  to  Exhibit  10.9  to  Form  10-Q  filed  by CIT on
                  February 14, 2002).

            10.8  Amendment No. 1 to Capita Corporation Credit Agreement,  dated
                  as of April 9, 1999  (Incorporated  by  reference  to  Exhibit
                  10.10 to Form 10-Q filed by CIT on February 14, 2002).

            10.9  Amendment No. 2 to Capita Corporation Credit Agreement,  dated
                  as of November 15, 1999  (Incorporated by reference to Exhibit
                  10.11 to Form 10-Q filed by CIT on February 14, 2002).

            10.10 Amendment No. 3 to Capita Corporation Credit Agreement,  dated
                  as of May 30, 2001 (Incorporated by reference to Exhibit 10.12
                  to Form 10-Q filed by CIT on February 14, 2002).

            10.11 Assumption  Agreement,  dated as of June 1,  2001,  to  Capita
                  Corporation  Credit  Agreement  (Incorporated  by reference to
                  Exhibit 10.13 to Form 10-Q filed by CIT on February 14, 2002).

            10.12 Guaranty by CIT Group Inc.,  dated as of November 15, 1999, of
                  Capita Corporation Credit Agreement (Incorporated by reference
                  to  Exhibit  10.14 to Form 10-Q filed by CIT on  February  14,
                  2002).

            10.13 364-Day Credit  Agreement,  dated as of March 27, 2001,  among
                  CIT Financial Ltd., the banks party thereto, as lenders, Royal
                  Bank of Canada, as Administrative Agent, and Canadian Imperial
                  Bank of Commerce and The Chase  Manhattan  Bank of Canada,  as
                  Syndication  Agents   ("Canadian  364-Day  Credit  Agreement")
                  (Incorporated by reference to Exhibit 10.15 to Form 10-Q filed
                  by CIT on February 14, 2002).

            10.14 Guaranty  of CIT  Group  Inc.,  dated as of July 2,  2002,  of
                  Canadian 364-Day Credit  Agreement  (Incorporated by reference
                  to  Exhibit  10.15 to Form  10-Q  filed by CIT on  August  14,
                  2002).

            10.15 364-Day Credit Agreement,  dated as of October 15, 2002, among
                  CIT  Group  Inc.,  the  banks  party  thereto,   J.P.   Morgan
                  Securities   Inc.,  as  Sole  Lead  Arranger  and  Bookrunner,
                  JPMorgan Chase Bank, as  Administrative  Agent,  Barclays Bank
                  PLC,  as  Syndication   Agent,  Bank  of  America,   N.A.,  as
                  Syndication  Agent, and Citibank,  N.A., as Syndication  Agent
                  (incorporated  by  reference  to Form 8-K  filed  October  24,
                  2002).

            10.19 Retention  Agreement for Albert R. Gamper, Jr., as proposed to
                  be amended  (incorporated  by  reference  to Exhibit  10.19 to
                  Amendment  No.  3 to the  Registration  Statement  on Form S-1
                  filed June 26, 2002).

            10.20 Retention  Agreement  for  Joseph M.  Leone  (incorporated  by
                  reference  to  Exhibit   10.20  to  Amendment  No.  3  to  the
                  Registration Statement on Form S-1 filed June 26, 2002).

            10.21 Retention  Agreement  for Thomas B. Hallman  (incorporated  by
                  reference  to  Exhibit   10.21  to  Amendment  No.  3  to  the
                  Registration Statement on Form S-1 filed June 26, 2002).

            10.22 Retention Agreement for David D. McKerroll.


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            10.23 Retention   Agreement  for  Nikita  Zdanow   (incorporated  by
                  reference  to  Exhibit   10.23  to  Amendment  No.  3  to  the
                  Registration Statement on Form S-1 filed June 26, 2002).

            10.24 Executive Severance Plan (incorporated by reference to Exhibit
                  10.24 to Amendment No. 3 to the Registration Statement on Form
                  S-1 filed June 26, 2002).

            10.25 Long-Term Equity  Compensation Plan (incorporated by reference
                  to  Exhibit  10.25  to  Amendment  No.  3 to the  Registration
                  Statement on Form S-1 filed June 26, 2002).

            10.26 Form of Indemnification  Agreement  (incorporated by reference
                  to  Exhibit  10.26  to  Amendment  No.  3 to the  Registration
                  Statement on Form S-1 filed June 26, 2002).

            10.27 Form of Tax Agreement by and between Tyco  International  Ltd.
                  and  CIT  (incorporated  by  reference  to  Exhibit  10.27  to
                  Amendment  No. 2  to  the  Registration  Statement on Form S-1
                  filed June 12, 2002).

            12.1  CIT Group Inc.  and  Subsidiaries  Computation  of Earnings to
                  Fixed Charges.

            21.1  Subsidiaries of CIT.

            23.1  Consent of PricewaterhouseCoopers LLP.

            23.2  Consent of KPMG LLP.

            24.1  Powers of Attorney.

            99.1  Certification  of Albert R. Gamper,  Jr. pursuant to 18 U.S.C.
                  Section  1350,  as  adopted  pursuant  to  Section  906 of the
                  Sarbanes-Oxley Act of 2002.

            99.2  Certification of Joseph M. Leone pursuant to 18 U.S.C. Section
                  1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
                  Act of 2002.


                                      104


                                   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.

                                 CIT GROUP INC.

                                 By:           /s/ Robert J. Ingato
                                    --------------------------------------------
                                                  Robert J. Ingato
                                    Executive Vice President and General Counsel

December 23, 2002

      Pursuant to the requirements of the Securities  Exchange Act of 1934, this
report has been signed  below by the  following  persons on December --, 2002 in
the capacities indicated below.

                         Name                                       Date
                         ----                                       ----
               /s/ Albert R. Gamper, Jr.                      December 23, 2002
---------------------------------------------------------
                 Albert R. Gamper, Jr.
Chairman, President, Chief Executive Officer and Director
             (principal executive officer)

                     John S. Chen*
---------------------------------------------------------
                     John S. Chen
                       Director

                 William A. Farlinger*
---------------------------------------------------------
                 William A. Farlinger
                       Director

                    Thomas H. Kean*
---------------------------------------------------------
                    Thomas H. Kean
                       Director

                 Edward J. Kelly, III*
---------------------------------------------------------
                 Edward J. Kelly, III
                       Director

                    Peter J. Tobin*
---------------------------------------------------------
                    Peter J. Tobin
                       Director

                  /s/ Joseph M. Leone                         December 23, 2002
---------------------------------------------------------
                    Joseph M. Leone
             Executive Vice President and
                Chief Financial Officer
            (principal accounting officer)

By:              /s/ Robert J. Ingato                         December 23, 2002
   ------------------------------------------------------
                   Robert J. Ingato
     Executive Vice President and General Counsel

      Original powers of attorney  authorizing Albert R. Gamper,  Jr., Robert J.
Ingato,  and  James  P.  Shanahan  and  each of them  to sign on  behalf  of the
above-mentioned  directors  are  held  by  the  Corporation  and  available  for
examination by the Securities and Exchange Commission pursuant to Item 302(b) of
Regulation S-T.


                                      105


                                 CERTIFICATIONS

I, Albert R. Gamper, Jr., certify that:

      1. I have reviewed this annual report on Form 10-K of CIT Group Inc.;

      2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

      3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

      4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

            a) designed such disclosure controls and procedures to ensure that
      material information relating to the registrant, including its
      consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this annual report is
      being prepared;

            b) evaluated the effectiveness of the registrant's disclosure
      controls and procedures as of a date within 90 days prior to the filing
      date of this annual report (the "Evaluation Date"); and

            c) presented in this annual report our conclusions about the
      effectiveness of the disclosure controls and procedures based on our
      evaluation as of the Evaluation Date;

      5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

            a) all significant deficiencies in the design or operation of
      internal controls which could adversely affect the registrant's ability to
      record, process, summarize and report financial data and have identified
      for the registrant's auditors any material weaknesses in internal
      controls; and

            b) any fraud, whether or not material, that involves management or
      other employees who have a significant role in the registrant's internal
      controls; and

      6. The registrant's other certifying officer and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: December 23, 2002

                                           /s/ Albert R. Gamper, Jr.
                                  --------------------------------------------
                                              Albert R. Gamper, Jr.
                                  Chairman, President, Chief Executive Officer
                                                  and Director


                                      106


I, Joseph M. Leone, certify that:

      1. I have reviewed this annual report on Form 10-K of CIT Group Inc.;

      2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

      3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

      4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

            a) designed such disclosure controls and procedures to ensure that
      material information relating to the registrant, including its
      consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this annual report is
      being prepared;

            b) evaluated the effectiveness of the registrant's disclosure
      controls and procedures as of a date within 90 days prior to the filing
      date of this annual report (the "Evaluation Date"); and

            c) presented in this annual report our conclusions about the
      effectiveness of the disclosure controls and procedures based on our
      evaluation as of the Evaluation Date;

      5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

            a) all significant deficiencies in the design or operation of
      internal controls which could adversely affect the registrant's ability to
      record, process, summarize and report financial data and have identified
      for the registrant's auditors any material weaknesses in internal
      controls; and

            b) any fraud, whether or not material, that involves management or
      other employees who have a significant role in the registrant's internal
      controls; and

      6. The registrant's other certifying officer and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: December 23, 2002

                                             /s/ Joseph M. Leone
                            ----------------------------------------------------
                                               Joseph M. Leone
                            Executive Vice President and Chief Financial Officer


                                      107