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

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

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

                   For the fiscal year ended December 31, 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                           (IRS Employer
of incorporation or organization)                     Identification No.)

           1 CIT Drive, Livingston, New Jersey                  07039
 (Address of registrant's principal executive offices)       (Zip Code)
       (Registrant's telephone number including area code): (973) 740-5000

                                   ----------

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

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

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

                                      None

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No ____.

     Indicate by check mark whether the  registrant is an  accelerated  filer as
defined in Rule 12b-2 of the Securities Exchange Act of 1934. Yes |X| No ____.

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. o

      The aggregate  market value of voting common stock held by  non-affiliates
of the registrant,  based on the New York Stock Exchange  Composite  Transaction
closing  price of Common Stock ($24.65 per share,  210,484,519  shares of common
stock  outstanding),  which occurred on June 30, 2003, was  $5,188,443,393.  For
purposes of this  computation,  all officers and directors of the registrant are
deemed to be  affiliates.  Such  determination  shall not be deemed an admission
that such officers and directors are, in fact, affiliates of the registrant.  At
February 17, 2004, 211,849,987 shares of CIT's common stock, par value $0.01 per
share, were outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

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

     Portions of the  registrant's  definitive  proxy statement  relating to the
2004 Annual Meeting of Stockholders  are incorporated by reference into Part III
hereof to the extent described herein.

                   See pages 105 to 109 for the exhibit index.



TABLE OF CONTENTS

 Form 10-K
 Item No.                          Name of Item                             Page
 --------                          ------------                             ----

                                     Part I

Item 1.    Business........................................................    1
Item 2.    Properties......................................................    8
Item 3.    Legal Proceedings...............................................    8
Item 4.    Submission of Matters to a Vote of Security Holders.............    8

                                     Part II

Item 5.    Market for Registrant's Common Equity and Related
             Stockholder Matters...........................................    9
Item 6.    Selected Financial Data.........................................   10
Item 7.    Management's Discussion and Analysis of Financial Condition
              and Results of Operations....................................   11
Item 7A.   Quantitative and Qualitative Disclosure about Market Risk.......   11
Item 8.    Financial Statements and Supplementary Data.....................   49
Item 9.    Changes in and Disagreements with Accountants on Accounting and
              Financial Disclosure.........................................  103
Item 9A.   Controls and Procedures.........................................  103

                                    Part III

Item 10.   Directors and Executive Officers of the Registrant..............  104
Item 11.   Executive Compensation..........................................  104
Item 12.   Security Ownership of Certain Beneficial Owners and Management..  104
Item 13.   Certain Relationships and Related Transactions..................  104
Item 14.   Principal Accountant Fees and Services..........................  104

                                     Part IV

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

Signatures ................................................................  110
Where You Can Find More Information........................................  111



                                     PART I

Item 1. Business

OVERVIEW

      CIT Group Inc., a Delaware corporation ("we," "CIT" or the "Company"),  is
a leading global  commercial and consumer finance  company.  Founded in 1908, we
provide  financing  and  leasing  capital  for  companies  in a wide  variety of
industries,   including  many  of  today's   leading   industries  and  emerging
businesses.  We offer vendor,  equipment,  commercial,  factoring,  consumer and
structured financing products.

      We have broad  access to  customers  and markets  through our  "franchise"
businesses.  Each  business  focuses on  specific  industries,  asset  types and
markets, with portfolios diversified by client, industry and geography.  Managed
assets were $49.7 billion, owned financing and leasing assets were $40.1 billion
and stockholders' equity was $5.4 billion at December 31, 2003.

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

      Transactions are generated  through direct calling efforts with borrowers,
lessees,  equipment  end-users,  vendors,  manufacturers  and  distributors  and
through referral sources and other  intermediaries.  In addition,  our strategic
business  units work  together in referring  transactions  to other CIT units to
best  meet  our  customers'  overall  financing  needs.  We also  buy  and  sell
participations  in and  syndications  of  finance  receivables  and/or  lines of
credit. From time to time, in the normal course of business, we purchase finance
receivables on a wholesale basis to supplement our  origination  volume and sell
certain  finance  receivables  and equipment  under  operating  leases to reduce
concentrations,  for other  balance  sheet  management  purposes,  or to improve
profitability.

      See page 7 for a glossary of key terms used by management in our business.

Business Segments

      We conduct our  operations  through  five  strategic  business  units that
market  products  and  services  that  satisfy the  financing  needs of specific
customers,  industries,  vendors/manufacturers,  and markets.  During 2003,  our
segment  reporting was modified and prior periods restated to reflect  Equipment
Finance  and  Capital  Finance  as  separate  segments.  Previously,  these  two
strategic  business  units were combined in the Equipment  Financing and Leasing
segment.   This  updated  presentation  is  consistent  with  the  reporting  to
management  and is intended  to  facilitate  the  analysis of our results by our
financial statement users. Our five business segments are as follows:

      o     Specialty  Finance  --  vendor  programs,   small-ticket  commercial
            lending and leasing,  consumer  home equity  lending and U.S.  Small
            Business Administration lending;

      o     Commercial  Finance  -- mid- to  large-ticket  asset-based  lending,
            factoring;

      o     Equipment  Finance -- diversified,  middle market equipment  lending
            and leasing;

      o     Capital  Finance -- commercial  aircraft and rail equipment  leasing
            and lending; and

      o     Structured  Finance  --  advisory  services,  including  transaction
            structuring,  other  specialized  investment  banking  services  and
            project and other large ticket asset-based financing.


                                       1


      The following  table  summarizes  the financing and leasing assets and the
managed assets of our business segments at December 31, 2003 ($ in billions):

                                     Financing and
                                     Leasing Assets           Managed Assets
                                  -------------------      -------------------
Specialty Finance ........        $  12.3       30.8%      $  18.7       37.8%
Commercial Finance .......           10.3       25.8%         10.3       20.8%
Equipment Finance ........            7.0       17.6%         10.2       20.6%
Capital Finance ..........            7.2       18.0%          7.2       14.5%
Structured Finance .......            3.1        7.8%          3.1        6.3%
                                  -------      ------      -------      ------
Total ....................        $  39.9      100.0%      $  49.5      100.0%
                                  =======      ======      =======      ======

Note: Amounts exclude Venture Capital/Equity Investments.

Specialty Finance Segment

      The  Specialty  Finance  Segment  financing  and  leasing  assets  include
small-ticket  commercial  financing and leasing assets,  vendor programs,  loans
guaranteed by the U.S.  Small Business  Administration  and consumer home equity
loans.  Also  included in the owned  financing  and  leasing  assets are certain
liquidating  portfolios,   which  include  manufactured  housing,   recreational
vehicles,  recreational  marine and wholesale  inventory  finance.  During 2003,
Equipment Finance transferred to Specialty Finance approximately $1.1 billion of
financing  and leasing  assets,  primarily  consisting of small  business  loans
guaranteed by the U.S. Small Business Administration.

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

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

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

      The home equity unit  primarily  originates,  purchases and services loans
secured  by  first  or  second  liens on  detached,  single-family,  residential
properties.  Products are both fixed and  variable-rate  closed-end  loans,  and
variable-rate lines of credit.  Customers borrow to consolidate debts, refinance
an existing mortgage,  fund home improvements,  pay education expenses and other
reasons.  Loans are originated  through brokers and  correspondents  with a high
proportion  of  home  equity  applications  processed  electronically  over  the
Internet via BrokerEdge,(SM) a proprietary  system.  Through experienced lending
professionals  and automation,  Specialty Finance provides rapid turnaround time
from application to loan funding, which is critical to broker relationships.


                                       2


      Specialty  Finance  occasionally  sells individual loans and portfolios of
loans to banks,  thrifts and other originators of consumer loans to maximize the
value of its origination network and to improve overall profitability.  Contract
servicing for securitization  trusts and other third parties is provided through
a centralized consumer Asset Service Center.  Commercial assets are serviced via
several  centers in the United  States,  Canada and  internationally.  Our Asset
Service Center centrally services and collects substantially all of our consumer
receivables,  including loans  originated or purchased by our Specialty  Finance
segment,  as well as loans originated or purchased and subsequently  securitized
with servicing  retained.  The servicing  portfolio also includes loans owned by
third parties that are serviced by our Specialty  Finance segment for a fee on a
"contract" basis. These third-party  portfolios totaled $3.2 billion at December
31, 2003.

Commercial Finance Segment

      We  conduct  our  Commercial  Finance  operations  through  two  strategic
business  units,  both of which focus on accounts  receivable and inventories as
the primary source of security for their lending transactions.

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

      o     Business  Credit  provides  secured  financing,  including  term and
            revolving  loans  based on asset  values,  as well as cash  flow and
            enterprise  value structures to a full range of borrowers from small
            to larger-sized companies.

Commercial Services

      Total financing and leasing assets were $6.3 billion at December 31, 2003,
or 15.8% of our total  financing and leasing assets and 12.7% of managed assets.
Commercial Services offers a full range of domestic and international customized
credit protection, lending and outsourcing services that include working capital
and term loans, factoring,  receivable management outsourcing, bulk purchases of
accounts receivable, import and export financing and letter of credit programs.

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

      Clients  use  Commercial  Services'  products  and  services  for  various
purposes,  including  improving  cash flow,  mitigating  or reducing the risk of
charge-offs,  increasing sales and improving  management  information.  Further,
with the TotalSource(SM) product, clients can outsource bookkeeping,  collection
and other  receivable  processing  activities.  These services are attractive to
industries outside the typical factoring markets.  Commercial Services generates
business regionally from a variety of sources,  including direct calling efforts
and  referrals  from  existing  clients  and other  referral  sources.  Accounts
receivable, operations and other administrative functions are centralized.

Business Credit

      Financing and leasing assets totaled $4.0 billion at December 31, 2003, or
9.8% of our total  financing  and  leasing  assets and 7.9% of  managed  assets.
Business Credit offers loan structures  ranging from  asset-based  revolving and
term loans secured by accounts receivable, inventories and fixed assets to loans
based  on  earnings  performance  and  enterprise   valuations  to  mid  through
larger-sized  companies.  Clients use such loans primarily for working  capital,
growth,  acquisitions,  debtor-in-possession  financing and debt restructurings.
Business Credit sells and purchases participation interests in such loans to and
from other lenders.


                                       3


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

      Business is originated regionally via solicitation activities focused upon
various types of intermediaries and referral sources. As a result of the current
economic  environment,  business volume has returned to more traditional working
capital  asset-based  lending  and  acquisition  financings  and away  from debt
restructuring activities. Business Credit maintains long-term relationships with
selected  banks,  finance  companies,  and  other  lenders  to both  source  and
diversify senior debt exposures.

Equipment Finance Segment

      The Equipment  Finance  Segment is a  diversified,  middle-market  secured
equipment  lender  with a  strong  market  presence  throughout  North  America.
Equipment  Finance provides  customized  financial  solutions for its customers,
which  include  manufacturers,   dealers,  distributors,   intermediaries,   and
end-users of equipment. Equipment Finance's financing and leasing assets include
a diverse mix of customers, industries, equipment types and geographic areas. In
2003, Equipment Finance transferred  approximately $1.1 billion in financing and
leasing assets to the Specialty Finance segment,  primarily  consisting of small
business loans guaranteed by the U.S. Small Business Administration.

      Primary products in Equipment Finance include loans, leases, wholesale and
retail  financing  packages,  operating  leases,   sale-leaseback  arrangements,
portfolio  acquisitions,  revolving  lines of credit  and  in-house  syndication
capabilities.  A core  competency for Equipment  Finance is assisting  customers
with  the  total  life-cycle   management  of  their  capital  assets  including
acquisition,  maintenance,  refinancing  and the eventual  liquidation  of their
equipment.   Equipment   Finance   originates   its  products   through   direct
relationships with manufacturers,  dealers,  distributors and intermediaries and
through  an  extensive  network of direct  sales  representatives  and  business
partners located throughout the United States and Canada.  Competitive advantage
is built  through an  experienced  staff that is both familiar with local market
factors  and   knowledgeable   about  the  industries   they  serve.   Operating
efficiencies  are realized  through  Equipment  Finance's two servicing  centers
located in Tempe,  Arizona,  and Burlington,  Ontario.  These offices  centrally
service and collect all loans and leases originated throughout the United States
and Canada.

      Equipment  Finance  is  organized  into  three  primary  operating  units:
Construction and Industrial, Specialized Industries and Canadian Operations. The
Construction and Industrial unit has provided  financing to the construction and
industrial  industries  in the  United  States for over  fifty  years.  Products
include  equipment loans and leases,  collateral and cash flow loans,  revolving
lines of  credit  and  other  products  that are  designed  to meet the  special
requirements of contractors,  distributors and dealers. The Specialized Industry
unit offers a wide range of  financial  products  and  services to  customers in
specialized  industries  such  as  corporate  aircraft,   healthcare,  food  and
beverage, gaming, sports, defense and security, mining and energy, and regulated
industries.  Equipment  Finance's Canadian unit has leadership  positions in the
construction, healthcare, printing, plastics and machine tool industries.

Capital Finance Segment

      Capital Finance  specializes in providing  customized  leasing and secured
financing primarily to end-users of commercial aircraft and railcars,  including
operating leases,  single investor leases,  equity portions of leveraged leases,
and sale and  leaseback  arrangements,  as well as loans  secured by  equipment.
Typical customers are major domestic and international airlines,  North American
railroad companies and middle-market to larger-sized companies.  New business is
generated  through  direct  calling  efforts,   supplemented  with  transactions
introduced  by  intermediaries  and  other  referral  sources.  Capital  Finance
utilizes special purpose entities ("SPEs") to record certain  structured leasing
transactions,  primarily aerospace leveraged leases. These SPEs are consolidated
in CIT's financial statements.

      Capital Finance has provided financing to commercial  airlines for over 30
years, and the commercial  aerospace portfolio includes most of the leading U.S.
and  foreign  commercial  airlines.  As of December  31,  2003,  the  commercial
aerospace  financing and leasing  portfolio  was $4.7 billion,  consisting of 84
accounts and 209 aircraft with an average age of approximately 6 years.


                                       4


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

      Capital  Finance has been  financing  the rail industry for over 25 years.
Its dedicated rail equipment group maintains  relationships with several leading
railcar manufacturers and calls directly on railroads and rail shippers in North
America.  The rail  portfolio,  which totaled $2.4 billion at December 31, 2003,
includes  leases to all of the U.S.  and Canadian  Class I railroads  (which are
railroads with annual revenues of at least $250 million) and numerous  shippers.
The operating lease fleet includes  primarily:  covered hopper cars used to ship
grain and agricultural  products,  plastic pellets and cement;  gondola cars for
coal,  steel coil and mill  service;  open hopper cars for coal and  aggregates;
center  beam flat cars for lumber;  and  boxcars  for paper and auto parts.  The
railcar  operating  lease  fleet is  relatively  young,  with an average  age of
approximately  seven years and approximately 85% (based on net investment) built
in 1994 or later.  The rail owned and serviced  fleet totals in excess of 55,000
railcars and approximately 500 locomotives.

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

Structured Finance Segment

      Structured Finance provides specialized investment banking services to the
international  corporate finance and institutional  finance markets by providing
asset-based financing for large-ticket asset acquisitions, project financing and
related  advisory  services  to  equipment  manufacturers,   corporate  clients,
regional  airlines,  governments  and  public  sector  agencies.  Communications
(including  telecommunication  and  media),  transportation,  and the  power and
utilities  sectors are among the  industries  that  Structured  Finance  serves.
Structured  Finance has a global  presence with operations in the United States,
Canada and Europe.

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

      Structured  Finance manages the direct private equity ($101.1 million) and
private fund venture  capital  ($148.8  million)  investment  portfolios,  which
totaled  $249.9  million at December 31, 2003. In our segment  reporting,  these
results  are  reflected  in  Corporate.  In 2001,  we ceased  making new venture
capital  investments beyond existing  commitments.  During the fourth quarter of
2003,  we  decided  to  accelerate  the  liquidation  of the  direct  investment
portfolio via sale. Accordingly,  in January 2004, we signed a purchase and sale
agreement to sell the direct private equity portfolio.

Other Segment and Concentration Data

      The  percentage  of total  segment  operating  margin  for the year  ended
December 31, 2003 by segment is as follows: Specialty Finance -- 48%, Commercial
Finance -- 30%,  Equipment  Finance -- 8%, Capital Finance -- 7%, and Structured
Finance -- 7%. For the year ended  December 31, 2003,  approximately  80% of our
revenues  were  derived  from  U.S.   financing  and  leasing   activities   and
approximately  20%  were  derived  from  international   financing  and  leasing
activities.  Further segment data, including certain income related balances, is
disclosed in "Item 8. Financial Statements and Supplementary Data," Note 21.


                                       5


      See "Item 8. Financial  Statements and Supplementary Data," Note 5 and the
"Concentrations"  section of "Item 7.  Management's  Discussion  and Analysis of
Financial  Condition and Results of Operations" and "Item 7A.  Quantitative  and
Qualitative  Disclosures  about  Market  Risk,"  for a  discussion  on  industry
concentration.

Competition

      Our  markets  are highly  competitive  with  factors  that vary based upon
product and  geographic  region.  Competitors  include  captive and  independent
finance companies,  commercial banks and thrift institutions,  industrial banks,
leasing  companies,  manufacturers and vendors.  Substantial  financial services
operations with global reach have been formed by bank holding,  leasing, finance
and insurance companies that compete with us. On a local level,  community banks
and smaller  independent finance and mortgage companies are a competitive force.
Some  competitors  have  substantial  local  market   positions.   Many  of  our
competitors are large companies that have substantial capital, technological and
marketing  resources.  Some of these  competitors are larger than we are and may
have access to capital at a lower cost than we do. Competition was enhanced by a
strong economy and growing marketplace  liquidity prior to 2001. During 2002 and
2001, the economy slowed and  marketplace  liquidity  tightened.  However,  that
trend shifted as the economy  showed signs of recovery  during 2003. The markets
for most of our products  are  characterized  by a large number of  competitors,
although the number of  competitors  has fallen in recent years as a consequence
of continued consolidation in the industry.

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

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

Regulation

      Our  operations are subject,  in certain  instances,  to  supervision  and
regulation by state,  federal and various foreign  governmental  authorities and
may be  subject  to  various  laws and  judicial  and  administrative  decisions
imposing various  requirements and restrictions,  which, among other things, (i)
regulate   credit  granting   activities,   including   establishing   licensing
requirements, if any, in various jurisdictions,  (ii) establish maximum interest
rates,  finance charges and other charges,  (iii) regulate customers'  insurance
coverages,   (iv)  require   disclosures   to  customers,   (v)  govern  secured
transactions, (vi) set collection, foreclosure, repossession and claims handling
procedures  and other trade  practices,  (vii)  prohibit  discrimination  in the
extension of credit and  administration of loans and (viii) regulate the use and
reporting of  information  related to a borrower's  credit  experience and other
data collection.  In addition,  (i) CIT Bank, a Utah industrial loan corporation
wholly owned by CIT, is subject to  regulation  and  examination  by the Federal
Deposit Insurance Corporation and the Utah Department of Financial Institutions,
(ii) CIT Small Business Lending Corporation, a Delaware corporation, is licensed
by and  subject  to  regulation  and  examination  by the  U.S.  Small  Business
Administration,  (iii) The Equipment  Insurance Company, a Vermont  corporation,
and Highlands  Insurance Company Limited, a Barbados company,  are each licensed
to enter  into  insurance  contracts  and are  regulated  by the  Department  of
Insurance  in  Vermont  and  Barbados,   respectively,   (iv)  various   banking
corporations  in  France,  Italy,  Belgium  and  Sweden,  are  each  subject  to
regulation and  examination by banking  regulators in its home country,  and (v)
various  broker-dealer  entities in Canada,  the United Kingdom,  and the United
States are each subject to regulation and  examination by securities  regulators
in its home country.

Employees

      CIT employed  approximately  5,800  people at December 31, 2003,  of which
approximately  4,480 were employed in the United States and approximately  1,320
were outside the United States.


                                       6


Glossary of Key Terms

Term                                   Description
--------------------------------------------------------------------------------
Average Earning Assets (AEA)........   "AEA" is the average during the reporting
                                       period of finance receivables,  operating
                                       lease equipment, finance receivables held
                                       for sale and  certain  investments,  less
                                       credit  balances  of  factoring  clients.
                                       Earning  assets are those  that  generate
                                       income, either interest or other revenue.
                                       The  average  is  used  for  certain  key
                                       profitability  ratios including return on
                                       AEA and margins as a percentage of AEA.

Average Finance Receivables (AFR)...   "AFR" is the average during the reporting
                                       period   of   finance   receivables   and
                                       includes  loans and  finance  leases.  It
                                       excludes  operating lease equipment.  The
                                       average  is used to  measure  the rate of
                                       charge-offs for the period.

Average Managed Assets (AMA)........   "AMA" is the average  earning assets plus
                                       the   average  of   finance   receivables
                                       previously  securitized and still managed
                                       by us. The average is used to measure the
                                       rate of  charge-offs  on a managed  basis
                                       for the period to monitor  overall credit
                                       performance,   and  to  monitor   expense
                                       control.

Derivative Contracts................   Derivatives  are  entered  into to reduce
                                       interest rate or foreign  currency risks.
                                       Derivative  contracts used by CIT include
                                       interest rate swaps, cross currency swaps
                                       and foreign exchange forward contracts.

Efficiency Ratio....................   The  efficiency  ratio measures the level
                                       of   expenses   in  relation  to  revenue
                                       earned,   and   is   calculated   as  the
                                       percentage   of   salaries   and  general
                                       operating  expenses to operating  margin,
                                       excluding   the   provision   for  credit
                                       losses.

Financing and Leasing Assets........   Financing  and  leasing   assets  include
                                       loans,   capital  and   finance   leases,
                                       leveraged   leases,   operating   leases,
                                       assets   held  for   sale   and   certain
                                       investments.

Leases -- capital and finance.......   Lease  designation  describing  financing
                                       structures  whereby  substantially all of
                                       the   economic   benefits  and  risks  of
                                       ownership are passed to the lessee.

Leases -- leveraged.................   Similar to capital  leases except a third
                                       party, long-term creditor is involved and
                                       provides debt financing.  CIT is party to
                                       these lease types as creditor and lessor.

Leases -- tax-optimized leverage....   Tax-optimized  leveraged leases, where we
                                       are the lessor,  have  increased  risk in
                                       comparison  to  other   leveraged   lease
                                       structures   as  the  creditor  in  these
                                       structures has a priority recourse to the
                                       leased equipment.

Leases -- operating.................   Lease  designation  where  CIT  maintains
                                       ownership  of the  asset,  collects  rent
                                       payments and recognizes  depreciation  on
                                       the asset.

Non-GAAP Financial Measures.........   Non-GAAP  financial measures are balances
                                       that do not  readily  agree  to  balances
                                       disclosed   in    financial    statements
                                       presented in accordance  with  accounting
                                       principles generally accepted in the U.S.
                                       These  measures are  disclosed to provide
                                       additional    information   and   insight
                                       relative to historical  operating results
                                       and financial position of the business.

Non-performing Assets...............   Non-performing   assets   include   loans
                                       placed  on  non-accrual  status,  due  to
                                       doubt of  collectibility of principal and
                                       interest, and repossessed assets.

Quality Spreads.....................   Interest  costs we incur on borrowings in
                                       excess of comparable  term U.S.  Treasury
                                       rates measured in percentage terms. These
                                       incremental  costs typically  reflect our
                                       debt credit ratings.

Retained Interest...................   The  portion  of the  interest  in assets
                                       sold in a securitization transaction that
                                       is retained by CIT.


                                       7


Term                                   Description
--------------------------------------------------------------------------------
Residual Values.....................   Residual  values  represent the estimated
                                       value  of  equipment  at  the  end of the
                                       lease term. For operating  leases,  it is
                                       the   value   to  which   the   asset  is
                                       depreciated  at the  end  of  its  useful
                                       economic  life (i.e.  "salvage" or "scrap
                                       value").

Risk Adjusted Margin................   Net finance  margin after  provision  for
                                       credit losses.

Special Purpose Entity (SPE)........   Distinct  legal  entities  created  for a
                                       specific purpose. SPEs are typically used
                                       in  securitization  transactions,   joint
                                       venture    relationships    and   certain
                                       structured leasing transactions.

Tangible Equity.....................   Tangible  stockholders'  equity  excludes
                                       goodwill and other intangible assets, and
                                       certain other comprehensive  income items
                                       and    includes     preferred     capital
                                       securities.  Tangible  equity is utilized
                                       in leverage ratios and return ratios.

Item 2. Properties

      CIT  operates  in  the  United  States,  Canada,  Europe,  Latin  America,
Australia and the Asia-Pacific  region.  CIT occupies  approximately 2.4 million
square feet of office space,  substantially all of which is leased.  Such office
space is suitable and adequate for our needs and we utilize, or plan to utilize,
substantially  all of our leased  office  space.  During 2003,  we purchased our
Livingston facility.

Item 3. 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
CIT's 2002 Initial Public Offering ("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.  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 were  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 in these actions.

      In addition,  there are various  legal  proceedings  pending  against CIT,
which have arisen in the ordinary course of business.  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 4. Submission of Matters to a Vote of Security Holders

      We did not submit any  matters to a vote of  security  holders  during the
three months ended December 31, 2003.


                                       8


                                     PART II

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

      Our common stock is listed on the New York Stock  Exchange.  The following
table sets forth the high and low  reported  sale prices for CIT's  common stock
for each of the quarterly periods in the two years ended December 31, 2003.

                                      2003                      2002
                              --------------------       -------------------
Common Stock Prices            High          Low          High         Low
-------------------           -------      -------       -------     -------
First Quarter ..............   $21.90      $16.61           N/A          N/A
Second Quarter .............   $24.65      $17.22           N/A          N/A
Third Quarter ..............   $30.10      $23.97        $23.80(1)    $17.98(1)
Fourth Quarter .............   $35.95      $29.50        $22.49       $13.95
--------------------------------------------------------------------------------
(1)   Prices  for the  period  from  July 2,  2002  (the  first  day of  trading
      subsequent to our IPO) through September 30, 2002.

      During the year ended December 31, 2003, for each of the four quarters, we
paid a dividend  of $0.12 per share for a total of $0.48 per  share.  This $0.12
per  share  quarterly  dividend  rate was  approved  by our  Board of  Directors
following  our July 2002 IPO and was paid  initially  on  November  27,  2002 to
shareholders  of record  on  November  15,  2002.  From June 2001  until the IPO
(during Tyco's ownership), there were no cash dividends on our common stock.

      During  January  2004,  our Board of  Directors  increased  the  quarterly
dividend to $0.13 per share.  Our dividend  practice is to pay a dividend  while
retaining a strong capital base. The declaration and payment of future dividends
are subject to the discretion of our Board of Directors. Any determination as to
the payment of  dividends,  including  the level of  dividends,  will depend on,
among other things, general economic and business conditions,  our strategic and
operational plans, our financial results and condition,  contractual,  legal and
regulatory  restrictions  on the  payment  of  dividends  by us,  and such other
factors as the Board of Directors may consider to be relevant.

      As of February 17, 2004, there were 86,541 beneficial owners of CIT common
stock.

      All equity  compensation  plans were approved by our  shareholders  during
2003, and are summarized in the following table.



                                                                                          Number of securities
                                                                                         remaining available for
                                               Number of securities                       future issuance under
                                                    to be issued      Weighted-average   equity compensation plans
                                                 upon exercise of     exercise price of    (excluding securities
                                               outstanding options   outstanding options  reflected in column (a))
                                               --------------------  ------------------- -------------------------
                                                         (a)                  (b)                  (c)
                                                                                       
Equity compensation plans approved
   by security holders ......................        18,766,824            $30.48               14,620,566


      We  had  no  equity   compensation   plans  that  were  not   approved  by
shareholders.  For further  information  on such plans,  including  the weighted
average exercise price, see Item 8. Financial Statements and Supplementary Data,
Note 16.


                                       9


Item 6. Selected Financial Data

      The following tables set forth selected consolidated financial information
regarding our results of operations and balance sheets. The data presented below
should be read in conjunction with Item 7. Management's  Discussion and Analysis
of Financial  Condition and Results of Operations and Item 7A.  Quantitative and
Qualitative  Disclosures about Market Risk and Item 8. Financial  Statements and
Supplementary Data.




                                    At or for     At or for                    At or for
                                    the Year      the Three   At or for the    the Nine     At or for the Years Ended
                                      Ended     Months Ended   Year Ended    Months Ended         December 31,
                                  December 31,  December 31,  September 30,  September 30,  --------------------------
                                      2003          2002          2002           2001           2000          1999
($ in millions,                   ------------  ------------  ------------   ------------   ------------   -----------
except per share data)             (successor)   (successor)   (successor)    (combined)    (predecessor) (predecessor)
----------------------
                                                                                           
Results of Operations
Net finance margin .............   $ 1,357.2       $ 354.4     $ 1,662.5      $ 1,318.8       $ 1,469.4      $ 917.4
Provision for credit losses ....       387.3         133.4         788.3          332.5           255.2        110.3
Operating margin ...............     1,829.2         478.1       1,806.5        1,558.9         2,126.2      1,157.9
Salaries and general operating
expenses .......................       942.3         242.1         946.4          794.5         1,035.2        516.0
Net income (loss) ..............       566.9         141.3      (6,698.7)(2)      263.3           611.6        389.4
Net income (loss) per
   share(1) --  diluted ........        2.66          0.67        (31.66)          1.24            2.89         1.84
Dividends per share(1) .........        0.48          0.12            --           0.25            0.50         0.31
Balance Sheet Data
Total finance receivables ......   $31,300.2     $27,621.3     $28,459.0      $31,879.4       $33,497.5    $31,007.1
Reserve for credit losses ......       643.7         760.8         777.8          492.9           468.5        446.9
Operating lease equipment, net..     7,615.5       6,704.6       6,567.4        6,402.8         7,190.6      6,125.9
Total assets ...................    46,342.8      41,932.4      42,710.5       51,349.3        48,689.8     45,081.1
Commercial paper ...............     4,173.9       4,974.6       4,654.2        8,869.2         9,063.5      8,974.0
Variable-rate bank credit
   facilities ..................          --       2,118.0       4,037.4             --              --           --
Variable-rate senior notes .....     9,408.4       4,906.9       5,379.0        9,614.6        11,130.5      7,147.2
Fixed-rate senior notes ........    19,830.8      19,681.8      18,385.4       17,113.9        17,571.1     19,052.3
Stockholders' equity ...........     5,394.2       4,870.7       4,757.8        5,947.6         6,007.2      5,554.4
Selected Data and Ratios
Profitability
Net income (loss) as a
   percentage of AEA ...........        1.58%         1.73%       (18.71)%         0.87%           1.50%        1.52%
Net income (loss) as a
   percentage of average tangible
   stockholders' equity ........        11.8%         12.5%       (160.0)%          8.5%           16.0%        14.2%
Net finance margin as a
   percentage of AEA ...........        3.79%         4.34%         4.64%          4.34%           3.61%        3.59%
Efficiency ratio ...............        42.5%         39.6%         36.5%          42.0%           43.8%        41.3%
Salaries and general operating
   expenses (excluding
   goodwill amortization) as
   a percentage of AMA .........        2.06%         2.18%         2.01%          2.09%           2.01%        1.75%



                                       10





                                    At or for     At or for                    At or for
                                    the Year      the Three   At or for the    the Nine     At or for the Years Ended
                                      Ended     Months Ended   Year Ended    Months Ended         December 31,
                                  December 31,  December 31,  September 30,  September 30,  --------------------------
                                      2003          2002          2002           2001           2000          1999
                                  ------------  ------------  ------------   ------------   ------------   -----------
($ in millions)                    (successor)   (successor)   (successor)    (combined)    (predecessor) (predecessor)
---------------
                                                                                              
Credit Quality
60+ days contractual
   delinquency as a percentage
   of finance receivables .......       2.16%         3.63%         3.76%         3.46%           2.98%         2.71%
Non-accrual loans as a
   percentage of finance
   receivables ..................       1.81%         3.43%         3.43%         2.67%           2.10%         1.65%
Net credit losses as a
   percentage of AFR ............       1.77%         2.32%         1.67%         1.20%           0.71%         0.42%
Reserve for credit losses as a
   percentage of finance
   receivables ..................       2.06%         2.75%         2.73%         1.55%           1.40%         1.44%
Other
Total managed assets ............  $49,735.6     $46,357.1     $47,622.3     $50,877.1       $54,900.9     $51,433.3
Tangible stockholders' equity
   to managed assets ............       10.4%         10.4%          9.9%          8.6%            7.8%          7.7%
Employees .......................      5,800         5,835         5,850         6,785           7,355         8,255


--------------------------------------------------------------------------------
(1)   Net income  (loss) and  dividend  per share  calculations  for the periods
      preceding  September 30, 2002 assume that common shares  outstanding  as a
      result of the July 2002 IPO (basic and diluted of 211.6  million and 211.7
      million) were outstanding during such historical periods.
(2)   Includes goodwill impairment charge of $6,511.7 million. See "Goodwill and
      Other  Intangible   Assets   Impairment  and   Amortization"  in  Item  7.
      "Management's  Discussion and Analysis of Financial  Condition and Results
      of Operations" for further information.

Note: See "Background -- 2002 IPO and Ownership Change" in Item 7. "Management's
Discussion and Analysis of Financial  Condition and Results of  Operations"  for
information regarding the presentation of selected financial data.

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

Introduction

      CIT is a global  commercial and consumer  finance company that was founded
in 1908.  We provide  financing  and  leasing  capital for  companies  in a wide
variety  of  industries,  offering  vendor,  equipment,  commercial,  factoring,
consumer, and structured financing products.

      Our primary  sources of revenue are interest and rental income  related to
collateralized  lending and equipment  leasing.  Finance  receivables (loans and
capital  leases) and operating lease  equipment  (operating  leases) are the two
major asset types that generate this revenue. In the case of finance receivables
(which are financial  assets),  the  substantive  risks and rewards of equipment
ownership have been transferred to the customer and we retain  predominantly the
borrower credit risk. With operating lease equipment,  we retain the substantive
risks and  rewards of  equipment  ownership.  We fund our  leasing  and  lending
activity via the global capital markets,  using commercial paper, unsecured term
debt,  and  securitizations.  We refer to the excess of our  interest and rental
income  over our  interest  expense as "net  finance  margin."  This  revenue is
supplemented by other "non-spread"  sources of revenue such as syndication fees,
gains from dispositions of equipment, factoring commissions,  servicing of loans
and other fees.

      We measure our overall level of profitability with the following metrics:

            o     Net income as a percentage of average earning assets (AEA);

            o     Net income per common share (EPS); and

            o     Net income as a percentage of average tangible equity (ROTE).


                                       11


      The keys to enhancing profitability in our business are as follows:

      Net Interest Margin -- Our ability to lend money at rates in excess of our
      cost of borrowing. We measure this with the following ratios:

            o     Finance  income as a  percentage  of  average  earning  assets
                  (AEA); and

            o     Net finance income as a percentage of AEA.

      Funding and Market Rate Risk  Management -- Our ability to access  funding
      sources at  competitive  rates,  which is dependent on the  maintenance of
      high quality assets,  strong capital ratios and high credit ratings.  This
      profitability  key is also a function  of interest  rate risk  management,
      where the goal is to  substantially  insulate  our  interest  margins  and
      profits  from  movements  in market  interest  rates and foreign  currency
      rates. We gauge our funding and interest rate risk  management  activities
      with various measurements, including the following:

            o     Interest expense as a percentage of AEA;

            o     Quality spread trends (our interest rate costs over comparable
                  term U.S. Treasury rates);

            o     Net finance margin as a percentage of AEA; and

            o     Various liquidity measurements that are discussed in Liquidity
                  Risk Management.

      Credit Risk Management -- Our ability to evaluate the  creditworthiness of
      our customers,  both during the credit granting  process and  periodically
      after the advancement of funds,  and to maintain high quality  assets.  We
      assess  our  credit  risk   management   activities   with  the  following
      measurements:

            o     Delinquent assets as a percentage of finance receivables;

            o     Non-performing  assets as a percentage of finance receivables;
                  and

            o     Net   charge-offs   as  a   percentage   of  average   finance
                  receivables.

      Expense  Management  --  Our  ability  to  maintain  efficient   operating
      platforms and  infrastructure  in order to run our business at competitive
      cost levels. We track our efficiency with the following measurements:

            o     Efficiency  ratio,  which is the ratio of salaries and general
                  operating expenses to operating margin excluding the provision
                  for credit losses; and

            o     Operating  expenses as a percentage of average  managed assets
                  (AMA).

      Equipment  and  Residual  Risk  Management  --  Our  ability  to  evaluate
      collateral  risk in  leasing  and  lending  transactions  and to  remarket
      equipment  at lease  termination.  We measure  these  activities  with the
      following:

            o     Operating  lease  margin as a  percentage  of  average  leased
                  equipment;

            o     Gains and losses on equipment sales; and

            o     Equipment utilization/value of equipment off lease.

      Asset  Generation  and Growth -- Our ability to originate new business and
      build our earning assets in a focused and prudent  manner.  We measure our
      performance in these areas with the following:

            o     Origination volumes;

            o     Levels of  financing  and leasing  assets and  managed  assets
                  (including finance receivables securitized that we continue to
                  manage); and

            o     Levels of non-spread and other revenue.

      Capital  Management  -- Our ability to maintain a strong  capital base and
      adequate credit loss reserve  levels.  We measure our performance in these
      areas with the following:

            o     Debt to tangible equity ratio;

            o     Tangible equity to managed assets ratio; and

            o     Reserve  for  credit   losses  as  a  percentage   of  finance
                  receivables,  of  delinquent  assets,  and  of  non-performing
                  assets.


                                       12


Profitability and Key Business Trends

      In 2003, we improved profitability with each successive quarter.  Improved
asset  quality,  lower  funding  costs  and  higher  asset  levels  led to  this
improvement.

      The  weak  economy  increased   defaults  and  put  downward  pressure  on
collateral  values in 2002,  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.
The  combination of these actions,  and some economic  improvement in the latter
part of 2003,  resulted in  significant  improvement  in our credit metrics over
recent quarters.

      We restored our funding  base and fully repaid our bank lines in 2003.  We
achieved  consistent  access to both the commercial  paper and term debt markets
and we benefited from the significant reduction 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.

      During  2003,  we focused on core  markets  served  through our  strategic
businesses.  Organic  growth  has been  modest,  consistent  with  the  economic
environment.  As a result, we have supplemented  growth with strategic portfolio
purchases that integrate well with our existing business  platforms and meet our
financial  return  requirements.  During the year ended  December 31,  2003,  we
completed the  acquisition of a railcar leasing  portfolio,  and the purchase of
two significant factoring portfolios.  Focused, prudent growth continues to be a
primary goal for 2004.

      We have  been  liquidating  several  non-strategic  product  lines.  These
include owner-operator trucking,  franchise,  manufactured housing, recreational
vehicle and inventory  finance  loans,  which totaled $1,173 million at December
31, 2003,  compared to $1,674 million at December 31, 2002 and $1,802 million at
September 30, 2002. Included in these balances are venture capital  investments.
During the fourth quarter of 2003, we decided to accelerate  the  liquidation of
the direct  investment  venture capital  portfolio via sale, which resulted in a
pre-tax fair value write-down of $63.0 million. We announced on January 15, 2004
that we signed a purchase and sale  agreement for the  disposition of the direct
investment  portfolio  at a price that  approximates  the December 31, 2003 book
value.

      Our profitability measurements for the respective periods are presented in
the table below:



                                               Year      Three Months        Year         Nine Months
                                               Ended         Ended           Ended           Ended
                                           December 31,  December 31,    September 30,   September 30,
                                               2003          2002            2002            2001
                                           ------------  ------------    -------------   -------------
                                                                                 
Net income per diluted share(1) .........     $2.66         $0.67          $(31.66)          $1.24
Net income as a percentage of AEA .......      1.58%         1.73%          (18.71%)          0.87%
Return on average tangible equity .......      11.8%         12.5%          (160.0%)           8.5%

--------------------------------------------------------------------------------
(1)   Earnings  per  diluted  share   calculations  for  the  periods  preceding
      September  30, 2002 assume that diluted  common  shares  outstanding  as a
      result of the July 2002 IPO ($211.7 million) were outstanding  during such
      historical periods.

      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. During 2003,
we recognized a gain on the  redemption of certain debt  instruments  and took a
charge to write-down certain direct private equity investments to estimated fair
value following our decision to accelerate the liquidation of this portfolio via
a sale. In 2002 and 2001, we took specific  reserving actions and recorded other
charges.  These transactions are significant,  and the exclusion thereof aids in
the  analysis of results  over the periods  presented.  The adoption of SFAS No.
142, "Goodwill and Other Intangible Assets" in October 2001 eliminated  goodwill
amortization and introduced goodwill  impairment charges.  The impairment charge
in the period ended  September 30, 2002 was a non-cash


                                       13


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):



                                                        Year      Three Months        Year         Nine Months
                                                        Ended         Ended           Ended           Ended
                                                    December 31,  December 31,    September 30,   September 30,
                                                        2003          2002            2002            2001
                                                    ------------  ------------    -------------   -------------
                                                                                         
Net income/(loss) GAAP basis ......................   $566.9         $141.3         $(6,698.7)       $263.3
Charges/(gains) included in net income/loss
  Venture capital losses/(gains) ..................     53.9            3.9              25.0          (3.7)
  Gain on debt redemption .........................    (30.8)            --                --            --
  Goodwill impairment .............................       --             --           6,511.7            --
  Goodwill amortization ...........................       --             --                --          92.5
  Specific reserving actions and other charges ....       --             --             220.1         158.0
  TCH losses ......................................       --             --             723.5          70.5
                                                      ------         ------         ---------        ------
Net Income -- before charges/gains ................   $590.0         $145.2         $   781.6        $580.6
                                                      ======         ======         =========        ======


      This  "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.  The sections that follow analyze our
results  by  financial   statement  caption  and  are  referenced  back  to  the
profitability keys that are discussed in "Introduction."

Net Finance Margin

      An analysis of net finance margin is set forth below ($ in millions):



                                                        Year      Three Months        Year         Nine Months
                                                        Ended         Ended           Ended           Ended
                                                    December 31,  December 31,     September 30,  September 30,
                                                        2003          2002            2002            2001
                                                    ------------  ------------     -------------  -------------
                                                                                        
Finance income ..................................    $ 3,729.5      $   971.7       $ 4,342.8       $ 3,975.3
Interest expense ................................      1,319.3          340.0         1,439.3         1,619.8
                                                     ---------      ---------       ---------       ---------
  Net finance income ............................      2,410.2          631.7         2,903.5         2,355.5
Depreciation on operating lease equipment .......      1,053.0          277.3         1,241.0         1,036.7
                                                     ---------      ---------       ---------       ---------
  Net finance margin ............................    $ 1,357.2      $   354.4       $ 1,662.5       $ 1,318.8
                                                     =========      =========       =========       =========
Average Earnings Asset ("AEA") ..................    $35,813.4      $32,693.2       $35,796.4       $40,442.0
                                                     =========      =========       =========       =========
As a % of AEA:
Finance income ..................................        10.41%         11.89%          12.13%          13.10%
Interest expense ................................         3.68%          4.16%           4.02%           5.34%
                                                     ---------      ---------       ---------       ---------
  Net finance income ............................         6.73%          7.73%           8.11%           7.76%
Depreciation on operating lease equipment .......         2.94%          3.39%           3.47%           3.42%
                                                     ---------      ---------       ---------       ---------
  Net finance margin ............................         3.79%          4.34%           4.64%           4.34%
                                                     =========      =========       =========       =========


      We utilize  these  ratios and trends to assess our funding and market risk
management  activities.  Finance income for 2003 reflected the continued decline
in market interest rates.  However,  interest  expense did not decline  directly
with the  corresponding  drop in  market  interest  rates due to the use of bank
lines (drawn in 2002) for part of 2003, term debt issued in 2002 at wider credit
spreads  and excess cash  maintained  for  liquidity  purposes.  Therefore,  net
finance margin as percentage of AEA decreased in 2003 from the prior periods.

      Finance  income  (interest on loans and lease  rentals) as a percentage of
AEA declined in each period since 2001.  This  primarily  reflected  the drop in
U.S.  treasury rates of approximately 275 basis points from the first quarter of
2002 through the second quarter of 2003.  Reduced  operating  lease rentals,  as
discussed further below, also contributed to the decline.

      Interest  expense as a percentage of AEA also declined  since 2001, as the
favorable  impact of lower market  interest rates was partially  offset by wider
borrowing  spreads and the resultant  higher cost of funding done


                                       14


following  the funding base  disruption.  At December 31, 2003,  $4.2 billion in
outstanding commercial paper was fully supported by undrawn bank facilities.  At
December 31, 2002,  September 30, 2002 and September 30, 2001,  commercial paper
outstanding was $5.0 billion, $4.7 billion and $8.9 billion, respectively, while
drawn   commercial   bank  lines  were  $2.1  billion,   $4.0  billion  and  $0,
respectively.

      Net finance  margin as a percentage of AEA improved  modestly in 2002 over
2001,  as the  benefit of a number of positive  factors  were  mitigated  by the
impact of wider  credit  spreads  and the other  factors  mentioned  above  that
followed  the  2002  funding  base  disruption  and  continued  into  2003.  The
liquidation or disposal of non-strategic and under-performing  businesses, lower
leverage and the effect of fair value adjustments in the new basis of accounting
(recorded as adjustments  to goodwill) to reflect market  interest rates on debt
and assets were among the  positive  factors.  AEA  declined  during 2002 due to
increased  securitization  activity,  the runoff of  non-strategic,  liquidating
portfolios  and the slower  economy,  while the  renewed  focus on asset  growth
during the current year led to the increase in AEA led to the 2003 increase.

      The  following  table  summarizes  the  trend in our  quality  spreads  in
relation to 5-year U.S.  treasuries.  Amounts are in basis points and  represent
the  average  spread  or  cost of  funds  over  comparable  term  U.S.  Treasury
securities:



                                         Year       Three Months      Year         Nine Months        Year
                                         Ended          Ended         Ended           Ended           Ended
                                     December 31,   December 31,  September 30,   September 30,   December 31,
                                         2003           2002          2002            2001            2000
                                     ------------   ------------  -------------   -------------   ------------
                                                                                         
Average spread over
  U.S. Treasuries .................      138            302            313             147              154


      Since our 2002 IPO, we have  readily  accessed the term  markets,  issuing
$17.0 billion in term debt,  comprised of $9.5 billion in floating-rate debt and
$7.5 billion in fixed-rate debt. As the table shows, our borrowing  spreads have
recently returned to near historical  levels. The funding base disruption in the
first  half of 2002  resulted  in a period of  increased  funding  cost with our
borrowing spreads being higher than traditionally experienced.

      On February 13, 2004, we issued $750 million of 10-year senior  fixed-rate
notes at 103 basis points over U.S. Treasuries.

Operating Leases

      The table below summarizes operating lease margin, both in amount and as a
percentage of average operating lease equipment ($ in millions):




                                                        Year      Three Months        Year         Nine Months
                                                        Ended         Ended           Ended           Ended
                                                    December 31,  December 31,    September 30,   September 30,
                                                        2003          2002            2002            2001
                                                    ------------  ------------    -------------   -------------
                                                                                         
Rental income ...................................     $1,480.3       $  389.7        $1,733.4        $1,473.1
Depreciation expense ............................      1,053.0          277.3         1,241.0         1,036.7
                                                      --------       --------        --------        --------
  Operating lease margin ........................     $  427.3       $  112.4        $  492.4        $  436.4
                                                      ========       ========        ========        ========
Average operating lease equipment ...............     $7,241.1       $6,605.0        $6,554.8        $7,114.6
                                                      ========       ========        ========        ========
As a % of Average Operating
Lease Equipment:
Rental income ...................................         20.4%          23.6%           26.4%           27.6%
Depreciation expense ............................         14.5%          16.8%           18.9%           19.4%
                                                      --------       --------        --------        --------
Operating lease margin ..........................          5.9%           6.8%            7.5%            8.2%
                                                      ========       ========        ========        ========


      These trends and ratios are  measurements of our equipment risk management
activities.  The decline in operating  lease margin and its  components  for the
above  periods  reflects  lower  rentals on the  aerospace  portfolio due to the
commercial  airline industry  downturn and the simultaneous  change in equipment
mix to a  greater  proportion  of  aircraft  and  rail  assets  with an  average
depreciable life of 25 and 40 years,  respectively,  from smaller-ticket  assets
with lives generally of 3 years in the Specialty  Finance and Equipment  Finance
portfolios.


                                       15


      The following  table  summarizes the total  operating  lease  portfolio by
segment ($ in millions).



                                          December 31,  December 31,    September 30,  September 30,
                                              2003           2002            2002           2001
                                          ------------  ------------    ------------    ------------
                                                                               
Capital Finance -- Aerospace ...........    $4,011.7       $3,129.8        $2,949.6        $1,968.6
Capital Finance -- Rail and Other ......     2,092.1        1,590.1         1,439.3         1,303.8
Specialty Finance ......................       959.5        1,257.3         1,353.2         1,796.1
Equipment Finance ......................       419.6          668.3           765.8         1,281.7
Structured Finance .....................       132.6           59.1            59.5            52.6
                                            --------       --------        --------        --------
Total ..................................    $7,615.5       $6,704.6        $6,567.4        $6,402.8
                                            ========       ========        ========        ========


      o     The increases in the Capital Finance  aerospace  portfolio  reflects
            deliveries of new commercial aircraft.

      o     The  increase in Capital  Finance  rail assets in 2003 was due to an
            acquisition.

      o     The  declines  in  the  Specialty   Finance  and  Equipment  Finance
            operating  lease  portfolios  are a result  of the  continued  trend
            toward financing equipment through finance leases and loans in these
            segments.

      o     The 2003 Structured  Finance  increase was primarily in the regional
            aerospace portfolio.

      Management  strives to maximize the  profitability  of the lease equipment
portfolio by balancing equipment utilization levels with market rental rates and
lease terms.  Equipment not subject to lease agreements  totaled $265.9 million,
$385.9 million,  and $267.3 million at December 31, 2003 and 2002, and September
30, 2002, respectively. The higher December 31, 2002 off lease equipment balance
primarily  reflects the higher level of commercial  aircraft and rail assets off
lease in Capital  Finance at that time.  The current  weakness in the commercial
airline  industry and the slower  economy  could  adversely  impact  prospective
rental and utilization rates.

Net Finance Margin after Provision for Credit Losses (Risk Adjusted Margin)

      The following table summarizes risk adjusted margin, both in amount and as
a percentage of AEA ($ in millions):




                                              Year      Three Months        Year         Nine Months
                                              Ended         Ended           Ended           Ended
                                          December 31,  December 31,    September 30,   September 30,
                                              2003          2002            2002            2001
                                          ------------  ------------    -------------   -------------
                                                                              
Net Finance Margin ....................    $ 1,357.2        $ 354.4       $ 1,662.5       $ 1,318.8
Provision for credit losses ...........        387.3          133.4           788.3           332.5
                                           ---------        -------       ---------       ---------
  Risk adjusted margin ................    $   969.9        $ 221.0       $   874.2       $   986.3
                                           =========        =======       =========       =========
As a percentage of AEA:
Net Finance Margin ....................         3.79%          4.34%           4.64%           4.34%
Provision for credit losses ...........         1.08%          1.64%           2.20%           1.09%
                                           ---------        -------       ---------       ---------
Risk Adjusted Margin ..................         2.71%          2.70%           2.44%           3.25%
                                           =========        =======       =========       =========


      Excluding the additional credit  provisions in 2002 to establish  reserves
for the  telecommunications  and Argentine exposures,  and certain 2001 specific
telecommunication  provisions,  risk adjusted  margin as a percentage of AEA was
3.38% for the twelve months ended September 30, 2002, and 3.54% for the combined
nine months ended September 30, 2001. On this basis, the trend down to 2.71% for
the full year 2003  primarily  reflects  the  previously  discussed  net finance
margin trends.

      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  were 2 basis points for the year ended  December 31, 2003,  13 basis
points for the three  months ended  December  31, 2002,  13 basis points for the
year ended  September 30, 2002,  and 5 basis points for the combined nine months
ended  September  30,  2001.  In  addition,  risk-adjusted  interest  margin was
impacted  positively due to fair value  adjustments to mark receivables


                                       16


and debt to market in conjunction  with the Tyco acquisition by approximately 14
basis points for the year ended December 31, 2003, 38 basis points for the three
months  ended  December 31,  2002,  45 basis points for the twelve  months ended
September  30,  2002 and 16 basis  points for the  combined  nine  months  ended
September 30, 2001.

Other Revenue

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



                                                        Year      Three Months        Year         Nine Months
                                                        Ended         Ended           Ended           Ended
                                                    December 31,  December 31,    September 30,   September 30,
                                                        2003          2002            2002            2001
                                                    ------------  ------------    -------------   -------------
                                                                                         
Fees and other income ..........................      $586.2         $169.2            $644.5        $387.2
Factoring commissions ..........................       189.8           55.1             165.5         111.9
Gains on securitizations .......................       100.9           30.5             149.0          97.7
Gains on sales of leasing equipment ............        70.7            8.7              13.6          47.9
Other charges ..................................          --             --                --         (78.1)(1)
                                                      ------         ------            ------        ------
  Total ........................................      $947.6         $263.5            $972.6        $566.6
                                                      ======         ======            ======        ======
Total Other Revenue as % of AEA ................        2.65%          3.22%             2.72%         1.87%
                                                      ======         ======            ======        ======


(1)   Includes  $19.6  million  of  write-downs   relating  to  venture  capital
      investments.

      The   following   table   presents   information    regarding   gains   on
securitizations ($ in millions):



                                                        Year      Three Months        Year         Nine Months
                                                        Ended         Ended           Ended           Ended
                                                    December 31,  December 31,    September 30,   September 30,
                                                        2003          2002            2002            2001
                                                    ------------  ------------    -------------   -------------
                                                                                      
Total volume securitized(1) ......................    $5,320.2       $1,189.3        $7,668.5        $3,293.3
Gains ............................................    $  100.9       $   30.5        $  149.0        $   97.7
Gains as a percentage of volume securitized ......        1.90%          2.57%           1.94%           2.97%
Gains as a percentage of pre-tax income ..........        10.8%          12.9%           16.9%           15.7%

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

      We continue to emphasize growth and diversification of other revenues to
improve our overall profitability.

      o     Fees and other income include  servicing fees,  miscellaneous  fees,
            syndication  fees and gains  from  asset  sales.  For the year ended
            December 31, 2003, fees and other income,  while still strong in our
            Commercial  Finance  segment,  were derived  from more  traditional,
            smaller working capital asset-based lending facilities and less from
            the larger-ticket  debtor in possession  lending that drove the 2002
            activity.

      o     Higher factoring  commissions than in the prior periods reflect both
            higher volume and higher  commission  rates,  as well as some impact
            from one of the two large  acquisitions  completed during the second
            half of the year.

      o     Securitization   volume,   including  consumer  home  equity  loans,
            increased in 2002 to meet funding and liquidity needs. We have since
            returned to more normal securitization levels and have de-emphasized
            securitizing   home   equity   loans  in   light   of  lower   cost,
            on-balance-sheet    funding.   We   continue   to   target   maximum
            securitization gains at 15% of pretax income.

      o     Gains on sales of equipment  improved  sharply from prior periods as
            we saw  firming  of  prices  during  the year,  particularly  in the
            mid-ticket equipment and rail portfolios.

      o     Other  charges in 2001,  consisting  of  write-downs  for other than
            temporary   impairment  of  certain   equity   investments   in  the
            telecommunications industry and e-commerce markets, were recorded as
            reductions to other revenue.

Losses on Venture Capital Investments

      During  the  fourth   quarter  of  2003,  we  decided  to  accelerate  the
liquidation of the venture capital direct investment  portfolio and marketed the
portfolio to prospective buyers. The resulting  indications of value contributed
to a pre-tax fair value write-down of $63.0 million. We announced on January 15,
2004,  that we signed


                                       17


a purchase and sales  agreement  for the  disposition  of the direct  investment
portfolio at an amount  approximating  the carrying  value at December 31, 2003.
Losses on venture  capital  investments  also  include  realized  losses on both
direct  investments  and  venture  capital  fund  investments  for  all  periods
presented.

Gain on Redemption of Debt

      We had  $1.25  billion  of term  debt  securities  outstanding  that  were
callable at par in December  2003 and January  2004.  These notes were 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  carried 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 called the securities  for redemption  pursuant to
the terms  outlined  in the  prospectuses.  The  December  call of $735  million
resulted in a pretax gain of $50.4 million  ($30.8  million after tax), as these
securities  had been adjusted to reflect  market  interest  rates in conjunction
with the June  2001 new  basis of  accounting.  The call of the  remaining  $512
million on January  15,  2004  resulted  in an  additional  pretax gain of $41.8
million ($25.5 million after tax),  which will be reflected in the first quarter
2004 results.

Provision for Credit Losses

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



                                                        Year      Three Months        Year         Nine Months
                                                        Ended         Ended           Ended           Ended
                                                    December 31,  December 31,    September 30,   September 30,
                                                        2003          2002            2002            2001
                                                    ------------  ------------    -------------   -------------
                                                                                         
Balance beginning of period .......................   $760.8         $777.8          $492.9          $468.5
                                                      ------         ------          ------          ------
Provision for credit losses .......................    408.8          133.4           453.3           243.0
Provision for credit losses -- specific
   reserving actions(1) ...........................    (21.5)            --           335.0            89.5
Reserves relating to dispositions,
   acquisitions, other ............................     17.5            4.1           (11.1)          (16.3)
                                                      ------         ------          ------          ------
   Additions to reserve for credit losses, net ....    404.8          137.5           777.2           316.2
                                                      ------         ------          ------          ------
Net credit losses:
Specialty Finance -- commercial ...................    110.5           23.2            80.3            57.0
Specialty Finance -- Argentina ....................    101.0             --              --              --
Commercial Finance ................................     74.1           33.5            88.2            38.9
Equipment Finance .................................    125.7           69.8           258.8            82.6
Capital Finance ...................................     13.1            1.3             0.1             0.2
Structured Finance ................................     42.0           15.5            18.5            64.8
Specialty Finance -- consumer .....................     55.5           11.2            46.4            48.3
                                                      ------         ------          ------          ------
   Total net credit losses ........................    521.9          154.5           492.3           291.8
                                                      ------         ------          ------          ------
Balance end of period .............................   $643.7         $760.8          $777.8          $492.9
                                                      ======         ======          ======          ======
Reserve for credit losses as a percentage
   of finance receivables .........................     2.06%          2.75%           2.73%           1.55%
                                                      ======         ======          ======          ======
Reserve for credit losses as a percentage
of past due receivables (60 days or more)(2) ......     95.2%          76.0%           72.7%           44.7%
                                                      ======         ======          ======          ======
Reserve for credit losses as a percentage
   of non-performing assets(3) ....................     95.2%          70.1%           68.2%           50.8%
                                                      ======         ======          ======          ======

--------------------------------------------------------------------------------
(1)   The specific  reserving  actions for the twelve months ended September 30,
      2002 consist of provisions relating to telecommunications ($200.0 million)
      and Argentine  exposures ($135.0  million),  while the action for the nine
      months   ended   September   30,  2001   consists   of  a  provision   for
      under-performing  loans and leases,  primarily  in the  telecommunications
      portfolio. The ($21.5) provision in 2003 reflects the transfer of specific
      Argentine reserves to other portfolio reserves.

(2)   The reserve for credit losses as a percentage of past due  receivables (60
      days or more),  excluding  telecommunication  and  Argentine  reserves and
      corresponding  delinquencies,  was 80.6% at December  31,  2003,  49.0% at
      December 31, 2002 and 45.3% at September 30, 2002.

(3)   The reserve for credit  losses as a percentage of  non-performing  assets,
      excluding  telecommunication  and  Argentine  reserves  and  corresponding
      non-performing  assets,  was 84.7% at December 31, 2003, 48.9% at December
      31, 2002 and 47.2% at September 30, 2002.


                                       18


      The decreased  provision for the year ended  December 31, 2003 in relation
to 2002 reflects lower  charge-offs  (excluding  Argentina) and improving credit
metrics.  The increased provision for the year ended September 30, 2002 reflects
higher  charge-off  levels and  reserving  actions  relating to exposures in the
telecommunications  portfolio  ($200  million  primarily  to  Competitive  Local
Exchange Carriers ("CLECs"), and our Argentine exposure ($135 million,  detailed
further  below).  The 2001  provision  includes a provision for credit losses of
$89.5 million relating to the impairment of certain  under-performing  equipment
leasing   and   loan   portfolios,   primarily   in   the   Structured   Finance
telecommunications  portfolio.

Net Charge-offs

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



                                     Year Ended      Three Months Ended      Year Ended       Nine Months Ended
                                  December 31, 2003   December 31, 2002  September 30, 2002  September 30, 2001
                                  -----------------   -----------------  ------------------  ------------------
                                                                                 
Specialty Finance-commercial ....  $110.5   1.59%     $ 23.2     1.55%     $ 80.3    1.26%     $ 57.0    1.11%
Specialty Finance-Argentina .....   101.0  75.07%         --       --          --      --          --      --
                                   ------             ------               ------              ------
  Total Specialty Finance-
    commercial .................   211.5   2.98%       23.2     1.55%       80.3    1.26%       57.0    1.11%
Commercial Finance ..............    74.1   0.80%       33.5     1.92%       88.2    1.13%       38.9    0.66%
Equipment Finance ...............   125.7   2.03%       69.8     3.78%      258.8    2.97%       82.6    1.07%
Capital Finance .................    13.1   1.06%        1.3     0.37%        0.1    0.01%        0.2    0.02%
Structured Finance ..............    42.0   1.44%       15.5     2.24%       18.5    0.75%       64.8    4.40%
                                   ------             ------               ------              ------
  Total Commercial Segments .....   466.4   1.75%      143.3     2.33%      445.9    1.65%      243.5    1.13%
Specialty Finance-consumer ......    55.5   2.01%       11.2     2.24%       46.4    1.78%       48.3    1.72%
                                   ------             ------               ------              ------
Total ...........................  $521.9   1.77%     $154.5     2.32%     $492.3    1.67%     $291.8    1.20%
                                   ======             ======               ======              ======


      The  2003  charge-offs  include  a  $101.0  million  Argentine  write-off,
reflecting  the  substantial  progress of collection and work out efforts in the
Argentine  portfolio.  Excluding  Argentina,  charge-offs  were  1.44% for 2003,
reflecting improvements in Equipment Finance and Commercial Finance.

      o     The increased Capital Finance  charge-offs were primarily the result
            of an $11.3 million charge-off recorded to write down the value of a
            waste-to-energy  project  following  bankruptcy  proceedings and the
            renegotiation of the related contracts.

      o     The  Structured  Finance  charge-offs   continue  to  be  driven  by
            telecommunication charge-offs.

      The higher loss rates in the  Commercial  Finance  segment in 2002 reflect
charge-offs  associated  with several loan work-outs due to the weaker  economic
trends.  The higher net charge-off  percentages for the year ended September 30,
2002 in relation to 2001 also reflect higher  charge-off  rates  associated with
receivables  in liquidation  status,  which  included  owner-operator  trucking,
franchise,  inventory  finance,  manufactured  housing and recreational  vehicle
receivables, as well as charge-offs in the telecommunications portfolio.

      Net  charge-offs,  both in amount and as a percentage  of average  finance
receivables,  are  shown  in  total  and  for  the  Argentine,  liquidating  and
telecommunication portfolios in the following tables ($ in millions):



                                                     Year Ended December 31, 2003
                                        --------------------------------------------------------
                                                          Before Argentina,       Argentina,
                                                           Liquidating and      Liquidating and
                                             Total        Telecommunications  Telecommunications
                                        -------------     ------------------  ------------------
                                                                       
Specialty Finance-commercial ........   $211.5   2.98%      $108.8   1.56%     $102.7    73.33%
Commercial Finance ..................     74.1   0.80%        69.4   0.75%        4.7    36.43%
Equipment Finance ...................    125.7   2.03%        94.8   1.62%       30.9     8.34%
Capital Finance .....................     13.1   1.06%        13.1   1.06%         --       --
Structured Finance ..................     42.0   1.44%         2.9   0.14%       39.1     5.01%
                                        ------              ------             ------
   Total Commercial Segments ........    466.4   1.75%       289.0   1.14%      177.4    13.60%
Specialty Finance-consumer ..........     55.5   2.01%        30.2   1.54%       25.3     3.15%
                                        ------              ------             ------
Total ...............................   $521.9   1.77%      $319.2   1.17%     $202.7     9.62%
                                        ======              ======             ======



                                       19





                                                  Three Months Ended December 31, 2002
                                        --------------------------------------------------------
                                                          Before Argentina,       Argentina,
                                                           Liquidating and      Liquidating and
                                             Total        Telecommunications  Telecommunications
                                        -------------     ------------------  ------------------
                                                                       
Specialty Finance-commercial ........   $ 23.2   1.55%      $ 21.2   1.42%     $  2.0    36.36%
Commercial Finance ..................     33.5   1.92%        33.5   1.92%         --       --
Equipment Finance ...................     69.8   3.78%        56.5   3.32%       13.3     9.25%
Capital Finance .....................      1.3   0.37%         1.3   0.37%         --       --
Structured Finance ..................     15.5   2.24%          --     --        15.5     8.75%
                                        ------              ------             ------
   Total Commercial Segments ........    143.3   2.33%       112.5   1.93%       30.8     9.44%
Specialty Finance-consumer ..........     11.2   2.24%         6.1   2.11%        5.1     2.42%
                                        ------              ------             ------
   Total ............................   $154.5   2.32%      $118.6   1.94%     $ 35.9     6.68%
                                        ======              ======             ======






                                                         Year Ended September 30, 2002
                                        --------------------------------------------------------
                                                          Before Argentina,       Argentina,
                                                           Liquidating and      Liquidating and
                                             Total        Telecommunications  Telecommunications
                                        -------------     ------------------  ------------------
                                                                       
Specialty Finance-commercial ........   $ 80.3   1.26%      $ 70.7   1.14%     $  9.6     5.62%
Commercial Finance ..................     88.2   1.13%        88.2   1.13%         --       --
Equipment Finance ...................    258.8   2.97%       168.5   2.22%       90.3     8.02%
Capital Finance .....................      0.1   0.01%         0.1   0.01%         --       --
Structured Finance ..................     18.5   0.75%         0.1   0.01%       18.4     2.78%
                                        ------              ------             ------
   Total Commercial Segments ........    445.9   1.65%       327.6   1.31%      118.3     6.04%
Specialty Finance-consumer ..........     46.4   1.78%        24.4   1.33%       22.0     2.86%
                                        ------              ------             ------
   Total ............................   $492.3   1.67%      $352.0   1.32%     $140.3     5.15%
                                        ======              ======             ======


Reserve for Credit Losses

      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):



                            December 31, 2003     December 31, 2002    September 30, 2002    September 30, 2001
                           -------------------   -------------------   -------------------   -------------------
                            Amount       %        Amount       %        Amount       %        Amount       %
                           --------- ---------   --------- ---------   --------- ---------   --------- ---------
                                                                                 
Finance receivables ......   $524.6    1.71%       $472.2    1.77%       $473.7    1.72%       $492.9    1.55%
Telecommunications .......    106.6   19.16%(1)     153.6   22.40%(1)     169.1   24.77%(1)        --      --%
Argentina ................     12.5   55.07%(2)     135.0   73.11%(2)     135.0   71.85%(2)        --      --%
                             ------                ------                ------                ------
Total ....................   $643.7    2.06%       $760.8    2.75%       $777.8    2.73%       $492.9    1.55%
                             ======                ======                ======                ======

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

(2) Percentage of finance receivables in Argentina.

      The decline in the reserve for credit losses at December 31, 2003, in both
amount  and  percentage,  from  the  2002  periods  was  due  to  Argentine  and
telecommunication portfolio charge-offs.

      The changes in percentages of reserves to finance  receivables  during the
periods shown in the above table reflects the weakening economic  conditions and
deteriorating  internal credit metrics in 2002 followed by improvements in 2003.
The  increase  to $524.6  million in the  finance  receivables  reserve in total
dollars during 2003 reflects portfolio growth during the current year.

Reserve for Credit Losses -- Finance Receivables

      The reserve for credit losses is determined  based on 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) reserves for general  economic
environment and other factors.


                                       20


      The reserve includes specific reserves relating to impaired loans of $66.4
million at December 31, 2003, $52.9 million at December 31, 2002, $109.0 million
at September 30, 2002 and $122.3  million at September 30, 2001.  The changes in
the  inherent  estimated  loss and  estimation  risk  components  of the reserve
reflect trends in our key credit metrics as mentioned above.

      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.  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. Based on currently available information,
management believes that our total reserve for credit losses is adequate.

Reserve for Credit Losses -- Telecommunications

      In light of the continued deterioration in the telecommunications  sector,
particularly with respect to our CLEC portfolio,  we added $200.0 million to the
reserve  for credit  losses  during the  quarter  ended  June 30,  2002.  In the
subsequent  quarters  through December 31, 2003, we have recorded net write offs
of $93.4 million against this specific reserve.

      Our  telecommunications  portfolio is included in  "Communications" in the
industry  composition  table  included in Note 5 to the  Consolidated  Financial
Statements.  This portfolio  includes  lending and leasing  transactions  to the
telecommunications  sector. Lending and leasing  telecommunication  equipment to
non-telecom  companies  is conducted in our  Specialty  Finance  business and is
included in the lessee's  industry in the industry  composition  table.  Certain
statistical data is presented in the following table ($ in millions).



                                                                  December 31,    December 31,   September 30,
                                                                      2003             2002           2002
                                                                  ------------    ------------   -------------
                                                                                            
CLEC accounts .................................................      $197.8           $262.3         $275.2
Other telecommunication accounts ..............................       381.2            447.8          432.0
                                                                     ------           ------         ------
Total telecommunications portfolio ............................      $579.0           $710.1         $707.2
                                                                     ======           ======         ======
Portfolio as a % of total financing and leasing assets ........         1.8%             2.0%          1.9%
Number of accounts ............................................          44               52             52
Average account balance .......................................      $ 13.2           $ 13.7         $ 13.6
Top 10 accounts ...............................................      $253.4           $264.5         $265.3
Largest account exposure ......................................      $ 31.0           $ 32.9         $ 34.1
Non-performing accounts .......................................      $ 57.2           $120.2         $137.0
Number of non-performing accounts .............................           6               10             11
Non-performing accounts as a percentage of portfolio ..........         9.9%            16.9%          19.4%


Reserve for Credit Losses -- Argentina

      We established a $135.0 million specific 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.  During the fourth quarter of 2003,  based on the  substantial
progress  with  collection  and work out efforts,  we recorded a $101.0  million
charge-off  against this specific  reserve and transferred  $21.5 million to the
Reserve for Credit Losses -- Finance Receivables.  At December 31, 2003, we have
$22.7 million in Argentina  loans that remains to be collected and  repatriated.
The  remaining  reserve  ($12.5  million)  reflects  our estimate of future loss
related to these balances.


                                       21


Salaries and General Operating Expenses

      The  efficiency  ratio and the ratio of  salaries  and  general  operating
expenses to average managed assets ("AMA") are summarized in the following table
($ in millions).



                                                        Year      Three Months        Year         Nine Months
                                                        Ended         Ended           Ended           Ended
                                                    December 31,  December 31,    September 30,   September 30,
                                                        2003          2002            2002            2001
                                                    ------------  ------------    -------------   -------------
                                                                                              
Efficiency ratio ................................          42.5%         39.6%           35.6%            40.2%
Salaries and general operating expenses
   as a percentage of AMA .......................          2.06%         2.18%           1.96%            2.07%
Salaries and general operating expenses .........       $ 942.3       $ 242.1         $ 923.4          $ 784.8
Average Managed Assets ..........................     $45,809.3     $44,361.8       $47,126.9        $50,600.3


Note: Ratios exclude expenses  relating to TCH, a Tyco acquisition  company that
had temporary status with respect to Tyco's acquisition of CIT.

      Salaries and general  operating  expenses for the year ended  December 31,
2003  increased  from  the  prior  periods  primarily  due  to   incentive-based
compensation  and other  employee  benefit  expenses,  as well as from  expenses
associated  with  our  return  to  public  ownership,   which  include  investor
relations, advertising,  corporate governance, increased insurance premiums, and
costs  associated  with  rebuilding  our income tax  function.  These  increased
expenses were mitigated by lower collection and repossession expenses.

      The decreased  expenses for the year ended  September 30, 2002 compared to
the  annualized  run rate for the combined nine months ended  September 30, 2001
were due to corporate staff reductions and business  restructurings  effected in
2001,  which were partially offset by higher  collection,  repossession and loan
workout expenses in the latter part of 2001 through 2002. Personnel decreased to
approximately 5,800 at December 31, 2003, from 5,835 at December 31, 2002, 5,850
at September 30, 2002, and 6,785 at September 30, 2001.

      The  deterioration in the efficiency ratio for the year ended December 31,
2003 and three months ended December 31, 2002 is principally the result of lower
revenues  in the  respective  periods  as  well  as  somewhat  higher  expenses.
Similarly,  the  deterioration  in the ratio of salaries  and general  operating
expenses to AMA from the September 30, 2002 fiscal year reflects  reduced levels
of average managed assets.

      Expenses are monitored  closely by business unit and corporate  management
and are reviewed monthly. An approval and review procedure is in place for major
capital  expenditures,  such  as  computer  equipment  and  software,  including
post-implementation  evaluations.  We continue to target an improved  efficiency
ratio in the mid 30% area and an AMA ratio of under 2.00%,  as we have  existing
capacity to grow assets without commensurate expense increases.  This efficiency
improvement will be partially offset by higher expenditures related to corporate
governance and compliance.


                                       22


Past Due and Non-performing Assets

      The following table sets forth certain information concerning our past due
(sixty days or more) and  non-performing  assets and the related  percentages of
finance receivables ($ in millions):



                            December 31, 2003     December 31, 2002    September 30, 2002    September 30, 2001
                            -----------------     -----------------    ------------------    ------------------
                                                                                 
Past Dues:
  Specialty Finance-
    commercial ............  $226.4    3.17%     $  182.9    3.07%     $  215.4    3.54%     $  259.5    3.97%
  Commercial Finance ......   105.9    1.03%        172.3    2.14%        209.4    2.35%        151.4    1.75%
  Equipment Finance .......   137.9    2.18%        359.3    4.88%        350.7    4.66%        416.2    4.30%
  Capital Finance .........     9.5    0.87%         85.5    6.40%        101.5    6.86%         50.3    2.85%
  Structured Finance ......    47.0    1.59%         67.6    2.31%         65.8    2.45%         38.3    1.75%
                             ------              --------              --------              --------
  Total Commercial
  Segments ................   526.7    1.90%        867.6    3.39%        942.8    3.53%        915.7    3.18%
  Specialty Finance-
    consumer ..............   149.6    4.26%        133.7    6.66%        127.2    7.20%        188.2    6.12%
                             ------              --------              --------              --------
Total .....................  $676.3    2.16%     $1,001.3    3.63%     $1,070.0    3.76%     $1,103.9    3.46%
                             ======              ========              ========              ========
Non-performing assets:
  Specialty Finance-
    commercial ............  $119.8    1.68%     $   98.2    1.65%     $  103.1    1.69%     $  124.2    1.90%
  Commercial Finance ......    75.6    0.74%        136.2    1.69%        176.1    1.98%        106.0    1.22%
  Equipment Finance .......   218.3    3.46%        403.5    5.48%        470.0    6.25%        362.2    3.75%
  Capital Finance .........     3.6    0.33%        154.9   11.60%         78.5    5.31%         96.9    5.50%
  Structured Finance ......   103.0    3.48%        151.6    5.19%        172.2    6.40%        110.4    5.05%
                             ------              --------              --------              --------
  Total Commercial
    Segments ..............   520.3    1.87%        944.4    3.69%        999.9    3.75%        799.7    2.78%
  Specialty Finance-
    consumer ..............   156.2    4.45%        141.4    7.04%        139.9    7.92%        170.0    5.53%
                             ------              --------              --------              --------
Total .....................  $676.5    2.16%     $1,085.8    3.93%     $1,139.8    4.01%     $  969.7    3.04%
                             ======              ========              ========              ========
Non accrual loans .........  $566.5              $  946.4              $  976.6              $  851.6
Repossessed assets ........   110.0                 139.4                 163.2                 118.1
                             ------              --------              --------              --------
  Total non-performing
    assets ................  $676.5              $1,085.8              $1,139.8              $  969.7
                             ======              ========              ========              ========


2003 Trends

      The  December  31,  2003  delinquency  rate  of  2.16%  marked  the  fifth
consecutive  quarter of  improvement  and  constitutes  the lowest  level  since
December 1999.  Past due loans were down across  virtually all segments with the
greatest  improvement in Equipment  Finance.  The  fluctuations in the Equipment
Finance and Specialty  Finance -- commercial also reflects the 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  $66  million,  $79 million and $65 million at December  31,  2003,
December 31, 2002 and September 30, 2002,  respectively.  Prior periods have not
been restated to reflect this transfer.

      o     Absent the transfer,  Specialty  Finance --  commercial  delinquency
            improved,   reflecting  the  continued   decline  in  past  dues  in
            International   portfolios,   including  European  operations  where
            servicing was centralized during 2003.

      o     The  Commercial  Finance  decline  from both 2002 periods was due to
            improvements  in  both  the  Commercial  Services   (factoring)  and
            Business Credit (asset-based lending) units.

      o     Capital Finance delinquency  improved $76.0 million during 2003, due
            to the return to earning  status of a  waste-to-energy  project  and
            lower  delinquency  in the aerospace  portfolio.  See "Provision for
            Credit  Losses" for  additional  discussion  of the  waste-to-energy
            charge.


                                       23


      o     Though  up in  amount  from  2002,  Specialty  Finance  --  consumer
            delinquency  as  a  percentage  of  finance  receivables   improved,
            reflecting a return to on-balance  growth in this  portfolio  during
            2003.  This is in  contrast  to 2002 when  higher  quality  consumer
            assets were  securitized to meet funding  requirements.  As shown in
            the table below,  consumer  delinquency  on a managed basis has been
            relatively stable in percentage over the periods presented.

      Non-performing assets also declined for the fifth consecutive quarter, and
constitute the lowest levels since 1999,  reflecting  the same trends  discussed
above,  namely  considerable  improvement  in the Equipment  Finance and Capital
Finance segments.  In addition to the above mentioned  waste-to-energy  project,
the  Capital  Finance  reduction  from  December  31,  2002  also  reflects  the
conversion  of  United  Airlines   receivables  ($95.7  million)  to  short-term
operating  leases  following the  carrier's  December 2002 Chapter 11 bankruptcy
filing.  Non-performing  telecommunications  accounts  (in  Structured  Finance)
totaled $57.2  million,  $120.2 million and $137.0 million at December 31, 2003,
December 31, 2002 and September 30, 2002, respectively.

2002 Trends

      Past due loans at December 31, 2002 declined  $68.7 million from September
30,  2002,  to  3.63%  of  finance  receivables  versus  3.76%.  This  reflected
improvements in most businesses,  particularly  Commercial Finance and Specialty
Finance  --  commercial.   The  decline  in  Commercial  Finance  reflected  the
conclusion  of  several  large loan work outs,  while the  Specialty  Finance --
commercial improvement included lower delinquency in the European operations and
vendor  programs.  Non-performing  assets decreased $54.0 million from September
30, 2002 due to reductions in Commercial  Finance and  Structured  Finance.  The
Equipment Finance non-performing assets declined sharply during the quarter, but
were more than offset by additional  aerospace  assets placed on  non-accrual in
Capital  Finance  relating  to the  bankruptcy  filing of UAL Corp.,  the parent
company of United Airlines.

      Past  due  loans  decreased  $33.9  million  from  September  30,  2001 to
September  30,  2002.  However,  due to  increased  securitization  activity and
declining asset levels,  the percentage of past due  receivables  increased over
the same time  period.  After  peaking  in March  31,  2002,  there  was  steady
improvement   in  Specialty   Finance  --   commercial   past  dues.   Specialty
Finance-consumer past due portfolio metrics were down in dollar terms, but up in
percentage of finance  receivables,  due to the continued  runoff of liquidating
portfolios  and the home equity  securitization  activity,  which  lowered owned
asset levels during the year.  Non-performing assets also trended downwards from
December 2002,  reflecting  improvement  across the majority of our small-ticket
businesses   and  runoff  of  our   liquidating   portfolio   assets.   However,
non-performing  assets  increased from September 30, 2001 to September 30, 2002,
both in  dollars  and as a  percentage  of  finance  receivables,  due  to:  (1)
increased  telecommunications (CLEC exposure) non-accrual accounts in Structured
Finance,  (2) the  previously  discussed  municipal  waste-to-energy  project in
Capital  Finance,  (3)  increased  non-accrual  accounts  in the Small  Business
Administration  lending  unit of  Equipment  Finance  (transferred  to Specialty
Finance in 2003) and (4) increased repossessed assets in Equipment Finance. Past
due and non-performing  assets of Commercial Finance were up from September 2001
to September 2002, mainly due to two large customer balances.

      Managed  past due  loans in  dollar  amount  and as a  percentage  managed
financial assets are shown in the table below ($ in millions).



                            December 31, 2003     December 31, 2002    September 30, 2002    September 30, 2001
                            -----------------     -----------------    ------------------    ------------------
                                                                                 
Past Dues:
  Specialty Finance-
    commercial ..........  $  321.2    2.77%     $  265.1    2.62%     $  303.3    2.94%     $  386.4    3.57%
  Commercial Finance ....     105.9    1.03%        172.3    2.14%        209.4    2.35%        151.4    1.75%
  Equipment Finance .....     243.6    2.49%        545.7    4.78%        609.1    5.07%        760.2    5.34%
  Capital Finance .......       9.5    0.87%         85.5    6.40%        101.5    6.86%         50.3    2.84%
  Structured Finance ....      47.0    1.59%         67.6    2.31%         65.8    2.45%         38.3    1.75%
                           --------              --------              --------              --------
  Total Commercial ......     727.2    2.04%      1,136.2    3.36%      1,289.1    3.64%      1,386.6    3.63%
  Specialty Finance-
    consumer ............     294.8    4.78%        259.4    4.71%        249.5    4.71%        253.2    4.32%
                           --------              --------              --------              --------
Total ...................  $1,022.0    2.44%     $1,395.6    3.55%     $1,538.6    3.78%     $1,639.8    3.72%
                           ========              ========              ========              ========



                                       24


      Managed past due loans decreased both in dollar amount and as a percentage
of managed financial  assets,  reflecting the same factors that are discussed in
the owned delinquency analysis.

Income Taxes

      The following table sets for the certain information concerning our income
taxes ($ in millions):



                                                        Year      Three Months        Year        Combined Nine
                                                        Ended         Ended           Ended        Months Ended
                                                    December 31,  December 31,    September 30,   September 30,
                                                        2003          2002            2002            2001
                                                    ------------  ------------    -------------   -------------
                                                                                         
Provision for income taxes ......................     $365.0          $92.0            $374.0        $242.2
Effective tax rates .............................       39.0%          39.0%             (5.9%)        47.1%
Effective tax rates excluding goodwill
  impairment, goodwill amortization
  and TCH results ...............................       39.0%          39.0%             38.1%         39.6%


      At  December  31,  2003,  CIT had U.S.  federal  net  operating  losses of
approximately $1,973.7 million, which expire in various years beginning in 2011.
In  addition,  CIT has various  state net  operating  losses that will expire in
various years beginning in 2004.  Federal and state net operating  losses may be
subject to annual use limitations under section 382 of the Internal Revenue Code
of 1986, as amended, and other limitations under certain state laws.  Management
believes that CIT will have  sufficient  taxable  income in future years and can
avail itself of tax planning  strategies in order to fully utilize these losses.
Accordingly, CIT does not believe a valuation allowance is required with respect
to these net operating losses.

      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 classified  our tax reporting as a "reportable  condition",  as
defined by standards  established by the American  Institute of Certified Public
Accountants.  We have made substantial  progress in rebuilding our tax reporting
and compliance  functions,  including hiring and training personnel,  rebuilding
tax reporting systems,  preparing amendments to prior period U.S. Federal income
tax returns, and implementing  processes and controls with respect to income tax
reporting and compliance. We have built processes to prepare a tax basis balance
sheet to complete  the  analysis of deferred  tax assets and  liabilities  as of
December 31, 2003. Further work continues in the areas of quality control, proof
and  reconciliation  and we anticipate  completing  this  initiative  during the
second or third  quarter  of 2004.  Future  income tax  return  filings  and the
completion of the aforementioned analysis of deferred tax assets and liabilities
could result in  reclassifications  to deferred tax assets and liabilities.  See
Note 15 -- Income Taxes for further information.

Results by Business Segment

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



                                                                                                      Nine
                                                     Year Ended   Three Months     Year Ended     Months Ended
                                                    December 31,  December 31,    September 30,   September 30,
                                                        2003          2002            2002            2001
                                                    ------------  ------------    -------------   -------------
                                                                                        
Net Income
Specialty Finance ...............................     $260.9         $ 73.7         $   349.8       $ 196.7
Commercial Finance ..............................      221.3           63.4             198.9         134.8
Equipment Finance ...............................       38.5           13.5             121.1         130.6
Capital Finance .................................       36.0           22.7              80.9          84.5
Structured Finance ..............................       60.3           13.9              65.2          45.8
                                                      ------         ------         ---------       -------
  Total Segments ................................      617.0          187.2             815.9         592.4
Corporate, including certain charges ............      (50.1)         (45.9)         (6,791.1)       (258.6)
                                                      ------         ------         ---------       -------
  Total .........................................     $566.9         $141.3         $(5,975.2)      $ 333.8
                                                      ======         ======         =========       =======
Return on AEA
Specialty Finance ...............................       2.13%          2.86%             2.98%         1.83%
Commercial Finance ..............................       3.42%          5.18%             3.41%         3.14%
Equipment Finance ...............................       0.56%          0.65%             1.24%         1.46%
Capital Finance .................................       0.53%          1.50%             1.45%         2.02%
Structured Finance ..............................       2.00%          1.96%             2.47%         2.37%
  Total Segments ................................       1.74%          2.32%             2.29%         1.97%
Corporate .......................................      (0.16)%        (0.59)%          (18.98)%       (0.87)%
  Total .........................................       1.58%          1.73%           (16.69)%        1.10%



                                       25


      The improvement in the bottom-line  return on AEA over 2002 was due to the
goodwill  impairment charge in 2002 and reduced corporate charges in the current
period.  Corporate for the year ended  December 31, 2003 includes the results of
the  venture  capital  business  ($77.6  million  loss  after  tax),  as well as
unallocated  funding and other costs ($3.3 million after tax), which were offset
in part by the gain on the early redemption of debt ($30.8 million after tax).

      Segment  returns  for 2003  versus the 2002  periods  were  reduced by the
allocation of all borrowing costs in the current year. Noteworthy 2003 trends by
segment are as follows:

      o     Return on AEA for Specialty  Finance,  while below 2002, was in line
            with  Corporate  return on equity  hurdles.  The  Specialty  Finance
            performance  for 2003 included  improved  earnings in  International
            operations  and strong  earnings  from  vendor  programs,  offset by
            slightly higher  charge-offs and reduced  securitization  gains from
            2002.

      o     Commercial  Finance earnings  remained very strong,  benefiting from
            continued high returns in both the factoring and asset-based lending
            businesses.

      o     Equipment Finance returns reflected soft margins,  offset in part by
            reduced charge-offs in relation to 2002.

      o     Capital Finance earnings were dampened by the lower aerospace rental
            rates  and  the   waste-to-energy   project   charge-off   described
            previously in "Provision for Credit Losses."

      o     Structured  Finance returns for 2003 remained in line with Corporate
            return  on  equity  hurdles  and  reflected   strong   advisory  and
            syndication fees, offset by higher charge-offs.

      With respect to 2002 trends:

      o     Net income improved sharply in Specialty  Finance over 2001 based on
            stronger margins and higher securitization gains.

      o     Commercial Finance also showed improvement from 2001 due to stronger
            factoring revenues on increased business volume.

      o     Equipment  Finance  reported reduced net income and return on assets
            due to lower portfolio assets and higher charge-offs.

      o     Capital  Finance  experienced  a decline in net income and return on
            assets due to lower aerospace rental income.

      Corporate  funding  costs  increased  significantly  in  2002  from  2001,
reflecting  management's  decision  to not  allocate to the  business  units the
incremental  costs of borrowing and liquidity  relating to the disruption to our
funding base and credit  downgrades.  Such 2002 additional costs included higher
debt  quality  spreads,  use of bank line versus  commercial  paper  borrowings,
incremental  cost of  liquidity  facilities,  and  excess  cash held to  enhance
liquidity.  Although  management chose to not allocate these  incremental  costs
because  they were  viewed as  relating  to  temporary  conditions,  costs  were
allocated  beginning January 1, 2003. For all periods shown,  Corporate includes
the results of the venture capital business.

      Corporate  included the  following  items in the year ended  September 30,
2002:  (1)  goodwill   impairment  of  $6,511.7   million,   (2)  provision  for
telecommunications  of $200.0 million  ($124.0 million after tax), (3) Argentine
provision of $135.0  million  ($83.7  million  after tax),  (4) funding costs of
$85.9 million  ($53.2  million  after tax),  and (5) venture  capital  operating
losses of $72.8  million  ($44.4  million  after tax).  Excluding  these  items,
unallocated  corporate  operating items totaled $7.2 million pre-tax (income) or
$3.9 million  after tax.  For the other  periods  shown in the table above,  the
corporate  segment  included funding costs and unallocated  corporate  operating
expenses.


                                       26


      Financing and Leasing Assets

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



                                                                                               % Change
                                                                                       -------------------------
                                            December 31,  December 31,  September 30,  Dec. `03 vs. Dec. `02 vs.
                                                2003          2002          2002         Dec `02      Sep. `02
                                            ------------  ------------  -------------  -----------    --------
                                                                                          
Specialty Finance:
Commercial:
   Finance receivables ...................    $ 7,698.1     $ 6,722.4     $ 6,620.2        14.5%         1.5%
   Operating lease equipment, net ........        959.5       1,257.3       1,353.2       (23.7)        (7.1)
                                              ---------     ---------     ---------
     Total commercial ....................      8,657.6       7,979.7       7,973.4         8.5          0.1
                                              ---------     ---------     ---------
Consumer:
   Home equity ...........................      2,814.3         962.7       1,314.2       192.3        (26.7)
   Other .................................        846.5       1,374.4         831.8       (38.4)        65.2
                                              ---------     ---------     ---------
     Total consumer ......................      3,660.8       2,337.1       2,146.0        56.6          8.9
                                              ---------     ---------     ---------
     Total Specialty Finance Segment .....     12,318.4      10,316.8      10,119.4        19.4          2.0
                                              ---------     ---------     ---------
Commercial Finance:
Commercial Services ......................      6,325.8       4,392.5       5,040.4        44.0        (12.9)
Business Credit ..........................      3,936.1       3,649.1       3,869.8         7.9         (5.7)
                                              ---------     ---------     ---------
     Total Commercial Finance
       Segment ...........................     10,261.9       8,041.6       8,910.2        27.6         (9.7)
                                              ---------     ---------     ---------
Equipment Finance:
   Finance receivables ...................      6,538.1       7,476.9       7,633.0       (12.6)        (2.0)
   Operating lease equipment, net ........        419.6         668.3         765.8       (37.2)       (12.7)
                                              ---------     ---------     ---------
     Total ...............................      6,957.7       8,145.2       8,398.8       (14.6)        (3.0)
                                              ---------     ---------     ---------
Capital Finance:
   Finance receivables ...................      1,097.4       1,335.8       1,479.5       (17.8)        (9.7)
   Operating lease equipment, net ........      6,103.8       4,719.9       4,388.9        29.3          7.5
                                              ---------     ---------     ---------
     Total ...............................      7,201.2       6,055.7       5,868.4        18.9          3.2
                                              ---------     ---------     ---------
Structured Finance:
   Finance receivables ...................      2,962.2       2,920.9       2,689.6         1.4          8.6
   Operating lease equipment, net ........        132.6          59.1          59.5       124.4         (0.7)
                                              ---------     ---------     ---------
     Total Structured Finance Segment ....      3,094.8       2,980.0       2,749.1         3.9          8.4
     Equity investments ..................        249.9         335.4         341.7       (25.5)        (1.8)
                                              ---------     ---------     ---------
     TOTAL FINANCING AND
       LEASING PORTFOLIO
       ASSETS ............................     40,083.9      35,874.7      36,387.6        11.7         (1.4)
                                              ---------     ---------     ---------
Finance receivables securitized:
   Specialty Finance-commercial ..........      3,915.4       3,377.4       3,703.1        15.9         (8.8)
   Specialty Finance-consumer ............      2,510.1       3,168.8       3,147.5       (20.8)         0.7
   Equipment Finance .....................      3,226.2       3,936.2       4,384.1       (18.0)       (10.2)
                                              ---------     ---------     ---------
       Total .............................      9,651.7      10,482.4      11,234.7        (7.9)        (6.7)
                                              ---------     ---------     ---------
       TOTAL MANAGED ASSETS ..............    $49,735.6     $46,357.1     $47,622.3         7.3%        (2.7)%
                                              =========     =========     =========


      During the quarter ended March 31, 2003, 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.


                                       27


      The primary  factors  that fueled the  increase in  financing  and leasing
portfolio assets during 2003 include:  two factoring  acquisitions in Commercial
Services,  growth in Business  Credit,  the combination of a strong  refinancing
market  and our  decision  to limit  securitization  activity  in the  Specialty
Finance home equity  portfolio,  a rail  acquisition and deliveries of aerospace
assets in Capital Finance.

      The 2002 trend of declining  asset levels  reflects the  increased  use of
securitization  as a funding tool in 2002 and the  liquidation of  non-strategic
assets.  The targeted  non-strategic  business  lines and products  were sold or
placed in liquidation  status,  and we ceased  originating new business in these
areas. In addition, during 2001 we ceased making new venture capital investments
beyond  existing  commitments.  During the fourth quarter of 2003, we decided to
accelerate the liquidation of the venture capital direct  investment  portfolio.
See "Losses on Venture Capital Investments" for more information. The balance of
each  of  these  non-strategic/liquidating   portfolios  are  presented  in  the
following table ($ in millions):

                                     December 31,   December 31,   September 30,
Portfolio                               2003(1)        2002(1)         2002(1)
---------                            ------------   ------------   -------------
Manufactured housing ...............    $  584          $  624         $  628
Recreational vehicle ...............        58              34             38
Recreational marine ................        86             123            133
Wholesale inventory finance ........         2              18             22
Franchise finance ..................       102             322            390
Owner-operator trucking ............        91             218            249
                                        ------          ------         ------
   Total ...........................    $  923          $1,339         $1,460
                                        ======          ======         ======
--------------------------------------------------------------------------------
(1) On-balance sheet financing and leasing assets.

      The following table presents new business volume (excluding  factoring) by
segment ($ in millions).

                                       Year       Three Months        Year
                                       Ended          Ended           Ended
                                   December 31,   December 31,    September 30,
                                       2003           2002            2002
                                   ------------   ------------    -------------
Specialty Finance(1) ............   $12,429.6       $2,698.2        $10,106.2
Commercial Finance ..............     1,931.7          501.4          1,583.1
Equipment Finance(1) ............     3,824.1        1,184.4          4,480.7
Capital Finance .................     1,242.7          356.2          1,476.2
Structured Finance ..............       804.0          371.9          1,418.9
                                    ---------       --------        ---------
  Total new business volume .....   $20,232.1       $5,112.1        $19,065.1
                                    =========       ========        =========
--------------------------------------------------------------------------------
(1)   During the March 2003 quarter,  certain  portfolios were  transferred from
      Equipment Finance to Specialty  Finance.  New business volumes  associated
      with the  transferred  portfolios were $208.6 million for the three months
      ended December 31, 2002 and $1,743.0  million for the year ended September
      30, 2002.  Prior  period data has not been  restated to conform to present
      period presentation.

      New  origination  volume for the year ended  December 31, 2003  (excluding
factoring  volume)  included  stronger volume from our Specialty  Finance vendor
relationships and home equity units, the more traditional financing transactions
in Equipment Finance and working capital financings in Business Credit.

Concentrations

Ten Largest Accounts

      Our ten largest  financing  and leasing  asset  accounts in the  aggregate
represented  5.2% of our total financing and leasing assets at December 31, 2003
(the largest  account being less than 1.0%),  5.0% at December 31, 2002, 4.8% at
September 30, 2002 and 3.7% at September 30, 2001.

Leveraged Leases

      As of December 31, 2003, net investments in leveraged  leases totaled $1.1
billion,  or 3.6% of finance  receivables,  with the major  components being (i)
$450.4 million in commercial aerospace transactions, including $217.9 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;  (ii)  $325.0  million  of project  finance  transactions,
primarily  in the power and utility  sector;  and (iii)  $225.4  million in rail
transactions.


                                       28


Joint Venture Relationships

      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  run  until  October  2005 and  January  2007,  respectively.  The Avaya
agreement,  which relates to profit sharing on a CIT direct origination program,
extends through September 2006.

      At December 31, 2003, our financing and leasing assets  included  $1,425.1
million,  $1,093.4  million and $828.6 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 $2,471.6 million,  $68.2 million and $781.0 million
from  the  Dell,  Snap-on  and  Avaya  origination  sources,  respectively.  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 20 -- Certain  Relationships
and Related Transactions.

Geographic Composition

      The following table summarizes  significant state  concentrations  greater
than 5.0% and foreign  concentrations  in excess of 1.0% of our owned  financing
and leasing  portfolio  assets at December 31, 2003 and 2002,  and September 30,
2002  and  2001.  For  each  period  presented,  our  managed  asset  geographic
composition  did not  differ  significantly  from  our  owned  asset  geographic
composition.

                        December 31,  December 31,  September 30,  September 30,
                            2003          2002          2002           2001
                        ------------  ------------  -------------  -------------
State
California ............     10.2%          9.8%          10.0%         10.4%
Texas .................      7.7%          7.0%           7.1%          7.7%
New York ..............      7.4%          7.9%           7.8%          8.8%
   Total United States      79.3%         79.3%          79.9%         83.1%
Country
Canada ................      5.1%          5.0%           4.7%          4.8%
England ...............      2.8%          3.2%           3.1%          2.1%
Australia .............      1.3%          1.3%           1.3%           (1)
France ................      1.1%          1.0%            (1)           (1)
Germany ...............      1.0%          1.1%           1.2%           (1)
Mexico ................      1.0%           (1)            (1)           (1)
China .................       (1)          1.2%           1.1%           (1)
Brazil ................       (1)          1.1%            (1)           (1)
   Total Outside U.S. .     20.7%         20.7%          20.1%         16.9%

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

Industry Composition

      The following discussions provide information with respect to selected
industry compositions.
Aerospace

      At December  31,  2003,  our  commercial  aerospace  portfolio  in Capital
Finance  consists of financing and leasing assets of $4,716.1  million  covering
209 aircraft,  with an average age of  approximately  6 years (based on a dollar
value weighted  average).  The portfolio was comprised of 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 and 78 accounts,  with a weighted average age
of  approximately  7 years.  The  commercial  aircraft all comply with stage III
noise regulations.  The increase during 2003 was due to new aircraft  deliveries
from both Airbus and Boeing.


                                       29


      The following table summarizes the composition of the commercial aerospace
portfolio ($ in millions):




                                          December 31, 2003         December 31, 2002       September 30, 2002
                                      -------------------------  ----------------------   ----------------------
                                          Net         Number of      Net      Number of       Net      Number of
                                      Investment       Planes    Investment    Planes     Investment    Planes
                                      ----------       ------    ----------    ------     ----------    ------
                                                                                          
By Region:
   Europe ..........................   $1,991.0          65       $1,506.5        51       $1,586.9         55
   North America(1) ................    1,029.7          72        1,042.2        75        1,025.9         76
   Asia Pacific ....................    1,013.6          40          853.6        35          813.4         31
   Latin America ...................      612.7          28          595.9        29          483.3         27
   Africa/Middle East ..............       69.1           4           74.6         4           77.2          4
                                       --------         ---       --------       ---       --------        ---
Total ..............................   $4,716.1         209       $4,072.8       194       $3,986.7        193
                                       ========         ===       ========       ===       ========        ===
By Manufacturer:
   Boeing ..........................   $2,581.7         140       $2,388.1       135       $2,439.6        137
   Airbus ..........................    2,114.6          57        1,647.9        42        1,507.7         38
   Other ...........................       19.8          12           36.8        17           39.4         18
                                       --------         ---       --------       ---       --------        ---
Total ..............................   $4,716.1         209       $4,072.8       194       $3,986.7        193
                                       ========         ===       ========       ===       ========        ===
By Body Type(2):
   Narrow ..........................   $3,415.7         159       $2,799.4       142       $2,723.3        141
   Intermediate ....................      877.0          18          859.2        17          849.0         16
   Wide ............................      403.6          20          377.4        18          375.0         18
   Other ...........................       19.8          12           36.8        17           39.4         18
                                       --------         ---       --------       ---       --------        ---
Total ..............................   $4,716.1         209       $4,072.8       194       $3,986.7        193
                                       ========         ===       ========       ===       ========        ===


--------------------------------------------------------------------------------
(1)   Comprised of net  investments in the U.S. and Canada of $822.7 million (66
      aircraft)   and  $207.0   million  (6  aircraft)  at  December  31,  2003,
      respectively,  and $832.7  million  (69  aircraft)  and $209.5  million (6
      aircraft)  at  December  31,  2002,  respectively  and $847.5  million (70
      aircraft)  and  $178.4   million  (6  aircraft)  at  September  30,  2002,
      respectively.

(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 Douglass DC10
      series aircraft.

      As of December 31, 2003, operating leases represented approximately 85% of
the  portfolio,  with the  remainder  consisting  of capital  leases  (including
leveraged   leases)   and  loans.   Tax-optimization   leveraged   leases   were
approximately  $217.9 million while total  leveraged  leases,  including the tax
optimization structures,  were $450.4 million or 9.6% of the aerospace portfolio
at December 31, 2003. Of the 209 aircraft, 5 are off-lease, 3 of which have been
remarketed  with leases pending as of December 31, 2003. In general,  the use of
leverage  increases  the  risk of a loss in the  event  of a  default,  with the
greatest risk incurred in tax-optimization leveraged leases.

      The top five commercial  aerospace  exposures  totaled $1,020.1 million at
December 31, 2003, the largest of which was $268.6 million.  All top five are to
carriers  outside of the U.S.  and the top three are to European  carriers.  The
largest  exposure  to a U.S.  carrier at December  31, 2003 was $138.5  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.

      The  regional  aircraft  portfolio  at December  31, 2003  consists of 119
planes and a net investment of $291.6 million, and is concentrated  primarily in
Structured  Finance.  The carriers are  primarily  located in North  America and
Europe.  Operating leases account for about 44% of the portfolio,  with the rest
capital  leases or loans.  There are 12 aircraft  that are off-lease at December
31, 2003 with a total book value of approximately $46.5 million. At December 31,
2002,  the  portfolio  consisted  of 117 planes and a net  investment  of $344.0
million.

      The following is a list of our exposure to bankrupt aerospace carriers and
the current status of the related aircraft at December 31, 2003.

      o     UAL Corp.  -- Under  existing  operating  lease  agreements,  United
            Airlines  leases 4  CIT-owned  narrow  body  aircraft  (2 Boeing 757
            aircraft and 2 Boeing 737 aircraft)  with a net  investment of $87.0
            million.

      o     Avianca Airlines -- Lessee of one MD 80 aircraft and one Boeing 757,
            with a combined  net  investment  of $31.7  million at December  31,
            2003.

      o     Air Canada -- Our net  investment in aircraft is  approximately  $50
            million,  relating to one Boeing 767  aircraft  which was  converted
            from  an  investment  in  a  non-accrual   leveraged  lease  (not  a
            tax-optimized


                                       30


            structure) to a performing  operating lease during 2003, and a $25.6
            million loan  collateralized  by 12 Bombardier Dash 8 aircraft.  The
            loan  is  collateralized  by  the  Bombardier   aircraft  and  fully
            guaranteed by the Canadian government.

      o     Sobelair -- Filed a  bankruptcy  proceeding  in Belgium,  in January
            2004, which resulted in a liquidation of the airline.  At that time,
            we had two Boeing 737 aircraft on operating  lease to Sobelair,  one
            of which was scheduled  for return in March 2004. By agreement  with
            Sobelair's  trustee, we took possession of both of these aircraft in
            January  2004.  We have leased one aircraft and have agreed to lease
            terms for the other  aircraft.  Our net investment in these aircraft
            at December 31, 2003 was approximately $60 million.

      Additionally,   we  hold  Senior  A  tranche   Enhanced   Equipment  Trust
Certificates  ("EETCs")  with a fair  value of $43.0  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, we are 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 December 31, 2003, is secured by, among
other collateral, previously unencumbered aircraft.

      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  circumstances  indicate  that the
carrying amount of the asset may not be recoverable. For the year ended December
31, 2003, a $1.8 million commercial aerospace  impairment loss was recorded,  as
indicated  by the excess of asset book value over  corresponding  fair value for
those aircraft  determined to be impaired.  Utilization is high,  with only five
aircraft  off-lease  at December 31, 2003 (three of which have letters of intent
signed),  which  demonstrates  our  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. See Note 17 -- Commitments and Contingencies  for additional  information
regarding commitments to purchase additional aircraft.

Equity and Venture Capital Investments

      Our  portfolio  of  direct  and  private  fund  venture   capital   equity
investments is summarized in the following table ($ in millions).



                                                                  December 31,   December 31,    September 30,
                                                                      2003           2002             2002
                                                                  ------------   ------------    -------------
                                                                                            
Total equity and venture capital investments ...................     $249.9         $335.4           $341.7
Direct equity investments ......................................     $101.1         $188.8           $196.6
Number of direct equity investments ............................         47             57               60
Private fund venture capital equity investments ................     $148.8         $146.6           $145.1
Number of private fund investments .............................         52             52               52
Remaining capital commitments -- private fund investments ......     $124.2         $164.9           $176.6
Remaining capital commitments -- direct investments ............     $   --         $  4.4           $  4.4


      See Note 5 -- Concentrations for further discussion on concentrations.


                                       31


Other Assets

      Other assets  totaled $3.3 billion at both  December 31, 2003 and December
31, 2002, and $3.4 billion at September 30, 2002.

      Other assets  primarily  consisted of the  following at December 31, 2003:
accrued interest and receivables from derivative counterparties of $0.9 billion,
investments  in and  receivables  from  non-consolidated  subsidiaries  of  $0.6
billion,  deposits on  commercial  aerospace  flight  equipment of $0.3 billion,
direct and private fund equity investments of $0.2 billion,  prepaid expenses of
$0.2 billion and repossessed assets and off-lease equipment of $0.1 billion. The
remaining balance includes furniture and fixtures, miscellaneous receivables and
other assets.

Goodwill and Other Intangible Assets Impairment and Amortization

      We periodically  review and evaluate  goodwill and other intangible assets
for  potential  impairment.  Effective  October 1, 2001 we 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,  we allocated  goodwill to each of our  reporting  units.
Under the transition provisions of SFAS 142, there was no goodwill impairment as
of October 1, 2001.

      During the quarter ended March 31, 2002, in connection  with its announced
break-up plan, our former parent, Tyco, experienced disruptions to its business,
downgrades  in its  credit  ratings,  and a  significant  decline  in its market
capitalization, which also disrupted our access to 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.  We performed a goodwill impairment analysis as of
October 1, 2003,  which  indicated that the fair value of goodwill was in excess
of carrying value. Therefore, additional impairment charges were not required.

      The  changes  in the  carrying  amount of  goodwill  were as follows ($ in
millions):
                                           Specialty    Commercial
                                            Finance       Finance         Total
                                            -------       -------         -----
Balance as of December 31, 2002 .........   $14.0         $370.4         $384.4
Severance reserve reduction .............    (1.3)            --           (1.3)
                                            -----         ------         ------
Balance as of December 31, 2003 .........   $12.7         $370.4         $383.1
                                            =====         ======         ======

      The  downward  revision  to  severance  liabilities  during the year ended
December 31, 2003 represents previously established reserves that were no longer
required. The revision was related to Specialty Finance restructuring activities
and was recorded as a reduction to goodwill, because the severance 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  $104.6  million,  at December 31, 2003,  $16.5  million at December 31,
2002,  $17.6  million at September  30, 2002 and $22.0  million at September 30,
2001,  and are included in Goodwill and  Intangible  Assets in the  Consolidated
Balance Sheets.  The increase in other  intangible  assets during the year ended
December 31, 2003 relates to customer  relationships acquired in the purchase of
two  factoring  businesses.  Other  intangible  assets are being  amortized on a
straight-line  basis over their  respective lives that range from five to twenty
years. Amortization expense totaled $4.9 million for the year ended December 31,
2003,  $1.1 million for the three months ended  December 31, 2002,  $4.4 million
for the year ended September 30, 2002, and there was no amortization expense for
the combined nine month period ended September 30, 2001.

Results and Trends in Relation to the Prior Year Twelve Months

      The following analysis is provided in addition to the required analysis of
GAAP  periods  to  discuss  year-over-prior  year  trends in our  business  on a
calendar  basis.  We  believe  this  analysis  provides  additional   meaningful
information  on  a  comparative  basis.  The  balances  provided  for  the  2002
twelve-month  period are non-GAAP and are derived by the  combination of results
for the three  month  transition  period  ended  December  31, 2002 and the nine
months ended September 30, 2002.


                                       32


      Net income for 2003 totaled  $566.9  million,  or $2.66 per diluted share,
compared to the 2002 net loss of $(6,741.5) million or $(31.70) proforma diluted
loss per share.  The results for 2003  included  two  significant  transactions.
First,  we  recognized  a pre-tax  gain of $50.4  million,  related to the early
redemption of $735 million in term debt.  Second,  a determination to accelerate
the  liquidation  of our direct  investment  venture  capital  portfolio and the
related marketing efforts to prospective buyers resulted in a pre-tax fair value
write-down of $63.0 million. Net income for 2003, excluding the gain on the debt
call and venture capital losses, was $590.0 million.

      Net income  for 2002  includes:  goodwill  impairment  charge of  $6,511.7
million,  $206.4 million of  telecommunication  and Argentine reserving actions,
charges of $668.6  million  for TCH related  expenses  and losses on our venture
capital  portfolio of $30.3 million.  Excluding these 2002 items, net income was
$675.5 million.  The reduction in 2003 net income  reflects  primarily lower net
finance margin due to higher funding costs.

      The table that follows  presents  results for the year ended  December 31,
2003 and the twelve  months ended  December  31,  2002,  both in amount and as a
percentage of AEA ($ in millions).



                                                              Year Ended                 Twelve Months Ended
                                                           December 31, 2003              December 31, 2002
                                                       ------------------------       ------------------------
                                                         Amount          % AEA         Amount          % AEA
                                                       ---------        -------       ---------       --------
                                                                                           
Finance income ....................................    $ 3,729.5        10.41%        $ 4,115.5        12.13%
Interest expense ..................................      1,319.3         3.68%          1,406.3         4.14%
                                                       ---------         ----         ---------       ------
Net finance income ................................      2,410.2         6.73%          2,709.2         7.99%
Depreciation on operating lease equipment .........      1,053.0         2.94%          1,179.8         3.48%
                                                       ---------         ----         ---------       ------
Net finance margin ................................      1,357.2         3.79%          1,529.4         4.51%
Provision for credit losses .......................        387.3         1.08%            808.8         2.38%
                                                       ---------         ----         ---------       ------
Net finance margin after provision for
credit losses .....................................        969.9         2.71%            720.6         2.13%
Other revenue .....................................        947.6         2.65%            993.6         2.93%
Loss on venture capital investments ...............        (88.3)       (0.25)%           (49.3)       (0.15)%
                                                       ---------         ----         ---------       ------
Operating margin ..................................      1,829.2         5.11%          1,664.9         4.91%
Salaries and general operating expenses ...........        942.3         2.63%            949.8         2.80%
Goodwill impairment ...............................           --           --           6,511.7        19.19%
Interest expense -- TCH ...........................           --           --             586.3         1.73%
                                                       ---------         ----         ---------       ------
Operating expenses ................................        942.3         2.63%          8,047.8        23.72%
Gain on call of debt ..............................         50.4         0.14%               --           --
                                                       ---------         ----         ---------       ------
Income before provision for income taxes ..........        937.3         2.62%         (6,382.9)      (18.81%)
Provision for income taxes ........................      ( 365.0)       (1.02)%          (347.8)       (1.03%)
Dividends on preferred capital securities,
   after tax ......................................        ( 5.4)       (0.02)%           (10.8)       (0.03%)
                                                       ---------         ----         ---------       ------
Net income ........................................    $   566.9         1.58%        $(6,741.5)      (19.87%)
                                                       =========         ====         =========       ======
AEA ...............................................    $35,813.4                      $33,928.8
                                                       =========                      =========


      Although net finance margin was down from the prior year, we  demonstrated
steady  improvement  in  profitability  throughout  2003 as we benefited  from a
return to historical  debt spread levels (in relation to U.S.  Treasuries).  The
compression in rental rates,  particularly in aerospace assets, also contributed
to the margin  compression.  Interest expense  decreased due to the low interest
rate  environment,  but was  tempered  by debt  issued  last year and  through a
portion  of this  year at  higher  spread  levels.  We  also  maintained  excess
liquidity throughout the year.

      The drop in  depreciation  expense from the prior year reflects the growth
of the longer-lived aerospace and rail equipment portfolios,  coupled with lower
operating  lease equipment  levels with shorter lives in both Specialty  Finance
and  Equipment  Finance.  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).

      The provision for credit losses  decreased  $421.5  million from last year
due to the prior  year  reserving  actions  of $335.0  million  relating  to the
telecommunications  and Argentine portfolios,  and improved credit quality, most
notably in Equipment Finance.


                                       33


      For 2003,  other revenue totaled $947.6 million,  down from $993.6 million
in 2002. Fees and other income,  which includes  servicing  fees,  miscellaneous
fees,  syndication  fees and gains from asset  sales,  were down,  primarily  in
Equipment Finance.  Factoring  commissions were up slightly in 2003. Although we
acquired two factoring  portfolios,  these  transactions were completed later in
the  year  and  had  a  modest  impact  on  the  improvement.   We  witnessed  a
strengthening  in  equipment  sales  values,  both on large and  smaller  ticket
assets,  as noted by the  increase  on gains  from  these  sales,  primarily  in
Specialty  Finance.  Securitization  gains during 2003 totaled  $100.9  million,
10.8% of pretax income,  on volume of $5,320 million,  down from $151.5 million,
14.2% of pretax income (excluding goodwill impairment, TCH charges and reserving
action  charges) on volume of $7,634  million for 2002.  In 2002 we  securitized
home  equity  loans for  liquidity  purposes,  whereas in 2003 we  de-emphasized
securitizing  home equity loans  because  on-balance  sheet  funding  costs were
lower.

      Salaries and general operating expenses were $942.3 million 2003, compared
to $935.0 million (excluding TCH expenses) for 2002. The increase from last year
included  higher   incentive-based   compensation,   and  incremental   expenses
associated  with our return to public  ownership,  which were in part  offset by
lower legal and collection  expenses.  Salaries and general  operating  expenses
were 2.06% of average managed assets for 2003,  essentially unchanged from 2.05%
in 2002. The efficiency ratio for 2003 (salaries and general operating  expenses
divided by operating margin,  excluding  provision for credit losses) was 42.5%,
compared to 37.8% in 2002. Headcount was 5,800 at December 31, 2003, compared to
5,835 in 2002.

Risk Management

      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).  Managing  risks is essential to conducting our commercial and
consumer businesses and to our profitability.  Accordingly,  our risk management
systems and procedures are designed to identify and analyze key business  risks,
to set appropriate  policies and limits, and to continually  monitor these risks
and limits by means of reliable  administrative and information  systems,  along
with other  policies and  programs.  We  performed  additional  risk  management
procedures in 2002 and into 2003 in light of the factors discussed previously in
the "Profitability and Key Business Trends" section. During the third quarter of
2003, we 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.

      We review and monitor  credit  exposures,  both owned and  managed,  on an
ongoing  basis  to  identify,  as  early  as  possible,  customers  that  may be
experiencing   declining   creditworthiness   or   financial   difficulty,   and
periodically  evaluate the  performance  of our finance  receivables  across the
entire organization. We monitor concentrations by borrower, industry, geographic
region and equipment  type, and we set or modify  exposure  limits as conditions
warrant to minimize  credit  concentrations  and 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 earnings.  Given the  developments
in the aerospace  sector during 2002 and 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 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.


                                       34


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  and Chief  Credit  Officer,  oversees  and
manages credit risk throughout CIT. This group includes senior credit executives
in 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  exceptions as delineated
within the  individual  business  unit credit  authority and  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 Credit Risk Management

      The commercial credit management  process (other than small ticket leasing
transactions)  begins 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  a  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/Lending

      For consumer transactions and small-ticket  leasing/lending  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,  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 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


                                       35


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,  and includes 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.  We conduct what we
believe are appropriate  management  practices and maintain policies designed to
effectively  mitigate such risks.  The objectives of our market risk  management
efforts are to preserve  the economic  and  accounting  returns of our assets by
matching the repricing and maturity  characteristics  of our assets with that of
our liabilities. 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 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.

      We use  derivatives  for  hedging  purposes  only,  and do not enter  into
derivative financial instruments for trading or speculative  purposes.  Interest
rate  swaps are an  effective  means of  achieving  our target  matched  funding
objectives  by converting  debt to the desired  basis and  duration.  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


                                       36


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 or in limited instances
against specific assets.  Our 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  derivatives  are required to closely  match the related terms of
hedged items.

      Interest  rate swaps with  notional  principal  amounts of $9.4 billion at
December 31, 2003,  $7.8 billion at December 31, 2002, $7.1 billion at September
30,  2002 and $6.9  billion at  September  30,  2001 were  designated  as hedges
against  outstanding  debt.  The net increase in notional  principal  amounts of
interest rate swaps at December 31, 2003 compared to the prior year consisted of
a $2,268.4 million increase in fixed to floating-rate  swaps (fair value hedges)
and a $665.5  million  decrease  in  floating  to  fixed-rate  swaps  (cash flow
hedges). The increase in fixed to float swaps was primarily due to the fact that
we elevated  our  fixed-rate  debt  issuance  during  2003,  as we extended  our
maturity profile in conjunction with spreads  declining.  In addition,  we enter
into hedge  transactions in conjunction with our  securitization  programs.  See
Note 9 -- Derivative Financial Instruments for further details.

      The  following  table   summarizes  the  composition  of  our  assets  and
liabilities before and after swaps:



                                             Before Swaps                     After Swaps
                                      ----------------------------    --------------------------
                                      Fixed Rate     Floating Rate    Fixed Rate   Floating Rate
                                      ----------     -------------    ----------   -------------
                                                                             
         December 31, 2003
Assets .............................       52%             48%            52%            48%
Liabilities ........................       59%             41%            46%            54%
         December 31, 2002
Assets .............................       53%             47%            53%            47%
Liabilities ........................       62%             38%            55%            45%


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



                                   Year Ended        Three Months Ended        Year Ended         Nine Months Ended
                                December 31, 2003     December 31, 2002    September 30, 2002    September 30, 2001
                                -----------------     -----------------    ------------------    ------------------
                                                                                      
Before Swaps
Commercial paper,
  variable-rate senior
   notes and bank credit
   facilities ...............  $12,352.1    1.83%    $12,344.2    2.09%    $17,087.2    2.34%    $20,373.6    4.91%
Fixed-rate senior and
  subordinated notes ........   20,002.0    6.06%     18,055.3    6.20%     16,764.8    6.11%     17,078.6    4.63%
                               ---------             ---------             ---------             ---------
Composite ...................  $32,354.1    4.45%    $30,399.5    4.54%    $33,852.0    4.21%    $37,452.2    4.14%
                               =========             =========             =========             =========
After Swaps
Commercial paper,
  variable-rate notes and
  bank credit facilities ....  $15,942.0    2.63%    $13,103.1    2.82%    $14,813.2    2.55%    $14,209.8    4.97%
Fixed-rate senior and
  subordinated note .........   16,412.1    5.82%     17,296.4    5.87%     19,038.8    5.90%     23,242.4    4.71%
                               ---------             ---------             ---------             ---------
Composite ...................  $32,354.1    4.25%    $30,399.5    4.56%    $33,852.0    4.43%    $37,452.2    4.34%
                               =========             =========             =========             =========


      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.

      We regularly  monitor and simulate our degree of interest rate sensitivity
by  measuring  the  repricing  characteristics  of  interest-sensitive   assets,
liabilities,  and derivatives. The Capital Committee reviews the results of this
modeling  periodically.  The interest rate  sensitivity  modeling  techniques we
employ  include the creation of  prospective  twelve month  "baseline" and "rate
shocked" net interest income simulations.


                                       37


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

      An immediate  hypothetical 100 basis point parallel  increase in the yield
curve on January 1, 2004 would  reduce net income by an  estimated  $24  million
after-tax over the next twelve  months.  A  corresponding  decrease in the yield
curve would cause an increase in net income of a like amount.  A 100 basis point
increase in the yield curve on January 1, 2003 would have  reduced net income by
an estimated $16 million after tax, while a corresponding  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 estimated
outcomes  of  our  simulations.  Further,  such  simulations  do  not  represent
management's current view of future market interest rate movements.

      We also  utilize  foreign  currency  exchange  forward  contracts to hedge
currency risk  underlying our net  investments  in foreign  operations and cross
currency  interest  rate swaps to hedge both foreign  currency and interest rate
risk  underlying  foreign debt.  At December 31, 2003,  CIT was party to foreign
currency  exchange forward contracts with notional amounts totaling $2.6 billion
and maturities  ranging from 2004 to 2007 and party to cross  currency  interest
rate swaps with notional  amounts  totaling $1.8 billion and maturities  ranging
from 2004 to 2024.  At  December  31,  2002,  CIT was party to foreign  currency
exchange forward contracts with notional amounts totaling $3.0 billion and party
to cross  currency  interest  rate swaps with  notional  amounts  totaling  $1.5
billion.  At  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.

      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,  in conjunction  with  Corporate Risk  Management,
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 and are aggregated by counterparty to monitor credit exposure.

      Liquidity  Risk  Management -- Liquidity  risk refers to the risk of 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,  and we maintain and periodically  review a contingency funding plan to
be  implemented  in the  event of any form of  market  disruption.  The  primary
funding  sources  are  commercial   paper  (U.S.),   long-term  debt  (U.S.  and
International) and asset-backed securities (U.S. and Canada).


                                       38


      The commercial paper program closed the 2003 year at $4.2 billion,  versus
$5.0 billion at December 31, 2002 and $4.7  billion at September  30, 2002.  Our
targeted  U.S.  program  size  remains  at $5.0  billion  with  modest  programs
aggregating  $500 million to be maintained in Canada and Australia.  Our goal is
to maintain committed bank lines in excess of aggregate  outstanding  commercial
paper.

      CIT maintains  registration  statements  with the  Securities and Exchange
Commission  ("SEC") covering debt securities that we may sell in the future.  At
December  31, 2003,  we had $10.1  billion of  registered,  but  unissued,  debt
securities  available under a shelf  registration  statement.  Term-debt  issued
during the year ended  December 31, 2003 consisted of $4.7 billion in fixed-rate
notes and $8.3 billion in variable-rate notes. In November 2002, we introduced a
retail  note  program  in which  we offer  fixed-rate  senior,  unsecured  notes
utilizing numerous  broker-dealers for placement to retail accounts.  During the
year, we issued $1.3 billion under this program  having  maturities of between 2
and 10 years. As part of our strategy to further  diversify our funding sources,
$0.3 billion of fixed-rate  foreign currency  denominated debt was issued during
the last quarter of 2003. We plan on utilizing these  alternate  sources of debt
funding to meet our strategic growth initiatives.

      To further  strengthen  our funding  capabilities,  we maintain  committed
asset backed facilities and shelf registration  statements,  which cover a range
of assets from equipment to consumer home equity  receivables and trade accounts
receivable.  While  these  are  predominately  in the  U.S.,  we  also  maintain
facilities  for Canadian  domiciled  assets.  As of December  31,  2003,  we had
approximately  $3.0  billion  of  availability  in  our  committed  asset-backed
facilities,  including $1.0 billion relating to our trade  receivable  facility,
and $3.8 billion of registered, but unissued,  securities available under public
shelf  registration  statements  relating  to  our  asset-backed  securitization
program.

      Our  committed  asset-backed  commercial  paper  programs in the U.S.  and
Canada  provide a substantial  source of alternate  liquidity.  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 as
outlined in the following table.




                                                             Current        December 31,    December 31,
Liquidity Measurement                                        Target             2003             2002
---------------------                                        -------        ------------    ------------
                                                                                        
Commercial paper to total debt ........................   Maximum of 15%         13%             16%
Short-term debt to total debt .........................   Maximum of 45%         36%             47%
Bank lines to short-term debt .........................   Minimum of 45%         76%             54%
Aggregate alternate liquidity* to short-term debt .....   Minimum of 75%         93%             75%

--------------------------------------------------------------------------------
*     Aggregate   alternative  liquidity  includes  available  bank  facilities,
      asset-backed conduit facilities and cash.

      Our credit  ratings are an important  factor in meeting our margin targets
as better  ratings  generally  correlate to lower cost of funds (see Net Finance
Margin, interest expense discussion).  The following credit ratings have been in
place since September 30, 2002.

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

      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 certain covenants contained in 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.  In addition,  our credit  agreements also
contain a minimum net worth test ranging from $3.75 billion to $4.0 billion.


                                       39


      The following tables summarize various contractual  obligations,  selected
contractual cash receipts and contractual commitments as of December 31, 2003 ($
in millions):



                                                                 Payments and Collections by Period
                                                      --------------------------------------------------------
                                                                                                        After
Contractual Obligations                    Total(3)      2004        2005       2006        2007        2007
-----------------------                    ---------  ---------   ---------   ---------   ---------   --------
                                                                                    
Commercial paper .......................   $ 4,173.9  $ 4,173.9   $      --   $      --   $      --   $     --
Variable-rate term debt ................     9,408.4    4,806.4     3,333.3       985.3        37.5      245.9
Fixed-rate term debt ...................    19,830.8    3,930.2     4,328.6     2,639.4     3,498.9    5,433.7
Preferred securities ...................       255.5         --          --          --          --      255.5
Lease rental expense ...................       164.7       53.2        38.3        28.6        20.7       23.9
                                           ---------  ---------   ---------   ---------   ---------   --------
   Total contractual obligations .......    33,833.3   12,963.7     7,700.2     3,653.3     3,557.1    5,959.0
                                           ---------  ---------   ---------   ---------   ---------   --------
Finance receivables(1) .................    31,300.2   11,698.9     4,503.7     3,441.2     2,197.8    9,458.6
Operating lease rental income ..........     2,871.8      997.1       666.5       411.0       269.9      527.3
Finance receivables held for sale(2) ...       918.3      918.3          --          --          --         --
Cash -- current balance ................     1,973.7    1,973.7          --          --          --         --
Retained interests in
   securitizations .....................     1,380.8      626.2       318.1       165.4        95.8      175.3
                                           ---------  ---------   ---------   ---------   ---------   --------
   Total projected cash availability ...    38,444.8   16,214.2     5,488.3     4,017.6     2,563.5   10,161.2
                                           ---------  ---------   ---------   ---------   ---------   --------
Net projected cash inflow (outflow) ....   $ 4,611.5  $ 3,250.5   $(2,211.9)  $   364.3   $  (993.6)  $4,202.2
                                           =========  =========   =========   =========   =========   ========

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

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

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

(3)   Projected  proceeds from the sale of operating lease  equipment,  interest
      revenue from finance  receivables,  debt interest  expense and other items
      are excluded.  Obligations  relating to  postretirement  programs are also
      excluded.  See Note 16--Post  Retirement  and Other Benefit Plans for more
      information.



                                                                   Commitment Expiration by Period
                                                        -----------------------------------------------------
                                                                                                        After
Contractual Commitments                      Total       2004        2005       2006        2007        2007
-----------------------                      -----       ----        ----       ----        ----        ----
                                                                                    
Aircraft purchases .....................   $ 2,934.0   $  634.0    $  952.0    $1,088.0    $  260.0   $     --
Credit extensions ......................     5,934.3    1,611.5       872.1       977.2       715.6    1,757.9
Letters of credit ......................     1,202.7    1,127.3         1.8        73.2          --        0.4
Sale-leaseback payments ................       486.4       28.5        28.5        28.5        28.5      372.4
Manufacturer purchase commitments ......       197.2      197.2          --          --          --         --
Venture capital commitments ............       124.2         --          --          --          --      124.2
Guarantees .............................       133.2      120.7          --          --        10.5        2.0
Acceptances ............................         9.3        9.3          --          --          --         --
                                           ---------   --------    --------    --------    --------   --------
  Total commitments ....................   $11,021.3   $3,728.5    $1,854.4    $2,166.9    $1,014.6   $2,256.9
                                           =========   ========    ========    ========    ========   ========


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"),  for which the implementation year is 2004. The committee,  which is
chaired by the Controller,  includes the CFO, the Director of Internal Audit and
other senior  executives in finance,  legal,  risk  management  and  information
technology.  We are currently  finalizing the documentation  phase of the SARBOX
project  and will begin the  testing,  assessment  and  remediation  of internal
controls in early 2004, with  documentation  and management  testing of internal
controls  expected to be completed  during the first three quarters of 2004. Our
management self-assessment is planned for the second half of 2004. At this time,
the standards for independent  assessment by independent  auditors have not been
finalized.


                                       40


Off-balance Sheet Arrangements
Securitization Program

      We fund asset  originations  on our  balance  sheet by  accessing  various
sectors of the capital  markets,  including the term debt and  commercial  paper
markets.  In an effort to broaden  funding  sources  and  provide an  additional
source of liquidity, we use an array of securitization programs,  including both
asset-backed commercial paper and term structures, to access both the public and
private asset-backed  securitization markets. Current products in these programs
include  receivables  and leases  secured by equipment as well as consumer loans
secured by residential real estate. The following table summarizes data relating
to our securitization balance and activity ($ in millions).



                                                                      Three Months                 Nine Months
                                                       Year Ended         Ended       Year Ended      Ended
                                                      December 31,    December 31,  September 30,  September 30,
                                                          2003            2002          2002           2001
                                                      ------------    ------------  -------------  -------------
                                                                                         
Securitized assets:
   Specialty Finance -- commercial .................    $3,915.4       $ 3,377.4      $ 3,703.1      $ 4,023.2
   Specialty Finance -- consumer ...................     2,510.1         3,168.8        3,147.5        1,659.9
   Equipment Finance ...............................     3,226.2         3,936.2        4,384.1        4,464.8
                                                        --------       ---------      ---------      ----------
     Total securitized assets ......................    $9,651.7       $10,482.4      $11,234.7      $10,147.9
                                                        ========       =========      =========      ==========
Securitized assets as a % of managed assets ........        19.4%           22.6%          23.6%          19.9%
Volume securitized:
   Specialty Finance -- commercial .................    $3,416.2       $   590.6      $ 2,602.0      $ 1,988.3
   Specialty Finance -- consumer ...................       489.2           288.1        2,738.6             --
   Equipment Finance ...............................     1,414.8           310.6        2,327.9        1,305.0
                                                        --------       ---------      ---------      ----------
     Total volume securitized ......................    $5,320.2       $ 1,189.3      $ 7,668.5      $  3,293.3
                                                        ========       =========      =========      ==========


      With the  restoration  of our funding  base and the  strengthening  of our
credit spreads, securitization volume normalized during 2003. Our securitization
activity  relating to commercial  finance  receivables was $4.8 billion,  as the
economics  remained  favorable to complete these sales. Also, we decided to grow
the consumer home equity  portfolio  on-balance  sheet during the second half of
2003.  Management targets a maximum of 15% of pre-tax income from securitization
gains.

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

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

      Our  retained  interests  had a carrying  value at  December  31,  2003 of
$1,309.3  million,  including  interests  in  commercial  securitized  assets of
$1,129.7 million and consumer  securitized  assets of $179.6 million.  The total
retained  interest as of December  31, 2003 is  comprised  of $623.3  million in
over-collateralization,  $425.7  million of  interest  only  strips,  and $260.3
million of cash reserve accounts.  Retained  interests are subject to credit and
prepayment risk. As of December 31, 2003,  approximately  50% of our outstanding
securitization pool balances are


                                       41


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

Securitization and Joint Venture Activities

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

      Securitization  Transactions  -- SPEs  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 SPEs, 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 a managed  basis.  Under the  recently  issued  rules
relating to consolidation and SPEs, non-qualifying  securitization entities have
to be  consolidated.  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 No. 140 and therefore will continue to qualify as off-balance
sheet transactions.  As part of these related activities,  CIT entered into $2.7
billion in notional  amount of hedge  transactions to protect the related trusts
against  interest  rate risk.  CIT is insulated  from this risk by entering into
offsetting  swap  transactions  with third  parties  totalling  $2.7  billion in
notional amount at December 31, 2003.

      During 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  organized  through  distinct
legal entities 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 using the
equity  method,  with  profits  and losses  distributed  according  to the joint
venture   agreement.   See  related   FASB   Interpretation   No.   ("FIN")  46,
"Consolidation  of Variable  Interest  Entities"  discussion in "Accounting  and
Technical  Pronouncements"  and disclosure in Item 8.  Financial  Statements and
Supplementary Data, Note 20 -- Certain Relationships and Related Transactions.

Capitalization

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



                                                      December 31,   December 31,   September 30,  September 30,
                                                          2003           2002           2002           2001
                                                      ------------   ------------   -------------  -------------
                                                                                        
Commercial paper ..................................    $ 4,173.9       $ 4,974.6     $ 4,654.2      $ 8,869.2
Bank credit facilities ............................           --         2,118.0       4,037.4             --
Term debt .........................................     29,239.2        24,588.7      23,764.4       26,828.5
Preferred Capital Securities ......................        255.5           257.2         257.7          260.0
Stockholders' equity(1) ...........................      5,427.8         4,968.5       4,857.3       10,661.4(2)
                                                       ---------       ---------     ---------      ---------
Total capitalization ..............................     39,096.4        36,907.0      37,571.0       46,619.1
Goodwill and other intangible assets ..............       (487.7)         (400.9)       (402.0)      (6,569.5)
                                                       ---------       ---------     ---------      ---------
Total tangible capitalization .....................    $38,608.7       $36,506.1     $37,169.0      $40,049.6
                                                       =========       =========     =========      =========
Tangible stockholders' equity(1) and Preferred
  Capital Securities to managed assets ............        10.45%          10.41%         9.89%          8.55%(2)
Total debt (excluding overnight deposits)
  to tangible stockholders' equity(1) and
  Preferred Capital Securities ....................         6.14x           6.24x         6.56x          8.13x(2)


--------------------------------------------------------------------------------
(1)   Stockholders'  equity  excludes  the impact of the  accounting  change for
      derivative financial  instruments  described in Note 9 to the Consolidated
      Financial  Statements and certain  unrealized  gains or losses on retained
      interests and investments, as these amounts are not necessarily indicative
      of amounts that will be realized. See "Non-GAAP Financial Measurements."

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


                                       42


      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.

Critical Accounting Estimates

      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,  the reported amounts of income and
expense during the reporting period and the disclosure of contingent  assets and
liabilities at the date of the financial  statements.  The following  accounting
estimates,  which are based on relevant information available at the end of each
period,  include  inherent  risks and  uncertainties  related to  judgments  and
assumptions made by management.  We consider the following  accounting estimates
to be critical in applying  our  accounting  policies  due to the  existence  of
uncertainty  at the time the  estimate  is made,  the  likelihood  of changes in
estimates  from period to period and the potential  impact that these  estimates
can have on the financial statements.

      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, are accounted for at fair value. The majority of these investments
are in our venture capital portfolio.  Accordingly,  management uses judgment in
determining fair value. As discussed  previously,  a significant  write-down was
taken  in 2003 on our  direct  private  equity  investment  portfolio  based  on
management's estimates of fair value,  reflecting our decision to accelerate the
liquidation  of these  assets and  additional  fair value data  obtained  in the
marketing  of the  portfolio  to  prospective  buyers.  As of December 31, 2003,
venture capital and private equity  investments  totaled $249.9  million.  A 10%
fluctuation in value of venture capital and private equity  investments  equates
to $0.07 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
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 determined based on 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


                                       43


based upon  historical and projected  credit trends and (3) reserves for general
economic  environment  and other factors.  Historical  loss rates are based on a
three-year  average,  which is consistent  with our portfolio  life and provides
what we believe to be appropriate  weighting to current loss rates.  The process
involves the use of estimates  and a high degree of management  judgment.  As of
December 31, 2003,  the reserve for credit losses was $643.7 million or 2.06% of
finance receivables.  A 5% change to the three-year historic loss rates utilized
in our reserve  determination  at December  31,  2003  equates to the  following
variances:  $19.4  million,  or 6 basis  points  (0.06%)  in the  percentage  of
reserves to finance  receivables;  and $0.06 in diluted  earnings  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. These assumptions reflect both the historical experience and
anticipated trends relative to the products  securitized.  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.  See  Note 6 --
Investments in Debt and Equity Securities for additional  information  regarding
securitization retained interests and related sensitivity analysis.

      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 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.  Data regarding  equipment  values,  including
appraisals,  and our historical  residual  realization  experience are among the
factors  considered in evaluating  estimated residual values. As of December 31,
2003, our direct  financing lease residual  balance was $2,419.5 million and our
operating lease equipment balance was $7,615.5 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 is assessed for impairment at least  annually.  During this  assessment,
management relies on a number of factors,  including operating results, business
plans,  economic  projections,  anticipated  future cash flows, and market place
data.  See  "--  Goodwill  and  Other  Intangible  Assets  Amortization"  for  a
discussion of our impairment analysis.

      Intangible  assets consist  primarily of customer  relationships  acquired
during the 2003 factoring acquisitions, which are being amortized over a 20-year
period, and computer software and related transaction processes, which are being
amortized  over a 5-year life. An  evaluation of the remaining  useful lives and
the amortization  methodology of the intangible assets is performed periodically
to determine if any change is warranted.

      Goodwill and Other  Intangibles  Assets was $487.7 million at December 31,
2003. A 10% fluctuation in the value equates to $0.21 in earnings per share.

      Deferred   Income  Taxes  --  Deferred  tax  assets  and  liabilities  are
recognized  for the  future  tax  consequences  of  transactions  that have been
reflected  in the  Consolidated  Financial  Statements.  Our  ability to realize
deferred tax assets is dependent on prospectively  generating  taxable income by
corresponding  tax  jurisdiction,  and in some cases on the timing and amount of
specific  types  of  future  transactions.   Management's  judgment,   regarding
uncertainties and the use of estimates and projections, is required in assessing
our  ability to realize  net  operating  loss  ("NOL's")  and other tax  benefit
carry-forwards,  as these assets begin to expire at various  dates  beginning in
2011.  Management  utilizes  historical and projected data, budgets and business
plans in making these estimates and assessments. Deferred tax assets relating to
NOL's were $834 million at December 31, 2003. A 1%  fluctuation  in the value of
deferred tax assets  relating to NOL's equates to $0.04 in diluted  earnings per
share.


                                       44


Accounting and Technical Pronouncements

      In  January  2004,  the FASB  issued  FASB Staff  Position  No. FAS 106-1,
"Accounting  and Disclosure  Requirements  Related to the Medicare  Prescription
Drug,  Improvement and Modernization  Act of 2003" (FSP 106-1).  The FSP permits
employers that sponsor  postretirement benefit plans providing prescription drug
benefits  to retirees to make a one-time  election to defer  accounting  for any
effects of the Medicare Prescription Drug, Improvement, and Modernization Act of
2003. CIT has elected to defer the related  accounting  pending further guidance
from the FASB.

      In December  2003, the FASB revised SFAS No. 132  "Employers'  Disclosures
about  Pensions  and Other  Postretirement  Benefits."  This  revision  requires
additional  disclosures  regarding  defined  benefit  pension plan  assumptions,
assets, obligations, cash flows and costs for fiscal years ending after December
15, 2003. The additional  required  disclosures  are included in Note 16 -- Post
Retirement and Other Benefit Plans.

      In  December  2003,  the  SEC  announced  that  it  will  release  a Staff
Accounting  Bulletin that will require  issued loan  commitments to be accounted
for as written  options that would be reported as liabilities  until the loan is
made or they expire  unexercised.  We are evaluating the impact of this proposed
accounting pending further guidance from the SEC and the FASB.

      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  was effective  immediately  for
financial instruments entered into or modified after May 31, 2003, and otherwise
was 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.

      In April 2003, the FASB issued SFAS No. 149 "Amendment of Statement 133 on
Derivative  Instruments and Hedging  Activities." This pronouncement  amends and
clarifies financial accounting and reporting for certain derivative instruments,
including  certain  derivative  instruments  embedded in other  contracts.  This
pronouncement is effective for all contracts entered into or modified after June
30, 2003. The  implementation of SFAS No. 149 did not have a significant  impact
on our financial position or results of operations.

      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 --  Business  and  Summary  of  Significant  Accounting
Policies for additional information regarding the implementation of FIN 46.

      The  FIN  46  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. The implementation of
this standard did not change the equity  method of accounting  for our strategic
vendor partner joint ventures (see Note 20 -- Certain  Relationships and Related
Transactions).  Our securitization transactions outstanding at December 31, 2003
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


                                       45


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.  In  December  2003,  the FASB  revised  FIN 46.  This  revision
clarified  certain  provisions  within  FIN 46 and  delayed  implementation  for
selected  transactions  until reporting periods ending after March 15, 2004. The
revisions  to  FIN  46  do  not  have  a  significant  impact  on  our  previous
assessments.

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

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. 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.


                                       46


      Selected  non-GAAP  disclosures  are presented and reconciled in the table
below ($ in millions):



                                                     December 31,    December 31,  September 30,  September 30,
                                                         2003            2002           2002          2001
                                                     ------------    ------------  -------------  -------------
                                                                                         
Managed assets(1):
Finance receivables ...............................    $31,300.2       $27,621.3      $28,459.0      $31,969.3
Operating lease equipment, net ....................      7,615.5         6,704.6        6,567.4        6,402.8
Finance receivables held for sale .................        918.3         1,213.4        1,019.5        2,014.9
Equity and venture capital investments
   (included in other assets) .....................        249.9           335.4          341.7          342.2
                                                       ---------       ---------      ---------      ---------
   Total financing and leasing portfolio assets ...     40,083.9        35,874.7       36,387.6       40,729.2
Securitized assets ................................      9,651.7        10,482.4       11,234.7       10,147.9
                                                       ---------       ---------      ---------      ---------
   Managed assets (Non-GAAP) ......................    $49,735.6       $46,357.1      $47,622.3      $50,877.1
                                                       =========       =========      =========      =========
Earning assets(2):
Total financing and leasing portfolio assets ......    $40,083.9       $35,874.7      $36,387.6      $40,729.2
Credit balances of factoring clients ..............     (3,894.6)       (2,270.0)      (2,513.8)      (2,392.9)
                                                       ---------       ---------      ---------      ---------
Earning assets (Non-GAAP) .........................    $36,189.3       $33,604.7      $33,873.8      $38,336.3
                                                       =========       =========      =========      =========
Tangible equity(3):
Total equity ......................................    $ 5,394.2       $ 4,870.7      $ 4,757.8      $ 5,947.6
Due from former parent ............................           --              --             --        4,650.4
Other comprehensive loss relating to derivative
financial instruments .............................         41.3           118.3          120.5           63.4
Unrealized gain on securitization investments .....         (7.7)          (20.5)         (23.6)            --
Goodwill and intangible assets ....................       (487.7)         (400.9)        (402.0)      (6,569.5)
                                                       ---------       ---------      ---------      ---------
Tangible common equity ............................      4,940.1         4,567.6        4,452.7        4,091.9
Preferred capital securities ......................        255.5           257.2          257.7          260.0
                                                       ---------       ---------      ---------      ---------
   Tangible equity (Non-GAAP) .....................    $ 5,195.6       $ 4,824.8      $ 4,710.4      $ 4,351.9
                                                       =========       =========      =========      =========
Debt, net of overnight deposits(4):
Total debt ........................................    $33,668.6       $31,681.3      $32,456.0      $35,697.7
Overnight deposits ................................     (1,529.4)       (1,578.7)      (1,550.6)        (333.4)
Preferred capital securities ......................       (255.5)             --             --             --
                                                       ---------       ---------      ---------      ---------
   Debt, net of overnight deposits (Non-GAAP) .....    $31,883.7       $30,102.6      $30,905.4      $35,364.3
                                                       =========       =========      =========      =========

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

Background -- 2002 IPO and Ownership Change

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

      Prior to the IPO,  the  activity of TCH  consisted  primarily  of interest
expense and related  fees to an  affiliate of Tyco from June 1, 2001 to June 30,
2002. The TCH  accumulated  net deficit was relieved via a capital  contribution
from Tyco.  TCH had no  operations  subsequent  to June 30,  2002.  Although the
audited financial statements and notes include the activity of TCH in conformity
with accounting  principles  generally accepted in the U.S., certain analysis of
results  exclude  the  impact of TCH,  as  management  believes  that it is more
meaningful to


                                       47


discuss our financial  results  excluding TCH, due to its temporary  status as a
Tyco acquisition  company with respect to CIT.  Consolidating  income statements
for CIT, TCH and CIT consolidated are displayed in Item 8. Financial  Statements
and Supplementary Data, Note 24.

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

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,

      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.


                                       48


Item 8. Financial Statements and Supplementary Data.

                         REPORT OF INDEPENDENT AUDITORS

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

In our opinion, the accompanying  consolidated balance sheets as of December 31,
2003 and 2002 and September 30, 2002, and the related consolidated statements of
income,  of  stockholders'  equity  and of cash  flows  present  fairly,  in all
material respects, the financial position of CIT Group Inc. and its subsidiaries
at  December  31,  2003 and 2002 and  September  2002,  and the results of their
operations  and their cash flows for the year ended December 31, 2003, the three
months ended December 31, 2002, the fiscal year ended September 30, 2002 and for
the period  from June 2, 2001  through  September  30, 2001 in  conformity  with
accounting principles generally accepted in the United States of America.  These
financial  statements are the  responsibility of the Company's  management;  our
responsibility  is to express an opinion on these financial  statements based on
our audits.  We conducted  our audits of these  statements  in  accordance  with
auditing  standards  generally  accepted in the United States of America,  which
require that we plan and perform the audit to obtain reasonable  assurance about
whether the financial  statements  are free of material  misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the financial  statements,  assessing the  accounting  principles
used and  significant  estimates made by management,  and evaluating the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

As discussed in Note 1 to the financial statements,  on June 2, 2001 the Company
changed its basis of accounting  for  purchased  assets and  liabilities, and on
October 1, 2001 the Company changed the manner in which it accounts for goodwill
and other intangible assets.


PricewaterhouseCoopers LLP
New York, New York
January 22, 2004


                                       49


                       REPORT OF INDEPENDENT ACCOUNTANTS

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

In  our  opinion,  the  accompanying   consolidated  statements  of  income,  of
stockholders' equity and of cash flows present fairly, in all material respects,
the results of operations and cash flows of CIT Group Inc. and its  subsidiaries
for the period from  January 1, 2001  through  June 1, 2001 in  conformity  with
accounting principles generally accepted in the United States of America.  These
financial  statements are the  responsibility of the Company's  management;  our
responsibility  is to express an opinion on these financial  statements based on
our  audit.  We  conducted  our audit of these  statements  in  accordance  with
auditing  standards  generally  accepted in the United States of America,  which
require that we plan and perform the audit to obtain reasonable  assurance about
whether the financial  statements  are free of material  misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the financial  statements,  assessing the  accounting  principles
used and  significant  estimates made by management,  and evaluating the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

As  discussed  in Note 1 to the  financial  statements,  on  January 1, 2001 the
Company  changed the manner in which it accounts for derivative  instruments and
hedging activities.


PricewaterhouseCoopers LLP
New York, New York
October 18, 2001, except as to the reacquisition
of international subsidiaries described in Note 25
and the reorganization of Tyco Capital Holding Inc.
described in Note 24, which are as of
February 11, 2002 and July 1, 2002, respectively.


                                       50


                         CIT GROUP INC. AND SUBSIDIARIES

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



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

Financing and leasing assets:
   Finance receivables ........................................         $31,300.2             $27,621.3             $28,459.0
Reserve for credit losses .....................................            (643.7)               (760.8)               (777.8)
                                                                        ---------             ---------             ---------
   Net finance receivables ....................................          30,656.5              26,860.5              27,681.2
   Operating lease equipment, net .............................           7,615.5               6,704.6               6,567.4
   Finance receivables held for sale ..........................             918.3               1,213.4               1,019.5
Cash and cash equivalents .....................................           1,973.7               2,036.6               2,274.4
Retained interests in securitizations .........................           1,380.8               1,451.4               1,410.4
Goodwill and intangible assets ................................             487.7                 400.9                 402.0
Other assets ..................................................           3,310.3               3,265.0               3,355.6
                                                                        ---------             ---------             ---------
Total Assets ..................................................         $46,342.8             $41,932.4             $42,710.5
                                                                        =========             =========             =========

               LIABILITIES AND STOCKHOLDERS' EQUITY

Debt:
   Commercial paper ...........................................         $ 4,173.9             $ 4,974.6             $ 4,654.2
   Variable-rate bank credit facilities .......................                --               2,118.0               4,037.4
   Variable-rate senior notes .................................           9,408.4               4,906.9               5,379.0
   Fixed-rate senior notes ....................................          19,830.8              19,681.8              18,385.4
   Preferred capital securities ...............................             255.5                    --                    --
                                                                        ---------             ---------             ---------
Total debt ....................................................          33,668.6              31,681.3              32,456.0
Credit balances of factoring clients ..........................           3,894.6               2,270.0               2,513.8
Accrued liabilities and payables ..............................           3,346.4               2,853.2               2,725.2
                                                                        ---------             ---------             ---------
Total Liabilities .............................................          40,909.6              36,804.5              37,695.0
                                                                        ---------             ---------             ---------
Commitments and Contingencies (Note 17)
Minority interest .............................................              39.0                    --                    --
Preferred capital securities ..................................                --                 257.2                 257.7
Stockholders' Equity:
   Preferred stock, $0.01 par value,
     100,000,000 authorized; none issued ......................                --                    --                    --
   Common stock, $0.01 par value,
     600,000,000 authorized; 211,848,997
     issued and 211,805,468 outstanding .......................               2.1                   2.1                   2.1
   Paid-in capital, net of deferred
     compensation of $30.6, $5.5 and $6.4 .....................          10,677.0              10,676.2              10,674.8
   Contributed capital ........................................                                                            --
   Accumulated (deficit) ......................................          (5,141.8)             (5,606.9)             (5,722.8)
   Accumulated other comprehensive loss .......................            (141.6)               (200.7)               (196.3)
Less: Treasury stock, 43,529 shares, at cost ..................              (1.5)                   --                    --
                                                                        ---------             ---------             ---------
Total Stockholders' Equity ....................................           5,394.2               4,870.7               4,757.8
                                                                        ---------             ---------             ---------
Total Liabilities and Stockholders' Equity ....................         $46,342.8             $41,932.4             $42,710.5
                                                                        =========             =========             =========


                See Notes to Consolidated Financial Statements.


                                       51


                         CIT GROUP INC. AND SUBSIDIARIES

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



                                                           Year         Three Months       Year           June 2         January 1
                                                           Ended            Ended          Ended          through         through
                                                       December 31,     December 31,   September 30,   September 30,      June 1,
                                                           2003             2002           2002            2001            2001
                                                       ------------     ------------   -------------   -------------   ------------
                                                        (successor)      (successor)    (successor)     (successor)    (predecessor)
                                                                                                         
Finance income ..................................       $ 3,729.5        $   971.7      $ 4,342.8        $ 1,676.5      $ 2,298.8
Interest expense ................................         1,319.3            340.0        1,439.3            597.1        1,022.7
                                                        ---------        ---------      ---------        ---------      ---------
Net finance income ..............................         2,410.2            631.7        2,903.5          1,079.4        1,276.1
Depreciation on operating lease
  equipment .....................................         1,053.0            277.3        1,241.0            448.6          588.1
                                                        ---------        ---------      ---------        ---------      ---------
Net finance margin ..............................         1,357.2            354.4        1,662.5            630.8          688.0
Provision for credit losses .....................           387.3            133.4          788.3            116.1          216.4
                                                        ---------        ---------      ---------        ---------      ---------
Net finance margin after provision
  for credit losses .............................           969.9            221.0          874.2            514.7          471.6
Other revenue ...................................           947.6            263.5          972.6            336.2          230.4
(Loss) gain on venture capital
  investments ...................................           (88.3)            (6.4)         (40.3)            (1.1)           7.1
                                                        ---------        ---------      ---------        ---------      ---------
Operating margin ................................         1,829.2            478.1        1,806.5            849.8          709.1
                                                        ---------        ---------      ---------        ---------      ---------
Salaries and general operating
  expenses ......................................           942.3            242.1          946.4            348.5          446.0
Interest expense -- TCH .........................              --               --          662.6             97.7            1.1
Goodwill impairment .............................              --               --        6,511.7               --             --
Goodwill amortization ...........................              --               --             --             59.8           37.8
Acquisition-related costs .......................              --               --             --               --           54.0
                                                        ---------        ---------      ---------        ---------      ---------
Operating expenses ..............................           942.3            242.1        8,120.7            506.0          538.9
                                                        ---------        ---------      ---------        ---------      ---------
Gain on redemption of debt ......................            50.4               --             --               --             --
                                                        ---------        ---------      ---------        ---------      ---------
Income (loss) before provision for
  income taxes ..................................           937.3            236.0       (6,314.2)           343.8          170.2
Provision for income taxes ......................          (365.0)           (92.0)        (374.0)          (157.4)         (84.8)
Dividends on preferred capital
  securities, after tax .........................            (5.4)            (2.7)         (10.5)            (3.6)          (4.9)
                                                        ---------        ---------      ---------        ---------      ---------
Net income (loss) ...............................       $   566.9        $   141.3      $(6,698.7)       $   182.8      $    80.5
                                                        =========        =========      =========        =========      =========
Net income (loss) per basic share ...............       $    2.68        $    0.67      $  (31.66)       $    0.86      $    0.38
                                                        =========        =========      =========        =========      =========
Net income (loss) per diluted share .............       $    2.66        $    0.67      $  (31.66)       $    0.86      $    0.38
                                                        =========        =========      =========        =========      =========


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

                See Notes to Consolidated Financial Statements.


                                       52


                         CIT GROUP INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                 ($ in millions)



                                                                                             Accumulated     Total         Total
                                               Common     Paid-in    Contributed   Treasury   Earnings/  Comprehensive Stockholders'
                                                Stock     Capital      Capital       Stock    (Deficit)  Income/(Loss)    Equity
                                               ------     -------    -----------   --------   ---------  ------------- -------------
                                                                                                   
December 31, 2000 (predecessor) ............  $     2.7  $ 3,527.2    $      --    $  (137.7)  $ 2,603.3   $    11.7    $ 6,007.2
Net income .................................                                                        80.5                     80.5
Foreign currency translation adjustments ...                                                                   (33.7)       (33.7)
Cumulative effect of new accounting
  principle ................................                                                                  (146.5)      (146.5)
Change in fair values of derivatives
  qualifying as cash flow hedges ...........                                                                     0.6          0.6
                                                                                                                        ---------
Total comprehensive loss ...................                                                                                (99.1)
                                                                                                                        ---------
Cash dividends .............................                                                       (52.9)                   (52.9)
Issuance of treasury stock .................                                            27.6                                 27.6
Restricted common stock grants .............                  12.4                                                           12.4
Merger of TCH ..............................                           (4,579.9)                                         (4,579.9)
                                              ---------  ---------    ---------    ---------   ---------   ---------    ---------
June 1, 2001 (predecessor) .................        2.7    3,539.6     (4,579.9)      (110.1)    2,630.9      (167.9)     1,315.3
Recapitalization at acquisition ............              (3,539.6)     3,539.6                                                --
Effect of push-down accounting of
  Tyco's purchase price on CIT's net assets.       (2.7)                5,945.1        110.1    (2,631.7)      167.9      3,588.7
                                              ---------  ---------    ---------    ---------   ---------   ---------    ---------
June 2, 2001 (successor) ...................         --         --      4,904.8           --        (0.8)         --      4,904.0
Net income .................................                                                       182.8                    182.8
Foreign currency translation adjustments ...                                                                   (13.4)       (13.4)
Change in fair values of derivatives
  qualifying as cash flow hedges ...........                                                                   (63.4)       (63.4)
                                                                                                                        ---------
Total comprehensive income .................                                                                                106.0
                                                                                                                        ---------
Cash dividends .............................                                                        (0.1)                    (0.1)
Tax benefit on stock transactions ..........                               39.4                                              39.4
Capital contribution from Tyco .............                              898.3                                             898.3
                                              ---------  ---------    ---------    ---------   ---------   ---------    ---------
September 30, 2001 (successor) .............         --         --      5,842.5           --       181.9       (76.8)     5,947.6
Net loss ...................................                                                    (6,698.7)                (6,698.7)
Foreign currency translation adjustments ...                                                                   (62.4)       (62.4)
Change in fair values of derivatives
  qualifying as cash flow hedges ...........                                                                   (57.1)       (57.1)
Unrealized gain on equity and
  securitization investments, net ..........                                                                    21.0         21.0
Minimum pension liability adjustment .......                                                                   (21.0)       (21.0)
                                                                                                                        ---------
Total comprehensive loss ...................                                                                             (6,818.2)
                                                                                                                        ---------
Issuance of common stock in connection
  with the initial public offering .........        2.0   10,420.4    (10,422.4)                                               --
Common stock issued -- overallotment .......        0.1      249.2                                                          249.3
Capital contribution from Tyco
  for TCH ..................................                            4,579.9                    794.0                  5,373.9
Restricted common stock grants .............                   5.2                                                            5.2
                                              ---------  ---------    ---------    ---------   ---------   ---------    ---------
September 30, 2002 (successor) .............        2.1   10,674.8           --           --    (5,722.8)     (196.3)     4,757.8
Net income .................................                                                       141.3                    141.3
Foreign currency translation adjustments ...                                                                     0.2          0.2
Change in fair values of derivatives
  qualifying as cash flow hedges ...........                                                                     2.2          2.2
Unrealized losses on equity and
  securitization investments, net ..........                                                                    (6.8)        (6.8)
                                                                                                                        ---------
Total comprehensive income .................                                                                                136.9
                                                                                                                        ---------
Cash dividends .............................                                                       (25.4)                   (25.4)
Restricted common stock grants .............                   1.4                                                            1.4
                                              ---------  ---------    ---------    ---------   ---------   ---------    ---------
December 31, 2002 (successor) ..............        2.1   10,676.2           --           --    (5,606.9)     (200.7)     4,870.7
Net income .................................                                                       566.9                    566.9
Foreign currency translation adjustments ...                                                                   (30.2)       (30.2)
Change in fair values of derivatives
  qualifying as cash flow hedges ...........                                                                    77.0         77.0
Unrealized losses on equity and
  securitization investments, net ..........                                                                    (7.4)        (7.4)
Minimum pension liability adjustment .......                                                                    19.7         19.7
                                                                                                                        ---------
Total comprehensive income .................                                                                                626.0
                                                                                                                        ---------
Cash dividends .............................                                                      (101.8)                  (101.8)
Restricted common stock grants .............                   8.8                                                            8.8
Treasury stock purchased, at cost ..........                                           (28.9)                               (28.9)
Exercise of stock option awards ............                  (8.0)                     27.4                                 19.4
                                              ---------  ---------    ---------    ---------   ---------   ---------    ---------
December 31, 2003 (successor) ..............  $     2.1  $10,677.0    $      --    $    (1.5)  $(5,141.8)  $  (141.6)   $ 5,394.2
                                              =========  =========    =========    =========   =========   =========    =========


                See Notes to Consolidated Financial Statements.


                                       53


                         CIT GROUP INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 ($ in millions)



                                                             Year        Three Months       Year           June 2        January 1
                                                            Ended           Ended          Ended          through        through
                                                         December 31,    December 31,   September 30,   September 30,     June 1,
                                                             2003            2002           2002            2001           2001
                                                          ---------       ---------       ---------       ---------      ---------
                                                         (successor)     (successor)     (successor)     (successor)   (predecessor)
                                                                                                         
Cash Flows From Operations:
Net income (loss) ..................................      $   566.9       $   141.3       $(6,698.7)      $   182.8     $    80.5
Adjustments to reconcile net income
  (loss) to net cash flows from operations:
Provision for credit losses ........................          387.3           133.4           788.3           116.1         216.4
Depreciation and amortization ......................        1,086.6           287.5         1,286.5           521.3         642.4
Provision for deferred federal
  income taxes .....................................          265.1            71.9           276.9           113.6          63.7
Gains on equipment, receivable and
  investment sales, net ............................         (253.0)          (58.2)         (243.4)         (120.2)        (11.1)
Gain on debt redemption ............................          (50.4)             --              --              --            --
Loss (gain) on venture capital investments .........           88.3             6.4            40.3             1.1          (7.1)
Increase (decrease) in accrued
  liabilities and payables .........................          279.2            55.4            57.0          (349.8)        (28.2)
(Increase) decrease in other assets ................         (174.2)           26.7          (626.7)         (429.7)         69.9
Goodwill impairment ................................             --              --         6,511.7              --            --
Other ..............................................           (8.7)          (52.0)            4.0           (67.3)         34.9
                                                          ---------       ---------       ---------       ---------     ---------
Net cash flows provided by (used for)
  operations .......................................        2,187.1           612.4         1,395.9           (32.1)      1,061.4
                                                          ---------       ---------       ---------       ---------     ---------
Cash Flows From Investing Activities:
Loans extended .....................................      (53,157.8)      (12,873.8)      (48,300.6)      (15,493.1)    (20,803.0)
Collections on loans ...............................       45,123.9        12,089.7        42,584.2        12,750.6      18,520.2
Proceeds from asset and receivable
  sales ............................................        7,714.1         1,085.4        10,992.4         5,213.0       2,879.6
Purchases of assets to be leased ...................       (2,096.3)         (449.1)       (1,877.2)         (756.9)       (694.0)
Purchases of finance receivable portfolios .........       (1,097.5)         (254.7)         (372.7)             --            --
Net (increase) decrease in short-term
  factoring receivables ............................         (396.1)          391.7          (651.9)         (471.2)       (131.0)
Intangible assets acquired with portfolio
   purchases .......................................          (92.6)             --              --              --            --

Other ..............................................           14.8            (4.3)          (52.5)            3.2         (24.4)
                                                          ---------       ---------       ---------       ---------     ---------
Net cash flows (used for) provided
  by investing activities ..........................       (3,987.5)          (15.1)        2,321.7         1,245.6        (252.6)
                                                          ---------       ---------       ---------       ---------     ---------
Cash Flows From Financing Activities:
Proceeds from the issuance of variable
  and fixed rate notes .............................       13,034.6         2,463.2        13,093.4         1,000.0       6,246.6
Repayments of variable and
  fixed-rate notes .................................      (10,265.6)       (3,558.3)      (12,148.8)       (3,272.2)     (6,491.5)
Net (decrease) increase in commercial
  paper ............................................         (800.7)          320.4        (4,186.2)       (1,007.8)        813.6
Net repayments of non-recourse
  leveraged lease debt .............................         (125.4)          (35.0)         (187.7)          (26.6)         (8.7)
Cash dividends paid ................................         (101.8)          (25.4)             --              --         (52.9)
Other ..............................................           (3.6)             --              --              --          27.6
Capital contributions from former Parent ...........             --              --           923.5           744.7           0.8
Proceeds from issuance of common stock .............             --              --           254.6              --            --
                                                          ---------       ---------       ---------       ---------     ---------
Net cash flows provided by (used for)
  financing activities .............................        1,737.5          (835.1)       (2,251.2)       (2,561.9)        535.5
                                                          ---------       ---------       ---------       ---------     ---------
Net (decrease) increase in cash and cash
  equivalents ......................................          (62.9)         (237.8)        1,466.4        (1,348.4)      1,344.3
Cash and cash equivalents, beginning
  of period ........................................        2,036.6         2,274.4           808.0         2,156.4         812.1
                                                          ---------       ---------       ---------       ---------     ---------
Cash and cash equivalents, end of period ...........      $ 1,973.7       $ 2,036.6       $ 2,274.4       $   808.0     $ 2,156.4
                                                          =========       =========       =========       =========     =========
Supplementary Cash Flow Disclosure:
Interest paid ......................................      $ 1,517.6       $   418.5       $ 1,713.9       $   652.9     $ 1,067.6
Federal, foreign and state and local
  income taxes (refunded) paid -- net ...............     $    80.6       $    44.2       $   (43.9)      $    31.4     $    14.7
Supplementary Non-cash Disclosure:
Push-down of purchase price by Parent ..............             --              --              --       $ 9,484.7            --


                See Notes to Consolidated Financial Statements.


                                       54


                         CIT GROUP INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 -- Business and Summary of Significant Accounting Policies

      CIT Group Inc., a Delaware corporation ("we," "CIT" or the "Company"),  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  products.  CIT operates primarily in North America,  with
locations in Europe, Latin America, Australia and the Asia-Pacific region.

Basis of Presentation

      The Consolidated  Financial  Statements include the results of CIT and its
subsidiaries  and  have  been  prepared  in  U.S.  dollars  in  accordance  with
accounting  principles  generally  accepted in the United States.  Certain prior
period amounts have been reclassified to conform to the current presentation. On
June 1, 2001, The CIT Group,  Inc. was acquired by a wholly-owned  subsidiary of
Tyco International Ltd. ("Tyco"),  in a purchase business  combination  recorded
under  the  "push-down"  method  of  accounting,  resulting  in a new  basis  of
accounting for the "successor" period beginning June 2, 2001 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.

      Following the  acquisition  by Tyco,  our fiscal year end was changed from
December 31 to September  30, to conform to Tyco's  fiscal year end. On November
5, 2002,  the CIT Board of Directors  approved the return to a calendar year end
effective  December 31, 2002. As a result,  the three months ended  December 31,
2002 constitutes a transitional fiscal period.

      In accordance  with the  provisions of FASB  Interpretation  No. 46R ("FIN
46"),  "Consolidation of Variable Interest Entities," CIT consolidates  variable
interest  entities for which  management  has concluded  that CIT is the primary
beneficiary.  Entities that do not meet the  definition  of a variable  interest
entity are subject to the  provisions  of  Accounting  Research  Bulletin No. 51
("ARB  51"),  "Consolidated  Financial  Statements"  and are  consolidated  when
management  has  determined  that it has  the  controlling  financial  interest.
Entities which do not meet the consolidation criteria in either FIN 46 or ARB 51
but which are significantly influenced by the Company,  generally those entities
that are twenty to fifty  percent  owned by CIT, are included in other assets at
cost for  securities not readily  marketable and presented at the  corresponding
share  of  equity  plus  loans  and  advances.  Investments  in  entities  which
management does not have  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. Inter-company transactions have been eliminated.

Financing and Leasing Assets

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

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

Income Recognition

      Finance  income  includes  interest on loans,  the  accretion of income on
direct financing leases, and rents on operating leases.  Related origination and
other nonrefundable fees and direct origination costs are deferred and amortized
as  an  adjustment  of  finance  income  over  the   contractual   life  of  the
transactions.  Income on  finance  receivables  other than  leveraged  leases is
recognized on an accrual  basis  commencing  in the month of  origination


                                       55


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

using methods that generally  approximate the interest  method.  Leveraged lease
income is recognized on a basis calculated to achieve a constant  after-tax rate
of return for periods in which CIT has a positive investment in the transaction,
net of related  deferred tax  liabilities.  Rental income on operating leases is
recognized on an accrual basis.

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

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

Lease Financing

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

Reserve for Credit Losses on Finance Receivables

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

Charge-off of Finance Receivables

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


                                       56


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Impaired Loans

      Impaired loans include any loans for $500 thousand or greater,  other than
homogeneous  pools of  loans,  that are  placed  on  non-accrual  status  or any
troubled debt  restructuring  that is subject to periodic  individual  review by
CIT's Asset Quality  Review  Committee  ("AQR").  The AQR, which is comprised of
members of senior management,  reviews overall portfolio performance, as well as
individual  accounts  meeting certain credit risk grading  parameters.  Excluded
from impaired loans are: 1) certain individual commercial  non-accrual loans for
which the collateral value supports the outstanding balance and the continuation
of earning status, 2) consumer loans, which are subject to automatic  charge-off
procedures,  and 3) short-term factoring customer receivables,  generally having
terms of no more than 30 days.  Loan  impairment  is  defined  as any  shortfall
between the estimated  value and the recorded  investment in the loan,  with the
estimated value determined using the fair value of the collateral and other cash
flows if the loan is  collateral  dependent,  or the  present  value of expected
future cash flows discounted at the loan's effective interest rate.

Long-Lived Assets

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

Goodwill and Other Identified Intangibles

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

      Other  intangible  assets are  comprised  primarily  of acquired  customer
relationships,  proprietary computer software and related transaction processes.
Other  intangible  assets are being  amortized over periods ranging from five to
twenty years on a straight-line  basis, and are assessed for impairment at least
annually.

Other Assets

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

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

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

      Investments  in debt and equity  securities  of  non-public  companies are
carried at fair value.  Gains and losses are recognized  upon sale or write-down
of these investments as a component of operating margin.


                                       57


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Securitizations

      Pools of assets are originated and sold to special purpose entities which,
in turn,  issue debt  securities  backed by the asset  pools or sell  individual
interests  in the assets to  investors.  CIT  retains the  servicing  rights and
participates in certain cash flows from the pools. The present value of expected
net cash flows (after  payment of principal and interest to  certificate  and/or
note holders and credit-related  disbursements)  that exceeds the estimated cost
of servicing is recorded at the time of sale as a "retained  interest." Retained
interests in securitized assets are classified as available-for-sale  securities
under SFAS No. 115. CIT, in its  estimation of those net cash flows and retained
interests,  employs a variety  of  financial  assumptions,  including  loan pool
credit losses,  prepayment  speeds and discount  rates.  These  assumptions  are
supported by both CIT's  historical  experience,  market trends and  anticipated
performance  relative to the particular  assets  securitized.  Subsequent to the
recording of retained interests, CIT reviews such values quarterly.  Fair values
of retained  interests are calculated  utilizing current and anticipated  credit
losses,  prepayment  speeds  and  discount  rates and are then  compared  to the
respective  carrying  values.  Unrealized  losses,  representing  the  excess of
carrying value over estimated  current fair value, are recorded as an impairment
in current earnings.  Unrealized gains are not credited to current earnings, but
are reflected in stockholders' equity as part of other comprehensive income.

Derivative Financial Instruments

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

      On January 1, 2001, CIT adopted SFAS No. 133,  "Accounting  for Derivative
Instruments and Hedging  Activities."  Derivative  instruments are recognized in
the balance  sheet at their fair values in other assets and accrued  liabilities
and payables, and changes in fair values are recognized immediately in earnings,
unless the derivatives  qualify as hedges of future cash flows.  For derivatives
qualifying as hedges of future cash flows,  the effective  portion of changes in
fair value is recorded  temporarily in accumulated other comprehensive income as
a separate  component  of equity,  and  contractual  cash flows,  along with the
related impact of the hedged items,  continue to be recognized in earnings.  Any
ineffective  portion  of a  hedge  is  reported  in  current  earnings.  Amounts
accumulated in other  comprehensive  income are  reclassified to earnings in the
same period that the hedged transaction impacts earnings.

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

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

Foreign Currency Translation

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


                                       58


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Income Taxes

      Deferred tax assets and liabilities are recognized for the expected future
tax  consequences  of  events  that  have  been  reflected  in the  Consolidated
Financial  Statements.  Deferred tax liabilities and assets are determined based
on the  differences  between  the book  values  and the tax basis of  particular
assets  and  liabilities,  using tax rates in effect  for the years in which the
differences are expected to reverse. A valuation allowance is provided to offset
any net deferred tax assets if, based upon the  available  evidence,  it is more
likely  than  not  that  some or all of the  deferred  tax  assets  will  not be
realized. U.S. income taxes are generally not provided on undistributed earnings
of foreign  operations as such  earnings are  permanently  invested.  Income tax
reserves are included in current  taxes  payable,  which is reflected in accrued
liabilities and payables.

Other Comprehensive Income/Loss

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

Consolidated Statements of Cash Flows

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

Use of Estimates

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

Stock-Based Compensation

      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):



                                                         Year       Three Months         Year            June 2        January 1
                                                         Ended          Ended            Ended           through        through
                                                     December 31,   December 31,     September 30,    September 30,     June 1,
                                                         2003           2002             2002             2001           2001
                                                     ------------   ------------     -------------    -------------   ----------
                                                     (successor)     (successor)     (successor)        (successor)  (predecessor)
                                                                                                        
Net income (loss) as reported .................       $   566.9       $   141.3       $(6,698.7)        $   182.8      $    80.5
Stock-based compensation expense
  -- fair value method, after tax .............           (23.0)           (5.7)           (5.7)               --             --
                                                      ---------       ---------       ---------         ---------      ---------
Pro forma net income (loss) ...................       $   543.9       $   135.6       $(6,704.4)        $   182.8      $    80.5
                                                      =========       =========       =========         =========      =========
Basic earnings per share as reported ..........       $    2.68       $    0.67       $  (31.66)        $    0.86      $    0.38
                                                      =========       =========       =========         =========      =========
Basic earnings per share pro forma ............       $    2.57       $    0.64       $  (31.69)        $    0.86      $    0.38
                                                      =========       =========       =========         =========      =========
Diluted earnings per share
  as reported .................................       $    2.66       $    0.67       $  (31.66)        $    0.86      $    0.38
                                                      =========       =========       =========         =========      =========
Diluted earnings per share pro forma ..........       $    2.55       $    0.64       $  (31.69)        $    0.86      $    0.38
                                                      =========       =========       =========         =========      =========



                                       59


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Accounting Pronouncements

      In  January  2004,  the FASB  issued  FASB Staff  Position  No. FAS 106-1,
"Accounting  and Disclosure  Requirements  Related to the Medicare  Prescription
Drug Improvement and Modernization  Act of 2003" (FSP 106-1).  FSP 106-1 permits
employers that sponsor  postretirement benefit plans providing prescription drug
benefits  to retirees to make a one-time  election to defer  accounting  for any
effects of the Medicare  Prescription  Drug Improvement and Modernization Act of
2003. CIT has elected to defer the related  accounting  pending further guidance
from the FASB.

      In December  2003, the FASB revised SFAS No. 132  "Employers'  Disclosures
about  Pensions  and Other  Postretirement  Benefits."  This  revision  requires
additional  disclosures  regarding  defined  benefit  pension plan  assumptions,
assets, obligations, cash flows and costs for fiscal years ending after December
15, 2003. The additional  required  disclosures  are included in Note 16 -- Post
Retirement and Other Benefit Plans.

      In  December  2003,  the  SEC  announced  that  it  will  release  a Staff
Accounting  Bulletin that will require  issued loan  commitments to be accounted
for as written  options that would be reported as liabilities  until the loan is
made or they expire  unexercised.  Management is  evaluating  the impact of this
proposed accounting pending further guidance from the SEC and the FASB.

      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.

      In April 2003, the FASB issued SFAS No. 149 "Amendment of Statement 133 on
Derivative  Instruments and Hedging  Activities." This pronouncement  amends and
clarifies financial accounting and reporting for certain derivative instruments,
including  certain  derivative  instruments  embedded in other  contracts.  This
pronouncement is effective for all contracts entered into or modified after June
30, 2003. The  implementation of SFAS No. 149 did not have a significant  impact
on our financial position or results of operations.

      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.

      The  FIN  46  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. The implementation of
this standard did not change the current  equity  method of  accounting  for our
strategic  vendor  partner  joint  ventures  (see Note 20).  Our  securitization
transactions  outstanding  at  December  31,  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.


                                       60


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The  consolidation  of these entities will not have a significant  impact on our
financial position or results of operations.  In December 2003, the FASB revised
FIN 46. This revision  clarified  certain  provisions  within FIN 46 and delayed
implementation  for selected  transactions  until reporting periods ending after
March 15, 2004. The revisions to FIN 46 do not have a significant  impact on our
previous assessments.

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

Note 2 -- Finance Receivables

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

                        December 31, 2003  December 31, 2002  September 30, 2002
                        -----------------  -----------------  ------------------
Loans ..................    $25,137.1          $21,030.2         $21,633.8
Leases .................      6,163.1            6,591.1           6,825.2
                            ---------          ---------         ---------
   Finance receivables..    $31,300.2          $27,621.3         $28,459.0
                            =========          =========         =========

      Finance receivables include unearned income of $3.3 billion, $ 3.2 billion
and $3.3 billion at December 31, 2003,  December  31, 2002,  and  September  30,
2002,  respectively.  Included in finance  receivables  are  equipment  residual
values of $2.4 billion at both  December 31, 2003 and December 31, 2002 and $2.3
billion at September  30, 2002.  Included in lease  receivables  at December 31,
2003,  December 31, 2002,  and September  30, 2002 are leveraged  leases of $1.1
billion, $1.2 billion, and $1.1 billion, respectively.  Leveraged leases exclude
the portion funded by third party  non-recourse  debt payable of $3.3 billion at
December  31,  2003,  $3.7  billion at December  31,  2002,  and $3.6 billion at
September 30, 2002.

      Additionally, CIT still managed finance receivables previously securitized
totaling $9.7 billion at December 31, 2003,  $10.5 billion at December 31, 2002,
and $11.2 billion at September 30, 2002.

      The  following  table sets  forth the  contractual  maturities  of finance
receivables due in the respective fiscal period.  The 2003 decline in maturities
for the 'due within one year' category reflects a refinement in the presentation
relating to certain revolving loans. Current year maturities for these loans are
reflected in their  contractual  maturity  date,  but in prior years the current
year maturities  were grouped in the first year total.  Prior year balances have
not been conformed ($ in millions).



                                              December 31, 2003        December 31, 2002        September 30, 2002
                                           ---------------------    ---------------------      --------------------
                                            Amount       Percent      Amount      Percent       Amount      Percent
                                           --------      -------    ---------     -------      -------      -------
                                                                                            
Due within one year ...................    $11,698.9      37.4%     $12,076.3       43.7%      $13,136.8      46.2%
Due within one to two years ...........      4,503.7      14.4        3,598.8       13.0         3,541.2      12.4
Due within two to four years ..........      5,639.0      18.0        4,181.2       15.2         4,375.7      15.4
Due after four years ..................      9,458.6      30.2        7,765.0       28.1         7,405.3      26.0
                                           ---------     -----      ---------      -----       ---------     -----
   Total ..............................    $31,300.2     100.0%     $27,621.3      100.0%      $28,459.0     100.0%
                                           =========     =====      =========      =====       =========     =====


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



                                                          December 31, 2003    December 31, 2002    September 30, 2002
                                                          -----------------    -----------------    ------------------
                                                                                                
Non-accrual finance receivables ....................           $   566.5           $   946.4             $   976.6
Assets received in satisfaction of loans ...........               110.0               139.4                 163.2
                                                               ---------           ---------             ---------
Total non-performing assets ........................           $   676.5           $ 1,085.8             $ 1,139.8
                                                               =========           =========             =========
Percentage of finance receivables ..................                2.16%               3.93%                 4.01%



                                       61


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      At December 31,  2003,  December 31, 2002,  and  September  30, 2002,  the
recorded  investment in loans considered for impairment  totaled $516.5 million,
$959.9 million, and $1,001.2 million,  respectively.  Loans whose estimated fair
market value is less than current recorded value totaled $279.8 million,  $522.3
million,  and $449.8  million at December  31,  2003,  December  31,  2002,  and
September 30, 2002, respectively.  The corresponding specific reserve for credit
loss allocations were $120.7 million,  $156.9 million, and $197.4 million and is
included  in the  reserve  for  credit  losses.  The  average  monthly  recorded
investment in loans  considered for  impairment  was $690.5  million  (including
$316.0 million relating to telecommunications), $980.6 million (including $327.3
million relating to  telecommunications),  and $818.9 million  (including $185.5
million  relating to  telecommunications)  for the year ended December 31, 2003,
three months ended  December 31, 2002,  and twelve  months ended  September  30,
2002,  respectively.  After being  classified as impaired,  there was no finance
income  recognized on these loans because our  definition of an impaired loan is
based upon non-accrual  classification.  The amount of finance income that would
have been recorded  under  contractual  terms for impaired loans would have been
$33.3  million,  $19.2 million,  $65.2  million,  and $46.1 million for the year
ended  December 31, 2003,  for the three months ended December 31, 2002, for the
twelve months ended  September 30, 2002, and for the nine months ended September
30, 2001, respectively.

Note 3 -- Reserve for Credit Losses

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



                                                       For the       For the Three      For the           June 2        January 1
                                                      Year Ended     Months Ended      Year Ended         through        through
                                                     December 31,    December 31,     September 30,    September 30,     June 1,
                                                         2003            2002             2002             2001           2001
                                                     ------------    ------------     -------------    -------------   -----------
                                                     (successor)      (successor)      (successor)      (successor)   (predecessor)
                                                                                                          
Balance, beginning of period ..................        $ 760.8          $ 777.8          $ 492.9          $ 462.7        $ 468.5
                                                       -------          -------          -------          -------        -------
Provision for credit losses ...................          408.8            133.4            453.3            116.1          126.9
Provision for credit losses --
  specific reserving actions(1) ...............          (21.5)              --            335.0               --           89.5
Reserves relating to dispositions,
  acquisitions, other .........................           17.5              4.1            (11.1)             0.9          (17.2)
                                                       -------          -------          -------          -------        -------
  Additions to the reserve for
    credit losses .............................          404.8            137.5            777.2            117.0          199.2
                                                       -------          -------          -------          -------        -------
Finance receivables charged-off ...............         (572.9)          (173.2)          (539.1)           (93.7)        (215.8)
Recoveries on finance receivables
  previously charged-off ......................           51.0             18.7             46.8              6.9           10.8
                                                       -------          -------          -------          -------        -------
  Net credit losses ...........................         (521.9)          (154.5)          (492.3)           (86.8)        (205.0)
                                                       -------          -------          -------          -------        -------
Balance, end of period ........................        $ 643.7          $ 760.8          $ 777.8          $ 492.9        $ 462.7
                                                       =======          =======          =======          =======        =======
Reserve for credit losses as a
  percentage of finance
  receivables .................................           2.06%            2.75%            2.73%            1.55%          1.50%
                                                       =======          =======          =======          =======        =======


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


                                       62


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 4 -- Operating Lease Equipment

      The  following  table  provides  an analysis of the net book value (net of
accumulated  depreciation  of $1.5 billion,  $1.3 billion,  and $1.2 billion) of
operating lease  equipment by equipment type at December 31, 2003,  December 31,
2002, and September 30, 2002 ($ in millions).



                                                         December 31, 2003       December 31, 2002       September 30, 2002
                                                         -----------------       -----------------       ------------------
                                                                                                    
Commercial aircraft ..........................               $4,141.1                $3,185.4                $3,005.5
Railcars and locomotives .....................                1,987.3                 1,507.7                 1,373.9
Communications ...............................                  320.6                   507.5                   554.5
Business aircraft ............................                  242.5                   292.6                   341.3
Office equipment .............................                  235.0                   132.7                   124.9
Information technology .......................                  229.3                   337.6                   370.3
Other ........................................                  459.7                   741.1                   797.0
                                                             --------                --------                --------
   Total .....................................               $7,615.5                $6,704.6                $6,567.4
                                                             ========                ========                ========


      Equipment not currently subject to lease agreements totaled 265.9 million,
$385.9 million and $267.3  million at December 31, 2003,  December 31, 2002, and
September 30, 2002, respectively.

      Rental income on operating  leases,  which is included in finance  income,
totaled $1.5 billion for the twelve months ended December 31, 2003, $0.4 billion
for the three months ended December 31, 2002, $1.7 billion for the twelve months
ended  September  30, 2002,  and $1.5 billion for the combined nine months ended
September 30, 2001. The following table presents future minimum lease rentals on
non-cancelable  operating  leases as of December  31, 2003.  Excluded  from this
table are variable  rentals  calculated on the level of asset usage,  re-leasing
rentals, and expected sales proceeds from remarketing  operating lease equipment
at  lease   expiration,   all  of  which  are  components  of  operating   lease
profitability ($ in millions).

Years Ended December 31,                                                  Amount
------------------------                                                  ------
2004 .............................................................      $  997.1
2005 .............................................................         666.5
2006 .............................................................         411.0
2007 .............................................................         269.9
2008 .............................................................         207.1
Thereafter .......................................................         320.2
                                                                        --------
       Total .....................................................      $2,871.8
                                                                        ========

Note 5 -- Concentrations

      The following  table  summarizes the geographic and industry  compositions
(by obligor) of  financing  and leasing  portfolio  assets at December 31, 2003,
December 31, 2002, and September 30, 2002 ($ in millions):



                                                    December 31, 2003       December 31, 2002      September 30, 2002
                                                    -----------------       -----------------      ------------------
Geographic                                           Amount   Percent       Amount    Percent       Amount   Percent
                                                    -------   -------       ------    -------      -------   --------
                                                                                             
North America:
Northeast ....................................     $ 8,319.8    20.8%     $ 7,833.8     21.8%     $ 8,047.0    22.1%
West .........................................       7,485.5    18.7        6,223.8     17.4        6,339.1    17.4
Midwest ......................................       5,996.2    14.9        5,748.3     16.0        5,941.0    16.3
Southeast ....................................       5,558.6    13.9        4,946.8     13.8        4,854.1    13.3
Southwest ....................................       4,423.1    11.0        3,691.9     10.3        3,932.0    10.8
Canada .......................................       2,055.5     5.1        1,804.9      5.0        1,688.4     4.7
                                                   ---------   -----      ---------    -----      ---------   -----
Total North America ..........................      33,838.7    84.4       30,249.5     84.3       30,801.6    84.6
Other foreign ................................       6,245.2    15.6        5,625.2     15.7        5,586.0    15.4
                                                   ---------   -----      ---------    -----      ---------   -----
   Total .....................................     $40,083.9   100.0%     $35,874.7    100.0%     $36,387.6   100.0%
                                                   =========   =====      =========    =====      =========   =====



                                       63


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



                                                    December 31, 2003       December 31, 2002      September 30, 2002
                                                    -----------------       -----------------      ------------------
Industry                                             Amount   Percent       Amount    Percent       Amount   Percent
                                                    -------   -------       ------    -------      -------   --------
                                                                                             
Manufacturing(1) (no industry
   greater than 2.7%) ........................     $ 7,340.6    18.3%     $ 7,114.3     19.8%     $ 7,115.1    19.6%
Retail(2) ....................................       5,630.9    14.0        4,053.6     11.3        4,892.2    13.5
Commercial airlines
   (including regional airlines) .............       5,039.3    12.6        4,570.3     12.7        4,266.2    11.7
Transportation(3) ............................       2,934.9     7.3        2,703.9      7.5        2,647.7     7.3
Consumer based lending -- Home
   mortgage ..................................       2,830.8     7.1        1,292.7      3.6        1,314.2     3.6
Service industries ...........................       2,608.3     6.5        1,571.1      4.4        1,468.1     4.0
Consumer based lending -- non-real
   estate(4) .................................       1,710.9     4.3        2,435.0      6.8        1,858.5     5.1
Construction equipment .......................       1,571.2     3.9        1,712.7      4.8        1,756.6     4.8
Communications(5) ............................       1,386.5     3.5        1,662.6      4.6        1,746.8     4.8
Wholesaling ..................................       1,374.7     3.4        1,305.2      3.6        1,248.4     3.4
Automotive Services ..........................       1,152.3     2.9        1,138.8      3.2        1,113.6     3.1
Other (no industry greater
   than 2.9%)(6) .............................       6,503.5    16.2        6,314.5     17.7        6,960.2    19.1
                                                   ---------   -----      ---------    -----      ---------   -----
   Total .....................................     $40,083.9   100.0%     $35,874.7    100.0%     $36,387.6   100.0%
                                                   =========   =====      =========    =====      =========   =====


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

(2)   Includes retailers of apparel (6.0%) and general merchandise (4.3%).

(3)   Includes  rail,  bus,   over-the-road  trucking  industries  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  $556.3  million,  $685.8 million and $707.2 million of equipment
      financed  for  the  telecommunications  industry  at  December  31,  2003,
      December  31, 2002 and  September  30,  2002,  respectively,  but excludes
      telecommunications equipment financed for other industries.

(6)   Included in "Other" above are financing and leasing  assets in the energy,
      power and utilities  sectors,  which totaled  $949.8  million,  or 2.4% of
      total  financing  and leasing  assets at December  31,  2003.  This amount
      includes  approximately  $651.2  million in project  financing  and $256.1
      million in rail cars on lease.

Note 6 -- Retained Interests in Securitizations

      Retained interests in securitizations and other investments  designated as
available for sale are shown in the following table ($ in millions).



                                                             December 31, 2003      December 31, 2002     September 30, 2002
                                                             -----------------      -----------------     ------------------
                                                                                                     
Retained interests in securitized
   commercial loans ......................................        $1,129.7              $1,042.1              $1,039.7
Retained interests in securitized
   consumer loans ........................................           179.6                 313.8                 274.0
Aerospace equipment trust certificates ...................            71.5                  95.5                  96.7
                                                                  --------              --------              --------
   Total .................................................        $1,380.8              $1,451.4              $1,410.4
                                                                  ========              ========              ========


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



                                                              December 31, 2003       December 31, 2002     September 30, 2002
                                                              -----------------       -----------------     ------------------
                                                                                                         
Retained subordinated securities .........................          $  623.3               $  698.2               $  658.9
Interest-only strips .....................................             425.7                  383.1                  362.2
Cash reserve accounts ....................................             260.3                  274.6                  292.6
                                                                    --------               --------               --------
  Total ..................................................          $1,309.3               $1,355.9               $1,313.7
                                                                    ========               ========               ========


      The carrying  value of the retained  interests  in  securitized  assets is
reviewed quarterly for valuation impairment.  During the year ended December 31,
2003,  net  accretion  of $81.5  million  was  recognized  in  pretax  earnings,
including  $66.6  million of  impairment  charges.  For the three  months  ended
December 31, 2002,


                                       64


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

accretion  of $33.2  million was  recognized  in pretax  earnings,  net of $10.6
million impairment charges.  For the twelve months ended September 30, 2002, net
accretion of $97.1 million was recognized in pretax  earnings,  including  $49.9
million in impairment charges.  Unrealized after tax gains totaled $7.7 million,
$20.5  million and $25.8  million at December  31,  2003,  December 31, 2002 and
September 30, 2002,  respectively,  and are  reflected as a part of  accumulated
other comprehensive loss.

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

      The key assumptions  used in measuring the retained  interests at the date
of securitization for transactions completed during 2003 were as follows:

                                             Commercial Equipment
                                             ---------------------
                                             Specialty   Equipment    Consumer
                                              Finance     Finance    Home Equity
                                             ---------   ---------   -----------
Weighted average prepayment speed ........    34.11%      12.20%       24.40%
Weighted average expected credit losses ..     0.47%       1.08%        0.90%
Weighted average discount rate ...........     9.13%       9.00%       13.00%
Weighted average life (in years) .........     1.37        1.92         3.51

      Key  assumptions  used in  calculating  the  fair  value  of the  retained
interests  in  securitized  assets by product  type at December 31, 2003 were as
follows:



                                                 Commercial Equipment                   Consumer
                                               -------------------------      ------------------------------
                                                                              Manufactured      Recreational
                                               Specialty       Equipment        Housing &         Vehicle &
                                                Finance         Finance       Home Equity          Boat
                                               ---------       ---------      ------------      ------------
                                                                                       
Weighted average prepayment speed ..........    26.57%           12.57%           26.50%           18.26%
Weighted average expected credit losses ....     1.02%            1.44%            1.29%            0.83%
Weighted average discount rate .............     8.03%            9.86%           13.08%           14.18%
Weighted average life (in years) ...........     1.14             1.41             3.04             3.05


      The  impact  of 10  percent  and 20  percent  adverse  changes  to the key
assumptions  on the fair value of retained  interests as of December 31, 2003 is
shown in the following tables ($ in millions).

                                                               Consumer
                                                      --------------------------
                                                      Manufactured  Recreational
                                          Commercial    Housing &     Vehicle &
                                           Equipment   Home Equity      Boat
                                          ----------  ------------  ------------
Prepayment speed:
   10 percent adverse change ..........    $ (27.1)    $ (11.1)      $ (0.6)
   20 percent adverse change ..........      (51.0)      (20.5)        (1.3)
Expected credit losses:
   10 percent adverse change ..........      (11.9)       (6.0)        (1.3)
   20 percent adverse change ..........      (23.8)      (11.4)        (2.7)
Weighted average discount rate:
   10 percent adverse change ..........      (10.5)       (3.5)        (1.5)
   20 percent adverse change ..........      (20.9)       (6.8)        (2.9)

      These  sensitivities  are  hypothetical  and should be used with  caution.
Changes  in  fair  value  based  on a 10  percent  or 20  percent  variation  in
assumptions  generally  cannot be extrapolated  because the  relationship of the
change in  assumptions  to the change in fair value may not be linear.  Also, in
this table,  the effect of a variation  in a particular  assumption  on the fair
value  of the  retained  interest  is  calculated  without  changing  any  other
assumption.  In reality,  changes in one factor may result in changes in another
(for example, increases in market interest rates may result in lower prepayments
and  increased   credit   losses),   which  might  magnify  or  counteract   the
sensitivities.


                                       65


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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

                                                   Commercial Equipment
                                                  Securitizations During
                                             --------------------------------
                                             2003          2002          2001
                                             ----          ----          ----
                                          (successor)   (successor)   (combined)
Actual and projected losses at:
   December 31, 2003 .....................   1.74%         2.04%        3.39%
   December 31, 2002 .....................     --          1.96%        2.94%
   September 30, 2002 ....................     --          1.92%        2.87%
   September 30, 2001 ....................     --            --         1.92%

                                            Home Equity Securitizations During
                                            ----------------------------------
                                             2003          2002          2001
                                             ----          ----          ----
                                          (successor)   (successor)   (combined)
Actual and projected losses at:
   December 31, 2003 .....................   3.07%         2.72%          --
   December 31, 2002 .....................     --          2.65%          --
   September 30, 2002 ....................     --          2.68%          --
   September 30, 2001 ....................     --            --           --

      The tables that follow  summarize the  roll-forward  of retained  interest
balances and certain cash flows received from and paid to securitization  trusts
($ in millions).



                                                Year Ended          Three Months Ended         Year Ended
                                             December 31, 2003       December 31, 2002     September 30, 2002
                                             -----------------      ------------------     ------------------
                                                                                        
Retained Interests
------------------
Retained interest at beginning of period ......   $1,355.9                $1,313.7               $  970.1
New sales .....................................      640.9                   154.9                  792.9
Distributions from trusts .....................     (728.6)                 (175.3)                (512.6)
Change in fair value ..........................      (21.1)                   (4.4)                  43.1
Other, including net accretion, and
   clean-up calls .............................       62.2                    67.0                   20.2
                                                  --------                --------               --------
Retained interest at end of period ............   $1,309.3                $1,355.9               $1,313.7
                                                  ========                ========               ========




                                                Year Ended          Three Months Ended         Year Ended
                                             December 31, 2003       December 31, 2002     September 30, 2002
                                             -----------------       -----------------     ------------------
                                                                                        
Cash Flows During the Periods
-----------------------------
Proceeds from new securitizations ............    $4,589.5                $1,060.2               $6,603.9
Other cash flows received on
   retained interests ........................       688.2                   175.3                  551.5
Servicing fees received ......................        80.2                    19.7                   72.3
Reimbursable servicing advances, net .........         7.3                    (4.0)                 (21.9)
Repurchases of delinquent or foreclosed
   assets and ineligible contracts ...........       (63.0)                   (3.7)                (104.7)
Purchases of contracts through clean
   up calls ..................................      (439.8)                   (8.2)                (456.9)
Guarantee draws ..............................        (2.1)                   (0.2)                  (1.2)
                                                  --------                --------               --------
  Total, net .................................    $4,860.3                $1,239.1               $6,643.0
                                                  ========                ========               ========



                                       66


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      Total  net   charge-offs,   for  both  finance   receivables  and  managed
receivables,  and net charge-offs as a percentage of average finance receivables
and  managed  receivables,  are set forth  below.  Managed  receivables  include
finance  receivables plus finance receivables  previously  securitized and still
managed by us ($ in millions).



                                                Net Charge-offs of Finance Receivables
                    ------------------------------------------------------------------------------------------
                                                                                                Combined
                         Year Ended         Three Months Ended         Year Ended           Nine Months Ended
                      December 31, 2003      December 31, 2002     September 30, 2002       September 30, 2001
                    --------------------    -------------------    --------------------    -------------------
                    Amount    Percentage    Amount   Percentage    Amount    Percentage    Amount   Percentage
                    ------    ----------    ------   ----------    ------    ----------    ------   ----------
                                                                               
Commercial ........   $466.4     1.75%        $143.3    2.33%        $445.9     1.65%        $243.5    1.13%
Consumer ..........     55.5     2.01%          11.2    2.24%          46.4     1.78%          48.3    1.72%
                      ------                  ------                 ------                  ------
  Total ...........   $521.9     1.77%        $154.5    2.32%        $492.3     1.67%        $291.8    1.20%
                      ======                  ======                 ======                  ======




                                                Net Charge-offs of Managed Receivables
                    ------------------------------------------------------------------------------------------
                                                                                                Combined
                         Year Ended         Three Months Ended         Year Ended           Nine Months Ended
                      December 31, 2003      December 31, 2002     September 30, 2002      September 30, 2001
                    --------------------    -------------------    --------------------    -------------------
                    Amount    Percentage    Amount   Percentage    Amount    Percentage    Amount   Percentage
                    ------    ----------    ------   ----------    ------    ----------    ------   ----------
                                                                               
Commercial .......  $578.8       1.72%      $187.5      2.29%      $701.6       2.71%      $351.6      1.87%
Consumer .........   101.3       1.76%        18.7      1.62%        78.8       1.35%        71.5      1.04%
                    ------                  ------                 ------                  ------
  Total ..........  $680.1       1.72%      $206.2      2.21%      $780.4       1.94%      $423.1      1.64%
                    ======                  ======                 ======                  ======


      Receivables  past due 60 days or more,  for both finance  receivables  and
managed receivables, and receivables past due 60 days or more as a percentage of
finance  receivables  and  managed  receivables  are set  forth  below.  Managed
receivables  include finance  receivables  plus finance  receivables  previously
securitized and still managed by us ($ in millions).

                        Finance Receivables Past Due 60 Days or More
              ------------------------------------------------------------------
               December 31, 2003      December 31, 2002      September 30, 2002
              -------------------    --------------------    -------------------
              Amount   Percentage    Amount    Percentage    Amount   Percentage
              ------   ----------    ------    ----------    ------   ----------
Commercial..    $526.7    1.90%      $  867.6     3.39%      $  942.8    3.53%
Consumer ...     149.6    4.26%         133.7     6.66%         127.2    7.20%
                ------               --------                --------
   Total ...    $676.3    2.16%      $1,001.3     3.63%      $1,070.0    3.76%
                ======               ========                ========

                        Managed Receivables Past Due 60 Days or More
              ------------------------------------------------------------------
               December 31, 2003      December 31, 2002      September 30, 2002
              -------------------    --------------------    -------------------
              Amount   Percentage    Amount    Percentage    Amount   Percentage
              ------   ----------    ------    ----------    ------   ----------
Commercial..  $  727.2    2.04%      $1,136.2     3.36%      $1,289.1    3.64%
Consumer ...     294.8    4.78%         259.4     4.71%         249.5    4.71%
              --------               --------                --------
  Total ....  $1,022.0    2.44%      $1,395.6     3.55%      $1,538.6    3.78%
              ========               ========                ========

Note 7 -- Other Assets

      Other assets  totaled $3.3 billion at both  December 31, 2003 and December
31,  2002,  and $3.4  billion at September  30,  2002.  Other  assets  primarily
consisted  of  the  following  at  December  31,  2003:   accrued  interest  and
receivables from derivative  counterparties of $0.9 billion,  investments in and
receivables  from  non-consolidated  subsidiaries  of $0.6 billion,  deposits on
commercial  aerospace flight equipment of $0.3 billion,  direct and private fund
equity  investments  of $0.2  billion,  prepaid  expenses of $0.2  billion,  and
repossessed  assets and  off-lease  equipment  of $0.1  billion.  The  remaining
balance  includes  furniture and fixtures,  miscellaneous  receivables and other
assets.


                                       67


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      Note 8 -- Debt

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



                                             December 31, 2003       December 31, 2002     September 30, 2002
                                             -----------------       -----------------     ------------------
                                                                                        
Borrowings outstanding ......................     $4,173.9                $4,974.6               $4,654.2
Weighted average interest rate ..............         1.19%                   1.62%                  1.87%
Weighted average number of days
  to maturity ...............................      50 days                 38 days                37 days




                                                         Three                              Combined Nine
                                   Year Ended        Months Ended        Year Ended         Months Ended
                                December 31, 2003  December 31, 2002  September 30, 2002  September 30, 2001
                                -----------------  -----------------  ------------------  ------------------
                                                                                 
Daily average borrowings ........   $4,648.2          $4,758.7           $  4,564.7          $10,142.5
Maximum amount outstanding ......    4,999.1           4,994.1             10,713.5           11,726.4
Weighted average interest rate ..       1.25%             1.75%                2.25%              4.67%


      The consolidated  weighted average interest rates on variable-rate  senior
notes at December 31,  2003,  December 31,  2002,  and  September  30, 2002 were
1.87%,  2.08%, and 2.31%,  respectively.  Fixed-rate  senior debt outstanding at
December  31, 2003  matures at various  dates  through  2028.  The  consolidated
weighted-average  interest rates on fixed-rate senior debt at December 31, 2003,
December  31,  2002,  and  September  30,  2002 was  6.12%,  6.74%,  and  6.82%,
respectively. Foreign currency-denominated debt (stated in U.S. Dollars) totaled
$1,601.4  million at December 31,  2003,  all of which was  fixed-rate.  Foreign
currency-denominated  debt (stated in U.S.  Dollars) totaled $1,652.4 million at
December  31,  2002,   of  which   $1,334.4  was   fixed-rate   and  $318.0  was
variable-rate.  Foreign  currency-denominated debt at September 30, 2002 totaled
$1,627.9  million,  of which $1,290.5  million was fixed-rate and $337.4 million
was variable-rate debt.

      The following tables present calendar year contractual  maturities and the
high and low  interest  rates for total  variable-rate  and  fixed-rate  debt at
December 31, 2003 and 2002, and fiscal year contractual  maturities at September
30, 2002 ($ in millions).



                                 Commercial  Variable-rate  December 31,  December 31,  September 30,
Variable-Rate                       Paper    Senior Notes    2003 Total       2002          2002
------------                     ----------   -----------    -----------  ------------  -------------
                                                                           
Due in 2003 ...................  $     --      $     --      $      --     $10,999.0      $12,601.9
Due in 2004 (rates ranging
   from 1.25% to 2.67%) .......   4,173.9       4,806.4        8,980.3         727.3        1,247.0
Due in 2005 (rates ranging
   from 1.39% to 2.66%) .......        --       3,333.3        3,333.3          29.1           23.4
Due in 2006 (rates ranging
   from 1.39% to 2.02%) .......        --         985.3          985.3          31.0           25.0
Due in 2007 (rates ranging
   from 1.93% to 2.02%) .......        --          37.5           37.5          33.0           26.6
Due in 2008 (rates ranging
   from 1.93% to 2.02%) .......        --          39.8           39.8          35.1           28.5
Due after 2008 (rates ranging
   from 1.93% to 2.02%) .......        --         206.1          206.1         145.0          118.2
                                 --------      --------      ---------     ---------      ---------
                                 $4,173.9      $9,408.4      $13,582.3     $11,999.5      $14,070.6
                                 ========      ========      =========     =========      =========



                                       68


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



                                                                     December 31,  December 31,  September 30,
Fixed-Rate                                                               2003          2002          2002
----------                                                           ------------  ------------  -------------
                                                                                         
Due in 2003 .....................................................    $      --      $ 4,245.8     $ 2,784.9
Due in 2004 (rates ranging from 1.85% to 8.26%) .................      3,930.2        3,231.0       4,321.5
Due in 2005 (rates ranging from 1.85% to 8.26%) .................      4,328.6        3,939.7       4,704.1
Due in 2006 (rates ranging from 2.10% to 7.80%) .................      2,639.4        1,137.1       1,179.1
Due in 2007 (rates ranging from 2.70% to 7.80%) .................      3,498.9        3,386.8       2,307.1
Due in 2008 (rates ranging from 2.90% to 7.80%) .................      1,740.5          212.1         212.1
Due after 2008 (rates ranging from 4.45% to 7.80%) ..............      3,693.2        3,529.3       2,876.6
                                                                     ---------      ---------     ---------
   Total ........................................................    $19,830.8      $19,681.8     $18,385.4
                                                                     =========      =========     =========


      At December 31, 2003,  $10.1 billion of unissued debt securities  remained
under a shelf registration statement.

      The following table represents information on unsecured committed lines of
credit at December 31, 2003 that can be drawn upon to support  commercial  paper
borrowings ($ in millions).

Expiration                             Total       Drawn     Available
----------                             -----       -----     ---------
October 13, 2004 ..................   $2,100.0    $   --      $2,100.0
March 28, 2005 ....................    2,000.0        --       2,000.0
October 14, 2008 ..................    2,100.0     281.2       1,818.8
                                      --------    ------      --------
Total credit lines ................   $6,200.0    $281.2      $5,918.8
                                      ========    ======      ========

      CIT has the ability to issue up to $400 million of letters of credit under
the $2.1  billion  facility  expiring in 2008,  which,  when  utilized,  reduces
available  borrowings under this facility.  At December 31, 2003, $281.2 million
letters of credit were issued under this  facility.  The credit line  agreements
contain clauses that permit  extensions beyond the expiration dates upon written
consent from the participating lenders. Certain foreign operations utilize local
financial  institutions to fund  operations.  At December 31, 2003, local credit
facilities  totaled  $84.7  million,  of which  $55.7  million  was  undrawn and
available.

      CIT had $1.25 billion of debt securities outstanding that were callable at
par in December 2003 and January  2004.  These notes were 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' coupon rates of 8.125% and 8.25%,
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
called the  securities  for  redemption  pursuant  to the terms  outlined in the
prospectuses.  Once called,  we recorded pre-tax gains totaling $50.4 million in
December 2003 and $41.8 million in January 2004 ($30.8 million and $25.5 million
after-tax, respectively), as the cash outlay was less than the carrying value of
the securities.

Preferred Capital Securities

      In  February  1997,  CIT Capital  Trust I (the  "Trust"),  a  wholly-owned
subsidiary of CIT, issued in a private offering $250.0 million liquidation value
of 7.70% Preferred  Capital  Securities (the "Capital  Securities"),  which were
subsequently  registered with the Securities and Exchange Commission pursuant to
an exchange offer.  Each capital security was recorded at the liquidation  value
of $1,000.  The Trust  subsequently  invested  the  offering  proceeds in $250.0
million principal amount Junior  Subordinated  Debentures (the  "Debentures") of
CIT, having  identical rates and payment dates.  The Debentures of CIT represent
the sole assets of the Trust.  Holders of the Capital Securities are entitled to
receive  cumulative  distributions at an annual rate of 7.70% through either the
redemption  date or maturity of the  Debentures  (February 15,  2027).  Both the
Capital  Securities  issued by the Trust and the  Debentures of CIT owned by the
Trust are redeemable in whole or in part on or after February 15, 2007 or at any
time in  whole  upon  changes  in  specific  tax  legislation,  bank  regulatory
guidelines or securities law at the option of CIT at their  liquidation value or
principal  amount.  The securities are redeemable at a specified premium through
February  15,  2017,  at which time the  redemption  price will be at par,  plus
accrued interest. Distributions


                                       69


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

by the  Trust  are  guaranteed  by CIT to the  extent  that the  Trust has funds
available for distribution. The Capital Securities were valued at $260.0 million
on June 1, 2001, the date of  acquisition  by Tyco, in new basis  accounting and
the current balance reflects accretion of the premium.

Note 9 -- Derivative Financial Instruments

      The components of the adjustment to Accumulated Other  Comprehensive  Loss
for  derivatives  qualifying as hedges of future cash flows are presented in the
following table ($ in millions).



                                                                      Adjustment of     Income         Total
                                                                      Fair Value of       Tax       Unrealized
                                                                       Derivatives      Effects        Loss
                                                                      -------------     -------     ----------
                                                                                             
Balance at September 30, 2002 -- unrealized loss ...................     $ 194.4        $(73.9)       $120.5
Changes in values of derivatives qualifying as cash flow hedges ....        (3.6)          1.4          (2.2)
                                                                         -------        ------        ------
Balance at December 31, 2002 -- unrealized loss ....................       190.8         (72.5)        118.3
Changes in values of derivatives qualifying as cash flow hedges ....      (126.2)         49.2         (77.0)
                                                                         -------        ------        ------
Balance at December 31, 2003 -- unrealized loss ....................     $  64.6        $(23.3)       $ 41.3
                                                                         =======        ======        ======


      The  unrealized  loss as of December 31, 2003,  presented in the preceding
table,   primarily   reflects  our  use  of  interest   rate  swaps  to  convert
variable-rate debt to fixed-rate debt,  followed by lower market interest rates.
For the year ended December 31, 2003, the ineffective  portion of changes in the
fair value of cash flow hedges amounted to $0.2 million and has been recorded as
an increase to interest  expense.  For the three months ended December 31, 2002,
the  ineffective  portion  of  changes  in the fair  value of cash  flow  hedges
amounted  to $0.4  million  and had been  recorded  as a  decrease  to  interest
expense.  For the year ended  September  30, 2002,  the  ineffective  portion of
changes in the fair value of cash flow hedges  amounted to $1.4  million and was
recorded as an increase to interest expense.  For the combined nine months ended
September 30, 2001, the ineffective portion of changes in the fair value of cash
flow hedges  amounted to $3.4 million and was recorded as a decrease to interest
expense. Assuming no change in interest rates,  approximately $46.0 million, net
of tax, of Accumulated Other  Comprehensive  Loss is expected to be reclassified
to earnings over the next twelve months as  contractual  cash payments are made.
The Accumulated  Other  Comprehensive  Loss (along with the  corresponding  swap
liability)  will be adjusted as market  interest rates change over the remaining
life of the swaps.

      As part of managing the exposure to changes in market interest rates, CIT,
as an end-user,  enters into various  interest  rate swap  transactions,  all of
which  are  transacted  in   over-the-counter   markets  with  other   financial
institutions acting as principal counterparties.  We use derivatives for hedging
purposes  only,  and  policy  prohibits   entering  into  derivative   financial
instruments for trading or speculative  purposes. To ensure both appropriate use
as a  hedge  and  hedge  accounting  treatment,  derivatives  entered  into  are
designated  according  to  a  hedge  objective  against  a  specific  liability,
including  commercial  paper,  or a specifically  underwritten  debt issue or in
limited  instances  against assets.  The notional  amounts,  rates,  indices and
maturities  of our  derivatives  closely  match the related  terms of our hedged
liabilities and certain assets. 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  ($ in
millions):



                                                Notional Amount
                                       ---------------------------------
                                         December 31,      September 30,
                                       ----------------   --------------
Interest Rate Swaps                     2003      2002         2002
-------------------                     ----      ----         ----
                                                             
Floating to fixed-rate swaps --                                          Effectively converts the interest rate on an
  cash flow hedges ..................  $2,615.0   $3,280.5   $3,585.8    equivalent amount of commercial paper,
                                                                         variable-rate notes and selected assets to
                                                                         a fixed rate.

Fixed to floating-rate swaps --                                          Effectively converts the interest rate on an
  fair value hedges .................   6,758.2    4,489.8    3,479.8    equivalent amount of fixed-rate notes and
                                       --------   --------   --------    selected assets to a variable rate.
Total interest rate swaps ...........  $9,373.2   $7,770.3   $7,065.6
                                       ========   ========   ========



                                       70


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      In  conjunction  with  securitizations,  CIT entered  into $2.7 billion in
notional  amount of hedge  transactions  to protect the related  trusts  against
interest rate risk. CIT is insulated from this risk by entering into  offsetting
swap  transactions  with third parties totalling $2.7 billion in notional amount
at December 31, 2003.

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

      CIT is exposed to credit risk to the extent that the counterparty fails to
perform under the terms of a derivative instrument. This risk is measured as the
market value of interest rate swaps or foreign exchange forwards with a positive
fair value,  which totaled $509.0  million at December 31, 2003,  reduced by the
effects of master  netting  agreements as presented in Note 19 -- Fair Values of
Financial  Instruments.  We  manage  this  credit  risk by  requiring  that  all
derivative  transactions be conducted with counterparties rated investment grade
by   nationally   recognized   rating   agencies,   with  the  majority  of  the
counterparties  rated "AA" or higher, and by setting limits on the exposure with
any individual counterparty.  Accordingly,  counterparty credit risk at December
31, 2003 is not considered significant.

      The following table presents the maturity,  notional principal amounts and
the  weighted  average  interest  rates  expected to be received or paid on U.S.
dollar interest rate swaps at December 31, 2003 ($ in millions).



Maturity                                  Floating to Fixed-rate                  Fixed to Floating-rate
--------                            ---------------------------------        --------------------------------
Years Ending                        Notional       Receive        Pay        Notional       Receive       Pay
December 31,                         Amount         Rate         Rate         Amount         Rate        Rate
------------                         ------         ----         ----         ------         ----        ----
                                                                                       
2004 ............................   $  399.5       1.17%        3.74%        $   11.0       7.85%        1.92%
2005 ............................      433.5       1.17%        3.80%           257.8       6.92%        2.42%

2006 ............................      211.9       1.19%        3.65%           340.7       3.15%        1.27%
2007 ............................      182.6       1.20%        4.04%         3,222.7       6.25%        3.92%
2008 ............................      146.3       1.20%        4.76%           747.9       4.54%        2.06%
2009 - Thereafter ...............      922.6       1.20%        6.21%         2,178.1       7.11%        3.40%
                                    --------                                 --------
  Total .........................   $2,296.4       1.19%        4.82%        $6,758.2       6.21%        3.35%
                                    ========                                 ========


      The following table presents the maturity, notional principal amounts and
the weighted average interest rates expected to be received or paid, of foreign
currency interest rate swaps that converted floating-rate debt to fixed rate
debt at December 31, 2003 ($ in million).



Foreign Currency                             Notional Amount   Receive Rate     Pay Rate      Maturity Range
----------------                             ---------------   ------------     --------      --------------
                                                                                   
Canadian Dollar .........................         $252.8          2.75%          6.21%         2004 -- 2009
Australian Dollar .......................         $ 48.9          5.45%          5.75%         2004 -- 2006
British Pound ...........................         $ 16.9          3.83%          5.43%                 2004


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

      At December 31, 2003, CIT was party to foreign  currency  exchange forward
contracts and cross currency  swaps.  The following  table presents the maturity
and notional  principal  amounts of foreign currency exchange forwards and cross
currency swaps at December 31, 2003 ($ in millions).

                                               Notional Principal Amount
                                          -----------------------------------
Maturity Years Ended                      Foreign Currency     Cross-Currency
December 31,                              Exchange Forwards         Swaps
--------------------                      -----------------    --------------
2004 ...................................      $1,985.8             $  135.5
2005 ...................................         440.7              1,082.3
2006 ...................................          56.7                 57.5
2007 ...................................         103.0                 14.7
2008 ...................................            --                348.6
2009 - Thereafter ......................            --                134.3
                                              --------             --------
  Total ................................      $2,586.2             $1,772.9
                                              ========             ========


                                       71


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 10 -- Accumulated Other Comprehensive Loss

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



                                                                      December 31,   December 31,  September 30,
                                                                          2003           2002          2002
                                                                      ------------   ------------  -------------
                                                                                             
Changes in fair values of derivatives qualifying as cash
flow hedges ........................................................     $ (41.3)      $(118.3)       $(120.5)
Foreign currency translation adjustments ...........................      (105.8)        (75.6)         (75.8)
Minimum pension liability adjustments ..............................        (0.8)        (20.5)         (21.0)
Unrealized gain on equity and securitization investments ...........         6.3          13.7           21.0
                                                                         -------       -------        -------
   Total accumulated other comprehensive loss ......................     $(141.6)      $(200.7)       $(196.3)
                                                                         =======       =======        =======


Note 11 -- Earnings Per Share

      Basic EPS is  computed  by  dividing  net  income by the  weighted-average
number of common shares  outstanding for the period. The diluted EPS computation
includes the potential  impact of dilutive  securities,  including stock options
and restricted  stock grants.  The dilutive  effect of stock options is computed
using the treasury  stock method,  which assumes the repurchase of common shares
by CIT at the  average  market  price  for  the  period.  Options  that  have an
anti-dilutive   effect  are  not  included  in  the   denominator  and  averaged
approximately 17.4 million shares for the year ended December 31, 2003.

      The reconciliation of the numerator and denominator of basic EPS with that
of diluted EPS is presented for the year ended December 31, 2003 ($ in millions,
except per share amounts and shares,  which are in whole dollars and  thousands,
respectively).

                                       Income         Shares       Per Share
                                     (Numerator)   (Denominator)    Amount
                                     -----------   -------------    ------
Basic EPS:
   Income available to common
     stockholders .................     $566.9       211,681          $2.68
Effect of Dilutive Securities:
   Restricted shares ..............         --           396             --
   Stock options ..................         --         1,066             --
                                        ------       -------
Diluted EPS .......................     $566.9       213,143          $2.66
                                        ======       =======

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

                                              Net (Loss)                Diluted
                                                Income    Basic EPS(1)  EPS(1)
                                              ----------  ------------  -------
Three months ended December 31, 2002
  (successor) .............................   $   141.3     $  0.67     $  0.67
Year ended September 30, 2002
  (successor) .............................   $(6,698.7)    $(31.66)    $(31.66)
June 2 through September 30, 2001
  (successor) .............................   $   182.8     $  0.86     $  0.86
January 1 through June 1, 2001
  (predecessor) ...........................   $    80.5     $  0.38     $  0.38
--------------------------------------------------------------------------------
(1)   Based on 211.6 million and 211.8 million  shares for basic and diluted EPS
      for the three months ended  December 31, 2002 and 211.6  million and 211.7
      million shares for basic and diluted EPS for all prior periods.


                                       72


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 12 -- Common Stock

      The following table summarizes changes in common stock outstanding for the
respective periods:

                                                     Common Stock
                                       ----------------------------------------
                                         Issued     Less Treasury  Outstanding
                                       -----------  -------------  -----------
Balance at September 30, 2002 .......  211,573,200          --      211,573,200
Activity for the three months ended
   December 31, 2002 ................           --          --               --
                                       -----------    --------      -----------
Balance at December 31, 2002 ........  211,573,200          --      211,573,200
Treasury shares purchased ...........           --    (913,886)        (913,886)
Stock options exercised .............           --     870,357          870,357
Restricted shares issued ............      275,797          --          275,797
                                       -----------    --------      -----------
Balance at December 31, 2003 ........  211,848,997     (43,529)     211,805,468
                                       ===========    ========      ===========

Note 13 -- Other Revenue

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



                                         Year           Three          Year          June 2        January 1
                                         Ended      Months Ended       Ended         through        through
                                     December 31,   December 31,   September 30,  September 30,     June 1,
                                         2003           2002           2002           2001           2001
                                     ------------   ------------   -------------  -------------  -------------
                                     (successor)    (successor)     (successor)   (successor)    (predecessor)
                                                                                      
Fees and other income ................   $586.2         $169.2         $644.5         $212.3         $174.9
Factoring commissions ................    189.8           55.1          165.5           50.7           61.2
Gains on securitizations .............    100.9           30.5          149.0           59.0           38.7
Gains on sales of leasing equipment ..     70.7            8.7           13.6           14.2           33.7
Other charges(1) .....................       --             --             --             --          (78.1)
                                         ------         ------         ------         ------         ------
  Total ..............................   $947.6         $263.5         $972.6         $336.2         $230.4
                                         ======         ======         ======         ======         ======

--------------------------------------------------------------------------------
(1)   Write-downs of $78.1 million were recorded for certain equity  investments
      in the telecommunications industry and e-commerce markets, including $19.6
      million relating to venture capital investments.

Note 14 -- Salaries and General Operating Expenses

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



                                         Year           Three                        June 2        January 1
                                        Ended       Months Ended    Year Ended       through        through
                                     December 31,   December 31,   September 30,  September 30,     June 1,
                                         2003           2002           2002           2001           2001
                                     ------------   ------------   -------------  -------------  -------------
                                     (successor)    (successor)    (successor)     (successor)   (predecessor)
                                                                                      
Salaries and employee benefits ....    $529.6         $126.8         $517.4          $204.7          $262.0
Other operating expenses-- CIT ....     412.7          115.3          406.0           134.2           184.0
Other operating expenses-- TCH ....        --             --           23.0             9.6              --
                                       ------         ------         ------          ------          ------
  Total ...........................    $942.3         $242.1         $946.4          $348.5          $446.0
                                       ======         ======         ======          ======          ======



                                       73


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 15 -- Income Taxes

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



                                                            Percentage of Pretax Income
                                      ------------------------------------------------------------------------
                                         Year           Three         Year          June 2         January 1
                                         Ended       Months Ended     Ended         through         through
                                      December 31,   December 31,  September 30,  September 30,     June 1,
                                         2003           2002          2002           2001            2001
                                      ------------   ------------  -------------  -------------  -------------
                                      (successor)    (successor)   (successor)    (successor)    (predecessor)
                                                                                          
Federal income tax rate .............      35.0%          35.0%         35.0%          35.0%          35.0%
Increase (decrease) due to:
State and local income taxes, net of
  federal income tax benefit ........       3.7            2.6          (0.3)           2.2            2.2
Foreign income taxes ................       1.0            1.6          (0.4)           2.2            2.2
Goodwill impairment .................        --             --         (36.1)            --             --
Interest expense-- TCH ..............        --             --          (4.2)            --             --
Goodwill amortization ...............        --             --            --            6.2            7.8
Other ...............................      (0.7)          (0.2)          0.1            0.2            2.6
                                        -------        -------      --------       --------       --------
Effective tax rate ..................      39.0%          39.0%         (5.9)%         45.8%          49.8%
                                        =======        =======      ========       ========       ========


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



                                         Year          Three           Year          June 2        January 1
                                         Ended      Months Ended       Ended         through        through
                                     December 31,   December 31,   September 30,  September 30,     June 1,
                                         2003           2002           2002           2001           2001
                                     ------------   ------------   -------------  -------------  -------------
                                      (successor)   (successor)    (successor)     (successor)   (predecessor)
Current federal income
                                                                                       
  tax provision ...................      $   --          $  --         $   --         $   --          $  --
Deferred federal income
  tax provision ...................       265.1           71.9          276.9          113.6           63.7
                                         ------          -----         ------         ------          -----
Total federal income taxes ........       265.1           71.9          276.9          113.6           63.7
State and local income taxes ......        53.5            9.4           30.4           11.7            5.7
Foreign income taxes ..............        46.4           10.7           66.7           32.1           15.4
                                         ------          -----         ------         ------          -----
  Total provision for income taxes       $365.0          $92.0         $374.0         $157.4          $84.8
                                         ======          =====         ======         ======          =====


      The tax effects of  temporary  differences  that give rise to  significant
portions of the deferred  income tax assets and  liabilities are presented below
($ in millions).



                                                   December 31,            December 31,           September 30,
                                                       2003                    2002                   2002
                                                   -----------             -----------            -------------
                                                   (successor)             (successor)             (successor)
Assets:
                                                                                           
Net operating loss carryforwards ..............     $   834.1               $   849.9               $   834.4
Provision for credit losses ...................         202.4                   254.8                   282.1
Alternative minimum tax credits ...............         142.0                   142.0                   142.0
Purchase price adjustments ....................          67.9                   176.9                   207.7
Goodwill ......................................          65.6                    91.5                    98.4
Other comprehensive income items ..............          47.6                    84.3                    86.0
Accrued liabilities and reserves ..............          43.8                    46.5                    59.9
Other .........................................          14.1                      --                      --
                                                    ---------               ---------               ---------
   Total deferred tax assets ..................       1,417.5                 1,645.9                 1,710.5
                                                    ---------               ---------               ---------
Liabilities:
Leasing transactions ..........................      (1,311.7)               (1,189.6)               (1.215.6)
Securitization transactions ...................        (633.0)                 (614.4)                 (590.0)
Market discount income ........................            --                    (1.4)                   (1.5)
                                                    ---------               ---------               ---------
   Total deferred tax liabilities .............      (1,944.7)               (1,805.4)               (1,807.1)
                                                    ---------               ---------               ---------
Net deferred tax (liability) ..................     $  (527.2)              $  (159.5)              $   (96.6)
                                                    =========               =========               =========



                                       74


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      The presentation of deferred tax assets and liabilities in prior years has
been modified to reflect  amounts  included on completed and amended  income tax
returns.  At December 31,  2003,  CIT was  continuing  to develop an analysis of
deferred tax assets and  liabilities.  Future income tax return  filings and the
completion of the aforementioned analysis of deferred tax assets and liabilities
could result in  reclassifications  to the  deferred tax assets and  liabilities
shown in the preceding table.

      At  December  31,  2003,  CIT had U.S.  federal  net  operating  losses of
approximately $1,973.7 million, which expire in various years beginning in 2011.
In  addition,  CIT has various  state net  operating  losses that will expire in
various years beginning in 2004.  Federal and state net operating  losses may be
subject to annual use limitations under section 382 of the Internal Revenue Code
of 1986, as amended, and other limitations under certain state laws.  Management
believes that CIT will have  sufficient  taxable  income in future years and can
avail itself of tax planning  strategies in order to fully utilize these losses.
Accordingly, CIT does not believe a valuation allowance is required with respect
to these net operating losses.

Note 16 -- Postretirement and Other Benefit Plans

Retirement and Postretirement Medical and Life Insurance Benefit Plans

      CIT has a number of funded and unfunded  noncontributory  defined  benefit
pension plans covering certain of its U.S. and non-U.S.  employees,  designed in
accordance  with  conditions  and  practices  in the  countries  concerned.  The
retirement  benefits  under the defined  benefit  pension plans are based on the
employee's  age,  years of service and  qualifying  compensation.  CIT's funding
policy is to make  contributions to the extent such  contributions  are not less
than the minimum  required by applicable  laws and  regulations,  are consistent
with our  long-term  objective of ensuring  sufficient  funds to finance  future
retirement benefits, and are tax deductible as actuarially determined.  CIT made
cash  contributions  of $69.4  million to its  pension  plans for the year ended
December  31,  2003.  Contributions  are charged to the  salaries  and  employee
benefits  expense on a  systematic  basis over the  expected  average  remaining
service period of employees expected to receive benefits.

      The largest plan is the CIT Group Inc. Retirement Plan (the "Plan"), which
accounts for 77% of the total benefit  obligation at December 31, 2003. The Plan
covers U.S.  employees  of CIT who have  completed  one year of service and have
attained the age of 21. The Company  also  maintains a  Supplemental  Retirement
Plan for employees whose benefit in the Plan is subject to Internal Revenue Code
limitations.

      The Plan has a "cash  balance"  formula that became  effective  January 1,
2001.  Certain  eligible  members  had the  option of  remaining  under the Plan
formula as in effect prior to January 1, 2001.  Under the cash balance  formula,
each member's  accrued benefits as of December 31, 2000 were converted to a lump
sum amount, and every year thereafter, the balance is credited with a percentage
(5% to 8%  depending  on  years  of  service)  of the  member's  "Benefits  Pay"
(comprised of base salary,  plus certain annual  bonuses,  sales  incentives and
commissions).  These balances also receive annual interest  credits,  subject to
certain  government limits. The interest credit was 5.01% and 5.76% for the plan
years  ended  December  31, 2003 and 2002,  respectively.  Upon  termination  or
retirement after five years of employment, the amount credited to a member is to
be paid in a lump sum or converted into an annuity at the option of the member.

      CIT also  provides  certain  healthcare  and life  insurance  benefits  to
eligible  retired U.S.  employees.  The healthcare  benefit is contributory  for
eligible  retirees;  the life  insurance  benefit is  noncontributory.  Salaried
participants  generally  become eligible for retiree  healthcare  benefits after
reaching age 55 with 11 years of  continuous  CIT service  immediately  prior to
retirement. Generally, the medical plan pays a stated percentage of most medical
expenses,  reduced by a  deductible  as well as by payments  made by  government
programs and other group  coverage.  The retiree health care benefit  includes a
limit on CIT's share of costs for all  employees  who retired  after January 31,
2002. The plans are funded on a pay as you go basis.

      CIT uses its disclosure  date as the  measurement  date for all Retirement
and  Postretirement  Medical and Life Insurance  Benefit Plans.  The measurement
dates included in this report for the Retirement and Postretirement  Medical and
Life Insurance Plans are December 31, 2003, December 31, 2002, and September 30,
2002.


                                       75


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      The  following  tables set forth the change in  benefit  obligation,  plan
assets and funded  status of the  retirement  plans as well as the net  periodic
benefit  cost  ($ in  millions).  All  periods  presented  include  amounts  and
assumptions relating to the Plan, the unfunded Supplemental  Retirement Plan, an
Executive Retirement Plan and various international plans.



                                                                         Retirement Benefits
                                                             ------------------------------------------
                                                                 Year       Three Months      Year
                                                                 Ended          Ended         Ended
                                                             December 31,   December 31,  September 30,
                                                                 2003           2002          2002
                                                             ------------   ------------  -------------
                                                                                     
Change in Benefit Obligation
Benefit obligation at beginning of period ..................     $225.2       $ 214.4         $184.4
Service cost ...............................................       15.6           4.0           12.6
Interest cost ..............................................       14.4           3.5           13.0
Actuarial loss .............................................       23.9           6.2           15.6
Benefits paid ..............................................       (4.6)         (1.1)          (4.2)
Plan settlements and curtailments ..........................       (4.5)         (2.3)          (7.6)
Currency translation adjustment ............................        2.2           0.5            0.6
Other ......................................................        0.8            --             --
                                                                 ------       -------         ------
Benefit obligation at end of period ........................     $273.0       $ 225.2         $214.4
                                                                 ======       =======         ======
Change in Plan Assets
Fair value of plan assets at beginning of period ...........     $123.1       $ 119.6         $126.5
Actual return on plan assets ...............................       28.7           6.1          (12.7)
Employer contributions .....................................       69.4           0.6           16.9
Plan settlements ...........................................       (4.5)         (2.3)          (7.1)
Benefits paid ..............................................       (4.6)         (1.1)          (4.2)
Currency translation adjustment ............................        0.7           0.2            0.2
                                                                 ------       -------         ------
Fair value of plan assets at end of period .................     $212.8       $ 123.1         $119.6
                                                                 ======       =======         ======
Reconciliation of Funded Status
Funded status ..............................................     $(60.2)      $(102.1)        $(94.8)
Unrecognized net actuarial loss ............................       57.8          56.5           54.7
Unrecognized prior service cost ............................         --            --             --
                                                                 ------       -------         ------
Net amount recognized ......................................     $ (2.4)      $ (45.6)        $(40.1)
                                                                 ======       =======         ======
Amounts Recognized in the Consolidated Balance Sheets
Prepaid benefit cost .......................................     $ 45.2       $    --         $   --
Accrued benefit liability ..................................      (48.9)        (79.2)         (75.0)
Intangible asset ...........................................         --            --             --
Accumulated other comprehensive income .....................        1.3          33.6           34.9
                                                                 ------       -------         ------
Net amount recognized ......................................     $ (2.4)      $ (45.6)        $(40.1)
                                                                 ======       =======         ======
Weighted-average Assumptions Used to Determine Benefit
   Obligations at Period End
Discount rate ..............................................       5.96%         6.45%          6.68%
Rate of compensation increase ..............................       4.26%         4.24%          4.22%
Weighted-average Assumptions Used to Determine
   Net Periodic Pension Cost for Periods
Discount rate ..............................................       6.45%         6.68%          7.40%
Rate of compensation increase ..............................       4.24%         4.22%          4.70%
Expected long-term return on plan assets ...................       7.92%         7.90%          9.93%
Components of Net Periodic Benefit Cost
Service cost ...............................................     $ 15.6       $   4.0         $ 12.6
Interest cost ..............................................       14.4           3.5           13.0
Expected return on plan assets .............................       (9.4)         (2.3)         (11.9)
Amortization of net loss ...................................        3.5           0.8            0.3
Amortization of prior service cost .........................         --            --             --
                                                                 ------       -------         ------
Total net periodic expense .................................     $ 24.1       $   6.0         $ 14.0
                                                                 ======       =======         ======



                                       76


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      Expected long-term rate of return assumptions for pension assets are based
on projected  asset  allocation and  historical and expected  future returns for
each asset class.  Independent  analysis of historical and projected asset class
returns, inflation and interest rates are provided by our investment consultants
and reviewed as part of the process to develop our assumptions.

      The accumulated  benefit  obligation for all defined benefit pension plans
was $232.4  million,  $193.0  million,  and $184.6 million at December 31, 2003,
December 31, 2002, and September 30, 2002, respectively.



                                                                          Year       Three Months      Year
                                                                          Ended          Ended         Ended
                                                                      December 31,   December 31,  September 30,
                                                                          2003           2002          2002
                                                                      ------------   ------------  -------------
                                                                                              
Information for Pension Plans with an Accumulated
   Benefit Obligation in Excess of Plan Assets
Projected benefit obligation ........................................     $ 61.2        $225.2         $214.4
Accumulated benefit obligation ......................................       47.4         193.0          184.6
Fair value of plan assets ...........................................        7.1         123.1          119.6
Additional Information
(Decrease) increase in Minimum Liability Included in
   Other Comprehensive Income .......................................     $(32.3)       $ (1.3)        $ 34.9
Pension Plan Weighted-average Asset Allocations
Equity securities ...................................................       67.6%         61.1%          58.2%
Debt securities .....................................................       32.1%         38.6%          41.7%
Real estate .........................................................         --            --             --
Other ...............................................................        0.3%          0.3%           0.1%
                                                                          ------        ------         ------
Total pension assets ................................................      100.0%        100.0%         100.0%
                                                                          ======        ======         ======


      CIT  maintains a "Statement of Investment  Policies and  Objectives"  that
specifies investment  guidelines  pertaining to the investment,  supervision and
monitoring of pension assets to ensure consistency with the long-term  objective
of ensuring sufficient funds to finance future retirement  benefits.  The policy
asset allocation guidelines allows for assets to be allocated between 50% to 70%
in Equities and 30% to 50% in Fixed-Income  investments.  CIT expects the actual
Equity and Fixed Income  allocation to approximate the "neutral" or mid-point of
the policy ranges over the long-term.  The guidelines  provide specific guidance
related to asset class objectives, fund manager guidelines and identification of
both  prohibited  and  restricted  transactions,  and are reviewed on a periodic
basis by the Employee  Benefit  Plans  Committee of CIT to ensure the  long-term
investment  objectives  are achieved.  Members of the Committee are appointed by
the Chief  Executive  Officer of CIT and  include the Chief  Executive  Officer,
Chief Operating  Officer,  Chief Financial Officer,  General Counsel,  and other
senior executives.

      There was no CIT common  stock  included  in the  pension  plan  assets at
December 31, 2003, December 31, 2002, or September 30, 2002.

      CIT  expects to  contribute  $3.8  million to its  pension  plans and $3.6
million to its other postretirement benefit plans in 2004.


                                       77


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



                                                                               Postretirement Benefits
                                                                      ------------------------------------------
                                                                          Year       Three Months      Year
                                                                          Ended          Ended         Ended
                                                                      December 31,   December 31,  September 30,
                                                                          2003           2002          2002
                                                                      ------------   ------------  -------------
                                                                                              
Change in Benefit Obligation
Benefit obligation at beginning of period ...........................     $ 48.1        $ 46.7         $ 39.5
Service cost ........................................................        1.5           0.3            1.2
Interest cost .......................................................        3.0           0.8            2.9
Actuarial loss ......................................................        9.6           0.8            5.3
Net benefits paid ...................................................       (4.2)         (0.5)          (2.2)
Plan amendments .....................................................         --            --             --
                                                                          ------        ------         ------
Benefit obligation at end of period .................................     $ 58.0        $ 48.1         $ 46.7
                                                                          ======        ======         ======
Change in Plan Assets
Fair value of plan assets at beginning of period ....................     $   --        $   --         $   --
Net benefits paid ...................................................       (4.2)         (0.5)          (2.2)
Employer contributions ..............................................        4.2           0.5            2.2
                                                                          ------        ------         ------
Fair value of plan assets at end of period ..........................     $   --        $   --         $   --
                                                                          ======        ======         ======
Reconciliation of Funded Status
Funded status .......................................................     $(58.0)       $(48.1)        $(46.7)
Unrecognized net actuarial loss .....................................       15.5           6.0            5.2
                                                                          ------        ------         ------
Accrued cost ........................................................     $(42.5)       $(42.1)        $(41.5)
                                                                          ------        ------         ------
Amounts Recognized in the Consolidated Balance Sheets
Prepaid benefit cost ................................................     $   --        $   --         $   --
Accrued benefit liability ...........................................      (42.5)        (42.1)         (41.5)
Intangible asset ....................................................         --            --             --
Accumulated other comprehensive income ..............................         --            --             --
                                                                          ------        ------         ------
Net amount recognized ...............................................     $(42.5)       $(42.1)        $(41.5)
                                                                          ======        ======         ======
Weighted-average Assumptions Used to Determine
   Benefit Obligations at Period End
Discount rate .......................................................       6.00%         6.50%          6.75%
Rate of compensation increase .......................................       4.25%         4.25%          4.25%
Weighted-average Assumptions Used to Determine Net
   Periodic Benefit Cost for periods
Discount rate .......................................................       6.50%         6.75%          7.50%
Rate of compensation increase .......................................       4.25%         4.25%          4.50%
Components of Net Periodic Benefit Cost
Service cost ........................................................     $  1.5        $  0.3         $  1.2
Interest cost .......................................................        3.0           0.8            2.9
Amortization of prior service cost ..................................         --            --             --
Amortization of net loss ............................................        0.1            --            0.1
                                                                          ------        ------         ------
Total net periodic expense ..........................................     $  4.6        $  1.1         $  4.2
                                                                          ======        ======         ======


      For the period ended December 31, 2003, the assumed health care cost trend
rates  decline for all retirees to an ultimate  level of 5.00% in 2018;  for the
period ended December 31 2002, 5.00% in 2008; and for the period ended September
30, 2002, 5.00% in 2008.


                                       78


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



                                                                          Year       Three Months      Year
                                                                          Ended          Ended         Ended
                                                                      December 31,   December 31,  September 30,
                                                                          2003           2002          2002
                                                                      ------------   ------------  -------------
                                                                                              
Assumed Health Care Trend Rates at Period End
Health care cost trend rate assumed for next year ...............         12.00%        10.00%         11.00%
Rate to which the cost trend rate is assumed to
   decline (the ultimate trend rate) ............................          5.00%         5.00%          5.00%
Year that the rate reaches the ultimate trend rate ..............          2018          2008           2008


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



                                                                                Postretirement Benefits
                                                                      ------------------------------------------
                                                                          Year       Three Months      Year
                                                                          Ended          Ended         Ended
                                                                      December 31,   December 31,  September 30,
                                                                          2003           2002          2002
                                                                      ------------------------------------------
                                                                                              
Effect of One-percentage Point Increase on:
Period end postretirement benefit obligation .....................         $ 2.7         $ 2.3         $ 2.2
Total of service and interest
   cost components ...............................................         $ 0.1         $  --         $ 0.1

Effect of One-percentage Point Decrease on:
Period end postretirement benefit obligation .....................         $(2.6)        $(2.2)        $(2.1)
Total of service and interest cost components ....................         $(0.1)        $  --         $(0.1)


      On December 8, 2003,  the  President of the United  States signed into law
the Medicare  Prescription  Drug Improvement and  Modernization Act of 2003. The
Act introduces a prescription  drug benefit under Medicare  (Medicare Part D) as
well as a federal  subsidy to sponsors of retiree health care benefit plans that
provide a benefit that is at least actuarially equivalent to Medicare Part D. In
accordance  with FASB Staff Position No. FAS 106-1,  "Accounting  and Disclosure
Requirements   related  to  the  Medicare   Prescription  Drug  Improvement  and
Modernization  Act of 2003",  any  measures  of the  accumulated  postretirement
benefit obligation or net periodic  postretirement benefit cost in the financial
statements or accompanying notes do not reflect the effects of the act. Specific
authoritative  guidance on the accounting for the federal subsidy is pending and
that  guidance,  when issued,  could require CIT to change  previously  reported
information.

Savings Incentive Plan

      CIT also has a number of defined  contribution  retirement  plans covering
certain  of its  U.S.  and  non-U.S.  employees,  designed  in  accordance  with
conditions and practices in the countries concerned.  Employee  contributions to
the  plans  are  subject  to  regulatory   limitations  and  the  specific  plan
provisions. The largest plan is the CIT Group Inc. Savings Incentive Plan, which
qualifies under section 401(k) of the Internal Revenue Code and accounts for 80%
of CIT's total Savings  Incentive  Plan expense for the year ended  December 31,
2003. CIT's expense is based on specific  percentages of employee  contributions
and plan administrative  costs and aggregated $16.9 million,  $4.0 million,  and
$14.5  million for the year ended  December  31,  2003,  the three  months ended
December 31, 2002, and the year ended September 30, 2002, respectively.

Corporate Annual Bonus Plan

      The CIT Group Inc. Annual Bonus Plan and Discretionary Bonus Plan together
make-up  CIT's annual bonus plan.  The amount of awards  depends on a variety of
factors,  including corporate performance and individual  performance during the
fiscal  period  for which  awards are made and is  subject  to  approval  by the
Compensation  Committee  of the  Board of  Directors.  Bonus  payments  of $59.0
million for the year ended  December  31,  2003,  were paid in February  2004. A
bonus of $20.1 million for the six months performance period from July 1, 2002


                                       79


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

through  December 31, 2002 was paid in February  2003. For the fiscal year ended
September  30,  2002,  $25.1  million  of  bonuses  were  paid  relative  to the
nine-month  performance  period ended June 30, 2002.  Certain  senior  executive
officers received a portion of their corporate bonuses in the form of restricted
stock based on the closing price of CIT shares on the date of approval.

Long-Term Equity Compensation Plan

      CIT sponsors a Long-Term  Equity  Compensation  Plan (the "ECP").  The ECP
allows CIT to issue to employees up to 36,000,000 shares of common stock through
grants of annual incentive awards,  incentive and  non-qualified  stock options,
stock appreciation rights,  restricted stock, performance shares and performance
units. Of the 36,000,000  shares, no more than 5,000,000 shares may be issued in
connection with awards of restricted stock,  performance  shares and performance
units.  Common stock issued under the ECP may be either  authorized but unissued
shares,  treasury  shares or any  combination  thereof.  All options  granted to
employees in 2003 have a vesting schedule of one third per year for three years,
have a 10-year  term from the date of grant and are issued  with  strike  prices
equal  to the  fair  market  value of the  common  stock  on the date of  grant.
Restricted stock granted in 2003 has a three-year cliff vesting.

      Data for the stock option plans is summarized as follows.



                                                 Year Ended          Three Months Ended             Year Ended
                                             December 31, 2003        December 31, 2002         September 30, 2002
                                           ----------------------  ------------------------  ------------------------
                                                       Weighted                  Weighted                 Weighted
                                                       Average                   Average                   Average
                                                     Option Price              Option Price              Option Price
                                           Shares      Per Share     Shares      Per Share      Shares    Per Share
                                           ------    ------------    ------    ------------     -------  ------------
                                                                                          
Outstanding at beginning of period ...  15,335,255      $33.13     15,494,009      $33.15            --         --
January Grant ........................   4,240,644      $21.05             --          --            --         --
July Grant ...........................     648,485      $27.74             --          --            --         --
Converted Tyco options ...............          --          --             --          --     4,808,585     $56.20
Granted -- IPO .......................          --          --             --          --    10,823,631     $23.00
Granted -- other .....................     485,625      $27.27         27,500      $20.14        52,258     $22.20
Exercised ............................    (870,357)     $23.02             --          --            --         --
Forfeited ............................  (1,072,828)     $34.25       (186,254)     $32.16      (190,465)    $35.50
                                        ----------      ------     ----------      ------    ----------     ------
Outstanding at end of period .........  18,766,824      $30.48     15,335,255      $33.13    15,494,009     $33.15
                                        ==========      ======     ==========      ======    ==========     ======
Options exercisable at end of period..   6,730,863      $43.18      3,960,926      $59.19     4,020,790     $59.06
                                        ==========      ======     ==========      ======    ==========     ======


      In 2003,  4,889,129  options  were  granted  to  employees  as part of the
long-term  incentive process.  In addition,  485,625 CIT options were granted to
new hires and employees returning from a leave of absence.

      The weighted  average  fair value of new options  granted in 2003 is $5.30
and $4.74 for the three month period ended  December 31, 2002. The fair value of
new options granted was determined at the date of grant using the  Black-Scholes
option-pricing model, based on the following assumptions. Due to limited Company
history as a public company, no forfeiture rate was used.



                                             Expected           Average         Expected           Risk Free
Option Issuance                          Option Life Range  Dividend Yield  Volatility Range  Interest Rate Range
---------------                          -----------------  --------------  ----------------  -------------------
                                                                                      
      2003
January, 2003 .........................      3-5 years           2.28%        31.6% - 33.4%       2.11% - 3.00%
January, 2003 -- Director Grant .......      10 Years            2.28%            28.2%               4.01%
March 2003 -- Other ...................      3-5 Years           2.65%        29.5% - 33.2%       2.12% - 2.97%
May, 2003 -- Director Grant ...........      10 Years            2.11%            28.2%               3.44%
July, 2003 ............................      3-5 years           1.70%        29.3% - 31.0%       2.06% - 3.10%
July, 2003 -- Director Grant ..........      10 Years            1.70%            28.1%               4.20%
September, 2003 -- Other ..............      3-5 Years           1.70%        29.3% - 31.0%       2.62% - 3.61%



                                       80


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



                                             Expected           Average         Expected           Risk Free
Option Issuance                          Option Life Range  Dividend Yield  Volatility Range  Interest Rate Range
---------------                          -----------------  --------------  ----------------  -------------------
                                                                                      
      2002
July, 2002 (Tyco replacement) .........      3.6-5.6 years       2.09%        32.3% - 33.2%        3.43% - 4.11%
July, 2002 (IPO) ......................      3-6 years           2.09%        32.3% - 33.2%        3.24% - 4.22%
July, 2002 (other) ....................      10 years            2.09%            27.8%               5.21%
August, 2002 (other) ..................      3-5 years           2.09%        32.5% - 33.2%        2.47% - 3.19%
August, 2002 (other) ..................      10 years            2.16%            27.8%               4.57%
November, 2002 (other) ................      3-5 years           2.40%        32.4% - 33.4%        2.26% - 3.95%


      The following table summarizes information about stock options outstanding
and options exercisable at December 31, 2003 and 2002.



                                               Options Outstanding                      Options Exercisable
                                   -------------------------------------------     ----------------------------
                                                    Weighted
           Range of                                  Average       Weighted                         Weighted
           Exercise                  Number        Contractual      Average          Number          Average
             Price                 Outstanding        Life      Exercise Price     Exercisable   Exercise Price
           --------                -----------     -----------  --------------     -----------   --------------
                                                                                     
             2003
       $18.14 - $27.21 .........   13,343,619          8.7          $ 22.38         2,850,463       $ 22.98
       $27.22 - $40.83 .........    2,598,485          8.3          $ 32.93         1,055,680       $ 35.38
       $40.84 - $61.26 .........      899,290          5.9          $ 51.27           899,290       $ 51.27
       $61.27 - $91.91 .........    1,779,982          4.4          $ 68.90         1,779,982       $ 68.90
       $91.92 - $137.87 ........      143,858          4.1          $130.82           143,858       $130.82
      $137.88 - $206.82 ........        1,590          4.4          $160.99             1,590       $160.99
                                   ----------                                       ---------
           Totals ..............   18,766,824                                       6,730,863
                                   ==========                                       =========
             2002
       $19.25 - $33.30 .........   10,654,783          9.5          $ 25.66             4,019       $ 23.00
       $33.31 - $49.96 .........    1,691,276          8.3          $ 37.02           967,711       $ 34.89
       $49.97 - $74.95 .........    2,763,934          5.8          $ 62.86         2,763,934       $ 62.86
       $74.96 - $112.44 ........       61,152          6.2          $ 88.37            61,152       $ 88.37
      $112.45 - $168.67 ........      164,110          5.1          $130.64           164,110       $130.64
                                   ----------                                       ---------
           Totals ..............   15,335,255                                       3,960,926
                                   ==========                                       =========


Employee Stock Purchase Plan

      In October 2002,  CIT adopted an Employee Stock Purchase Plan (the "ESPP")
for all employees  customarily  employed at least 20 hours per week. The ESPP is
available  to  employees  in the  United  States  and to  certain  international
employees.  Under the ESPP, CIT is authorized to issue up to 1,000,000 shares of
common stock to eligible employees.  Employees can choose to have between 1% and
10% of their base salary  withheld to purchase shares  quarterly,  at a purchase
price  equal to 85% of the fair market  value of CIT common  stock on either the
first  business day or the last business day of the quarterly  offering  period,
whichever  is lower.  The  amount of common  stock  that may be  purchased  by a
participant  through the plan is generally  limited to $25,000 per year. A total
of 88,323 shares were purchased under the plan in 2003.

Restricted Stock

      In 2003, CIT issued  1,229,450  restricted  shares to employees  under the
Long-Term Equity  Compensation Plan. These shares were issued at the fair market
value on the date of the  grant  and have a  three-year  cliff-vest  period.  In
addition,  6,488  shares  were  granted  to  outside  members  of the  Board  of
Directors,  who elected to receive shares in lieu of cash compensation for their
retainer.  These restricted  shares vest on the first  anniversary of the grant.
For the year ended  December 31, 2003,  three months ended December 31, 2002 and
year ended  September  30, 2002,  $8.8  million,  $1.2 million and $5.2 million,
respectively,  of  expenses  are  included in  salaries  and  general  operating
expenses on the consolidated statements of income.


                                       81



                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 17 -- 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 December 31, 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 with respect to
certain factoring  products,  which are included in credit balances of factoring
clients in the CIT consolidated balance sheet ($ in millions).



                                                                                         At            At
                                                                                    December 31,  September 30,
                                                           December 31,2003             2002          2002
                                                   -------------------------------  ------------ -------------
                                                      Due to Expire
                                                    -------------------
                                                    Within      After      Total        Total         Total
                                                   One Year   One Year  Outstanding  Outstanding   Outstanding
                                                   --------   --------- -----------  -----------   -----------
                                                                                      
Financing and leasing assets ....................   $1,611.5  $4,322.8    $5,934.3     $3,618.9      $3,075.8
Letters of credit and acceptances:
Standby letters of credit .......................      506.1       2.6       508.7        519.8         469.0
Other letters of credit .........................      621.2      72.8       694.0        583.3         641.8
Acceptances .....................................        9.3        --         9.3          5.6           8.4
Guarantees ......................................      120.7      12.5       133.2        745.8         724.5
Venture capital fund commitments ................         --     124.2       124.2        164.9         176.6
Venture capital direct investment commitments ...         --        --          --          4.4           4.4


      As of December 31, 2003,  commitments to purchase commercial aircraft from
both Airbus Industrie and The Boeing Company are detailed below ($ in millions).

Calendar Year:                                         Amount           Number
--------------                                         ------           ------
2004 ..............................................   $  634.0            15
2005 ..............................................      952.0            20
2006 ..............................................    1,088.0            21
2007 ..............................................      260.0             5
                                                      --------            --
Total .............................................   $2,934.0            61
                                                      ========            ==

      The order amounts exclude CIT's options to purchase  additional  aircraft.
Lease  commitments  are in place for twelve of the fifteen units to be delivered
in 2004.

      Outstanding  commitments  to purchase  equipment,  other than the aircraft
detailed  above,  totaled $197.2 million at December 31, 2003. CIT is party to a
railcar  sale-leaseback  transaction  under  which  it  is  obligated  to  pay a
remaining  total of $486.4 million,  approximately  $28 million per year through
2010 and declining thereafter


                                       82


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

through  2024,  which is more  than  offset  by CIT's  re-lease  of the  assets,
contingent on its ability to maintain  railcar usage.  In conjunction  with this
sale-leaseback  transaction,  CIT has guaranteed all  obligations of the related
consolidated lessee entity.

      CIT has guaranteed  the public and private debt  securities of a number of
its wholly-owned,  consolidated subsidiaries,  including those disclosed in Note
27 -- 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 that
are  guaranteed  by  CIT.  These   transactions  are  generally  used  by  CIT's
subsidiaries  outside of the U.S. to allow the local  subsidiary to borrow funds
in local  currencies.  In  addition,  CIT has  guaranteed,  on behalf of certain
non-consolidated  subsidiaries,  $11.9 million of third party debt, which is not
reflected in the consolidated balance sheet at December 31, 2003.

Note 18 -- Lease Commitments

      The following table presents  future minimum rentals under  noncancellable
long-term lease agreements for premises and equipment at December 31, 2003 ($ in
millions).

Years Ended December 31,                                         Amount
------------------------                                         ------
      2004 ..................................................     $ 53.2
      2005 ..................................................       38.3
      2006 ..................................................       28.6
      2007 ..................................................       20.7
      2008 ..................................................        9.0
      Thereafter ............................................       14.9
                                                                  ------
        Total ...............................................     $164.7
                                                                  ======
      In addition to fixed lease rentals,  leases  generally  require payment of
maintenance  expenses and real estate  taxes,  both of which are subject to rent
escalation  provisions.  Minimum  payments  have not  been  reduced  by  minimum
sublease  rentals  of  $32.8  million  due in the  future  under  noncancellable
subleases.

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



                                    Year         Three          Year          June 2          January 1
                                   Ended     Months Ended       Ended         through          through
                                December 31,  December 31,   September 30,  September 30,      June 1,
                                    2003          2002           2002           2001            2001
                                ------------  ------------   -------------  -------------      -------
                               (successor)   (successor)     (successor)     (successor)    (predecessor)
                                                                           
Premises ....................     $ 34.0        $ 9.2           $38.4          $14.8            $19.0
Equipment ...................        9.3          2.1             8.4            3.0              3.7
Less sublease income ........       (9.4)        (1.8)           (9.0)         (2.7)            (3.4)
                                  ------        -----           -----          -----            -----
  Total .....................     $ 33.9        $ 9.5           $37.8          $15.1            $19.3
                                  ======        =====           =====          =====            =====


Note 19 -- Fair Values of Financial Instruments

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


                                       83


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      Actual fair values in the  marketplace  are affected by other  significant
factors,  such as supply and demand,  investment  trends and the  motivations of
buyers  and  sellers,  which  are  not  considered  in the  methodology  used to
determine the estimated fair values presented. In addition, fair value estimates
are based on existing financial  instruments  without attempting to estimate the
value of future  business  transactions  and the value of assets and liabilities
that  are  part  of  CIT's  overall  value  but  are  not  considered  financial
instruments.   Significant  assets  and  liabilities  that  are  not  considered
financial instruments include customer base, operating lease equipment, premises
and  equipment,  assets  received in  satisfaction  of loans,  and  deferred tax
balances.  In addition,  tax effects relating to the unrealized gains and losses
(differences  in  estimated  fair  values  and  carrying  values)  have not been
considered in these  estimates  and can have a significant  effect on fair value
estimates.  The carrying amounts for cash and cash equivalents  approximate fair
value because they have short maturities and do not present  significant  credit
risks.  Credit-related  commitments, as disclosed in Note 17 -- "Commitments and
Contingencies", are primarily short-term floating-rate contracts whose terms and
conditions are individually negotiated, taking into account the creditworthiness
of the customer and the nature,  accessibility and quality of the collateral and
guarantees.   Therefore,  the  fair  value  of  credit-related  commitments,  if
exercised, would approximate their contractual amounts.


                                       84


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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



                                      December 31, 2003          December 31, 2002        September 30, 2002
                                      Asset/(Liability)          Asset/(Liability)         Asset/(Liability)
                                   ------------------------  ------------------------  ------------------------
                                    Carrying     Estimated    Carrying     Estimated     Carrying    Estimated
                                      Value     Fair Value      Value     Fair Value       Value    Fair Value
                                   -----------  -----------  -----------  -----------   ----------- -----------
                                                                                  
Finance receivables-loans(1) ....   $24,620.1    $24,711.3   $ 20,450.9    $ 20,608.0   $ 21,065.3  $ 21,218.0
Finance receivables
   held for sale ................       918.3        918.3      1,213.4       1,213.4      1,019.5     1,019.5
Retained interests in
   securitizations(2) ...........     1,380.8      1,380.8      1,451.4       1,451.4      1,410.4     1,410.4
Other assets(3) .................     1,287.8      1,287.8      1,322.4       1,322.4      1,337.4     1,337.4
Commercial paper(4) .............    (4,173.9)    (4,173.9)    (4,974.6)     (4,974.6)    (4,654.2)   (4,654.2)
Fixed-rate senior notes and
   subordinated fixed-rate
   notes(5) .....................   (20,123.7)   (20,291.6)   (19,952.5)    (20,621.3)   (18,718.8)  (18,844.7)
Variable-rate bank credit
   facilities(5) ................          --           --     (2,118.0)     (2,118.0)    (4,040.0)   (4,040.0)
Variable-rate senior notes(5) ...    (9,428.9)    (9,440.5)    (4,917.6)     (4,893.1)    (5,392.4)   (5,361.5)
Credit balances of factoring
   clients and other
   liabilities(5)(6) ............    (6,318.7)    (6,318.7)    (4,586.9)     (4,586.9)    (4,682.1)   (4,682.1)
Preferred capital securities(7)..      (263.0)      (286.4)      (257.2)       (273.4)      (257.7)     (262.7)
Derivative financial
   instruments:(8)
Interest rate swaps, net ........       (36.1)       (36.1)       (60.5)        (60.5)       (16.3)      (16.3)
Cross-currency swaps, net .......       254.3        254.3        145.8         145.8        142.2       142.2
Foreign exchange
   forwards, net ................      (216.0)      (216.0)       (95.4)        (95.4)       (43.3)      (43.3)


--------------------------------------------------------------------------------
(1)  The fair value of performing  fixed-rate  loans was estimated  based upon a
     present value discounted cash flow analysis, using interest rates that were
     being  offered  at the end of the  year for  loans  with  similar  terms to
     borrowers of similar  credit  quality.  Discount  rates used in the present
     value calculation range from 4.63% to 7.36% for December 31, 2003, 4.78% to
     7.75% for December 31, 2002 and 4.91% to 7.52% for September 30, 2002.  The
     maturities used represent the average  contractual  maturities adjusted for
     prepayments.  For floating-rate  loans that reprice  frequently and have no
     significant  change in credit  quality,  fair value  approximates  carrying
     value.  The net carrying value of lease finance  receivables not subject to
     fair value  disclosure  totaled $6.0  billion at December  31,  2003,  $6.4
     billion at December 31, 2002 and $6.6 billion at September 30, 2002.

(2)   Fair  values of  retained  interests  in  securitizations  are  calculated
      utilizing  current and anticipated  credit losses,  prepayment  speeds and
      discount rates. Other investment securities actively traded in a secondary
      market were valued using quoted available market prices.

(3)  Other assets  subject to fair value  disclosure  include  accrued  interest
     receivable,  certain investment  securities and miscellaneous other assets.
     The carrying amount of accrued interest receivable approximates fair value.
     The  carrying  value of other  assets not subject to fair value  disclosure
     totaled  $2,022.5 at December  31, 2003,  $1,959.1  million at December 31,
     2002 and $2,035.8 million at September 30, 2002.

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

(5)   The carrying value of fixed-rate senior notes and subordinated  fixed-rate
      notes  includes  $292.9  million,  $270.6  million  and $333.4  million of
      accrued interest at December 31, 2003, December 31, 2002 and September 30,
      2002,  respectively.  The  carrying  value of  variable-rate  bank  credit
      facilities  includes  $2.6 million of accrued  interest at  September  30,
      2002.   Accrued   interest  was  negligible  at  December  31,  2002.  The
      variable-rate senior notes include $20.5 million,  $10.7 million and $13.4
      million of accrued  interest at December 31, 2003,  December 31, 2002, and
      September  30, 2002,  respectively.  These  amounts are excluded  from the
      other  liabilities  balances in this table.  Fixed-rate  notes were valued
      using a present value  discounted  cash flow analysis with a discount rate
      approximating  current  market rates for  issuances by CIT of similar term
      debt at the end of the year.  Discount  rates  used in the  present  value
      calculation  ranged from 1.54% to 6.32% at  December  31,  2003,  1.65% to
      6.02% at December 31, 2002; and 2.23% to 7.61% at September 30, 2002.

(6)  The  estimated  fair  value  of  credit   balances  of  factoring   clients
     approximates  carrying  value due to their short  settlement  terms.  Other
     liabilities  include accrued liabilities and deferred federal income taxes.
     Accrued  liabilities  and  payables  with  no  stated  maturities  have  an
     estimated fair value that  approximates  carrying value. The carrying value
     of other  liabilities not subject to fair value  disclosure  totaled $601.4
     million,  $255.0 million and $207.5 million at December 31, 2003,  December
     31, 2002 and September 30, 2002, respectively.

(7)  Preferred  capital  securities were valued using a present value discounted
     cash flow analysis with a discount rate approximating  current market rates
     of similar  issuances at the end of the year,  and includes $7.5 million of
     accrued interest at December 31, 2003.

(8)  CIT enters into derivative financial instruments for hedging purposes only.
     The estimated fair values are calculated  internally  using market data and
     represent the net amount  receivable or payable to terminate the agreement,
     taking  into  account  current  market  rates.  See  Note 9 --  "Derivative
     Financial  Instruments" for notional  principal amounts associated with the
     instruments.


                                       85


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 20 -- Certain Relationships and Related 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 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 with one  independent  director.  Any losses
generated by DFS as determined  under U.S. GAAP are allocated to CIT. DFS is not
consolidated  in CIT's December 31, 2003  financial  statements and is accounted
for under the equity method. At December 31, 2003,  financing and leasing assets
originated by DFS and purchased by CIT (included in the CIT Consolidated Balance
Sheet) were $1.4 billion and securitized  assets included in managed assets were
$2.5 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 $205 million pretax at December 31, 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 December 31,
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  $17 million
pretax at December 31, 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
December 31, 2003,  CIT's maximum exposure to loss with respect to activities of
the joint venture is $119 million  pretax,  which is comprised of the investment
in and loans to the joint venture.

      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 December 31,
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 December 31, 2003.

      As of December 31, 2003, CIT bought  receivables  totaling  $350.0 million
from certain  subsidiaries of Tyco in a factoring  transaction on an arms-length
basis.  CIT and Tyco  engaged in similar  factoring  transactions,  the  highest
amount of which was $384.4 million,  at various times during Tyco's ownership of
CIT.

      Certain  shareholders  of CIT provide  investment  management  services in
conjunction  with employee  benefit  plans.  These  services are provided in the
normal course of business.


                                       86


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 21 -- Business Segment Information

Management's Policy in Identifying Reportable Segments

      CIT's  reportable  segments  are  comprised of  strategic  business  units
aggregated  into segments based upon the core  competencies  relating to product
origination,  distribution methods,  operations and servicing, and the nature of
their  regulatory  environment.  This segment  reporting is consistent  with the
presentation to management.

Types of Products and Services

      CIT has five reportable segments:  Specialty Finance,  Commercial Finance,
Equipment Finance, Capital Finance and Structured Finance. These segments, other
than Commercial  Finance,  offer secured lending and leasing products to midsize
and  larger  companies  across a variety  of  industries,  including  aerospace,
construction,  rail, machine tool, business aircraft, technology,  manufacturing
and  transportation.  The Commercial  Finance segment offers secured lending and
receivables  collection as well as other financial products to small and midsize
companies.  These  include  secured  revolving  lines of credit and term  loans,
credit protection,  accounts receivable collection,  import and export financing
and  factoring,  debtor-in-possession  and turnaround  financing.  The Specialty
Finance segment also offers home equity products to consumers  primarily through
a network of brokers and correspondents.

Segment Profit and Assets

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

      Segment  reporting was modified,  beginning in the quarter ended March 31,
2003, to reflect  Equipment  Finance and Capital  Finance as separate  segments.
Prior  periods  have been  restated  to  conform to this  current  presentation.
Previously,  these two strategic  business  units were combined as the Equipment
Financing  and  Leasing  segment.  This  new  presentation  is  consistent  with
reporting to management. The business segments' operating margins and net income
for the year ended December 31, 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.  Also,  for the year ended December 31,
2003,  Corporate and Other included an after-tax charge of $38.4 million related
to the write-down of equity  investments,  an after-tax benefit of $30.8 million
from a gain on a call of debt as well as unallocated  expenses.  During 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.

      The Corporate and Other segment  included the following  items in the year
ended  September  30, 2002:  (1) goodwill  impairment of $6,511.7  million,  (2)
provision for  telecommunications  of $200.0 million ($124.0 million after tax),
(3) Argentine provision of $135.0 million ($83.7 million after tax), (4) funding
costs of $85.9 million ($53.2 million after tax), and (5) unallocated  corporate
operating  items  totaling $7.2 million  pre-tax  (income) or $3.9 million after
tax. For the 2001 periods  shown in the table,  the corporate  segment  included
funding costs and unallocated  corporate operating  expenses.  Corporate segment
funding costs increased significantly in 2002 from 2001, reflecting management's
decision  to not  allocate  to the  business  units  the  incremental  costs  of
borrowing  and  liquidity  relating to the  disruption  to our funding  base and
credit  downgrades.  Such 2002  additional  costs  included  higher debt quality
spreads,  use of bank line versus commercial paper borrowings,  incremental cost
of liquidity  facilities,  and excess cash held to enhance  liquidity.  Although
management  chose to not  allocate  these  incremental  costs  because they were
viewed as relating to  temporary  conditions,  costs have been  allocated  since
January 1, 2003. For all periods shown, Corporate and Other includes the results
of the venture capital business.


                                       87


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      The  following  table  presents  reportable  segment  information  and the
reconciliation  of segment  balances  to the  consolidated  financial  statement
totals  and the  consolidated  managed  assets  total at or for the  year  ended
December 31, 2003,  the three months ended  December 31, 2002, the twelve months
ended  September 30, 2002,  and the combined  nine months  ending  September 30,
2001. 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. ($ in millions)



                                                                                               Corporate
                            Specialty   Commercial   Equipment  Capital  Structured   Total       and
                             Finance     Finance     Finance    Finance   Finance   Segments     Other   Consolidated
                             -------     -------     -------    -------   -------   --------     -----   ------------
                                                                                  
At and for the year ended
December 31, 2003
Operating margin .......... $  842.5    $  529.4    $  148.0    $ 132.2 $  131.6   $ 1,783.7  $   45.5    $ 1,829.2
Income taxes ..............    166.8       141.6        24.6       23.0     38.6       394.6     (29.6)       365.0
Operating earnings (loss)..    260.9       221.3        38.5       36.0     60.3       617.0     (50.1)       566.9
Total financing and
  leasing assets .......... 12,318.4    10,261.9     6,957.7    7,201.2  3,344.7    40,083.9        --     40,083.9
Total managed assets ...... 18,743.9    10,261.9    10,183.9    7,201.2  3,344.7    49,735.6        --     49,735.6
At and for the three months
ended December 31, 2002
Operating margin .......... $  216.8    $  148.0     $  64.7     $ 52.2  $  29.8   $   511.5  $  (33.4)    $  478.1
Income taxes ..............     47.1        40.5         8.7       14.5      8.9       119.7     (27.7)        92.0
Operating earnings (loss)..     73.7        63.4        13.4       22.8     13.9       187.2     (45.9)       141.3
Total financing and
  leasing assets .......... 10,316.8     8,041.6     8,145.2    6,055.7  3,315.4    35,874.7        --     35,874.7
Total managed assets ...... 16,863.0     8,041.6    12,081.4    6,055.7  3,315.4    46,357.1        --     46,357.1
At or for the year ended
September 30, 2002
Operating margin .......... $  932.1    $  474.9    $  378.7    $ 184.9 $  132.8   $ 2,103.4 $  (296.9)  $  1,806.5
Income taxes ..............    214.4       121.9        74.3       49.6     40.0       500.2    (126.2)       374.0
Operating earnings (loss)..   349. 8       198.9       121.1       80.9     65.2       815.9  (7,514.6)    (6,698.7)
Total financing and
  leasing assets .......... 10,119.4     8,910.2     8,398.8    5,868.4  3,090.8    36,387.6        --     36,387.6
Total managed assets ...... 16,970.0     8,910.2    12,782.9    5,868.4  3,090.8    47,622.3        --     47,622.3
At or for the combined
nine months ended
September 30, 2001
Operating margin .......... $  649.4    $  343.2    $  398.6    $ 153.7  $  36.0   $ 1,580.9  $  (22.0)   $ 1,558.9
Income taxes ..............    119.7        86.3        81.7       29.4     26.0       343.1    (100.9)       242.2
Operating earnings (loss)..    196.7       134.8       130.6       84.5     45.8       592.4    (329.1)       263.3
Total financing and
  leasing assets .......... 12,791.1     8,657.1    11,063.7    5,045.4  3,171.9    40,729.2        --     40,729.2
Total managed assets ...... 18,474.2     8,657.1    15,528.5    5,045.4  3,171.9    50,877.1        --     50,877.1


      Finance  income  and other  revenues  derived  from  United  States  based
financing and leasing assets were $3,695.2  million,  $977.1  million,  $4,284.8
million,  and $3,718.7  million for the year ended  December 31, 2003, the three
months ended December 31, 2002, the year ended  September 30, 2002, and the nine
months  ending  September  30,  2001,  respectively.  Finance  income  and other
revenues  derived from foreign based financing and leasing  assets,  were $944.0
million,  $251.7  million,  $990.3 million and $829.2 million for the year ended
December 31, 2003,  the three  months  ended  December 31, 2002,  the year ended
September 30, 2002 and the nine months ended September 31, 2001, respectively.

Note 22 -- 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
CIT's 2002 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


                                       88


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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.  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 were  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 in these actions.

      In addition,  there are various  legal  proceedings  pending  against CIT,
which have arisen in the ordinary course of business.  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.

Note 23 -- Goodwill and Intangible Assets

      Goodwill and intangible  assets totaled $487.7  million,  $400.9  million,
$402.0  million and $6,569.5  million at December  31, 2003,  December 31, 2002,
September  30,  2002  and  September   30,  2001,   respectively.   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.  Management
performed a goodwill  impairment analysis as of October 1, 2003, which indicated
that the fair value of goodwill was in excess of the carrying value.  Therefore,
additional impairment charges were not necessary.

      There  were no  changes  in the  carrying  values of  goodwill  during the
transition period ended December 31, 2002. The changes in the carrying amount of
goodwill for the year ended December 31, 2003 were as follows ($ in millions):

                                           Specialty    Commercial
                                            Finance       Finance       Total
                                           ---------    -----------   --------
Balance as of December 31, 2002 .........    $14.0        $370.4       $384.4
Severance reduction .....................     (1.3)           --         (1.3)
                                             -----        ------       ------
Balance as of December 31, 2003 .........    $12.7        $370.4       $383.1
                                             =====        ======       ======

      The  downward  revision  to  severance  liabilities  during the year ended
December 31, 2003 was related to Specialty Finance restructuring  activities and
was  recorded  as a  reduction  to  goodwill,  as the  severance  liability  was
established   in  conjunction   with  Tyco   acquisition   purchase   accounting
adjustments.

      Other  intangible  assets,   comprised   primarily  of  acquired  customer
relationships,  proprietary computer software and related transaction processes,
totaled  $104.6  million,  $16.5  million,  $17.6  million and $22.0  million at
December 31, 2003 and 2002 and  September 30, 2002 and 2001,  respectively,  and
are  included in Goodwill  and  Intangible  Assets on the  Consolidated  Balance
Sheets.  The increase in other intangible  assets during the year ended December
31,  2003 was due to  customer  relationships  acquired  in the  purchase of two
factoring  businesses.  Other intangible assets are being amortized over periods
ranging from five to twenty years on a straight-line basis. Amortization expense
totaled $4.9 million for the year ended December 31, 2003,  $1.1 million for the
three months


                                       89


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

ended December 31, 2002,  $4.4 million for the year ended September 30, 2002 and
$0 million for the  combined  nine month period ended  September  30, 2001.  The
projected  amortization  for the years ended December 31, 2004 through  December
31, 2008 are:  $9.1 million for 2004 and 2005;  $8.0 million for 2006;  and $4.7
million for 2007 and 2008.

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



                                                                 Three           Year          June 2       January 1
                                                Year Ended   Months Ended       Ended         through        through
                                               December 31,  December 31,   September 30,   September 30,    June 1,
                                                   2003          2002           2002            2001           2001
                                               ------------  ------------   -------------   ------------    ----------
                                                (successor)   (successor)     (successor)    (successor)   (predecessor)
                                                                                              
Net income (loss) as reported ...............    $566.9         $141.3        $(6,698.7)       $182.8         $ 80.5
Goodwill amortization, net of tax ...........        --             --               --          59.8           32.7
                                                 ------         ------        ---------        ------         ------
Net income (loss) as adjusted ...............    $566.9         $141.3        $(6,698.7)       $242.6         $113.2
                                                 ======         ======        =========        ======         ======
Net income (loss) as adjusted per
     share -- basis .........................    $ 2.68         $ 0.67        $  (31.66)       $ 1.15         $ 0.53
Net income (loss) as adjusted per
     share -- diluted .......................    $ 2.66         $ 0.67        $  (31.66)       $ 1.15         $ 0.53


Note 24 --  Consolidating  Financial  Statements  -- Tyco Capital  Holdings Inc.
(TCH)

      TCH's activity was in connection with its capacity as the holding company
for the acquisition of CIT by Tyco,  which included an outstanding loan from and
related interest expense payable to an affiliate of Tyco.  Immediately  prior to
the IPO of CIT on July 8, 2002,  TCH was merged with CIT and the activity of TCH
(accumulated net deficit) was relieved via a capital  contribution from Tyco. As
a  result,  TCH  had no  subsequent  impact  on the CIT  consolidated  financial
statements.




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



                                       90


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 25 -- Initial Public Offering and Acquisition by Tyco International Ltd.

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

      The purchase price paid by Tyco for CIT was valued at  approximately  $9.5
billion.  The $9.5 billion  value  consisted of the  following:  the issuance of
approximately  133.0 million Tyco common  shares  valued at $6,650.5  million on
June 1, 2001 in exchange for  approximately  73% of the  outstanding  CIT common
stock (including  exchangeable  shares of CIT Exchangeco,  Inc.); the payment of
$2,486.4  million in cash to Dai-Ichi  Kangyo Bank,  Limited  ("DKB") on June 1,
2001 for approximately 27% of the outstanding CIT common stock; options for Tyco
common shares valued at $318.6 million issued in exchange for CIT stock options;
and $29.2 million in  acquisition-related  costs  incurred by Tyco. In addition,
$22.3 million in  acquisition-related  costs incurred by Tyco were paid and were
reflected in CIT's equity as an additional capital contribution. The purchase of
the CIT common stock held by DKB, which was contingent upon the  satisfaction of
the conditions of the merger, took place immediately prior to the closing of the
merger on June 1, 2001.  Additionally,  Tyco made capital contributions totaling
$898.3 million for the period June 2, 2001 through September 30, 2001, including
a note  receivable of $200.0 million that was  subsequently  paid by Tyco during
the first fiscal quarter of 2002.  Except for the capital  contribution  used to
unwind the activity of TCH,  there were no further  capital  contributions  from
Tyco subsequent to September 30, 2001.

      In connection with the  acquisition by Tyco, CIT recorded  acquired assets
and  liabilities at their  estimated June 2, 2001 fair values.  During the first
six months of fiscal 2002, CIT recorded additions to goodwill of $348.6 million.
The goodwill  adjustments  were related to fair value  adjustments  to purchased
assets and liabilities,  and accruals related to severance,  facilities or other
expenses incurred as a result of the purchase transaction. The accruals recorded
during the six months ended March 31, 2002 related to finalizing integration and
consolidation plans for the elimination of additional  corporate  administrative
and other  personnel  located  primarily  in North  America  and  Europe.  These
accruals  resulted in additional  purchase  accounting  liabilities,  which also
increased goodwill and deferred tax assets. The severance reserve established at
the acquisition date was primarily related to corporate administrative personnel
in  North  America.  The  Other  Reserve  established   consisted  primarily  of
acquisition-related costs incurred by Tyco.

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


                                       91


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



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

October 1 -- December 31, 2002
   utilization ...........................     (41)       (6.0)          (2)        (1.8)        --       (7.8)
                                              ----       -----         ----        -----      -----     ------
Balance December 31, 2002 ................     240        17.2           22         12.4         --       29.6
2003 Utilization .........................     (97)      (13.1)         (10)        (5.2)        --      (18.3)
2003 Reduction ...........................    (100)       (1.8)          --           --         --       (1.8)
                                              ----       -----         ----        -----      -----     ------
Balance December 31, 2003 ................      43       $ 2.3           12        $ 7.2      $  --     $  9.5
                                              ====       =====         ====        =====      =====     ======


      The  downward  revision to the  severance  reserves  during the year ended
December 31, 2003 related to Specialty Finance restructuring  activities and was
recorded as a reduction to goodwill. The reserves remaining at December 31, 2003
primarily  relate to the  restructuring  of European  operations.  The  facility
reserves  relate  primarily to shortfalls in sublease  transactions  and will be
utilized over the remaining  lease terms,  generally  within 6 years.  Severance
reserves also include  amounts  payable within the next year to individuals  who
chose to receive payments on a periodic basis.

      On September 30, 2001,  CIT sold at net book value  certain  international
subsidiaries to a non-U.S.  subsidiary of Tyco. As a result of this sale,  there
were receivables from affiliates  totaling  $1,440.9  million,  representing the
debt investment in these  subsidiaries.  CIT charged arm's length,  market-based
interest  rates on these  receivables,  and recorded  $19.0  million of interest
income, as an offset to interest expense, related to those notes for the quarter
ended  December  31,  2001.  A note  receivable  issued  at  the  time  of  this
transaction  of  approximately  $295  million was  collected.  Following  Tyco's
announcement  on  January  22,  2002  that it  planned  to  separate  into  four
independent,  publicly traded  companies,  CIT repurchased at net book value the
international  subsidiaries  on February  11,  2002.  In  conjunction  with this
repurchase,  the receivables from affiliates of $1,588.1 million at December 31,
2001 were satisfied.  The reacquisition of these subsidiaries has been accounted
for as a merger of entities  under  common  control.  Accordingly,  the balances
contained within the financial  statements and footnotes  include the results of
operations,  financial position and cash flows of the international subsidiaries
repurchased from Tyco for all periods presented.

Note 26 -- Acquisition-Related Costs

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

Note 27 -- Summarized Financial Information of Subsidiaries (Unaudited)

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


                                       92


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



                                                                 CIT
           CONSOLIDATING                     CIT      Capita   Holdings     Other
           BALANCE SHEETS                Group Inc. Corporation   LLC   Subsidiaries   Eliminations    Total
           --------------                ----------------------   ---   ------------   ------------    -----
           (successor)
                                                                                    
December 31, 2003
ASSETS
Net finance receivables ............   $   1,581.3   $3,755.4  $1,208.8   $24,111.0     $       --    $30,656.5
Operating lease equipment, net .....            --      580.3     146.4     6,888.8             --      7,615.5
Finance receivables held for sale ..            --       80.0     163.8       674.5             --        918.3
Cash and cash equivalents ..........       1,479.9      410.6     227.5      (144.3)            --      1,973.7
Other assets .......................       8,308.2      198.1     174.1     1,892.6       (5,394.2)     5,178.8
                                       -----------   --------  --------   ---------     ----------    ---------
  Total Assets .....................   $  11,369.4   $5,024.4  $1,920.6   $33,422.6     $ (5,394.2)   $46,342.8
                                       ===========   ========  ========   =========     ==========    =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Debt ...............................   $  30,656.7   $1,003.5  $1,407.7   $   600.7     $       --    $33,668.6
Credit balances of
  factoring clients ................            --         --        --     3,894.6             --      3,894.6
Accrued liabilities and
  payables .........................     (24,681.5)   3,412.0    (701.2)   25,317.1             --      3,346.4
                                       -----------   --------  --------   ---------     ----------    ---------
  Total Liabilities ................       5,975.2    4,415.5     706.5    29,812.4             --     40,909.6
Minority interest ..................            --         --        --        39.0             --         39.0
Total Stockholders' Equity .........       5,394.2      608.9   1,214.1     3,571.2       (5,394.2)     5,394.2
                                       -----------   --------  --------   ---------     ----------    ---------
  Total Liabilities and
  Stockholders' Equity .............   $  11,369.4   $5,024.4  $1,920.6   $33,422.6     $ (5,394.2)   $46,342.8
                                       ===========   ========  ========   =========     ==========    =========
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 .......................       6,940.5      283.3     391.6     2,372.6       (4,870.7)     5,117.3
                                       -----------   --------  --------   ---------     ----------    ---------
  Total Assets .....................   $   8,884.9   $4,949.5  $1,840.9   $31,127.8     $ (4,870.7)   $41,932.4
                                       ===========   ========  ========   =========     ==========    =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Debt ...............................   $  28,194.8   $1,815.7  $2,116.8   $  (446.0)    $       --    $31,681.3
Credit balances of
  factoring clients ................            --         --        --     2,270.0             --      2,270.0
Accrued liabilities and
  payables .........................     (24,180.6)   2,574.1  (1,400.3)   25,860.0             --      2,853.2
                                       -----------   --------  --------   ---------     ----------    ---------
  Total Liabilities ................       4,014.2    4,389.8     716.5    27,684.0             --     36,804.5
Preferred capital securities .......            --         --        --       257.2             --        257.2
Total Stockholders' Equity .........       4,870.7      559.7   1,124.4     3,186.6       (4,870.7)     4,870.7
                                       -----------   --------  --------   ---------     ----------    ---------
  Total Liabilities and
  Stockholders' Equity .............   $   8,884.9   $4,949.5  $1,840.9   $31,127.8     $ (4,870.7)   $41,932.4
                                       ===========   ========  ========   =========     ==========    =========




                                       93


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



                                                                 CIT
           CONSOLIDATING                     CIT      Capita   Holdings     Other
           BALANCE SHEETS                Group Inc. Corporation   LLC   Subsidiaries   Eliminations    Total
           --------------                ----------------------   ---   ------------   ------------    -----
           (successor)
                                                                                    
September 30, 2002
ASSETS
Net finance receivables ............    $    864.3   $2,504.8  $  893.5   $23,418.6      $      --    $27,681.2
Operating lease equipment, net .....            --      797.2     185.3     5,584.9             --      6,567.4
Finance receivables held
  for sale .........................            --      156.7      47.7       815.1             --      1,019.5
Cash and cash equivalents ..........       1,737.8      225.8     330.3       (19.5)            --      2,274.4
Other assets .......................       4,855.0      444.4     452.5     4,173.9       (4,757.8)     5,168.0
                                        ----------   --------  --------   ---------      ---------    ---------
  Total Assets .....................    $  7,457.1   $4,128.9  $1,909.3   $33,973.0      $(4,757.8)   $42,710.5
                                        ==========   ========  ========   =========      =========    =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Debt ...............................    $ 28,860.8   $1,858.0  $2,147.6   $  (410.4)     $      --    $32,456.0
Credit balances of factoring clients            --         --        --     2,513.8             --      2,513.8
Accrued liabilities and
  payables .........................     (26,161.5)   1,799.5  (1,348.1)   28,435.3             --      2,725.2
                                        ----------   --------  --------   ---------      ---------    ---------
  Total Liabilities ................       2,699.3    3,657.5     799.5    30,538.7             --     37,695.0
Preferred capital securities .......            --         --        --       257.7             --        257.7
Total Stockholders' Equity .........       4,757.8      471.4   1,109.8     3,176.6       (4,757.8)     4,757.8
                                        ----------   --------  --------   ---------      ---------    ---------
  Total Liabilities and
  Stockholders' Equity .............    $  7,457.1   $4,128.9  $1,909.3   $33,973.0      $(4,757.8)   $42,710.5
                                        ==========   ========  ========   =========      =========    =========



                                       94


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



                                                                     CIT
           CONSOLIDATING                     CIT       Capita      Holdings    Other
       STATEMENTS OF INCOME               Group Inc. Corporation     LLC    Subsidiaries Eliminations   Total
       --------------------               ---------- -----------   -------- ------------ ------------   -----
           (successor)
                                                                                    
Year Ended December 31, 2003
Finance income .........................   $  89.0     $ 785.3      $195.0    $2,660.2      $    --   $3,729.5
Interest expense .......................     (52.7)      303.8         6.6     1,061.6           --    1,319.3
                                           -------     -------      ------    --------      -------   --------
Net finance income .....................     141.7       481.5       188.4     1,598.6           --    2,410.2
Depreciation on operating lease
  equipment ............................        --       371.6        68.5       612.9           --    1,053.0
                                           -------     -------      ------    --------      -------   --------
Net finance margin .....................     141.7       109.9       119.9       985.7           --    1,357.2
Provision for credit losses ............      36.7        53.1        14.6       282.9           --      387.3
                                           -------     -------      ------    --------      -------   --------
Net finance margin, after provision for
  credit losses ........................     105.0        56.8       105.3       702.8           --      969.9
Equity in net income of subsidiaries ...     481.3          --          --          --       (481.3)        --
Other revenue ..........................      60.4       124.8        95.7       666.7           --      947.6
Loss on venture capital investments ....        --          --          --       (88.3)          --      (88.3)
                                           -------     -------      ------    --------      -------   --------
Operating margin .......................     646.7       181.6       201.0     1,281.2       (481.3)   1,829.2
Operating expenses .....................      57.4       168.9        90.3       625.7           --      942.3
Gain on redemption of debt .............        --          --          --        50.4           --       50.4
                                           -------     -------      ------    --------      -------   --------
Income (loss) before provision for
  income taxes .........................     589.3        12.7       110.7       705.9       (481.3)     937.3
Provision for income taxes .............      22.4         5.0        43.2       294.4           --      365.0
Dividends on preferred capital securities,
  after tax ............................        --          --          --        (5.4)          --       (5.4)
                                           -------     -------      ------    --------      -------   --------
Net income .............................   $ 566.9     $   7.7      $ 67.5    $  406.1      $(481.3)  $  566.9
                                           =======     =======      ======    ========      =======   ========






                                                                     CIT
                                             CIT        Capita      Holdings    Other
         (successor)                       Group Inc. Corporation     LLC    Subsidiaries Eliminations   Total
                                          ---------- -----------   -------- ------------ ------------   -----

                                                                                    
Three Months Ended December 31, 2002
Finance income .........................    $ 32.9     $ 224.5      $ 50.6     $ 663.7      $    --    $ 971.7
Interest expense .......................      23.9        73.9        (1.1)      243.3           --      340.0
                                           -------     -------      ------    --------      -------   --------
Net finance income .....................       9.0       150.6        51.7       420.4           --      631.7
Depreciation on operating lease equipment       --       105.0        21.6       150.7           --      277.3
                                           -------     -------      ------    --------      -------   --------
Net finance margin .....................       9.0        45.6        30.1       269.7           --      354.4
Provision for credit losses ............      18.8         8.9         2.4       103.3           --      133.4
                                           -------     -------      ------    --------      -------   --------
Net finance margin, after provision for
  credit losses ........................      (9.8)       36.7        27.7       166.4           --      221.0
Equity in net income of subsidiaries ...     144.1          --          --          --       (144.1)        --
Other revenue ..........................       4.1        46.1        23.5       189.8           --      263.5
Loss on venture capital investments ....        --          --          --        (6.4)          --       (6.4)
                                           -------     -------      ------    --------      -------   --------
Operating margin .......................     138.4        82.8        51.2       349.8       (144.1)     478.1
Operating expenses .....................      16.4        35.1        24.7       165.9           --      242.1
                                           -------     -------      ------    --------      -------   --------
Income before provision for income taxes     122.0        47.7        26.5       183.9       (144.1)     236.0
Provision (benefit) for income taxes ...     (19.3)       18.6        14.2        78.5           --       92.0
Dividends on preferred capital
  securities, after tax ................        --          --          --        (2.7)          --       (2.7)
                                           -------     -------      ------    --------      -------   --------
Net income .............................   $ 141.3     $  29.1      $ 12.3     $ 102.7      $(144.1)  $  141.3
                                           =======     =======      ======    ========      =======   ========



                                       95


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



                                                                     CIT
              CONSOLIDATING                  CIT        Capita     Holdings     Other
          STATEMENTS OF INCOME           Group Inc.   Corporation     LLC   Subsidiaries  Eliminations  Total
       --------------------------        ----------   -----------  -------- ------------  ------------  ------
               (successor)
                                                                                   
Year Ended September 30, 2002
Finance income ........................  $   200.4    $1,050.1      $233.2    $2,859.1    $    --    $ 4,342.8
Interest expense ......................      (80.3)      401.3         4.8     1,113.5         --      1,439.3
                                         ---------    --------      ------    --------    -------    ---------
Net finance income ....................      280.7       648.8       228.4     1,745.6         --      2,903.5
Depreciation on operating lease
  equipment ...........................         --       503.0       105.5       632.5         --      1,241.0
                                         ---------    --------      ------    --------    -------    ---------
Net finance margin ....................      280.7       145.8       122.9     1,113.1         --      1,662.5
Provision for credit losses ...........      308.3       197.9        24.9       257.2         --        788.3
                                         ---------    --------      ------    --------    -------    ---------
Net finance margin, after provision for
  credit losses .......................      (27.6)      (52.1)       98.0       855.9         --        874.2
Equity in net income of subsidiaries ..      130.9          --          --          --     (130.9)          --
Other revenue .........................       20.7       124.0        93.0       734.9         --        972.6
Loss on venture capital investments ...         --          --          --       (40.3)        --        (40.3)
                                         ---------    --------      ------    --------    -------    ---------
Operating margin ......................      124.0        71.9       191.0     1,550.5     (130.9)     1,806.5
Operating expenses ....................    6,588.0       188.7        65.9     1,278.1         --      8,120.7
                                         ---------    --------      ------    --------    -------    ---------
(Loss) income before provision for
  income taxes ........................   (6,464.0)     (116.8)      125.1       272.4     (130.9)    (6,314.2)
Provision (benefit) for income taxes ..      234.7       (45.6)       48.8       136.1         --        374.0
Dividends on preferred capital
  securities, after tax ...............         --          --          --       (10.5)        --        (10.5)
                                         ---------    --------      ------    --------    -------    ---------
Net (loss) income .....................  $(6,698.7)   $  (71.2)     $ 76.3    $  125.8    $(130.9)   $(6,698.7)
                                         =========    ========      ======    ========    =======    =========

               (combined)

Nine Months Ended September 30, 2001
Finance income ........................     $226.4      $998.0      $219.1    $2,531.8    $    --     $3,975.3
Interest expense ......................      141.3       305.4        23.1     1,150.0         --      1,619.8
                                            ------      ------      ------    --------    -------     --------
Net finance income ....................       85.1       692.6       196.0     1,381.8         --      2,355.5
Depreciation on operating lease
  equipment ...........................         --       460.5       103.4       472.8         --      1,036.7
                                            ------      ------      ------    --------    -------     --------
Net finance margin ....................       85.1       232.1        92.6       909.0         --      1,318.8
Provision for credit losses ...........       54.7        88.9        15.1       173.8         --        332.5
                                            ------      ------      ------    --------    -------     --------
Net finance margin, after provision for
  credit losses .......................       30.4       143.2        77.5       735.2         --        986.3
Equity in net income of subsidiaries ..      461.5          --          --          --     (461.5)          --
Other revenue .........................      (80.6)       67.6        68.1       511.5         --        566.6
Gain on venture capital investments ...         --          --          --         6.0         --          6.0
                                            ------      ------      ------    --------    -------     --------
Operating margin ......................      411.3       210.8       145.6     1,252.7     (461.5)     1,558.9
Operating expenses ....................      216.9       160.0        78.4       589.6         --      1,044.9
                                            ------      ------      ------    --------    -------     --------
Income before provision for
  income taxes ........................      194.4        50.8        67.2       663.1     (461.5)       514.0
Provision (benefit) for income taxes ..      (68.9)       19.3        25.5       266.3         --        242.2
Dividends on preferred capital
  securities, after tax ...............         --          --          --        (8.5)        --         (8.5)
                                            ------      ------      ------    --------    -------     --------
Net income ............................     $263.3      $ 31.5      $ 41.7    $  388.3    $(461.5)    $  263.3
                                            ======      ======      ======    ========    =======     ========



                                       96


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)




                                                                  CIT
              CONSOLIDATING                  CIT       Capita   Holdings     Other
         STATEMENT OF CASH FLOWS         Group Inc.  Corporation   LLC   Subsidiaries Eliminations   Total
         -----------------------         ----------  -----------   ---   -------------------------   -----
               (successor)
                                                                                
Year Ended December 31, 2003
Cash Flows From Operating Activities:
Net cash flows provided by
  operations ........................   $    224.4  $  629.7  $    386.6  $    946.4  $       --  $  2,187.1
                                        ----------  --------  ----------  ----------  ----------  ----------
Cash Flows From Investing Activities:
Net decrease in financing and
  leasing assets ....................       (982.4)   (338.2)     (416.4)   (2,172.7)         --    (3,909.7)
Decrease in inter-company loans
  and investments ...................     (1,534.9)       --          --          --     1,534.9          --
Other ...............................           --        --          --       (77.8)         --       (77.8)
                                        ----------  --------  ----------  ----------  ----------  ----------
Net cash flows (used for)
  investing activities ..............     (2,517.3)   (338.2)     (416.4)   (2,250.5)    1,534.9    (3,987.5)
                                        ----------  --------  ----------  ----------  ----------  ----------
Cash Flows From Financing Activities:
Net increase (decrease) in debt .....      2,461.9    (812.2)     (709.1)      902.3          --     1,842.9
Inter-company financing .............           --     700.2       672.7       162.0    (1,534.9)         --
Cash dividends paid .................           --        --          --      (101.8)         --      (101.8)
Other ...............................           --        --          --        (3.6)         --        (3.6)
                                        ----------  --------  ----------  ----------  ----------  ----------
Net cash flows provided by
  (used for) financing activities ...      2,461.9    (112.0)      (36.4)      958.9    (1,534.9)    1,737.5
                                        ----------  --------  ----------  ----------  ----------  ----------
Net (decrease) increase in cash
and cash equivalents ................        169.0     179.5       (66.2)     (345.2)         --       (62.9)
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 .....................   $  1,479.9  $  410.6  $    227.5  $   (144.3) $       --  $  1,973.7
                                        ==========  ========  ==========  ==========  ==========  ==========




                                       97


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



                                                                         CIT
              CONSOLIDATING                   CIT         Capita       Holdings     Other
         STATEMENT OF CASH FLOWS           Group Inc.   Corporation      LLC      Subsidiaries    Eliminations     Total
     ------------------------------        ----------   -----------    --------   ------------    ------------   ----------
               (successor)
                                                                                               
Three Months Ended December 31, 2002
Cash Flows From Operating Activities:
Net cash flows (used for)
  provided by operations ...............   $ (2,191.1)   $    115.1    $   51.5    $  2,636.9      $       --    $    612.4
                                           ----------    ----------    --------    ----------      ----------    ----------
Cash Flows From Investing Activities:
Net increase (decrease) in financing
  and leasing assets ...................        212.8      (1,062.8)      (43.6)        882.8              --         (10.8)
Increase in intercompany loans
  and investments ......................      2,217.4            --          --            --        (2,217.4)           --
Other ..................................           --            --          --          (4.3)             --          (4.3)
                                           ----------    ----------    --------    ----------      ----------    ----------
Net cash flows (used for) provided by
  investing activities .................      2,430.2      (1,062.8)      (43.6)        878.5        (2,217.4)        (15.1)
                                           ----------    ----------    --------    ----------      ----------    ----------
Cash Flows From Financing Activities:
Net decrease in debt ...................       (666.0)        (42.3)      (30.8)        (70.6)             --        (809.7)
Intercompany financing .................           --         995.3       (13.7)     (3,199.0)        2,217.4            --
Cash dividends paid ....................           --            --          --         (25.4)             --         (25.4)
                                           ----------    ----------    --------    ----------      ----------    ----------
Net cash flows (used for) provided by
  financing activities .................       (666.0)        953.0       (44.5)     (3,295.0)        2,217.4        (835.1)
                                           ----------    ----------    --------    ----------      ----------    ----------
Net (decrease) increase in cash and
  cash equivalents .....................       (426.9)          5.3       (36.6)        220.4              --        (237.8)
Cash and cash equivalents,
  beginning of period ..................      1,737.8         225.8       330.3         (19.5)             --       2,274.4
                                           ----------    ----------    --------    ----------      ----------    ----------
Cash and cash equivalents, end of period   $  1,310.9    $    231.1    $  293.7    $    200.9      $       --    $  2,036.6
                                           ==========    ==========    ========    ==========      ==========    ==========




                                       98


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



                                       CIT
              CONSOLIDATING                     CIT        Capita    Holdings    Other
         STATEMENT OF CASH FLOWS             Group Inc. Corporation    LLC   Subsidiaries Eliminations    Total
         -----------------------             ----------------------    ---   ------------ ------------    -----
               (successor)
                                                                                      
Year Ended September 30, 2002
Cash Flows From Operating Activities:
Net cash flows provided by
   (used for) operations ...............   $    334.7  $   (298.1) $ (688.2) $  2,047.5     $     --    $  1,395.9
                                           ----------  ----------  --------  ----------     --------    ----------
Cash Flows From Investing Activities:
Net increase in financing
   and leasing assets ..................        662.0       211.9     721.3       779.0           --       2,374.2
Increase in intercompany loans and
   investments .........................      1,008.3          --        --          --     (1,008.3)           --
Other ..................................           --          --        --       (52.5)          --         (52.5)
                                           ----------  ----------  --------  ----------     --------    ----------
Net cash flows provided by
   investing activities ................      1,670.3       211.9     721.3       726.5     (1,008.3)      2,321.7
                                           ----------  ----------  --------  ----------     --------    ----------
Cash Flows From Financing Activities:
Net (decrease) increase in debt ........     (1,885.3)   (1,021.2)    175.3      (698.1)          --      (3,429.3)
Intercompany financing .................           --     1,226.2     117.7    (2,352.2)     1,008.3            --
Capital contributions from
   former parent .......................        923.5          --        --          --           --         923.5
Cash dividends paid ....................           --          --        --          --           --            --
Proceeds from issuance of
   common stock ........................        254.6          --        --          --           --         254.6
                                           ----------  ----------  --------  ----------     --------    ----------
Net cash flows (used for) provided by
   financing activities ................       (707.2)      205.0     293.0    (3,050.3)     1,008.3      (2,251.2)
                                           ----------  ----------  --------  ----------     --------    ----------
Net increase (decrease) in cash and
   cash equivalents ....................      1,297.8       118.8     326.1      (276.3)          --       1,466.4
Cash and cash equivalents,
   beginning of period .................        440.0       107.0       4.2       256.8           --         808.0
                                           ----------  ----------  --------  ----------     --------    ----------
Cash and cash equivalents, end of period   $  1,737.8  $    225.8  $  330.3  $    (19.5)    $     --    $  2,274.4
                                           ==========  ==========  ========  ==========     ========    ==========






                                       99


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)





                                                                       CIT
              CONSOLIDATING                      CIT       Capita    Holdings     Other
         STATEMENT OF CASH FLOWS             Group Inc. Corporation    LLC   Subsidiaries  Eliminations     Total
         -----------------------             ----------------------    ---   ------------  ------------     -----
               (combined)
                                                                                         
Nine Months Ended September 30, 2001
Cash Flows From Operating Activities:
Net cash flows provided by (used for)
   operations ..........................   $     17.4  $    275.1  $  128.4     $  608.4     $     --      $  1,029.3
                                           ----------  ----------  --------     --------     ----------    ----------
Cash Flows From Investing Activities:
Net increase (decrease) in financing and
   leasing assets ......................        335.0       440.4     (36.7)       275.5           --         1,014.2
Decrease in intercompany loans and
   investments .........................     (2,822.6)       --        --           --          2,822.6          --
Other ..................................         --          --        --          (21.2)          --           (21.2)
                                           ----------  ----------  --------     --------     ----------    ----------
Net cash flows provided by (used for)
   investing activities ................     (2,487.6)      440.4     (36.7)       254.3        2,822.6         993.0
                                           ----------  ----------  --------     --------     ----------    ----------
Cash Flows From Financing Activities:
Net (decrease) increase in debt ........      1,114.7    (2,872.5)   (247.4)      (741.4)          --        (2,746.6)
Intercompany financing .................         --       2,134.7     240.6        447.3       (2,822.6)         --
Capital contributions from
   former parent .......................        675.0        --        --           70.5           --           745.5
Cash dividends paid ....................         --          --        --          (52.9)          --           (52.9)
Other ..................................         --          --        --           27.6           --            27.6
                                           ----------  ----------  --------     --------     ----------    ----------
Net cash flows (used for) provided by
   financing activities ................      1,789.7      (737.8)     (6.8)      (248.9)      (2,822.6)     (2,026.4)
                                           ----------  ----------  --------     --------     ----------    ----------
Net (decrease) increase in cash and
   cash equivalents ....................       (680.5)      (22.3)     84.9        613.8           --            (4.1)
Cash and cash equivalents, beginning
   of period ...........................      1,120.5       129.3     (80.7)      (357.0)          --           812.1
                                           ----------  ----------  --------     --------     ----------    ----------
Cash and cash equivalents, end of period   $    440.0  $    107.0  $    4.2     $  256.8     $     --      $    808.0
                                           ==========  ==========  ========     ========     ==========    ==========



                                       100


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      Note 28 -- Selected Quarterly Financial Data (Unaudited)

Summarized  quarterly financial data are presented below ($ in millions,  except
per share data).



                                                             Year Ended December 31, 2003
                                                --------------------------------------------------
                                                  First        Second         Third       Fourth
                                                 Quarter       Quarter       Quarter      Quarter
                                                ----------  ------------  ------------   ---------
                                                                              
Net finance margin .........................     $313.7        $339.2       $342.3        $362.0
Provision for credit losses ................      103.0         100.6         82.9         100.8
Other revenue ..............................      239.9         229.7        232.0         246.0
Loss on venture capital investments ........       (4.4)        (12.1)       (11.3)        (60.5)
Salaries and general operating expenses ....      233.6         227.2        237.5         244.0
Gain on debt call ..........................         --            --           --          50.4
Provision for income taxes .................       82.9          89.3         94.6          98.2
Dividends on preferred capital
  securities, after tax ....................        2.7           2.7           --            --

Minority interest after tax ................         --           0.1          0.2           (0.3)
Net income (loss) ..........................     $127.0        $136.9       $147.8        $155.2
Net income (loss) per diluted share (1) ....     $ 0.60        $ 0.65        $0.69        $ 0.72






                                                                           Year Ended September 30, 2002
                                                                    ------------------------------------------
                                                     Three Months
                                                         Ended
                                                     December 31,    First     Second       Third      Fourth
                                                         2002       Quarter    Quarter     Quarter     Quarter
                                                     ------------   -------    -------     -------    --------
                                                                                         
Net finance margin ................................     $354.4      $487.5     $ 448.2      $ 356.0     $370.8
Provision for credit losses .......................      133.4       112.9       195.0        357.7      122.7
Other revenue .....................................      263.5       242.5       237.4        247.5      245.2
(Loss) gain on venture capital investments ........       (6.4)        2.6        (5.3)        (1.4)     (36.2)
Salaries and general operating expenses ...........      242.1       238.7       234.2        237.9      235.6
Interest expense -- TCH ...........................         --        76.3       305.0        281.3         --
Goodwill impairment ...............................         --          --     4,512.7      1,999.0         --
Provision for income taxes ........................       92.0       118.2        50.4        121.3       84.1
Minority interest in subsidiary trust holding
   solely debentures of the Company, after tax ....        2.7         2.4         2.7          2.7        2.7
Net income (loss) .................................     $141.3      $184.1   $(4,619.7)   $(2,397.8)    $134.7
Net income (loss) per diluted share (1) ...........     $ 0.67      $ 0.87    $ (21.84)   $  (11.33)    $ 0.64



                                       101


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



                                                                     Nine Months Ended September 30, 2001
                                                                   ----------------------------------------
                                                                    First          Second            Third
                                                                   Quarter        Quarter(2)        Quarter
                                                                   -------        ----------        -------
                                                                (predecessor)     (combined)      (successor)
                                                                                           
Net finance margin ............................................     $404.7          $429.4          $484.7
Provision for credit losses ...................................       68.3           166.7            97.5
Other revenue .................................................      206.7           120.0           239.9
Gain (loss) on venture capital investments ....................        4.9             1.8            (0.7)
Salaries and general operating expenses .......................      263.5           267.9           263.1
Goodwill amortization .........................................       22.5            29.7            45.4
Interest expense -- TCH .......................................         --            25.0            73.8
Acquisition-related costs .....................................         --            54.0              --
Provision for income taxes ....................................       99.0            30.5           112.7
Minority interest in subsidiary trust holding solely
   debentures of the Company, after tax .......................        2.9             2.8             2.8
Net income (loss) .............................................     $160.1          $(25.4)         $128.6
Net income (loss) per diluted share(1) ........................     $ 0.75          $(0.12)         $ 0.61

--------------------------------------------------------------------------------
(1)  Per share calculations assume that common shares outstanding as a result of
     the  July  2002  IPO  (211.7  million)  were  outstanding  for all  periods
     preceding the quarter ended September 30, 2002.

(2)  The second quarter of 2001 includes predecessor  operations through June 1,
     2001 and successor operations for June 2 through June 30, 2001.


                                       102


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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

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

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

Item 9A. Controls and Procedures.

      As of December 31, 2003 the Company  evaluated  the  effectiveness  of the
design and operation of its disclosure  controls and  procedures.  The Company's
disclosure  controls and procedures are designed to ensure that the  information
that the  Company  must  disclose  in its  reports  filed  under the  Securities
Exchange Act is communicated and processed in a timely manner.  Albert R. Gamper
Jr. Chairman 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.

      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 classified  our tax reporting as a "reportable  condition",  as
defined by standards  established by the American  Institute of Certified Public
Accountants.  We have made substantial  progress in rebuilding our tax reporting
and compliance  functions,  including hiring and training personnel,  rebuilding
tax reporting systems,  preparing amendments to prior period U.S. Federal income
tax returns, and implementing  processes and controls with respect to income tax
reporting and compliance. We have built processes to prepare a tax basis balance
sheet to complete  the  analysis of deferred  tax assets and  liabilities  as of
December 31, 2003. Further work continues in the areas of quality control, proof
and  reconciliation  and we anticipate  completing  this  initiative  during the
second or third  quarter  of 2004.  Future  income tax  return  filings  and the
completion of the aforementioned analysis of deferred tax assets and liabilities
could result in reclassifications to deferred tax assets and liabilities.


                                       103


                                    PART III

Item 10. Directors and Executive Officers of the Registrant.

      The  information  called for by Item 10 is  incorporated by reference from
the  information  under the caption  "Election of  Directors"  and  "Election of
Directors --  Executive  Officers"  in our Proxy  Statement  for our 2004 annual
meeting of stockholders.

Item 11. Executive Compensation.

      The  information  called for by Item 11 is  incorporated by reference from
the  information  under the caption  "Compensation  of Directors  and  Executive
Officers" in our Proxy Statement for our 2004 annual meeting of stockholders.

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

      The  information  called for by Item 12 is  incorporated by reference from
the  information  under  the  caption  "Principal  Shareholders"  in  our  Proxy
Statement for our 2004 annual meeting of stockholders.

Item 13. Certain Relationships and Related Transactions.

      The  information  called for by Item 13 is  incorporated by reference from
the  information   under  the  caption   "Certain   Relationships   and  Related
Transactions"   in  our  Proxy   Statement  for  our  2004  annual   meeting  of
stockholders.

Item 14. Principal Accountant Fees and Services.

      The  information  called for by Item 14 is  incorporated by reference from
the information  under the caption  "Appointment of Independent  Accountants" in
our Proxy Statement for our 2004 annual meeting of stockholders.


                                      104


                                     PART IV

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

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

            1.    The following financial statements of CIT and Subsidiaries:

                  Reports of Independent Accountants

                  Consolidated  Balance  Sheets-December  31, 2003, December 31,
                  2002, and September 30, 2001.

                  Consolidated  Statements of Income for the year ended December
                  31, 2003,  for the three months ended  December 31, 2002,  for
                  the fiscal year ended  September 30, 2002, for the period from
                  June 2 through  September 30, 2001, and for the period January
                  1 through June 1, 2001.

                  Consolidated  Statements of Shareholders'  Equity for the year
                  ended  December 31, 2003,  for the three months ended December
                  31, 2002,  for the fiscal year ended  September 30, 2002,  for
                  the period from June 2 through September 30, 2001, and for the
                  period January 1 through June 1, 2001.

                  Consolidated  Statements  of Cash  Flows  for the  year  ended
                  December  31, 2003,  for the three  months ended  December 31,
                  2002,  for the fiscal year ended  September 30, 2002,  for the
                  period from June 2 through  September  30,  2001,  and for the
                  period January 1 through June 1, 2001.

                  Notes to Consolidated Financial Statements

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

      (b)   Current  Report on Form 8-K,  dated October 22, 2003,  reporting (i)
            that CIT's Board of Directors declared a dividend of $.12 per share,
            (ii) that CIT currently  anticipated calling certain debt securities
            for  redemption  in December 2003 and January 2004 pursuant to their
            terms,  and (iii) CIT's financial  results as of and for the quarter
            and nine month periods ended September 30, 2003.

            Current Report on Form 8-K, dated October 23, 2003,  attaching as an
            exhibit certain historical quarterly financial information.

            Current Report on Form 8-K, dated December 22, 2003,  reporting that
            CIT  and  the  applicable   trustee   intended  to  execute  certain
            documentation  to correct  the  interest  payment  schedule on CIT's
            Floating Rate Senior Notes maturing  September 22, 2006,  which were
            issued  on  September  23,  2003,  CUSIP  Number  125581AF5,  in the
            aggregate principal amount of $200,000,000.

      (c) 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   Form of  Certificate of Common Stock of CIT  (incorporated  by
                  reference   to  Exhibit  4.1  to   Amendment   No.  3  to  the
                  Registration Statement on Form S-3 filed June 26, 2002).

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

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


                                      105


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

            4.5   Third  Supplemental  Indenture  dated July 2, 2002 between CIT
                  Group Inc. and The Bank of New York, as Trustee  (Incorporated
                  by  reference  to Exhibit 4.1 to Form 8-K filed by CIT on July
                  10, 2002).

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

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

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

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

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

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

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

            4.13  Second Supplemental Indenture dated as of February 14, 2002 to
                  an Indenture  dated as of September 24, 1998, as  supplemented
                  by the First Supplemental  Indenture dated as of June 1, 2001,
                  by and between CIT Group Inc.  (formerly known as Tyco Capital
                  Corporation and Tyco  Acquisition  Corp. XX (NV) and successor
                  to The CIT Group,  Inc.) and The Bank


                                      106


                  of New York, as trustee,  for the issuance of unsecured senior
                  subordinated  debt  securities  (Incorporated  by reference to
                  Exhibit 4.3 to Form 8-K filed by CIT on February 22, 2002).

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

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

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

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

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

            4.19  Indenture  dated as of August 26,  2002 by and among CIT Group
                  Inc.,  J.P.  Morgan Trust Company,  National  Association  (as
                  successor  to 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).

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

            4.21  5-Year Credit Agreement, dated as of March 28, 2000, among CIT
                  Group Inc. (formerly known as Tyco Capital Corporation and The
                  CIT  Group,  Inc.),  the  banks  party  thereto,  J.P.  Morgan
                  Securities Inc.  (formerly known as Chase Securities Inc.), as
                  Arranger,  Barclays Bank PLC, Bank of America, N.A., Citibank,
                  N.A. and The Dai-Ichi  Kangyo Bank,  Limited,  as  Syndication
                  Agents,  and JP Morgan Chase Bank (formerly known as The Chase
                  Manhattan  Bank),  as  Administrative  Agent  ("5 Year  Credit
                  Agreement") (Incorporated by reference to Exhibit 10.6 to Form
                  10-Q filed by CIT on February 14, 2002).


                                      107


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

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

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

            4.25  Assumption  Agreement  dated  as of July 2,  2002  made by CIT
                  Group Inc.  (Incorporated  by reference to Exhibit 4.1 to Form
                  8-K filed by CIT on July 10, 2002).

            4.26  364-Day Credit Agreement,  dated as of October 15, 2002, among
                  CIT Group  Inc.,  the banks and other  financial  institutions
                  from time to time parties  thereto,  J.P.  Morgan  Securities,
                  Inc.,  as sole lead arranger and  bookrunner,  JP Morgan Chase
                  Bank, as administrative  agent, and Barclays Bank PLC, Bank of
                  America,    N.A.   and   Citibank,   as   syndication   agents
                  (Incorporated  by  reference  to  Form  10-Q  filed  by CIT on
                  November 7, 2002).

            4.27  5-Year  Credit  Agreement,  dated as of October 10, 2003 among
                  J.P.  Morgan  Securities  Inc.,  a  joint  lead  arranger  and
                  bookrunner,  Citigroup  Global  Markets  Inc.,  as joint  lead
                  arranger   and   bookrunner,   JP   Morgan   Chase   Bank   as
                  administrative  agent,  Bank of America,  N.A. as  syndication
                  agent,   and  Barclays  Bank  PLC,  as   documentation   agent
                  (Incorporated  by  reference to Exhibit 4.2 to Form 10-Q filed
                  by CIT on November 7, 2003).

            10.1  Agreement  dated as of June 1, 2001 between CIT Holdings  (NV)
                  Inc., a wholly-owned  subsidiary of Tyco  International  Ltd.,
                  and CIT (formerly  known as Tyco Capital  Corporation and Tyco
                  Acquisition  Corp.  XX (NV) and  successor  to The CIT  Group,
                  Inc.), a Nevada corporation,  regarding  transactions  between
                  CIT  Holdings  and CIT  (incorporated  by reference to Exhibit
                  10.1 to Amendment No. 3 to the Registration  Statement on Form
                  S-3 filed June 7, 2002).

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

            10.3  Form  of  Financial  Services  Cooperation  Agreement  by  and
                  between  Tyco  International  Ltd.  and CIT  (incorporated  by
                  reference  to  Exhibit  [10.3]  to  Amendment  No.  3  to  the
                  Registration Statement on Form S-3 filed June 12, 2002).

            10.4  Employment  Agreement for Albert R. Gamper,  Jr.,  dated as of
                  January 1, 2003  (incorporated by reference to Form 10-K filed
                  by CIT on February 26, 2003).  10.5  Employment  Agreement for
                  Joseph M. Leone dated as of January 1, 2003  (incorporated  by
                  reference to Form 10-K filed by CIT on February 26, 2003).

            10.6  Employment Agreement for Thomas B. Hallman dated as of January
                  1, 2003  (incorporated  by reference to Form 10-K filed by CIT
                  on February 26, 2003).

            10.7  Employment  Agreement  for Lawrence A.  Marsiello  dated as of
                  January 1, 2003  (incorporated by reference to Form 10-K filed
                  by CIT on February 26, 2003).

            10.8  Employment  Agreement for Nikita Zdanow dated as of January 1,
                  2003  (incorporated  by reference to Form 10-K filed by CIT on
                  February 26, 2003).

            10.9  Employment  Agreement for Jeffrey M. Peek dated as of July 22,
                  2003  (incorporated  by reference to Form 10-Q filed by CIT on
                  November 7, 2003).

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

            10.11 Long-Term Equity  Compensation Plan (incorporated by reference
                  to Form DEF-14A filed April 23, 2003).

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


                                      108


            10.13 Form of Tax Agreement by and between Tyco  International  Ltd.
                  and CIT  (incorporated  by  reference  to  Exhibit  [10.27] to
                  Amendment  No.  3 to the  Registration  Statement  on Form S-3
                  filed June 26, 2002).

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

            21.1  Subsidiaries of CIT.

            23.1  Consent of PricewaterhouseCoopers LLP.

            24.1  Powers of Attorney.

            31.1  Certification  of  Albert R.  Gamper,  Jr.  pursuant  to Rules
                  13a-15(e) and 15d-15(f) of the Securities Exchange Commission,
                  as  promulgated  pursuant to Section  13(a) of the  Securities
                  Exchange  Act and  Section  302 of the  Sarbanes-Oxley  Act of
                  2002.

            31.2  Certification  of Joseph M. Leone pursuant to Rules  13a-15(e)
                  and  15d-15(f)  of  the  Securities  Exchange  Commission,  as
                  promulgated  pursuant  to  Section  13(a)  of  the  Securities
                  Exchange  Act and  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.


                                      109


                                   SIGNATURES

      Pursuant  to the  requirements  of Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                   CIT GROUP INC.

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

March 9, 2004

      Pursuant to the requirements of the Securities  Exchange Act of 1934, this
report has been signed  below by the  following  persons on March 9, 2004 in the
capacities indicated below.

                         Name                                            Date
                        ------                                           ----

               /s/ ALBERT R. GAMPER, JR.
----------------------------------------------------
                 Albert R. Gamper Jr.
          Chairman and Chief Executive Officer
                     and Director
             (principal executive officer)

----------------------------------------------------
                    Gary C. Butler
                       Director

                 WILLIAM A. FARLINGER*
----------------------------------------------------
                 William A. Farlinger
                       Director

                   WILLIAM FREEMAN*
----------------------------------------------------
                    William Freeman
                       Director

                    THOMAS H. KEAN*
----------------------------------------------------
                    Thomas H. Kean
                       Director

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

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

                    JEFFREY M. PEEK
----------------------------------------------------
                    Jeffrey M. Peek
                       Director

                      JOHN RYAN*
----------------------------------------------------
                       John Ryan
                       Director

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

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

                  /S/ JOSEPH M. LEONE
----------------------------------------------------
                    Joseph M. Leone
                   Vice Chairman and
                Chief Financial Officer
            (principal accounting officer)


*By:             /s/ WILLIAM J. TAYLOR
----------------------------------------------------
                   William J. Taylor
        Executive Vice President and Controller
            (principal accounting officer)

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

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


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Where You Can Find More Information

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

      The Annual  Report on Form 10-K,  including  the  exhibits  and  schedules
thereto,  and other SEC filings,  are available  free of charge on the Company's
Internet site at http://www.cit.com as soon as reasonably practicable after such
material  is  electronically  filed  with  the  SEC.  Copies  of  our  Corporate
Governance  Guidelines,  the Charters of the Audit  Committee,  the Compensation
Committee, and the Nominating and Governance Committee, and our Code of Business
Conduct   are   available,   free   of   charge,   on  our   internet   site  at
http://www.cit.com,  and printed  copies are  available by  contacting  Investor
Relations, 1 CIT Drive, Livingston, NJ 07439 or by telephone at (973) 740-5000.


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