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

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

                                   ----------
                                    Form 10-Q
                                   ----------

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

               For the quarterly period ended September 30, 2003

                                       OR


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

                        Commission File Number: 001-31369

                                   ----------

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

              Delaware                                       65-1051192
  (State or other jurisdiction of                           (IRS Employer
  incorporation or organization)                       Identification Number)

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

                                 (973) 740-5000
                         (Registrant's telephone number)

              (Former name, former address and former fiscal year,
                         if changed since last report)

     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 _____

     As of October 31, 2003, there were  213,303,594  shares of the Registrant's
common stock outstanding.

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                         CIT GROUP INC. AND SUBSIDIARIES
                                TABLE OF CONTENTS

                                                                           Page
                                                                           ----

                         Part I--Financial Information:

Item 1     Consolidated Financial Statements (Unaudited)................     1
           Consolidated Balance Sheets..................................     1
           Consolidated Statements of Income............................     2
           Consolidated Statements of Stockholders' Equity..............     3
           Consolidated Statements of Cash Flows........................     4
           Notes to Consolidated Financial Statements...................   5-19
Item 2     Management's Discussion and Analysis of Financial
             Condition and Results of Operations and Quantitative
             and Qualitative Disclosure about Market Risk...............   20-54
Item 4     Controls and Procedures......................................    54

                           Part II--Other Information:

Item 1     Legal Proceedings............................................    55
Item 6     Exhibits and Reports on Form 8-K.............................   55-56
           Signatures...................................................    57


                                       i



                          PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

                         CIT GROUP INC. AND SUBSIDIARIES

                     CONSOLIDATED BALANCE SHEETS (Unaudited)
                       ($ in millions, except share data)




                                                                                 September 30,     December 31,
                                                                                     2003              2002
                                                                                 -------------     ------------
                                     ASSETS
                                                                                               
Financing and leasing assets:
   Finance receivables........................................................     $30,342.6         $27,621.3
   Reserve for credit losses..................................................        (752.5)           (760.8)
                                                                                   ---------         ---------
   Net finance receivables....................................................      29,590.1          26,860.5
   Operating lease equipment, net.............................................       7,485.3           6,704.6
   Finance receivables held for sale..........................................       1,017.9           1,213.4
Cash and cash equivalents.....................................................       2,269.0           2,036.6
Goodwill......................................................................         388.7             384.4
Other assets..................................................................       4,749.6           4,732.9
                                                                                   ---------         ---------
Total Assets..................................................................     $45,500.6         $41,932.4
                                                                                   =========         =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Debt:
   Commercial paper...........................................................     $ 4,935.8         $ 4,974.6
   Variable-rate bank credit facilities.......................................            --           2,118.0
   Variable-rate senior notes.................................................       7,430.0           4,906.9
   Fixed-rate senior notes....................................................      21,390.4          19,681.8
   Preferred capital securities...............................................         255.9                --
                                                                                   ---------         ---------
Total debt....................................................................      34,012.1          31,681.3
Credit balances of factoring clients..........................................       3,103.0           2,270.0
Accrued liabilities and payables..............................................       3,164.7           2,853.2
                                                                                   ---------         ---------
   Total Liabilities..........................................................      40,279.8          36,804.5
                                                                                   ---------         ---------
Commitments and Contingencies (Note 8)
Minority Interest.............................................................          39.9                --
Preferred capital securities..................................................            --             257.2
Stockholders' Equity:
   Preferred stock, $0.01 par value, 100,000,000 authorized; none issued......            --                --
   Common stock, $0.01 par value, 600,000,000 authorized; 213,324,623
     issued and 213,283,734 outstanding.......................................           2.1               2.1
   Paid-in capital, net of deferred compensation of $34.3 and $5.5............      10,679.1          10,676.2
   Accumulated deficit........................................................      (5,271.5)         (5,606.9)
   Accumulated other comprehensive loss.......................................        (227.6)           (200.7)
   Treasury stock, at cost....................................................          (1.2)               --
                                                                                   ---------         ---------
   Total Stockholders' Equity.................................................       5,180.9           4,870.7
                                                                                   ---------         ---------
   Total Liabilities and Stockholders' Equity.................................     $45,500.6         $41,932.4
                                                                                   =========         =========


          See Notes to Consolidated Financial Statements (Unaudited).


                                       1


                         CIT GROUP INC. AND SUBSIDIARIES

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



                                                            For the Quarter            For the Nine Months
                                                          Ended September 30,          Ended September 30,
                                                         ---------------------       ---------------------
                                                          2003          2002           2003          2002
                                                         ------       --------       --------     ---------
                                                                                      
Finance income....................................       $921.2       $1,015.2       $2,803.6     $ 3,143.8
Interest expense..................................        326.5          347.8        1,004.3       1,066.3
                                                         ------       --------       --------     ---------
Net finance income................................        594.7          667.4        1,799.3       2,077.5
Depreciation on operating lease equipment.........        252.4          296.6          804.1         902.5
                                                         ------       --------       --------     ---------
Net finance margin................................        342.3          370.8          995.2       1,175.0
Provision for credit losses.......................         82.9          122.7          286.5         675.4
                                                         ------       --------       --------     ---------
Net finance margin after provision for
   credit losses..................................        259.4          248.1          708.7         499.6
Other revenue.....................................        220.7          209.0          673.8         687.2
                                                         ------       --------       --------     ---------
Operating margin..................................        480.1          457.1        1,382.5       1,186.8
                                                         ------       --------       --------     ---------
Salaries and general operating expenses...........        237.5          235.6          698.3         707.7
Interest expense - TCH............................           --             --             --         586.3
Goodwill impairment...............................           --             --             --       6,511.7
                                                         ------       --------       --------     ---------
Operating expenses................................        237.5          235.6          698.3       7,805.7
                                                         ------       --------       --------     ---------
Income (loss) before provision for income taxes...        242.6          221.5          684.2      (6,618.9)
(Provision) for income taxes......................        (94.6)         (84.1)        (266.8)       (255.8)
Minority interest, after tax......................         (0.2)            --           (0.3)           --
Dividends on preferred capital securities,
  after tax ......................................           --           (2.7)          (5.4)         (8.1)
                                                         ------       --------       --------     ---------
Net income (loss).................................       $147.8       $  134.7       $  411.7     $(6,882.8)
                                                         ======       ========       ========     =========
Net income (loss) per basic share.................       $ 0.70       $   0.64       $   1.95     $  (32.53)
                                                         ======       ========       ========     =========
Net income (loss) per diluted share...............       $ 0.69       $   0.64       $   1.94     $  (32.53)
                                                         ======       ========       ========     =========
Dividends per common share........................       $ 0.12       $     --       $   0.36     $      --
                                                         ======       ========       ========     =========


Note: Per share calculations for the nine months ended September 30, 2002 assume
that common shares as a result of the July 2002 IPO (211.6 million)  outstanding
for the quarter were outstanding for the nine months.

          See Notes to Consolidated Financial Statements (Unaudited).


                                       2


                         CIT GROUP INC. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
                                 ($ in millions)



                                                                           Accumulated
                                                                              Other                     Total
                                      Common      Paid-in    Accumulated  Comprehensive  Treasury   Stockholders'
                                       Stock      Capital      Deficit       (Loss)        Stock       Equity
                                       ----      ---------   ---------    ------------   --------   -------------
                                                                                    
December 31, 2002.................     $2.1      $10,676.2   $(5,606.9)      $(200.7)      $  --      $4,870.7
Net income........................       --             --       411.7            --          --         411.7
Foreign currency translation
  adjustments.....................       --             --          --         (26.9)         --         (26.9)
Unrealized loss on equity
  and securitization
  investments.....................       --             --          --          (9.6)         --          (9.6)
Minimum pension
  liability adjustment............       --             --          --          (1.8)         --          (1.8)
Change in fair values of
  derivatives qualifying
  as cash flow hedges.............       --             --          --          11.4          --          11.4
                                                                                                      --------
Total comprehensive
  income..........................       --             --          --            --          --         384.8
                                                                                                      --------
Cash dividends....................       --             --       (76.3)           --          --         (76.3)
Restricted common
  stock grants....................       --            4.9          --            --          --           4.9
Treasury stock purchased,
  at cost.........................       --             --          --            --       (11.4)        (11.4)
Exercise of stock
  option awards...................       --          (2.0)          --            --        10.2           8.2
                                       ----      ---------   ---------       -------      ------      --------
September 30, 2003................     $2.1      $10,679.1   $(5,271.5)      $(227.6)     $ (1.2)     $5,180.9
                                       ====      =========   =========       =======      ======      ========


          See Notes to Consolidated Financial Statements (Unaudited).


                                       3


                         CIT GROUP INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
                                 ($ in millions)



                                                                         For the Nine Months
                                                                         Ended September 30,
                                                                     --------------------------
                                                                        2003            2002
                                                                     ----------     -----------
                                                                              
Cash Flows From Operations
Net income (loss)...............................................     $    411.7     $  (6,882.8)
Adjustments to reconcile net income (loss) to net cash
   flows from operations:
   Goodwill impairment..........................................             --         6,511.7
   Provision for credit losses..................................          286.5           675.4
   Depreciation and amortization................................          831.4           944.9
   Provision for deferred federal income taxes..................          229.6           122.2
   Gains on equipment, receivable and investment sales..........         (158.9)         (143.6)
   Increase in other assets.....................................         (161.6)         (654.6)
   Increase in accrued liabilities and payables.................          162.4           402.9
   Other........................................................          (55.2)          (55.6)
                                                                     ----------     -----------
Net cash flows provided by operations...........................        1,545.9           920.5
                                                                     ----------     -----------
Cash Flows From Investing Activities
Loans extended..................................................      (38,740.8)      (35,351.6)
Collections on loans............................................       32,794.5        30,822.9
Proceeds from asset and receivable sales........................        5,693.7         7,961.9
Purchases of assets to be leased................................       (1,672.1)       (1,329.1)
Net increase in short-term factoring receivables................         (529.4)       (1,219.9)
Purchase of finance receivable portfolios.......................         (961.9)          (26.0)
Purchase of investment securities...............................           (7.2)         (149.9)
Other...........................................................           30.2           107.0
                                                                     ----------     -----------
Net cash flows (used for) provided by investing activities......       (3,393.0)          815.3
                                                                     ----------     -----------
Cash Flows From Financing Activities
Proceeds from the issuance of variable and fixed-rate notes.....        8,608.9        12,568.4
Repayments of variable and fixed-rate notes.....................       (6,316.3)      (10,781.3)
Net decrease in commercial paper................................          (38.8)       (3,333.1)
Net repayments of non-recourse leveraged lease debt.............          (96.8)         (140.1)
Cash dividends paid.............................................          (76.3)             --
Purchase of treasury stock......................................           (1.2)             --
Net capitalization from Tyco and Tyco affiliates................             --           668.6
Proceeds from the issuance of common stock......................             --           254.6
                                                                     ----------     -----------
Net cash flows provided by (used for) financing activities......        2,079.5          (762.9)
                                                                     ----------     -----------
Net increase in cash and cash equivalents.......................          232.4           972.9
Cash and cash equivalents, beginning of period..................        2,036.6         1,301.5
                                                                     ----------     -----------
Cash and cash equivalents, end of period........................     $  2,269.0     $   2,274.4
                                                                     ==========     ===========
Supplementary Cash Flow Disclosure
Interest paid...................................................     $  1,110.3     $   1,208.3
Federal, foreign, state and local income taxes paid, net........     $     53.1     $      71.8


          See Notes to Consolidated Financial Statements (Unaudited).


                                       4


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1 -- Summary of Significant Accounting Policies

      CIT Group Inc., a Delaware corporation ("we," "CIT" or the "Company"),  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.

      These  financial  statements,  which have been prepared in accordance with
the  instructions  to Form 10-Q, do not include all of the  information and note
disclosures  required by accounting  principles generally accepted in the United
States  ("GAAP") and should be read in  conjunction  with the  Company's  Annual
Report on Form 10-K for the  three-month  transition  period ended  December 31,
2002.  These  financial   statements  have  not  been  examined  by  independent
accountants in accordance with generally accepted auditing standards, but in the
opinion  of  management  include  all  adjustments,  consisting  only of  normal
recurring  adjustments,  necessary  for a  fair  statement  of  CIT's  financial
position  and  results  of   operations.   Certain   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 and
the recognition of related  goodwill.  On July 8, 2002, Tyco completed a sale of
100% of CIT's  outstanding  common stock in an initial public offering  ("IPO").
Immediately  prior to the offering,  CIT was merged with its parent Tyco Capital
Holding,  Inc.  ("TCH"),  a  company  used to  acquire  CIT.  As a  result,  the
historical financial results of TCH are included in the historical  consolidated
CIT financial statements.

      CIT  consolidates  entities in which it owns or  controls  more than fifty
percent of the voting shares. 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  Statement of Financial  Accounting
Standards ("SFAS") No. 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  inter-company  transactions have
been eliminated.

      On  February   1,  2003,   CIT  adopted   FASB   Interpretation   No.  46,
"Consolidation of Variable  Interest  Entities" ("FIN 46") for Variable Interest
Entities  ("VIEs")  acquired  after  January  31,  2003.  FIN 46  addresses  the
identification of a VIE and the consolidation of a VIE's assets, liabilities and
results of  operations  in a company's  financial  statements.  VIEs are certain
entities  in  which  equity  investors  do not  have  the  characteristics  of a
controlling  financial interest or do not have sufficient equity at risk for the
entity to finance  its  activities  without  additional  subordinated  financial
support from other parties.  FIN 46 requires the  consolidation  of a VIE by its
primary  beneficiary  if the VIE does not  effectively  distribute  the economic
risks  and  rewards  of  ownership  among  the  parties  involved.  The  primary
beneficiary  is the  entity  that has the  majority  of the  economic  risks and
rewards.  As a result of the delay in the implementation of FIN 46, announced on
October 9, 2003,  VIEs in  existence  at  February  1, 2003 for which CIT is the
primary beneficiary,  will be consolidated in the Company's financial statements
effective December 31, 2003.

      The FIN 46 potential impact to CIT is primarily  related to three types of
transactions:  1) strategic vendor partner joint ventures,  2)  securitizations,
and  3)  selected   financing  and  private   equity   transactions.   Based  on
interpretations of FIN 46 currently available,  we believe the implementation of
this  standard does not change the current  equity method of accounting  for our
strategic   vendor   partner  joint   ventures  (see  Note  7  -  Related  Party
Transactions).  Securitization  transactions  outstanding  at September 30, 2003
would  qualify as  off-balance  sheet  transactions.  The Company may  structure
certain future  securitization  transactions,  including factoring trade


                                       5


                         CIT GROUP INC. AND SUBSIDIARIES

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

account receivables transactions,  as on-balance sheet financings.  Certain VIEs
acquired  primarily in conjunction with selected financing and/or private equity
transactions  may be  consolidated  under  FIN 46.  The  consolidation  of these
entities will not have a significant impact on the Company's  financial position
or results of operations. Due to the complexity of the new guidance and evolving
interpretations among accounting  professionals,  the Company will consider such
further guidance,  if any, and continue  assessing the accounting and disclosure
impact of FIN 46.

      For  guarantees  issued or  modified  subsequent  to  December  31,  2002,
liabilities  are  recognized  at the  estimated  fair  value  of the  obligation
undertaken at the inception of the guarantee.

      Effective July, 1, 2003, CIT adopted SFAS No. 150, "Accounting for Certain
Financial  Instruments  with  Characteristics  of both  Liabilities  and Equity"
("SFAS 150").  As a result of this adoption,  Preferred  Capital  Securities are
included in debt in the  Consolidated  Balance Sheet,  and the related  dividend
expense is included in interest  expense on a pretax basis. As prior periods may
not be conformed to the current period presentation,  the obligation and related
dividends are displayed above equity and below minority interest on a net of tax
basis in the consolidated  balance sheet and income statement,  respectively for
prior  periods.  On November 7, 2003,  certain  measurement  and  classification
provisions   of  SFAS  150,   relating   to   certain   mandatorily   redeemable
non-controlling  interests,  were deferred  indefinitely.  The adoption of these
delayed provisions, which relate primarily to minority interests associated with
finite-lived  entities,  is not  expected  to have a  significant  impact on the
financial position or results of operations.

      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"),  as  amended  by SFAS  No.  148,  "Accounting  for
Stock-Based  Compensation  -- Transition  and  Disclosure" 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. The following table presents the pro forma  information
required by SFAS 123 as if CIT had accounted for stock options granted under the
fair  value  method of SFAS 123,  as amended  ($ in  millions,  except per share
data):

                                                 Nine Months Ended September 30,
                                                 -------------------------------
                                                      2003           2002
                                                     ------       ---------
Net income (loss) as reported...................     $411.7       $(6,882.8)
Stock-based compensation expense -- fair
  value method, after tax.......................       18.5             5.7
                                                     ------       ---------
Pro forma net income (loss).....................     $393.2       $(6,888.5)
                                                     ======       =========
Basic earnings per share as reported............     $ 1.95       $  (32.53)
                                                     ======       =========
Basic earnings per share pro forma..............     $ 1.86       $  (32.56)
                                                     ======       =========
Diluted earnings per share as reported..........     $ 1.94       $  (32.53)
                                                     ======       =========
Diluted earnings per share pro forma............     $ 1.85       $  (32.56)
                                                     ======       =========

Note 2 -- Earnings Per Share

      Basic earnings per share ("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 do
not have a  dilutive  effect  (because  the  exercise  price is above the market
price) are not  included in the  denominator  and  averaged  approximately  17.6
million and 18.0 million shares for the quarter and nine months ended  September
30, 2003.


                                       6


                         CIT GROUP INC. AND SUBSIDIARIES

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

      The reconciliation of the numerator and denominator of basic EPS with that
of diluted EPS is presented for the quarter and nine months ended  September 30,
2003 and 2002.  The  denominator  for the nine months ended  September  30, 2002
assumes the shares  outstanding  for the quarter were  outstanding  for the nine
months.  ($ in millions,  except per share amounts,  which are in whole dollars;
share balances in thousands):



                                        Quarter Ended September 30, 2003      Quarter Ended September 30, 2002
                                       -----------------------------------  ------------------------------------
                                         Income       Shares     Per Share    Income        Shares     Per Share
                                       (Numerator) (Denominator)  Amount    (Numerator)  (Denominator)  Amount
                                       ----------- -------------  ------    -----------  -------------  ------
                                                                                       
Basic EPS:
   Income available to common
     stockholders....................    $147.8      211,735      $0.70        $134.7       211,573      $0.64
Effect of Dilutive Securities:
   Restricted shares.................        --          284         --            --           122         --
   Stock options.....................        --        1,510       0.01            --            --         --
                                         ------      -------      -----        ------       -------      -----
Diluted EPS..........................    $147.8      213,529      $0.69        $134.7       211,695      $0.64
                                         ======      =======      =====        ======       =======      =====




                                      Nine Months Ended September 30, 2003  Nine Months Ended September 30, 2002
                                      ------------------------------------  ------------------------------------
                                         Income       Shares     Per Share    (Loss)        Shares     Per Share
                                       (Numerator) (Denominator)  Amount    (Numerator)  (Denominator)  Amount
                                       ----------- -------------  ------    -----------  -------------  ------
                                                                                     
Basic EPS:
   Income available to common
     stockholders....................    $411.7      211,633      $1.95     $(6,882.8)      211,573    $(32.53)
Effect of Dilutive Securities:
   Restricted shares.................        --          355         --            --            --         --
   Stock options.....................        --          510       0.01            --            --         --
                                         ------      -------      -----     ---------       -------    -------
Diluted EPS..........................    $411.7      212,498      $1.94     $(6,882.8)      211,573    $(32.53)
                                         ======      =======      =====     =========       =======    =======


Note 3 -- Derivative Financial Instruments

      The components of the adjustment to Accumulated Other  Comprehensive  Loss
for  derivatives  qualifying as hedges of future cash flows at December 31, 2002
and at September 30, 2003 are presented in the following table ($ in millions):




                                                                     Adjustment of
                                                                     Fair Value of   Income Tax   Net Unrealized
                                                                      Derivatives      Effects         Loss
                                                                      -----------    ----------   --------------
                                                                                            
Balance at December 31, 2002.......................................     $(190.8)       $(72.5)       $(118.3)
Changes in values of derivatives qualifying
  as cash flow hedges..............................................        18.7           7.3           11.4
                                                                        -------        ------        -------
Balance at September 30, 2003......................................     $(172.1)       $(65.2)       $(106.9)
                                                                        =======        ======        =======


      The unrealized  loss as of September 30, 2003,  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
quarter ended September 30, 2003, 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 nine months ended September 30, 2003, the
ineffective  portion  of  changes  in the fair  value of cash flow  hedges was a
nominal charge to interest expense.  Assuming no change in interest rates, $53.1
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.


                                       7


                         CIT GROUP INC. AND SUBSIDIARIES

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

      As part of managing the exposure to changes in market interest rates, CIT,
as an end-user,  enters into various interest rate swap transactions,  which are
transacted in over-the-counter  markets with other financial institutions acting
as principal counter-parties.  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 under SFAS 133, 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.

      The following  table presents the notional  principal  amounts of interest
rate swaps by class and the corresponding hedged liability position at September
30, 2003 and December 31, 2002 ($ in millions):



                                                   Notional Amount
                                        ------------------------------------
Interest Rate Swaps                     September 30, 2003  December 31, 2002             Comments
-------------------                     ------------------  -----------------             --------
                                                                    
Floating to fixed-rate swaps--                                               Effectively converts the interest
  cash flow hedges.....................      $2,729.4          $3,280.5      rate on an  equivalent  amount  of
                                                                             commercial  paper  and variable-rate
                                                                             notes to a fixed rate.

Fixed to floating-rate swaps--                                               Effectively converts the interest
  fair value hedges....................       7,058.2           4,489.8      rate on an equivalent amount of
                                             --------          --------      fixed-rate notes to a variable rate.
Total interest rate swaps .............      $9,787.6          $7,770.3
                                             ========          ========


      CIT utilizes  trusts as part of its ongoing  securitization  programs.  As
part of these related  activities,  the Company  enters into hedge  transactions
with the trusts in order to protect the trusts  against  interest rate risk. CIT
offsets its  associated  risk by entering  into  substantially  offsetting  swap
transactions with third parties. The net effect is to protect the trusts and CIT
from interest rate risk. The notional  amount of these swaps was $2.9 billion at
September 30, 2003.

      CIT also utilizes  foreign currency  exchange  forward  contracts to hedge
currency risk  underlying its net  investments  in foreign  operations and cross
currency  interest  rate swaps to hedge both foreign  currency and interest rate
risk  underlying  foreign debt. At September 30, 2003,  CIT was party to foreign
currency  exchange forward contracts with notional amounts totaling $2.3 billion
and  maturities  ranging from 2003 to 2006. CIT was also party to cross currency
interest rate swaps with notional  amounts  totaling $1.3 billion and maturities
ranging from 2004 to 2027.

      During the quarter ended September 30, 2003, the Company executed treasury
lock  interest  rate  hedges,  totaling  $1.2 billion in notional  amount,  with
forward  dates  ranging  between  December 15, 2003 and January 15, 2004.  These
derivative contracts,  which lock in a fixed rate of interest,  were executed in
conjunction with planned  term-debt  refinancings.  These contracts,  which were
designated  as cash flow hedges of a forecasted  transaction,  insulate CIT from
potential movement in U.S. Treasury rates until refinancing.  The refinancing is
related  to the  call of  $1.25  billion  of debt  securities  outstanding.  See
"Liquidity" in Management's  Discussion and Analysis of Financial  Condition and
Results of Operations for more information.

Note 4 -- Business Segment Information

      Segment reporting was modified, beginning in the prior quarter, to reflect
Equipment Finance and Capital Finance as separate  segments.  Previously,  these
two  strategic  business  units were  combined as the  Equipment  Financing  and
Leasing segment. This new presentation is intended to facilitate the analysis of
the Company's results for users of the financial statements.


                                       8


                         CIT GROUP INC. AND SUBSIDIARIES

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

      The selected financial  information by business segment presented below is
based upon a fixed  leverage  ratio across  business units and the allocation of
most corporate expenses. The business segments' operating margins and net income
for the nine months  ended  September  30, 2003  include  the  allocation  (from
Corporate  and  Other) of  additional  borrowing  costs  stemming  from the 2002
disruption to the Company's funding base and increased  liquidity levels.  These
additional  borrowing and liquidity  costs had a greater  impact in 2003 than in
2002 and were included in Corporate and Other in 2002.  Corporate and Other also
included the 2002  non-cash  goodwill  impairment  charge,  which  substantially
wrote-off the goodwill established in conjunction with the June 2001 fresh start
accounting.

      During  the  quarter  ended  March  31,  2003,  in order to  better  align
competencies,  we transferred certain small business loans and leases, including
the small  business  lending  unit,  totaling  $1,078.6  million from  Equipment
Finance to Specialty Finance. Prior periods have not been restated to conform to
this current presentation ($ in millions).



                                                                                               Corporate
                             Specialty  Equipment   Capital   Commercial Structured    Total      and
                              Finance    Finance    Finance    Finance    Finance    Segments    Other     Consolidated
                              -------    -------    -------    -------    -------    --------    -----     ------------
                                                                                    
For the quarter ended
   September 30, 2003
Operating margin...........   $  218.7   $   35.8   $  37.7   $  131.0    $  36.3   $   459.5   $   20.6    $   480.1
Income taxes...............       45.7        5.8       7.9       34.3       11.1       104.8     (10.2)         94.6
Operating earnings (loss)..       71.6        9.0      12.3       53.8       17.1       163.8     (16.0)        147.8

At or for the nine months
   ended September 30, 2003
Operating margin...........   $  613.6   $  111.8   $  98.8   $  392.2    $  96.2   $ 1,312.6   $   69.9    $ 1,382.5
Income taxes...............      119.3       17.7      18.6      104.4       28.2       288.2      (21.4)       266.8
Operating earnings (loss)..      186.8       27.6      29.1      163.5       44.0       451.0      (39.3)       411.7
Total financing and
   leasing assets..........   12,126.9    6,732.6   7,068.3    9,871.1    3,360.8    39,159.7        --      39,159.7
Total managed assets.......   18,763.4   10,237.1   7,068.3    9,871.1    3,360.8    49,300.7        --      49,300.7

For the quarter ended
   September 30, 2002
Operating margin...........  $   205.4   $   53.7  $   47.3   $  123.5    $  33.0   $   462.9   $   (5.8)   $   457.1
Income taxes...............       42.2        4.6      12.5       31.5       10.0       100.8      (16.7)        84.1
Operating earnings (loss)..       68.9        7.6      20.4       51.4       16.4       164.7      (30.0)       134.7

At or for the nine months
   ended September 30, 2002
Operating margin...........  $   681.4   $  258.0  $  136.0  $   353.4    $  99.5   $ 1,528.3   $ (341.5)   $ 1,186.8
Income taxes...............      154.9       48.5      35.8       89.7       29.6       358.5     (102.7)       255.8
Operating earnings (loss)..      252.7       79.2      58.4      146.3       48.3       584.9   (7,467.7)    (6,882.8)
Total financing and
   leasing assets..........   10,119.4    8,398.8   5,868.4    8,910.2    3,090.8    36,387.6        --      36,387.6
Total managed assets.......   16,970.0   12,782.9   5,868.4    8,910.2    3,090.8    47,622.3        --      47,622.3



                                       9


                         CIT GROUP INC. AND SUBSIDIARIES

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

Note 5 -- Concentrations

      The following  table presents the geographic and industry  compositions of
financing and leasing  portfolio  assets,  based on the location and industry of
the customer, at September 30, 2003 and December 31, 2002 ($ in millions):



                                                  At September 30, 2003    At December 31, 2002
                                                  ---------------------    --------------------
                                                    Amount     Percent     Amount       Percent
                                                    ------     -------     ------       -------
                                                                              
North America:
   Northeast ...................................   $ 8,140.3    20.8%      $ 7,833.8      21.8%
   West ........................................     7,414.1    18.9%        6,223.8      17.4%
   Midwest .....................................     5,981.0    15.3%        5,748.3      16.0%
   Southeast ...................................     5,374.1    13.7%        4,946.8      13.8%
   Southwest ...................................     4,290.3    11.0%        3,691.9      10.3%
   Canada ......................................     1,943.9     5.0%        1,804.9       5.0%
                                                   ---------   -----       ---------     -----
Total North America ............................    33,143.7    84.7%       30,249.5      84.3%
Other foreign ..................................     6,016.0    15.3%        5,625.2      15.7%
                                                   ---------   -----       ---------     -----
   Total .......................................   $39,159.7   100.0%      $35,874.7     100.0%
                                                   =========   =====       =========     =====




                                                  At September 30, 2003   At December 31, 2002
                                                  ---------------------   ---------------------
                                                   Amount      Percent    Amount        Percent
                                                   ------      -------    ------        -------
                                                                             
Manufacturing(1) (no industry greater than 2.9%)   $ 7,420.7    18.9%     $ 7,114.3      19.8%
Retail(2) ......................................     5,179.3    13.2%       4,053.6      11.3%
Commercial Airlines ............................     4,911.0    12.5%       4,570.3      12.7%
Transportation(3) ..............................     2,946.8     7.5%       2,703.9       7.5%
Consumer based lending-- home mortgage .........     2,593.1     6.6%       1,292.7       3.6%
Service industries .............................     2,510.8     6.4%       1,571.1       4.4%
Consumer based lending-- non-real estate(4) ....     1,942.1     5.0%       2,435.0       6.8%
Construction equipment .........................     1,638.7     4.2%       1,712.7       4.8%
Communications(5) ..............................     1,396.3     3.6%       1,662.6       4.6%
Wholesaling ....................................     1,286.1     3.3%       1,305.2       3.6%
Automotive services ............................     1,157.3     3.0%       1,138.8       3.2%
Other (no industry greater than 3.0%)(6) .......     6,177.5    15.8%       6,314.5      17.7%
                                                   ---------   -----      ---------     -----
   Total .......................................   $39,159.7   100.0%     $35,874.7     100.0%
                                                   =========   =====      =========     =====

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

(2)  Includes retailers of apparel (6.0%) and general merchandise (3.6%).

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

(4)  Includes receivables from consumers for products in various industries such
     as manufactured housing,  recreational  vehicles,  marine and computers and
     related equipment.

(5)  Includes  $600.2  million and $685.8 million of  telecommunication  related
     assets at September 30, 2003 and December 31, 2002, respectively.

(6)  Included in "Other" above are  financing and leasing  assets in the energy,
     power and utilities sectors, which totaled $929.7 million, or 2.4% of total
     financing and leasing  assets at September 30, 2003.  This amount  includes
     approximately  $617 million in project  financing  and $264 million in rail
     cars on lease.


                                       10


                         CIT GROUP INC. AND SUBSIDIARIES

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

Note 6 -- Accumulated Other Comprehensive Loss

      The  following  table details the September 30, 2003 and December 31, 2002
components of accumulated other comprehensive loss, net of tax ($ in millions):

                                                      September 30, December 31,
                                                          2003          2002
                                                      ------------- -----------

Changes in fair values of derivatives
  qualifying as cash flow hedges ...................   $ (106.9)     $ (118.3)
Foreign currency translation adjustments ...........     (102.5)        (75.6)
Minimum pension liability adjustments ..............      (22.3)        (20.5)
Unrealized gain on equity and securitization
  investments ......................................        4.1          13.7
                                                       --------      --------
   Total accumulated other comprehensive loss ......   $ (227.6)     $ (200.7)
                                                       ========      ========

      During the quarter ended September 30, 2003, the Company contributed $41.9
million  to the CIT Group  Inc.  Retirement  Plan.  This  contribution,  and the
expected  additional  contribution  planned for the quarter  ended  December 31,
2003, has the potential to  substantially  reduce the minimum pension  liability
adjustment.

Note 7 -- Related Party Transactions

      CIT is a partner with Dell Inc.  ("Dell") in Dell Financial  Services L.P.
("DFS"),  a joint  venture that offers  financing to Dell  customers.  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 acquired this  relationship  through an acquisition  during
November  1999,  and the current  agreement  extends  until  October  2005.  CIT
regularly purchases finance receivables from DFS at a premium, portions of which
are typically  securitized  within 90 days of purchase from DFS. CIT has limited
recourse  back to DFS on  defaulted  contracts.  In  accordance  with the  joint
venture agreement,  net income generated by DFS as determined under U.S. GAAP is
allocated 70% to Dell and 30% to CIT,  after CIT has  recovered  any  cumulative
losses.  The DFS board of directors  voting  representation  is equally weighted
between  designees  of CIT and  Dell and an  independent  director.  Any  losses
generated by DFS as determined  under U.S. GAAP are allocated to CIT. DFS is not
consolidated in CIT's  September 30, 2003 financial  statements and is accounted
for under the equity method. At September 30, 2003, financing and leasing assets
originated by DFS and purchased by CIT (included in the CIT Consolidated Balance
Sheet) were $1.4 billion whereas  securitized  assets included in managed assets
were $2.3 billion. In addition to the owned and securitized assets acquired from
DFS,  CIT's  maximum  exposure to loss with respect to  activities  of the joint
venture is  approximately  $218 million  pretax at September 30, 2003,  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  defaulted  receivables.  CIT
acquired this  relationship  through an  acquisition  during  November 1999. The
agreement  with Snap-on  extends until  January  2007.  CIT and Snap-on have 50%
ownership interests,  50% board of directors 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 September
30, 2003, the related  financing and leasing assets and securitized  assets were
$1.1  billion  and $0.1  billion,  respectively.  In  addition  to the owned and
securitized  assets  purchased  from the Snap-on  joint  venture,  CIT's maximum
exposure  to  loss  with  respect  to   activities   of  the  joint  venture  is
approximately  $14 million  pretax at September 30, 2003,  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  ("CIBC") in an entity that is engaged in  asset-based
lending in Canada.  Both CIT and CIBC 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
September 30, 2003, CIT's maximum exposure to loss with respect to activities of
the joint venture is $115 million  pretax,  which is comprised of the investment
in and loans to the joint venture.


                                       11


                         CIT GROUP INC. AND SUBSIDIARIES

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

      CIT  invests  in  various  trusts,  partnerships,  and  limited  liability
corporations  established in conjunction with structured financing  transactions
of equipment,  power and infrastructure  projects. CIT's interests in certain of
these  entities  were  acquired  by  CIT  in  November  1999,  and  others  were
subsequently  entered into in the normal  course of business.  At September  30,
2003,  other assets  included  $21 million of  investments  in  non-consolidated
entities  relating to such  transactions 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 September 30, 2003.

      As of September 30, 2002, CIT bought  receivables  totaling $350.0 million
from certain  subsidiaries of Tyco in a factoring  transaction on an arms-length
basis. CIT has continued to purchase  receivables from Tyco in similar factoring
transactions through September 30, 2003 on an arms-length basis.

Note 8 -- 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.

      Guarantees  are issued  primarily  in  conjunction  with  CIT's  factoring
product,  whereby CIT provides the client with credit  protection  for its trade
receivables  without actually  purchasing the  receivables.  The trade terms are
generally  sixty days or less.  In the event that the  customer is unable to pay
according to the contractual terms, then the receivables would be purchased.

      As of September 30, 2003, there were no outstanding  liabilities  relating
to these  credit-related  commitments  or  guarantees,  as amounts are generally
billed and collected on a monthly basis.

      The   accompanying   table   summarizes   the   contractual   amounts   of
credit-related  commitments.   The  reduction  in  guarantees  outstanding  from
December  31,  2002  reflects  the  transition  to  on-balance  sheet  factoring
products,  which are included in credit balances of factoring clients in the CIT
consolidated balance sheet ($ in millions).




                                                                                                         At
                                                                                                     December 31,
                                                                     At September 30, 2003              2002
                                                             -----------------------------------     -----------
                                                                 Due to Expire
                                                             ---------------------
                                                              Within        After        Total          Total
                                                             One Year     One Year    Outstanding    Outstanding
                                                             --------     --------    -----------    -----------
                                                                                          
Unused commitments to extend credit:
  Financing and leasing assets..........................       $933.2     $4,293.4     $5,226.6       $3,618.9
Letters of credit and acceptances:
  Standby letters of credit.............................        520.2         18.8        539.0          519.8
  Other letters of credit...............................        478.5         23.8        502.3          583.3
  Acceptances...........................................         14.0           --         14.0            5.6
Guarantees..............................................        104.2           --        104.2          745.8
Venture capital fund and equity commitments.............           --        140.7        140.7          164.9



                                       12


                         CIT GROUP INC. AND SUBSIDIARIES

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

     As of September 30, 2003,  commitments to purchase commercial aircraft from
both Airbus Industrie and The Boeing Company totaled 67 units through 2007 at an
approximate value of $3,153.0 million as detailed below ($ in millions):

Calendar Year:                                           Amount          Units
--------------                                           ------          -----
2003.................................................   $  201.0            5
2004.................................................      604.0           14
2005.................................................    1,072.0           24
2006.................................................    1,016.0           19
2007.................................................      260.0            5
                                                        --------           --
Total................................................   $3,153.0           67
                                                        ========           ==

      The order amounts exclude CIT's options to purchase  additional  aircraft.
All of the 2003 units and six of the 2004 units have lease commitments in place.

      Outstanding  commitments  to purchase  equipment,  other than the aircraft
detailed above,  totaled $124.2 million at September 30, 2003. In addition,  CIT
is party to a railcar sale-leaseback  transaction under which it is obligated to
pay a remaining total of $486 million,  including  approximately $28 million per
year through 2010 and declining thereafter through 2024, which is expected to be
more than offset by CIT's  re-lease of the assets,  contingent on its ability to
maintain railcar usage.

      CIT has guaranteed  the public and private debt  securities of a number of
its wholly-owned,  consolidated subsidiaries,  including those disclosed in Note
13 -- 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  and  included  in  the  consolidated  financial
statements.  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,  $9.5 million of third party debt,  which is not  reflected in the
consolidated balance sheet at September 30, 2003.

Note 9 -- Legal Proceedings

      On April 10, 2003, a putative class action lawsuit, asserting claims under
the Securities  Act of 1933,  was filed in the United States  District Court for
the Southern  District of New York against CIT, its Chief Executive  Officer and
its  Chief  Financial  Officer.  The  lawsuit  contained  allegations  that  the
registration  statement and prospectus prepared and filed in connection with the
IPO were  materially  false and  misleading,  principally  with  respect  to the
adequacy of CIT's telecommunications-related loan loss reserves at the time. The
lawsuit  purported to have been brought on behalf of all those who purchased CIT
common  stock in or  traceable  to the IPO,  and  sought,  among  other  relief,
unspecified damages or rescission for those alleged class members who still hold
CIT stock and unspecified  damages for other alleged class members.  On June 25,
2003, by order of the United States District Court, the lawsuit was consolidated
with five other  substantially  similar suits, all of which had been filed after
April 10, 2003 and one of which named as defendants some of the  underwriters in
the IPO and certain  former  directors of CIT (with respect to whom CIT may have
indemnification  obligations).  Glickenhaus & Co., a privately  held  investment
firm, was named lead plaintiff in the consolidated action.

      On September  16, 2003, an amended and  consolidated  complaint was filed.
That  complaint  contains  substantially  the same  allegations  as the original
complaints. In addition to the foregoing, two similar suits have been brought by
certain  shareholders  on behalf of CIT  against CIT and some of its present and
former directors under Delaware corporate law.

      CIT believes  that the  allegations  in each of these  actions are without
merit and that its disclosures were proper,  complete and accurate.  CIT intends
to vigorously defend itself against these actions.

      In addition,  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, including the class action suit
above,  will not have a material  adverse effect on the  consolidated  financial
position, results of operations or liquidity of CIT.


                                       13


                         CIT GROUP INC. AND SUBSIDIARIES

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

Note 10 -- Severance and Facility Restructuring Reserves

      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 of CIT by Tyco, as well as utilization  during
the current quarter ($ in millions):



                                                             Severance            Facilities
                                                       --------------------  ---------------------
                                                       Number of              Number of                 Total
                                                       Employees    Reserve  Facilities    Reserve    Reserves
                                                       ---------    -------  ----------    -------    --------
                                                                                        
Balance at December 31, 2002......................        240       $ 17.2        22        $12.4      $ 29.6
Utilization.......................................        (91)       (11.9)       (5)        (4.6)      (16.5)
Reduction.........................................        (94)        (1.7)       --           --        (1.7)
                                                          ---       ------        --        -----      ------
Balance at September 30, 2003.....................         55       $  3.6        17        $ 7.8      $ 11.4
                                                          ===       ======        ==        =====      ======


      The downward  revision to the  severence  reserves  during the nine months
ended September 30, 2003 related to Specialty Finance  restructuring  activities
and was recorded as a reduction to goodwill.

      The  reserves  remaining  at  September  30,  2003  relate  largely to the
restructuring of the European operations. The facility reserves relate primarily
to shortfalls in sublease  transactions  and will be utilized over the remaining
lease terms,  generally between 3 and 7 years.  Severance  reserves also include
amounts  payable  within  the next  year to  individuals  who  chose to  receive
payments on a periodic basis.

Note 11 -- Consolidating Financial Statements

      The September 30, 2002 financial  statements  include the activity of TCH,
which was a wholly owned  subsidiary of a Tyco affiliate and the holding company
for the acquisition of CIT by Tyco. In its capacity as the  acquisition  holding
company,  TCH's activity  included an outstanding loan from and related interest
expense and prepayment  penalties  payable to an affiliate of Tyco.  Immediately
prior to the IPO of CIT on July 8, 2002, the prior activity of TCH  (accumulated
net deficit) was eliminated by means of a capital  contribution  from Tyco. As a
result,  the consolidated  financial  statements of CIT were not impacted by TCH
subsequent to June 30, 2002.




($ in millions)                                                     For the Nine Months Ended September 30, 2002
                                                                    --------------------------------------------
                                                                          CIT            TCH      Consolidated
                                                                       ---------      -------       ---------
                                                                                           
Finance Income......................................................   $ 3,143.8      $    --       $ 3,143.8
Interest expense....................................................     1,066.3           --         1,066.3
                                                                       ---------      -------       ---------
Net finance income..................................................     2,077.5           --         2,077.5

Depreciation on operating lease equipment...........................       902.5           --           902.5
                                                                       ---------      -------       ---------
Net finance margin..................................................     1,175.0           --         1,175.0
Provision for credit losses.........................................       675.4           --           675.4
                                                                       ---------      -------       ---------
Net finance margin after provision for credit losses................       499.6           --           499.6
Other revenue.......................................................       687.2           --           687.2
                                                                       ---------      -------       ---------
Operating margin....................................................     1,186.8           --         1,186.8
                                                                       ---------      -------       ---------
Salaries and general operating expenses.............................       692.9         14.8           707.7
Interest expense - TCH..............................................          --        586.3           586.3
Goodwill impairment.................................................     6,511.7          --          6,511.7
                                                                       ---------      -------       ---------
Operating expenses..................................................     7,204.6        601.1         7,805.7
                                                                       ---------      -------       ---------
(Loss) before provision for income taxes............................    (6,017.8)      (601.1)       (6,618.9)
(Provision) for income taxes........................................      (188.3)       (67.5)         (255.8)
Dividends on preferred capital securities, after tax................        (8.1)         --             (8.1)
                                                                       ---------      -------       ---------
Net (loss)..........................................................   $(6,214.2)     $(668.6)      $(6,882.8)
                                                                       =========      =======       =========



                                       14


                         CIT GROUP INC. AND SUBSIDIARIES

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

Note 12 -- Accounting Change -- Goodwill

      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,  "Goodwill and Other  Intangible  Assets"  ("SFAS
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 its reporting  units as of October 1, 2001.  Under
the transition  provisions of SFAS 142,  there was no goodwill  impairment as of
October 1, 2001.

      During the  quarter  ended  March 31,  2002,  CIT's  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,  which caused a disruption  in the  Company's  ability to access
capital markets. As a result,  management  performed  impairment analyses during
the quarters ended March 31, 2002 and June 30, 2002. These analyses  resulted in
goodwill  impairment  charges  of $4.513  billion  and  $1.999  billion  for the
quarters ended March 31, 2002 and June 30, 2002, respectively.

      The changes in the  carrying  amount of goodwill for the nine months ended
September 30, 2003 were as follows ($ in millions):



                                               Specialty   Capital    Commercial
                                                Finance    Finance      Finance    Total
                                                -------    -------      -------    -----
                                                                      
Balance as of December 31, 2002...............  $14.0        $  --     $370.4     $384.4
Goodwill related to rail acquisition .........     --          5.4         --        5.4
Severance reduction...........................   (1.1)          --         --       (1.1)
                                                -----        -----     ------     ------
Balance as of September 30, 2003..............  $12.9        $ 5.4     $370.4     $388.7
                                                =====        =====     ======     ======


      The $5.4  million  increase  to  goodwill  during  the nine  months  ended
September  30, 2003 related to the  acquisition  of a majority  interest in Flex
Leasing  Corporation by Capital Finance in April 2003.  Flex,  which is based in
San Francisco,  California and was founded in 1996, leases  approximately  7,200
general-purpose railcars,  representing  approximately $410.0 million in assets,
to railroads and shippers in the U.S. and Canada. The Flex results of operations
from the date of acquisition  through September 30, 2003 are included in the CIT
consolidated  results.  Minority  interest  related to the Flex  acquisition was
$39.9  million  at  September  30,  2003  and is  reflected  on the  face of the
Consolidated Balance Sheet.

      The  downward  revision to  severence  liabilities  during the nine months
ended  September  30,  2003  was  related  to  Specialty  Finance   restucturing
activities  and was  recorded  as a  reduction  to  goodwill,  as the  severence
liability  was  established  in  conjunction  with  Tyco  acquisition   purchase
accounting adjustments.

      Other intangible  assets,  net,  comprised  primarily of acquired customer
relationships,  proprietary computer software and related transaction processes,
totaled  $49.2  million and $16.5 million at September 30, 2003 and December 31,
2002, respectively, and are included in Other Assets on the Consolidated Balance
Sheets.  The increase in other  intangible  assets  during the nine months ended
September 30, 2003 was due to customer relationships acquired in the purchase of
a factoring  portfolio  in September  2003.  Other  intangible  assets are being
amortized  over periods  ranging  from five to twenty  years on a  straight-line
basis.  Amortization  expense  totaled  $3.3  million for each nine month period
ended September 30, 2003 and 2002.


                                       15


                         CIT GROUP INC. AND SUBSIDIARIES

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

Note 13 -- Summarized Financial Information of Subsidiaries

      The following presents condensed  consolidating  financial information for
CIT Holdings LLC and Capita Corporation (formerly AT&T Capital Corporation). CIT
has guaranteed on a full and  unconditional  basis the existing debt  securities
that  were  registered  under  the  Securities  Act of 1933  and  certain  other
indebtedness  of these  subsidiaries.  CIT has not presented  related  financial
statements or other information for these subsidiaries on a stand-alone basis ($
in millions).



                                                                   CIT
                CONSOLIDATING               CIT       Capita     Holdings      Other
               BALANCE SHEETS           Group Inc.  Corporation     LLC    Subsidiaries Eliminations   Total
               --------------           ----------  -----------     ---    ------------ ------------   -----
                                                                                   
September 30, 2003
ASSETS
Net finance receivables..............    $ 1,509.4   $3,663.9    $1,154.4   $23,262.4    $      --   $29,590.1
Operating lease equipment, net.......           --      599.4       152.0     6,733.9           --     7,485.3
Finance receivables held for sale....           --       69.2        61.4       887.3           --     1,017.9
Cash and cash equivalents............      1,709.8      399.3       185.4       (25.5)          --     2,269.0
Other assets and goodwill............      7,274.2      168.3        57.8     2,818.9     (5,180.9)    5,138.3
                                         ---------   --------    --------   ---------    ---------   ---------
   Total Assets......................    $10,493.4   $4,900.1    $1,611.0   $33,677.0    $(5,180.9)  $45,500.6
                                         =========   ========    ========   =========    =========   =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Debt.................................    $30,340.9   $1,752.4    $1,543.7    $  375.1    $      --   $34,012.1
Credit balances of
   factoring clients.................           --         --          --     3,103.0           --     3,103.0
Other liabilities....................    (25,028.4)   2,571.2    (1,489.3)   27,111.2           --     3,164.7
                                         ---------   --------    --------   ---------    ---------   ---------
   Total Liabilities.................      5,312.5    4,323.6        54.4    30,589.3           --    40,279.8
Minority interest....................           --         --          --        39.9           --        39.9
Equity...............................      5,180.9      576.5     1,556.6     3,047.8     (5,180.9)    5,180.9
                                         ---------   --------    --------   ---------    ---------   ---------
   Total Liabilities and
   Stockholders' Equity..............    $10,493.4   $4,900.1    $1,611.0   $33,677.0    $(5,180.9)  $45,500.6
                                         =========   ========    ========   =========    =========   =========
December 31, 2002
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
Finance receivables 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 and goodwill............      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 capital 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
                                         =========   ========    ========   =========    =========   =========



                                       16


                         CIT GROUP INC. AND SUBSIDIARIES

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)



                                                                   CIT
                CONSOLIDATING               CIT       Capita     Holdings      Other
            STATEMENTS OF INCOME        Group Inc.  Corporation     LLC    Subsidiaries Eliminations    Total
            --------------------        ----------  -----------     ---    ------------ ------------    -----
                                                                                   
Nine Months Ended
   September 30, 2003
Finance income.......................    $    73.4    $ 592.1     $ 142.0    $1,996.1    $     --    $ 2,803.6
Interest expense.....................          3.0      244.5        12.2       744.6          --      1,004.3
                                         ---------    -------     -------    --------    --------    ---------
Net finance income...................         70.4      347.6       129.8     1,251.5          --      1,799.3
Depreciation on operating
   lease equipment...................          --       287.2        53.6       463.3          --        804.1
                                         ---------    -------     -------    --------    --------    ---------
Net finance margin...................         70.4       60.4        76.2       788.2          --        995.2
Provision for credit losses..........         30.6       33.9        12.2       209.8          --        286.5
                                         ---------    -------     -------    --------    --------    ---------
Net finance margin, after provision
   for credit losses.................         39.8       26.5        64.0       578.4          --        708.7
Equity in net income of
   subsidiaries......................        392.8         --          --          --      (392.8)          --
Other revenue........................          4.2       86.8        74.2       508.6         --         673.8
                                         ---------    -------     -------    --------    --------    ---------
Operating margin.....................        436.8      113.3       138.2     1,087.0      (392.8)     1,382.5
Operating expenses...................         30.0      134.4        73.3       460.6          --        698.3
                                         ---------    -------     -------    --------    --------    ---------
Income (loss) before provision
   for income taxes..................        406.8     (21.1)        64.9       626.4      (392.8)       684.2
Benefit (provision) for
   income taxes......................          4.9     (30.8)       (43.1)     (197.8)         --       (266.8)
Preferred dividends, after tax.......           --         --          --        (5.4)         --         (5.4)
Minority interest, after tax.........           --         --          --        (0.3)         --         (0.3)
                                         ---------    -------     -------    --------    --------    ---------
Net income (loss)....................    $   411.7    $ (51.9)    $  21.8    $  422.9    $ (392.8)   $   411.7
                                         =========    =======     =======    ========    ========    =========
Nine Months Ended
   September 30, 2002
Finance income.......................    $   147.8    $ 756.7      $169.0    $2,070.3    $     --    $ 3,143.8
Interest expense.....................        (35.8)     318.6         3.8       779.7          --      1,066.3
                                         ---------    -------     -------    --------    --------    ---------
Net finance income...................        183.6      438.1       165.2     1,290.6          --      2,077.5
Depreciation on operating
   lease equipment...................          --       363.4        73.9       465.2          --        902.5
                                         ---------    -------     -------    --------    --------    ---------
Net finance margin...................        183.6       74.7        91.3       825.4          --      1,175.0
Provision for credit losses..........        281.3      192.8        22.1       179.2          --        675.4
                                         ---------    -------     -------    --------    --------    ---------
Net finance margin, after
   provision for credit losses.......        (97.7)    (118.1)       69.2       646.2          --        499.6
Equity in net income of
   subsidiaries......................       (275.3)        --          --          --       275.3           --
Other revenue........................         20.6       95.6        68.2       502.8          --        687.2
                                         ---------    -------     -------    --------    --------    ---------
Operating margin.....................      (352.4)      (22.5)      137.4     1,149.0       275.3      1,186.8
Operating expenses...................      6,567.4      145.6        43.9     1,048.8          --      7,805.7
                                         ---------    -------     -------    --------    --------    ---------
Income (loss) before provision
   for income taxes..................     (6,919.8)    (168.1)       93.5       100.2       275.3     (6,618.9)
Benefit (provision) for
   income taxes......................         37.0       73.4       (47.1)     (319.1)         --       (255.8)
Preferred dividends, after tax.......           --         --          --        (8.1)         --         (8.1)
                                         ---------    -------     -------    --------    --------    ---------
Net (loss) income....................    $(6,882.8)   $ (94.7)    $  46.4    $ (227.0)   $  275.3    $(6,882.8)
                                         =========    =======     =======    ========    ========    =========



                                       17


                         CIT GROUP INC. AND SUBSIDIARIES

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)



                                                                   CIT
           CONSOLIDATING STATEMENT          CIT       Capita     Holdings      Other
                OF CASH FLOWS           Group Inc.  Corporation     LLC    Subsidiaries Eliminations   Total
           -----------------------      ----------  -----------  --------  ------------ ------------   -----
                                                                                   
Nine Months Ended
   September 30, 2003
Cash Flows From
   Operating Activities:
Net cash flows provided by
   (used for) operations.............    $  (164.9)   $ 609.9   $ 1,544.5    $ (443.6)    $     --   $ 1,545.9
                                         ---------    -------   ---------    --------     --------   ---------
Cash Flows From
   Investing Activities:
Net decrease in financing and
   leasing assets....................       (904.6)    (174.7)     (254.8)   (2,089.1)          --    (3,423.2)
Decrease in inter-company loans
   and investments...................     (1,111.8)        --          --          --      1,111.8          --
Other................................           --         --          --        30.2           --        30.2
                                         ---------    -------   ---------    --------     --------   ---------
Net cash flows (used for)
   investing activities..............     (2,016.4)    (174.7)     (254.8)   (2,058.9)     1,111.8    (3,393.0)
                                         ---------    -------   ---------    --------     --------   ---------
Cash Flows From
   Financing Activities:
Net increase (decrease) in debt......      2,580.2      (63.3)     (573.1)      213.2           --     2,157.0
Inter-company financing..............           --     (203.7)     (824.9)    2,140.4     (1,111.8)         --
Cash dividends paid..................           --         --          --       (76.3)          --       (76.3)
Purchase of treasury stock...........           --         --          --        (1.2)          --        (1.2)
                                         ---------    -------   ---------    --------     --------   ---------
Net cash flows provided by
   (used for) financing activities...      2,580.2     (267.0)   (1,398.0)    2,276.1     (1,111.8)    2,079.5
                                         ---------    -------   ---------    --------     --------   ---------
Net increase (decrease) in cash
   and cash equivalents..............        398.9      168.2      (108.3)     (226.4)          --       232.4
Cash and cash equivalents,
   beginning of period...............      1,310.9      231.1       293.7       200.9           --     2,036.6
                                         ---------    -------   ---------    --------     --------   ---------
Cash and cash equivalents,
   end of period.....................    $ 1,709.8    $ 399.3   $   185.4    $  (25.5)    $     --   $ 2,269.0
                                         =========    =======   =========    ========     ========   =========



                                       18


                         CIT GROUP INC. AND SUBSIDIARIES

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)



                                                                   CIT
           CONSOLIDATING STATEMENT          CIT       Capita     Holdings      Other
                OF CASH FLOWS           Group Inc.  Corporation     LLC    Subsidiaries Eliminations    Total
           -----------------------      ----------  -----------  --------  ------------ ------------   -----
                                                                                   
Nine Months Ended
   September 30, 2002
Cash Flows From
   Operating Activities:
Net cash flows provided by
   (used for) operations.............     $  474.5   $ (223.6)    $(310.9)    $ 980.5      $    --   $   920.5
                                          --------   --------     -------     -------      -------   ---------
Cash Flows From
   Investing Activities:
Net increase in financing and
   leasing assets....................        513.2      381.6       243.4      (429.9)          --       708.3
Increase in inter-company loans
   and investments...................       (945.7)        --          --          --        945.7          --
Other................................           --         --          --       107.0           --       107.0
                                          --------   --------     -------     -------      -------   ---------
Net cash flows provided by
   (used for) investing activities...       (432.5)     381.6       243.4      (322.9)       945.7       815.3
                                          --------   --------     -------     -------      -------   ---------
Cash Flows From
   Financing Activities:
Net increase (decrease) in debt......       (315.7)  (1,065.0)       95.2      (400.6)          --    (1,686.1)
Inter-company financing..............           --      987.7       192.0      (234.0)      (945.7)         --
Capital contributions.............           668.9         --          --        (0.3)          --       668.6
Issuance of common stock .........           254.6         --          --          --           --       254.6
                                          --------   --------     -------     -------      -------   ---------
Net cash flows (used for) provided
   by financing activities...........        607.8      (77.3)      287.2      (634.9)      (945.7)     (762.9)
                                          --------   --------     -------     -------      -------   ---------
Net increase (decrease) in cash
   and cash equivalents..............        649.8       80.7       219.7        22.7           --       972.9
Cash and cash equivalents,
   beginning of period...............        833.4      145.1       110.6       212.4           --     1,301.5
                                          --------   --------     -------     -------      -------   ---------
Cash and cash equivalents,
   end of period.....................     $1,483.2   $  225.8     $ 330.3     $ 235.1      $    --   $ 2,274.4
                                          ========   ========     =======     =======      =======   =========



                                       19


Item 2. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations and Quantitative and Qualitative  Disclosure about  Market
        Risk

Overview

      Net income for the  quarter  increased  9.7% from the prior year to $147.8
million.  This increase  reflected  lower funding costs,  lower  charge-offs and
higher asset  levels,  which  resulted in improved  risk  adjusted  margin.  The
quarter over prior-year  quarter  comparisons also benefitted from lower venture
capital  losses.  The increase in 2003 net income - before  charges for the nine
months  ended   September   30,  2003,   was  due   primarily  to  the  specific
telecommunication  and  Argentine  reserving  actions in the first half of 2002,
which totalled  $207.7 million after tax.  Excluding the impact of the reserving
actions,  the nine month comparisons reflect lower current year interest margin,
due to higher borrowing costs resulting from the funding base disruption.

      Managed assets  totaled $49.3 billion at September 30, 2003,  versus $46.4
billion at December 31, 2002 and $47.6 billion at September 30, 2002.  Financing
and leasing portfolio assets totaled $39.2 billion at September 30, 2003, versus
$35.9 billion at December 31, 2002, and $36.4 billion at September 30, 2002. The
portfolio  growth  for the  current  nine  month  period  was  primarily  in the
Commercial  Finance and Capital Finance segments.  The Commercial  Finance trend
reflected  both  seasonal  growth and a portfolio  acquisition  in the factoring
business as well as strong  asset-based  lending  growth.  The  Capital  Finance
increase in the operating lease portfolio  included new aircraft  deliveries and
the acquisition of a rail portfolio.  Home equity  receivables  also grew in the
Specialty Finance segment.

      The  accompanying   Management's  Discussion  and  Analysis  of  Financial
Condition and Results of Operations and Quantitative and Qualitative  Disclosure
about Market Risk contain certain  non-GAAP  financial  measures.  See "Non-GAAP
Financial Measurements" for additional information.

Key Business Initiatives and Trends

      During the nine months  ended  September  30, 2003,  we have  restored our
funding  base as evidenced by our  repayment  in full of  previously  drawn bank
lines, our consistent  access to both the commercial paper and term debt markets
and the  significant  lowering of our term debt quality  spreads  (interest rate
cost  over U.S.  treasury  rates)  to  pre-2002  levels.  Our  funding  base was
disrupted in 2002  following our former  parent's  announcement  of its break-up
plan and intent to sell CIT.

      The past  few  years'  weak  economic  conditions  resulted  in  increased
defaults  and  downward  pressure  on  collateral  values,  particularly  in our
Equipment Finance segment. In response, we intensified our credit and collection
efforts,  selectively  tightened credit underwriting  standards and strengthened
credit  loss  reserves.  We have seen a  significant  improvement  in our credit
metrics over recent quarters.

      A more recent business initiative has been the pursuit of balanced growth,
focusing on core markets served through our strategic businesses.  While organic
growth  has been  modest,  consistent  with the  economic  environment,  we have
supplemented  growth with strategic  portfolio  purchases  where we benefit from
operating leverage  attainable through our existing  platforms.  During the nine
months ended September 30, 2003, we completed the acquisition of Flex Leasing, a
railcar company, and the purchase of a significant factoring portfolio.

      We continue to run off our venture  capital  portfolio as we are no longer
originating  new  investments,  and we  are  exploring  other  more  rapid  exit
opportunities,  including the possible sale of our direct investment  portfolio.
If we were to pursue an  outright  sale,  and  thereby  change  our  disposition
strategy, a sale-related disposition loss is possible.

      Since our IPO in July of 2002, we have readily  accessed the term markets,
issuing an aggregate  $12.6  billion in term debt,  comprised of $6.7 billion in
floating-rate  debt and $5.9 billion in fixed-rate  debt.  These totals  include
$2.0  billion  issued  through a retail note  program,  which was  initiated  in
November 2002.


                                       20


      The funding base disruption in the first half of 2002 resulted in a period
of  increased  cost of funds due to our  borrowing  spreads  being  higher  than
traditionally  experienced.  The  following  table  summarizes  the trend in our
quality  spreads in relation to 5-year  treasuries.  Amounts are in basis points
and represent the average spread during the stated periods:



                                      Three Months Ended                               Years Ended
                           --------------------------------------   --------------------------------------------
                            September 30,  June 30,     March 31,    September 30,  September 30,   December 31,
                                2003         2003         2003           2002           2001            2000
                            -------------  --------     ---------    -------------  -------------   ------------
                                                                                       
Average spread over
  U.S. Treasuries ..........     95           152          215            313            147             154


      On October 27, 2003, we issued $500.0 million of 5-year senior  fixed-rate
notes at 82 basis points over Treasuries.

Net Finance Margin

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



                                                                Quarter Ended             Nine Months Ended
                                                                September 30,               September 30,
                                                          -------------------------   ------------------------
                                                             2003          2002          2003          2002
                                                           ---------     ---------     ---------     ---------
                                                                                         
Finance income.......................................      $   921.2     $ 1,015.2     $ 2,803.6     $ 3,143.8
Interest expense.....................................          326.5         347.8       1,004.3       1,066.3
                                                           ---------     ---------     ---------     ---------
  Net finance income.................................          594.7         667.4       1,799.3       2,077.5
Depreciation on operating lease equipment............          252.4         296.6         804.1         902.5
                                                           ---------     ---------     ---------     ---------
  Net finance margin.................................      $   342.3     $   370.8     $   995.2     $ 1,175.0
                                                           =========     =========     =========     =========
Average earning assets ("AEA").......................      $36,072.4     $33,959.4     $35,559.0     $34,674.5
                                                           =========     =========     =========     =========
As a % of AEA:
Finance income.......................................          10.22%        11.96%        10.51%        12.09%
Interest expense.....................................           3.62%         4.10%         3.76%         4.10%
                                                           ---------     ---------     ---------     ---------
  Net finance income.................................           6.60%         7.86%         6.75%         7.99%
Depreciation on operating lease equipment............           2.80%         3.49%         3.02%         3.47%
                                                           ---------     ---------     ---------     ---------
Net finance margin as a % of AEA.....................           3.80%         4.37%         3.73%         4.52%
                                                           =========     =========     =========     =========


      The debt quality spread factors discussed  previously in the "Key Business
Initiatives and Trends" section  adversely  impacted interest margin in relation
to 2002 periods.  Finance income  reflected the decline in market interest rates
from  September  2002.  However,  interest  expense  did not fully  reflect  the
corresponding  decrease in market  interest  rates,  because the decrease was in
part offset by the draw down of bank facilities to pay off commercial paper, the
issuance of term debt at wider credit  spreads and higher  levels of excess cash
maintained for liquidity purposes.

      Finance income (interest on loans and lease rentals) for the quarter ended
September  30, 2003  decreased  $94.0  million from the same quarter in 2002 and
decreased  $340.2 million for the nine months ended  September 30, 2003 from the
prior year nine months.  AEA for the quarter and nine months ended September 30,
2003 increased 6.2% and 2.6% from the prior year periods. However, the impact of
lower  market  interest  rates more than offset the higher  asset  levels in the
finance income  comparisons with 2002. This trend was also reflected in an 11.6%
reduction in operating  lease rentals to $364.3  million from $412.3 million for
the prior year quarter and an 11.4% reduction to $1,123.7  million from $1,268.9
million for the prior year nine months,  primarily  resulting from lower rentals
on the aerospace portfolio due to the commercial airline industry downturn.

      Interest  expense as a percentage of AEA averaged  3.62% and 3.76% for the
quarter and nine months ended September 30, 2003, compared to 4.10% for both the
quarter and nine months ended  September 30, 2002,  as the  favorable  impact of
lower market interest rates was partially offset by wider borrowing  spreads and
the  higher  cost of  non-callable  funding  done  following  the  funding  base
disruption  in the  first  half of  2002.  As a result  of  adopting  SFAS  150,
preferred capital securities dividends are reflected in interest expense for the
quarter ended September 30, 2003. For prior periods, these amounts are reflected
as  minority  interest  net of tax.  This change  reduces net finance  margin by
approximately  5 basis points in relation to prior  periods.  At  September  30,
2003, CIT had


                                       21


$4.9 billion in outstanding  commercial  paper and bank facilities were undrawn.
At December 31, 2002 and September 30, 2002,  commercial  paper  outstanding was
$5.0 billion and $4.7 billion,  respectively,  while drawn commercial bank lines
were $2.1 billion and $4.0 billion, respectively.

      The operating lease equipment  portfolio was $7.5 billion at September 30,
2003,  compared  to $6.7  billion  at  December  31,  2002 and $6.6  billion  at
September 30, 2002. The following  table  summarizes the total  operating  lease
portfolio by segment ($ in millions).



                                 September 30, 2003  December 31, 2002 September 30, 2002
                                 ------------------  ----------------- ------------------
                                                                    
Capital Finance................        $5,859.4           $4,719.9           $4,388.9
Specialty Finance..............         1,043.4            1,257.3            1,353.2
Equipment Finance..............           461.7              668.3              765.8
Structured Finance.............           120.8               59.1               59.5
                                       --------           --------           --------
Total..........................        $7,485.3           $6,704.6           $6,567.4
                                       ========           ========           ========


      The  increase in the Capital  Finance  operating  lease  portfolio in 2003
largely reflects the deliveries of new commercial aircraft, while the decline in
the Specialty  Finance  operating lease  portfolio  reflects the continued trend
toward finance leases and loans in the technology portfolio.

      The table below summarizes operating lease margin, both in amount and as a
percentage of average operating lease equipment for the respective periods ($ in
millions).



                                                                  Quarter Ended            Nine Months Ended
                                                                  September 30,              September 30,
                                                            -----------------------     ----------------------
                                                               2003           2002        2003          2002
                                                            --------       --------     --------      --------
                                                                                          
Rental income.............................................  $  364.3       $  412.3     $1,123.7      $1,268.9
Depreciation expense......................................     252.4          296.6        804.1         902.5
                                                            --------       --------     --------      --------
  Operating lease margin..................................  $  111.9       $  115.7     $  319.6      $  366.4
                                                            ========       ========     ========      ========
Average operating lease equipment.........................  $7,458.9       $6,615.0     $7,151.1      $6,597.3
                                                            ========       ========     ========      ========
As a % of Average Operating Lease Equipment:
Rental income.............................................      19.5%          24.9%        21.0%         25.6%
Depreciation expense......................................      13.5%          17.9%        15.0%         18.2%
                                                            --------       --------     --------      --------
  Operating lease margin..................................       6.0%           7.0%         6.0%          7.4%
                                                            ========       ========     ========      ========


      The decline in both  operating  lease  margin and its  components  for the
quarter and nine months  ended  September  30, 2003 from the prior year  periods
reflects  a greater  proportion  of  aircraft  and rail  assets  with an average
depreciable life of 25 and 40 years,  respectively,  compared to  smaller-ticket
asset lives generally of 3 years in the Specialty  Finance and Equipment Finance
portfolios,  as well as lower  rentals  on the  aerospace  portfolio  due to the
commercial airline industry downturn.

Net Finance Margin After Provision for Credit Losses

      The net finance  margin after  provision for credit losses (risk  adjusted
interest  margin)  for the  quarter and nine  months  ended  September  30, 2003
increased  by $11.3  million  and $209.1  million to $259.4  million  and $708.7
million from $248.1  million and $499.6  million for the  comparable  periods in
2002.  These amounts  equated to risk  adjusted  margins of 2.88% and 2.92% as a
percentage of AEA for the quarters ended  September 30, 2003 and 2002, and 2.66%
and 1.92% for the nine months ended  September  30, 2003 and 2002.  The improved
risk adjusted  margin in 2003 for the nine months largely  reflect the impact of
specific reserving actions in 2002 relating to the telecommunications  portfolio
and Argentine  exposures.  These reserving actions totaled $335.0 million (1.29%
as a percentage of AEA) for the nine months ended September 30, 2002.

      The  positive  impact on risk  adjusted  margin,  before  the  benefit  of
refinancing at better rates,  due to fair value  adjustments to mark receivables
and debt to  market  remaining  from the  Tyco  acquisition  was 15 and 47 basis
points for the quarters  ended  September 30, 2003 and 2002, and 16 and 44 basis
points for the nine months ended September 30, 2003 and 2002.


                                       22


      In  conjunction  with  the  June  2001  acquisition-related   fresh  start
accounting,  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.  These  discounts  are being  accreted into
income as the portfolios liquidate.  The positive impact on risk-adjusted margin
due to purchase  accounting  fair value  adjustments  related to the liquidating
portfolios was one and 16 basis points for the quarters ended September 30, 2003
and 2002 and was three  basis  points and 10 basis  points  for the nine  months
ended September 30, 2003 and 2002.

Other Revenue

      Other revenue for the quarter ended  September 30, 2003  increased 5.6% to
$220.7 million from $209.0 million during the quarter ended  September 30, 2002,
and for the nine  months  ended  September  30,  2003  decreased  1.9% to $673.8
million from $687.2  million in the prior year period.  Other  revenue was 2.45%
and 2.46% as a percentage of AEA for the quarters  ended  September 30, 2003 and
2002 and 2.53% and 2.64% for the nine months ended  September 30, 2003 and 2002.
The  components  of other  revenue  are set forth in the  following  table ($ in
millions):



                                                                  Quarter Ended            Nine Months Ended
                                                                  September 30,              September 30,
                                                              ---------------------       --------------------
                                                               2003           2002        2003          2002
                                                              ------         ------       ------        ------
                                                                                            
Fees and other income.....................................    $151.5         $165.7       $430.8        $471.0
Factoring commissions.....................................      47.6           47.7        139.3         127.2
Gains on securitizations..................................      18.3           29.2         82.8         121.0
Gains on sales of leasing equipment.......................      14.6            2.6         48.7          10.9
(Losses) on venture capital investments...................     (11.3)         (36.2)       (27.8)        (42.9)
                                                              ------         ------       ------        ------
Total Other Revenue.......................................    $220.7         $209.0       $673.8        $687.2
                                                              ======         ======       ======        ======


      The increase in total other  revenue for the quarter was driven  primarily
by reduced venture  capital losses from 2002 levels.  The prior year quarter and
nine months included an unusually high level of  securitization  activity due to
the disruption to our historical  funding sources and the use of  securitization
as an alternate  funding source.  Gains from the sales of leasing equipment were
up primarily in the Specialty Finance and Equipment Finance segments, reflecting
end-of-lease equipment sales of small to mid-ticket equipment.  The reduction in
fees and other income  reflected the  continuation  of lower net  securitization
revenues in relation to the prior year, while the  year-to-date  amount for 2003
included  a modest  loss on the sale of a portion of the  liquidating  franchise
finance portfolio.  The trend in fees and other income also reflects a migration
in new volume away from  larger-ticket,  DIP  (debtor-in-possession)  financings
back  to  more  traditional,   smaller  working  capital   asset-based   lending
facilities.

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



                                                                  Quarter Ended            Nine Months Ended
                                                                  September 30,              September 30,
                                                            -----------------------     ----------------------
                                                               2003           2002        2003          2002
                                                               ----           ----        ----          ----
                                                                                          
Volume securitized(1).....................................  $1,317.5         $980.0     $4,207.4      $6,444.6
Gains.....................................................     $18.3          $29.2        $82.8        $121.0
Gains as a percentage of volume securitized...............      1.39%          2.98%        1.97%         1.88%

--------------------------------------------------------------------------------
(1) Excludes  short-term  trade  receivables  securitized  in 2002 for liquidity
    purposes at no gain.

      The lower  gain as a  percentage  of volume  securitized  for the  current
quarter  reflects the sale of  equipment  assets from a conduit to a public term
structure (at no gain), the sale of a higher proportion of lower spread, shorter
duration assets and no consumer home equity loan sales this quarter. The greater
year to date volume  securitized  in 2002 was done primarily to meet funding and
liquidity needs.


                                       23


      The key assumptions  used in measuring the retained  interests at the date
of  securitization  for  transactions  completed  during the nine  months  ended
September 30, 2003 were as follows:



                                                                    Commercial Equipment             Consumer
                                                                ---------------------------          --------
                                                                Specialty          Equipment           Home
                                                                 Finance            Finance           Equity
                                                                 -------            -------           ------
                                                                                             
Weighted average prepayment speed.........................       32.21%             12.54%            24.40%
Weighted average expected credit losses...................        0.48%              1.12%             0.90%
Weighted average discount rate............................       10.08%              9.00%            13.00%
Weighted average life (in years)..........................        1.29               1.88              3.51


 Key assumptions used in calculating the fair value of the retained interests in
securitized assets by product type at September 30, 2003 were as follows:



                                                              Commercial Equipment            Consumer
                                                             ---------------------   ---------------------------
                                                                                     Manufactured
                                                             Specialty   Equipment     Housing &    Recreational
                                                              Finance     Finance     Home Equity  Vehicle & Boat
                                                              -------     -------     -----------  --------------
                                                                                           
Weighted average prepayment speed.........................    24.03%      12.02%        26.12%         17.67%
Weighted average expected credit losses...................     0.98%       1.60%         1.21%          0.75%
Weighted average discount rate............................     9.05%      10.07%        13.08%         14.18%
Weighted average life (in years)..........................     1.15        1.43          3.10           3.17


      The Specialty Finance -- commercial securitized assets include receivables
originated to consumers through DFS.

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 the  efficiency of expenses in relation to loans and
leases we collect and service  represented by our managed asset base. The AMA is
used to better reflect the relationship of expenses recognized in the Statements
of Income with the asset sources that drive expenses ($ in millions).



                                                                  Quarter Ended            Nine Months Ended
                                                                  September 30,              September 30,
                                                              ----------------------      --------------------
                                                               2003           2002        2003          2002
                                                              ------         ------       ------        ------
                                                                                              
Efficiency ratio(1).......................................      42.2%          40.6%        41.8%         37.2%
Salaries and general operating expenses as a
  percentage of AMA(2)....................................      2.06%          2.08%        2.04%         2.01%
Salaries and general operating expenses...................    $237.5         $235.6       $698.3        $692.9

--------------------------------------------------------------------------------
(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.

      Salaries and general  operating  expenses for the quarter ended  September
30,  2003  increased  0.8%  from the  prior  year  quarter  to  $237.5  million,
reflecting increased incentive compensation and other employee benefit expenses,
which were in part offset by lower collection and repossession expenses. For the
nine months ended September 30, 2003,  salaries and general  operating  expenses
increased 0.8% from the prior year period to $698.3 million,  reflecting similar
trends to the quarterly  expense  comparisons.  Personnel was 5,780 at September
30, 2003, compared to 5,845 last quarter and 5,850 at September 30, 2002.

      The  deterioration  in  efficiency  ratios for the quarter and nine months
ended  September  30,  2003 to 42.2%  and  41.8%  from  40.6%  and 37.2% for the
comparable periods of 2002 is the result of lower net finance margin in 2003. We
continue  to  target  an  efficiency  ratio in the mid 30% area and an AMA ratio
under  2.00%,  as we have some  existing  capacity  to increase  assets  without
additional expense.


                                       24


      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.

 Provision for Credit Losses

      The provision  for credit losses was $82.9 million and $286.5  million for
the quarter and nine months ended  September 30, 2003 versus $122.7  million and
$675.4  million for the same  periods last year.  The nine month 2002  provision
included specific reserving actions related to our telecommunications  portfolio
($200.0 million) and the economic reforms instituted by the Argentine government
that resulted in the mandatory conversion of dollar-denominated receivables into
the peso ($135.0 million).

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



                                                            For the Quarter Ended     For the nine Months Ended
                                                         --------------------------- ---------------------------
                                                         September 30, September 30, September 30, September 30,
                                                             2003          2002          2003          2002
                                                         ------------- ------------- ------------- -------------
                                                                                          
Balance beginning of period............................      $754.9        $808.9      $760.8         $496.4
                                                             ------        ------      ------         ------
Provision for credit losses............................        82.9         122.7       286.5          340.4
Provision for credit losses -- telecommunications......          --            --          --          200.0
Provision for credit losses -- Argentine exposure......          --            --          --          135.0
Reserves relating to dispositions, acquisitions, other.         5.3         (12.8)       18.5          (14.6)
                                                             ------        ------      ------         ------
  Additions to reserve for credit losses...............        88.2         109.9       305.0          660.8
                                                             ------        ------      ------         ------
Net credit losses:
Specialty Finance -- commercial........................        25.6          18.8        80.5           59.6
Equipment Finance......................................        23.1          70.7        99.8          196.7
Capital Finance........................................          --           0.1         1.8            0.1
Commercial Finance.....................................        19.7          22.4        57.6           71.6
Structured Finance.....................................         9.2          18.4        31.6           18.5
Specialty Finance -- consumer..........................        13.0          10.6        42.0           32.9
                                                             ------        ------      ------         ------
  Total net credit losses..............................        90.6         141.0       313.3          379.4
                                                             ------        ------      ------         ------
Balance end of period..................................      $752.5        $777.8      $752.5         $777.8
                                                             ======        ======      ======         ======
Reserve for credit losses as a percentage of finance
  Receivables(1).......................................                                  2.48%          2.73%
                                                                                       ======         ======
Reserve for credit losses as a percentage of past due
  receivables (sixty days or more)(1)..................                                  87.2%          72.7%
                                                                                       ======         ======
Reserve for credit losses as a percentage of
  non-performing assets(1).............................                                  86.8%          68.2%
                                                                                       ======         ======

--------------------------------------------------------------------------------
(1)   The reserve for credit losses  excluding  the impact of  telecommunication
      and Argentine reserves as a percentage of finance receivables was 1.69% at
      September 30, 2003 and 1.72% at September 30, 2002. The reserve for credit
      losses excluding the impact of telecommunication and Argentine reserves as
      a percentage  of past due  receivables  (sixty days or more) was 62.0% and
      45.3% at September 30, 2003 and 2002, respectively. The reserve for credit
      losses excluding the impact of telecommunication and Argentine reserves as
      a percentage of non-performing assets was 64.4% and 47.2% at September 30,
      2003 and 2002, respectively.


                                       25


       The tables that follow detail net  charge-offs  for the quarters and nine
months  ended  September  30, 2003 and  September  30, 2002 by segment,  both in
amount and as a  percentage  of average  finance  receivables  on an  annualized
basis. In addition to total amounts, net charge-offs relating to the liquidating
and telecommunications  portfolios are presented to provide enhanced analysis ($
in millions):




                                                                 Quarter Ended September 30, 2003
                                                     ----------------------------------------------------------
                                                                              Before
                                                                          Liquidating and      Liquidating and
                                                          Total         Telecommunications   Telecommunications
                                                     --------------     ------------------   ------------------
                                                                                     
Specialty Finance-- commercial ..................    $25.6    1.47%        $25.2   1.45%      $ 0.4    228.57%
Equipment Finance ...............................     23.1    1.52%         18.1   1.26%        5.0      6.53%
Capital Finance .................................       --      --            --     --          --        --
Commercial Finance ..............................     19.7    0.84%         17.7   0.75%        2.0     66.12%
Structured Finance ..............................      9.2    1.28%           --     --         9.2      6.01%
                                                     -----                 -----              -----
   Total Commercial Segments ....................     77.6    1.17%         61.0   0.95%       16.6      7.13%
Specialty Finance-- consumer ....................     13.0    1.80%          6.6   1.26%        6.4      3.22%
                                                     -----                 -----              -----
   Total ........................................    $90.6    1.23%        $67.6   0.98%      $23.0      5.33%
                                                     =====                 =====              =====




                                                                 Quarter Ended September 30, 2002
                                                    -----------------------------------------------------------
                                                                              Before
                                                                          Liquidating and      Liquidating and
                                                          Total         Telecommunications   Telecommunications
                                                    ---------------     ------------------   ------------------
                                                                                      
Specialty Finance-- commercial ..................   $ 18.8    1.22%       $ 17.6   1.15%      $ 1.2     10.74%
Equipment Finance ...............................     70.7    3.71%         59.1   3.52%       11.6      5.13%
Capital Finance .................................      0.1    0.03%          0.1   0.03%         --        --
Commercial Finance ..............................     22.4    1.06%         22.4   1.06%         --        --
Structured Finance ..............................     18.4    2.78%           --     --        18.4     10.67%
                                                    ------                ------              -----
   Total Commercial Segments ....................    130.4    1.98%         99.2   1.60%       31.2      7.62%
Specialty Finance-- consumer ....................     10.6    2.17%          6.2   2.27%        4.4      2.05%
                                                    ------                ------              -----
Total ...........................................   $141.0    1.99%       $105.4   1.63%      $35.6      5.70%
                                                    ======                ======              =====




                                                               Nine Months Ended September 30, 2003
                                                    -----------------------------------------------------------
                                                                              Before
                                                                          Liquidating and      Liquidating and
                                                          Total         Telecommunications   Telecommunications
                                                    ---------------     ------------------   ------------------
                                                                                      
Specialty Finance-- commercial ..................   $ 80.5    1.51%       $ 79.7   1.49%      $ 0.8     15.92%
Equipment Finance ...............................     99.8    2.14%         73.9   1.70%       25.9      8.34%
Capital Finance .................................      1.8    0.19%          1.8   0.19%         --        --
Commercial Finance ..............................     57.6    0.86%         52.9   0.80%        4.7     45.41%
Structured Finance ..............................     31.6    1.45%           --     --        31.6      6.57%
                                                    ------                ------              -----
   Total Commercial Segments ....................    271.3    1.37%        208.3   1.10%       63.0      7.81%
Specialty Finance-- consumer ....................     42.0    2.23%         23.1   1.81%       18.9      3.10%
                                                    ------                ------              -----
   Total ........................................   $313.3    1.45%       $231.4   1.14%      $81.9      5.79%
                                                    ======                ======              =====




                                                               Nine Months Ended September 30, 2002
                                                    -----------------------------------------------------------
                                                                              Before
                                                                          Liquidating and      Liquidating and
                                                          Total         Telecommunications   Telecommunications
                                                    ---------------     ------------------   ------------------
                                                                                       
Specialty Finance-- commercial ..................   $ 59.6    1.28%       $ 53.7   1.18%      $ 5.9      6.51%
Equipment Finance ...............................    196.7    3.08%        142.0   2.54%       54.7      6.77%
Capital Finance .................................      0.1    0.01%          0.1   0.01%         --        --
Commercial Finance ..............................     71.6    1.28%         71.6   1.28%         --        --
Structured Finance ..............................     18.5    0.97%          0.1   0.01%       18.4      3.45%
                                                    ------                ------              -----
   Total Commercial Segments ....................    346.5    1.76%        267.5   1.46%       79.0      5.51%
Specialty Finance-- consumer ....................     32.9    1.96%         18.7   1.62%       14.2      2.69%
                                                    ------                ------              -----
Total ...........................................   $379.4    1.77%       $286.2   1.47%      $93.2      4.75%
                                                    ======                ======              =====



                                       26


      Certain small  business loans and leases were  transferred  from Equipment
Finance to Specialty  Finance -- commercial during the March 2003 quarter (prior
period amounts have not been restated).  Charge-offs  related to the transferred
portfolios  during the quarter and nine months ended  September 30, 2003 totaled
$4.0  million and $22.0  million,  respectively,  versus $4.7  million and $13.5
million   during  the  quarter  and  nine  months  ended   September  30,  2002,
respectively.   Excluding  the  impact  of  the  transfers,   Equipment  Finance
charge-offs  were  down  significantly  from  both  prior  year  periods,  while
Specialty  Finance -- commercial  charge-offs were modestly above the prior year
for the quarter and slightly below 2002 for the nine months.

Reserve for Credit Losses

      The  reserve  for  credit  losses  was  $752.5  million  (2.48% of finance
receivables)  at  September  30,  2003  compared  to $760.8  million  (2.75%) at
December 31, 2002 and $777.8 million (2.73%) at September 30, 2002. The decrease
from both December 31, 2002 and  September  30, 2002 reflects  telecommunication
charge-offs  which  were  applied  to the  specific  telecommunications  reserve
established in 2002,  partially  offset by reserves  associated with loan growth
during the respective  periods. In 2002, we took two specific reserving actions.
First, in light of the continued deterioration in the telecommunications sector,
particularly  with respect to our competitive  local exchange  carrier  ("CLEC")
portfolio,  we added $200.0  million to the reserve for credit losses as at 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.  The current  balances for the specific
reserves are detailed below.

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



                                                  At September 30, 2003  At December 31, 2002  At September 30, 2002
                                                  ---------------------  --------------------  --------------------
                                                    Amount      %          Amount     %          Amount     %
                                                    ------   ---------     -------- --------     -------  -------
                                                                                         
Finance receivables ...........................     $500.9    1.69%         $472.2   1.77%        $473.7   1.72%
Telecommunications ............................      116.6   19.43%(1)       153.6  22.40%(1)      169.1  24.77%(1)
Argentina .....................................      135.0   83.64%(2)       135.0  73.11%(2)      135.0  71.85%(2)
                                                    ------                  ------                ------
Total .........................................     $752.5    2.48%         $760.8   2.75%        $777.8   2.73%
                                                    ======                  ======                ======

--------------------------------------------------------------------------------
(1)  Percentages of telecommunications portfolio finance receivables.

(2)  Percentages of finance receivables in Argentina.

      The reserve for credit losses, exclusive of the specific telecommunication
and  Argentine  reserves,  increased  in  amount  during  2003 due to  increased
receivables but declined in percentage,  reflecting improved credit metrics. The
reserve includes specific amounts relating to SFAS 114 impaired loans (excluding
telecommunications  and  Argentina)  of $56.3  million at  September  30,  2003,
compared to $52.9 million at December 31, 2002,  and $111.7 million at September
30, 2002.  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 $623.6  million and $216.7  million at September 30, 2003,
compared to $710.1  million and $262.3  million at December  31, 2002 and $707.2
million  and $275.2  million  at  September  30,  2002.  Telecommunications  net
charge-offs were $11.2 million and $36.3 million for the quarter and nine months
ended September 30, 2003, respectively.  Management believes, based on a current
assessment of the portfolio, that the reserve is adequate at September 30, 2003.

      We established a $135 million reserve for Argentine  exposure in the first
half of 2002 to reflect the  geopolitical  risks  associated with collecting our
peso-based assets and repatriating them into U.S. dollars that resulted from the
Argentine government instituting certain economic reforms. When established, the
reserve was about two-thirds of our combined  currency and credit  exposure.  We
have made progress in collecting  these balances and the portfolio's  underlying
credit profile continues to perform as expected.  Discussions with the Argentine
government  are ongoing and additional  recovery  efforts  continue.  Management
expects  to seek  substantial  resolution  of  collateral  efforts in the coming
quarters  and  resulting  charge-offs  are  expected to be recorded  against the
reserve as these  activities  are  concluded.  Management  believes,  based on a
current  assessment of the portfolio,  that the reserve is adequate at September
30, 2003.


                                       27


      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 credit metrics, including past due and non-performing accounts, or
other events affecting specific obligors or industries may necessitate additions
or reductions to the consolidated reserve for credit losses.

Past Due and Non-Performing Assets

      The following table sets forth certain information concerning our past due
(sixty  days  or  more)  and  non-performing   assets  (finance  receivables  on
non-accrual status and assets received in satisfaction of loans) and the related
percentages of finance  receivables at September 30, 2003, December 31, 2002 and
September 30, 2002 ($ in millions):



                                                    At September 30,     At December 31,     At September 30,
                                                          2003                2002                 2002
                                                    -----------------  ------------------   ------------------
                                                                                      
Finance receivables, past due 60 days or more:
   Specialty Finance -- commercial ..............   $245.9    3.60%     $  182.9   3.07%     $  215.4   3.54%
   Equipment Finance ............................    206.3    3.35%        359.3   4.88%        350.7   4.66%
   Capital Finance ..............................     60.5    5.00%         85.5   6.40%        101.5   6.86%
   Commercial Finance ...........................    130.2    1.32%        172.3   2.14%        209.4   2.35%
   Structured Finance ...........................     82.8    2.83%         67.6   2.31%         65.8   2.45%
                                                    ------              --------             --------
   Total Commercial Segments ....................    725.7    2.69%        867.6   3.39%        942.8   3.53%
   Specialty Finance -- consumer ................    137.7    4.12%        133.7   6.66%        127.2   7.20%
                                                    ------              --------             --------
   Total ........................................   $863.4    2.85%     $1,001.3   3.63%     $1,070.0   3.76%
                                                    ======              ========             ========
Non-performing assets:
   Specialty Finance -- commercial ..............   $132.7    1.94%      $  98.2   1.65%     $  103.1   1.69%
   Equipment Finance ............................    283.7    4.61%        403.5   5.48%        470.0   6.25%
   Capital Finance ..............................     54.7    4.52%        154.9  11.60%         78.5   5.31%
   Commercial Finance ...........................    108.0    1.09%        136.2   1.69%        176.1   1.98%
   Structured Finance ...........................    141.6    4.84%        151.6   5.19%        172.2   6.40%
                                                    ------              --------             --------
   Total Commercial Segments ....................    720.7    2.67%        944.4   3.69%        999.9   3.75%
   Specialty Finance -- consumer ................    146.1    4.37%        141.4   7.04%        139.9   7.92%
                                                    ------              --------             --------
   Total ........................................   $866.8    2.86%     $1,085.8   3.93%     $1,139.8   4.01%
                                                    ======              ========             ========
Non-accrual loans ...............................   $732.2              $  946.4             $  976.6
Repossessed assets ..............................    134.6                 139.4                163.2
                                                    ------              --------             --------
   Total non-performing assets ..................   $866.8              $1,085.8             $1,139.8
                                                    ======              ========             ========


      Driven largely by across the board  improvement  in the Equipment  Finance
segment,  past due loans continued a declining  trend,  down $137.9 million from
December 31, 2002,  ending the quarter at 2.85% of finance  receivables,  versus
3.63% and 3.76% at December 31, 2002 and September 30, 2002. The fluctuations in
the Equipment Finance and Specialty Finance -- commercial  segments also reflect
the  previously  mentioned  transfer in March 2003 of small  business  loans and
leases from  Equipment  Finance to  Specialty  Finance --  commercial.  Past due
accounts related to these transferred  portfolios  approximated $75 million, $79
million and $65 million at September  30, 2003,  December 31, 2002 and September
30 2002, respectively. Prior periods were not restated to reflect the March 2003
transfer. Excluding the impact of the transferred accounts, past due accounts in
Equipment  Finance  and  Specialty  Finance  --  commercial  were each below the
December and September 2002 amounts.  The Commercial  Finance  decline from both
the  2002  periods  was due to  improvements  in both  the  Commercial  Services
(factoring) and Business  Credit  (asset-based  lending) units.  Capital Finance
delinquency  improved $38.7 million during the current  quarter,  largely due to
the  conversion of a  non-performing  Air Canada  leveraged  lease ($50 million,
after  purchase of  non-recourse  debt) to a  performing  operating  lease.  The
improvement  in Specialty  Finance -- consumer  deliquency  as a  percentage  of
finance receivables  reflects growth in the owned portfolio during 2003. This is
in  contrast  to 2002 when  consumer  assets were  securitized  to meet  funding
requirements.

      Similar to past due loans,  non-performing  assets declined for the fourth
consecutive quarter at September 30, 2003, with the improvement primarily in the
Equipment  Finance and Capital Finance  segments.  The Capital Finance reduction
from December 31, 2002 reflects the conversion of United Airlines receivables to
short-term operating leases and the Air Canada transaction discussed above.


                                       28


      Managed past due loans, which also include securitized loans, decreased to
2.95% of managed  financial  assets  (managed  assets less operating  leases and
venture  capital  investments)  at  September  30,  2003 from 3.55% and 3.78% at
December 31, 2002 and  September 30, 2002,  respectively,  as shown in the table
below ($ in millions):



                                      September 30, 2003  December 31, 2002  September 30, 2002
                                      ------------------  -----------------  ------------------
                                                                         
Managed Financial Assets, past due
  60 days or more:
  Specialty Finance -- commercial     $  332.4    2.90%    $  265.1   2.62%   $  303.3     2.94%
  Equipment Finance                      332.7    3.40%       545.7   4.78%      609.1     5.07%
  Capital Finance                         60.5    5.00%        85.5   6.40%      101.5     6.86%
  Commercial Finance                     130.1    1.32%       172.3   2.14%      209.4     2.35%
  Structured Finance                      82.8    2.83%        67.6   2.31%       65.8     2.45%
                                      --------             --------           --------
  Total Commercial                       938.5    2.66%     1,136.2   3.36%    1,289.1     3.64%
  Specialty Finance -- consumer          283.9    4.54%       259.4   4.71%      249.5     4.71%
                                      --------             --------           --------
  Total                               $1,222.4    2.95%    $1,395.6   3.55%   $1,538.6     3.78%
                                      ========             ========           ========


      The managed past due table above includes the impact of securitized assets
in the Equipment Finance and Specialty Finance segments, and reflects the trends
discussed previously in the owned delinquency section.

Income Taxes

      The  effective  tax rate was 39.0% for both the  quarter  and nine  months
ended  September 30, 2003,  and 38.0% and (3.9)% for the  respective  prior year
periods.  The provision for income taxes totaled $94.6 million and $84.1 million
for the quarters  ended  September 30, 2003 and 2002,  respectively,  and $266.8
million and $255.8 million for the comparable prior year nine month periods. The
effective  tax rate for the prior year nine months,  excluding the impact of TCH
and the non-cash goodwill impairment charge, was 38.1%.

      As of September 30, 2003,  we had  approximately  $1,559.0  million of tax
loss carryforwards,  primarily related to U.S. federal and state  jurisdictions.
The federal loss carryforwards  expire at various dates through 2021. These loss
carryforwards  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, we have made substantial progress in rebuilding our tax functions,
including hiring and training personnel,  and rebuilding systems,  processes and
controls.

Results by Business Segment

      Our segment  reporting  has been  modified and prior  periods  restated to
reflect Equipment Finance and Capital Finance as separate segments.  Previously,
these two strategic business units were combined as the Equipment  Financing and
Leasing segment. This presentation is intended to facilitate the analysis of our
results for our financial statement users.


                                       29


      The table  that  follows  summarizes  selected  financial  information  by
business  segment,  based upon a fixed leverage ratio across  business  units, a
39.0% and 38.0%  effective  tax rate for 2003 and 2002  across the units and the
allocation  of  most  corporate  expenses.   Certain  allocation  methodologies,
including  those related to funding  costs,  were changed  resulting in relative
performance variances as described below ($ in millions):




                                                             Quarter Ended             Nine Months Ended
                                                      --------------------------- ---------------------------
                                                      September 30, September 30, September 30, September 30,
                                                          2003          2002          2003          2002
                                                      ------------- ------------- ------------- -------------
                                                                                      
Net Income (Loss)
Specialty Finance...................................    $ 71.6         $ 68.9       $186.8       $   252.7
Equipment Finance...................................       9.0            7.6         27.6            79.2
Capital Finance.....................................      12.3           20.4         29.1            58.4
Commercial Finance..................................      53.8           51.4        163.5           146.3
Structured Finance..................................      17.1           16.4         44.0            48.3
                                                        ------         ------       ------       ---------
  Total Segments....................................     163.8          164.7        451.0           584.9
Corporate, including certain charges................     (16.0)         (30.0)       (39.3)       (7,467.7)
                                                        ------         ------       ------       ---------
  Total.............................................    $147.8         $134.7       $411.7       $(6,882.8)
                                                        ======         ======       ======       =========
Return on AEA
Specialty Finance...................................      2.34%          2.66%        2.04%           3.05%
Equipment Finance...................................      0.53%          0.35%        0.53%           1.10%
Capital Finance.....................................      0.69%          1.38%        0.58%           1.39%
Commercial Finance..................................      3.22%          3.41%        3.40%           3.58%
Structured Finance..................................      2.29%          2.42%        1.96%           2.44%
  Total Segments....................................      1.83%          1.96%        1.71%           2.27%
Corporate, including certain charges................     (0.19)%        (0.37)%      (0.17)%        (28.74)%
  Total.............................................      1.64%          1.59%        1.54%         (26.47)%


      The  improvement  in the  return on AEA over the prior  year  periods  was
primarily the result of certain  corporate charges described below. On a segment
basis, results reflect the dampened but improving returns in Capital Finance and
Equipment Finance,  continued strong performance by Commercial Finance,  reduced
securitization  gains in Specialty Finance and the allocation to the segments of
higher corporate borrowing costs in 2003 as described below.

      Corporate  included the following items in the nine months ended September
30, 2002: (1) goodwill impairment of $6,511 million,  (2) TCH expenses of $601.1
million  ($668.6  million after tax),  (3) specific loan loss reserves of $335.0
million ($207.7 million after tax) relating to  telecommunication  exposures and
economic  reforms  instituted by the Argentine  government which resulted in the
mandatory  conversion  of  dollar-denominated  receivables  into  pesos  and (4)
venture capital  operating losses of $66.8 million ($41.4 million after tax) and
$43.3  million  ($26.9  million after tax) for the nine months and quarter ended
September 30, 2002.  Corporate  included $57.3 million ($35.0 million after tax)
and $21.2 million ($12.9 million after tax) of venture capital  operating losses
for the nine months and quarter ended September 30, 2003. Excluding these items,
unallocated corporate expenses and funding costs after tax were $3.1 million and
$3.1 million during the quarters ended September 30, 2003 and 2002 and were $4.3
million and $38.3 million for the nine months ended September 30, 2003 and 2002,
respectively,  reflecting the change in borrowing  cost  allocation as explained
below.

      For the first  nine  months of 2003,  return  on AEA was down  across  all
segments in relation to the 2002 period reflecting margin  compression offset in
part by lower charge-offs from the year ago levels.  The business segments' risk
adjusted  margins for the quarter and nine months ended  September 30, 2003 were
further  dampened by the  allocation  (from  Corporate) of additional  borrowing
costs  stemming  from the 2002  disruption  to the  Company's  funding  base and
enhanced  liquidity levels.  These additional costs have had a greater impact in
2003 in that they have  been  allocated  to the  units  whereas  the  additional
borrowing and liquidity costs were included in Corporate in 2002.

      The unfavorable variance in Equipment Finance reflected reduced returns in
construction  and  industrial,  while Capital  Finance  included lower aerospace
profitability. In addition to lower risk adjusted margins, the Specialty Finance
comparisons  with the prior  year  reflected  higher  levels  of  securitization
activity  during the prior


                                       30


year done primarily for liquidity  purposes.  The profitability for the Business
Credit unit of Commercial  Finance  reflects a migration in new volume away from
larger-ticket,  DIP financings back to more traditional, smaller working capital
asset-based lending facilities.

       During  the  quarter  ended  March 31,  2003,  in order to  better  align
competencies,  we transferred  $1,078.6  million of certain small business loans
and leases, including the small business lending unit, from Equipment Finance to
Specialty Finance -- commercial. Prior periods have not been restated to conform
to this current presentation.

Financing and Leasing Assets

      Owned  financing  and leasing  portfolio  assets  totaled $39.2 billion at
September 30, 2003, up from $35.9 billion at December 31, 2002.  Managed assets,
comprised  of  owned  financing  and  leasing  assets  and  finance  receivables
previously  securitized  that we continue to manage,  totaled  $49.3  billion at
September  30,  2003,  up from $46.4  billion at December  31,  2002.  Excluding
factoring,  total  origination  volume  was up from  2002 by 25% and 13% for the
quarter and the nine months.  The favorable  variances were primarily  driven by
Specialty  Finance.  Growth in our  portfolio  assets for the nine months  ended
September  30, 2003 was most notable in Capital  Finance,  Specialty  Finance --
consumer and Commercial Finance.  The Capital Finance growth was due to a $410.0
million rail operating lease portfolio  acquisition and new aircraft deliveries.
The  Specialty  Finance  increase was in the home equity  portfolio,  reflecting
solid platform origination levels as well as bulk purchases,  and the Commercial
Finance growth was due to the seasonal factoring new business volumes and a $450
million  factoring  acquisition.  During the March 2003  quarter,  certain asset
portfolios  totaling  approximately  $1 billion were  transferred from Equipment
Finance to Specialty Finance -- commercial. The prior period was not restated to
reflect this transfer.

      As of September 30, 2003, the net  investment in leveraged  leases totaled
$1.2  billion,  or 3.9% of finance  receivables.  The major  components  of this
amount are as  follows:  $447  million  in  commercial  aerospace  transactions,
including $217 million of  tax-optimization  leveraged  leases,  which generally
have increased risk for lessors in relation to conventional lease structures due
to  additional  leverage in the  transactions;  $317 million of project  finance
transactions,  primarily  in the power and utility  sector;  and $259 million in
rail transactions.

      Our  non-strategic/liquidating  portfolios  are presented in the following
table ($ in millions):

              Portfolio              September 30, 2003(1)  December 31, 2002(1)
              ---------              ---------------------  --------------------
Manufactured housing..................       $  594                $  624
Franchise finance.....................          144                   322
Owner-operator trucking...............          134                   218
Recreational marine...................           93                   123
Recreational vehicle(2)...............           64                    34
Wholesale inventory finance ..........            2                    18
                                             ------                ------
  Sub total - liquidating portfolios..        1,031                 1,339
Venture capital.......................          314                   335
                                             ------                ------
  Total...............................       $1,345                $1,674
                                             ======                ======
--------------------------------------------------------------------------------
(1) On-balance sheet financing and leasing assets.

(2) The increase is due to repurchase of previously securitized receivables.


                                       31


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



                                                               At             At                 Change
                                                          September 30,  December 31,     ---------------------
                                                              2003           2002            $            %
                                                          -------------  ------------     --------    ---------
                                                                                            
Specialty Finance:
Commercial:
    Finance receivables(1).............................     $ 7,593.6      $ 6,722.4      $  871.2      13.0%
    Operating lease equipment, net.....................       1,043.4        1,257.3        (213.9)    (17.0)%
                                                            ---------      ---------      --------
      Total commercial.................................       8,637.0        7,979.7         657.3       8.2%
                                                            ---------      ---------      --------
Consumer:
   Home equity.........................................       2,443.1        1,292.7       1,150.4      89.0%
   Other...............................................       1,046.8        1,044.4           2.4       0.2%
                                                            ---------      ---------      --------
     Total consumer....................................       3,489.9        2,337.1       1,152.8      49.3%
                                                            ---------      ---------      --------
    Total Specialty Finance Segment....................      12,126.9       10,316.8       1,810.1      17.5%
                                                            ---------      ---------      --------
Equipment Finance:
   Finance receivables(1)..............................       6,270.9        7,476.9      (1,206.0)    (16.1)%
   Operating lease equipment, net......................         461.7          668.3        (206.6)    (30.9)%
                                                            ---------      ---------      --------
   Total Equipment Finance Segment.....................       6,732.6        8,145.2      (1,412.6)    (17.3)%
                                                            ---------      ---------      --------
Capital Finance:
   Finance receivables.................................       1,208.9        1,335.8        (126.9)     (9.5)%
   Operating lease equipment, net......................       5,859.4        4,719.9       1,139.5      24.1%
                                                            ---------      ---------      --------
     Total Capital Finance Segment.....................       7,068.3        6,055.7       1,012.6      16.7%
                                                            ---------      ---------      --------
Commercial Finance:
   Commercial Services.................................       5,697.8        4,392.5       1,305.3      29.7%
   Business Credit.....................................       4,173.3        3,649.1         524.2      14.4%
                                                            ---------      ---------      --------
     Total Commercial Finance Segment..................       9,871.1        8,041.6       1,829.5      22.8%
                                                            ---------      ---------      --------
Structured Finance:
   Finance receivables.................................       2,926.1        2,920.9           5.2       0.2%
   Operating lease equipment, net......................         120.8           59.1          61.7     104.4%
                                                            ---------      ---------      --------
     Total Structured Finance Segment..................       3,046.9        2,980.0          66.9       2.2%
                                                            ---------      ---------      --------
   Sub-total -- Financing and Leasing Assets...........      38,845.8       35,539.3       3,306.5       9.3%
                                                            ---------      ---------      --------
Equity investments(3)..................................         313.9          335.4         (21.5)     (6.4)%
                                                            ---------      ---------      --------
   TOTAL FINANCING AND LEASING
     PORTFOLIO ASSETS..................................      39,159.7       35,874.7       3,285.0       9.2%
                                                            ---------      ---------      --------
Finance receivables securitized:
Specialty Finance -- commercial........................       3,876.8        3,377.4         499.4      14.8%
Specialty Finance -- consumer..........................       2,759.7        3,168.8        (409.1)    (12.9)%
Equipment Finance......................................       3,504.5        3,936.2        (431.7)    (11.0)%
                                                            ---------      ---------      --------
     Total.............................................      10,141.0       10,482.4        (341.4)     (3.3)%
                                                            ---------      ---------      --------
     TOTAL MANAGED ASSETS(2)...........................     $49,300.7      $46,357.1      $2,943.6       6.4%
                                                            =========      =========      ========

--------------------------------------------------------------------------------
(1)  During the  quarter  ended March 31,  2003,  finance  receivables  totaling
     $1,078.6  million  were  transferred  from  Equipment  Finance to Specialty
     Finance -- commercial, principally representing small business loans. Prior
     periods  have not been  restated  to conform to the  current  presentation.
     Specialty   Finance-Commercial  includes  loans  originated  to  consumers,
     primarily  through  DFS,  of  $1,045.3  million  and  $1,420.1  million  at
     September 30, 2003 and December 31, 2002, respectively.

(2)  Managed  assets are  comprised of  financing  and leasing  assets  (finance
     receivables, finance receivables held for sale, operating leases and equity
     investments)  and  finance  receivables   previously  securitized  that  we
     continue to manage.

(3)  Included in other assets in the consolidated balance sheet.


                                       32


Concentrations

      Our ten largest  financing  and leasing  asset  accounts in the  aggregate
represented 5.1% of our total financing and leasing assets at September 30, 2003
(with the largest account  representing less than 1.0%) and 5.0% at December 31,
2002. For both periods,  these accounts were primarily  commercial  accounts and
were secured by equipment, accounts receivable or inventory.

      Our strategic relationships with industry-leading  equipment vendors are a
significant origination channel for our financing and leasing activities.  These
vendor alliances include traditional vendor finance programs, joint ventures and
profit sharing structures. Our vendor programs with Dell, Snap-on and Avaya Inc.
are among our largest  alliances.  The joint  venture  agreements  with Dell and
Snap-on  extend until  October 2005 and January  2007,  respectively.  The Avaya
agreement,  which relates to profit sharing on a CIT direct origination program,
was recently extended through September 2006.

      At September 30, 2003,  our financing and leasing assets  included  $1,438
million,  $1,066 million and $819 million related to the Dell, Snap-on and Avaya
programs, respectively. These amounts include receivables originated directly by
CIT as well as receivables  purchased from joint venture  entities.  Securitized
assets  included  $2,349  million,  $78 million and $702  million from the Dell,
Snap-on and Avaya origination sources,  respectively, at September 30, 2003. Any
significant  reduction in origination  volumes from any of these alliances could
have a material impact on our asset levels. For additional information regarding
certain  of  our  joint  venture  activities,   see  Note  7  --  Related  Party
Transactions.


Geographic Composition

                                                     September 30,  December 31,
                                                         2003           2002
                                                     ------------   ------------
State
   California .............................             10.5%           9.8%
   Texas ..................................              7.5%           7.0%
   New York ...............................              7.4%           7.9%
Total U.S. ................................             79.7%          79.3%
Country
   Canada .................................              5.0%           5.0%
   England ................................              3.0%           3.2%
   Australia ..............................              1.2%           1.3%
   Germany ................................              1.0%           1.1%
   China ..................................             (1)             1.2%
   France .................................             (1)             1.0%
   Brazil .................................             (1)             1.1%
Total Outside U.S. ........................             20.3%          20.7%
--------------------------------------------------------------------------------
(1) The applicable balances are less than 1.0%.

Industry Composition

      At September 30, 2003, our commercial  aerospace  portfolio in the Capital
Finance  business  unit  consisted of financing  and leasing  assets of $4,575.7
million   covering  204  aircraft.   These   aircraft  had  an  average  age  of
approximately 7 years (based on a dollar value weighted average).  The portfolio
was spread over 84 accounts, with the majority placed with major airlines around
the world. The commercial  aerospace portfolio at December 31, 2002 was $4,072.8
million of financing and leasing assets,  which covered 194 aircraft spread over
78  accounts,  with  a  weighted  average  age of  approximately  7  years.  The
commercial aircraft all comply with stage III noise regulations.


                                       33


      The following table summarizes the composition of the commercial aerospace
portfolio as of September 30, 2003 and December 31, 2002 ($ in millions):

                            At September 30, 2003        At December 31, 2002
                          ------------------------     ------------------------
                              Net        Number of         Net         Number of
                          Investment      Planes       Investment       Planes
                          ----------     ---------     ----------      ---------

By Geography:
   Europe ..............   $1,980.9         64          $1,506.5          51
   North America(1) ....    1,065.8         73           1,042.2          75
   Asia Pacific ........      875.1         36             853.6          35
   Latin America .......      529.1         25             595.9          29
   Africa/Middle East ..      124.8          6              74.6           4
                           --------        ---          --------         ---
Total ..................   $4,575.7        204          $4,072.8         194
                           ========        ===          ========         ===
By Manufacturer:
   Boeing ..............   $2,626.5        141          $2,388.1         135
   Airbus ..............    1,928.2         51           1,647.9          42
   Other ...............       21.0         12              36.8          17
                           --------        ---          --------         ---
Total ..................   $4,575.7        204          $4,072.8         194
                           ========        ===          ========         ===
By Body Type(2):
   Narrow ..............   $3,285.9        155          $2,799.4         142
   Intermediate ........      881.0         18             859.2          17
   Wide ................      387.8         19             377.4          18
   Other ...............       21.0         12              36.8          17
                           --------        ---          --------         ---
Total ..................   $4,575.7        204          $4,072.8         194
                           ========        ===          ========         ===
--------------------------------------------------------------------------------
(1)  Comprised of net  investments  of $856.3  million (67 aircraft) in the U.S.
     and $209.5  million (6 aircraft) in Canada at September 30, 2003 and $832.7
     million (69 aircraft) in the U.S. and $209.5 million (6 aircraft) in Canada
     at December 31, 2002.

(2)  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  Douglas DC10 series
     aircraft.

      As of September 30, 2003,  operating leases represented  approximately 83%
of the commercial aerospace portfolio,  with the remainder consisting of capital
leases  (including  leveraged  leases)  and  loans.  Tax-optimization  leveraged
leases, which generally have increased risk in comparison to our other lease and
leveraged lease structures,  were approximately  $216.7 million at September 30,
2003.  Total  leveraged  leases,   including  the  tax  optimization  structures
described  above,  were $446.7  million or 9.8% of the  aerospace  portfolio  at
September 30, 2003. Of the 204 aircraft,  3 are off-lease,  2 of which have been
remarketed with leases pending as of September 30, 2003.

      The regional  aircraft  portfolio at September  30, 2003  consisted of 116
planes and a net  investment  of $310.0  million,  primarily  in the  Structured
Finance segment.  The planes are primarily  located in North America and Europe.
Operating leases accounted for about 38% of the portfolio at September 30, 2003,
with the rest  being  capital  leases or loans.  There are 12  aircraft  in this
portfolio  that are  off-lease.  At December  31, 2002,  the  regional  aircraft
portfolio consisted of 117 planes and a net investment of $344.0 million.

      The  following  is a list of CIT's  exposure to bankrupt  carriers and the
current status of related aircraft as of September 30, 2003.

      o     UAL Corp.  -- On December 9, 2002,  UAL Corp.,  the parent of United
            Airlines, announced its Chapter 11 bankruptcy filing. Under existing
            agreements,  United Airlines leases 4 CIT-owned narrow body aircraft
            (2 Boeing 757  aircraft and 2 Boeing 737  aircraft)  with a net book
            value of $90.5  million.  These  leases were  converted  from single
            investor  capital leases to short-term  operating  leases during the
            March 2003 quarter.

      o     Avianca Airlines -- Avianca  Airlines filed voluntary  petitions for
            re-organization  under  Chapter  11 of the U.S.  Bankruptcy  Code on
            March 21, 2003. Under existing agreements,  CIT has operating leases
            with  Avianca  Airlines  whereby  it is  the  lessee  of  one  MD 80
            aircraft. A Boeing 757 aircraft was returned to CIT and is committed
            to another  airline.  That  aircraft  has been  replaced  by another
            Boeing 757 that was  returned  from  another  carrier.  Current  net
            investment is $31.2 million.


                                       34


     o    Air Canada -- Air Canada filed for protection  from creditors on April
          1, 2003 under the Companies'  Creditors  Arrangement Act, the Canadian
          reorganization  law.  CIT's  exposure  in  aircraft  to Air  Canada is
          approximately  USD $50  million,  relating to one Boeing 767  aircraft
          which was converted  from an  investment  in a  non-accrual  leveraged
          lease (not a tax-optimized  structure) to a performing operating lease
          during the quarter  ended  September 30, 2003 and a $25.6 million loan
          collateralized  by 12  Bombardier  Dash 8 aircraft.  The loan is fully
          guaranteed by the Canadian  government.  CIT had a second 767 aircraft
          that came  off-lease on June 1, 2003 and has been re-leased to another
          carrier.

      Additionally,   CIT  holds  Senior  A  tranche  Enhanced  Equipment  Trust
Certificates  (EETCs)  with a fair  value  of $39.1  million  issued  by  United
Airlines, which are debt instruments  collateralized by aircraft operated by the
airline.  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  $102.0  million.  This  debtor-in-possession  facility,  with an
outstanding balance of $28.0 million at September 30, 2003, is secured by, among
other collateral, previously unencumbered aircraft.

      The top five commercial  aerospace  exposures  totaled $1,017.9 million at
September 30, 2003, the largest of which was $289.7 million. All are to carriers
outside  of the  U.S.  and the top  three  of these  exposures  are to  European
carriers.  The largest  exposure  to a U.S.  carrier at  September  30, 2003 was
$140.6  million.  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 aerospace  assets  include both operating  leases and capital  leases.
Management  monitors economic conditions  affecting equipment values,  trends in
equipment values, and periodically  obtains third party appraisals of commercial
aerospace  equipment,  which  include  projected  rental  rates.  We adjust  the
depreciation  schedules of commercial aerospace equipment on operating leases or
residual values underlying capital leases,  when required.  Aerospace assets are
reviewed for  impairment  annually,  or more often when events or  circumstances
warrant.   An  aerospace   asset  is  defined  as  impaired  when  the  expected
undiscounted  cash flow over its expected  remaining  life is less than its book
value. Both historical information and current economic trends are factored into
the  assumptions and analyses used when  determining  the expected  undiscounted
cash flow. Included among these assumptions are the following:

      o  Lease terms

      o  Remaining life of the asset

      o  Lease rates supplied by independent appraisers

      o  Remarketing prospects

      o  Maintenance costs

      An  impairment  loss is  recognized  if the asset book value  exceeds  the
corresponding  asset fair  value.  There  were no  recorded  impairment  charges
related to the commercial  aerospace  assets during the quarter ended  September
30,  2003,  while $1.8  million  was  recorded  during  the March 2003  quarter.
Management  remains  comfortable  with  valuations of the  commercial  aerospace
portfolio.  Utilization is good,  demonstrating  the ability to place  aircraft.
However,  these current placements are at compressed rental rates, which reflect
current market conditions. Generally, leases are being written for terms between
three and five years.

      Our  telecommunications  portfolio is included in  "Communications" in the
industry  composition  table  included in Note 5 to the  Consolidated  Financial
Statements.  This portfolio totals approximately $623.6 million at September 30,
2003, or approximately 1.6% of total financing and leasing assets. The portfolio
consists of 49 accounts with an average balance of approximately  $12.7 million.
The 10 largest  accounts in the  portfolio  aggregate  $254.9  million  with the
largest single account totaling $32.5 million.  Non-performing  accounts totaled
$88.5 million (9 accounts) or 14.2% of this portfolio. At December 31, 2002, the
portfolio  totaled $710.1  million  (approximately  2.0% of total  financing and
leasing  assets)  and  consisted  of 52  accounts  with an  average  balance  of
approximately $13.7 million. The 10 largest accounts in the portfolio aggregated
$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 $216.7  million,  or
34.7% of the telecommunications  portfolio, at September 30,


                                       35


2003. 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,"  $116.6  million of  previously  recorded  reserves  remain for
telecommunication exposures. As management continues to monitor and work out the
individual  accounts  in this  portfolio,  charge-offs  will  likely be recorded
against this reserve in subsequent periods.

      The  portfolio  of  direct  and  private  fund  venture   capital   equity
investments  totaled  $313.9 million at September 30, 2003 and $335.4 million at
December 31, 2002. At September 30, 2003, this portfolio was comprised of direct
investments of  approximately  $161.5 million in 47 companies and $152.4 million
in 52 private equity funds.  Our direct  investments  totaled $188.8 million (57
companies) and our investment in private equity funds amounted to $146.6 million
(52 funds) as of  December  31,  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 $140.7 million at September 30, 2003 and $164.9 million at
December 31, 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 the performance of the underlying  companies,  and
public and private  market  valuations of these  companies.  During the quarters
ended September 30, 2003 and 2002, we recognized pre-tax losses of $11.3 million
and $36.2  million and for the nine months  ended  September  30, 2003 and 2002,
losses  totaled  $27.8 million and $42.9  million.  We continue to liquidate our
venture  capital  portfolio in the normal  course of business,  while  exploring
other more rapid exit  opportunities,  including the possible sale of our direct
investment portfolio.  If we were to pursue an outright sale, and thereby change
our disposition strategy, a sale-related disposition loss is possible.

      At September 30, 2003, we had  approximately  $161.4  million of loans and
assets  outstanding to customers located or doing business in Argentina.  During
2002, the Argentine government instituted economic reforms that were detrimental
to the  realization  of our  investment,  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 2002. The underlying
portfolio  continues  to  perform  as  to  collection,   but  payments  are  now
predominantly  in pesos.  Collection  efforts and discussions with the Argentine
government continue in order to maximize recovery efforts. Management expects to
seek  resolution  in the coming  quarters  and  charge-offs  are  expected to be
recorded against the reserve as these activities are concluded.

      Management  strives to maximize the  profitability  of the operating lease
equipment portfolio by balancing equipment utilization levels with market rental
rates and lease terms.  Substantially  all such  equipment  was subject to lease
agreements  throughout the first nine months of 2003 and 2002.  Total  equipment
not  subject to lease  agreements  was  $253.7  million  and  $385.9  million at
September 30, 2003 and December 31, 2002, respectively.  The current weakness in
the commercial  airline industry and the slower economy could further  adversely
impact both rental and utilization rates prospectively.

      See Note 5 -- Concentrations of Item 1. Consolidated  Financial Statements
for further discussion on concentrations.

Other Assets

      Other assets  totaled $4.7 billion at both September 30, 2003 and December
31,  2002,  as both  the  total  balance  and  the  underlying  components  were
essentially  unchanged.  Other assets  primarily  consisted of the  following at
September  30, 2003:  securitization  assets,  including  interest-only  strips,
retained subordinated securities,  cash reserve accounts and servicing assets of
$1.4 billion, accrued interest and receivables from derivative counterparties of
$0.8  billion,   investments  in  and   receivables   from  joint  ventures  and
non-consolidated  subsidiaries of $0.7 billion, deposits on commercial aerospace
flight equipment of $0.3 billion,  direct and private fund equity investments of
$0.3  billion,  repossessed  assets of $0.1  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.


                                       36


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,  "Goodwill and Other  Intangible  Assets"  ("SFAS
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 its reporting  units as of October 1, 2001.  Under
the transition  provisions of SFAS 142,  there was no goodwill  impairment as of
October 1, 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,  which caused a disruption in our access to the capital markets.
As a result,  management performed impairment analyses during the quarters ended
March 31, 2002 and June 30, 2002. These analyses resulted in goodwill impairment
charges of $4.513  billion and $1.999  billion for the quarters  ended March 31,
2002 and June 30, 2002, respectively.

      The changes in the  carrying  amount of goodwill for the nine months ended
September 30, 2003 were as follows ($ in millions):

                                         Specialty  Capital  Commercial
                                          Finance   Finance    Finance    Total
                                         --------   -------  ----------   -----
Balance as of December 31, 2002 ........  $ 14.0      $ --    $ 370.4   $ 384.4
Goodwill related to rail acquisition ...      --       5.4         --       5.4
Severance reduction ....................    (1.1)       --         --      (1.1)
                                           -----      ----     ------    ------
Balance as of September 30, 2003 .......  $ 12.9      $5.4    $ 370.4   $ 388.7
                                           =====      ====     ======    ======

      The $5.4  million  increase  to  goodwill  during  the nine  months  ended
September  30, 2003 related to the  acquisition  of a majority  interest in Flex
Leasing  Corporation by Capital Finance in April 2003.  Flex,  which is based in
San Francisco,  California and was founded in 1996, leases  approximately  7,200
general-purpose railcars,  representing  approximately $410.0 million in assets,
to railroads and shippers in the U.S. and Canada. The Flex results of operations
from the date of acquisition  through September 30, 2003 are included in the CIT
consolidated  results.  Minority  interest  related to the Flex  acquisition was
$39.9  million at  September  30, 2003 and is  reflected  on the face of the CIT
Consolidated Balance Sheet.

      The  downward  revision to  severence  liabilities  during the nine months
ended  September  30,  2003  was  related  to  Specialty  Finance  restructuring
activities  and was  recorded  as a  reduction  to  goodwill,  as the  severence
liability  was  established  in  conjunction  with  Tyco  acquisition   purchase
accounting adjustments.

      Other intangible  assets,  net,  comprised  primarily of acquired customer
relationships,  proprietary computer software and related transaction processes,
totaled  $49.2  million and $16.5 million at September 30, 2003 and December 31,
2002, respectively, and are included in Other Assets on the Consolidated Balance
Sheets.  The increase in other  intangible  assets  during the nine months ended
September 30, 2003 was due to customer relationships acquired in the purchase of
a factoring  business.  Other intangible assets are being amortized over periods
ranging from five to twenty years on a straight-line basis. Amortization expense
totaled $3.3 million for each nine month  period  ended  September  30, 2003 and
2002.

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  on a  sequential
quarter basis, for periods subsequent to our July 2002 IPO.


                                       37


      Net income for the quarter ended September 30, 2003 was $147.8 million, or
$0.69 per diluted share,  compared to $136.9 million, or $0.65 per diluted share
for the quarter ended June 30, 2003. The table that follows presents results for
the quarters ended September 30, 2003 and June 30, 2003, both in amount and as a
percentage of AEA ($ in millions):



                                                                     Quarter Ended            Quarter Ended
                                                                    September 30, 2003         June 30, 2003
                                                                     Amount     % AEA       Amount       % AEA
                                                                   ---------    -----      ---------     -----
                                                                                             
Finance income ................................................     $  921.2    10.22%      $  943.2     10.57%
Interest expense ..............................................        326.5     3.62%         331.1      3.71%
                                                                   ---------     ----      ---------      ----
Net finance income ............................................        594.7     6.60%         612.1      6.86%
Depreciation on operating lease equipment .....................        252.4     2.80%         272.9      3.06%
                                                                   ---------     ----      ---------      ----
Net finance margin ............................................        342.3     3.80%         339.2      3.80%
Provision for credit losses ...................................         82.9     0.92%         100.6      1.13%
                                                                   ---------     ----      ---------      ----
Net finance margin after provision for credit losses ..........        259.4     2.88%         238.6      2.67%
Other revenue .................................................        220.7     2.45%         217.6      2.44%
                                                                   ---------     ----      ---------      ----
Operating margin ..............................................        480.1     5.33%         456.2      5.11%
Salaries and general operating expenses .......................        237.5     2.64%         227.2      2.55%
                                                                   ---------     ----      ---------      ----
Income before provision for income taxes ......................        242.6     2.69%         229.0      2.56%
Provision for income taxes ....................................        (94.6)   (1.05)%        (89.3)    (1.00)%
Minority interest .............................................         (0.2)      --%          (0.1)       --%
Dividends on preferred capital securities, after tax ..........           --       --%          (2.7)    (0.03)%
                                                                   ---------     ----      ---------      ----
Net income ....................................................    $   147.8     1.64%     $   136.9      1.53%
                                                                   =========     ====      =========      ====
Net income per share-- basic ..................................    $    0.70               $    0.65
                                                                   =========               =========
Net income per share-- diluted ................................    $    0.69               $    0.65
                                                                   =========               =========
Average Earning Assets (AEA) ..................................    $36,072.4               $35,700.0
                                                                   =========               =========


      The  increase in net income  from the prior  quarter  primarily  reflected
lower charge-offs,  partially off-set by higher incentive-based compensation and
other employee related expenses.

      For the quarter ended  September 30, 2003, net finance margin was 3.80% of
average earning assets,  flat with the prior quarter.  Current quarter dividends
on preferred capital  securities were included in interest expense for the first
time due to the adoption of SFAS 150. These dividends were presented on an after
tax basis below minority  interest in prior periods.  On a comparable basis, net
finance  margin  improved  5 basis  points  from the  prior  quarter,  primarily
reflecting  lower  interest  expense due to improved  funding rates and a modest
improvement  in net  rental  income,  offset by lower  yield-related  fees.  The
positive  impact on risk adjusted  margin due to fair value  adjustments to mark
finance  receivables  and debt to market  remaining  from the Tyco  acquisition,
before the benefit of refinancing at better rates,  was 15 basis points compared
to 13 basis points last quarter.

      The table  below  summarizes  operating  lease  margin for the  respective
periods ($ in millions).

                                                            Quarter Ended
                                                     ---------------------------
                                                     September 30,      June 30,
                                                         2003             2003
                                                     ------------     ----------
Rental income ..................................      $    364.3      $    379.3
Depreciation expense ...........................           252.4           272.9
                                                      ----------      ----------
  Operating lease margin .......................      $    111.9      $    106.4
                                                      ==========      ==========
Average operating lease equipment ..............      $  7,458.9      $  7,304.2
                                                      ==========      ==========

      Operating  lease  equipment  decreased to $7,485.3  million from  $7,560.0
million at June 30, 2003 primarily due to the decline in  smaller-ticket  assets
in the Specialty  Finance  segment.  Operating  lease margin (rental income less
depreciation  expense) as a percentage of average  operating lease equipment was
6.0% during the quarter  ended  September  30, 2003 versus 5.9% during the prior
quarter, reflecting a modest improvement from compressed aerospace rental rates.
The  decline  in  depreciation  expense  for  the  quarter  reflects  a  greater
proportion  of  aircraft  and rail  assets  with  average  depreciable  lives of
approximately  25 and 40  years,  compared  to  smaller  ticket  asset


                                       38


lives  of   approximately   3  years.   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).

      Total net  charge-offs  during the quarter  ended  September 30, 2003 were
$90.6 million  (1.23%),  including $11.2 million of  telecommunication  loan net
charge-offs,  compared to $108.4  million  (1.51%) during the quarter ended June
30,  2003.  The tables that follow  detail net  charge-offs  for the current and
prior quarters by segment, both in amount and as a percentage of average finance
receivables.  In  addition to total  amounts,  net  charge-offs  relating to the
liquidating  and  telecommunications  portfolios  are also  presented to provide
enhanced analysis ($ in millions):




Net Charge-offs:                                                Quarter Ended September 30, 2003
                                                 --------------------------------------------------------------
                                                                    Before Liquidating and    Liquidating and
                                                        Total         Telecommunications    Telecommunications
                                                  ---------------   ----------------------  ------------------
                                                                                    
Specialty Finance -- commercial ..............    $ 25.6    1.47%      $25.2      1.45%      $ 0.4    228.57%
Equipment Finance ............................      23.1    1.52%       18.1      1.26%        5.0      6.53%
Commercial Finance ...........................      19.7    0.84%       17.7      0.75%        2.0     66.12%
Capital Finance ..............................        --      --          --        --          --        --
Structured Finance ...........................       9.2    1.28%         --        --         9.2      6.01%
                                                  ------               -----                 -----
  Total Commercial Segments ..................      77.6    1.17%       61.0      0.95%       16.6      7.13%
Specialty Finance -- consumer ................      13.0    1.80%        6.6      1.26%        6.4      3.22%
                                                  ------               -----                 -----
  Total ......................................    $ 90.6    1.23%      $67.6      0.98%      $23.0      5.33%
                                                  ======               =====                 =====





Net Charge-offs:                                                   Quarter Ended June 30, 2003
                                                 --------------------------------------------------------------
                                                                    Before Liquidating and    Liquidating and
                                                        Total         Telecommunications    Telecommunications
                                                  ---------------   ----------------------  ------------------
                                                                                     
Specialty Finance -- commercial ..............    $ 23.9    1.33%      $23.9      1.33%       $ --        --
Equipment Finance ............................      38.6    2.51%       26.1      1.82%       12.5     12.00%
Commercial Finance ...........................      21.3    0.96%       18.6      0.84%        2.7     76.80%
Capital Finance ..............................        --      --          --        --          --        --
Structured Finance ...........................       8.6    1.18%         --        --         8.6      5.38%
                                                  ------               -----                 -----
  Total Commercial Segments ..................      92.4    1.40%       68.6      1.09%       23.8      8.87%
Specialty Finance -- consumer ................      16.0    2.62%        9.9      2.43%        6.1      3.01%
                                                  ------               -----                 -----
  Total ......................................    $108.4    1.51%      $78.5      1.17%      $29.9      6.33%
                                                  ======               =====                 =====


      Liquidating and  telecommunications net charge-offs were down $6.9 million
from last quarter due to lower net charge-offs in the liquidating  franchise and
trucking portfolios,  as the prior quarter included charge-offs relating to sold
assets.   Before  liquidating   portfolio   charge-offs  and   telecommunication
charge-offs  covered by specific 2002 reserving  actions,  net charge-offs  were
$67.6 million (0.98% of average finance  receivables)  for the current  quarter,
down from $78.5 million (1.17%) last quarter.  The improvement from last quarter
primarily  reflects  declines  in  Equipment  Finance  in the  construction  and
industrial equipment businesses and in Specialty Finance -- consumer charge-offs
of home equity loans.


                                       39


      Other Revenue  totaled $220.7 million for the quarter ended  September 30,
2003,  up slightly  from $217.6  million  for the quarter  ended June 30,  2003,
reflecting  increased  syndication  and  advisory  fees in  Structured  Finance,
coupled with improved returns on previously  securitized assets and revenue from
joint venture activities in the Specialty Finance segment,  and higher factoring
commissions.  Partially  offsetting  these  increases were lower  securitization
gains due to lower levels of  securitization  and changes in the mix of products
securitized.  Securitization  gains  during the current  quarter  totaled  $18.3
million,  7.5% of pretax income, on  securitization  volume of $1,317.5 million,
compared to $33.8 million,  14.8% of pretax income, on securitization  volume of
$1,652.5  million  during the prior  quarter.  Other  revenue  included  venture
capital losses of $11.3 million during the current  quarter,  compared to losses
of $12.1 million for the prior quarter.  The components of Other Revenue are set
forth in the following table ($ in millions):

                                                              Quarter Ended
                                                     ---------------------------
                                                     September 30,      June 30,
                                                         2003             2003
                                                     -------------    ----------
Fees and other income ...........................        $151.5          $134.6
Factoring commissions ...........................          47.6            44.8
Gains on securitizations ........................          18.3            33.8
Gains on sales of leasing equipment .............          14.6            16.5
Loss on venture capital investments .............         (11.3)          (12.1)
                                                         ------          ------
  Total .........................................        $220.7          $217.6
                                                         ======        ========

      Salaries  and  general  operating  expenses  were  $237.5  million for the
current  quarter,  compared  to $227.2  million  reported  for the June 30, 2003
quarter.  The  increase  from last  quarter was  primarily  the result of higher
incentive-based  compensation and other employee related expenses.  Salaries and
general  operating  expenses  were 2.06% of average  managed  assets  during the
quarter,  versus  1.99%  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 42.2%, compared to 40.8% in the prior
quarter.  Headcount  was 5,780 at September 30, 2003 down from 5,845 at June 30,
2003.

Risk Management

      We performed  additional risk management  procedures in 2002 and into 2003
in light of the factors  discussed  previously in the "Key Business  Initiatives
and Trends" section.  During the third quarter of 2003, we have further elevated
the  prominence  of  risk  management   throughout  the  organization  with  the
establishment  of the  newly-created  position of Vice  Chairman & Chief  Credit
Officer  within  the  Office  of  the  Chairman.  Our  ongoing  risk  management
activities,  beyond these special liquidity and capital measures,  are described
more fully in the sections that follow. Our business  activities involve various
elements of risk.  We  consider  the  principal  types of risk to be credit risk
(including  credit,  collateral and equipment  risk) and market risk  (including
interest rate, foreign currency and liquidity risk.)

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

      We review and monitor  credit  exposures,  both owned and  managed,  on an
ongoing basis to identify,  as early as possible,  those  customers  that may be
experiencing   declining   creditworthiness   or   financial   difficulty,   and
periodically evaluate our finance receivables across the entire organization. We
monitor  concentrations by borrower,  industry,  geographic region and equipment
type,  and we adjust  limits  as  conditions  warrant  to  minimize  the risk of
substantial credit loss. We have maintained a standard practice of reviewing our
aerospace  portfolio  regularly and, in accordance with SFAS No. 13 and SFAS No.
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 2002 and into 2003, performance,
profitability  and  residual  values  relating  to  aerospace  assets  have been
reviewed more frequently with the Executive Credit Committee.

      Our Asset  Quality  Review  Committee  is  comprised  of members of senior
management,  including  the  Vice  Chairman  & Chief  Credit  Officer,  the Vice
Chairman & Chief Financial Officer,  the Chief Risk Officer,  the Controller and
the Director of Credit  Audit.  Periodically,  the  Committee  meets with senior
executives of our


                                       40


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 Vice Chairman & Chief Credit 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 workout responsibilities. Our Executive Credit
Committee includes the Chief Executive Officer, the Chief Operating Officer, the
Chief Credit Officer and members of the Corporate Credit Risk Management  group.
The committee  approves  transactions  which are outside of  established  target
market definitions and risk acceptance criteria, corporate "standard" exceptions
and/or  "non-traditional"  business  as well as  transactions  that  exceed  the
strategic business units' credit authority. The Corporate 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 (other than small ticket leasing
transactions)  starts with the initial  evaluation of credit risk and underlying
collateral at the time of origination and continues over the life of the finance
receivable  or  operating  lease,  including  collecting  past due  balances and
liquidating underlying collateral.

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

Consumer and Small Ticket Leasing

      For consumer transactions and small-ticket leasing transactions, we employ
proprietary  automated  credit scoring models by loan type that include customer
demographics and credit bureau  characteristics.  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,  combined
loan to  value  ratio,  length  of  time  in  business,  industry  category  and
geographic location. The models are used to assess a potential borrower's credit
standing and  repayment  ability  considering  the


                                       41


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  and the small ticket
leasing  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  an  underwriter  with  the
appropriate level of authority reviews all applications.

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 the  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 the
Chief  Executive  Officer,  Chief  Operating  Officer,  Vice  Chairman and Chief
Financial  Officer,  Vice  Chairman and Chief Credit  Officer,  Vice  Chairman -
Specialty  Finance,  Treasurer,  and  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  exchange
contracts, and through 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 the issuance
of both 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.


                                       42


      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 under
SFAS 133,  all  derivatives  entered  into are  designated  according to a hedge
objective against a specified liability, including long-term debt 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.

      We target to match the basis of assets with that of our liabilities  (i.e.
fixed rate assets  funded with fixed rate  liabilities  and floating rate assets
funded with floating  rate  liabilities),  while also  targeting to preserve the
economic  returns of our assets through duration  matching.  Interest rate swaps
are an effective  means of achieving our target  matched  funding  objectives by
converting debt to the desired basis and duration.

      Interest  rate swaps with  notional  principal  amounts of $9.8 billion at
September  30, 2003 and $9.2 billion at June 30, 2003 were  designated as hedges
against  outstanding  debt.  The net increase in notional  principal  amounts of
interest  rate swaps as of  September  30, 2003  consisted  of a $536.9  million
increase in fixed to floating-rate swaps (fair value hedges) and a $92.4 million
increase in floating to  fixed-rate  swaps (cash flow  hedges).  The increase in
fair value hedges was due to the  combination  of fixed rate notes issued during
the quarter  which were swapped to float and retail  fixed-rate  debt  issuances
being  swapped to float.  In  addition,  CIT enters into hedge  transactions  in
conjunction  with its  securitization  programs.  See Note 3 to the Consolidated
Financial Statements for further details.

      The  following  table   summarizes  the  composition  of  our  assets  and
liabilities before and after swaps at September 30 and June 30, 2003:



                                         Before Swaps                After Swaps
                                   --------------------------  -------------------------
                                   Fixed Rate   Floating Rate  Fixed Rate  Floating Rate
                                   ----------   -------------  ----------  -------------
                                                                   
        September 30, 2003
Assets ..........................      51%           49%          51%          49%
Liabilities .....................      63%           37%          49%          51%

           June 30, 2003
Assets ..........................      52%           48%          52%          48%
Liabilities .....................      65%           35%          53%          47%


      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):



                                                                Quarter Ended September 30, 2003
                                                           -------------------------------------------
                                                               Before Swaps           After Swaps
                                                           ------------------     --------------------
                                                                                     
Commercial paper and variable rate senior notes
   and bank credit facilities........................      $11,728.3    1.77%     $15,917.6      2.58%
Fixed rate senior and subordinated notes.............       20,297.9    6.04%      16,108.6      5.78%
                                                           ---------              ---------
Composite............................................      $32,026.2    4.48%     $32,026.2      4.19%
                                                           =========              =========




                                                                   Quarter Ended June 30, 2003
                                                           -------------------------------------------
                                                               Before Swaps           After Swaps
                                                           ------------------     --------------------
                                                                                     
Commercial paper and variable rate senior notes
    and bank credit facilities.......................      $12,030.2    1.90%     $15,646.8      2.72%
Fixed rate senior and subordinated notes.............       20,284.9    6.13%      16,668.3      5.93%
                                                           ---------              ---------
Composite............................................      $32,315.1    4.56%     $32,315.1      4.37%
                                                           =========              =========



                                       43




                                                                Quarter Ended September 30, 2002
                                                           -------------------------------------------
                                                               Before Swaps           After Swaps
                                                           ------------------     --------------------
                                                                                     
Commercial paper and variable rate senior notes
  and bank credit facilities.........................      $14,103.2    2.20%     $13,552.1      2.68%
Fixed rate senior and subordinated notes.............       16,443.4    6.88%      16,994.5      6.63%
                                                           ---------              ---------
Composite                                                  $30,546.6    4.72%     $30,546.6      4.88%
                                                           =========              =========





                                                              Nine Months Ended September 30, 2003
                                                           -------------------------------------------
                                                               Before Swaps           After Swaps
                                                           ------------------     --------------------
                                                                                     
Commercial paper and variable rate senior notes and bank
   credit facilities.................................      $12,154.3    1.87%     $15,412.0      2.69%
Fixed rate senior and subordinated notes.............       20,092.9    6.17%      16,835.2      5.94%
                                                           ---------              ---------
Composite............................................      $32,247.2    4.55%     $32,247.2      4.39%
                                                           =========              =========




                                                              Nine Months Ended September 30, 2002
                                                           -------------------------------------------
                                                               Before Swaps           After Swaps
                                                           ------------------     --------------------
                                                                                     
Commercial paper and variable rate senior notes
   and bank credit facilities........................      $16,486.7    2.19%     $14,472.8      2.45%
Fixed rate senior and subordinated notes.............       16,866.1    5.88%      18,880.0      5.80%
                                                           ---------              ---------
Composite............................................      $33,352.8    4.06%     $33,352.8      4.35%
                                                           =========              =========


      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 3 --  Derivative  Financial
Instruments to the Consolidated Financial Statements.

      We regularly  monitor and simulate 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 we
employ  include the creation of  prospective  twelve month  "baseline" and "rate
shocked" net interest income simulations.

      At the date that  interest rate  sensitivity  is modeled,  "baseline"  net
interest income is derived  considering the current level of  interest-sensitive
assets and related run-off (including both contractual  repayment and historical
prepayment experience), the current level of interest-sensitive  liabilities and
related  maturities,  and the  current  level  of  derivatives.  The  "baseline"
simulation assumes that, over the next successive twelve months, market interest
rates (as of the date of simulation)  are held constant and that no new loans or
leases are extended.  Once the  "baseline"  net interest  income is  calculated,
market interest rates, which were previously held constant, are raised 100 basis
points  instantaneously  and parallel across the entire yield curve, and a "rate
shocked"  simulation is run.  Interest rate  sensitivity is then measured as the
difference between calculated "baseline" and "rate shocked" net interest income.

      An immediate  hypothetical  100 basis point increase in the yield curve on
October 1, 2003 would have reduced net income by an estimated  $15 million after
tax over the next twelve months,  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  of  our
simulations.  Further, it does not necessarily  represent  management's  current
view of future market interest rate movements.

      We also  utilize  foreign  currency  exchange  forward  contracts to hedge
currency risk  underlying our net  investments  in foreign  operations and cross
currency  interest  rate swaps to hedge both foreign  currency and interest rate
risk  underlying  foreign debt. At September 30, 2003,  CIT was party to foreign
currency  exchange forward contracts with notional amounts totaling $2.3 billion
and  maturities  ranging from 2003 to 2006. CIT was also party to cross currency
interest rate swaps with notional  amounts  totaling $1.3 billion and maturities
ranging from 2004 to 2027.  At June 30,  2003,  CIT was party to $2.4 billion in
notional  principal  amount of foreign currency  exchange forward  contracts and
$1.4 billion in notional principal amount of cross currency interest rate swaps.
At


                                       44


September 30, 2002, CIT was party to $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.  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.

      During the quarter ended September 30, 2003, the Company executed treasury
lock interest rate hedges totaling $1.2 billion in notional amount, with forward
dates ranging between  December 15, 2003 and January 15, 2004.  These derivative
contracts,  which lock in a fixed rate of interest, were executed in conjunction
with planned  term-debt  refinancings.  These  contracts were designated as cash
flow hedges of a forecasted transaction and insulate CIT from potential movement
in  U.S.  Treasury  rates  related  to  the  refinancing.  See  "Liquidity"  for
discussion of the related term-debt refinancings.

Derivative Risk Management

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

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

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

Liquidity Risk Management

      Liquidity  risk refers to the risk of CIT being  unable to meet  potential
cash  outflows  promptly and cost  effectively.  Factors that could cause such a
risk to arise might be a disruption  of a  securities  market or other source of
funds. We actively manage and mitigate liquidity risk by maintaining diversified
sources of funding  and  committed  alternate  sources of  funding.  The primary
funding  sources  are  commercial   paper  (U.S.),   long-term  debt  (U.S.  and
International) and asset-backed  securities (U.S. and Canada).  Included as part
of our  securitization  programs are  committed  asset-backed  commercial  paper
programs in the U.S. and Canada. We also maintain committed bank lines of credit
to provide  backstop 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.

Internal Controls

      In 2003, we formed an Internal Controls  Committee that is responsible for
monitoring and improving  internal controls and overseeing the internal controls
attestation   mandated  by  Section  404  of  the  Sarbanes-Oxley  Act  of  2002
("SARBOX"). The committee, which is chaired by the Controller, includes the CFO,
Director of Internal Audit as well as other senior executives in finance, legal,
risk   management  and   information   technology.   We  are  currently  in  the
documentation  phase of the  SARBOX  project  and  expect to begin the  testing,
assessment  and  remediation  of  internal  controls  in 2004.  The  final  self
assessment is planned for the second half of 2004.


                                       45


Liquidity

      The commercial  paper program  closed the quarter at $4.9 billion,  versus
$4.6  billion  at June 30,  2003 and $5.0  billion at  December  31,  2002.  Our
targeted  program  size  remains at $5.0  billion and our goal is to maintain at
least 100% back-up liquidity.

      At September  30, 2003,  we had undrawn  total bank credit  facilities  of
$6,270.0  million.  Accordingly,  backstop  liquidity  coverage  of  outstanding
commercial  paper was in excess of 100% at September  30, 2003.  During  October
2003,  we  negotiated  two  new  facilities   totaling   $4,200.0   million  and
concurrently reduced another facility to $2,000.0 million.

      In addition to the commercial  paper  markets,  CIT accesses the unsecured
term debt markets. CIT maintains registration statements with the Securities and
Exchange  Commission covering debt securities that it may sell in the future. At
September  30, 2003,  we had $14.5 billion of  registered,  but  unissued,  debt
securities  available under a shelf  registration  statement.  Term-debt  issued
during  the  quarter  ended  September  30,  2003  consisted  of a $0.5  billion
three-year, global issue and $1.8 billion in variable-rate medium-term notes. In
November  2002,  we  introduced a retail note program in which we offer  senior,
unsecured  notes  utilizing  numerous  broker-dealers  for  placement  to retail
accounts.  During the quarter,  we issued $141 million under this program. As of
September  30,  2003,  we had issued $2.0  billion of notes  under this  program
having maturities of between 2 and 10 years.

      To further  strengthen  our funding  capabilities,  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 September 30, 2003, we had approximately  $2.9
billion  of  availability  in our  committed  asset-backed  facilities  and $1.8
billion of registered,  but unissued,  securities  available  under public shelf
registration  statements  relating to our asset-backed  securitization  program.
Securitization volume was $1.3 billion, compared to $1.7 billion last quarter.

     The following credit ratings have been in place since September 30, 2002:

                                   Short Term    Long Term
                                   ----------   ----------
Moody's ........................       P-1          A2
Standard & Poor's ..............       A-1           A
Fitch ..........................       F1            A
--------------------------------------------------------------------------------
The credit  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.

      We have some material covenants within our legal documents that govern our
funding sources.  The most  significant  covenant in CIT's indentures and credit
agreements is a negative pledge  provision,  which limits granting or permitting
liens on our assets,  but provides for  exceptions for certain  ordinary  course
liens needed to operate our business.  As of September 30, 2003,  various credit
agreements  also contained a minimum net worth test of $3.75  billion.  The bank
lines  established  on October 14, 2003  contained the same  provisions,  with a
minimum net worth test of $4.0 billion,  commensurate  with the Company's larger
capital base.


                                       46


      The following tables summarize various contractual  obligations,  selected
contractual cash receipts and contractual  commitments as of September 30, 2003.
Projected proceeds from the 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
                                       --------------------------------------------------------------------
                                                   Remaining                                       After
Contractual Obligations                  Total       2003        2004        2005        2006       2006
-----------------------                ---------   ---------   ---------   ---------   ---------  ---------
                                                                               
Commercial Paper ...................   $ 4,935.8   $ 4,935.8   $    --     $    --     $    --    $    --
Variable-rate term debt ............     7,430.0       997.9     3,806.4     2,333.3        35.3      257.1
Fixed-rate term debt ...............    21,390.4     2,491.8     3,322.0     4,231.5     2,827.7    8,517.4
Lease rental expense ...............       177.1        18.8        47.5        38.4        27.4       45.0
                                       ---------   ---------   ---------   ---------   ---------  ---------
   Total contractual obligations ...    33,933.3     8,444.3     7,175.9     6,603.2     2,890.4    8,819.5
                                       ---------   ---------   ---------   ---------   ---------  ---------
Finance receivables(1) .............    30,342.6     7,375.6     5,077.1     4,268.7     2,960.5   10,660.7
Operating lease rental income ......     3,012.8       309.6       947.0       619.4       376.8      760.0
Finance receivables held for sale(2)     1,017.9     1,017.9        --          --          --         --
Cash-- current balance .............     2,269.0     2,269.0        --          --          --         --
                                       ---------   ---------   ---------   ---------   ---------  ---------
   Total projected cash availability    36,642.3    10,972.1     6,024.1     4,888.1     3,337.3   11,420.7
                                       ---------   ---------   ---------   ---------   ---------  ---------
Net projected cash inflow (outflow)    $ 2,709.0   $ 2,527.8   $(1,151.8)  $(1,715.1)  $   446.9  $ 2,601.2
                                       =========   =========   =========   =========   =========  =========

--------------------------------------------------------------------------------
(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
                                               ----------------------------------------------------------------
                                                           Remaining                                    After
Contractual Commitments                          Total       2003       2004        2005      2006      2006
-----------------------                        ---------   --------    --------   --------  --------   --------
                                                                                      
Aircraft purchases .........................   $ 3,153.0    $ 201.0     $ 604.0   $1,072.0  $1,016.0    $ 260.0
Credit extensions ..........................     5,226.6      933.2       809.8      696.7     714.7    2,072.2
Letters of credit ..........................     1,041.3      998.7        41.6        0.3       0.3        0.4
Sale-leaseback payments ....................       486.4         --        28.5       28.5      28.5      400.9
Manufacturer purchase commitments ..........       124.2      124.2          --         --        --         --
Venture capital fund and
  equity commitments .......................       140.7         --         2.5        0.4       0.3      137.5
Guarantees .................................       104.2      104.2          --         --        --         --
Acceptances ................................        14.0       14.0          --         --        --         --
                                               ---------   --------    --------   --------  --------   --------
Total Commitments ..........................   $10,290.4   $2,375.3    $1,486.4   $1,797.9  $1,759.8   $2,871.0
                                               =========   ========    ========   ========  ========   ========


      CIT  has  $1.25  billion  of  debt  securities  outstanding,   which  were
originally issued by the former AT&T Capital  Corporation,  that are callable at
par in December  2003 and January  2004.  These notes are listed on the New York
Stock  Exchange  under the ticker  symbols CIC and CIP and are commonly known as
PINEs ("Public Income Notes").  The securities  carry coupon rates of 8.125% and
8.25%, but were marked down to a yield of approximately  7.5% in CIT's financial
statements through purchase accounting adjustments.  In light of the high coupon
rates,  we plan to call the  securities  for  redemption  pursuant  to the terms
outlined  in the  prospectuses.  Once  called,  we  would  record  non-recurring
after-tax  gains  estimated  to total  approximately  $90 million  ($55  million
after-tax),  as the cash we would outlay is less than the current carrying value
of the  securities.  These gains would be spread over two  quarters,  coinciding
with the timing of each note redemption.  Margins may also benefit prospectively
as we refinance the debt at lower rates.  See Interest Rate and Foreign Exchange
Risk  Management   section  of  "Risk  Management"  for  discussion  of  hedging
activities related to the call of these notes.

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


                                       47


      Capitalization

      The following table presents  information  regarding our capital structure
($ in millions):

                                                     September 30,  December 31,
                                                         2003           2002
                                                     -------------  ------------
Commercial paper ..................................    $ 4,935.8      $ 4,974.6
Bank credit facilities ............................           --        2,118.0
Term debt .........................................     28,820.4       24,588.7
Preferred capital securities ......................        255.9          257.2
Stockholders' equity(1) ...........................      5,279.8        4,968.5
                                                       ---------      ---------
Total capitalization ..............................     39,291.9       36,907.0
Goodwill ..........................................       (388.7)        (384.4)
                                                       ---------      ---------
Total tangible capitalization .....................    $38,903.2      $36,522.6
                                                       =========      =========
Total tangible stockholders' equity ...............    $ 4,891.1      $ 4,584.1
                                                       =========      =========
Tangible stockholders' equity(1) and
  Preferred Capital Securities to managed assets ..       10.44%         10.44%
Total debt (excluding overnight deposits) to
  tangible stockholders' equity(1) and Preferred
  Capital Securities ..............................        6.22x          6.22x
--------------------------------------------------------------------------------
(1)  Stockholders'  equity for these  calculations  excludes  accumulated  other
     comprehensive  loss  relating  to  derivative  financial   instruments  and
     unrealized gains on  securitization  investments of $98.9 million and $97.8
     million at September 30, 2003 and December 31, 2002, respectively, as these
     losses and gains are not  necessarily  indicative  of amounts which will be
     realized.

      The preferred capital  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.  Consistent  with rating agency
measurements,  preferred  capital  securities are included in tangible equity in
our leverage  ratios.  See  "Non-GAAP  Financial  Measurements"  for  additional
information.  Also see Note 1 Summary of  Significant  Accounting  Policies  for
information regarding the accounting and reporting for these securities.

      See "Liquidity  Risk  Management"  for  discussion of 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"
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  or  acquired  and sold to SPE's,
which in turn issue debt  securities to investors  solely backed by asset pools.
Accordingly,  CIT has no legal  obligations to repay the securities in the event
of a default by the SPE. 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, non-qualifying securitization entities will
have to be consolidated.  Based on our preliminary analysis, we believe that all
of our existing  asset-backed SPE structures meet the definition of a qualifying
special  purpose  entity  ("QSPE")  as  defined  by SFAS 140 and will  therefore
continue to qualify as off-balance sheet transactions.  As part of these related
activities,  the Company enters into hedge transactions with the trusts (SPE) in
order to protect  the trust  against  interest  rate  risk.  CIT  insulates  its
associated  risk by  entering  into  offsetting  swap  transactions  with  third
parties. The net effect is to protect the trust and CIT from interest rate risk.
The  notional  amount of these swaps was $2.9  billion at  September  30,  2003.
During February 2003, we successfully  completed a consent solicitation to amend
the negative pledge  provision in our 1994 debt indenture.  This action conforms
the 1994 debt  indenture to our other  agreements  and provides  flexibility  in
structuring our securitizations as accounting sales or secured financings.

      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. The vendor  partner and CIT jointly own
these distinct legal entities, and there is no third-party debt involved.  These
arrangements are accounted for


                                       48


using the equity method,  with profits and losses  distributed  according to the
joint venture agreement. See related FIN 46, "Consolidation of Variable Interest
Entities" discussion in "Accounting and Technical Pronouncements" and disclosure
in Note 7 -- Related Party Transactions.

Critical Accounting Policies

      The  preparation of financial  statements in conformity with GAAP 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 CIT 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  a  lower  of cost  or  fair  value  method.  Accordingly,
management  uses judgment in determining  fair value and in determining  when an
unrealized loss is deemed to be other than temporary, in which case such loss is
charged  to  earnings.   As  of  September  30,  2003,  venture  capital  equity
investments  totaled  $313.9  million.  A 10%  fluctuation  in value of  venture
capital investments equates to $0.09 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
substantial  collection  efforts are conducted,  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 for those loans defined as impaired
loans  in the  Company's  application  of SFAS  114,  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.  The  determination  of
impairment involves  management's judgment and the use of market and third party
estimates regarding collateral values. Valuations in the level of impaired loans
and  corresponding  impairment as defined under SFAS 114 affect the level of the
reserve for credit losses.

      Reserve for Credit Losses -- 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, COO, CFO,  Chief Credit  Officer and  Controller
among others, in conjunction with setting the reserve for credit losses.

      The reserve for credit losses is set and recorded based on the development
of three key components (1) specific  reserves for  collateral  dependent  loans
which are impaired under SFAS 114, (2) reserves for estimated losses inherent in
the portfolio based upon historical and projected credit trends and, (3) general
reserves for estimation  risk.  The process  involves the use of estimates and a
high degree of management  judgement.  As of September 30, 2003, the reserve for
credit losses was $752.5 million or 2.48% of finance receivables and 87.2% of 60
days or more past due  receivables.  A $10.0  million  change in the reserve for
credit losses equates to the following variances:  3 basis points (0.03%) in the
percentage of reserves to finance  receivables;  116 basis points (1.16%) 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.


                                       49


      Lease Residual Values -- Operating lease equipment is carried at cost less
accumulated  depreciation  and is depreciated to estimated  residual value using
the straight-line  method over the lease term or projected  economic life of the
asset.  Direct  financing  leases are recorded at the aggregated  future minimum
lease payments plus estimated  residual values less unearned finance income.  We
generally  bear greater risk in operating  lease  transactions  (versus  finance
lease  transactions) as the duration of an operating lease is generally  shorter
relative to the equipment useful life than a finance lease.  Management performs
periodic reviews of the estimated residual values, with non-temporary impairment
recognized in the current period. As of September 30, 2003, our direct financing
lease residual  balance was $2,451.7  million and our operating  lease equipment
balance was $7,485.3 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 Company  determined at October 1, 2001
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  market  place  data.   See  "--  Goodwill  and  Other   Intangible   Assets
Amortization" for a discussion of our impairment  analysis.  Goodwill was $388.7
million at  September  30,  2003.  A 10%  fluctuation  in the value of  goodwill
equates to $0.18 in earnings per share.

Accounting and Technical Pronouncements

      In January 2003, the FASB issued FIN 46, which requires the  consolidation
of VIEs by their primary  beneficiaries if they do not effectively  disperse the
risks among the parties  involved.  On October 9, 2003,  the FASB  announced the
delay in  implementation of FIN 46 for VIEs in existence as of February 1, 2003.
VIEs  are  certain   entities  in  which  equity   investors  do  not  have  the
characteristics  of a controlling  financial  interest or do not have sufficient
equity at risk for the  entity to  finance  its  activities  without  additional
subordinated  financial support from other parties.  The primary  beneficiary is
the entity that has the majority of the economic  risks and rewards of ownership
of the  VIE.  See Note 1 --  Summary  of  Significant  Accounting  Policies  for
additional information regarding the implementation of FIN 46.

      The FIN 46 potential impact to CIT is primarily  related to three types of
transactions:  1) strategic vendor partner joint ventures,  2)  securitizations,
and  3)  selected   financing  and  private   equity   transactions.   Based  on
interpretations of FIN 46 currently available,  we believe the implementation of
this  standard will not change the current  equity method of accounting  for our
strategic   vendor   partner  joint  ventures  (see  Note  7  --  Related  Party
Transactions). Our securitization transactions outstanding at September 30, 2003
will  continue to qualify as  off-balance  sheet  transactions.  The Company may
structure certain future securitization transactions,  including factoring trade
account receivables transactions,  as on-balance sheet financings.  Certain VIEs
acquired  primarily in conjunction with selected financing and/or private equity
transactions  may be  consolidated  under  FIN 46.  The  consolidation  of these
entities will not have a significant impact on our financial position or results
of  operations.  Due  to  the  complexity  of  the  new  guidance  and  evolving
interpretations among accounting  professionals,  the Company will consider such
further guidance,  if any, and continue  assessing the accounting and disclosure
impact of FIN 46 on its VIEs.

      In May  2003,  the FASB  issued  SFAS No.  150,  "Accounting  for  Certain
Financial Instruments with Characteristics of both Liabilities and Equity." This
pronouncement  establishes  standards  for  classifying  and  measuring  certain
financial  instruments as a liability (or an asset in some circumstances).  This
pronouncement   requires  CIT  to  display  the  Preferred  Capital   Securities
(previously  described as "Company obligated  mandatorily  redeemable  preferred
securities of subsidiary trust holding solely debentures of the Company") within
the debt  section on the face of the  Consolidated  Balance  Sheets and show the
related expense with interest expense on a pre-tax basis. There was no impact to
net  income  upon  adoption.  This  pronouncement  is  effective  for  financial
instruments  entered  into or modified  after May 31,  2003,  and  otherwise  is
effective at the beginning of the first interim period  beginning after June 15,
2003. Prior period  restatement is not permitted.  On November 7, 2003,  certain
measurement  and  classification  provisions  of SFAS 150,  relating  to certain
mandatorily redeemable  non-controlling  interests,  were deferred indefinitely.
The adoption of these  delayed  provisions,  which relate  primarily to minority
interests  associated  with  finite-lived  entities,  is not  expected to have a
significant   impact  on  the  financial  position  or  results  of  operations.
Consistent with rating agency  measurements,  preferred  capital  securities are
included in tangible  equity in our leverage  ratios.  See  "Non-GAAP  Financial
Measurements" for additional information.


                                       50


Statistical Data

      The following  table presents  components of net income,  including TCH in
2002,  as a percent  of AEA,  along  with other  selected  financial  data ($ in
millions):

                                                          Nine Months Ended
                                                            September 30,
                                                      -------------------------
                                                         2003          2002
                                                      ----------    ----------
Finance income ....................................        10.51%        12.09%
Interest expense ..................................         3.76%         4.10%
                                                       ---------     ---------
  Net finance income ..............................         6.75%         7.99%
Depreciation on operating lease equipment .........         3.02%         3.47%
                                                       ---------     ---------
  Net finance margin ..............................         3.73%         4.52%
Provision for credit losses .......................         1.07%         2.60%
                                                       ---------     ---------
Net finance margin, after provision
  for credit losses ...............................         2.66%         1.92%
Other revenue .....................................         2.52%         2.64%
                                                       ---------     ---------
Operating margin ..................................         5.18%         4.56%
                                                       ---------     ---------
Salaries and general operating expenses ...........         2.62%         2.73%
Goodwill impairment ...............................           --         25.04%
Interest expense-- TCH ............................           --          2.25%
                                                       ---------     ---------
Operating expenses ................................         2.62%        30.02%
                                                       ---------     ---------
Income (loss) before income taxes .................         2.56%       (25.46)%
Provision for income taxes ........................        (1.00)%       (0.98)%
Minority interest .................................           --            --
Dividends on preferred capital securities,
  after tax .......................................        (0.02)%       (0.03)%
                                                       ---------     ---------
  Net income (loss) ...............................         1.54%       (26.47)%
                                                       ---------     ---------
Average earning assets ............................    $35,559.0     $34,674.5
                                                       =========     =========

Non-GAAP Financial Measurements

      The U.S.  Securities and Exchange Commission ("SEC") adopted Regulation G,
which applies to any public  disclosure or release of material  information that
includes  a non-GAAP  financial  measure.  These  financial  statements  and the
accompanying  Management's  Discussion  and Analysis of Financial  Condition and
Results of Operations and Quantitative  and Qualitative  Disclosure about Market
Risk contain certain  non-GAAP  financial  measures.  The SEC defines a non-GAAP
financial  measure as a numerical  measure of a company's  historical  or future
financial performance,  financial position, or cash flows that excludes amounts,
or is subject to adjustments that have the effect of excluding amounts, that are
included in the most directly  comparable  measure  calculated  and presented in
accordance  with GAAP in the  financial  statements or includes  amounts,  or is
subject to  adjustments  that have the  effect of  including  amounts,  that are
excluded from the most directly comparable measure so calculated and presented.

      Non-GAAP  financial measures disclosed in this report are meant to provide
additional  information and insight relative to historical operating results and
financial  position of the  business and in certain  cases to provide  financial
information  that is presented  to rating  agencies and other users of financial
information.  These  measures are not in accordance  with, or a substitute  for,
GAAP and may be different from or inconsistent with non-GAAP  financial measures
used by other companies.


                                       51


      Selected  non-GAAP  disclosures  as of September 30, 2003 and December 31,
2002 are presented and reconciled in the table below:

                                                     September 30,  December 31,
                                                         2003           2002
                                                     ------------   ------------
Managed assets(1):
Finance receivables ...............................    $30,342.6      $27,621.3
Operating lease equipment, net ....................      7,485.3        6,704.6
Finance receivables held for sale .................      1,017.9        1,213.4
Equity and venture capital investments (included
  in other assets) ................................        313.9          335.4
                                                       ---------      ---------
Total financing and leasing portfolio assets ......     39,159.7       35,874.7
 Securitized assets ...............................     10,141.0       10,482.4
                                                       ---------      ---------
Managed assets ....................................    $49,300.7      $46,357.1
                                                       =========      =========
Earning assets(2):
Total financing and leasing portfolio assets ......    $39,159.7      $35,874.7
 Credit balances of factoring clients .............     (3,103.0)      (2,270.0)
                                                       ---------      ---------
Earning assets ....................................    $36,056.7      $33,604.7
                                                       =========      =========
Tangible equity(3):
Total equity ......................................    $ 5,180.9      $ 4,870.7
 Other comprehensive loss relating to derivative
 financial instruments ............................        106.9          118.3
 Unrealized gain on securitization investments ....         (8.0)         (20.5)
 Goodwill .........................................       (388.7)        (384.4)
                                                       ---------      ---------
Total common equity ...............................      4,891.1        4,584.1
 Preferred capital securities .....................        255.9          257.2
                                                       ---------      ---------
Tangible equity ...................................    $ 5,147.0      $ 4,841.3
                                                       =========      =========
Debt, net of overnight deposits(4):
Total debt ........................................    $34,012.1      $31,681.3
Overnight deposits ................................     (1,722.9)      (1,578.7)
Preferred capital securities ......................       (255.9)            --
                                                       ---------      ---------
Debt, net of overnight deposits ...................    $32,033.3      $30,102.6
                                                       =========      =========
--------------------------------------------------------------------------------
1) Managed assets are utilized in certain credit and expense ratios. Securitized
   assets are included in managed assets because CIT retains certain credit risk
   and the servicing related to assets that are funded through securitizations.

2) Earning assets are utilized in certain revenue and earnings  ratios.  Earning
   assets are net of credit  balances  of  factoring  clients.  This net amount,
   which corresponds to amounts funded, is a basis for revenues earned,  such as
   finance income and factoring commissions.

3) Tangible  equity is utilized in leverage  ratios,  and is consistent with our
   presentation to rating agencies.  Other  comprehensive  losses and unrealized
   gains on securitization  investments (both included in the separate component
   of equity)  are  excluded  from the  calculation,  as these  amounts  are not
   necessarily indicative of amounts which will be realized.

4) Debt,  net of  overnight  deposits is utilized  in certain  leverage  ratios.
   Overnight deposits are excluded from these calculations, as these amounts are
   retained by the Company to repay debt.  Overnight  deposits are  reflected in
   both debt and cash and cash equivalents.

      Note 1 to the accompanying Consolidated Financial Statements describes our
IPO and the inclusion of TCH in our consolidated  accounts.  Prior to our IPO on
July 8, 2002,  the  activity of TCH  consisted  primarily  of  interest  expense
payable  to an  affiliate  of Tyco,  and the TCH  accumulated  net  deficit  was
relieved via a capital contribution from Tyco. TCH had no operations  subsequent
to June 30, 2002.  Although the 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 prospective  results,  prior period year to
date comparisons exclude the results of TCH. Consolidating income statements for
CIT, TCH and CIT  consolidated  for the nine months ended September 30, 2002 are
displayed in Item 1. Consolidating  Financial Statements and Supplementary Data,
Note 11 - Consolidating Financial Statements.


                                       52


      The  following  table  summarizes  the  impact  of  various  items for the
respective  reporting  periods that affect the  comparability  of our  financial
results  under GAAP. We are  presenting  these items as a supplement to the GAAP
results to facilitate the comparability of results between periods. The adoption
of SFAS No. 142,  "Goodwill and Other  Intangible  Assets"  eliminated  goodwill
amortization and introduced goodwill  impairment charges.  The impairment charge
in the period  ended June 30, 2002 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. 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):



                                                   Quarter Ended       Nine Months Ended
                                                   September 30,         September 30,
                                                ------------------   -------------------
                                                  2003      2002      2003        2002
                                                --------  --------   -------   ---------
                                                                   
Net income (loss)-- GAAP basis ...............   $147.8    $134.7     $411.7   $(6,882.8)
Charges included in net income (loss):
  Goodwill impairment ........................       --        --         --     6,511.7
  TCH losses .................................       --        --         --       668.6
                                                 ------    ------     ------     -------
Net income-- before charges ..................   $147.8    $134.7     $411.7     $ 297.5
                                                 ======    ======     ======     =======


Forward-Looking Statements

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

      o     our liquidity risk management,

      o     our credit risk management,

      o     our asset/liability risk management,

      o     our funding, borrowing costs and net finance margin

      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,


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      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.

Item 4. Controls and Procedures

      As of the end of the period covered by 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 of 1934 is  communicated  and processed in a
timely manner.  Albert R. Gamper, Jr., Chairman and Chief Executive Officer, and
Joseph M. Leone, Vice Chairman 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,  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  currently  believes that this matter has not had any material impact
on our financial statements. Management has completed the design and development
of processes and controls to address this deficiency. The testing of systems and
data integrity is underway.  The project  initiatives  also include historic tax
basis data gathering,  as well as quality control review and process and control
documentation.  The  significant  aspects of this  project  will be completed in
2003.


                                       54


                           PART II. OTHER INFORMATION

Item 1. Legal Proceedings

      On April 10, 2003, a putative class action lawsuit, asserting claims under
the Securities  Act of 1933,  was filed in the United States  District Court for
the Southern  District of New York against CIT, its Chief Executive  Officer and
its  Chief  Financial  Officer.  The  lawsuit  contained  allegations  that  the
registration  statement and prospectus prepared and filed in connection with the
IPO were  materially  false and  misleading,  principally  with  respect  to the
adequacy of CIT's telecommunications-related loan loss reserves at the time. The
lawsuit  purported to have been brought on behalf of all those who purchased CIT
common  stock in or  traceable  to the IPO,  and  sought,  among  other  relief,
unspecified damages or rescission for those alleged class members who still hold
CIT stock and unspecified  damages for other alleged class members.  On June 25,
2003, by order of the United States District Court, the lawsuit was consolidated
with five other  substantially  similar suits, all of which had been filed after
April 10, 2003 and one of which named as defendants some of the  underwriters in
the IPO and certain  former  directors of CIT (with respect to whom CIT may have
indemnification  obligations).  Glickenhaus & Co., a privately  held  investment
firm, was named lead plaintiff in the consolidated action.

      On September  16, 2003, an amended and  consolidated  complaint was filed.
That  complaint  contains  substantially  the same  allegations  as the original
complaints. In addition to the foregoing, two similar suits have been brought by
certain  shareholders  on behalf of CIT  against CIT and some of its present and
former directors under Delaware corporate law.

      CIT believes  that the  allegations  in each of these  actions are without
merit and that its disclosures were proper,  complete and accurate.  CIT intends
to vigorously defend itself against these actions.

      In addition,  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, including the class action suit
above,  will not have a material  adverse effect on the  consolidated  financial
position, results of operations or liquidity of CIT.

Item 6. Exhibits and Reports on Form 8-K

     (a)          Exhibits

            3.1   Second Restated  Certificate of  Incorporation  of the Company
                  (incorporated by reference to Form 10-Q filed by CIT on August
                  12, 2003).

            3.2   Amended and Restated  By-laws of the Company  (incorporated by
                  reference to Form 10-Q filed by CIT on August 12, 2003).

            4.1   Indenture  dated as of August 26,  2002 by and among 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,   for  the  issuance  of  unsecured   and
                  unsubordinated  debt securities  (incorporated by reference to
                  Exhibit 4.18 to Form 10-K filed by CIT on February 26, 2003).

            4.2   Form of 5-Year Credit Agreement, dated as of October 10, 2003,
                  among CIT Group  Inc.,  a Delaware  corporation,  the  several
                  banks and other financial institutions, J.P. Morgan Securities
                  Inc. and Citigroup  Global Markets Inc.,  acting as joint lead
                  arrangers and bookrunners, Citibank, N.A. and Bank of America,
                  N.A.,   as   syndication   agents,   Barclays   Bank  Plc,  as
                  documentation agent and JPMorgan Chase Bank, as administrative
                  agent.

            4.3   Form of 364-Day  Credit  Agreement,  dated as of  October  10,
                  2003,  among CIT  Group  Inc.,  a  Delaware  corporation,  the
                  several banks and other  financial  institutions,  J.P. Morgan
                  Securities  Inc. and Citigroup  Global  Markets Inc., as joint
                  lead  arrangers and  bookrunners,  Citibank,  N.A. and Bank of
                  America,  N.A., as syndication  agents,  Barclays Bank Plc, as
                  documentation agent and JPMorgan Chase Bank, as administrative
                  agent.

            10.1  Employment Agreement for Jeffrey M. Peek, dated July 22, 2003.

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


                                       55


            31.1  Certification of Albert R. Gamper, Jr. pursuant to Section 302
                  of the Sarbanes-Oxley Act of 2002.

            31.2  Certification  of Joseph M. Leone  pursuant  to Section 302 of
                  the Sarbanes-Oxley Act of 2002.

            32.1  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.

            32.2  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.

        (b)       Reports on Form 8-K

                  Current Report on Form 8-K filed July 24, 2003,  reporting the
                  financial  results of CIT as of and for the quarter ended June
                  30, 2003,  and  announcing  the  formation of an Office of the
                  Chairman.

                  Current  Report on Form 8-K filed August 1, 2003,  declaring a
                  dividend  $0.12  per  share,  payable  on August  29,  2003 to
                  shareholders  of record on August 15, 2003, and announcing the
                  expansion of the Board of Directors.


                                       56


                                   SIGNATURES

      Pursuant to the  requirements 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/ Joseph M. Leone
                                      ..........................................
                                                   Joseph M. Leone
                                      Vice Chairman and Chief Financial Officer


                                  By:         /s/ William J. Taylor
                                      ..........................................
                                                  William J. Taylor
                                        Executive Vice President, Controller
                                          and Principal Accounting Officer

November 7, 2003


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