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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    ---------
                                    Form 10-K
                                    ---------

      |_|   ANNUAL  REPORT  PURSUANT  TO SECTION  13 OR 15(d) OF THE
            SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2002

                                       OR

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

       For the transition period from October 1, 2002 to December 31, 2002

                                   ----------

                        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 executive offices)            (Zip Code)

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

                                   ----------

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

                                                          Name of each exchange
          Title of each class                              on 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 whether the registrant is an  accelerated  filer as
defined in Rule 12b-2 of the Securities Exchange Act of 1934. 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 ($17.10 per share,  211,445,378 shares
of  common  stock  outstanding),  which  occurred  on  February  14,  2003,  was
$3,615,715,964.  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 February 14, 2003, 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).

      Portions of the registrant's  definitive  proxy statement  relating to the
2003 Annual Meeting of Stockholders  are incorporated by reference into Part III
hereof to the  extent  described  herein.  See  pages 98 to 102 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 ..............................................   7
Item 4.   Submission of Matters to a Vote of Security Holders ............   7

                                     Part II

Item 5.   Market for Registrant's Common Equity and Related
            Stockholder Matters ..........................................   8
Item 6.   Selected Financial Data ........................................   8
Item 7.   Management's Discussion and Analysis of Financial
            Condition and Results of Operations and ......................   11
Item 7A.  Quantitative and Qualitative Disclosure about
            Market Risk ..................................................   11
Item 8.   Financial Statements and Supplementary Data ....................   44
Item 9.   Changes in and Disagreements with Accountants on
            Accounting and Financial Disclosure ..........................   96

                                    Part III

Item 10.  Directors and Executive Officers of the Registrant .............   97
Item 11.  Executive Compensation .........................................   97
Item 12.  Security Ownership of Certain Beneficial Owners and
            Management and Related Stockholder Matters ...................   97
Item 13.  Certain Relationships and Related Transactions .................   97
Item 14.  Controls and Procedures ........................................   97

                                     Part IV

Item 15.  Exhibits, Financial Statement Schedules and Reports
            on Form 8-K ..................................................   98

Signatures ...............................................................   103
Certifications ...........................................................   104
Where You Can Find More Information ......................................   106


                                       i



                                     PART I

Item 1. Business

Overview

      CIT Group Inc., a Delaware corporation ("we," "CIT" or the "Company"),  is
a leading  global  commercial and consumer  finance  company that was founded in
1908. 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"),
completed a sale of 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"),  a Nevada  corporation,
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., a predecessor of CIT, 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"  periods  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.
As a result,  the quarter ended  December 31, 2002  constitutes  a  transitional
fiscal period.

      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 $46.4 billion, owned financing
and leasing assets were $35.9 billion and stockholders'  equity was $4.9 billion
at December 31, 2002.

      We  provide 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 of our  operations  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 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 on a wholesale  basis to supplement our originated  finance
receivables  and sell select finance  receivables  and equipment under operating
leases  for risk and other  balance  sheet  management  purposes,  or to improve
profitability.

Business Segments

      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  Segment had total  financing  and
leasing  assets of $14.2  billion at December  31, 2002,  representing  39.6% of
total  financing  and leasing  assets.  Total  Equipment  Financing  and Leasing
managed assets were $18.1 billion or 39.1% 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 cars and locomotives.

      Equipment   Financing  and  Capital   Finance   personnel  have  extensive
experience 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 re-certify 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 $8.1 billion
at December  31, 2002,  representing  22.7% of our total  financing  and leasing
assets. On a managed asset basis,  Equipment Financing  represents $12.1 billion
or 26.1% 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
December 31, 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 $6.1  billion at
December 31, 2002,  which  represented  16.9% of our total financing and leasing
assets and 13.1% 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,  and 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  utilizes  special purpose  entities (SPE's) to record
certain structured leasing  transactions,  primarily aerospace leveraged leases.
These SPE's are consolidated in CIT's financial statements.

      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 December  31, 2002,  the
commercial  aerospace  financing  and leasing  asset  balance was $4.1  billion,
consisting of 78 accounts and 194 aircraft with an average age of  approximately
6.9 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
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.  The owned
operating  lease rail car fleet is  relatively  young,  with  approximately  80%
(based upon net  investment)  built in 1994 or later.  The Capital  Finance rail
owned and serviced fleet totals in excess of 47,000  railcars and  approximately
500 locomotives.

Specialty Finance Segment

      At December 31, 2002, the Specialty  Finance Segment financing and leasing
assets totaled $10.3 billion,  representing 28.8% of total financing and leasing
assets. Specialty Finance managed assets were $16.9 billion,  representing 36.4%
of total managed assets.  These assets include small ticket commercial financing
and leasing  assets,  vendor  programs  and  consumer  home equity  loans.  Also
included in the owned  financing  and leasing  assets are  previously  announced
liquidating  portfolios,   which  include  manufactured  housing,   recreational
vehicles, recreational marine and wholesale inventory finance.

      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  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,  Specialty  Finance accounts for
these  arrangements  on an equity  basis,  with  profits and losses  distributed
according  to the joint  venture  agreement,  and  purchases  qualified  finance
receivables  originated by the joint  venture.  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,  among  other  reasons.
Specialty Finance primarily  originates loans through brokers and correspondents
with


                                       3


a high proportion of home equity applications processed  electronically over the
internet via  BrokerEdge(SM)  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 $2.2 billion at December
31, 2002.

Commercial Finance Segment

      At December 31, 2002,  the financing and leasing  assets of our Commercial
Finance Segment totaled $8.0 billion,  representing 22.4% of total financing and
leasing assets and 17.3% 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,  including  term and
            revolving  loans  based on asset  values,  as well as cash  flow and
            enterprise  value structures to a full range of borrowers from small
            to larger-sized companies.

Commercial Services

      Commercial Services had total financing and leasing assets of $4.4 billion
at December 31, 2002, which represented 12.2% of our total financing and leasing
assets and 9.5% 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.  The operating systems of
the clients and  Commercial  Services are  integrated in order to facilitate the
factoring relationship.

      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 TotalSource(SM) 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.   Accounts   receivable,   operations  and  other
administrative functions are centralized.


                                       4


Business Credit

      Financing and leasing  assets of Business  Credit  totaled $3.6 billion at
December  31,  2002 and  represented  10.2% of our total  financing  and leasing
assets  and 7.9% of managed  assets.  Business  Credit  offers  loan  structures
ranging  from   asset-based   revolving  and  term  loans  secured  by  accounts
receivable,  inventories and fixed assets to loans based on earnings performance
and enterprise  valuations to mid through  larger-sized  companies.  Clients use
such   loans   primarily   for   working    capital,    growth,    acquisitions,
debtor-in-possession  financing and debt  restructurings.  Business Credit sells
and purchases participation interests in such loans to and from other lenders.

      Through its variable rate,  senior  revolving and term products,  Business
Credit meets its customer  financing needs that are unfulfilled by other sources
of senior debt.  Business Credit  primarily  structures  financings on a secured
basis and,  through its  Corporate  Finance  unit,  extends loans based upon the
sustainability  of a  customer's  operating  cash  flow and  ongoing  enterprise
valuations.  Revolving and term loans are made on a variable interest-rate basis
based upon published indices such as LIBOR or the prime rate of interest.

      Business is originated regionally via solicitation activities focused upon
various  types of  intermediaries  and  referral  sources.  Business  Credit has
increased  its  focus  upon  acquisition   financings  to  compliment  its  debt
restructuring activities. Business Credit maintains long term relationships with
selected  banks,  finance  companies,  and  other  lenders  to both  source  and
diversify senior debt exposures.

Structured Finance Segment

      Structured  Finance  had  financing  and leasing  assets of $3.3  billion,
comprising  9.2% of our total  financing and leasing  assets and 7.2% of managed
assets at December 31, 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 and media),
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 (SPE's) to record certain
structured leasing  transactions,  including  leveraged leases.  These SPE's are
generally consolidated in CIT's financial statements.

      The segment has direct and private fund venture capital equity investments
totaling  $335.4  million at December 31, 2002.  In 2001,  we ceased  making new
venture  capital   investments  beyond  existing   commitments,   which  totaled
approximately $164.9 million at December 31, 2002. In December 2002, we retained
a private  equity  firm,  consisting  of former  CIT  employees,  to manage  the
existing portfolio.

Other Segment and Concentration Data

      The  percentage  of total  segment  operating  margin for the three months
ended  December  31,  2002 by segment is as  follows:  Equipment  Financing  and
Leasing  -- 23%,  Specialty  Finance  -- 42%,  Commercial  Finance  -- 29%,  and
Structured  Finance -- 6%. For the three months ended  December 31, 2002, 80% of
our revenues  were derived from U.S.  financing and leasing  activities  and 20%
were 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 25.

      See Item 8. Financial  Statements and  Supplementary  Data, Note 8 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.


                                       5


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  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,  particularly  following  the recent  disruption  to our
funding  base.  Competition  had been  enhanced by a strong  economy and growing
marketplace liquidity prior to 2001, although, during 2002 and 2001, the economy
has slowed and marketplace liquidity has tightened.  The markets for most of our
products are characterized by a large number of competitors, although the number
of  competitors  has  fallen  in  recent  years as a  consequence  of  continued
consolidation in the industry.

      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,  (viii)  regulate the use and
reporting of  information  related to a borrower's  credit  experience and other
data collection.  In addition,  (i) 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,
(ii) CIT Small Business Lending Corporation, a Delaware corporation, is licensed
by and  subject  to  regulation  and  examination  by the  U.S.  Small  Business
Administration,  (iii) The Equipment  Insurance Company, a Vermont  corporation,
and Highlands  Insurance Company Limited, a Barbados company,  are each licensed
to enter  into  insurance  contracts  and are  regulated  by the  Department  of
Insurance  in  Vermont  and  Barbados,   respectively,   (iv)  various   banking
corporations  in  France,  Italy,  Belgium  and  Sweden,  are  each  subject  to
regulation and  examination by banking  regulators in its home country,  and (v)
various  broker-dealer  entities in Canada,  the United Kingdom,  and the United
States are each subject to regulation and  examination by securities  regulators
in its home country.

Employees

      CIT employed  approximately  5,835  people at December 31, 2002,  of which
approximately  4,405 were  employed in the United  States and 1,430 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
office space is suitable  and adequate for our needs and we utilize,  or plan to
utilize, substantially all


                                       6


of our leased office space.  We are  currently in  negotiations  to purchase our
Livingston  facility  during 2003 at a price that results in expense levels that
are comparable to the current lease expenses.

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
three months ended, December 31, 2002.


                                       7


                                     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)  ("IPO")  through  September  30, 2002 the high and low last  reported
sales price for our common stock was $23.80 and $17.98, respectively. During the
three months ended December 31, 2002,  the  respective  high and low prices were
$22.49 and $13.95.

      Following  our initial  public  offering in November 1997 and prior to the
acquisition by Tyco International Ltd. ("Tyco"), we paid a quarterly dividend of
$0.10 per share (based upon shares  outstanding prior to the Tyco  acquisition),
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 IPO,  our policy has been 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, which was paid on November 27, 2002
to shareholders of record on November 15, 2002. The board of directors  declared
another  quarterly  dividend of $0.12 per share on January 21, 2003,  payable on
February  28,  2003  to  shareholders  of  record  on  February  15,  2003.  The
declaration and payment of 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 February 5, 2003, there were 27,891  beneficial owners of CIT common
stock.

      All equity  compensation plans were approved by our sole shareholder prior
to our 2002 IPO, and are summarized in the following table.



                                                                                Number of securities
                                                                               remaining available for
                                   Number of securities                         future issuance under
                                       to be issued       Weighted-average    equity compensation plans
                                     upon exercise of     exercise price of     (excluding securities
                                    outstanding options  outstanding options  reflected in column (a))
                                   --------------------  -------------------  -------------------------
                                           (a)                   (b)                     (c)
                                                                             
Equity compensation plans
  approved by security
  holders .......................       15,335,255             $33.13                 10,139,698


      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 19.

Item 6. Selected Financial Data

      On  June  1,  2001,  The  CIT  Group,  Inc.  ("CIT")  was  acquired  by  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. Information  relating to
all  "predecessor"  periods prior to the  acquisition  is presented  using CIT's
historical  basis of  accounting.  Following the Tyco  acquisition,  CIT adopted
Tyco's fiscal year ending  September 30. 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,  completed  a sale of 100% of
CIT's  outstanding  common stock in the 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 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 the
periods ended September 30, 2002 and September 30, 2001 include activity of TCH.
Therefore,  certain  previously  reported  CIT  data  may  differ  from the data
presented  below, due primarily to the  inter-company  debt and related interest
expense of TCH.


                                       8


      On November 5, 2002,  the CIT board of directors  approved  returning to a
calendar  year end from a September  30 fiscal year end. As a result,  the three
months ended December 31, 2002 constitutes a transitional fiscal period.

      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 for     At or for      At or for
                                                 the Three     the Twelve     the Nine            At or for the Years Ended
                                                Months Ended  Months Ended  Months Ended                 December 31,
                                                December 31,  September 30, September 30, -----------------------------------------
                                                   2002          2002           2001          2000          1999         1998
                                                -----------   -----------    ----------   ------------- ------------- -------------
($ in millions, except per share data)          (successor)   (successor)    (combined)   (predecessor) (predecessor) (predecessor)
--------------------------------------
                                                                                                      
Results of Operations
Net finance margin ...........................   $   354.4     $ 1,662.5      $ 1,318.8     $ 1,469.4     $   917.4     $   804.8
Provision for credit losses ..................       133.4         788.3          332.5         255.2         110.3          99.4
Operating margin .............................       478.1       1,806.5        1,558.9       2,126.2       1,157.9         960.8
Salaries and general operating
    expenses .................................       242.1         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            --            --            --
Interest expense -- TCH ......................          --         662.6           98.8            --            --            --
Net income (loss) ............................       141.3      (6,698.7)         263.3         611.6         389.4         338.8
Net income (loss) per share(1) --
    basic and diluted ........................        0.67        (31.66)          1.24          2.89          1.84          1.60
Dividends per share(1) .......................        0.12            --           0.25          0.50          0.31          0.23

Balance Sheet Data
Total finance receivables ....................   $27,621.3     $28,459.0      $31,879.4     $33,497.5     $31,007.1     $19,856.0
Reserve for credit losses ....................       760.8         777.8          492.9         468.5         446.9         263.7
Operating lease equipment, net ...............     6,704.6       6,567.4        6,402.8       7,190.6       6,125.9       2,774.1
Goodwill, net ................................       384.4         384.4        6,547.5       1,964.6       1,850.5         216.5
Total assets .................................    41,932.4      42,710.5       51,349.3      48,689.8      45,081.1      24,303.1
Commercial paper .............................     4,974.6       4,654.2        8,869.2       9,063.5       8,974.0       6,144.1
Variable-rate bank credit facilities .........     2,118.0       4,037.4             --            --            --            --
Variable-rate senior notes ...................     4,906.9       5,379.0        9,614.6      11,130.5       7,147.2       4,275.0
Fixed-rate senior notes ......................    19,681.8      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 ................       257.2         257.7          260.0         250.0         250.0         250.0
Stockholders' equity .........................     4,870.7       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) ........        4.34%         4.64%          4.34%         3.61%         3.59%         3.93%
Ratio of earnings to fixed charges(4) ........        1.67x           (9)          1.30x         1.39x         1.45x         1.49x
Salaries and general operating
    expenses (excluding goodwill
    amortization) as a percentage of
    average managed assets
    ("AMA")(5) ...............................        2.18%         2.01%          2.09%         2.01%         1.75%         1.78%
Efficiency ratio(6) ..........................        39.6%         36.5%          42.0%         43.8%         41.3%         39.2%



                                       9




                                                At or for     At or for     At or for
                                                the Three    the Twelve      the Nine            At or for the Years Ended
                                               Months Ended  Months Ended  Months Ended                 December 31,
                                                December 31, September 30, September 30, -------------------------------------------
                                                   2002          2002          2001          2000           1999           1998
                                                ----------    -----------   ----------   -------------  -------------  -------------
($ in millions)                                 (successor)   (successor)   (combined)   (predecessor)  (predecessor)  (predecessor)
---------------
                                                                                                            
Credit Quality
60+ days contractual delinquency as a
    percentage of finance receivables ........        3.63%         3.76%         3.46%         2.98%          2.71%          1.75%
Non-accrual loans as a percentage
    of finance receivables ...................        3.43%         3.43%         2.67%         2.10%          1.65%          1.06%
Net credit losses as a percentage of
    average finance receivables ..............        2.32%         1.67%         1.20%         0.71%          0.42%          0.42%
Reserve for credit losses as a
    percentage of finance
    receivables ..............................        2.75%         2.73%         1.55%         1.40%          1.44%          1.33%

Leverage
Total debt (net of overnight deposits) to
    tangible stockholders' equity(3)(7) ......       6.22x          6.54x         8.20x         8.78x          8.75x          6.82x
Tangible stockholders' equity(3) to
    managed assets(8) ........................        10.4%          9.9%          8.6%          7.8%           7.7%          10.4%

Other
Total managed assets(8) ......................   $46,357.1     $47,622.3     $50,877.1     $54,900.9      $51,433.3      $26,216.3
Employees ....................................       5,835         5,850         6,785         7,355          8,255          3,230


--------------------------------------------------------------------------------
(1)   Net income  (loss) and  dividend  per share  calculations  for the periods
      preceding  September 30, 2002 assume that common shares  outstanding  as a
      result of the July 2002 IPO (basic and diluted of 211.6  million and 211.7
      million) were outstanding during such historical periods.

(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 operating margin, excluding the provision for credit losses.

(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 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 for
      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.


                                       10


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"), a Nevada corporation 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.
Accordingly,  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,
prior  period  comparisons  exclude  the results of TCH.  Consolidating  balance
sheets and income  statements for CIT, TCH and CIT consolidated are displayed in
Item 8. Financial Statements and Supplementary Data, Note 2.

      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. As a result,  the quarter ended  December 31, 2002
constitutes a transitional fiscal period. To assist in the comparability and the
analysis of results for the  three-month  transition  period ended  December 31,
2002,  results for the quarter ended  December 31, 2001 are shown in addition to
results for the year ended  September  30,  2002,  the  nine-month  period ended
September 30, 2001 and the year ended December 31, 2000.

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.

      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


                                       11


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.

      The  balance  of each of these  non-strategic/liquidating  portfolios  are
presented in the following table ($ in millions):



                                                   Balance Outstanding at  Balance Outstanding at
                    Portfolio                       December 31, 2002(1)   September 30, 2002(1)
                    ---------                      ----------------------  ----------------------
                                                                            
Manufactured housing .............................         $  624                 $  628
Recreational vehicle .............................             34                     38
Recreational marine ..............................            123                    133
Wholesale inventory finance ......................             18                     22
Franchise finance ................................            322                    390
Owner-operator trucking ..........................            218                    249
                                                           ------                 ------
Sub total -- liquidating portfolios ..............          1,339                  1,460
Venture capital ..................................            335                    342
                                                           ------                 ------
Total ............................................         $1,674                 $1,802
                                                           ======                 ======


--------------------------------------------------------------------------------
(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 re-access
the  commercial  paper and term debt  markets and to improve  our balance  sheet
strength. The steps taken are outlined 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 of 7.75%  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 renewed  our  existing  $3
billion  equipment  conduit  facility and  increased  the facility  size to $3.5
billion.  Also in June  2002,  we  executed  a $1 billion  public  asset  backed
transaction, secured by home equity assets.

      In July 2002,  we completed  our 100% IPO,  with the proceeds  paid to our
former parent.  CIT received  approximately  $250 million of additional  capital
shortly  following the IPO, which enhanced our capital base, as the underwriters
elected to exercise a portion of their over-allotment or "green shoe" option.

      Immediately  following  the 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 market pricing levels.
We continued  to pay down  existing  credit  facilities,  maintaining  back-stop
liquidity to fully cover all  outstanding  commercial  paper.  In July 2002,  we
entered into an  agreement  with a financial  institution  to provide us with an
additional $250 million in back-stop liquidity. The terms and conditions of that
agreement are substantially  identical to those contained in our previous credit
agreements.  In October  2002,  we made  further  improvements  to our  maturity
profile.  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


                                       12


expires  in  October  2003.  Proceeds  from the new  facility  along  with other
liquidity  sources were  utilized to pay down the prior  facility.  As a result,
outstanding  bank lines were  reduced by almost  $2.0  billion  during the three
months ended  December 31, 2002. In January  2003, we repaid an additional  $0.5
billion of the  outstanding  bank lines.  The Company  had  aggregate  committed
credit facilities of approximately $7.35 billion,  with $5.23 billion available,
at December  31, 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  an  aggregate  $4.0  billion  in  term  debt in the
institutional  debt markets,  comprised of $2.9 billion in  fixed-rate  debt and
$1.1 billion in  floating-rate  debt. In October  2002, we  established a retail
note program and have issued $736 million through December 31, 2002. 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.  The  weighted
average rate on the fixed rate issuance has been lower than the weighted average
rate of our  outstanding  debt  portfolio  due to  lower  index  rates,  but the
borrowing  spreads are higher than  comparable  borrowing  spreads  prior to the
onset of events surrounding our separation from Tyco. 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 our
borrowing spreads being higher than traditionally experienced. Additionally, the
Company has been  maintaining  cash liquidity levels in excess of our historical
norms. Although our quality spreads have been trending towards historical levels
in recent months,  management  expects that margin and earnings will continue to
be negatively  impacted for the foreseeable  future, as results will continue to
reflect more expensive borrowing spreads and excess liquidity.

      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 our emphasis on
liquidating or selling targeted assets, and securitizing higher levels of assets
to meet liquidity  needs, our on balance sheet 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 increased, or "widened out", leading to increased
borrowing costs relative to U.S.  Treasury  securities and various floating rate
indices for most corporate borrowers, including CIT.

      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:



                                                   December 31,  September 30,  September 30,  December 31,
                                                       2002          2002           2001           2000
                                                   ------------  -------------  -------------  ------------
                                                                                        
Average spread over U.S. Treasuries ............        302           313            147            154


      Though quality  spreads remain high in relation to historical  levels,  we
did see a  tightening  of our  spreads  during  the  latter  half of the  fourth
calendar  quarter.  In early  December 2002, we completed a five year fixed rate
borrowing for $800 million at a spread of 235 basis points over U.S. treasuries,
and our spreads in the  secondary  bond market were 225 basis points over 5-year
treasuries on December 31, 2002.

      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 year ended  September  30, 2002.  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. While charge-offs remained high during the three months ended December
31, 2002, the dollar amounts of delinquencies and non-performing assets improved
from September 30, 2002, which we consider to be a leading indicator of possible
future charge-off activity.


                                       13


      Management's current principal focus is on improving the credit quality of
our  portfolio,  lowering our  borrowing  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.

Income Statement and Balance Sheet Analysis in Relation to Prior Year Periods

      The  following  table  summarizes  the  impact  of  various  items for the
respective  reporting  periods that affect the  comparability  of our  financial
results under accounting  principles generally accepted in the U.S. ("GAAP"). We
are presenting these items as a supplement to the GAAP results to facilitate the
comparability of results between periods. The adoption of Statement of Financial
Accounting  Standards No. ("SFAS") 142,  "Goodwill and Other Intangible  Assets"
eliminated goodwill amortization and introduced goodwill impairment charges. The
impairment  charge in the September  30, 2002 fiscal year was a non-cash  charge
and did not  impact  our  tangible  capital.  The TCH  results  relate to a Tyco
acquisition company that had temporary status with respect to Tyco's acquisition
of CIT.  The venture  capital  charges  relate to a line of business in which we
have ceased  originations,  while reserving  actions and other charges represent
significant  items  that  relate  to  specific  portfolios  and to  Tyco-related
acquisition costs. For these reasons, we believe that this table, in addition to
the GAAP results, aids in the analysis of the significant trends in our business
over the periods presented ($ in millions).



                                                                    Three Months           Twelve          Nine
                                                                 Ended December 31,     Months Ended   Months Ended     Year Ended
                                                             -------------------------  September 30,  September 30,   December 31,
                                                                2002          2001          2002           2001           2000
                                                             -----------   -----------  -------------  -------------  -------------
                                                             (successor)   (successor)   (successor)    (combined)    (predecessor)
                                                                                                         
Net income (loss) -- GAAP basis ........................      $  141.3      $  184.1      $(6,698.7)     $  263.3       $  611.6
Charges included in net income
  (loss):
    Goodwill impairment ................................            --            --        6,511.7            --             --
    Goodwill amortization ..............................            --            --             --          92.5           75.4
    Reserving actions and other
      charges ..........................................            --            --          220.1         158.0             --
    Venture capital (gains) losses .....................           3.9          (1.6)          25.0          (3.7)         (33.3)
    TCH losses .........................................            --          54.9          723.5          70.5             --
                                                              --------      --------      ---------      --------       --------
Net income -- before charges ...........................      $  145.2      $  237.4      $   781.6      $  580.6       $  653.7
                                                              ========      ========      =========      ========       ========


      The  reduction in net income for the three months ended  December 31, 2002
from the prior year quarter  resulted from lower interest  margin due to a lower
asset base and higher borrowing costs, as well as higher charge-offs.

      The reserving  actions and other charges of $220.1  million for the twelve
months  ended  September  30, 2002  includes  the  following:  a $136.4  million
after-tax   provision  to   establish   reserves   primarily   relating  to  the
telecommunications   portfolio,   notably  competitive  local  exchange  carrier
exposures,  and an $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.  As a result of the adoption of SFAS 142 on October 1, 2001,  there
was no goodwill amortization for the periods subsequent to September 30, 2001.

      Net income for the combined nine months ended  September 30, 2001 included
a charge of $221.6 million  ($158.0 million  after-tax),  which consisted 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  $46.4  billion at December 31, 2002 versus $47.6
billion at September 30, 2002 and $49.1 billion at December 31, 2001.  Financing
and leasing portfolio assets totaled $35.9 billion at December 31,


                                       14


2002,  $36.4  billion at  September  30, 2002 and $38.6  billion at December 31,
2001.  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.  The  decline in assets from
September 30, 2002 to December 31, 2002 also included a $0.9 billion  decline in
the  Commercial  Finance  portfolio due to seasonal  runoff.  See "Financing and
Leasing Assets" for additional information.

Net Finance Margin

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



                                                         Three Months                  Twelve             Nine
                                                      Ended December 31,            Months Ended      Months Ended      Year Ended
                                                 ----------------------------       September 30,     September 30,    December 31,
                                                    2002              2001              2002              2001             2000
                                                 ----------        ----------       -------------     -------------    ------------
                                                 (successor)       (successor)       (successor)       (combined)      (predecessor)
                                                                                                         
Finance income ...........................       $    971.7        $  1,199.0        $  4,342.8        $  3,975.3       $  5,248.4
Interest expense .........................            340.0             373.0           1,439.3           1,619.8          2,497.7
                                                 ----------        ----------        ----------        ----------       ----------
    Net finance income ...................            631.7             826.0           2,903.5           2,355.5          2,750.7
Depreciation on operating lease
 equipment ...............................            277.3             338.5           1,241.0           1,036.7          1,281.3
                                                 ----------        ----------        ----------        ----------       ----------
    Net finance margin ...................       $    354.4        $    487.5        $  1,662.5        $  1,318.8       $  1,469.4
                                                 ==========        ==========        ==========        ==========       ==========
Average earning assets ("AEA") ...........       $ 32,693.2        $ 37,471.2        $ 35,796.4        $ 40,442.0       $ 40,682.5
                                                 ==========        ==========        ==========        ==========       ==========
As a % of AEA:
Finance income ...........................            11.89%            12.80%            12.13%            13.10%           12.90%
Interest expense .........................             4.16%             3.98%             4.02%             5.34%            6.14%
                                                 ----------        ----------        ----------        ----------       ----------
    Net finance income ...................             7.73%             8.82%             8.11%             7.76%            6.76%
Depreciation on operating lease
 equipment ...............................             3.39%             3.62%             3.47%             3.42%            3.15%
                                                 ----------        ----------        ----------        ----------       ----------
Net finance margin........................             4.34%             5.20%             4.64%             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 (recorded as adjustments to goodwill)
to reflect market interest rates  (including lower debt quality spreads) on debt
and assets (including  liquidating  portfolios) and lower leverage. The positive
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 38, 48, 45 and 16 basis points for the three months ended December
31,  2002 and 2001,  the twelve  months  ended  September  30, 2002 and the nine
months ended September 30, 2001, respectively.  Our funding costs increased as a
result of 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.  These factors were particularly
evident in the  comparisons  for the three  months  ended  December 31, 2002 and
2001. AEA declined  during 2002 due to increased  securitization,  the runoff of
non-strategic,  liquidating  portfolios  and the  slower  economy.  See the "Key
Business  Initiatives and Trends" section for further  discussion of our quality
spreads and the factors causing the lower levels of AEA.

      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 three months
ended December 31, 2002 decreased $227.3 million to $971.7 million from the same
period in 2001,  reflecting  a decline  of 12.8% in AEA and the  impact of lower
market  interest  rates,  as well as lower  operating  lease  rentals  primarily
resulting from lower rentals


                                       15


on the aerospace  portfolio  following the 2001 commercial airline industry down
turn.  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.

      Although  down in dollar  amount,  interest  expense for the three  months
ended  December 31, 2002  increased as a percentage  of AEA in comparison to the
three months ended  December 31,  2001,  in spite of declining  market  interest
rates.  Cost of funds as a percentage of AEA averaged 4.16% for the three months
ended  December 31, 2002  compared to 3.98% for the three months ended  December
31, 2001,  reflecting the term out of floating interest rate funding sources and
higher borrowing  spreads.  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. At December 31, 2002, CIT had outstanding  $5.0 billion
in commercial paper and $2.1 billion in drawn bank facilities.  Commercial paper
outstanding  at  December  31,  2001  amounted  to  $8.0  billion  and we had no
outstandings  drawn under the  commercial  bank  lines.  We continue to pay down
drawn bank  loans,  while  maintaining  back-stop  liquidity  to fully cover all
outstanding commercial paper.

      The operating lease  equipment  portfolio was $6.7 billion at December 31,
2002,  $6.6  billion at September  30, 2002,  $6.5 billion at December 31, 2001,
$6.4  billion at September  30, 2001 and $7.2 billion at December 31, 2000.  The
table below summarizes  operating lease margin as a % of average operating lease
equipment for the respective periods.



                                                               Three Months               Twelve           Nine
                                                            Ended December 31,         Months Ended    Months Ended     Year Ended
                                                       ----------------------------    September 30,   September 30,   December 31,
                                                          2002              2001           2002            2001            2000
                                                       ----------        ----------    -------------   -------------   ------------
                                                       (successor)       (successor)    (successor)     (combined)     (predecessor)
                                                                                                             
Rental income ......................................      23.6%              28.9%          26.4%          27.6%            27.9%
Depreciation expense ...............................      16.8%              21.1%          18.9%          19.4%            19.5%
                                                          ----               ----           ----           ----             ----
Operating lease margin .............................       6.8%               7.8%           7.5%           8.2%             8.4%
                                                          ====               ====           ====           ====             ====


      In addition to the previously  mentioned  reduction in aerospace  rentals,
the declines in both rental income and depreciation expense for the three months
ended December 31, 2002 from the corresponding period of 2001 reflects a greater
proportion of longer-term aircraft and rail assets in the current period.

Net Finance Margin after Provision for Credit Losses

      The net finance  margin after  provision for credit losses (risk  adjusted
interest margin) for the three months ended December 31, 2002 declined by $153.6
million (41.0%) to $221.0 million from $374.6 million for the comparable  period
of 2001.  These amounts  equated to risk adjusted margin of 2.70% and 4.00% as a
percentage  of AEA for the three  months ended  December  31, 2002 and 2001.  In
addition to the factors discussed in Net Finance Margin,  these comparisons also
reflected a $20.5 million increase in the provision for credit losses,  stemming
primarily  from  higher  charge-offs  in  the  Commercial  Finance  segment  and
telecommunication  charge-offs, which were provided for in prior period specific
reserving actions.

      The risk  adjusted  net margin was $874.2  million  (2.44%) for the twelve
months ended  September 30, 2002, and $986.3 million (3.25%) for the nine months
ended  September  30,  2001.  Excluding  the  additional  credit  provisions  to
establish  reserves for the  telecommunications  and  Argentine  exposures,  and
certain prior year  provisions,  risk adjusted margin as a percentage of AEA was
3.38% for the twelve months ended September 30, 2002,  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


                                       16


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 the
three months ended December 31, 2002, the year ended September 30, 2002, and the
nine  months  ended  September  30,  2001  were  13,  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 three  months  ended
December 31, 2002,  other revenue  increased  4.9% to $257.1 million from $245.1
million  in the  comparable  period  in 2001.  The  venture  capital  impairment
valuations and  write-downs in all periods,  as well as special charges in 2001,
consisting of write-downs for other than temporary  impairment of certain equity
investments  in the  telecommunications  industry and e-commerce  markets,  were
recorded as reductions to other revenue. Excluding these items, other revenue as
a  percentage  of AEA was 3.22% for the three  months  ended  December 31, 2002,
2.59% for the three  months ended  December  31, 2001,  2.72% for the year ended
September 30, 2002, 2.13% for the nine months ended September 30, 2001 and 2.11%
for the year ended  December 31, 2000.  The  components of other revenue are set
forth in the following table ($ in millions).



                                                               Three Months               Twelve           Nine
                                                            Ended December 31,         Months Ended    Months Ended     Year Ended
                                                       ----------------------------    September 30,   September 30,   December 31,
                                                          2002              2001           2002            2001            2000
                                                       ----------        ----------    -------------   -------------   ------------
                                                       (successor)       (successor)    (successor)     (combined)     (predecessor)
                                                                                                            
Fees and other income ..............................     $169.2             $173.5         $644.5          $387.2          $480.9
Factoring commissions ..............................       55.1               38.3          165.5           111.9           154.7
Gains on securitizations ...........................       30.5               28.0          149.0            97.7           109.5
Gains on sales of leasing
    equipment ......................................        8.7                2.7           13.6            47.9           113.2
(Losses) gains on venture capital
    investments ....................................       (6.4)               2.6          (40.3)            6.0            53.7
Other charges ......................................         --                 --             --           (78.1)             --
                                                         ------             ------         ------          ------          ------
    Total ..........................................     $257.1             $245.1         $932.3          $572.6          $912.0
                                                         ======             ======         ======          ======          ======


      For the three months ended December 31, 2002, fees and other income, which
includes  servicing fees,  miscellaneous  fees,  syndication fees and gains from
asset sales,  declined  slightly from the comparable  period of 2001.  Factoring
commissions  increased $16.8 million from the quarter ended December 31, 2001 to
$55.1 million,  reflecting both increased  volume and higher  commission  rates.
Losses on venture  capital  investments  for the three months ended December 31,
2002 are attributable to weaker economic  conditions compared to the same period
in 2001.

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



                                                               Three Months               Twelve           Nine
                                                            Ended December 31,         Months Ended    Months Ended     Year Ended
                                                       ----------------------------    September 30,   September 30,   December 31,
                                                          2002              2001           2002            2001            2000
                                                       ----------        ----------    -------------   -------------   ------------
                                                       (successor)       (successor)    (successor)     (combined)     (predecessor)
                                                                                                          
Volume securitized(1) .............................     $ 1,189.3         $ 1,223.8      $ 7,668.5       $ 3,293.3       $ 4,129.2
Gains .............................................          30.5              28.0          149.0            97.7           109.5
Gains as a percentage of volume
    securitized ...................................          2.57%             2.29%          1.94%           2.97%           2.65%


--------------------------------------------------------------------------------
(1)   Excludes short-term trade receivables securitized for liquidity purposes.

      During the three months  ended  December 31,  2002,  we  securitized  $0.3
billion of home  equity  loans and $0.9  billion  of  equipment  loans.  For the
periods  in 2001 and 2000,  the  securitization  volume was  entirely  equipment
loans.  For the twelve  months ended  September 30, 2002,  we  securitized  $2.7
billion  of  home  equity  loans  and  $4.9  billion  of  equipment  loans.  The
securitization  volume increased in 2002 primarily to meet funding and liquidity
needs.


                                       17


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 ($ in
millions).



                                                               Three Months               Twelve           Nine
                                                            Ended December 31,         Months Ended    Months Ended     Year Ended
                                                       ----------------------------    September 30,   September 30,   December 31,
                                                          2002              2001           2002            2001            2000
                                                       ----------        ----------    -------------   -------------   ------------
                                                       (successor)       (successor)    (successor)     (combined)     (predecessor)
                                                                                                          
Efficiency ratio(1) ..............................         39.6%              31.5%          35.6%           40.2%            43.8%
Salaries and general operating
    expenses as a percentage
    of AMA(2) ....................................         2.18%              1.93%          1.96%           2.07%            2.01%
Salaries and general operating
    expenses .....................................      $ 242.1            $ 230.5        $ 923.4         $ 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.

      The  increase in salaries  and general  operating  expenses  for the three
months ended  December 31, 2002 in relation to the same period in 2001  includes
increased expenses associated with our return to public ownership. The decreased
expenses  for the  twelve  months  ended  September  30,  2002  compared  to the
annualized  run rates for the nine months ended  September 30, 2001 and the year
ended  December  31, 2000 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.  The expenses  relating to our
return  to  public  company  status  include  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 5,835 at December 31,
2002 from 5,850 at September 30, 2002,  6,785 at September 30, 2001 and 7,355 at
December 31, 2000.

      In addition to the higher  expenses,  the  deterioration in the efficiency
ratio for the three months  ended  December 31, 2002 to 39.6% from 31.5% for the
comparable  period of 2001 is also the  result of lower  net  finance  margin in
2002.  Similarly,  the  deterioration  in the  ratio  of  salaries  and  general
operating  expenses to AMA reflects reduced levels of average managed assets. We
continue to target an  efficiency  ratio in the mid 30% area and an AMA ratio of
under 2.00%.  The higher  efficiency  (lower  ratio) for the twelve months ended
September 30, 2002 in comparison to the nine months ended  September 30, 2001 is
the result of strong fee income and cost reductions.

      Expenses are monitored  closely by business unit and corporate  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
Company  adopted SFAS No. 142, 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  was $97.6 million (pretax) for the nine months
ended September 30, 2001.

      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


                                       18


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 us 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  further 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  2002  quarter.   Our  remaining   goodwill  is
substantially in our commercial finance segment businesses.  Due to a relatively
stable credit market and business environment since June 30, 2002, we determined
that no additional  goodwill impairment charges were needed during the remaining
periods of 2002.

Provision for Credit Losses

      The provision  for credit  losses was $133.4  million for the three months
ended December 31, 2002,  $788.3  million for the twelve months ended  September
30, 2002,  and $332.5  million for the combined nine months ended  September 30,
2001.  The increased  provision  for the year ended  September 30, 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.


                                       19


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



                                                                     For the Three  For the Twelve     For the Nine       For the
                                                                      Months Ended   Months Ended      Months Ended      Year Ended
                                                                      December 31,   September 30,     September 30,    December 31,
                                                                         2002            2002              2001            2000
                                                                     -------------  --------------     -------------   -------------
                                                                      (successor)     (successor)       (combined)     (predecessor)
                                                                                                              
Balance beginning of period ......................................      $777.8          $492.9           $468.5           $446.9
                                                                        ------          ------           ------           ------
Provision for credit losses ......................................       133.4           453.3            243.0            255.2
Provision for credit losses -- specific reserving
 actions(1) ......................................................          --           335.0             89.5               --
Reserves relating to dispositions, acquisitions,
 other ...........................................................         4.1           (11.1)           (16.3)             2.0
                                                                        ------          ------           ------           ------
    Additions to reserve for credit losses .......................       137.5           777.2            316.2            257.2
                                                                        ------          ------           ------           ------
Net credit losses:
Equipment Financing and Leasing ..................................        71.1           258.9             82.8            102.9
Specialty Finance -- commercial ..................................        23.2            80.3             57.0             31.7
Commercial Finance ...............................................        33.5            88.2             38.9             46.2
Structured Finance ...............................................        15.5            18.5             64.8              0.4
Specialty Finance -- consumer ....................................        11.2            46.4             48.3             54.4
                                                                        ------          ------           ------           ------
    Total net credit losses ......................................       154.5           492.3            291.8            235.6
                                                                        ------          ------           ------           ------
Balance end of period ............................................      $760.8          $777.8           $492.9           $468.5
                                                                        ======          ======           ======           ======
Reserve for credit losses as a percentage of
 finance receivables .............................................        2.75%           2.73%            1.55%            1.40%
                                                                        ======          ======           ======           ======
Reserve for credit losses as a percentage of past
 due receivables (sixty days or more)(2) .........................        76.0%           72.7%            44.7%            46.9%
                                                                        ======          ======           ======           ======


--------------------------------------------------------------------------------
(1)   The specific  reserving  actions for the twelve months ended September 30,
      2002 consist of provisions relating to telecommunications ($200.0 million)
      and Argentine  exposures ($135.0  million),  while the action for the nine
      months   ended   September   30,  2001   consists   of  a  provision   for
      under-performing  loans and leases,  primarily  in the  telecommunications
      portfolio.

(2)   The reserve for credit losses  excluding  the impact of  telecommunication
      and  Argentine  reserves and  delinquencies  as a  percentage  of past due
      receivables  (sixty days or more) is 49.0% at December  31, 2002 and 45.3%
      at September 30, 2002.

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

Net Charge-offs:



                                                       For the Three Months         For the Twelve   For the Nine        For the
                                                        Ended December 31,           Months Ended    Months Ended       Year Ended
                                                  -------------------------------    September 30,   September 30,     December 31,
                                                       2002            2001              2002             2001             2000
                                                  --------------   --------------   --------------   --------------   --------------
                                                    (successor)     (successor)       (successor)      (combined)      (predecessor)
                                                                                                 
Equipment Financing and Leasing ...............   $ 71.1   3.23%   $ 62.1   2.22%   $258.9   2.51%   $ 82.8   0.91%   $102.9   0.71%
Specialty Finance-commercial ..................     23.2   1.55%     20.7   1.25%     80.3   1.26%     57.0   1.11%     31.7   0.54%
Commercial Finance ............................     33.5   1.92%     16.6   0.80%     88.2   1.13%     38.9   0.66%     46.2   0.60%
Structured Finance ............................     15.5   2.24%       --     --      18.5   0.75%     64.8   4.40%      0.4   0.03%
                                                  ------           ------           ------           ------           ------
  Total Commercial Segments ...................    143.3   2.33%     99.4   1.41%    445.9   1.65%    243.5   1.13%    181.2   0.62%
Specialty Finance-consumer ....................     11.2   2.24%     13.4   1.70%     46.4   1.78%     48.3   1.72%     54.4   1.32%
                                                  ------           ------           ------           ------           ------
Total .........................................   $154.5   2.32%   $112.8   1.44%   $492.3   1.67%   $291.8   1.20%   $235.6   0.71%
                                                  ======           ======           ======           ======           ======


      The increased net  charge-offs in the three months ended December 31, 2002
from the  comparable  period in 2001,  both in amount  and  percentage,  reflect
general  economic  weakness  leading  to higher net  charge-offs  in most of our
business segments.  In particular,  weakened  collateral values in the equipment
financing  and leasing  segment have  resulted in both  increased  frequency and
severity of losses.  The higher loss rates in the commercial  finance segment in
2002 reflect  charge-offs  associated  with several  loan  work-outs  due to the
weaker  economic  trends.  The higher net charge-off  percentages for the twelve
months ended September 30, 2002 in relation to the prior year also


                                       20


reflect  higher  charge-off  rates  associated  with  receivables in liquidation
status, which include  owner-operator  trucking,  franchise,  inventory finance,
manufactured  housing  and  recreational   vehicle   receivables,   as  well  as
charge-offs in the  telecommunications  portfolio which were provided for in the
specific reserving actions.

      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 periods under review in the  following  tables ($ in
millions):



                                                                    Three Months Ended December 31, 2002
                                                    ------------------------------------------------------------------
                                                        Excluding
                                                      Liquidating and       Liquidating and
                                                    Telecommunications     Telecommunications              Total
                                                    ------------------     ------------------       ------------------
                                                                                               
Equipment Financing and Leasing .............         $ 57.8    2.81%       $ 13.3     9.25%        $ 71.1       3.23%
Specialty Finance-commercial ................           21.2    1.42%          2.0    36.36%          23.2       1.55%
Commercial Finance ..........................           33.5    1.92%           --       --           33.5       1.92%
Structured Finance ..........................             --      --          15.5     8.75%          15.5       2.24%
                                                      ------                ------                  ------
    Total Commercial Segments ...............          112.5    1.93%         30.8     9.44%         143.3       2.33%
Specialty Finance-consumer ..................            6.1    2.11%          5.1     2.42%          11.2       2.24%
                                                      ------                ------                  ------
    Total ...................................         $118.6    1.94%       $ 35.9     6.68%        $154.5       2.32%
                                                      ======                ======                  ======




                                                                    Three Months Ended December 31, 2002
                                                    ------------------------------------------------------------------
                                                        Excluding
                                                      Liquidating and       Liquidating and
                                                    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

      The  reserve  for credit  losses  was  $760.8  million or 2.75% of finance
receivables at December 31, 2002. The reserve for credit losses at September 30,
2002,  September  30,  2001 and  December  31, 2000 was $777.8  million,  $492.9
million and $468.5 million,  respectively,  which represented  2.73%,  1.55% and
1.40%, of finance  receivables  outstanding,  respectively.  The increase in the
reserve,  both on a dollar basis and as a percentage of finance receivables,  is
primarily  due to two  specific  reserving  actions  taken during the year ended
September   30,  2002.  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. Additionally, as a result of 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  ($95 million  during the quarter ended
March 31, 2002 and $40  million  during the quarter  ended June 30,  2002).  The
specific  reserve for the  telecommunications  portfolio  was $153.6  million at
December 31, 2002 and $169.1 million at September 30, 2002,  while the Argentine
specific reserve remained at $135.0 million through December 31, 2002.


                                       21


       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 December 31, 2002      At September 30, 2002    At September 30, 2001   At December 31, 2000
                                   -----------------------    -----------------------   ---------------------   --------------------
                                    Amount           %         Amount           %         Amount        %        Amount        %
                                   --------     ----------    --------     ----------   ---------    --------   --------    --------
                                        (successor)                (successor)               (successor)            (predecessor)
                                                                                                      
Finance receivables ............    $472.2        1.77%        $473.7        1.72%        $492.9       1.55%     $468.5       1.40%
Telecommunications .............     153.6       22.40%(1)      169.1       24.77%(1)         --         --%         --         --%
Argentina ......................     135.0       73.11%(2)      135.0       71.85%(2)         --         --%         --         --%
                                    ------                     ------                     ------                 ------
Total ..........................    $760.8        2.75%        $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.

      Excluding the Argentine and telecommunication reserving actions previously
discussed,  the reserve for credit losses was $472.2  million  (1.77% of finance
receivables)  at December 31, 2002 $473.7 million (1.72%) at September 30, 2002,
$492.9 million (1.55% of finance  receivables)  at September 30, 2001 and $468.5
million (1.40% of finance  receivables) at December 31, 2000. On this basis, the
reserve declined in total dollars due to lower asset levels,  but increased as a
percentage of finance receivables due to weaker economic conditions.

      At December 31, 2002, finance receivables past due 60 days,  excluding the
Argentine and the  telecommunications  portfolios,  amounted to $964.0  million,
down $81.8 million (7.8%) from September 30, 2002. The reserve includes specific
reserves relating to SFAS 114 impaired loans (excluding  telecommunications  and
Argentina)  of $52.9 million at December 31, 2002,  down from $109.0  million at
September  30,  2002 and  $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 total telecommunications portfolio and the portion comprising the CLEC
exposure  amounted to $710.1  million and $262.3  million at December  31, 2002,
compared to $707.2 million and $275.2 million at September 30, 2002.  During the
three   months   ended   September   30,   2002,   we   charged   the   specific
telecommunications  reserve  for $18.4  million  in loan  charge-offs  and $12.5
million in  telecommunications  equipment  write-downs.  During the three months
ended December 31, 2002, an additional $15.5 million in  telecommunication  loan
charge-offs were charged against the reserve.

      Our  consolidated  reserve for credit losses is periodically  reviewed for
adequacy based on portfolio  collateral  values and credit  quality  indicators,
including  charge-off  experience,  levels of past due loans and  non-performing
assets,  evaluation  of  portfolio  diversification/concentration  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 of $500 thousand or greater 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  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.


                                       22


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 December 31, 2002; September 30, 2002; and
September 30, 2001 ($ in millions).



                                            At December 31,       At September 30,       September 30,        At December 31,
                                                 2002                  2002                  2001                  2000
                                          ------------------     ------------------    -----------------    ------------------
                                              (successor)           (successor)           (successor)          (predecessor)
                                                                                                 
Finance receivables,
  past due 60 days
  or more:
  Equipment Financing
    and Leasing .....................      $  444.8    5.12%      $  452.2    5.02%     $  466.5   4.08%     $399.8    2.88%
  Specialty Finance-
   commercial .......................         182.9    3.07%         215.4    3.54%        259.5   3.97%      184.9    3.07%
  Commercial Finance ................         172.3    2.14%         209.4    2.35%        151.4   1.75%      107.9    1.40%
  Structured Finance ................          67.6    2.31%          65.8    2.45%         38.3   1.75%       96.2    5.59%
                                           --------               --------              --------             ------
  Total Commercial
   Segments .........................         867.6    3.39%         942.8    3.53%        915.7   3.18%      788.8    2.69%
  Specialty Finance-
   consumer .........................         133.7    6.66%         127.2    7.20%        188.2   6.12%      211.1    5.03%
                                           --------               --------              --------             ------
Total ...............................      $1,001.3    3.63%      $1,070.0    3.76%     $1,103.9   3.46%     $999.9    2.98%
                                           ========               ========              ========             ======

Non-performing assets:
  Equipment Financing
    and Leasing .....................      $  558.4    6.42%      $  548.5    6.09%     $  459.1   4.02%     $351.0    2.53%
  Specialty Finance-
   commercial .......................          98.2    1.65%         103.1    1.69%        124.2   1.90%       93.9    1.56%
  Commercial Finance ................         136.2    1.69%         176.1    1.98%        106.0   1.22%       65.3    0.85%
  Structured Finance ................         151.6    5.19%         172.2    6.40%        110.4   5.05%      118.6    6.90%
                                           --------               --------              --------             ------
  Total Commercial
   Segments .........................         944.4    3.69%         999.9    3.75%        799.7   2.78%      628.8    2.15%
  Specialty Finance-
   consumer .........................         141.4    7.04%         139.9    7.92%        170.0   5.53%      199.3    4.75%
                                           --------               --------              --------             ------
  Total .............................      $1,085.8    3.93%      $1,139.8    4.01%     $  969.7   3.04%     $828.1    2.47%
                                           ========               ========              ========             ======

Non accrual loans ...................      $  946.4               $  976.6              $  851.6             $704.2
Repossessed assets ..................         139.4                  163.2                 118.1              123.9
                                           --------               --------              --------             ------
  Total non-performing
   assets ...........................      $1,085.8               $1,139.8              $  969.7             $828.1
                                           ========               ========              ========             ======


      Past due loans declined $68.7 million from September 30, 2002,  ending the
quarter at 3.63% of finance receivables,  versus 3.76% last quarter.  This trend
reflected  improvements in most businesses,  particularly the Commercial Finance
Segment and the Specialty  Finance -- commercial unit. The decline in Commercial
Finance  reflected  the fact that several  large loan work outs were  concluded,
while the Specialty Finance - commercial  improvement included lower delinquency
in the European operations and vendor programs.  Non-performing assets decreased
$54.0  million  from  September  30, 2002 due to  reductions  in the  Commercial
Finance and Structured Finance Segments. Equipment Financing unit non-performing
assets  declined  sharply  during  the  quarter,  but were more  that  offset by
additional  aerospace  assets placed on non-accrual in the Capital  Finance unit
relating to the  bankruptcy  filing of UAL Corp.,  the parent  company of United
Airlines.

      Past  due  loans  decreased  $33.9  million  from  September  30,  2001 to
September 30, 2002, despite the weakened U.S. economy. However, due to increased
securitization  activity and declining asset levels,  the percentage of past due
receivables increased over the same time period. Non-performing assets increased
from  September  30,  2001 to  September  30,  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
non-accrual  status  collateralized by a municipal  waste-to-energy  project and
underlying revenue contracts in Equipment Financing and Leasing,


                                       23


(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  $120.2 million and $137.0
million at December  31 and  September  30,  2002,  respectively,  of which CLEC
accounts totaled $92.9 million and $109.9 million, respectively.

      After  peaking in March 31, 2002, we have seen steady  improvement  in the
Specialty  Finance -  commercial  segment past dues.  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.  Past due and non-performing  assets of the Commercial Finance
segment were up from September 2001 to September  2002,  mainly due to two large
customer  balances.  The Specialty  Finance-consumer  past due portfolio metrics
were 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 a 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.

      Managed past due loans, which also include securitized loans, decreased to
3.55% of managed  financial  assets  (managed  assets less operating  leases and
venture  capital  investments)  at  December  31,  2002 from  3.78% and 3.72% at
September 30, 2002 and September 30, 2001,  respectively,  as shown in the table
below ($ in  millions).  Managed  past dues  declined  9.3% to $1.4  billion  at
December 31, 2002 from $1.5 billion at September  30, 2002,  and 14.8% from $1.6
billion at September  30, 2001.  These trends  reflect the same factors that are
discussed in the owned delinquency analysis.



                                          At December 31, 2002   At September 30, 2002   At September 30, 2001  At December 31, 2000
                                          --------------------   ---------------------   ---------------------  --------------------
                                              (successor)             (successor)             (successor)           (predecessor)
                                                                                                      
Managed Financial Assets,
  past due 60 days or more:
  Equipment Financing
   and Leasing .........................    $  631.2    4.95%      $  710.6    5.27%      $  810.5     5.06%     $  661.3     3.21%
  Specialty Finance-
   commercial ..........................       265.1    2.62%         303.3    2.94%         386.4     3.57%        424.3     4.44%
  Commercial Finance ...................       172.3    2.14%         209.4    2.35%         151.4     1.75%        113.3     1.47%
  Structured Finance ...................        67.6    2.31%          65.8    2.45%          38.3     1.75%         96.2     4.10%
                                            --------               --------               --------               --------
  Total Commercial .....................     1,136.2    3.36%       1,289.1    3.64%       1,386.6     3.63%      1,295.1     3.22%
  Specialty Finance-
   consumer ............................       259.4    4.71%         249.5    4.71%         253.2     4.32%        264.0     3.65%
                                            --------               --------               --------               --------
  Total ................................    $1,395.6    3.55%      $1,538.6    3.78%      $1,639.8     3.72%     $1,559.1     3.29%
                                            ========               ========               ========               ========


      In light of the continued general economic weakness, and the circumstances
surrounding  particular  sectors  as  discussed  in  "Concentrations",  past due
finance  receivables  and  non-performing  assets may increase from December 31,
2002 amounts.

Income Taxes

      The effective tax rates for the three months ended  December 31, 2002, the
year ended September 30, 2002, the combined nine months ended September 30, 2001
and the year  ended  December  31,  2000 were  39.0%,  (5.9)%,  47.1% and 37.9%,
respectively. The provision for income taxes totaled $92.0 million for the three
months ended  December 31, 2002 and $118.2  million  (38.8%) for the  comparable
period in 2001.  The effective tax rates for the three months ended December 31,
2002 and 2001 were 39.0% and 38.0% (excluding TCH), respectively.  The provision
for income taxes for the year ended September 30, 2002, the combined nine months
ended  September  30,  2001 and the year  ended  December  31,  2000 was  $374.0
million, $242.2 million and $381.2 million, respectively.


                                       24


The  effective  tax  rate,  excluding  the 2002  goodwill  impairment,  goodwill
amortization  and TCH  results  of  operations,  was  38.1%  for the year  ended
September  31, 2002 and 39.6% for the combined  nine months ended  September 30,
2001.

      As of December 31, 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.  Following
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  results of
operations ($ in millions).



                                                               Three Months               Twelve           Nine
                                                            Ended December 31,         Months Ended    Months Ended     Year Ended
                                                       ----------------------------    September 30,   September 30,   December 31,
                                                          2002              2001           2002            2001            2000
                                                       ----------        ----------    -------------   -------------   ------------
                                                       (successor)       (successor)    (successor)     (combined)     (predecessor)
                                                                                                          
Net Income
Equipment Financing and Leasing ....................     $ 36.2             $ 61.7       $   202.0         $ 215.1        $ 287.8
Specialty Finance ..................................       73.7               93.9           349.8           196.7          222.2
Commercial Finance .................................       63.4               51.3           198.9           134.8          161.8
Structured Finance .................................       13.9               17.1            65.2            45.8           65.4
                                                         ------             ------       ---------         -------        -------
    Total Segments .................................      187.2              224.0           815.9           592.4          737.2
Corporate, including certain charges ...............      (45.9)              15.0        (6,791.1)         (258.6)        (125.6)
                                                         ------             ------       ---------         -------        -------
    Total ..........................................     $141.3             $239.0       $(5,975.2)        $ 333.8        $ 611.6
                                                         ======             ======       =========         =======        =======
Return on AEA
Equipment Financing and Leasing ....................       1.02%              1.55%           1.32%           1.64%          1.42%
Specialty Finance ..................................       2.86%              2.91%           2.98%           1.83%          1.73%
Commercial Finance .................................       5.18%              3.48%           3.41%           3.14%          3.03%
Structured Finance .................................       1.96%              2.62%           2.47%           2.37%          3.25%
    Total Segments .................................       2.32%              2.40%           2.29%           1.97%          1.82%
Corporate ..........................................      (0.59)%             0.15%         (18.98)%         (0.87)%        (0.32)%
    Total ..........................................       1.73%              2.55%         (16.69)%          1.10%          1.50%


      For the three months ended  December 31, 2002,  net income as a percentage
of AEA  declined 81 basis points to 173 basis  points from the  comparable  2001
period.  While total  segment  returns  were down  modestly  from the prior year
quarter,  the  fluctuation  in  Corporate  drove the majority of the decline due
primarily  to  higher  borrowing  costs.  In terms of the  individual  segments,
Commercial  Finance reported the most marked  improvement due to strong earnings
in both our  factoring  operation  and  Business  Credit,  while  the  Equipment
Financing unit within the Equipment  Financing and Leasing  Segment  experienced
lower finance income on lower assets and significantly higher charge-offs.

      For the year ended September 30, 2002, net income sharply  improved in the
Specialty  Finance  Segment in relation  to 2001 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 the decline in portfolio assets,  higher charge-offs
in the Equipment  Financing  business and lower aerospace rentals in the Capital
Finance business.


                                       25


      The  Corporate  segment  included  the  following  items in the year ended
September 30, 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. For the other  periods  shown in the table  above,  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 to the  business  units the  incremental
costs of borrowing and liquidity  relating to the disruption to our funding base
and credit downgrades, discussed previously. Such 2002 additional 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,  costs will
be  allocated  beginning  January  1, 2003.  For all  periods  shown,  Corporate
includes the results of the 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
predominately 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  $46.4 billion at
December  31, 2002  compared  to $47.6  billion at  September  30,  2002.  Owned
financing  and leasing  portfolio  assets  totaled $35.9 billion at December 31,
2002, compared to $36.4 billion at September 30, 2002.

      The decline in  financing  and  leasing  assets  from  September  30, 2002
included a $0.9  billion  drop in the  Commercial  Finance  segment,  reflecting
seasonal  runoff in both the  factoring  (Commercial  Services)  and  asset-base
lending (Business Credit) businesses.  Growth in most core portfolios during the
quarter, including $86.1 million in the Capital Finance aerospace portfolio, was
offset by the continued runoff in the liquidating portfolios.

      The 2002 trend of declining  asset levels  reflects the factors  discussed
previously in the "Key Business  Initiatives and Trends" section,  including the
increased use of securitization as a funding tool in 2002. At December 31, 2002,
the liquidating portfolios excluding certain venture capital investments totaled
$1.3  billion,  down from $1.5 billion at September 30, 2002 and $3.1 billion at
September 30, 2001. The December 31, 2002 liquidating portfolio balances were as
follows:  manufactured  housing $0.6  billion,  franchise  finance $0.3 billion,
owner-operator  trucking  $0.2 billion and other $0.2 billion.  New  origination
volume for the twelve months ended September 30, 2002 (excluding  factoring) was
down by approximately 12% from the comparable 2001 period.

      However, new business origination volume,  excluding factoring,  increased
by  approximately  20% during the three months ended  December 31, 2002 from the
prior quarter, driven by stronger organic originations in all business segments.
This  flow  included   working  capital   facilities  and   debtor-in-possession
financings  in  the  Business  Credit  unit,   collateralized   transactions  in
Structured Finance,  aerospace placements in Capital Finance and stronger volume
from our vendor partnerships.


                                       26


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



                                                                                                                   % Change
                                                         At                At              At             --------------------------
                                                     December 31,     September 30,   September 30,       Dec. '02 vs   Sep. '02 vs
                                                        2002              2002            2001              Sep. '02    vs. Sep. '01
                                                     -----------      -------------   -------------       -----------   ------------
                                                                                                            
Equipment Financing:
    Finance receivables .........................     $ 7,476.9        $ 7,633.0        $ 9,782.0             (2.0)%       (22.0)%
    Operating lease equipment, net ..............         668.3            765.8          1,281.7            (12.7)        (40.3)
                                                      ---------        ---------        ---------
      Total .....................................       8,145.2          8,398.8         11,063.7             (3.0)        (24.1)
                                                      ---------        ---------        ---------
Capital Finance:
    Finance receivables .........................       1,335.8          1,479.5          1,773.0             (9.7)        (16.6)
    Operating lease equipment, net ..............       4,719.9          4,388.9          3,272.4              7.5          34.1
                                                      ---------        ---------        ---------
      Total .....................................       6,055.7          5,868.4          5,045.4              3.2          16.3
                                                      ---------        ---------        ---------
      Total Equipment Financing
        and Leasing Segment .....................      14,200.9         14,267.2         16,109.1             (0.5)        (11.4)
                                                      ---------        ---------        ---------
Specialty Finance:
Commercial:
    Finance receivables .........................       6,722.4          6,620.2          6,791.6              1.5          (2.5)
    Operating lease equipment, net ..............       1,257.3          1,353.2          1,796.1             (7.1)        (24.7)
                                                      ---------        ---------        ---------
      Total commercial ..........................       7,979.7          7,973.4          8,587.7              0.1          (7.2)
                                                      ---------        ---------        ---------
Consumer:
    Home equity .................................         962.7          1,314.2          2,760.2            (26.7)        (52.4)
    Other .......................................       1,374.4            831.8          1,443.2             65.2         (42.4)
                                                      ---------        ---------        ---------
      Total consumer ............................       2,337.1          2,146.0          4,203.4              8.9         (48.9)
                                                      ---------        ---------        ---------
      Total Specialty Finance Segment ...........      10,316.8         10,119.4         12,791.1              2.0         (20.9)
                                                      ---------        ---------        ---------
Commercial Services .............................       4,392.5          5,040.4          5,112.2            (12.9)         (1.4)
Business Credit .................................       3,649.1          3,869.8          3,544.9             (5.7)          9.2
                                                      ---------        ---------        ---------
      Total Commercial Finance
        Segment .................................       8,041.6          8,910.2          8,657.1             (9.7)          2.9
                                                      ---------        ---------        ---------
Structured Finance:
    Finance receivables .........................       2,920.9          2,689.6          2,777.1              8.6          (3.2)
    Operating lease equipment, net ..............          59.1             59.5             52.6             (0.7)         13.1
    Equity investments ..........................         335.4            341.7            342.2             (1.8)         (0.1)
                                                      ---------        ---------        ---------
      Total Structured Finance Segment ..........       3,315.4          3,090.8          3,171.9              7.3          (2.6)
                                                      ---------        ---------        ---------
      TOTAL FINANCING AND
       LEASING PORTFOLIO ASSETS .................      35,874.7         36,387.6         40,729.2             (1.4)        (10.7)
                                                      ---------        ---------        ---------
Finance receivables securitized:
    Equipment Financing .........................       3,936.2          4,384.1          4,464.8            (10.2)         (1.8)
    Specialty Finance-commercial ................       3,377.4          3,703.1          4,023.2             (8.8)         (8.0)
    Specialty Finance-consumer ..................       3,168.8          3,147.5          1,659.9              0.7          89.6
                                                      ---------        ---------        ---------
      Total .....................................      10,482.4         11,234.7         10,147.9             (6.7)         10.7
                                                      ---------        ---------        ---------
      TOTAL MANAGED ASSETS(1) ...................     $46,357.1        $47,622.3        $50,877.1             (2.7)%        (6.4)%
                                                      =========        =========        =========


--------------------------------------------------------------------------------
(1)   Managed assets are compromised of financing and leasing assets and finance
      receivables previously securitized that we continue to manage.

Concentrations

      Our ten largest  financing  and leasing  asset  accounts in the  aggregate
represented  5.0% of our total financing and leasing assets at December 31, 2002
(with the largest account  representing  less than 1.0%),  4.8% at September 30,
2002 and 3.7% at  September  30,  2001.  All ten accounts at each period of time
were commercial  accounts and were secured by equipment,  accounts receivable or
inventory.


                                       27


Geographic Composition

      The following table summarizes  significant state  concentrations  greater
than 5.0% and foreign  concentrations  in excess of 1.0% of our owned  financing
and  leasing  portfolio  assets at December  31,  2002,  September  30, 2002 and
December 31, 2001. In each period, our managed asset geographic  composition did
not differ significantly from our owned asset geographic composition.



                                                    December 31,  September 30,  September 30,  December 31,
                                                        2002          2002           2001          2000
                                                    ------------  -------------  -------------  ------------
State
                                                                                       
California ......................................        9.8%         10.0%          10.4%         10.4%
New York ........................................        7.9%          7.8%           8.8%          6.9%
Texas ...........................................        7.0%          7.1%           7.7%          7.9%
    Total United States .........................       79.3%         79.9%          83.1%         83.0%
Country
Canada ..........................................        5.0%          4.7%           4.8%          5.4%
England .........................................        3.2%          3.1%           2.1%          2.8%
Australia .......................................        1.3%          1.3%            (1)           (1)
China ...........................................        1.2%          1.1%            (1)           (1)
Germany .........................................        1.1%          1.2%            (1)           (1)
Brazil ..........................................        1.1%           (1)            (1)           (1)
France ..........................................        1.0%           (1)            (1)           (1)
    Total Outside U.S. ..........................       20.7%         20.1%          16.9%         17.0%


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

Industry Composition

      At December 31, 2002,  our commercial  aerospace  portfolio in the Capital
Finance  business  unit  consists of  financing  and leasing  assets of $4,072.8
million covering 194 aircraft,  with an average age of approximately  6.9 years.
The  portfolio is spread over 78 accounts,  with the majority  placed with major
airlines.  The commercial aerospace portfolio at September 30, 2002 was $3,986.7
million of financing and leasing assets,  which covered 193 aircraft spread over
77 accounts,  with an average age of  approximately  7.4 years.  The  commercial
aircraft all comply with stage III noise regulations.

      The following table summarizes the composition of the commercial aerospace
portfolio as of December 31, and September 30, 2002 ($ in millions):



                                                       At December 31, 2002     At September 30, 2002
                                                      ---------------------     ---------------------
                                                          Net     Number of         Net     Number of
                                                      Investment   Planes       Investment   Planes
                                                      ----------  ---------     ----------  ---------
                                                                                    
By Geography:
    Europe .......................................     $1,506.5       51         $1,586.9       55
    North America ................................      1,042.2       75          1,025.9       76
    Asia Pacific .................................        853.6       35            813.4       31
    Latin America ................................        595.9       29            483.3       27
    Africa/Middle East ...........................         74.6        4             77.2        4
                                                       --------      ---         --------      ---
Total ............................................     $4,072.8      194         $3,986.7      193
                                                       ========      ===         ========      ===
By Manufacturer:
    Boeing .......................................     $2,388.1      135         $2,439.6      137
    Airbus .......................................      1,647.9       42          1,507.7       38
    Other ........................................         36.8       17             39.4       18
                                                       --------      ---         --------      ---
Total ............................................     $4,072.8      194         $3,986.7      193
                                                       ========      ===         ========      ===
By Body Type(1):
    Narrow .......................................     $2,799.4      142         $2,723.3      141
    Intermediate .................................        859.2       17            849.0       16
    Wide .........................................        377.4       18            375.0       18
    Other ........................................         36.8       17             39.4       18
                                                       --------      ---         --------      ---
Total ............................................     $4,072.8      194         $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.


                                       28


      As of December 31, 2002, operating leases represented approximately 75% of
the  portfolio,  with the  remainder  consisting  of capital  leases  (including
leveraged leases) and loans.  Tax-optimization leveraged leases, which generally
have  increased  risk for lessors in  relation to our other lease and  leveraged
lease structures,  were  approximately  $215 million at December 31, 2002. Total
leveraged  leases,  including the tax optimization  structures  described above,
were $474 million or 12% of the aerospace portfolio at December 31, 2002. Of the
194  aircraft,  9 are  off-lease,  6 of which have been  remarketed  with leases
pending as of December 31, 2002.

      The  regional  aircraft  portfolio  at December  31, 2002  consists of 117
planes and a net  investment  of $344.0  million,  primarily  in the  Structured
Finance segment.  The planes are primarily  located in North America and Europe.
Operating  leases account for about 16% of the portfolio,  with the rest capital
leases or loans.  There are 5 aircraft in this portfolio that are off-lease.  At
September 30, 2002, the regional aircraft portfolio consisted of 94 planes and a
net investment of $245.0 million.  The increase during the quarter reflected one
collateralized transaction, supported by sovereign credit.

      On August 11,  2002,  U.S.  Airways  announced  its Chapter 11  bankruptcy
filing.  CIT's  outstandings are approximately $60 million to this carrier as of
December 31, 2002,  secured primarily by five narrow-body  737's. On November 6,
2002 National  Airlines,  which was operating in  bankruptcy,  announced that it
would cease operations  effective  November 6, 2002. We have repossessed our two
narrow-body Boeing 757 aircraft  previously leased to National,  with a carrying
value of $39.7 million,  and are remarketing the aircraft.  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 CIT-owned  aircraft narrow body (2 Boeing 757 aircraft and
2 Boeing 737 aircraft), totaling $95.7 million. These United Airlines leases are
on non-accrual status and are included in non-performing  assets at December 31,
2002.  Additionally,  CIT holds  $38.0  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.  As of
January  31,  2003,  all the planes on lease to the two  bankrupt  carriers  are
flying.  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,  with  an
outstanding  balance of $96.4 million at December 31, 2002, is secured by, among
other collateral, previously unencumbered aircraft. 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 Note 7 to the  Consolidated  Financial
Statements.  This portfolio totals  approximately $710.1 million at December 31,
2002, or approximately 2.0% of total financing and leasing assets. The portfolio
consists of 52 accounts with an average balance of approximately  $13.7 million.
The 10 largest  accounts in the  portfolio  aggregate  $264.5  million  with the
largest single account totaling $32.9 million.  Non-performing  accounts totaled
$120.2 million (10 accounts) or 16.9% of this portfolio.  The telecommunications
portfolio  includes CLECs,  wireless,  and towers,  with the largest group being
CLEC accounts,  which totaled $262.3 million, or 36.9% of the telecommunications
portfolio at December 31, 2002. The metrics of the telecommunications  portfolio
have not changed  significantly  since  September  30,  2002,  at which time the
portfolio  totaled $707.2  million  (approximately  1.9% of total  financing and
leasing  assets)  and  consisted  of 52  accounts  with an  average  balance  of
approximately $13.6 million.  Total CLEC exposure at September 30, 2002 amounted
to $275.2  million.  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," $153.6 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.  Weakness in this
sector could result in additional losses or require additional reserves.


                                       29


      Direct and private fund venture capital equity investments  totaled $335.4
million at December  31,  2002 and $341.7  million at  September  30,  2002.  At
December  31, 2002,  this  portfolio  was  comprised  of direct  investments  of
approximately  $188.8  million in 57 companies and $146.6  million in 52 private
equity funds. Our direct  investments  totaled $196.6 million (60 companies) and
our  investment in private equity funds amounted to $145.1 million (52 funds) as
of September 30, 2002.  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  $164.9  million  at  December  31,  2002 and  $176.6  million  at
September 30, 2002. These commitments, which are mainly to private equity funds,
may, or may not, be drawn.  Performance of both our direct  investments  and our
fund  investments  will depend upon  individual  performance  of the  underlying
companies, the economy and the venture capital and private equity markets.

      At  December  31,  2002,  we had  approximately  $184.7  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.

      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 and 2001.  Equipment not subject to lease agreements were $385.9
million,  $267.3 million and $247.2 million at December 31, 2002,  September 30,
2002,  and  September 30, 2001,  respectively.  The increase in the December 31,
2002 primarily  reflects  aircraft  repossessed  during the period.  The current
weakness  in the  commercial  airline  industry  and the  slower  economy  could
adversely impact both rental and utilization rates going forward.

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

Other Assets

      Other assets totaled $4.7 billion at December 31, 2002 and $4.8 billion at
September 30, 2002, as both the total balance and the underlying components were
essentially unchanged.

      Other assets  primarily  consisted of the  following at December 31, 2002:
securitization  assets,  including  interest-only strips,  retained subordinated
securities,  cash  reserve  accounts  and  servicing  assets  of  $1.5  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 $0.4 billion,
direct and private fund equity  investments of $0.3 billion,  repossessed assets
and off-lease  equipment 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.

Results and Trends in Relation to the Prior Quarter

      The following analysis is provided in addition to the year-over-prior year
period  analysis  in order to  discuss  trends in our  business  in the  periods
subsequent to our July 2, 2002 IPO.

      Net income for the quarter ended December 31, 2002 was $141.3 million,  or
$0.67 per diluted share, compared to $134.7,  million or $0.64 per diluted share
for the quarter ended September 30, 2002. The current  quarter results  included
charges of $3.9 million,  $0.02 per share ($6.4 million pretax),  related to the
run-off venture


                                       30


capital equity  investment  business,  versus venture  capital  charges of $22.4
million,  $0.11 per share ($36.2 million pretax),  during the prior quarter. The
table that follows presents results for the quarters ended December 31, 2002 and
September 30, 2002, both in amount and as a percentage of average earning assets
("AEA") ($ in millions).



                                                                           Quarter ended                       Quarter ended
                                                                         December 31, 2002                  September 30, 2002
                                                                   ----------------------------         --------------------------
                                                                     Amount            % AEA              Amount          % AEA
                                                                   ----------        ----------         ----------      ----------
                                                                                                                 
Finance income ..............................................      $   971.7           11.89%           $ 1,015.2          11.96%
Interest expense ............................................          340.0            4.16%               347.8           4.10%
                                                                   ---------           -----            ---------          -----
Net finance income ..........................................          631.7            7.73%               667.4           7.86%
Depreciation on operating lease equipment ...................          277.3            3.39%               296.6           3.49%
                                                                   ---------           -----            ---------          -----
Net finance margin ..........................................          354.4            4.34%               370.8           4.37%
Provision for credit losses .................................          133.4            1.64%               122.7           1.45%
                                                                   ---------           -----            ---------          -----
Net finance margin after provision for credit
    losses ..................................................          221.0            2.70%               248.1           2.92%
Other revenue ...............................................          257.1            3.15%               209.0           2.46%
                                                                   ---------           -----            ---------          -----
Operating margin ............................................          478.1            5.85%               457.1           5.38%
Salaries and general operating expenses .....................          242.1            2.96%               235.6           2.77%
                                                                   ---------           -----            ---------          -----
Income before provision for income taxes ....................          236.0            2.89%               221.5           2.61%
Provision for income taxes ..................................          (92.0)          (1.13%)              (84.1)         (0.99%)
Minority interest in subsidiary trust holding
    solely debentures of the Company, after tax .............           (2.7)          (0.03%)               (2.7)         (0.03%)
                                                                   ---------           -----            ---------          -----
Net income ..................................................      $   141.3            1.73%           $   134.7           1.59%
                                                                   =========           =====            =========          =====
Net income per share - basic and diluted ....................      $    0.67                            $    0.64
                                                                   =========                            =========
Average Earning Assets (AEA) ................................      $32,693.2                            $33,959.4
                                                                   =========                            =========


      Net finance margin,  while down $16.4 million from last quarter,  declined
more  modestly as a percentage  of AEA due to the  continued  decline in assets.
Higher funding costs, which reflected our term funding  initiatives and improved
liquidity  position,  were  essentially  offset  by higher  yield-related  fees.
Further,  approximately  $20 million of the $35.7 million decline in net finance
income  from last  quarter  resulted  from the trade  receivable  securitization
during  the  current  quarter.  Although  this  facility  was fully paid down at
December 31, 2002, this alternate source of liquidity shifted net finance income
to other revenue during the quarter for financial reporting.

      The drop in  depreciation  expense  from the prior  quarter  reflects  the
continued  trend toward a greater  proportion of  longer-term  aircraft and rail
equipment on operating lease, as well as management's  decision during the prior
quarter to more rapidly depreciate certain shorter-lived assets. 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).
Operating lease margin (rental income less depreciation expense) as a percentage
of average  operating lease equipment was 6.8% during the quarter ended December
31, 2002, versus 7.0% during the prior quarter.

      The provision for credit losses  increased  $10.7 million from the quarter
ended September 30, 2002,  reflecting a $13.5 million increase  quarterly in net
charge-offs.  The higher net  charge-offs  were  predominantly  in the  Business
Credit unit within the  Commercial  Finance  Segment,  reflecting  write-offs in
connection with financing several loan work-outs.  The tables that follow detail
charge-offs by business  segment,  both in amount and as a percentage of average
finance receivables, for the current and prior quarter ($ in millions).



Net Charge-offs:                                                       Quarter Ended December 31, 2002
                                                     -------------------------------------------------------------------
                                                         Excluding
                                                       Liquidating and        Liquidating and
                                                     Telecommunications      Telecommunications              Total
                                                     ------------------      ------------------        -----------------
                                                                                                 
Equipment Financing and Leasing .............         $ 57.8     2.81%       $ 13.3       9.25%        $ 71.1      3.23%
Specialty Finance -- commercial .............           21.2     1.42%          2.0      36.36%          23.2      1.55%
Commercial Finance ..........................           33.5     1.92%           --         --           33.5      1.92%
Structured Finance ..........................             --       --          15.5       8.75%          15.5      2.24%
                                                      ------                 ------                    ------
    Total Commercial Segments ...............          112.5     1.93%         30.8       9.44%         143.3      2.33%
Specialty Finance -- consumer ...............            6.1     2.11%          5.1       2.42%          11.2      2.24%
                                                      ------                 ------                    ------
    Total ...................................         $118.6     1.94%       $ 35.9       6.68%        $154.5      2.32%
                                                      ======                 ======                    ======



                                       31




Net Charge-offs:                                                       Quarter Ended September 30, 2002
                                                     -------------------------------------------------------------------
                                                         Excluding
                                                       Liquidating and        Liquidating and
                                                     Telecommunications      Telecommunications              Total
                                                     ------------------      ------------------        -----------------
                                                                                                 
Equipment Financing and Leasing .............         $ 59.2     2.88%       $ 11.6       5.13%        $ 70.8      3.10%
Specialty Finance -- commercial .............           17.6     1.15%          1.2      10.74%          18.8      1.22%
Commercial Finance ..........................           22.4     1.06%           --         --           22.4      1.06%
Structured Finance ..........................             --       --          18.4      10.67%          18.4      2.78%
                                                      ------                 ------                    ------
    Total Commercial Segments ...............           99.2     1.60%         31.2       7.62%         130.4      1.98%
Specialty Finance -- consumer ...............            6.2     2.27%          4.4       2.05%          10.6      2.17%
                                                      ------                 ------                    ------
    Total ...................................         $105.4     1.63%       $ 35.6       5.70%        $141.0      1.99%
                                                      ======                 ======                    ======


      For the quarter  ended  December 31, 2002,  other revenue  totaled  $257.1
million,  up from $209.0  million  for the quarter  ended  September  30,  2002,
reflecting lower venture capital losses, increased factoring revenues (including
approximately  $20 million  that was  re-characterized  from net finance  income
relating  to the trade  receivables  securitization),  higher  fee  income and a
modest  increase in equipment  gains,  primarily in the Equipment  Financing and
Leasing Segment.  These  improvements were offset in part by lower other income.
Venture  capital  impairment  valuations  and  write-downs  of $6.4 million were
recognized  as a reduction  to other  revenue in the  quarter  compared to $36.2
million of such charges in the previous quarter. Securitization gains during the
current  quarter  totaled $30.5 million,  12.9% of pretax  income,  on volume of
$1,189 million,  compared to $29.2 million, 13.2% of pretax income, on volume of
$980 million during the prior  quarter.  The components of other revenue are set
forth in the following table ($ in millions).

                                                        Three Months Ended
                                                    ----------------------------
                                                    December 31,   September 30,
                                                       2002            2002
                                                    ------------   -------------
                                                    (successor)     (successor)
Fees and other income ............................     $169.2         $165.7
Factoring commissions ............................       55.1           47.7
Gains on securitizations .........................       30.5           29.2
Gains on sales of leasing equipment ..............        8.7            2.6
Losses on venture capital investments ............       (6.4)         (36.2)
                                                       ------         ------
    Total ........................................     $257.1         $209.0
                                                       ======         ======

      Salaries  and  general  operating  expenses  were  $242.1  million for the
current  quarter,  compared to $235.6  million  reported for the September  2002
quarter. The increase from last quarter included incremental expenses associated
with our return to public  ownership and higher legal and  collection  expenses.
Salaries and general  operating  expenses were 2.18% of average  managed  assets
during the quarter, versus 2.08% for the prior quarter. The efficiency ratio for
the  quarter  (salaries  and general  operating  expenses  divided by  operating
margin, excluding provision for credit losses) was 39.6% as compared to 40.6% in
the prior quarter. Headcount was 5,835 at December 31, 2002 compared to 5,850 at
September 30, 2002.

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


                                       32


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  performance,  including  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.

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.


                                       33


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 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 periodically measure the 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


                                       34


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.

      Interest  rate swaps with  notional  principal  amounts of $7.8 billion at
December  31,  2002,  $7.1  billion at  September  30, 2002 and $6.9  billion at
September  30,  2001 were  designated  as hedges  against  outstanding  debt.  A
comparative analysis of the weighted average principal  outstanding and interest
rates on our debt before and after the effect of interest rate swaps is shown in
the following table ($ in millions).



                                       Three Months Ended    Twelve Months Ended     Nine Months Ended          Year Ended
                                        December 31, 2002     September 30, 2002     September 30, 2001      December 31, 2000
                                       ------------------    -------------------     ------------------     ------------------
                                           (successor)            (successor)            (combined)            (predecessor)
                                                                                                 
Before Swaps
Commercial paper,
  variable-rate senior
  notes and bank credit
  facilities .......................   $12,344.2    2.09%     $17,087.2    2.34%     $20,373.6    4.91%     $19,848.6    6.53%
Fixed-rate senior and
  subordinated notes ...............    18,055.3    6.20%      16,764.8    6.11%      17,078.6    4.63%      17,689.7    6.72%
                                       ---------              ---------              ---------              ---------
Composite ..........................   $30,399.5    4.54%     $33,852.0    4.21%     $37,452.2    4.14%     $37,538.3    6.62%
                                       =========              =========              =========              =========
After Swaps
Commercial paper,
  variable-rate notes
  and bank credit
  facilities .......................   $13,103.1    2.82%     $14,813.2    2.55%     $14,209.8    4.97%     $14,762.1    6.74%
Fixed-rate senior and
  subordinated note ................    17,296.4    5.87%      19,038.8    5.90%      23,242.4    4.71%      22,776.2    6.67%
                                       ---------              ---------              ---------              ---------
Composite ..........................   $30,399.5    4.56%     $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 11 -- 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  re-pricing  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.


                                       35


      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  increase in the yield
curve on January 1, 2003 would  reduce net income by an  estimated  $16  million
after-tax  over the next  twelve  months,  with a  decrease  in the yield  curve
causing an increase in net income of like amount.  A 100 basis point increase in
the yield curve on October 1, 2002 would have reduced net income by an estimated
$12 million after tax,  while a decrease in the yield curve would have increased
net income by a like  amount.  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 December 31, 2002,  CIT was party to foreign
currency  exchange forward contracts with notional amounts totaling $3.0 billion
and  maturities  ranging from 2003 to 2006. CIT was also party to cross currency
interest rate swaps with notional  amounts  totaling $1.5 billion and maturities
ranging  from 2003 to 2027.  At  September  30,  2002,  $3.1 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 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.  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  counter-party  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  counter-party
credit  exposure,  which is defined as the ability of a counter-party to perform
its financial  obligations  under a derivative  contract.  We control the credit
risk  of our  derivative  agreements  through  counter-party  credit  approvals,
pre-established exposure limits and monitoring procedures.

      The Capital Committee approves each counter-party and establishes exposure
limits based on credit analysis and market value. All derivative  agreements are
entered into with major money center  financial  institutions  rated  investment
grade  by  nationally  recognized  rating  agencies,  with the  majority  of our
counter-parties 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 counter-party 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  and  committed
alternate  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).


                                       36


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,  minimum  percentage of committed  bank line coverage to outstanding
commercial  paper and  minimum  percentage  of  alternate  liquidity  sources to
current cash obligations.

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,  with $5.0  billion  outstanding  at December 31, 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 bank  facilities  proceeds  had been used to  satisfy  our
outstanding  commercial paper obligations as they came due. Our targeted program
size  remains at $5 billion and our goal is to  maintain  at least 100%  back-up
liquidity support for our outstanding commercial paper.

      At December  31,  2002,  we had total bank credit  facilities  of $7,353.0
million,  of which  $2,118.0  million was drawn (down from drawn  facilities  of
$4,037.4 million at September 30, 2002). Accordingly, undrawn backstop liquidity
coverage of  outstanding  commercial  paper was 105% at December  31,  2002.  In
January  2003,  we  repaid  an  additional   $0.5  billion  of  the  outstanding
facilities,  further improving coverage.  On October 15, 2002, we retired a $3.7
billion 364 day bank  facility  due in March  2003,  and  negotiated  a new $2.3
billion 364 day committed credit facility expiring in October 2003. One facility
for $3,720 million, undrawn and available, expires March 2005, and the remainder
expire periodically during 2003.

      In addition to the commercial  paper  markets,  CIT accesses the unsecured
term debt markets. From time to time, CIT files registration statements for debt
securities,  which it may sell in the future.  At December 31, 2002, we had $8.2
billion of registered,  but unissued,  debt  securities  available under a shelf
registration  statement.  During the three  months ended  December 31, 2002,  we
issued $2.5 billion in term debt. The majority of the term debt issued was fixed
rate and was virtually  evenly split among global,  medium-term  note and retail
issuances.

      In October 2002,  we  introduced a retail note program,  in which we offer
senior,  unsecured  notes  utilizing  numerous broker / dealers for placement to
retail accounts.  As of December 31, 2002, we had issued $736 million under this
program having maturities of between 2 and 10 years.

      To further strengthen our funding flexibility, we maintain committed asset
backed facilities, which cover a range of assets from equipment to consumer home
equity receivables,  and trade accounts  receivable.  While these facilities are
predominately  in the U.S., we also maintain  facilities for Canadian  domiciled
assets.  As  of  December  31,  2002  we  had  approximately   $2.7  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.  Securitization
volume  increased  to $1.2  billion  during the quarter from $1.0 billion in the
three months ended September 20, 2002.


                                       37


      Our credit  ratings are shown for December 31, 2002,  September  30, 2002,
June 30, 2002 and September 30, 2001 in the following table.



                                    At December 31, 2002   At September 30, 2002   At June 30, 2002   At September 30, 2001
                                    --------------------   ---------------------   ----------------   ---------------------
                                      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          A2
Standard & Poor's ................     A-1          A        A-1            A        A-2      BBB+       A-1          A+
Fitch ............................     F1           A        F1             A        F2        BBB       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.

      While we have minimal  material  covenants within our legal documents that
govern our funding  sources,  some do exist.  The most  significant  covenant in
CIT's  indentures and credit  agreements is a negative pledge  provision,  which
prohibits  granting  or  permitting  liens  on  our  assets,  but  provides  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 December 31, 2002.
Projected proceeds from sale of operating lease equipment, interest revenue from
finance  receivables,  debt interest  expense and other items are excluded ($ in
millions).



                                                                                  Payments and Collections by Period
                                                                    ---------------------------------------------------------------
                                                                                                                            After
Contractual Obligations                                 Total         2003          2004         2005          2006          2006
-----------------------                               ---------     ---------     ---------    ---------     ---------    ---------
                                                                                                              
Commercial paper .................................    $ 4,974.6     $ 4,974.6     $      --    $      --     $      --    $      --
Bank credit facilities ...........................      2,118.0       2,118.0            --           --            --           --
Variable-rate term debt ..........................      4,906.9       3,906.4         727.3         29.1          31.0        213.1
Fixed-rate term debt .............................     19,681.8       4,245.8       3,231.0      3,939.7       1,137.1      7,128.2
Lease rental expense .............................        274.2          68.1          57.2         48.3          37.5         63.1
                                                      ---------     ---------     ---------    ---------     ---------    ---------
    Total contractual obligations ................     31,955.5      15,312.9       4,015.5      4,017.1       1,205.6      7,404.4
                                                      ---------     ---------     ---------    ---------     ---------    ---------
Finance receivables(1) ...........................     27,621.3      12,076.3       3,598.8      2,483.6       1,697.6      7,765.0
Operating lease rental income ....................      3,365.3       1,131.0         725.8        458.1         300.1        750.3
Finance receivables held for sale(2) .............      1,213.4       1,213.4            --           --            --           --
Cash -- current balance ..........................      2,036.6       2,036.6            --           --            --           --
                                                      ---------     ---------     ---------    ---------     ---------    ---------
    Total projected cash availability ............     34,236.6      16,457.3       4,324.6      2,941.7       1,997.7      8,515.3
                                                      ---------     ---------     ---------    ---------     ---------    ---------
Net projected cash inflow (outflow) ..............    $ 2,281.1     $ 1,144.4     $   309.1    $(1,075.4)    $   792.1    $ 1,110.9
                                                      =========     =========     =========    =========     =========    =========


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

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



                                                                                   Commitment Expiration by Period
                                                                    ---------------------------------------------------------------
                                                                                                                            After
Contractual Obligations                                 Total         2003          2004         2005          2006          2006
-----------------------                               ---------     ---------     ---------    ---------     ---------    ---------
                                                                                                          
Aircraft purchases ...............................     $3,796.0      $  828.0      $1,043.0     $1,248.0       $585.0       $ 92.0
Credit extensions ................................      3,618.9       3,254.3         111.9         34.5         39.2        179.0
Letters of credit ................................      1,103.1       1,101.2           1.9           --           --           --
Guarantees .......................................        745.8         745.8            --           --           --           --
Venture capital funds ............................        164.9            --            --           --           --        164.9
Acceptances ......................................          5.6           5.6            --           --           --           --
                                                       --------      --------      --------     --------       ------       ------
    Total commitments ............................     $9,434.3      $5,934.9      $1,156.8     $1,282.5       $624.2       $435.9
                                                       ========      ========      ========     ========       ======       ======


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


                                       38


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,  including both
conduit/warehouse  and term  structures,  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 three months ended  December 31, 2002,  we
securitized  $1.2 billion of financing  and leasing  assets and the  outstanding
securitized asset balance at December 31, 2002 was $10.5 billion or 22.6% of our
total managed assets.  During the quarters ended September 30, 2002 and December
31,  2001,  we  securitized  $1.0  billion and $1.2  billion,  respectively.  At
September 30, 2002 and December 31, 2001,  outstanding  securitized  assets were
$11.2 billion and $10.4 billion,  respectively,  and represented 23.6% and 21.3%
of total managed assets, respectively.  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  conduit  facilities
backed by trade  accounts  receivable  and home equity  receivables  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  three   months  ended   December   31,   2002,   we  recorded
securitization gains of $30.5 million on approximately $1.2 billion of financing
and  leasing  assets  securitized,  which  equates  to 12.9% of  pretax  income.
Securitization  gains for the three months ended September 30, 2002 and December
31, 2001 were $29.2  million,  on  approximately  $1.0 billion of financing  and
leasing assets  securitized,  and $28.0 million on approximately $1.2 billion in
volume, respectively.  Securitization gains for these latter periods represented
13.2  %  and  7.2%  of  pretax  income,  respectively.   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  December  31,  2002 of
$1,355.9  million,  including  interests  in  commercial  securitized  assets of
$1,042.1 million and consumer  securitized  assets of $313.8 million.  The total
retained  interest as of December  31, 2002 is  comprised  of $698.2  million in
over-collateralization,  $383.1  million of  interest  only  strips,  and $274.6
million of cash reserve accounts.  Retained  interests are subject to credit and
prepayment risk. As of December 31, 2002,  approximately  50% of our outstanding
securitization pool balances are in conduit  structures.  Our interests relating
to commercial  securitized assets are 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.  See "Securitization and Joint Venture
Activities" for information  regarding recent accounting  pronouncements and the
impact on our securitization program.


                                       39


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 quarter ended December 31, 2002, our managed assets declined by
$1.3 billion  (2.7%) from  September  30, 2002 and our owned assets  declined by
$0.5 billion (1.4%). 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 $1.5 billion at September 30,
2002 and $2.0  billion at December 31, 2001 to $1.3 billion at December 31, 2002
due to liquidation and sales.  Our additions to retained  earnings and our asset
runoff  continued  to  improve  our  capitalization  and  leverage  ratios.  The
following  table  presents  information  regarding  our capital  structure ($ in
millions).



                                                            December 31,      September 30,    September 30,        December 31,
                                                               2002              2002              2001                 2000
                                                            ------------      -------------    -------------        ------------
                                                            (successor)       (successor)       (successor)         (predecessor)
                                                                                                         
Commercial paper .....................................       $ 4,974.6         $ 4,654.2         $ 8,869.2           $ 9,063.5
Bank credit facilities ...............................         2,118.0           4,037.4                --                  --
Term debt ............................................        24,588.7          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") .................           257.2             257.7             260.0               250.0
Stockholders' equity(1) ..............................         4,968.5           4,857.3          10,661.4(2)          6,007.2
                                                             ---------         ---------         ---------           ---------
Total capitalization .................................        36,907.0          37,571.0          46,619.1            44,222.3
Goodwill .............................................          (384.4)           (384.4)         (6,569.5)           (1,964.6)
                                                             ---------         ---------         ---------           ---------
Total tangible capitalization ........................       $36,522.6         $37,186.6         $40,049.6           $42,257.7
                                                             =========         =========         =========           =========
Tangible stockholders' equity(1) and Preferred
    Capital Securities to managed assets .............           10.44%             9.93%             8.55%(2)            7.82%(2)
Total debt (excluding overnight deposits)
    to tangible shareholder's equity(1) and
    Preferred Capital Securities .....................           6.22x             6.54x              8.20x(2)            8.78x(2)


--------------------------------------------------------------------------------
(1)   Stockholders'  equity  excludes  the impact of the  accounting  change for
      derivative financial  instruments described in Note 11 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
      contributions by 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.  Under the  recently-issued  rules relating to consolidation and
SPE's,


                                       40


non-qualifying  securitization  entities will have to be consolidated.  Based on
our  preliminary  analysis,  we  believe  that  all of our  public  asset-backed
structures and the majority of our conduit  facilities  will continue to qualify
as off-balance sheet transactions.

      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.  See
related FASB Interpretation No. 46 (FIN 46), "Consolidation of Variable Interest
Entities"  disclosure in Item 8. Financial  Statements and  Supplementary  Data,
Note 24-Certain Relationships and Related Transactions.

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,  the majority of which are venture  capital  equity
investments,  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.  As of  December  31,  2002,  the
balance  of  venture  capital  equity  investments  was  $335.4  million.  A 10%
fluctuation  in value of these  investments  equates  to $0.10 in  earnings  per
share.

      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 December 31, 2002,  the reserve for credit losses was
$760.8  million  or  2.75%  of  finance   receivables  and  76.0%  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;  100 basis points (1.00%) 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.  Sensitivities  to changes in financial  assumptions  are
summarized in Item 8. Financial  Statements and  Supplementary  Data,  Note 9 --
Investments in Equity Securities.

      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


                                       41


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 December 31, 2002, our direct financing
lease  residual  balance was $2,350  million and our operating  lease  equipment
balance was $6,705 million. A 10 basis points (0.1%) fluctuation in the total of
these amounts equates to $0.03 in earnings per share.

      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.
Goodwill was $384.4 million at December 31, 2002. A 10% fluctuation in the value
of goodwill equates to $0.18 in earnings per share.

Accounting and Technical Pronouncements

      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.

      In October 2002,  the FASB issued SFAS No. 147,  "Acquisitions  of Certain
Financial Institutions." SFAS No. 147, which is effective for acquisitions on or
after October 1, 2002, 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
did not and is not  expected  to impact  our  financial  position  or results of
operations.

      In  December  2002,  the  FASB  issued  SFAS  No.  148,   "Accounting  for
Stock-Based  Compensation  -- Transition  and  Disclosure."  This  pronouncement
amends SFAS No. 123 to provide  alternative  methods of transition for an entity
that  voluntarily  changes  to the fair  value-based  method of  accounting  for
stock-based  compensation.  SFAS also expands the disclosure  requirements  with
respect to stock-based  compensation.  CIT does not intend to change to the fair
value method of accounting.  The required expanded disclosure is included in the
December 31, 2002 financial statements and notes thereto.

      In  November  2002,  the  FASB  issued  Interpretation  No.  45 (FIN  45),
"Guarantor's  Accounting and Disclosure  Requirements for Guarantees,  Including
Indirect  Guarantees of  Indebtedness of Others." FIN 45 requires a guarantor to
recognize,  at the  inception of a guarantee,  a liability for the fair value of
the obligation undertaken in issuing certain guarantees. The expanded disclosure
requirements  are required for financial  statements  ending after  December 15,
2002, while the liability recognition provisions are applicable to all guarantee
obligations  modified  or issued  after  December  31,  2002.  We are  currently
assessing the impact of this new required  liability  recognition.  The expanded
disclosure  requirements  are  included  in  our  December  31,  2002  financial
statements and notes thereto.

      In  January  2003,  the  FASB  issued  Interpretation  No.  46  (FIN  46),
"Consolidation of Variable Interest Entities." FIN 46 addresses consolidation by
business  enterprises  of variable  interest  entities  (selected  entities with
related contractual,  ownership,  voting or other monetary interests,  including
certain  special  purpose  entities),  and requires  additional  disclosure with
respect to these  entities.  FIN 46 applies  immediately  to  variable  interest
entities  created after January 31, 2003,  and for reporting  periods  beginning
after June 15, 2003 for entities  that existed  prior to February 1, 2003.  This
new interpretation is not expected to have a significant impact on our financial
position or results of  operations.  The expanded  disclosure  requirements  are
included in our December 31, 2002 financial statements and notes thereto.

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


                                       42


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,

      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.


                                       43


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
December 31, 2002 and 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  December  31,  2002  and
September 30, 2002 and 2001 and the results of their  operations  and their cash
flows for the three  months  ended  December  31,  2002,  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
January 23, 2003


                                       44


                       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
stockholders' 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 fourth paragraph of Note 24
and first paragraph of Note 1,
which are as of February 11, 2002
and July 1, 2002, respectively


                                       45


                          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


                                       46


                         CIT GROUP INC. AND SUBSIDIARIES

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



                                                                                 December 31,      September 30,      September 30,
                                                                                    2002               2002               2001
                                                                                  ---------          ---------          ---------
                                    ASSETS
                                                                                                               
Financing and leasing assets:
    Finance receivables ...................................................       $27,621.3          $28,459.0          $31,879.4
    Reserve for credit losses .............................................          (760.8)            (777.8)            (492.9)
                                                                                  ---------          ---------          ---------
    Net finance receivables ...............................................        26,860.5           27,681.2           31,386.5
    Operating lease equipment, net ........................................         6,704.6            6,567.4            6,402.8
    Finance receivables held for sale .....................................         1,213.4            1,019.5            2,014.9
Cash and cash equivalents .................................................         2,036.6            2,274.4              808.0
Goodwill, net .............................................................           384.4              384.4            6,547.5
Receivables from Tyco affiliates ..........................................              --                 --              362.7
Other assets ..............................................................         4,732.9            4,783.6            3,826.9
                                                                                  ---------          ---------          ---------
Total Assets ..............................................................       $41,932.4          $42,710.5          $51,349.3
                                                                                  =========          =========          =========

                     LIABILITIES AND STOCKHOLDERS' EQUITY
Debt:
    Commercial paper ......................................................       $ 4,974.6          $ 4,654.2          $ 8,869.2
    Variable-rate bank credit facilities ..................................         2,118.0            4,037.4                 --
    Variable-rate senior notes ............................................         4,906.9            5,379.0            9,614.6
    Fixed-rate senior notes ...............................................        19,681.8           18,385.4           17,113.9
    Subordinated fixed-rate notes .........................................              --                 --              100.0
                                                                                  ---------          ---------          ---------
Total debt ................................................................        31,681.3           32,456.0           35,697.7
Note payable to Tyco Affiliates ...........................................              --                 --            5,017.3
Credit balances of factoring clients ......................................         2,270.0            2,513.8            2,392.9
Accrued liabilities and payables ..........................................         2,853.2            2,725.2            2,033.8
                                                                                  ---------          ---------          ---------
Total Liabilities .........................................................        36,804.5           37,695.0           45,141.7
                                                                                  ---------          ---------          ---------
Commitments and Contingencies (Note 22)
Company-obligated mandatorily redeemable preferred
    securities of subsidiary trust holding solely debentures
    of the Company ........................................................           257.2              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                2.1                 --
    Paid-in capital, net of deferred compensation of
      $5.5 and $6.4 .......................................................        10,676.2           10,674.8                 --
    Contributed capital ...................................................              --                 --            5,842.5
    Accumulated (deficit) earnings ........................................        (5,606.9)          (5,722.8)             181.9
    Accumulated other comprehensive loss ..................................          (200.7)            (196.3)             (76.8)
                                                                                  ---------          ---------          ---------
Total Stockholders' Equity ................................................         4,870.7            4,757.8            5,947.6
                                                                                  ---------          ---------          ---------
Total Liabilities and Stockholders' Equity ................................       $41,932.4          $42,710.5          $51,349.3
                                                                                  =========          =========          =========


                 See Notes to Consolidated Financial Statements


                                       47


                        CIT GROUP INC. AND SUBSIDIARIES

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



                                                      Three Months   Twelve Months     June 2           January 1
                                                         Ended          Ended          through           through         Year Ended
                                                      December 31,   September 30,   September 30,       June 1,        December 31,
                                                         2002           2002              2001            2001             2000
                                                      ------------   -------------   -------------       -------        ------------
                                                      (successor)    (successor)      (successor)     (predecessor)    (predecessor)
                                                                                                          
Finance income ..................................      $   971.7      $ 4,342.8        $ 1,676.5        $ 2,298.8        $ 5,248.4
Interest expense ................................          340.0        1,439.3            597.1          1,022.7          2,497.7
                                                       ---------      ---------        ---------        ---------        ---------
Net finance income ..............................          631.7        2,903.5          1,079.4          1,276.1          2,750.7
Depreciation on operating lease
  equipment .....................................          277.3        1,241.0            448.6            588.1          1,281.3
                                                       ---------      ---------        ---------        ---------        ---------
Net finance margin ..............................          354.4        1,662.5            630.8            688.0          1,469.4
Provision for credit losses .....................          133.4          788.3            116.1            216.4            255.2
                                                       ---------      ---------        ---------        ---------        ---------
Net finance margin after provision
  for credit losses .............................          221.0          874.2            514.7            471.6          1,214.2
Other revenue ...................................          257.1          932.3            335.1            237.5            912.0
                                                       ---------      ---------        ---------        ---------        ---------
Operating margin ................................          478.1        1,806.5            849.8            709.1          2,126.2
                                                       ---------      ---------        ---------        ---------        ---------
Salaries and general operating
  expenses ......................................          242.1          946.4            348.5            446.0          1,035.2
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 ..............................          242.1        8,120.7            506.0            538.9          1,121.5
                                                       ---------      ---------        ---------        ---------        ---------
Income (loss) before provision for
  income taxes ..................................          236.0       (6,314.2)           343.8            170.2          1,004.7
Provision for income taxes ......................          (92.0)        (374.0)          (157.4)           (84.8)          (381.2)
Minority interest in subsidiary trust
  holding solely debentures of the
  Company, after tax ............................           (2.7)         (10.5)            (3.6)            (4.9)           (11.9)
                                                       ---------      ---------        ---------        ---------        ---------
Net income (loss) ...............................      $   141.3      $(6,698.7)       $   182.8        $    80.5        $   611.6
                                                       =========      =========        =========        =========        =========
Net income (loss) per basic share ...............      $    0.67      $  (31.66)       $    0.86        $    0.38        $    2.89
                                                       =========      =========        =========        =========        =========
Net income (loss) per diluted share .............      $    0.67      $  (31.66)       $    0.86        $    0.38        $    2.89
                                                       =========      =========        =========        =========        =========


Note: Per share  calculations for the periods June 2 through September 30, 2001,
January 1 through June 1, 2001 and the year ended  December 31, 2000 assume that
the shares for the twelve months ended  September 30, 2002 were  outstanding for
the respective periods.

                See Notes to Consolidated Financial Statements.


                                       48


                        CIT GROUP INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                 ($ in millions)



                                                                                            Accumulated     Total         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 (successor) .......         2.1     10,674.8            --            --   (5,722.8)      (196.3)      4,757.8
Net income ...........................                                                           141.3                      141.3
Foreign currency translation
  adjustments ........................                                                                          0.2           0.2
Change in fair values of
  derivatives
  qualifying as cash flow
  hedges .............................                                                                          2.2           2.2
Unrealized losses on equity and
  securitization investments, net ....                                                                         (6.8)         (6.8)
                                                                                                                        ---------
Total comprehensive income ...........                                                                                      136.9
                                                                                                                        ---------
Cash dividends .......................                                                           (25.4)                     (25.4)
Restricted common stock grants .......                      1.4                                                               1.4
                                         ---------    ---------     ---------     ---------  ---------    ---------     ---------
December 31, 2002 (successor) ........   $     2.1    $10,676.2     $      --     $      --  $(5,606.9)   $  (200.7)    $ 4,870.7
                                         =========    =========     =========     =========  =========    =========     =========


                See Notes to Consolidated Financial Statements.


                                       49


                        CIT GROUP INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 ($ in millions)



                                                        Three Months    Twelve Months      June 2        January 1
                                                           Ended          Ended           through         through        Year Ended
                                                        December 31,    September 30,   September 30,     June 1,       December 31,
                                                           2002            2002            2001            2001            2000
                                                         ---------       ---------       ---------       ---------       ---------
                                                        (successor)     (successor)     (successor)    (predecessor)   (predecessor)
                                                                                                          
Cash Flows From Operations:
Net income (loss) ..................................     $   141.3       $(6,698.7)      $   182.8       $    80.5       $   611.6
Adjustments to reconcile net income
  (loss) to net cash flows from operations:
  Goodwill impairment ..............................            --         6,511.7              --              --              --
  Provision for credit losses ......................         133.4           788.3           116.1           216.4           255.2
  Depreciation and amortization ....................         287.5         1,286.5           521.3           642.4         1,408.7
  Provision for deferred federal
    income taxes ...................................          71.9           276.9           113.6            63.7           211.5
  Gains on equipment, receivable and
    investment sales, net ..........................         (51.8)         (203.1)         (119.1)          (18.2)         (371.8)
  Increase (decrease) in accrued
    liabilities and payables .......................          55.4            57.0          (349.8)          (28.2)          449.0
  Decrease (increase) in other assets ..............          26.7          (626.7)         (429.7)           69.9          (690.9)
  Other ............................................         (76.6)          (32.3)          (70.6)           36.0            31.9
                                                         ---------       ---------       ---------       ---------       ---------
Net cash flows provided by (used for)
  operations .......................................         587.8         1,359.6           (35.4)        1,062.5         1,905.2
                                                         ---------       ---------       ---------       ---------       ---------
Cash Flows From Investing Activities:
Loans extended .....................................     (12,873.8)      (48,300.6)      (15,493.1)      (20,803.0)      (49,275.8)
Collections on loans ...............................      12,089.7        42,584.2        12,750.6        18,520.2        41,847.5
Proceeds from asset and receivable
  sales ............................................       1,085.4        10,992.4         5,213.0         2,879.6         7,055.4
Purchases of assets to be leased ...................        (449.1)       (1,877.2)         (756.9)         (694.0)       (2,457.6)
Purchases of finance receivable
  portfolios .......................................        (254.7)         (372.7)             --              --        (1,465.6)
Net decrease (increase) in short-term
  factoring receivables ............................         391.7          (651.9)         (471.2)         (131.0)         (175.4)
Other ..............................................          (4.3)          (52.5)            3.2           (24.4)          (79.4)
                                                         ---------       ---------       ---------       ---------       ---------
Net cash flows (used for) provided
  by investing activities ..........................         (15.1)        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 .............................       2,463.2        13,093.4         1,000.0         6,246.6        12,645.3
Repayments of variable and
  fixed-rate notes .................................      (3,558.3)      (12,148.8)       (3,272.2)       (6,491.5)      (10,143.2)
Net increase (decrease) in commercial
  paper ............................................         320.4        (4,186.2)       (1,007.8)          813.6            89.5
Net repayments of non-recourse
  leveraged lease debt .............................         (35.0)         (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 ................................         (25.4)             --              --           (52.9)         (105.9)
Issuance (purchase) of treasury stock ..............            --              --              --            27.6           (67.2)
                                                         ---------       ---------       ---------       ---------       ---------
Net cash flows (used for) provided by
  financing activities .............................        (835.1)       (2,251.2)       (2,561.9)          535.5         2,387.3
                                                         ---------       ---------       ---------       ---------       ---------
Net (decrease) increase in cash and cash
  equivalents ......................................        (262.4)        1,430.1        (1,351.7)        1,345.4          (258.4)
Exchange rate impact on cash .......................          24.6            36.3             3.3            (1.1)           (2.9)
Cash and cash equivalents, beginning
  of period ........................................       2,274.4           808.0         2,156.4           812.1         1,073.4
                                                         ---------       ---------       ---------       ---------       ---------
Cash and cash equivalents, end of
  period ...........................................     $ 2,036.6       $ 2,274.4       $   808.0       $ 2,156.4       $   812.1
                                                         =========       =========       =========       =========       =========
Supplementary Cash Flow Disclosure:
Interest paid ......................................     $   418.5       $ 1,713.9       $   652.9       $ 1,067.6       $ 2,449.7
Federal, foreign and state and local
  income taxes (refunded) paid-- net ...............     $    44.2       $   (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.


                                       50


                         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  global 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.  Certain 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,  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 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 the nature of  revolving  credit  facilities,
including those combined with term loan facilities (advances and interest


                                       51


                         CIT GROUP INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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 loans 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


                                       52


                         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,  generally having
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. Impairment of assets is determined 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.  Fair value is based upon  discounted cash
flow analysis and available  market data.  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  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 17 -- Accounting Change -- Goodwill.

Securitizations

      Pools of assets are originated and sold to special purpose entities which,
in turn,  issue debt  securities  backed by the asset  pools or sell  individual
interests  in the assets to  investors.  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
equity  securities are recorded in other  accumulated  comprehensive  income,  a
separate component of equity.


                                       53


                         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 SFAS 123,  which
allows for the  retention  of  principles  within  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. See Note 19 -- Post Retirement and Other Benefit
Plans for the pro forma impact on net income/loss and per share amounts assuming
recognition of stock option compensation costs based upon the provisions of SFAS
123.

Foreign Currency Translation

      CIT has  operations  in Canada,  Europe and other  countries  outside  the
United States. The functional currency for these foreign operations is 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 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


                                       54


                         CIT GROUP INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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.

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
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.  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 17 -- Accounting Change Goodwill.

      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 CIT's financial position or results of operations.

      In October 2002,  the FASB issued SFAS No. 147,  "Acquisitions  of Certain
Financial Institutions." SFAS No. 147, which is effective for acquisitions on or
after October 1, 2002, 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
did not and is not  expected to impact  CIT's  financial  position or results of
operations.

      In  December  2002,  the  FASB  issued  SFAS  No.  148,   "Accounting  for
Stock-Based  Compensation  -- Transition  and  Disclosure."  This  pronouncement
amends SFAS No. 123 to provide  alternative  methods of transition for an entity
that  voluntarily  changes  to the fair  value-based  method of  accounting  for
stock-based  compensation.  SFAS also expands the disclosure  requirements  with
respect to stock-based  compensation.  CIT does not intend to change to the fair
value method of accounting.  The required expanded disclosure is included in the
December 31, 2002 financial statements and notes thereto.

      In  November  2002,  the  FASB  issued  Interpretation  No.  45 (FIN  45),
"Guarantor's  Accounting and Disclosure  Requirements for Guarantees,  Including
Indirect  Guarantees of  Indebtedness of Others." FIN 45 requires a guarantor to
recognize,  at the  inception of a guarantee,  a liability for the fair value of
the obligation undertaken in issuing the


                                       55


                         CIT GROUP INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

guarantee.  The expanded  disclosure  requirements  are  required for  financial
statements  ending  after  December 15, 2002,  while the  liability  recognition
provisions are applicable to certain  guarantee  obligations  modified or issued
after  December 31,  2002.  CIT is  currently  assessing  the impact of this new
required liability recognition.

      In  January  2003,  the  FASB  issued  Interpretation  No.  46  (FIN  46),
"Consolidation of Variable Interest Entities." FIN 46 addresses consolidation by
business  enterprises  of variable  interest  entities  (selected  entities with
related contractual,  ownership,  voting or other monetary interests,  including
certain  special  purpose  entities),  and requires  additional  disclosure with
respect to these  entities.  FIN 46 applies  immediately  to  variable  interest
entities  created after January 31, 2003,  and for reporting  periods  beginning
after June 15, 2003 for  entities  that existed  prior to February 1, 2003.  The
expanded  disclosure  requirements are required for financial  statements ending
after  December  15,  2002.  This new  interpretation  is not expected to have a
significant impact on the financial position or results of operations.

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

      The September 30, 2001 balance sheet  includes the activity of TCH,  which
was a  wholly-owned  subsidiary  of a  Tyco  affiliate.  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, TCH was merged with CIT and the activity of TCH  (accumulated net deficit)
was  relieved  via a capital  contribution  from Tyco.  As a result,  TCH had no
subsequent impact on the CIT consolidated financial statements.



($ in millions)                                                 September 30, 2001
                                                  --------------------------------------------------
                                                     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 earnings (deficit) ..............       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
                                                  =========    =========   -=========    =========



                                       56


                         CIT GROUP INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



($ in millions)                                  For the Year Ended              For the Nine Months Ended
                                                 September 30, 2002                 September 30, 2001
                                         ----------------------------------  ----------------------------------
                                           CIT          TCH    Consolidated    CIT          TCH    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
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
                                        =========     =======   ==========     ========    =======    ========


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.


                                       57


                         CIT GROUP INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      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 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 $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 were
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 2, 2001 fair values.  During the first
six months of fiscal 2002, CIT recorded additions to goodwill of $348.6 million.
The goodwill  adjustments  were related to fair value  adjustments  to purchased
assets and liabilities,  and accruals related 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  that were recorded in
connection  with the  acquisition  by Tyco,  as well as  utilization  during the
respective periods ($ in millions).



                                               Severance                           Facilities
                                          --------------------  -----------------------------------------------
                                         Number of              Number of                   Other      Total
                                         Employees    Reserves  Facilities    Reserves     Reserves   Reserves
                                         ---------    --------  ----------    --------     --------   ---------
                                                                                      
Reserves established in fiscal 2001 ..      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
October 1 - December 31, 2002
  utilization ........................      (41)         (6.0)       (2)         (1.8)          --        (7.8)
                                           ----        ------       ---         -----       ------      ------
Balance December 31, 2002 ............      240        $ 17.2        22         $12.4       $   --      $ 29.6
                                           ====        ======       ===         =====       ======      ======


Note 4 -- Change in Fiscal Year

      Following our acquisition by Tyco in June 2001, 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.  The quarter  ended  December 31, 2002
constitutes  a  transitional   fiscal  period.   The  following  table  provides
comparative  results  for the  three  months  ended  December  31,  2002 and the
unaudited three months ended December 31, 2001 ($ in millions).


                                       58


                         CIT GROUP INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                                                                  (Unaudited)
                                                   December 31,   December 31,
                                                      2002            2001
                                                   ------------   ------------
Finance income ................................      $971.7         $1,199.0
Interest expense ..............................       340.0            373.0
                                                     ------         --------
Net finance income ............................       631.7            826.0
Depreciation on operating lease
  equipment ...................................       277.3            338.5
                                                     ------         --------
Net finance margin ............................       354.4            487.5
Provision for credit losses ...................       133.4            112.9
                                                     ------         --------
Net finance margin after provision
  for credit losses ...........................       221.0            374.6
Other revenue .................................       257.1            245.1
                                                     ------         --------
Operating margin ..............................       478.1            619.7
                                                     ------         --------
Salaries and general operating
  expenses ....................................       242.1            238.7
Interest expense - TCH ........................          --             76.3
                                                     ------         --------
Operating expenses ............................       242.1            315.0
                                                     ------         --------
Income before provision for
  income taxes ................................       236.0            304.7
Provision for income taxes ....................       (92.0)          (118.2)
Minority interest in subsidiary trust
  holding solely debentures of the
  Company, after tax ..........................        (2.7)            (2.4)
                                                     ------         --------
Net income ....................................      $141.3         $  184.1
                                                     ======         ========
Net income per diluted share ..................      $ 0.67         $   0.87(1)
                                                     ======         ========

--------------------------------------------------------------------------------
(1)   Assumes that common  shares  outstanding  as a result of the July 2002 IPO
      (211.7 million) were outstanding.

Note 5 -- Finance Receivables

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

                          At December 31,    At September 30,   At September 30,
                               2002               2002                2001
                          ---------------    ----------------   ----------------
Loans ..................     $19,854.9           $20,494.5          $23,590.9
Leases .................       7,766.4             7,964.5            8,288.5
                             ---------           ---------          ---------
  Finance receivables ..     $27,621.3           $28,459.0          $31,879.4
                             =========           =========          =========

      Finance Receivables  included $2.4 billion,  $2.3 billion and $2.6 billion
in  equipment  residual  values at December  31,  2002,  September  30, 2002 and
September 30, 2001, respectively.  Included in lease receivables at December 31,
2002,  September 30, 2002 and  September  30, 2001 are leveraged  leases of $1.2
billion, $1.1 billion and $1.0 billion,  respectively.  Leveraged leases exclude
the portion funded by third party  non-recourse  debt payable of $3.7 billion at
December  31,  2002,  $3.6  billion at  September  30, 2002 and $2.4  billion at
September 30, 2001.

      Additionally,  at December 31, 2002,  September 30, 2002 and September 30,
2001, finance receivables  previously  securitized totaling $10.5 billion, $11.2
billion and $10.1 billion, respectively, were still managed by CIT.

      The  following  table sets  forth the  contractual  maturities  of finance
receivables due in the respective calendar or fiscal years ($ in millions).



                                         At December 31, 2002    At September 30, 2002   At September 30, 2001
                                         --------------------    ---------------------   ---------------------
                                          Amount     Percent      Amount      Percent      Amount     Percent
                                         --------   ---------    --------    ---------   ----------  ---------
                                                                                      
Due within one year .................   $12,076.3     43.7%      $13,136.8     46.2%      $14,212.6     44.6%
Due within one to two years .........     3,598.8     13.0         3,541.2     12.4         5,233.5     16.4
Due within two to four years ........     4,181.2     15.2         4,375.7     15.4         4,515.2     14.2
Due after four years ................     7,765.0     28.1         7,405.3     26.0         7,918.1     24.8
                                        ---------    -----       ---------    -----       ---------    -----
    Total ...........................   $27,621.3    100.0%      $28,459.0    100.0%      $31,879.4    100.0%
                                        =========    =====       =========    =====       =========    =====



                                       59


                         CIT GROUP INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      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 certain information regarding total non-performing assets ($ in millions).



                                             At December 31, 2002   At September 30, 2002  At September 30, 2001
                                             ---------------------  ---------------------  ---------------------
                                                                                           
Non-accrual finance receivables ..........        $  946.4                 $  976.6                 $851.6
Assets received in satisfaction of loans..           139.4                    163.2                  118.1
                                                  --------                 --------                 ------
Total non-performing assets ..............        $1,085.8                 $1,139.8                 $969.7
                                                  ========                 ========                 ======
Percentage of finance receivables ........            3.93%                    4.01%                  3.04%
                                                  ========                 ========                 ======


      At December 31,  2002,  September  30, 2002 and  September  30, 2001,  the
recorded  investment in loans considered for impairment  totaled $959.9 million,
$1,001.2 million, and $555.3 million,  respectively.  Loans whose estimated fair
market value is less than current recorded value totaled $522.3 million,  $449.8
million  and  $304.1  million at  December  31,  2002,  September  30,  2002 and
September 30, 2001, respectively.  The corresponding specific reserve for credit
loss allocations were $156.9 million, $197.4 million and $122.3 million included
in the reserve for credit losses.  The average  monthly  recorded  investment in
loans  considered for impairment  was $980.6 million  (including  $327.3 million
relating  to  telecommunications),  $818.9  million  (including  $185.5  million
relating to telecommunications), $409.8 million and $256.6 million for the three
months ended  December 31, 2002,  twelve months ended  September 30, 2002,  nine
months ended September 30, 2001, and 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 $19.2  million,  $65.2
million, $46.1 million and $38.1 million for the three months ended December 31,
2002, for the twelve months ended  September 30, 2002, for the nine months ended
September 30, 2001, and for the year ended December 31, 2000, respectively.

Note 6 -- Reserve for Credit Losses

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



                                    For the Three  For the Twelve     June 2       January 1       For the
                                     Months Ended   Months Ended     through        through      Year Ended
                                     December 31,   September 30,  September 30,    June 1,      December 31,
                                        2002             2002          2001           2001           2000
                                    ------------   -------------   -------------  -------------  -------------
                                     (successor)    (successor)    (successor)    (predecessor)  (predecessor)
                                                                                     
Balance, beginning of period .....     $ 777.8        $ 492.9        $462.7          $ 468.5        $ 446.9
                                       -------        -------        ------          -------        -------
Provision for credit losses ......       133.4          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 ............         4.1          (11.1)          0.9            (17.2)           2.0
                                       -------        -------        ------          -------        -------
  Additions to the reserve for
    credit losses ................       137.5          777.2         117.0            199.2          257.2
                                       -------        -------        ------          -------        -------
Finance receivables charged-off ..      (173.2)        (539.1)        (93.7)          (215.8)        (255.8)
Recoveries on finance receivables
  previously charged-off .........        18.7           46.8           6.9             10.8           20.2
                                       -------        -------        ------          -------        -------
  Net credit losses ..............      (154.5)        (492.3)        (86.8)          (205.0)        (235.6)
                                       -------        -------        ------          -------        -------
Balance, end of period ...........     $ 760.8        $ 777.8        $492.9          $ 462.7        $ 468.5
                                       =======        =======        ======          =======        =======
Reserve for credit losses as a
  percentage of finance
  receivables ....................        2.75%          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).  The 2001 amount  consists of a provision  for  under-performing
      loans and leases, primarily in the telecommunications portfolio.


                                       60


                         CIT GROUP INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 7 -- Operating Lease Equipment

      The  following  table  provides  an analysis of the net book value (net of
accumulated  depreciation  of $1.3  billion,  $1.2 billion and $0.4  billion) of
operating lease equipment by equipment type at December 31, 2002,  September 30,
2002 and September 30, 2001 ($ in millions).

                             At December 31,  At September 30,  At September 30,
                                  2002             2002               2001
                             ---------------  ----------------  ----------------
Commercial aircraft ........    $3,185.4          $3,005.5          $2,017.2
Railcars and locomotives ...     1,507.7           1,373.9           1,242.5
Communications .............       507.5             554.5             799.5
Information technology .....       337.6             370.3             702.1
Business aircraft ..........       292.6             341.3             359.6
Transportation -- other ....       179.2             191.2             298.1
Other ......................       694.6             730.7             983.8
                                --------          --------          --------
  Total ....................    $6,704.6          $6,567.4          $6,402.8
                                ========          ========          ========

      Included in the  preceding  table is equipment  not  currently  subject to
lease  agreements  of $385.9  million,  $267.3  million  and  $247.2  million at
December 31, 2002, September 30, 2002, and September 30, 2001, respectively.

      Rental income on operating  leases,  which is included in finance  income,
totaled $0.4 billion for the three months ended December 31, 2002,  $1.7 billion
for the twelve months ended  September  30, 2002,  $1.5 billion for the combined
nine  months  ended  September  30,  2001 and $1.8  billion  for the year  ended
December 31, 2000. The following  table presents future minimum lease rentals on
non-cancelable  operating  leases as of December  31, 2002.  Excluded  from this
table are variable  rentals  calculated on the level of asset usage,  re-leasing
rentals, and expected sales proceeds from remarketing  operating lease equipment
at  lease   expiration,   all  of  which  are  components  of  operating   lease
profitability ($ in millions).

Years Ended December 31,                                                Amount
------------------------                                                ------
2003 ..............................................................    $1,131.0
2004 ..............................................................       725.8
2005 ..............................................................       458.1
2006 ..............................................................       300.1
2007 ..............................................................       232.3
Thereafter ........................................................       518.0
                                                                       --------
  Total ...........................................................    $3,365.3
                                                                       ========

Note 8 -- Concentrations

      The following  table  summarizes the geographic and industry  compositions
(by obligor) of  financing  and leasing  portfolio  assets at December 31, 2002,
September 30, 2002 and September 30, 2001 ($ in millions):



                                    At December 31, 2002         At September 30, 2002        At September 30, 2001
                                   ----------------------        ----------------------       ---------------------
                                   Amount         Percent        Amount         Percent       Amount        Percent
                                   ------         -------        ------         -------       ------        -------
                                                                                            
Geographic
North America:
Northeast ....................   $ 7,833.8         21.8%       $ 8,047.0         22.1%      $ 9,117.9         22.4%
West .........................     6,223.8         17.4          6,339.1         17.4         7,561.7         18.6
Midwest ......................     5,748.3         16.0          5,941.0         16.3         6,957.3         17.0
Southeast ....................     4,946.8         13.8          4,854.1         13.3         5,505.4         13.5
Southwest ....................     3,691.9         10.3          3,932.0         10.8         4,708.1         11.6
Canada .......................     1,804.9          5.0          1,688.4          4.7         1,952.4          4.8
                                 ---------        -----        ---------        -----       ---------        -----
Total North America ..........    30,249.5         84.3         30,801.6         84.6        35,802.8         87.9
Other foreign ................     5,625.2         15.7          5,586.0         15.4         4,926.4         12.1
                                 ---------        -----        ---------        -----       ---------        -----
  Total ......................   $35,874.7        100.0%       $36,387.6        100.0%      $40,729.2        100.0%
                                 =========        =====        =========        =====       =========        =====



                                       61


                        CIT GROUP INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



                                           At December 31, 2002      At September 30, 2002      At September 30, 2001
                                           --------------------      ---------------------      ---------------------
                                           Amount       Percent      Amount        Percent      Amount        Percent
                                           ------       -------      ------        -------      ------        -------
                                                                                              
Industry
Manufacturing(1) (no industry
  greater than 2.7%) ................     $ 7,063.3      19.7%      $ 7,446.2        20.5%    $ 8,442.2         20.7%
Commercial airlines
  (including regional airlines) .....       4,587.6      12.8         4,285.3        11.8       3,412.3          8.4
Retail(2) ...........................       4,469.2      12.5         4,939.4        13.6       5,020.9         12.3
Transportation(3) ...................       2,715.7       7.6         2,665.8         7.3       2,675.8          6.6
Communications(4) ...................       1,787.3       5.0         1,840.1         5.1       1,590.3          3.9
Construction equipment ..............       1,721.3       4.8         1,760.2         4.8       2,273.7          5.6
Services ............................       1,654.3       4.6         1,533.4         4.2       1,755.3          4.3
Wholesaling .........................       1,306.9       3.6         1,245.5         3.4       1,435.7          3.5
Home mortgage .......................       1,292.7       3.6         1,314.2         3.6       2,760.2          6.8
Automotive Services .................       1,179.6       3.3         1,116.2         3.1       1,073.0          2.6
Other (no industry greater than 3.0%)       8,096.8      22.5         8,241.3        22.6      10,289.8         25.3
                                          ---------     -----       ---------       -----     ---------        -----
  Total .............................     $35,874.7     100.0%      $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 (4.5%) and general merchandise (4.4%).

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

(4)   Includes   $710.1   million,   $707.2   million  and  $637.7   million  of
      telecommunication  related assets at December 31, 2002, September 30, 2002
      and September 30, 2001, respectively.

Note 9 -- Investments in Debt and Equity Securities

      Investments in debt and equity securities designated as available for sale
(and included in other  assets) as of December 31, 2002,  September 30, 2002 and
September 30, 2001 are shown in the following table ($ in millions).



                                              At December 31, 2002   At September 30, 2002   At September 30, 2001
                                              --------------------   ---------------------   ---------------------
                                                                                            
Retained interests in securitized
  commercial loans ..........................       $1,042.1                $1,039.7                 $843.6
Retained interests in securitized
  consumer loans ............................          313.8                   274.0                  126.5
Aerospace equipment trust certificates ......           95.5                    96.7                     --
                                                    --------                --------                 ------
  Total .....................................       $1,451.4                $1,410.4                 $970.1
                                                    ========                ========                 ======


      Retained  interests  in  securitizations   include  interest-only  strips,
retained  subordinated  securities and cash reserves related to securitizations.
The  composition  of retained  interests in  securitizations  as of December 31,
2002, September 30, 2002 and September 30, 2001 was as follows ($ in millions).



                                              At December 31, 2002   At September 30, 2002   At September 30, 2001
                                              --------------------   ---------------------   ---------------------
                                                                                            
Retained subordinated securities ............       $  698.2                $  658.9                 $564.9
Interest-only strips ........................          383.1                   362.2                  155.0
Cash reserve accounts .......................          274.6                   292.6                  250.2
                                                    --------                --------                 ------
  Total .....................................       $1,355.9                $1,313.7                 $970.1
                                                    ========                ========                 ======


      The carrying  value of the retained  interests  in  securitized  assets is
reviewed  quarterly  for  valuation  impairment.  During the three  months ended
December  31, 2002,  net  accretion of $33.2  million was  recognized  in pretax
earnings,  including $10.6 million of impairment charges.  For the twelve months
ended  September  30, 2002,  net  accretion of $97.1  million was  recognized in
pretax earnings,  including $49.9 million of impairment  charges,  respectively.
Unrealized  after tax gains  totaled $20.5 million and $25.8 million at December
31,  2002  and   September  30,  2002,   respectively,   and  are  reflected  in
stockholders' equity as a part of accumulated other comprehensive loss.


                                       62


                         CIT GROUP INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      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,
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 the three  months ended
December 31, 2002 were as follows:

                                              Commercial Equipment
                                             ----------------------
                                                        Equipment
                                             Specialty  Finance and   Consumer
                                              Finance     Leasing    Home Equity
                                             ---------  -----------  -----------
Weighted average prepayment speed ........     12.83%     11.58%        24.00%
Weighted average expected credit losses ..      0.79%      1.08%         0.97%
Weighted average discount rate ...........      9.68%      9.00%        11.00%
Weighted average life (in years) .........      1.46       2.01          3.67

      Key  assumptions  used in  calculating  the  fair  value  of the  retained
interests  in  securitized  assets by product  type at December 31, 2002 were as
follows:



                                                 Commercial Equipment                  Consumer
                                                --------------------------    ---------------------------
                                                               Equipment      Manufactured   Recreational
                                                Specialty    Financing and      Housing &     Vehicle &
                                                 Finance        Leasing        Home Equity       Boat
                                                ---------    -------------    -------------  ------------
                                                                                    
Weighted average prepayment speed ...........     17.85%         11.71%            25.85%       18.03%
Weighted average expected credit losses .....      1.24%          2.23%             1.09%        0.50%
Weighted average discount rate ..............     11.09%         10.73%            12.68%       14.30%
Weighted average life (in years) ............      1.18           1.53              3.07         3.21


      The  impact  of 10  percent  and 20  percent  adverse  changes  to the key
assumptions  on the fair value of retained  interests as of December 31, 2002 is
shown in the following tables ($ in millions).

                                                               Consumer
                                                     ---------------------------
                                                     Manufactured   Recreational
                                         Commercial    Housing &     Vehicle &
                                         Equipment    Home Equity      Boat
                                         ----------  -------------  ------------
Prepayment speed:
  10 percent adverse change ..........    $(4.4)        $(9.2)      $(1.6)
  20 percent adverse change ..........     (8.3)        (17.0)       (3.1)
Expected credit losses:
  10 percent adverse change ..........    (15.7)         (5.2)       (1.3)
  20 percent adverse change ..........    (31.4)        (10.3)       (2.6)
Weighted average discount rate:
  10 percent adverse change ..........    (14.4)         (4.9)       (2.1)
  20 percent adverse change ..........    (28.4)         (9.6)       (4.0)

      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.


                                       63


                         CIT GROUP INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      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 period.

                                     Commercial Equipment Securitizations During
                                     -------------------------------------------
                                          2002           2001          2000
                                          ----           ----          ----
                                       (successor)    (combined)   (predecessor)
Actual and projected losses at:
  December 31, 2002 ................      1.96%          2.94%         4.31%
  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:
  December 31, 2002 ................      2.65%            --            --
  September 30, 2002 ...............      2.68%            --            --
  September 30, 2001 ...............        --             --            --
  December 31, 2000 ................        --             --            --

      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 three months ended  December 31, 2002 and twelve months ended  September
30, 2002 ($ in millions).

                                         Three Months Ended  Twelve Months Ended
                                         December 31, 2002   September 30, 2002
                                         ------------------  -------------------
Retained Interests                          (successor)          (successor)
------------------
Retained interest at beginning
  of period ..............................    $1,313.7             $  970.1
New sales ................................       154.9                792.9
Distributions from trusts ................      (175.3)              (512.6)
Other, including net accretion,
  and clean-up calls .....................        67.0                 20.2
Change in fair value .....................        (4.4)                43.1
                                              --------             --------
Retained interest at end of period .......    $1,355.9             $1,313.7
                                              ========             ========

                                         Three Months Ended  Twelve Months Ended
                                         December 31, 2002   September 30, 2002
                                         ------------------  -------------------
Retained Interests                          (successor)          (successor)
------------------
Proceeds from new securitizations ........    $1,060.2             $6,603.9
Other cash flows received on
  retained interests .....................       175.3                551.5
Servicing fees received ..................        19.7                 72.3
Repurchases of delinquent or
  foreclosed assets and ineligible
  contracts ..............................        (3.7)              (104.7)
Purchases of contracts through
  clean up calls .........................        (8.2)              (456.9)
Reimbursable servicing advances,
  net ....................................        (4.0)               (21.9)
Guarantee draws ..........................        (0.2)                (1.2)
                                              --------             --------
Total, net ...............................    $1,239.1             $6,643.0
                                              ========             ========

      Total  net   charge-offs,   for  both  finance   receivables  and  managed
receivables,  and net charge-offs as a percentage of average finance receivables
and managed receivables, for the three months ended December 31,


                                       64


                         CIT GROUP INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

2002, the twelve months ended September 30, 2002, and combined nine months ended
September  30, 2001 are set forth  below.  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).



                                               Net Charge-offs of Finance Receivables
                     -----------------------------------------------------------------------------------
                         Three Months Ended         Twelve Months Ended       Combined Nine Months Ended
                         December 31, 2002           September 30, 2002           September 30, 2001
                      -----------------------      ----------------------     --------------------------
                      Amount       Percentage      Amount      Percentage       Amount       Percentage
                      ------       ----------      ------      ----------       ------       ----------
                                                                              
Commercial .......    $143.3         2.33%         $445.9         1.65%         $243.5          1.13%
Consumer .........      11.2         2.24%           46.4         1.78%           48.3          1.72%
                      ------                       ------                       ------
Total ............    $154.5         2.32%         $492.3         1.67%         $291.8          1.20%
                      ======                       ======                       ======




                                               Net Charge-offs of Managed Receivables
                     -----------------------------------------------------------------------------------
                         Three Months Ended         Twelve Months Ended       Combined Nine Months Ended
                         December 31, 2002           September 30, 2002           September 30, 2001
                      -----------------------      ----------------------     --------------------------
                      Amount       Percentage      Amount      Percentage       Amount       Percentage
                      ------       ----------      ------      ----------       ------       ----------
                                                                              
Commercial .......    $187.5         2.29%         $701.6         2.71%         $351.6          1.87%
Consumer .........      18.7         1.62%           78.8         1.35%           71.5          1.04%
                      ------                       ------                       ------
Total ............    $206.2         2.21%         $780.4         1.94%         $423.1          1.64%
                      ======                       ======                       ======


      Receivables  past due 60 days or more,  for both finance  receivables  and
managed receivables, and receivables past due 60 days or more as a percentage of
finance receivables and managed receivables, at December 31, 2002, September 30,
2002 and  September  30,  2001,  are set forth  below.  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).



                                          Finance Receivables Past Due 60 Days or More
                      ----------------------------------------------------------------------------------
                        At December 31, 2002        At September 30, 2002         At September 30, 2001
                      -----------------------      -----------------------       -----------------------
                      Amount       Percentage      Amount       Percentage       Amount       Percentage
                      ------       ----------      ------       ----------       ------       ----------
                                                                              
Commercial .......   $  867.6         3.39%       $  942.8         3.53%        $  915.7        3.18%
Consumer .........      133.7         6.66%          127.2         7.20%           188.2        6.12%
                     --------                     --------                      --------
Total ............   $1,001.3         3.63%       $1,070.0         3.76%        $1,103.9        3.46%
                     ========                     ========                      ========




                                          Managed Receivables Past Due 60 Days or More
                      ----------------------------------------------------------------------------------
                        At December 31, 2002        At September 30, 2002         At September 30, 2001
                      -----------------------      -----------------------       -----------------------
                      Amount       Percentage      Amount       Percentage       Amount       Percentage
                      ------       ----------      ------       ----------       ------       ----------
                                                                              
Commercial .......   $1,136.2         3.36%       $1,289.1         3.64%        $1,386.6        3.63%
Consumer .........      259.4         4.71%          249.5         4.71%           253.2        4.32%
                     --------                     --------                      --------
Total ............   $1,395.6         3.55%       $1,538.6         3.78%        $1,639.8        3.72%
                     ========                     ========                      ========


Note 10 -- Debt

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



                                     At December 31, 2002    At September 30, 2002   At September 30, 2001
                                     --------------------    ---------------------   ---------------------
                                         (successor)             (successor)              (successor)
                                                                                  
Borrowings outstanding ............        $4,974.6               $4,654.2                 $8,869.2
Weighted average interest rate ....            1.62%                  1.87%                    3.37%
Weighted average remaining days
  to maturity .....................         38 days                37 days                  31 days



                                       65


                         CIT GROUP INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



                                            For the Three         For the Twelve          For the Nine            For the
                                             Months Ended          Months Ended           Months Ended           Year Ended
                                           December 31, 2002    September 30, 2002     September 30, 2001     December 31, 2000
                                           -----------------    ------------------     ------------------     -----------------
                                              (successor)           (successor)            (combined)            (predecessor)
                                                                                                      
Daily average borrowings ...............        $4,758.7             $ 4,564.7              $10,142.5             $10,565.1
Maximum amount outstanding .............         4,994.1             $10,713.5              $11,726.4             $12,868.2
Weighted average interest rate .........            1.75%                 2.25%                  4.67%                 6.23%


      The consolidated  weighted average interest rates on variable-rate  senior
notes at December  31,  2002,  September  30, 2002 and  September  30, 2001 were
2.08%,  2.31% and 3.49%,  respectively.  Fixed-rate  senior debt  outstanding at
December  31, 2002  matures at various  dates  through  2028.  The  consolidated
weighted-average  interest rates on fixed-rate senior debt at December 31, 2002,
September  30,  2002  and  September  30,  2001  was  6.74%,  6.82%  and  6.72%,
respectively. Foreign currency-denominated debt (stated in U.S. Dollars) totaled
$1,652.4  million at December 31, 2002,  of which  $1,334.4 was  fixed-rate  and
$318.0 was  variable-rate.  Foreign  currency-denominated  debt at September 30,
2002 totaled  $1,627.9  million,  of which  $1,290.5  million was fixed-rate and
$337.4   million  was   variable-rate   debt.   As  of   September   30,   2001,
foreign-currency  denominated  debt was  $1,306.1  million,  of  which  $1,286.1
million was fixed-rate and $20.0 million was variable-rate debt.

      The following tables present calendar year contractual  maturities and the
high and low  interest  rates for total  variable-rate  and  fixed-rate  debt at
December 31, 2002, fiscal year contractual  maturities at September 30, 2002 and
fiscal year contractual maturities of September 30, 2001 ($ in millions).



                                                 At December 31, 2002
                                  -----------------------------------------------------         At              At
                                  Commercial  Variable-rate    Bank Credit                 September 30,    September 30,
Variable-Rate                       Paper     Senior Notes     Facilities       Total          2002             2001
-------------                     ----------  -------------    ----------     ---------    -------------    -------------
                                                                             (successor)    (successor)
                                                                                            
Due in 2002 ...................    $     --     $     --       $     --       $      --      $      --        $14,594.2
Due in 2003 (rates ranging
  from 1.43% to 4.50%) ........     4,974.6      3,906.4        2,118.0        10,999.0       12,601.9          3,889.6
Due in 2004 (rates ranging
  from 2.22% to 2.93%) ........          --        727.3             --           727.3        1,247.0               --
Due in 2005 (rates ranging
  from 2.22% to 2.63%) ........          --         29.1             --            29.1           23.4               --
Due in 2006 (rates ranging
  from 2.22% to 2.63%) ........          --         31.0             --            31.0           25.0               --
Due in 2007 (rates ranging
  from 2.22% to 2.63%) ........          --         33.0             --            33.0           26.6               --
Due after 2007 (rates ranging
  from 2.22% to 2.63%) ........          --        180.1             --           180.1          146.7               --
                                  ---------    ---------      ---------       ---------      ---------        ---------
                                  $ 4,974.6    $ 4,906.9      $ 2,118.0       $11,999.5      $14,070.6        $18,483.8
                                  =========    =========      =========       =========      =========        =========




                                                                    At                  At                  At
                                                               December 31,       September 30,       September 30,
Fixed-Rate                                                         2002                2002                2001
----------                                                     ------------       -------------       -------------
                                                                                               
Due in 2002 ................................................     $      --          $      --           $ 2,456.4
Due in 2003 (rates ranging from 2.85% to 8.26%) ............       4,245.8            2,784.9             2,889.0
Due in 2004 (rates ranging from 3.80% to 8.26%) ............       3,231.0            4,321.5             4,391.9
Due in 2005 (rates ranging from 4.20% to 8.26%) ............       3,939.7            4,704.1             4,593.6
Due in 2006 (rates ranging from 3.25% to 7.12%) ............       1,137.1            1,179.1             1,175.8
Due in 2007 (rates ranging from 5.10% to 7.38%) ............       3,386.8            2,307.1                86.8
Due after 2007 (rates ranging from 6.50% to 8.25%) .........       3,741.4            3,088.7             1,620.4
                                                                 ---------          ---------           ---------
    Total ..................................................     $19,681.8          $18,385.4           $17,213.9
                                                                 =========          =========           =========


      At December 31, 2002,  there  remained  $8.2  billion of  registered,  but
unissued debt securities under a shelf registration statement.


                                       66


                         CIT GROUP INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      The following table represents information on unsecured committed lines of
credit at December 31, 2002 that can be drawn upon to support  commercial  paper
borrowings ($ in millions).

Expiration                                Total          Drawn         Available
----------                                -----          -----         ---------
March 2003 .....................        $  318.0        $  318.0        $     --
April 2003 .....................           765.0              --           765.0
July 2003 ......................           250.0              --           250.0
October 2003 ...................         2,300.0         1,800.0           500.0
March 2005 .....................         3,720.0              --         3,720.0
                                        --------        --------        --------
Total credit lines .............        $7,353.0        $2,118.0        $5,235.0
                                        ========        ========        ========

      The credit line agreements  contain clauses that permit  extensions beyond
the  expiration  dates upon  written  consent  from the  participating  lenders.
Certain  foreign  operations  utilize  local  financial   institutions  to  fund
operations.  At December  31,  2002,  local  credit  facilities  totaled  $171.6
million, of which $146.8 million was undrawn and available.

Note 11 -- Derivative Financial Instruments

      CIT adopted SFAS 133 on January 1, 2001 and recorded a $146.5 million, net
of tax,  cumulative effect adjustment to Accumulated Other  Comprehensive  Loss,
for  derivatives  qualifying as hedges of future cash flows,  in accordance with
this accounting standard.  The components of the adjustment to Accumulated Other
Comprehensive Loss for derivatives  qualifying as hedges of future cash flows as
of December 31, 2002 and September 30, 2002 are presented in the following table
($ in millions).

                                           Adjustment of  Income      Total
                                           Fair Value of   Tax      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
Changes in values of derivatives
  qualifying as cash flow hedges .......        (3.6)        1.4       (2.2)
                                              ------      ------     ------
Balance at December 31, 2002 ...........      $190.8      $(72.5)    $118.3
                                              ======      ======     ======

      The  unrealized  loss as of December 31, 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
three months ended December 31, 2002, the ineffective  portion of changes in the
fair value of cash flow hedges amounted to $0.4 million and has been recorded as
a decrease to interest  expense.  For the year ended  September  30,  2002,  the
ineffective portion of changes in the fair value of cash flow hedges amounted to
$1.4  million and was recorded as an increase to interest  expense.  Assuming no
change in  interest  rates,  $61.4  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.


                                       67


                         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 December
31, 2002 ($ in millions)



Interest Rate Swaps                   Notional Amount                     Comments
------------------                    ---------------                     --------
                                                      
                                                            Effectively converts the interest rate on an
Floating to fixed-rate swaps --                             equivalent amount of commercial paper and
cash flow hedges ...................     $3,280.5           variable-rate notes to a fixed rate.

Fixed to floating-rate swaps --                             Effectively converts the interest rate on an equivalent
fair value hedges ..................      4,489.8           amount of fixed-rate notes to a variable rate.
                                         --------
Total interest rate swaps ..........     $7,770.3
                                         ========


      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 $456.8  million at December 31, 2002,  reduced by the
effects of master  netting  agreements  as presented in Note 23 -"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 December
31, 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 December 31, 2002 ($ in millions).




Maturity                                  Floating to Fixed-rate                           Fixed to Floating-rate
--------                        -----------------------------------------          -----------------------------------------
Years Ending                    Notional           Receive           Pay           Notional            Receive          Pay
December 31,                     Amount             Rate             Rate           Amount              Rate            Rate
------------                    --------           -------           ----          --------            -------          ----
                                                                                                       
2003 .......................     $1,292.4           1.42%            6.21%         $  311.0             7.35%            2.88%
2004 .......................        261.0           1.44%            4.98%             11.0             7.69%            2.17%
2005 .......................        265.1           1.45%            4.93%            257.8             7.20%            2.47%
2006 .......................         99.2           1.51%            5.25%               --               --               --
2007 .......................         81.8           1.53%            5.67%          2,160.0             6.48%            4.35%
2008 - Thereafter ..........        946.7           1.47%            6.38%          1,750.0             7.39%            4.24%
                                 --------                                          --------
Total ......................     $2,946.2           1.45%            5.99%         $4,489.8             6.94%            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 December 31, 2002 ($ in million).




Foreign Currency                  Notional Amount         Receive Rate          Pay Rate              Maturity Range
----------------                  ---------------         ------------          --------              --------------
                                                                                           
Canadian Dollar ............          $240.7                  2.85%               6.21%                2003 -- 2009
Australian Dollar ..........          $ 78.1                  4.83%               6.05%                2003 -- 2006
British Pound ..............          $ 15.5                  3.94%               5.43%                2003 -- 2024


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

      At December 31, 2002, CIT was party to foreign  currency  exchange forward
contracts with notional  amounts  totaling $3.0 billion and  maturities  ranging
from 2002 to 2006. CIT was also party to cross currency interest rate


                                       68


                         CIT GROUP INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

swaps with notional  amounts  totaling $1.5 billion and maturities  ranging from
2003 to 2027.  The following  table  presents the maturity,  notional  principal
amounts of foreign  exchange  forwards and cross  currency swaps at December 31,
2002 ($ in millions).

                                              Notional Principal Amount
                                        -------------------------------------
Maturity Years Ended                    Foreign Exchange      Cross-Currency
December 31,                                Forwards               Swaps
--------------------                    ----------------      ---------------
2003 ...............................         $2,724.7            $  136.3
2004 ...............................            267.7               126.1
2005 ...............................              6.7             1,082.1
2006 ...............................             12.4                57.5
2007 ...............................               --                17.8
2008 - Thereafter ..................               --                84.4
                                             --------            --------
  Total ............................         $3,011.5            $1,504.2
                                             ========            ========

Note 12 -- 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  minority  interest,  after tax,  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.


                                       69


                         CIT GROUP INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 13 -- Other Revenue

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



                                               Three         Twelve          June 2       January 1       Year
                                           Months Ended   Months Ended       through      through         Ended
                                           December 31,   September 30,   September 30,    June 1,     December 31,
                                               2002           2002            2001          2001          2000
                                           ------------   ------------    ------------   -----------   ------------
                                           (successor)     (successor)     (successor)  (predecessor)  (predecessor)
                                                                                           
Fees and other income ..................      $169.2          $644.5         $212.3        $174.9         $480.9
Factoring commissions ..................        55.1           165.5           50.7          61.2          154.7
Gains on securitizations ...............        30.5           149.0           59.0          38.7          109.5
Gains on sales of leasing equipment ....         8.7            13.6           14.2          33.7          113.2
(Losses) gains on venture capital
  investments ..........................        (6.4)          (40.3)          (1.1)          7.1           53.7
Other Charges(1) .......................          --              --             --         (78.1)            --
                                              ------          ------         ------        ------         ------
  Total ................................      $257.1          $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.

Note 14 -- Earnings Per Share

      Basic EPS is  computed  by  dividing  net  income by the  weighted-average
number of common shares  outstanding for the period. 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 15.4 million shares for the three months ended December 31, 2002.

      The reconciliation of the numerator and denominator of basic EPS with that
of diluted  EPS is  presented  for the  quarter  ended  December  31, 2002 ($ in
millions,  except per share  amounts and shares  which are in whole  dollars and
thousands, respectively).

                                         Income          Shares        Per Share
                                       (Numerator)    (Denominator)      Amount
                                       -----------    -------------    ---------
Basic EPS:
  Income available to common
    stockholders ....................      $141.3       211,573           $0.67
Effect of Dilutive Securities:
  Restricted shares .................          --           253              --
  Stock options .....................          --            --              --
                                           ------       -------           -----
Diluted EPS .........................      $141.3       211,826           $0.67
                                           ======       =======           =====

      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 shares  outstanding at September 30, 2002 were outstanding for
all historical periods ($ in millions, except per share amounts).

                                         Net (Loss)                    Diluted
                                           Income       Basic EPS(1)    EPS(1)
                                         ----------     ------------   --------
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

--------------------------------------------------------------------------------
(1)   Based on 211,573 and  211,695  shares for basic and  diluted  EPS,  except
      where anti-dilutive.


                                       70


                         CIT GROUP INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 15 -- Salaries and General Operating Expenses

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



                                                        Three        Twelve        June 2        January 1         Year
                                                    Months Ended  Months Ended     through        through          Ended
                                                    December 31,  September 30, September 30,     June 1,      December 31,
                                                        2002          2002          2001           2001            2000
                                                    ------------  ------------  -------------   -----------    ------------
                                                    (successor)   (successor)   (successor)    (predecessor)   (predecessor)
                                                                                                 
Salaries and employee benefits ..............          $126.8        $517.4        $204.7         $262.0        $  600.7
Other operating expenses -- CIT .............           115.3         406.0         134.2          184.0           434.5
Other operating expenses -- TCH .............              --          23.0           9.6             --              --
                                                       ------        ------        ------         ------        --------
  Total .....................................          $242.1        $946.4        $348.5         $446.0        $1,035.2
                                                       ======        ======        ======         ======        ========


Note 16 -- 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 17 -- 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 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 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
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  an  estimated  fair value of each  reporting  unit.  The
estimated 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 estimated  fair value.  This analysis  required the Company to
estimate  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.


                                       71


                         CIT GROUP INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      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.

      There have been no changes in the carrying value of goodwill for the three
months ended  December 31, 2002.

      The changes in the carrying amount of goodwill for the twelve months ended
September 30, 2002 were 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
                                               =========      =========       =========       ======      =========


      Following is a  reconciliation  of  previously  reported net income to net
income  excluding  goodwill  amortization  ($  in  millions,  except  per  share
amounts):



                                                        Three           Twelve           June 2         January 1       Year
                                                    Months Ended     Months Ended        through         through        Ended
                                                    December 31,     September 30,    September 30,      June 1,     December 31,
                                                        2002             2002             2001            2001           2000
                                                    ------------    --------------    -------------   ------------   ------------
                                                    (successor)      (successor)       (successor)    (predecessor)  (predecessor)
                                                                                                         
Net income (loss) as reported ...............          $141.3         $(6,698.7)         $182.8           $ 80.5        $611.6
Goodwill amortization, net of tax ...........              --                --            59.8             32.7          75.4
                                                       ------         ---------          ------           ------        ------
Net income (loss) as adjusted ...............          $141.3         $(6,698.7)         $242.6           $113.2        $687.0
                                                       ======         =========          ======           ======        ======
Net income (loss) as adjusted per
  share -- basic and fully diluted ..........          $ 0.67         $  (31.66)         $ 1.15           $ 0.53        $ 3.25
                                                       ======         =========          ======           ======        ======


      Other intangible assets, net, comprised primarily of proprietary  computer
software and related transaction processes, totaled $16.5 million, $17.6 million
and $22.0 million at December 31, 2002,  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.


                                       72


                         CIT GROUP INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 18 -- Income Taxes

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



                                                                            Percentage of Pretax Income
                                                  -------------------------------------------------------------------------------
                                                      Three          Twelve           June 2         January 1          Year
                                                  Months Ended    Months Ended        through         through           Ended
                                                  December 31,    September 30,    September 30,      June 1,        December 31,
                                                      2002            2002             2001            2001              2000
                                                  ------------    -------------    ------------     -----------      ------------
                                                   (successor)     (successor)      (successor)     (predecessor)    (predecessor)
                                                                                                          
Federal income tax rate ....................          35.0%           35.0%            35.0%            35.0%            35.0%
Increase (decrease) due to:
Goodwill impairment ........................            --           (36.1)              --               --               --
Interest expense-- TCH .....................            --            (4.2)              --               --               --
Goodwill amortization ......................            --              --              6.2              7.8              3.0
Foreign income taxes .......................           1.6            (0.4)             2.2              2.2              2.0
State and local income taxes, net of
      federal income tax benefit ...........           2.6            (0.3)             2.2              2.2              1.6
Other ......................................          (0.2)            0.1              0.2              2.6             (3.7)
                                                      ----            ----             ----             ----             ----
Effective tax rate .........................          39.0%           (5.9)%           45.8%            49.8%            37.9%
                                                      ====            ====             ====             ====             ====


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



                                                      Three           Twelve           June 2         January 1         Year
                                                  Months Ended     Months Ended        through         through          Ended
                                                  December 31,     September 30,    September 30,      June 1,       December 31,
                                                      2002             2002             2001            2001             2000
                                                  ------------     ------------    ------------     -----------      ------------
                                                   (successor)      (successor)      (successor)    (predecessor)    (predecessor)
                                                                                                          
Current federal income tax provision .......          $  --            $   --          $   --           $  --            $ 31.9
Deferred federal income tax provision ......           71.9             276.9           113.6            63.7             211.5
                                                      -----            ------          ------           -----            ------
  Total federal income taxes ...............           71.9             276.9           113.6            63.7             243.4
Foreign income taxes .......................           10.7              66.7            32.1            15.4             113.2
State and local income taxes ...............            9.4              30.4            11.7             5.7              24.6
                                                      -----            ------          ------           -----            ------
  Total provision for income taxes .........          $92.0            $374.0          $157.4           $84.8            $381.2
                                                      =====            ======          ======           =====            ======


      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 ($ in millions).



                                                              At December 31,    At September 30,     At September 20,
                                                                  2002                2002                  2001
                                                              ---------------    ----------------     ---------------
                                                               (successor)         (successor)           (successor)
                                                                                                
Assets:
Accrued liabilities and reserves ................               $  316.2             $  310.7            $   282.8
Net operating loss carryforwards ................                  612.4                612.4                524.2
Purchase price adjustments ......................                  446.9                778.8                877.9
Provision for credit losses .....................                  200.0                206.2                 95.5
Alternative minimum tax credits .................                   85.7                 85.7                 85.7
Other ...........................................                  267.3                267.3                 83.5
                                                                --------             --------            ---------
  Total deferred tax assets .....................                1,928.5              2,261.1              1,949.6
                                                                --------             --------            ---------
Liabilities:
Leasing transactions ............................               (1,737.4)            (2,007.8)            (1,679.2)
Securitization transactions .....................                 (430.8)              (419.7)              (371.4)
Market discount income ..........................                  (36.2)               (36.2)               (35.2)
                                                                --------             --------            ---------
  Total deferred tax liabilities ................               (2,204.4)            (2,463.7)           $(2,085.8)
                                                                --------             --------            ---------
Net deferred tax (liability) ....................               $ (275.9)            $ (202.6)           $  (136.2)
                                                                ========             ========            =========



                                       73


                         CIT GROUP INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      At  December  31,  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 annual use limitations
under Section 382 of the Internal  Revenue Code of 1986,  as amended,  and other
limitations under state laws.

Note 19 -- 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 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 December 31, 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 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 this 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% depending on years of service) of the member's  "Benefits
Pay" (comprised of base salary, plus certain annual bonuses, sales incentive and
commissions).  These balances also receive annual interest  credits,  subject to
certain  government limits. The interest credit was 5.76% and 7.00% for the plan
years ended December 31, 2002 and 2001,  respectively.  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 plan pays 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.


                                       74


                         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).  All periods presented include amounts and assumptions relating
to  the  Plan,   the  unfunded   Supplemental   Retirement   Plans  and  various
international plans.



                                                                                 Retirement Benefits
                                                              -----------------------------------------------------------
                                                              Three Months       Year           June 2         January 1
                                                                  Ended          Ended          through         through
                                                              December 31,   September 30,   September 30,      June 1,
                                                                  2002           2002            2001            2001
                                                              ------------   -------------   -------------   ------------
                                                              (successor)     (successor)     (successor)    (predecessor)
                                                                                                     
Change in Benefit Obligation
Benefit obligation at beginning of period ..............        $ 214.4          $184.4          $185.2          $176.3
Service cost ...........................................            4.0            12.6             4.1             5.5
Interest cost ..........................................            3.5            13.0             4.3             5.1
Actuarial loss (gain) ..................................            6.2            15.6            (1.6)            3.4
Benefits paid ..........................................           (1.1)           (4.2)           (1.2)           (1.2)
Plan settlements .......................................           (2.3)           (7.1)           (6.8)           (8.5)
Plan curtailments ......................................             --            (0.5)             --              --
Plan amendments ........................................             --              --              --             5.5
Other ..................................................            0.5             0.6             0.4            (0.9)
                                                                -------          ------          ------          ------
Benefit obligation at end of period ....................        $ 225.2          $214.4          $184.4          $185.2
                                                                =======          ======          ======          ======
Change in Plan Assets
Fair value of plan assets at beginning of period .......        $ 119.6          $126.5          $145.4          $154.4
Actual return on plan assets ...........................            6.1           (12.7)          (13.9)            1.0
Employer contributions .................................            0.6            16.9             2.8             0.3
Plan settlements .......................................           (2.3)           (7.1)           (6.8)           (8.5)
Benefits paid ..........................................           (1.1)           (4.2)           (1.2)           (1.2)
Other ..................................................            0.2             0.2             0.2            (0.6)
                                                                -------          ------          ------          ------
Fair value of plan assets at end of period .............        $ 123.1          $119.6          $126.5          $145.4
                                                                =======          ======          ======          ======
Reconciliation of Funded Status
Funded status ..........................................        $(102.1)         $(94.8)         $(57.9)         $(39.9)
Unrecognized net loss ..................................           56.5            54.7            15.1            13.2
Unrecognized net transition obligation .................             --              --              --            11.2
Unrecognized prior service cost ........................             --              --              --              --
                                                                -------          ------          ------          ------
Prepaid (accrued) benefit cost .........................        $ (45.6)         $(40.1)         $(42.8)         $(15.5)
                                                                =======          ======          ======          ======
Amounts Recognized in the Consolidated
  Balance Sheets
Prepaid benefit cost ...................................        $    --          $   --          $   --          $  2.3
Accrued benefit liability ..............................          (79.2)          (75.0)          (42.8)          (24.0)
Intangible asset .......................................             --              --              --             3.5
Accumulated other comprehensive income .................           33.6            34.9              --             2.7
                                                                -------          ------          ------          ------
Net amount recognized ..................................        $ (45.6)         $(40.1)         $(42.8)         $(15.5)
                                                                =======          ======          ======          ======
Weighted-average Assumptions
Discount rate ..........................................           6.45%           6.68%           7.40%           7.40%
Rate of compensation increase ..........................           4.24%           4.22%           4.70%           4.56%
Expected return on plan assets .........................           7.92%           7.90%           9.93%           9.93%

Components of Net Periodic Benefit Cost
Service cost ...........................................        $   4.0          $ 12.6          $  4.2          $  5.5
Interest cost ..........................................            3.5            13.0             4.3             5.1
Expected return on plan assets .........................           (2.3)          (11.9)           (4.6)           (5.7)
Amortization of losses (gains) .........................            0.8             0.3              --             0.4
Amortization of prior service cost .....................             --              --              --             0.4
                                                                -------          ------          ------          ------
Total net periodic expense .............................        $   6.0          $ 14.0          $  3.9          $  5.7
                                                                =======          ======          ======          ======



                                       75


                         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 $211.3 million, $180.3 million and $117.7 million,
respectively,   at  December  31,  2002.  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 $13.8 million,  $12.7 million and $5.4
million,  respectively,  at December 31, 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
                                                              -----------------------------------------------------------
                                                              Three Months       Year           June 2         January 1
                                                                  Ended          Ended          through         through
                                                              December 31,   September 30,   September 30,      June 1,
                                                                  2002           2002            2001            2001
                                                              ------------   -------------   -------------   ------------
                                                              (successor)     (successor)     (successor)    (predecessor)
                                                                                                     
Change in Benefit Obligation
Benefit obligation at beginning of period ...............        $ 46.7          $ 39.5          $ 37.0          $ 36.3
Service cost ............................................           0.3             1.2             0.4             0.5
Interest cost ...........................................           0.8             2.9             0.9             1.1
Actuarial loss ..........................................           0.8             5.3             2.1             0.1
Net benefits paid .......................................          (0.5)           (2.2)           (0.9)           (1.0)
Plan amendments .........................................            --              --              --              --
                                                                 ------          ------          ------          ------
Benefit obligation at end of period .....................        $ 48.1          $ 46.7          $ 39.5          $ 37.0
                                                                 ======          ======          ======          ======
Change in Plan Assets
Fair value of plan assets at beginning of period ........        $   --          $   --          $   --          $   --
Net benefits paid .......................................          (0.5)           (2.2)           (0.9)           (1.0)
Employer contributions ..................................           0.5             2.2             0.9             1.0
                                                                 ------          ------          ------          ------
Fair value of plan assets at end of period ..............        $   --          $   --          $   --          $   --
                                                                 ======          ======          ======          ======
Reconciliation of Funded Status
Funded status ...........................................        $(48.1)         $(46.7)         $(39.5)         $(37.0)
Unrecognized net loss (gain) ............................           6.0             5.2              --            (2.9)
Unrecognized net transition obligation ..................            --              --              --            11.4
                                                                 ------          ------          ------          ------
Prepaid (accrued) benefit cost ..........................        $(42.1)         $(41.5)         $(39.5)         $(28.5)
                                                                 ======          ======          ======          ======
Weighted-average Assumptions
Discount rate ...........................................          6.50%           6.75%           7.50%           7.50%
Rate of compensation increase ...........................          4.25%           4.25%           4.50%           4.50%
Components of Net Periodic Benefit Cost
Service cost ............................................        $  0.3          $  1.2          $  0.4          $  0.5
Interest cost ...........................................           0.8             2.9             0.9             1.1
Amortization of transition obligation ...................            --              --              --             0.4
Amortization of gains ...................................            --             0.1              --              --
                                                                 ------          ------          ------          ------
Total net periodic expense ..............................        $  1.1          $  4.2          $  1.3          $  2.0
                                                                 ======          ======          ======          ======


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


                                       76


                         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
                                                      -----------------------------------------------------------
                                                      Three Months       Year           June 2         January 1
                                                          Ended          Ended          through         through
                                                      December 31,   September 30,   September 30,      June 1,
                                                          2002           2002            2001            2001
                                                      ------------   -------------   -------------   ------------
                                                      (successor)     (successor)     (successor)    (predecessor)
                                                                                             
Effect of One-percentage Point
  Increase on:
Period end benefit obligation ....................       $ 2.3           $ 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 ....................       $(2.2)          $(2.1)           $(1.1)         $(1.3)
Total of service and interest
  cost components ................................       $  --           $(0.1)           $(0.1)         $(0.1)


Savings Incentive Plan

      CIT also has a number of defined  contribution  retirement  plans covering
certain  of its  U.S.  and  non-U.S.  employees,  designed  in  accordance  with
conditions and practices in the countries concerned.  Employee  contributions to
the  plans  are  subject  to  regulatory   limitations  and  the  specific  plan
provisions.  The largest plan is the CIT Group  Savings  Incentive  Plan,  which
qualifies under section 401(k) of the Internal Revenue Code and accounts for 84%
of CIT's total Savings  Incentive  Plan expense for three months ended  December
31,  2002.   CIT's  expense  is  based  on  specific   percentages  of  employee
contributions and plan administrative  costs and aggregated $4.0 million,  $14.5
million and $13.7 million for the three months ended December 31, 2002, the year
ended  September 30, 2002 and the combined nine month period ended September 30,
2001, respectively.

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 three month period
ending  December 31, 2002, no corporate  bonuses were paid. A corporate bonus of
$20.1 million for the six month performance period from July 1, 2002 to December
31, 2002 was paid in early February  2003.  For the fiscal year ended  September
30, 2002, $25.1 million in corporate bonuses were paid related to the nine month
performance  period  ended June 30,  2002.  Certain  senior  executive  officers
received all of their  corporate  bonus for the nine month period ended June 30,
2002 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. Prior
to the IPO, cash bonuses were also paid under a quarterly  corporate  bonus plan
that was discontinued.

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
(subject to acceleration  in the case of death or disability),  depending on the
level of the recipient in the organization.


                                       77


                         CIT GROUP INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      Data for the stock option plans is summarized as follows.



                                                           Three Months Ended                       Year Ended
                                                            December 31, 2002                   September 30, 2002
                                                    --------------------------------       -------------------------------
                                                                        Weighted                              Weighted
                                                                     Average Option                        Average Option
                                                       Shares        Price Per Share         Shares        Price Per Share
                                                    ------------     ---------------       ----------     ----------------
                                                                                                   
Outstanding at beginning of period ..........        15,494,009           $33.15                   --              --
Converted Tyco Options ......................                --               --            4,808,585          $56.20
Granted -- IPO ..............................                --               --           10,823,631          $23.00
Granted -- other ............................            27,500           $20.14               52,258          $22.20
Exercised ...................................                --               --                   --              --
Forfeited ...................................          (186,254)          $32.16             (190,465)         $35.50
                                                     ----------                            ----------
Outstanding at end of period ................        15,335,255           $33.13           15,494,009          $33.15
                                                     ==========                            ==========
Options exercisable at end of period ........         3,960,926           $59.19            4,020,790          $59.06
                                                     ==========                            ==========          ======


      The 27,500 in options  granted  during the three months ended December 31,
2002 were for new hires and IPO grants for  employees  returning  from leaves of
absence. 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  during the three
month  period ended  December 31, 2002 was $4.74.  The fair value of new options
granted  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%
November, 2002 (other) ..............        3-5 years               2.40%            32.4%-33.4%            2.26%-3.95%


      The following table summarizes information about stock options outstanding
and options exercisable at December 31, 2002.



                                                 Options Outstanding                               Options Exercisable
                              ------------------------------------------------------        ---------------------------------
     Range of                                      Remaining             Weighted                                 Weighted
     Exercise                   Number            Contractual             Average             Number               Average
       Price                  Outstanding            Life             Exercise Price        Exercisable        Exercise Price
     --------                 -----------         ----------          --------------        -----------        --------------
                                                                                                    
$ 19.25 - $ 33.30              10,654,783             9.5                 $ 25.66                 4,019            $ 23.00
$ 33.31 - $ 49.96               1,691,276             8.3                 $ 37.02               967,711            $ 34.89
$ 49.97 - $ 74.95               2,763,934             5.8                 $ 62.86             2,763,934            $ 62.86
$ 74.96 - $112.44                  61,152             6.2                 $ 88.37                61,152            $ 88.37
$112.45 - $168.67                 164,110             5.1                 $130.64               164,110            $130.64
                               ----------                                                     ---------
  Totals                       15,335,255                                                     3,960,926
                               ==========                                                     =========



                                       78


                         CIT GROUP INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Employee Stock Purchase Plan

      In October 2002,  CIT adopted an Employee Stock Purchase Plan (the "ESPP")
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 purchase shares  quarterly,  at a purchase
price  equal to 85% of the fair market  value of CIT 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.

Restricted Stock

      The holder of restricted  stock  generally has the rights of a stockholder
of CIT,  including  the right to vote and to receive cash  dividends at the same
rate applicable to all other issues and outstanding shares.  Restricted stock of
525,047 shares was outstanding  December 31, 2002 and will vest according to the
following schedule: 68,462 June 2003, 208,745 August 2003 and 247,840 June 2004.

      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.

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 income and net income per
diluted  share for the three  months  ended  December  31,  2002 would have been
$135.6  million and $0.64 per share,  compared  to $141.3  million and $0.67 per
share, as reported.  Net loss and net loss per share for the twelve months ended
September  30, 2002 would have been  $(6,704.4)  million and $(31.69) per share,
compared to $(6,698.7) million and $(31.66) per share, as reported.


                                       79


                         CIT GROUP INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 20 -- Lease Commitments

      The following table presents  future minimum rentals under  noncancellable
long-term lease agreements for premises and equipment at December 31, 2002 ($ in
millions).

Years Ended December 31,                                             Amount
------------------------                                            --------
    2003 .........................................................   $ 68.1
    2004 .........................................................     57.2
    2005 .........................................................     48.3
    2006 .........................................................     37.5
    2007 .........................................................     32.3
    Thereafter ...................................................     30.8
                                                                     ------
      Total ......................................................   $274.2
                                                                     ======

      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  $54.2  million  due in the  future  under  noncancellable
subleases.

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



                                              Three         Twelve           June 2          January 1           Year
                                          Months Ended   Months Ended        through          through            Ended
                                          December 31,   September 30,    September 30,       June 1,        December 31,
                                              2002           2002             2001             2001              2000
                                          ------------   ------------     ------------      -----------      ------------
                                           (successor)    (successor)      (successor)      (predecessor)    (predecessor)
                                                                                                  
Premises ........................           $ 9.2            $38.4             $14.8            $19.0            $47.7
Equipment .......................             2.1              8.4               3.0              3.7             11.1
Less sublease income ............            (1.8)            (9.0)             (2.7)            (3.4)            (5.7)
                                            -----            -----             -----            -----            -----
  Total .........................           $ 9.5            $37.8             $15.1            $19.3            $53.1
                                            =====            =====             =====            =====            =====


      CIT is  currently in  negotiations  to purchase  the  Livingston  facility
during 2003 at a price that results in expense levels that are comparable to the
current lease expenses.

Note 21 -- 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 22 -- Commitments and Contingencies

      In the normal course of meeting the financing needs of its customers,  CIT
enters into various  credit-related  commitments,  including  standby letters of
credit, which obligate CIT to pay the beneficiary of the letter of credit in the
event that a CIT  client to which the letter of credit was issued  does not meet
its related obligation to the beneficiary.  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.  As of December 31, 2002,  there was no
outstanding liability related to credit-related commitments or guarantees.

      Guarantees  are issued  primarily  in  conjunction  with  CIT's  factoring
product,  whereby CIT provides the client with credit protection for their trade
receivables  without  actually  purchasing the  receivable.  The trade terms are
generally  sixty  days or less.  The  receivable  is not  purchased  unless  the
customer in unable to pay.  There are no  liabilities  recorded at December  31,
2002 for these guarantees.


                                       80


                         CIT GROUP INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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



                                                                                                      At              At
                                                                                                  September 30,   September 30,
                                                                 At September 30, 2002                2002            2001
                                                         -------------------------------------    ------------    -------------
                                                            Due to Expire
                                                         ---------------------
                                                          Within         After        Total         Total            Total
                                                         One Year      One Year    Outstanding    Outstanding     Outstanding
                                                         --------      --------    -----------    ------------    ------------
                                                                                                     
Unused commitments to extend credit:
Financing and leasing assets ....................         $3,254.3      $364.6       $3,618.9       $3,075.8        $2,386.8
Letters of credit and acceptances:
Standby letters of credit .......................            517.9         1.9          519.8          469.0           196.5
Other letters of credit .........................            583.3          --          583.3          641.8           437.8
Acceptances .....................................              5.6          --            5.6            8.4             9.1
Guarantees ......................................            745.8          --          745.8          724.5           714.5
Venture capital funds ...........................               --       164.9          164.9          176.6           225.2


      As of December 31, 2002,  commitments to purchase commercial aircraft from
both Airbus Industrie and The Boeing Company totaled 79 units through 2007 at an
approximate value of $3,796.0 million as detailed below ($ in millions).

Calendar Year:                                     Amount               Number
-------------                                     --------              ------
2003 ........................................     $  828.0                19
2004 ........................................      1,043.0                22
2005 ........................................      1,248.0                27
2006 ........................................        585.0                10
2007 ........................................         92.0                 1
                                                  --------               ---
Total .......................................     $3,796.0                79
                                                  ========               ===


      The order  amounts  are  based on  current  appraised  values in 2002 base
dollars and exclude CIT's options to purchase additional aircraft. Twelve of the
2003 units and two of the 2004 units have lessees in place.

      Outstanding  commitments  to purchase  equipment,  other than the aircraft
detailed  above,  totaled $304.5 million at December 31, 2002. CIT is party to a
railcar  sale-leaseback  transaction  under  which  it  is  obligated  to  pay a
remaining total of $515 million, approximately $28 million per year through 2010
and  declining  thereafter  through  2024,  which is more  than  offset by CIT's
re-lease of the assets,  contingent on its ability to maintaining railcar usage.
In  conjunction  with this  sale-leaseback  transaction,  CIT has guaranteed all
obligations of the related consolidated lessee entity.

      CIT has guaranteed  the public and private debt  securities of a number of
its wholly-owned,  consolidated subsidiaries,  including those disclosed in Note
26 -- Summarized Financial Information of Subsidiaries.  In the normal course of
business,  various  consolidated CIT subsidiaries have entered into other credit
agreements and certain  derivative  transactions  with  financial  institutions,
which are  guaranteed by CIT.  These  transactions  are generally  used by CIT's
subsidiaries  outside of the U.S. to allow the local  subsidiary to borrow funds
in local  currencies.  In  addition,  CIT has  guaranteed,  on behalf of certain
non-consolidated  subsidiaries,  $8 million of third  party  debt,  which is not
reflected in the consolidated balance sheet at December 31, 2002.

Note 23 -- 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


                                       81


                         CIT GROUP INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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 22 -- "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.


                                       82


                         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 December 31, 2002, September 30,
2002 and September 30, 2001 are set forth below ($ in millions).



                                               December 31, 2002           September 30, 2002             September 30, 2001
                                               Asset/(Liability)            Asset/(Liability)             Asset/(Liability)
                                          ---------------------------   --------------------------    --------------------------
                                           Carrying        Estimated     Carrying       Estimated      Carrying       Estimated
                                             Value        Fair Value       Value       Fair Value        Value       Fair Value
                                          -----------     -----------   -----------    -----------    -----------    -----------
                                                 (successor)                    (successor)                  (successor)
                                                                                                    
Finance receivables-loans(1) .........     $19,308.0      $19,465.1      $19,934.4      $20,087.1      $23,226.2      $23,683.9
Finance receivables
    held for sale ....................       1,213.4        1,213.4        1,019.5        1,019.5        2,014.9        2,014.9
Other assets(2) ......................       2,773.8        2,803.1        2,747.8        2,768.8        2,474.8        2,474.8
Commercial paper(3) ..................      (4,974.6)      (4,974.6)      (4,654.2)      (4,654.2)      (8,869.2)      (8,869.2)
Fixed-rate senior notes and
    subordinated fixed-rate
    notes(4) .........................     (19,952.5)     (20,621.3)     (18,718.8)     (18,844.7)     (17,471.4)     (17,937.9)
Variable-rate bank credit
    facilities(4) ....................      (2,118.0)      (2,118.0)      (4,040.0)      (4,040.0)            --             --
Variable-rate senior notes(4) ........      (4,917.6)      (4,893.1)      (5,392.4)      (5,361.5)      (9,672.9)      (9,658.5)
Credit balances of factoring
    clients and other
    liabilities(4)(5) ................      (4,586.9)      (4,586.9)      (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) .......................        (257.2)        (273.4)        (257.7)        (262.7)        (260.0)        (260.0)
Derivative financial
    instruments:(7)
Interest rate swaps, net .............         (60.5)         (60.5)         (16.3)         (16.3)        (243.5)        (243.5)
Cross-currency swaps, net ............         145.8          145.8          142.2          142.2           93.0           93.0
Foreign exchange
    forwards, net ....................         (95.4)         (95.4)         (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 4.78% to 7.75% for December 31, 2002, 4.91%
      to 7.52% for September 30, 2002 and 7.26% to 8.57% for September 30, 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 $7.6  billion at December  31, 2002,  $8.3
      billion at September 30, 2002, and $8.2 billion at September 30, 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 $1,959.1 million
      at December 31, 2002, $2,035.8 million 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  $270.6  million,  $333.4  million  and $257.5  million of
      accrued  interest at December 31, 2002,  September 30, 2002, and September
      30, 2001,  respectively.  The carrying value of variable-rate  bank credit
      facilities  include $2.6 million of accrued interest at September 30, 2002
      and was  negligible at December 31, 2002. The  variable-rate  senior notes
      include $10.7 million, $13.4 million and $58.3 million of accrued interest
      at  December  31,  2002,  September  30,  2002  and  September  30,  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
      1.65% to 6.02% at December 31, 2002; 2.23% to 7.61% at September 30, 2002;
      and 2.59% to 5.89% at September 30, 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 $255.0
      million,  $207.5 million and $86.5 million at December 31, 2002, September
      30, 2002, and September 30, 2001, respectively.


                                       83


                         CIT GROUP INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(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 11 --  "Derivative  Financial  Instruments"  for  notional
      principal amounts associated with the instruments.

Note 24 -- Certain Relationships and Related Transactions

      As of December 31, 2002,  certain  subsidiaries  of Tyco sold  receivables
totaling  $350.0  million to CIT in a factoring  transaction.  At various  times
during  Tyco's  ownership  of CIT,  CIT and Tyco  engaged in  similar  factoring
transactions, the highest amount of which was $384.4 million.

      CIT  has  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 December 31, 2002, the aggregate amount  outstanding  under these
equipment loans and leases was approximately $28.9 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 were 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 have been satisfied as of December 31, 2002.

      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 entered into this  relationship in
November  1999 in  conjunction  with the Newcourt  acquisition,  and the current
agreement   extends  until  October  2005.  CIT  regularly   purchases   finance
receivables from DFS at a premium, a portion of which are typically  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.  The DFS board of directors voting  representation is evenly
split among CIT, Dell and an independent  third party.  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.  At December 31, 2002,  financing
and leasing  assets  originated by DFS and purchased by CIT (included in the CIT
Consolidated  Balance Sheet) were $1.7 billion and securitized  assets were $1.7
billion.  CIT's maximum exposure to loss with respect to activities of the joint
venture is  approximately  $280 million  pretax at December  31, 2002,  which is
comprised of the investment in and loans to the joint venture.

      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.  CIT
entered into this  relationship in connection with the November 1999 acquisition
of Newcourt.  The agreement  with Snap-on  extends  until January 2007.  CIT and
Snap-on have 50% ownership interests, 50% board of directors


                                       84


                         CIT GROUP INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

representation and share income and losses equally. The Snap-on joint venture is
accounted for under the equity method and is not consolidated in CIT's financial
statements.  As of December 31, 2002,  the related  financing and leasing assets
and securitized assets were $1.0 billion and $0.1 billion,  respectively.  CIT's
maximum  exposure to loss with  respect to  activities  of the joint  venture is
approximately $15 million pretax at December 31, 2002, which is comprised of the
investment in and loans to the joint venture.

      Since December  2000,  CIT has been a joint venture  partner with Canadian
Imperial Bank of Commerce in an entity that is engaged in asset-based lending in
Canada. Both CIT and the Bank have a 50% ownership interest in the joint venture
and share income and losses  equally.  This entity is not  consolidated in CIT's
financial  statements  and is  accounted  for under  the  equity  method.  As of
December 31, 2002,  CIT's maximum  exposure to loss related to activities of the
joint venture is $76 million pretax,  which equates to 50% of the entity's total
assets.

      CIT  has  equity  or  variable   return   interests  in  various   trusts,
partnerships, and limited liability corporations established in conjunction with
structured  financing  transactions  of  communication,   equipment,  power  and
infrastructure  projects.  CIT's  interests  in certain of these  entities  were
acquired by CIT in conjunction  with the Newcourt  acquisition in November 1999,
with others entered into in the normal course of business.  At December 31, 2002
in conjunction with these  transactions,  other assets included $41.3 million of
investments in non-consolidated entities that are accounted for under the equity
or cost methods.  This investment is CIT's maximum exposure to loss with respect
to these interests as of December 31, 2002.

Note 25 -- 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,  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 a 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 assets total at or for the three months


                                       85


                        CIT GROUP INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

ended  December  31,  2002,  the twelve  months ended  September  30, 2002,  the
combined nine months ending  September 30, 2001, and the year ended December 31,
2000.  The results  presented are based upon a fixed  leverage  ratio across the
segments and the allocation of most corporate expenses.

      The  Corporate  segment  included  the  following  items in the year ended
September 30, 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. For the other periods shown in the table,  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  to the  business  units  the  incremental  costs  of
borrowing  and  liquidity  relating to the  disruption  to our funding  base and
credit  downgrades.  Such 2002  additional  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,  costs will be allocated  beginning
January 1, 2003.  For all periods shown,  Corporate  includes the results of the
venture capital business.



                                         Equipment                                                          Corporate
                                       Financing and   Specialty    Commercial  Structured     Total           and
($ in millions)                           Leasing       Finance       Finance     Finance     Segments        Other     Consolidated
                                       -------------   ---------    ----------  ----------    --------      ----------  ------------
                                                                                                     
Three Months Ended
December 31, 2002
  (successor)
Operating margin ...................... $   116.9     $   216.8     $  148.0     $   29.8     $   511.5     $   (33.4)    $   478.1
Income taxes ..........................      23.2          47.1         40.5          8.9         119.7         (27.7)         92.0
Net income ............................      36.2          73.7         63.4         13.9         187.2         (45.9)        141.3
Total financing and leasing assets ....  14,200.9      10,316.8      8,041.6      3,315.4      35,874.7            --      35,874.7
Total managed assets ..................  18,137.1      16,863.0      8,041.6      3,315.4      46,357.1            --      46,357.1
Twelve Months Ended
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
Nine Months Ended
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
Year Ended 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 $977.1  million,  $4,284.8  million,  $3,718.7
million and $5,215.6  million for the three months ended  December 31, 2002, the
twelve  months ended  September 30, 2002,  the nine months ending  September 30,
2001,  and the year ended  December 31, 2000,  respectively.  Finance income and
other revenues  derived from foreign based  financing and leasing  assets,  were
$251.7 million,  $990.3 million, $829.2 million and $944.8 million for the three
months ended December 31, 2002, the twelve months ended  September 30, 2002, the
nine months  ending  September 30, 2001,  and the year ended  December 31, 2000,
respectively.


                                       86


                         CIT GROUP INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 26 -- 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
                                December 31, 2002
                                   (successor)



                                                                                   CIT
                                                          CIT        Capita      Holdings       Other
                                                       Group Inc.  Corporation     LLC       Subsidiaries   Eliminations     Total
                                                       ----------  -----------     ---       ------------   ------------     -----
($ in millions)
                                                                    ASSETS
                                                                                                         
Net finance receivables ............................  $    633.5    $3,541.4    $   935.7    $  21,749.9     $      --     $26,860.5
Operating lease equipment, net .....................         --        734.6        157.1        5,812.9            --       6,704.6
Assets held for sale ...............................         --        159.1         62.8          991.5            --       1,213.4
Cash and cash equivalents ..........................     1,310.9       231.1        293.7          200.9            --       2,036.6
Other assets .......................................     6,532.9       283.3        391.6        2,780.2      (4,870.7)      5,117.3
                                                      ----------    --------    ---------    -----------     ---------     ---------
  Total Assets .....................................  $  8,477.3    $4,949.5    $ 1,840.9    $  31,535.4     $(4,870.7)    $41,932.4
                                                      ==========    ========    =========    ===========     =========     =========

                                                      LIABILITIES AND STOCKHOLDERS' EQUITY

Debt ...............................................  $ 27,760.7    $1,815.7    $ 2,116.8    $     (11.9)    $      --     $31,681.3
Credit balances of factoring clients ...............          --          --           --        2,270.0            --       2,270.0
Other liabilities ..................................   (24,154.1)    2,551.5     (1,396.1)      25,851.9            --       2,853.2
                                                      ----------    --------    ---------    -----------     ---------     ---------
  Total Liabilities ................................     3,606.6     4,367.2        720.7       28,110.0            --      36,804.5
Preferred securities ...............................          --          --           --          257.2            --         257.2
Equity .............................................     4,870.7       582.3      1,120.2        3,168.2      (4,870.7)      4,870.7
                                                      ----------    --------    ---------    -----------     ---------     ---------
  Total Liabilities and
  Stockholders' Equity .............................  $  8,477.3    $4,949.5    $ 1,840.9    $  31,535.4     $(4,870.7)    $41,932.4
                                                      ==========    ========    =========    ===========     =========     =========



                                       87


                        CIT GROUP INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                           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
                                             ==========      ========      =========       =========       =========      =========



                                       88


                         CIT GROUP INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                        CONSOLIDATING STATEMENT OF INCOME
                      Three Months Ended December 31, 2002
                                   (successor)



                                                                               CIT
                                                   CIT         Capita        Holdings       Other
                                               Group Inc.    Corporation       LLC       Subsidiaries     Eliminations     Total
                                               ----------    -----------     --------    ------------     -----------     -------
($ in millions)
                                                                                                        
Finance income ..........................       $ 32.9          $224.5        $50.6         $663.7          $    --       $971.7
Interest expense ........................         41.3            73.9         (1.1)         225.9               --        340.0
                                                ------          ------        -----         ------           ------       ------
Net finance income ......................         (8.4)          150.6         51.7          437.8               --        631.7
Depreciation on operating lease equipment           --           105.0         21.6          150.7               --        277.3
                                                ------          ------        -----         ------           ------       ------
Net finance margin ......................         (8.4)           45.6         30.1          287.1               --        354.4
Provision for credit losses .............         18.8             8.9          2.4          103.3               --        133.4
                                                ------          ------        -----         ------           ------       ------
Net finance margin, after provision for
  credit losses .........................        (27.2)           36.7         27.7          183.8               --        221.0
Equity in net income of subsidiaries ....        164.7              --           --             --           (164.7)          --
Other revenue ...........................          4.1            46.1         23.5          183.4               --        257.1
                                                ------          ------        -----         ------           ------       ------
Operating margin ........................        141.6            82.8         51.2          367.2           (164.7)       478.1
Operating expenses ......................         16.4            35.1         24.7          165.9               --        242.1
                                                ------          ------        -----         ------           ------       ------
Income before provision for income taxes         125.2            47.7         26.5          201.3           (164.7)       236.0
(Benefit) provision for income taxes ....        (16.1)           10.4         12.8           84.9               --         92.0
Minority interest, after tax ............           --             --          --            (2.7)               --        (2.7)
                                                ------          ------        -----         ------           ------       ------
Net income ..............................       $141.3          $ 37.3        $13.7         $113.7          $(164.7)      $141.3
                                                ======          ======        =====         ======          =======       ======



                                       89


                         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
                                           ---------         --------        ------         --------         -----        ---------
(Loss) 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 (loss) income ......................   $(6,698.7)        $  (56.8)       $ 70.7         $  (91.7)        $77.8        $(6,698.7)
                                           =========         ========        ======         ========         =====        =========



                                       90


                         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
(Benefit) 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
                                                    ======       ======        ======          ========       =======      ========



                                       91


                         CIT GROUP INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                      CONSOLIDATING STATEMENT OF CASH FLOWS
                      Three Months Ended December 31, 2002
                                   (successor)



                                                                                 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 ......................  $(1,783.5)    $   123.3        $ 52.9      $ 2,195.1       $      --     $  587.8
                                                 ---------     ---------        ------      ---------       ---------     --------
Cash Flows From Investing Activities:
Net increase (decrease) in financing
  and leasing assets ..........................      212.8      (1,062.8)        (43.6)         882.8              --        (10.8)
Decrease in intercompany loans
  and investments .............................    1,792.4            --            --             --        (1,792.4)          --
Other .........................................         --            --            --           (4.3)             --         (4.3)
                                                 ---------     ---------        ------      ---------       ---------     --------
Net cash flows provided by
  (used for) investing activities .............    2,005.2      (1,062.8)        (43.6)         878.5        (1,792.4)       (15.1)
                                                 ---------     ---------        ------      ---------       ---------     --------
Cash Flows From Financing Activities:
Net decrease in debt ..........................     (648.6)        (42.3)        (30.8)         (88.0)             --       (809.7)
Intercompany financing ........................         --         987.1         (15.1)      (2,764.4)        1,792.4           --
Cash dividends paid ...........................         --            --            --          (25.4)             --        (25.4)
                                                 ---------     ---------        ------      ---------       ---------     --------
Net cash flows (used for) provided by
  financing activities ........................     (648.6)        944.8         (45.9)      (2,877.8)        1,792.4       (835.1)
                                                 ---------     ---------        ------      ---------       ---------     --------
Net (decrease) increase in cash and
  cash equivalents ............................     (426.9)          5.3         (36.6)         195.8              --       (262.4)
Exchange rate impact on cash ..................         --            --            --           24.6              --         24.6
Cash and cash equivalents,
  beginning of period .........................    1,737.8         225.8         330.3          (19.5)             --      2,274.4
                                                 ---------     ---------        ------      ---------       ---------     --------
Cash and cash equivalents, end of period ......  $ 1,310.9     $   231.1        $293.7      $   200.9       $      --     $2,036.6
                                                 =========     =========        ======      =========       =========     ========



                                       92


                        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 (decrease) increase 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
                                                 =========    =========       =======       =========       =======      =========



                                       93


                         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 from Tyco ............      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
                                              =========    =========       =======      ========       =========      =========



                                       94


                         CIT GROUP INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 27 -- 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, except per
share data).



                                                                                       Year Ended September 30, 2002
                                                                                ---------------------------------------------
                                                                Three Months
                                                                   Ended
                                                                December 31,     First     Second         Third       Fourth
                                                                    2002        Quarter    Quarter       Quarter      Quarter
                                                                ------------    -------    -------       -------      -------
                                                                                                       
Net finance margin ..........................................      $354.4       $487.5    $   448.2     $   356.0     $370.8
Provision for credit losses .................................       133.4        112.9        195.0         357.7      122.7
Other revenue ...............................................       257.1        245.1        232.1         246.1      209.0
Salaries and general operating expenses .....................       242.1        238.7        234.2         237.9      235.6
Interest expense -- TCH .....................................          --         76.3        305.0         281.3         --
Goodwill impairment .........................................          --           --      4,512.7       1,999.0         --
Provision for income taxes ..................................        92.0        118.2         50.4         121.3       84.1
Minority interest in subsidiary trust holding
   solely debentures of the Company, after tax ..............         2.7          2.4          2.7           2.7        2.7
Net income (loss) ...........................................       141.3       $184.1    $(4,619.7)    $(2,397.8)    $134.7
Net income (loss) per diluted share (1) .....................      $  0.67      $ 0.87    $  (21.84)    $  (11.33)    $ 0.64




                                                                             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
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 common shares outstanding as a result
      of the July 2002 IPO (211.7  million)  were  outstanding  for all  periods
      preceding the quarter ended September 30, 2002.


                                       95


                        CIT GROUP INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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.  (formerly 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.


                                       96


                                    PART III

Item 10. Directors and Executive Officers of the Registrant.

      The  information  called for by Item 10 is  incorporated by reference from
the  information  under the caption  "Election of  Directors"  and  "Election of
Directors --  Executive  Officers"  in our Proxy  Statement  for our 2003 annual
meeting of stockholders.

Item 11. Executive Compensation.

      The  information  called for by Item 11 is  incorporated by reference from
the  information  under the caption  "Compensation  of Directors  and  Executive
Officers" in our Proxy Statement for our 2003 annual meeting of stockholders.

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

      The  information  called for by Item 12 is  incorporated by reference from
the  information  under  the  caption  "Principal  Shareholders"  in  our  Proxy
Statement for our 2003 annual meeting of stockholders.

Item 13. Certain Relationships and Related Transactions.

      The  information  called for by Item 13 is  incorporated by reference from
the  information   under  the  caption   "Certain   Relationships   and  Related
Transactions"   in  our  Proxy   Statement  for  our  2003  annual   meeting  of
stockholders.

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  established  a  project  plan  and  has
completed  the  initial  design  of  processes  and  controls  to  address  this
deficiency. Development is ongoing and implementation/completion of this project
is anticipated in 2003.


                                       97


                                     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-December 31, 2002, September 30,
                  2001, and December 31, 2000.

                  Consolidated  Statements  of Income for the three months ended
                  December 31,  2002,  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 year
                  ended December 31, 2000.

                  Consolidated  Statements of Shareholders' Equity for the three
                  months  ended  December  31,  2002,  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 year ended December 31, 2000.

                  Consolidated  Statements  of Cash  Flows for the three  months
                  ended December 31, 2002,  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 year ended December 31, 2000.

                  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, dated October 17, 2002, reporting that CIT
had entered into a new 364 bank credit  facility and amended its  outstanding  5
year bank credit facilities.

                  Current Report on Form 8-K, dated October 28, 2002,  reporting
                  that  reporting  that  CIT's  Board of  Directors  declared  a
                  dividend of $.12 per share.

                  Current Report on Form 8-K, dated October 29, 2002,  reporting
                  CIT's  financial  results as of an for the  quarter and twelve
                  month periods ended September 30, 2002.

                  Current Report on Form 8-K, dated October 31, 2002,  attaching
                  as  an  exhibit   certain   historical   quarterly   financial
                  information.

                  Current Report on Form 8-K, dated November 1, 2002,  reporting
                  that CIT entered into a Selling Agent  Agreement in connection
                  with the  establishment of a program for the offering of up to
                  $2,000,000,000 aggregate principal amount of CIT InterNotes.

                  Current Report on Form 8-K, dated November 5, 2002,  reporting
                  that  CIT's  Board of  Directors  approved  the  change of its
                  fiscal year-end from September 30 to December 31.

                  Current Report on Form 8-K, dated December 9, 2002,  reporting
                  the financing  relationship of CIT and its  subsidiaries  with
                  UAL Corp. and its subsidiary, United Airlines, Inc.

      (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).


                                       98


                  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).

                  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-3 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).


                                       99


                  4.10  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).

                  4.11  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).

                  4.12  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).

                  4.13  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).

                  4.14  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  BNY  Midwestern  Trust  Company  (as
                        successor  trustee to Harris Trust and Savings  Bank) 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).

                  4.15  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  BNY
                        Midwestern Trust Company (as successor trustee to Harris
                        Trust and  Savings  Bank) as  trustee  (Incorporated  by
                        reference  to  Exhibit  4.2e to Form S-3 filed by CIT on
                        June 7, 2001).

                  4.16  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 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  BNY  Midwestern  Trust  Company  (as
                        successor  trustee to Harris Trust and Savings  Bank) 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).

                  4.17  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 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 BNY  Midwestern
                        Trust Company (as successor  trustee to Harris Trust and
                        Savings Bank) 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).


                                      100


                  4.18  Indenture  dated as of August 26,  2002 by and among CIT
                        Group Inc., Bank One Trust Company, N.A., as Trustee and
                        Bank One N.A., London Branch, as London Paying Agent and
                        London  Calculation Agent, for the issuance of unsecured
                        and unsubordinated debt securities.

                  4.19  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 10.1 to
                        Amendment  No. 3 to the  Registration  Statement on Form
                        S-3 filed June 7, 2002).

                  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-3 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. 3 to the
                        Registration Statement on Form S-3 filed June 12, 2002).

                  10.4  364-Day Credit Agreement,  dated as of October 15, 2002,
                        among CIT  Group  Inc.,  the  banks and other  financial
                        institutions  from time to time  parties  thereto,  J.P.
                        Morgan  Securities,  Inc.,  as sole  lead  arranger  and
                        bookrunner,  JP Morgan  Chase  Bank,  as  administrative
                        agent, and Barclays Bank PLC, Bank of America,  N.A. and
                        Citibank,   as  syndication   agents   (Incorporated  by
                        reference  to  Exhibit  99.2 to Form 8-K filed by CIT on
                        October 24, 2002).

                  10.5  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).

                  10.6  First Amendment to 5 Year Credit Agreement,  dated as of
                        October 7, 2002  (Incorporated  by  reference to Exhibit
                        99.3 to Form 8-K filed by CIT on October 24, 2002).

                  10.7  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).

                  10.8  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).

                  10.9  $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).

                  10.10 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).


                                      101


                  10.11 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).

                  10.12 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).

                  10.13 Fourth Amendment to Capita Corporation Credit Agreement,
                        dated as of October 7, 2002  (Incorporated  by reference
                        to Exhibit  99.4 to Form 8-K filed by CIT on October 24,
                        2002).

                  10.14 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).

                  10.15 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).

                  10.16 364-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).

                  10.17 Guaranty of CIT Group Inc.,  dated as of March 27, 2001,
                        of Canadian  364-Day Credit  Agreement  (Incorporated by
                        reference to Exhibit  10.16 to Form 10-Q filed by CIT on
                        February 14, 2002).

                  10.18 Employment Agreement for Albert R. Gamper, Jr., dated as
                        of January 1, 2003.

                  10.19 Employment  Agreement  for Joseph M.  Leone  dated as of
                        January 1, 2003.

                  10.20 Employment  Agreement  for Thomas B. Hallman dated as of
                        January 1, 2003.

                  10.21 Employment  Agreement for Lawrence A. Marsiello dated as
                        of January 1, 2003.

                  10.22 Employment  Agreement  for  Nikita  Zdanow  dated  as of
                        January 1, 2003.

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

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

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

                  10.26 Form of Tax Agreement by and between Tyco  International
                        Ltd.  and CIT  (incorporated  by  reference  to  Exhibit
                        [10.27] to Amendment No. 3 to the Registration Statement
                        on Form S-3 filed June 26, 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.


                                      102


                                   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, General Counsel
                                                     and Secretary
February 26, 2003

      Pursuant to the requirements of the Securities  Exchange Act of 1934, this
report has been signed  below by the  following  persons on February 26, 2003 in
the capacities indicated below.

                      Name                                                Date
                     ------                                               ----
            /s/ ALBERT R. GAMPER, JR.
-------------------------------------------------
              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

             MARIANNE MILLER PARRS*
-------------------------------------------------
             Marianne Miller Parrs
                    Director

                 PETER J. TOBIN*
-------------------------------------------------
                 Peter J. Tobin
                    Director

               LOIS M. VAN DEUSEN*
-------------------------------------------------
               Lois M. Van Deusen
                    Director

               /s/ JOSEPH M. LEONE
-------------------------------------------------
                 Joseph M. Leone
          Executive Vice President and
             Chief Financial Officer
         (principal accounting officer)

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

      Original  powers  of  attorney  authorizing  Robert  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.


                                      103


                                 CERTIFICATIONS

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

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

      2. Based on my  knowledge,  this  transition  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
transition report;

      3. Based on my knowledge,  the financial  statements,  and other financial
information  included in this transition 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 transition 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 transition 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 transition report (the "Evaluation Date"); and

            c) presented in this  transition  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 officers and I have indicated in this
transition 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: February 26, 2003

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


                                      104


                                 CERTIFICATIONS

I, Joseph M. Leone, certify that:

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

      2. Based on my  knowledge,  this  transition  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
transition report;

      3. Based on my knowledge,  the financial  statements,  and other financial
information  included in this transition 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 transition 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 transition 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 transition report (the "Evaluation Date"); and

            c) presented in this  transition  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 officers and I have indicated in this
transition 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: February 26, 2003

                                          /S/ JOSEPH M. LEONE
                            ----------------------------------------------------
                                              Joseph M. Leone
                            Executive Vice President and Chief Financial Officer


                                      105


Where You Can Find More Information

      A copy of the Transition  Report on Form 10-K,  including the exhibits and
schedules thereto,  may be read and copied at the SEC's Public Reference Room at
450 Fifth  Street,  N.W.,  Washington  D.C.  20549.  Information  on the  Public
Reference  Room  may be  obtained  by  calling  the  SEC at  1-800-SEC-0330.  In
addition, the SEC maintains an Internet site at  http://www.sec.gov,  from which
interested parties can electronically access the Transition Report on Form 10-K,
including the exhibits and schedules thereto.

      The Transition  Report on Form 10-K,  including the exhibits and schedules
thereto,  and other SEC filings,  are available  free of charge on the Company's
Internet site at http://www.cit.com as soon as reasonably practicable after such
material is electronically filed with the SEC.