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

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

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

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

                  For the quarterly period ended March 31, 2004

                                       OR

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

                        Commission File Number: 001-31369

                                   ----------

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

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

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

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

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

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

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

      As of April 30, 2004, there were 211,725,186 shares of the Registrant's
common stock outstanding.

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                         CIT GROUP INC. AND SUBSIDIARIES
                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

                         Part I--Financial Information:

Item 1.  Consolidated Financial Statements ..............................     1
         Consolidated Balance Sheets (Unaudited).........................     1
         Consolidated Statements of Income (Unaudited)...................     2
         Consolidated Statements of Stockholders' Equity (Unaudited).....     3
         Consolidated Statements of Cash Flows (Unaudited)...............     4
         Notes to Consolidated Financial Statements......................   5-18
Item 2.  Management's Discussion and Analysis of Financial Condition
           and Results of Operations and Quantitative and Qualitative
           Disclosure about Market Risk..................................  19-46
Item 4.  Controls and Procedures.........................................    47

                           Part II--Other Information:

Item 1.  Legal Proceedings...............................................    48
Item 2.  Common Stock Repurchase Activity................................    48
Item 6.  Exhibits and Reports on Form 8-K................................    49
         Signatures......................................................    50


                                       i


                          PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

                        CIT GROUP INC. AND SUBSIDIARIES

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



                                                                                   March 31,        December 31,
                                                                                     2004              2003
                                                                                   ---------        ------------

                                     ASSETS

Financing and leasing assets:
                                                                                               
   Finance receivables........................................................     $32,187.4         $31,300.2
   Reserve for credit losses..................................................        (636.7)           (643.7)
                                                                                   ---------         ---------
   Net finance receivables....................................................      31,550.7          30,656.5
   Operating lease equipment, net.............................................       7,576.2           7,615.5
   Finance receivables held for sale..........................................       1,006.2             918.3
Cash and cash equivalents.....................................................       1,356.5           1,973.7
Retained interest in securitizations..........................................       1,364.6           1,380.8
Goodwill and intangible assets................................................         485.5             487.7
Other assets..................................................................       2,912.7           3,310.3
                                                                                   ---------         ---------
Total Assets..................................................................     $46,252.4         $46,342.8
                                                                                   =========         =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Debt:
   Commercial paper...........................................................     $ 4,820.2         $ 4,173.9
   Variable-rate senior notes.................................................       9,170.7           9,408.4
   Fixed-rate senior notes....................................................      19,829.8          19,830.8
   Preferred capital securities...............................................         255.1             255.5
                                                                                   ---------         ---------
Total debt....................................................................      34,075.8          33,668.6
Credit balances of factoring clients..........................................       3,619.4           3,894.6
Accrued liabilities and payables..............................................       3,025.9           3,346.4
                                                                                   ---------         ---------
   Total Liabilities..........................................................      40,721.1          40,909.6
                                                                                   ---------         ---------
Commitments and Contingencies (Note 10)
Minority interest.............................................................          38.6              39.0
Stockholders' Equity:
   Preferred stock: $0.01 par value, 100,000,000 authorized, none issued......            --                --
   Common stock: $0.01 par value, 600,000,000 authorized,
     211,849,987 issued, 211,832,465 outstanding..............................           2.1               2.1
   Paid-in capital, net of deferred compensation of $52.8 and $30.6...........      10,668.2          10,677.0
   Accumulated deficit........................................................      (4,980.5)         (5,141.8)
   Accumulated other comprehensive loss.......................................        (196.4)           (141.6)
   Less: Treasury stock, 17,522 and 43,529 shares, at cost....................          (0.7)             (1.5)
                                                                                   ---------         ---------
   Total Stockholders' Equity.................................................       5,492.7           5,394.2
                                                                                   ---------         ---------
   Total Liabilities and Stockholders' Equity.................................     $46,252.4         $46,342.8
                                                                                   =========         =========


                 See Notes to Consolidated Financial Statements.


                                       1


                         CIT GROUP INC. AND SUBSIDIARIES

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



                                                                                 For the Quarters Ended March 31,
                                                                                 --------------------------------
                                                                                      2004              2003
                                                                                    --------          --------
                                                                                                
Finance income................................................................      $  902.9          $  939.2
Interest expense..............................................................         298.0             354.7
                                                                                    --------          --------
Net finance income............................................................         604.9             584.5
Depreciation on operating lease equipment.....................................         234.5             278.8
                                                                                    --------          --------
Net finance margin............................................................         370.4             305.7
Provision for credit losses...................................................          85.6             103.0
                                                                                    --------          --------
Net finance margin after provision for credit losses..........................         284.8             202.7
Other revenue.................................................................         230.4             239.9
Gain (loss) on venture capital investments....................................           0.7              (4.4)
                                                                                    --------          --------
Operating margin..............................................................         515.9             438.2
Salaries and general operating expenses.......................................         247.3             225.6
Gain on redemption of debt....................................................          41.8                --
                                                                                    --------          --------
Income before provision for income taxes......................................         310.4             212.6
Provision for income taxes....................................................        (121.1)            (82.9)
Dividends on preferred capital securities, after tax..........................            --              (2.7)
                                                                                    --------          --------
Net income....................................................................      $  189.3          $  127.0
                                                                                    ========          ========
Earnings per share
Basic earnings per share......................................................      $   0.89          $   0.60
                                                                                    ========          ========
Diluted earnings per share....................................................      $   0.88          $   0.60
                                                                                    ========          ========
Number of shares - basic (thousands)..........................................       211,839           211,573
                                                                                    ========          ========
Number of shares - diluted (thousands)........................................       215,809           211,899
                                                                                    ========          ========
Dividends per common share....................................................      $   0.13          $   0.12
                                                                                    ========          ========


                 See Notes to Consolidated Financial Statements.


                                       2


                         CIT GROUP INC. AND SUBSIDIARIES

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



                                                                            Accumulated         Total             Total
                                      Common      Paid-in      Treasury     (Deficit)/      Comprehensive     Stockholders'
                                       Stock      Capital        Stock       Earnings       (Loss)/Income        Equity
                                      ------     ---------     --------     -----------     -------------     -------------
                                                                                               
Balance December 31, 2003.........     $ 2.1     $10,677.0      $ (1.5)      $(5,141.8)         $(141.6)         $5,394.2
Net income........................        --            --          --           189.3               --             189.3
Foreign currency translation
  adjustments.....................        --            --          --              --              1.4               1.4
Change in fair values of
  derivatives qualifying as
  cash flow hedges................        --            --          --              --            (61.6)            (61.6)
Unrealized gains on equity
  and securitization
  investments, net................        --            --          --              --              5.4               5.4
                                                                                                                 --------
Total comprehensive income........        --            --          --              --               --             134.5
                                                                                                                 --------
Cash dividends....................        --            --          --           (28.0)              --             (28.0)
Restricted common
  stock grants....................        --           6.6          --              --               --               6.6
Treasury stock purchased,
  at cost.........................        --            --       (37.1)             --               --             (37.1)
Exercise of stock
  option awards...................        --         (15.4)      37.9              --               --              22.5
                                       -----     ---------      ------       ---------          -------          --------
Balance March 31, 2004............     $ 2.1     $10,668.2      $ (0.7)      $(4,980.5)         $(196.4)         $5,492.7
                                       =====     =========      ======       =========          =======          ========


                 See Notes to Consolidated Financial Statements.


                                       3


                         CIT GROUP INC. AND SUBSIDIARIES

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



                                                                                        For the Quarters
                                                                                         Ended March 31,
                                                                                   --------------------------
                                                                                      2004            2003
                                                                                   ----------      ----------
                                                                                              
Cash Flows From Operations
Net income....................................................................     $    189.3       $   127.0
Adjustments to reconcile net income to net cash flows from operations:
   Depreciation and amortization..............................................          248.2           288.8
   Provision for credit losses................................................           85.6           103.0
   Provision for deferred federal income taxes................................           95.4            74.7
   Gains on equipment, receivable and investment sales........................          (62.5)          (60.7)
   Gain on debt redemption....................................................          (41.8)             --
   Decrease (increase) in other assets........................................          303.1          (116.7)
   (Decrease) increase in accrued liabilities and payables....................         (346.6)           61.1
   Other......................................................................          (26.0)           21.5
                                                                                   ----------      ----------
Net cash flows provided by operations.........................................          444.7           498.7
                                                                                   ----------      ----------
Cash Flows From Investing Activities
Loans extended................................................................      (12,699.8)      (12,341.1)
Collections on loans..........................................................       10,829.8        10,233.4
Proceeds from asset and receivable sales......................................        1,731.9         1,699.2
Purchases of finance receivable portfolios....................................         (595.1)         (360.8)
Net decrease in short-term factoring receivables..............................         (400.8)         (182.7)
Purchases of assets to be leased..............................................         (268.7)         (333.4)
Other   ......................................................................           (1.1)          (41.4)
                                                                                   ----------      ----------
Net cash flows (used for) investing activities................................       (1,403.8)       (1,326.8)
                                                                                   ----------      ----------
Cash Flows From Financing Activities
Repayments of variable and fixed-rate notes...................................       (3,011.5)       (2,997.8)
Proceeds from the issuance of variable and fixed-rate notes...................        2,804.2         4,352.4
Net decrease in commercial paper..............................................          646.3          (484.1)
Net repayments of non-recourse leveraged lease debt...........................          (61.1)          (28.2)
Cash dividends paid...........................................................          (28.0)          (25.4)
Other   ......................................................................           (8.0)             --
                                                                                   ----------      ----------
Net cash flows provided by financing activities...............................          341.9           816.9
                                                                                   ----------      ----------
Net (decrease) in cash and cash equivalents...................................         (617.2)          (11.2)
Cash and cash equivalents, beginning of period................................        1,973.7         2,036.6
                                                                                   ----------      ----------
Cash and cash equivalents, end of period......................................     $  1,356.5      $  2,025.4
                                                                                   ==========      ==========
Supplementary Cash Flow Disclosure
Interest paid.................................................................     $    287.5      $    331.2
Federal, foreign, state and local income taxes paid, net......................     $     24.7      $     18.9


                 See Notes to Consolidated Financial Statements.


                                       4


                         CIT GROUP INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1 -- Summary of Significant Accounting Policies

      CIT Group Inc., a Delaware corporation ("we," "CIT" or the "Company"),  is
a global  commercial and consumer  finance company that was founded in 1908. CIT
provides  financing  and leasing  capital  for  companies  in a wide  variety of
industries,  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.

      These  financial  statements,  which have been prepared in accordance with
the  instructions  to Form 10-Q, do not include all of the  information and note
disclosures  required by accounting  principles generally accepted in the United
States  ("GAAP") and should be read in  conjunction  with the  Company's  Annual
Report on Form 10-K for the year ended December 31, 2003.  Financial  statements
in this  Form  10-Q  have  not  been  examined  by  independent  accountants  in
accordance with generally  accepted  auditing  standards,  but in the opinion of
management  include  all  adjustments,   consisting  only  of  normal  recurring
adjustments,  necessary  for a fair  statement of CIT's  financial  position and
results of operations.  Certain prior period amounts have been  reclassified  to
conform to the current presentation.

      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.

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):



                                                                                  For the Quarters Ended March 31,
                                                                                  --------------------------------
                                                                                        2004             2003
                                                                                       ------           ------

                                                                                                  
Net income as reported..........................................................       $189.3           $127.0
Stock-based compensation expense-- fair value method, after tax.................          5.1              6.7
                                                                                       ------           ------
Pro forma net income............................................................       $184.2           $120.3
                                                                                       ======           ======
Basic earnings per share as reported............................................       $ 0.89           $ 0.60
                                                                                       ======           ======
Basic earnings per share pro forma..............................................       $ 0.87           $ 0.57
                                                                                       ======           ======
Diluted earnings per share as reported..........................................       $ 0.88           $ 0.60
                                                                                       ======           ======
Diluted earnings per share pro forma............................................       $ 0.85           $ 0.57
                                                                                       ======           ======



                                       5


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

      For the quarters ended March 31, 2004 and 2003,  net income  includes $4.0
million and $0.5 million of after-tax  compensation  cost related to  restricted
stock awards.

Recent Accounting Pronouncements

      In March 2004, the SEC issued Staff  Accounting  Bulletin 105 "Application
of Accounting Principles to Loan Commitments" ("SAB 105"). SAB 105 requires that
certain mortgage loan  commitments  issued after March 31, 2004 be accounted for
as  derivatives  until the loan is made or they expire  unexercised.  Management
does not expect the adoption of SAB 105 to have a material  financial  statement
impact.

      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
interim  disclosures  regarding certain components of net periodic pension costs
and the employer's  contribution paid, or expected to be paid during the current
fiscal year, if significantly  different from amounts  previously  disclosed for
interim  periods  beginning  after December 15, 2003.  The  additional  required
disclosures are included in Note 9 -- Post Retirement and Other Benefit Plans.

      In December  2003, the SEC issued Staff  Accounting  Bulletin 104 "Revenue
Recognition"  ("SAB  104"),  which  revises  or  rescinds  portions  of  related
interpretive  guidance  in order to be  consistent  with  current  authoritative
accounting and auditing guidance and SEC rules and regulations.  The adoption of
SAB 104 as of  January  1,  2004 did not  have a  material  financial  statement
impact.

      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.

Note 2 -- Earnings Per Share

      Basic earnings per share ("EPS") is computed by dividing net income by the
weighted-average number of common shares outstanding for the period. The diluted
EPS computation includes the potential impact of dilutive securities,  including
stock options and restricted stock grants.  The dilutive effect of stock options
is computed  using the treasury  stock method,  which assumes the  repurchase of
common shares by CIT at the average market price for the period. Options that do
not have a  dilutive  effect  (because  the  exercise  price is above the market
price) are not  included in the  denominator  and  averaged  approximately  16.1
million  shares for the quarter ended March 31, 2004 and 17.3 million shares for
the quarter ended March 31, 2003.


                                       6


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

      The reconciliation of the numerator and denominator of basic EPS with that
of diluted EPS is presented ($ in millions,  except per share amounts, which are
in whole dollars; weighted-average share balances in thousands):



                                             Quarter Ended March 31, 2004              Quarter Ended March 31, 2003
                                        ---------------------------------------   ---------------------------------------
                                          Income         Shares       Per Share     Income         Shares       Per Share
                                        (Numerator)   (Denominator)    Amount     (Numerator)   (Denominator)    Amount
                                        -----------   -------------   ---------   -----------   -------------   ---------
                                                                                                
Basic EPS:
   Income available to common
     stockholders....................     $189.3        211,839        $ 0.89        $127.0        211,573        $0.60
Effect of Dilutive Securities:
   Restricted shares.................         --            540            --            --            326           --
   Stock options.....................         --          3,430         (0.01)           --             --           --
                                          ------        -------        ------        ------        -------        -----
Diluted EPS..........................     $189.3        215,809        $ 0.88        $127.0        211,899        $0.60
                                          ======        =======        ======        ======        =======        =====


Note 3 -- Business Segment Information

      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.  Corporate  and Other  includes  operating  losses on
venture  capital   investments,   although  those  assets  are  included  within
Structured Finance, which manages the assets ($ in millions).



                                                                                               Total
                                Specialty   Commercial   Equipment    Capital    Structured   Business   Corporate
                                 Finance     Finance      Finance     Finance     Finance     Segments   and Other   Consolidated
                                ---------   ----------   ---------    -------    ----------   --------   ---------   ------------

                                                                                              
At and for the quarter ended
   March 31, 2004
Operating margin ...........    $   228.1   $   142.3    $    47.3    $   48.3    $   26.5    $   492.5    $23.4      $   515.9
Income taxes ...............         44.7        37.5          9.8         9.8         6.8        108.6     12.5          121.1
Net income .................         78.2        60.6         15.2        19.0        10.1        183.1      6.2          189.3
Total financing and
   leasing assets ..........     13,048.1    10,555.9      6,871.7     7,229.2     3,316.7     41,021.6       --       41,021.6
Total managed assets .......     19,062.6    10,555.9      9,924.2     7,229.2     3,316.7     50,088.6       --       50,088.6

At and for the quarter ended
   March 31, 2003
Operating margin ...........    $   190.5   $   129.9    $    40.2    $   28.9    $   28.3    $   417.8    $20.4      $   438.2
Income taxes ...............         33.4        34.6          6.8         4.9         7.8         87.5     (4.6)          82.9
Net income (loss) ..........         52.2        54.1         10.7         7.7        12.2        136.9     (9.9)         127.0
Total financing and
   leasing assets ..........     11,925.8     8,682.7      6,928.2     6,196.7     3,359.9     37,093.3       --       37,093.3
Total managed assets .......     18,336.3     8,682.7     10,905.4     6,196.7     3,359.9     47,481.0       --       47,481.0



                                       7


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Note 4 -- Concentrations

      The following  table  summarizes the geographic and industry  compositions
(by obligor) of financing and leasing portfolio assets ($ in millions):



                                                                      March 31, 2004          December 31, 2003
                                                                   --------------------     --------------------
                                                                     Amount     Percent     Amount       Percent
                                                                   ---------    -------     ---------    -------
                                                                                               
Geographic
North America:
   Northeast...............................................        $ 8,166.6     19.9%      $ 8,319.8      20.8%
   West....................................................          7,870.8     19.2%        7,485.5      18.7%
   Midwest.................................................          6,271.5     15.3%        5,996.2      14.9%
   Southeast...............................................          5,782.7     14.1%        5,558.6      13.9%
   Southwest...............................................          4,643.1     11.3%        4,423.1      11.0%
   Canada..................................................          2,009.6      4.9%        2,055.5       5.1%
                                                                   ---------    -----       ---------     -----
Total North America........................................         34,744.3     84.7%       33,838.7      84.4%
Foreign....................................................          6,277.3     15.3%        6,245.2      15.6%
                                                                   ---------    -----       ---------     -----
   Total...................................................        $41,021.6    100.0%      $40,083.9     100.0%
                                                                   =========    =====       =========     =====

                                                                     March 31, 2004          December 31, 2003
                                                                   --------------------     --------------------
                                                                    Amount      Percent       Amount     Percent
                                                                   ---------    -------     ---------    -------
Industry
Manufacturing(1) (no industry greater than 2.9%)...........        $ 7,416.7     18.1%      $ 7,340.6      18.3%
Retail(2)..................................................          5,700.7     13.9%        5,630.9      14.0%
Commercial airlines (including regional airlines)..........          5,029.6     12.3%        5,039.3      12.6%
Consumer based lending-- home mortgage.....................          3,465.1      8.4%        2,830.8       7.1%
Transportation(3)..........................................          2,920.8      7.1%        2,934.9       7.3%
Service industries.........................................          2,678.9      6.5%        2,608.3       6.5%
Consumer based lending-- non-real estate(4)................          1,856.9      4.5%        1,710.9       4.3%
Construction equipment.....................................          1,471.3      3.6%        1,571.2       3.9%
Wholesaling................................................          1,431.8      3.5%        1,374.7       3.4%
Communications(5)..........................................          1,317.7      3.2%        1,386.5       3.5%
Automotive Services........................................          1,212.7      3.0%        1,152.3       2.9%
Other (no industry greater than 3.0%)(6)...................          6,519.4     15.9%        6,503.5      16.2%
                                                                   ---------    -----       ---------     -----
   Total...................................................        $41,021.6    100.0%      $40,083.9     100.0%
                                                                   =========    =====       =========     =====


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

(2)   Includes retailers of apparel (5.9%) and general merchandise (4.1%).

(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  $500.0 million and $556.3 million of equipment  financed for the
      telecommunications  industry  at March 31,  2004 and  December  31,  2003,
      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  $956.6  million,  or 2.3% of
      total financing and leasing assets at March 31, 2004. This amount includes
      approximately  $630.2  million in project  financing and $269.0 million in
      rail cars on lease.


                                       8


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Note 5 -- Retained Interests in Securitizations

      The following table details the components of retained interests in
securitizations ($ in millions):



                                                                                 March 31,        December 31,
                                                                                   2004               2003
                                                                                 ---------        ------------
                                                                                              
Retained interests in commercial loans:
   Retained subordinated securities..........................................     $  456.1          $  536.6
   Interest-only strips......................................................        371.9             366.8
   Cash reserve accounts.....................................................        303.3             226.3
                                                                                  --------          --------
   Sub total.................................................................      1,131.3           1,129.7
                                                                                  --------          --------
Retained interests in consumer loans:
   Retained subordinated securities..........................................         89.9              86.7
   Interest-only strips......................................................         49.9              58.9
   Cash reserve accounts.....................................................         26.1              34.0
                                                                                  --------          --------
   Sub total.................................................................        165.9             179.6
                                                                                  --------          --------
Aerospace equipment trust certificates.......................................         67.4              71.5
                                                                                  --------          --------
   Total.....................................................................     $1,364.6          $1,380.8
                                                                                  ========          ========


Note 6 -- Accumulated Other Comprehensive Loss

      The following table details the components of accumulated other
comprehensive loss, net of tax ($ in millions):



                                                                                  March 31,       December 31,
                                                                                    2004              2003
                                                                                  ---------       ------------
                                                                                              
Foreign currency translation adjustments.....................................      $(104.4)         $(105.8)
Changes in fair values of derivatives qualifying as cash flow hedges.........       (102.9)           (41.3)
Unrealized gain on equity and securitization investments.....................         11.7              6.3
Minimum pension liability adjustments........................................         (0.8)            (0.8)
                                                                                   -------          -------
   Total accumulated other comprehensive loss................................      $(196.4)         $(141.6)
                                                                                   =======          =======


Note 7 -- Derivative Financial Instruments

      As part of managing exposure to interest rate,  foreign currency,  and, in
limited  instances,  credit  risk,  CIT, as an  end-user,  enters  into  various
derivative transactions, all of which are transacted in over-the-counter markets
with  other  financial   institutions   acting  as  principal  counter  parties.
Derivatives  are  utilized  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 to  achieve  hedge
accounting treatment,  whenever possible,  substantially all derivatives entered
into are  designated  according  to a hedge  objective  against  a  specific  or
forecasted  liability or, in limited  instances,  assets.  The notional amounts,
rates,  indices,  and  maturities of our  derivatives  closely match the related
terms of the underlying hedged items.

      CIT  utilizes  interest  rate  swaps to  exchange  variable-rate  interest
underlying forecasted issuances of commercial paper, specific variable-rate debt
instruments,  and, in limited  instances,  variable-rate  assets for  fixed-rate
amounts.  These  interest  rate  swaps are  designated  as cash flow  hedges and
changes in fair value of these  swaps,  to the extent  they are  effective  as a
hedge,  are  recorded in other  comprehensive  income.  Ineffective  amounts are
recorded in interest  expense.  Interest rate swaps are also utilized to convert
fixed-rate interest on specific debt instruments to variable-rate amounts. These
interest  rate swaps are  designated  as fair value  hedges and  changes in fair
value of these swaps are recorded as basis  adjustments to the  underlying  debt
balance.


                                       9


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

      The following  table presents the notional  principal  amounts of interest
rate  swaps by class  and the  corresponding  hedged  liability  position  ($ in
millions):



                                                    Notional Amount
                                          ----------------------------------
                                          March 31, 2004   December 31, 2003
                                          --------------   -----------------
                                                                    
                                                                             Effectively converts the interest
                                                                             rate on an equivalent amount of
                                                                             forecasted commercial paper
Floating to fixed-rate swaps--                                               issuances, variable-rate notes and
  cash flow hedges.....................      $2,585.5          $2,615.0      selected assets to a fixed rate.

                                                                             Effectively converts the interest
                                                                             rate on an equivalent amount of
Fixed to floating-rate swaps--                                               fixed-rate notes and selected assets
  fair value hedges ...................       6,751.2           6,758.2      to a variable rate.
                                             --------          --------
Total interest rate swaps..............      $9,336.7          $9,373.2
                                             ========          ========


      In  addition  to the  swaps  in  the  table  above,  in  conjunction  with
securitizations,  CIT entered into $2.8  billion in notional  amount of interest
rate swaps with the related trusts to protect the trusts  against  interest rate
risk.  CIT is  insulated  from  this  risk  by  entering  into  offsetting  swap
transactions  with third  parties  totaling  $2.8 billion in notional  amount at
March 31, 2004.

      CIT utilizes foreign currency exchange forward contracts to hedge currency
risk underlying  foreign  currency loans to subsidiaries and the net investments
in foreign  operations.  These contracts are designated as foreign currency cash
flow  hedges  or net  investment  hedges  and  changes  in fair  value  of these
contracts are recorded in other comprehensive  income along with the translation
gains  and  losses on the  underlying  hedged  items.  CIT also  utilizes  cross
currency interest rate swaps to hedge currency risk underlying  foreign currency
debt. These swaps are designated as foreign currency cash flow hedges or foreign
currency  fair value  hedges and  changes in fair value of these  contracts  are
recorded in other  comprehensive  income  along with the  translation  gains and
losses on the underlying hedged items.

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



                                                                      Fair Value                      Total
                                                                      Adjustments    Income Tax    Unrealized
                                                                    of Derivatives     Effects        Loss
                                                                    --------------   ----------    ----------
                                                                                            
Balance at December 31, 2003-- unrealized loss.....................     $ 64.6         $(23.3)       $ 41.3
Changes in values of derivatives qualifying as cash flow hedges....      101.0          (39.4)         61.6
                                                                        ------         ------        ------
Balance at March 31, 2004-- unrealized loss........................     $165.6         $(62.7)       $102.9
                                                                        ======         ======        ======


      The  unrealized  loss as of March 31,  2004,  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 quarter ended March 31, 2004, the ineffective  portion of changes in the
fair value of cash flow hedges amounted to $0.3 million and has been recorded as
a  decrease  to  interest  expense.   Assuming  no  change  in  interest  rates,
approximately $43.3 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.

      During the first quarter of 2004,  CIT entered into credit  default swaps,
with a  combined  notional  value  of $35.0  million  and  terms of 5 years,  to
economically  hedge  certain  credit  exposures.  These  swaps  do not  meet the
requirements for hedge  accounting  treatment and therefore are recorded at fair
value,  with both  realized  and  unrealized  gains or losses  recorded in other
revenue in the consolidated statement of income. The fair value adjustment as of
March 31, 2004 was not significant.


                                       10


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Note 8 -- 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 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 GAAP are  allocated to CIT. DFS is not  consolidated  in CIT's
March 31,  2004  financial  statements  and is  accounted  for under the  equity
method.  At March 31,  2004,  financing  and leasing  assets  related to the DFS
program  (included in the CIT Consolidated  Balance Sheet) were $1.6 billion and
securitized assets included in managed assets were $2.4 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  $202
million  pretax at March 31, 2004,  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 March 31,
2004, 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  $21 million
pretax at March 31, 2004,  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
March 31, 2004, CIT's maximum exposure to loss with respect to activities of the
joint venture is $142 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 March 31, 2004,
other assets  included $22 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 March 31, 2004.

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


                                       11


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Note 9 -- Post retirement and Other Benefit Plans

      The following table discloses various  components of pension expense ($ in
millions).

                                                For the Quarters Ended March 31,
                                                --------------------------------
                                                       2004           2003
                                                       ----           ----
Retirement Plans
Service cost..................................        $ 4.5          $ 3.9
Interest cost.................................          3.9            3.6
Expected return on plan assets................         (4.1)          (2.3)
Amortization of net loss......................          0.7            0.9
                                                      -----          -----
Net periodic benefit cost.....................        $ 5.0          $ 6.1
                                                      =====          =====
Postretirement Plans
Service cost..................................        $ 0.5          $ 0.4
Interest cost.................................          0.8            0.7
Amortization of net loss......................          0.3            0.1
                                                      -----          -----
Net periodic benefit cost.....................        $ 1.6          $ 1.2
                                                      =====          =====

Note 10 -- 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 March 31,  2004,  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 ($ in millions).



                                                                                                          At
                                                                                                     December 31,
                                                                      At March 31, 2004                  2003
                                                             ------------------------------------    ------------
                                                                 Due to Expire
                                                             ---------------------
                                                              Within        After        Total          Total
                                                             One Year     One Year    Outstanding    Outstanding
                                                             --------     --------    -----------    -----------
                                                                                          
Financing and leasing assets............................     $1,428.8     $5,486.0     $6,914.8       $5,934.3
Letters of credit and acceptances:
  Standby letters of credit.............................        508.5         22.3        530.8          508.7
  Other letters of credit...............................        627.2         72.8        700.0          694.0
  Acceptances...........................................         11.2           --         11.2            9.3
Guarantees..............................................         97.5         12.4        109.9          133.2
Venture capital fund commitments........................          3.4        113.7        117.1          124.2



                                       12


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

      As of March 31, 2004, commitments to purchase commercial aircraft from
both Airbus Industrie and The Boeing Company are detailed below ($ in millions).

Calendar Year:                                       Amount         Number
--------------                                       ------         ------
2004.............................................   $  715.0           17
2005.............................................      918.0           18
2006.............................................      996.0           20
2007.............................................      260.0            5
                                                    --------           --
Total............................................   $2,889.0           60
                                                    ========           ==

      The order amounts exclude CIT's options to purchase additional aircraft.

      Outstanding  commitments  to purchase  equipment,  other than the aircraft
detailed  above,  totaled  $206.7  million at March 31, 2004.  CIT is party to a
railcar  sale-leaseback  transaction  under  which  it  is  obligated  to  pay a
remaining  total of $465.7 million,  approximately  $28 million per year through
2010 and declining  thereafter  through 2024, which is more than offset by CIT's
re-lease of the assets,  contingent on its ability to 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
14 -- 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 March 31, 2004.

Note 11 -- 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 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, has been 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.


                                       13


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Note 12 -- Severance and Facility Restructuring Reserves

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



                                                            Severance              Facilities
                                                       --------------------    ---------------------
                                                       Number of               Number of                 Total
                                                       Employees    Reserve    Facilities    Reserve    Reserves
                                                       ---------    -------    ----------    -------    --------
                                                                                          
Balance December 31, 2003.........................         43        $ 2.3         12         $ 7.2      $ 9.5
Utilization.......................................        (12)        (0.8)        (2)         (4.2)      (5.0)
                                                          ---        -----         --         -----      -----
Balance at March 31, 2004.........................         31        $ 1.5         10         $ 3.0      $ 4.5
                                                           ==        =====         ==         =====      =====


      The  reserves   remaining  at  March  31,  2004  relate   largely  to  the
restructuring  of the European  operations.  Severance  reserves include amounts
payable within the next year to individuals  who chose to receive  payments on a
periodic basis. The facility reserves relate primarily to shortfalls in sublease
transactions  and will be utilized  over the  remaining  lease terms,  generally
within 6 years.

Note 13 -- Goodwill and Intangible Assets

      Goodwill and  intangible  assets totaled $485.5 million and $487.7 million
at March 31, 2004 and December 31, 2003, 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.

      The most recent  goodwill  impairment  analysis was  performed  during the
fourth quarter of 2003,  which  indicated that the fair value of goodwill was in
excess of the carrying  value.  There were no changes in the carrying  values of
goodwill during the quarter ended March 31, 2004. The following table summarizes
the remaining goodwill balance by segment ($ in millions):

                                           Specialty    Commercial
                                            Finance       Finance        Total
                                           ---------    ----------       -----
Balance as of March 31, 2004............     $12.7        $370.4         $383.1

      Other intangible  assets,  net,  comprised  primarily of acquired customer
relationships,  proprietary computer software and related transaction processes,
totaled  $102.4 million and $104.6  million,  at March 31, 2004 and December 31,
2003,  and are included in Goodwill and  Intangible  Assets in the  Consolidated
Balance Sheets.  Other intangible  assets are being amortized in relation to the
related  revenue  streams  over their  respective  lives that range from five to
twenty years.  Amortization  expense  totaled $2.2 million for the quarter ended
March 31, 2004 versus $1.1  million for the quarter  ended March 31,  2003.  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.

Note 14 -- Summarized Financial Information of Subsidiaries

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


                                       14


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)



                                                                     CIT
            CONSOLIDATING                  CIT         Capita      Holdings      Other
           BALANCE SHEETS               Group Inc.   Corporation     LLC      Subsidiaries   Eliminations     Total
           --------------               ----------   -----------   --------   ------------   ------------     -----

                                                                                          
March 31, 2004

ASSETS
Net finance receivables..............   $  1,203.3    $3,523.0     $1,300.4    $25,524.0       $      --    $31,550.7
Operating lease equipment, net.......           --       586.9        117.4      6,871.9              --      7,576.2
Finance receivables held for sale....           --        74.6         77.0        854.6              --      1,006.2
Cash and cash equivalents............        633.2       472.6        256.3         (5.6)             --      1,356.5
Other assets.........................      7,648.8       310.4        349.5      1,946.8        (5,492.7)     4,762.8
                                        ----------    --------     --------    ---------       ---------    ---------
   Total Assets......................   $  9,485.3    $4,967.5     $2,100.6    $35,191.7       $(5,492.7)   $46,252.4
                                        ==========    ========     ========    =========       =========    =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Debt.................................   $ 31,879.4    $  536.3     $1,433.4    $   226.7       $      --    $34,075.8
Credit balances of
   factoring clients.................           --          --           --      3,619.4              --      3,619.4
Accrued liabilities and payables.....    (27,886.8)    3,829.2       (555.6)    27,639.1              --      3,025.9
                                        ----------    --------     --------    ---------       ---------    ---------
   Total Liabilities.................      3,992.6     4,365.5        877.8     31,485.2              --     40,721.1
Minority interest....................           --          --           --         38.6              --         38.6
Total Stockholders' Equity...........      5,492.7       602.0      1,222.8      3,667.9        (5,492.7)     5,492.7
                                        ----------    --------     --------    ---------       ---------    ---------
   Total Liabilities and
   Stockholders' Equity..............   $  9,485.3    $4,967.5     $2,100.6    $35,191.7       $(5,492.7)   $46,252.4
                                        ==========    ========     ========    =========       =========    =========

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



                                       15


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)



                                                                     CIT
             CONSOLIDATING                 CIT         Capita      Holdings      Other
         STATEMENTS OF INCOME           Group Inc.   Corporation     LLC      Subsidiaries   Eliminations     Total
         --------------------           ----------   -----------   --------   ------------   ------------     -----

                                                                                            
Quarter Ended
   March 31, 2004
Finance income.......................     $  9.5       $184.4       $47.6        $661.4        $    --        $902.9
Interest expense.....................      (22.9)        54.1         3.9         262.9             --         298.0
                                          ------       ------       -----        ------        -------        ------
Net finance income...................       32.4        130.3        43.7         398.5             --         604.9
Depreciation on operating
   lease equipment...................         --         84.6        11.1         138.8             --         234.5
                                          ------       ------       -----        ------        -------        ------
Net finance margin...................       32.4         45.7        32.6         259.7             --         370.4
Provision for credit losses..........        4.2         10.7         2.6          68.1             --          85.6
                                          ------       ------       -----        ------        -------        ------
Net finance margin, after provision
   for credit losses.................       28.2         35.0        30.0         191.6             --         284.8
Equity in net income
   of subsidiaries...................      155.6           --          --            --         (155.6)           --
Other revenue........................        0.6         31.3        32.6         165.9             --         230.4
Gain on venture capital
   investments.......................         --           --          --           0.7             --           0.7
                                          ------       ------       -----        ------        -------        ------
Operating margin.....................      184.4         66.3        62.6         358.2         (155.6)        515.9
Operating expenses...................       18.6         36.7        23.2         168.8             --         247.3
Gain on redemption of debt...........       41.8           --          --            --             --          41.8
                                          ------       ------       -----        ------        -------        ------
Income (loss) before provision
   for income taxes..................      207.6         29.6        39.4         189.4         (155.6)        310.4
Provision for income taxes...........       18.3         11.5        15.4          75.9             --         121.1
                                          ------       ------       -----        ------        -------        ------
Net income (loss)....................     $189.3       $ 18.1       $24.0        $113.5        $(155.6)       $189.3
                                          ======       ======       =====        ======        =======        ======

Quarter Ended
   March 31, 2003
Finance income.......................     $ 29.7       $202.6       $48.5        $658.4        $    --        $939.2
Interest expense.....................       (2.1)        88.9        (2.7)        270.6             --         354.7
                                          ------       ------       -----        ------        -------        ------
Net finance income...................       31.8        113.7        51.2         387.8             --         584.5
Depreciation on operating
   lease equipment...................         --         98.2        20.1         160.5             --         278.8
                                          ------       ------       -----        ------        -------        ------
Net finance margin...................       31.8         15.5        31.1         227.3             --         305.7
Provision for credit losses..........       12.7         13.3         2.7          74.3             --         103.0
                                          ------       ------       -----        ------        -------        ------
Net finance margin, after
   provision for credit losses.......       19.1          2.2        28.4         153.0             --         202.7
Equity in net income of
   subsidiaries......................      107.7           --          --            --         (107.7)           --
Other revenue........................        0.6         34.0        21.1         184.2             --         239.9
Loss on venture capital
   investments.......................         --           --          --          (4.4)            --         (4.4)
                                          ------       ------       -----        ------        -------        ------
Operating margin.....................      127.4         36.2        49.5         332.8         (107.7)        438.2
Operating expenses...................       (1.9)        40.1        40.0         147.4             --         225.6
                                          ------       ------       -----        ------        -------        ------
Income (loss) before provision for
   income taxes......................      129.3         (3.9)        9.5         185.4         (107.7)        212.6
Provision (benefit) for income taxes.        2.3         (1.5)        3.7          78.4             --          82.9
Dividends on preferred capital
   securities, after tax.............         --           --          --          (2.7)            --          (2.7)
                                          ------       ------       -----        ------        -------        ------
Net income (loss)....................     $127.0       $ (2.4)      $ 5.8        $104.3        $(107.7)       $127.0
                                          ======       ======       =====        ======        =======        ======



                                       16


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)



                                                                     CIT
        CONSOLIDATING STATEMENT            CIT         Capita      Holdings      Other
             OF CASH FLOWS              Group Inc.   Corporation     LLC      Subsidiaries   Eliminations     Total
        -----------------------         ----------   -----------   --------   ------------   ------------     -----

                                                                                          
Quarter Ended
   March 31, 2004

Cash Flows From
   Operating Activities:
Net cash flows provided by
   (used for) operations.............   $    65.0     $ (83.3)     $(141.1)    $   604.1      $      --     $   444.7
                                        ---------     -------      -------     ---------      ---------     ---------
Cash Flows From
   Investing Activities:
Net (increase) decrease in financing
   and leasing assets................       374.0       154.4         18.1      (1,949.2)            --      (1,402.7)
Decrease in inter-company loans
   and investments...................    (2,508.4)         --           --            --        2,508.4
Other................................          --          --           --          (1.1)            --          (1.1)
                                        ---------     -------      -------     ---------      ---------     ---------
Net cash flows (used for) provided
   by investing activities...........    (2,134.4)      154.4         18.1      (1,950.3)       2,508.4      (1,403.8)
                                        ---------     -------      -------     ---------      ---------     ---------
Cash Flows From
   Financing Activities:
Net increase (decrease) in debt......     1,222.7      (467.2)        25.7        (403.3)            --         377.9
Inter-company financing..............          --       458.1        126.1       1,924.2       (2,508.4)           --
Cash dividends paid..................          --          --           --         (28.0)            --         (28.0)
Other................................          --          --           --          (8.0)            --          (8.0)
                                        ---------     -------      -------     ---------      ---------     ---------
Net cash flows provided by
   (used for) financing activities...     1,222.7        (9.1)       151.8       1,484.9       (2,508.4)        341.9
                                        ---------     -------      -------     ---------      ---------     ---------
Net (decrease) increase in cash
   and cash equivalents..............      (846.7)       62.0         28.8         138.7             --        (617.2)
Cash and cash equivalents,
   beginning of period...............     1,479.9       410.6        227.5        (144.3)            --       1,973.7
                                        ---------     -------      -------     ---------      ---------     ---------
Cash and cash equivalents,
   end of period.....................   $   633.2     $ 472.6      $ 256.3     $    (5.6)     $      --     $ 1,356.5
                                        =========     =======      =======     =========      =========     =========



                                       17


                         CIT GROUP INC. AND SUBSIDIARIES

       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)



                                                                     CIT
        CONSOLIDATING STATEMENT            CIT         Capita      Holdings      Other
             OF CASH FLOWS              Group Inc.   Corporation     LLC      Subsidiaries   Eliminations     Total
        -----------------------         ----------   -----------   --------   ------------   ------------     -----

                                                                                          
Quarter Ended
   March 31, 2003
Cash Flows From
   Operating Activities:
Net cash flows provided
   by (used for) operations..........    $ (534.5)     $ 466.3     $ (77.4)    $   644.3       $    --      $   498.7
                                         --------      -------     -------     ---------       -------      ---------
Cash Flows From
   Investing Activities:
Net decrease in financing and
   leasing assets....................        (2.2)       (12.6)      (42.1)     (1,228.5)           --       (1,285.4)
Decrease in inter-company loans
   and investments...................      (430.9)          --          --            --         430.9             --
Other................................          --           --          --         (41.4)           --          (41.4)
                                         --------      -------     -------     ---------       -------      ---------
Net cash flows (used for)
   investing activities..............      (433.1)       (12.6)      (42.1)     (1,269.9)        430.9       (1,326.8)
                                         --------      -------     -------     ---------       -------      ---------
Cash Flows From
   Financing Activities:
Net increase (decrease) in debt......     1,073.3        (16.4)     (249.0)         34.4            --          842.3
Inter-company financing..............          --       (379.9)      146.9         663.9        (430.9)            --
Cash dividends paid..................          --           --          --         (25.4)           --          (25.4)
                                         --------      -------     -------     ---------       -------      ---------
Net cash flows provided by
   (used for) financing activities...     1,073.3       (396.3)     (102.1)        672.9        (430.9)         816.9
                                         --------      -------     -------     ---------       -------      ---------
Net (decrease) increase in cash
   and cash equivalents..............       105.7         57.4      (221.6)         47.3            --          (11.2)
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.....................    $1,416.6      $ 288.5     $  72.1     $   248.2       $    --      $ 2,025.4
                                         ========      =======     =======     =========       =======      =========




                                       18


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

      The  following  discussion  uses  financial  terms  that we  believe to be
relevant to our business. A glossary of other key terms used in our business can
be found following the "Introduction" section.

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 and
other  collateralized  asset  ownership  belong  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,  including the
right to take  depreciation and the risk of damage or obsolescence.  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).

      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 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 depends on maintaining 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  exchange  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  interest  sensitivity and liquidity  measurements  that are
            discussed in 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.


                                       19


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
            securitized finance receivables 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.

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. 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
                                       and more  recently to hedge  credit risk.
                                       Derivative  contracts used by CIT include
                                       interest  rate  swaps,   cross   currency
                                       swaps, foreign exchange forward contracts
                                       and credit default swaps.


                                       20


Term                                   Description
-----                                  ----------

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.

Finance Income......................   Finance  income  includes  both  interest
                                       income on finance  receivables and rental
                                       income on operating leases.

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  or  as
                                       lessor, depending on the transaction.

Leases -- tax-optimized leveraged...   Tax-optimized  leveraged  leases where we
                                       are the lessor and 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,  recognizes depreciation on the
                                       asset,   and   assumes   the   risks   of
                                       ownership, including obsolescence.

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.

Non-spread Revenue..................   Non-spread  revenues include  syndication
                                       fees,   gains   from    dispositions   of
                                       equipment,  factoring  commissions,  loan
                                       servicing and other fees and are reported
                                       in Other Revenue.

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.

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.


                                       21


Term                                   Description
-----                                  ----------

Special Purpose Entity (SPE)........   Distinct  legal  entities  created  for a
                                       specific  purpose in order to isolate the
                                       risks and  rewards  of owning  its assets
                                       and incurring its  liabilities.  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.

Yield-related Fees..................   In certain  transactions,  in addition to
                                       interest income,  yield-related  fees are
                                       collected    for   the    assumption   of
                                       underwriting risk. Yield-related fees are
                                       reported   in  Finance   Income  and  are
                                       recognized  over the life of the  lending
                                       transaction.

Profitability and Key Business Trends

      Net income for the quarter  ended March 31, 2004  included a $25.5 million
after-tax gain recognized on the early redemption of debt. Aside from this item,
our improved profitability  reflected higher asset levels, lower charge-offs and
lower borrowing costs.

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

                                                     Quarters Ended March 31,
                                                     ------------------------
                                                      2004              2003
                                                     -----             -----
Net income per diluted share(1)..................    $0.88             $0.60
Net income as a percentage of AEA(1).............     2.05%             1.47%
Return on average tangible equity(1).............     15.1%             11.0%

--------------------------------------------------------------------------------
(1)   For the quarter ended March 31, 2004,  net income per diluted  share,  net
      income as a  percentage  of AEA and return on tangible  equity,  excluding
      gain on redemption of debt, were $0.76, 1.78% and 13.1%, respectively.

      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."

      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.  As noted
above,  during the quarter  ended March 31,  2004,  we  recognized a gain on the
early redemption of debt. While this gain is significant,  it does not represent
income from our core business,  and does not occur on a regular  basis.  Venture
capital gains and losses relate to private equity investments that we are in the
process of running off,  through both the systematic  liquidation of the private
fund  investments  and the sale of the direct  investment  portfolio.  For these
reasons,  we believe that this table,  in addition to the GAAP results,  aids in
the analysis of comparing the results in our business over the periods presented
($ in millions):

                                                      Quarters Ended March 31,
                                                      ------------------------
                                                       2004             2003
                                                      ------           ------
Net income (loss) GAAP basis.....................     $189.3           $127.0
Charges (gains) included in net income/loss
  Gain on debt redemption........................      (25.5)              --
  Venture capital (gains) losses..................      (0.4)             2.7
                                                      ------           ------
  Net Income-- before gains/losses...............     $163.4           $129.7
                                                      ======           ======


                                       22


Net Finance Margin

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

                                                     Quarters Ended March 31,
                                                   --------------------------
                                                      2004              2003
                                                   ---------        ---------
Finance income..................................   $   902.9        $   939.2
Interest expense................................       298.0            354.7
                                                   ---------        ---------
  Net finance income............................       604.9            584.5
Depreciation on operating lease equipment.......       234.5            278.8
                                                   ---------        ---------
  Net finance margin............................   $   370.4        $   305.7
                                                   =========        =========
Average Earnings Asset ("AEA")..................   $36,865.1        $34,600.6
                                                   =========        =========

As a % of AEA:
Finance income..................................        9.80%           10.86%
Interest expense................................        3.23%            4.11%
                                                        ----            -----
  Net finance income............................        6.57%            6.75%
Depreciation on operating lease equipment.......        2.55%            3.22%
                                                        ----            -----
Net finance margin..............................        4.02%            3.53%
                                                        ====            =====

      Net finance  margin  improved by $64.7  million and 49 basis  points (as a
percentage  of AEA) from the first  quarter  of 2003 due  primarily  to  reduced
borrowing  costs.  Year over year growth in  financing  and  leasing  assets was
offset by lower  finance  income and operating  lease  rentals,  which  declined
correspondingly  with market  interest  rates.  Lower  operating  lease  rentals
reduced  finance  income  by $33.7  million  or 37 basis  points  from the first
quarter of 2003.  Operating lease margin, while down modestly as a percentage of
operating  lease  equipment,  increased  $10.6 million from 2003. See "Operating
Leases" for additional information regarding operating lease margin.

      The trend in net finance  margin as a  percentage  of AEA,  excluding  the
impact of  operating  lease  rentals,  reflects a greater  decline  in  interest
expense than in finance income yield, due to the narrowing  (improvement) of our
credit  spreads,  the  refinancing  of  higher-cost  debt and a reduced level of
excess  liquidity  represented  by a lower cash  balance.  The  increase  in AEA
reflects growth in the latter part of 2003 and 2004.

      For the March 2004 quarter,  we made a reporting change to reclassify debt
commissions from general operating expense to interest expense to reflect all-in
funding costs in margin. This change was also made in the historical comparative
data and does not  impact net  income.  As a result of this  change,  prior year
interest  expense was increased by  approximately  $8 million and was roughly 10
basis points higher than historically reported ratios.

      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:



                                            Quarter         Year          Quarter           Year          Nine Months
                                             Ended         Ended           Ended            Ended            Ended
                                           March 31,    December 31,    December 31,    September 30,    September 30,
                                             2004           2003            2002            2002             2001
                                           ---------    ------------    ------------    -------------    -------------
                                                                                               
Average spread over
  U.S. Treasuries......................       78             138             302             313              147


      As the table shows, our borrowing  spreads have improved since the funding
base disruption in the first half of 2002.


                                       23


      Additional  information  regarding  our  borrowing  costs  is shown in the
following table ($ in millions).



                                                          Quarter Ended                  Quarter Ended
                                                         March 31, 2004                 March 31, 2003
                                                         ---------------                ---------------
                                                                                        
Before Swaps
Commercial paper, variable-rate senior notes
  and bank credit facilities...................       $13,704.2       1.56%          $12,704.5      1.94%
Fixed-rate senior and subordinated notes.......        18,948.1       5.70%           19,695.7      6.32%
                                                      ---------                      ---------
Composite......................................       $32,652.3       3.96%          $32,400.2      4.61%
                                                      =========                      =========
After Swaps
Commercial paper, variable-rate senior notes
  and bank credit facilities...................       $17,823.7       2.26%          $14,751.9      2.80%
Fixed-rate senior and subordinated notes.......        14,828.6       5.34%           17,648.3      6.10%
                                                      ---------                      ---------
Composite......................................       $32,652.3       3.66%          $32,400.2      4.60%
                                                      =========                      =========


Operating Leases

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

                                                  Quarters Ended March 31,
                                                  ------------------------
                                                   2004              2003
                                                  ------            ------
Rental income...............................     $  346.3         $  380.0
Depreciation expense........................        234.5            278.8
                                                 --------         --------
  Operating lease margin....................     $  111.8         $  101.2
                                                 ========         ========
Average operating lease equipment...........     $7,590.0         $6,712.6
                                                 ========         ========
As a % of Average Operating
Lease Equipment:
Rental income...............................        18.25%           22.65%
Depreciation expense........................        12.36%           16.62%
                                                 --------         --------
  Operating lease margin....................         5.89%            6.03%
                                                 ========         ========

      The decline in  operating  lease margin and its  components  for the above
periods reflects lower rentals on the Capital Finance aerospace portfolio due to
the commercial  airline  industry  downturn and the change in equipment mix to a
greater proportion of aircraft and rail assets with an average  depreciable life
of 25 and 40 years,  respectively,  compared to smaller-ticket assets with lives
generally of 3 years in the Specialty Finance and Equipment Finance  portfolios.
Aerospace rentals have trended downward  following  September 11, 2001, but have
recently shown some stability.

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

                                                  March 31,        March 31,
                                                    2004              2003
                                                  ---------        ---------
Capital Finance -- Aerospace.................     $3,991.6         $3,400.2
Capital Finance -- Rail and Other............      2,150.5          1,572.8
Specialty Finance............................        919.1          1,227.6
Equipment Finance............................        385.6            527.4
Structured Finance...........................        129.4            103.4
                                                  --------         --------
Total........................................     $7,576.2         $6,831.4
                                                  ========         ========

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

      o     The increase in the Capital Finance rail and other portfolio was due
            primarily to a second quarter 2003 rail acquisition.

      o     The decline 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.


                                       24


      Maximizing equipment  utilization levels is a prime component of operating
lease portfolio profitability. Equipment not subject to lease agreements totaled
$231.1  million and $265.9  million,  at March 31, 2004 and  December  31, 2003,
respectively.  The current  weakness in the  commercial  airline  industry 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):

                                                    Quarters Ended March 31,
                                                    ------------------------
                                                      2004             2003
                                                     ------           ------
Net finance margin.............................      $370.4           $305.7
Provision for credit losses....................        85.6            103.0
                                                     ------           ------
  Risk-adjusted margin.........................      $284.8           $202.7
                                                     ======           ======
As a percentage of AEA:
Net finance margin.............................        4.02%            3.53%
Provision for credit losses....................        0.93%            1.19%
                                                     ------           ------
  Risk-adjusted margin.........................        3.09%            2.34%
                                                     ======           ======

      The improvement to 3.09% for the March 31, 2004 quarter primarily reflects
the  previously  discussed  improvement  in  net  finance  margin,  as  well  as
incremental  benefit from a lower provision for charge-offs,  which is discussed
further in "Credit Metrics".

      Discounts  related to the  liquidating  portfolios,  recorded  under fresh
start  accounting in  conjunction  with the June 2001  acquisition  by Tyco, are
being accreted into income as the portfolios liquidate. These portfolios totaled
$874 million and $923  million at March 31, 2004 and December 31, 2003.  For the
quarter ended March 31, 2004, this finance income  accretion was 13 basis points
(as a percentage of consolidated  AEA) and was completely  offset by liquidating
portfolio  charge-offs.  For the quarter  ended March 31,  2003  finance  income
accretion  of 22  basis  points  was  largely  offset  by  17  basis  points  in
liquidating portfolio  charge-offs.  In addition,  risk-adjusted interest margin
was impacted  positively due to fair value  adjustments to mark  receivables and
debt to market in conjunction  with the 2001  acquisition by  approximately  six
basis  points for the quarter  ended March 31, 2004 and 19 basis  points for the
quarter ended March 31, 2003. See "Financing and Leasing  Assets" for additional
information regarding the liquidating portfolios.

Other Revenue

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

                                                    Quarters Ended March 31,
                                                    ------------------------
                                                     2004              2003
                                                    ------            ------
Fees and other income...........................    $126.7            $144.7
Factoring commissions...........................      55.0              46.9
Gains on sales of leasing equipment.............      27.3              17.6
Gains on securitizations........................      21.4              30.7
                                                    ------            ------
  Total.........................................    $230.4            $239.9
                                                    ======            ======
Total Other Revenue as % of AEA.................      2.50%             2.77%
                                                    ======            ======

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

                                                     Quarters Ended March 31,
                                                     ------------------------
                                                      2004              2003
                                                     ------            ------
Total volume securitized........................    $1,236.4         $1,237.4
Gains...........................................     $  21.4          $  30.7
Gains as a percentage of volume securitized.....        1.73%            2.48%
Gains as a percentage of pre-tax income.........         6.9%            14.4%


                                       25


      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. The reduction from the
            prior year  reflects  lower fees in our Business  Credit unit and in
            Equipment Finance. In line with the improving economy,  business has
            generally  returned to smaller working capital  asset-based  lending
            activities,   away  from  the  larger-ticket,   debtor-in-possession
            lending.  Reduced  fees and  other  income  also  reflect  lower fee
            revenue  related to  securitizations  consistent  with the runoff in
            securitized asset balances.

      o     Higher factoring  commissions  benefited from two large acquisitions
            completed during the second half of 2003.

      o     Securitization  volume,  while essentially  unchanged from the prior
            year, is comprised of a higher  proportion of commercial  assets, as
            we continue to fund home equity growth  entirely  on-balance  sheet.
            2003 volume includes $0.4 billion of home equity loans.

      o     Gains on sales  of  leasing  equipment  increased  from  2003 due to
            higher  commercial  aircraft  equipment  gains  as well  as  general
            strengthening of equipment values.

Venture Capital Investments

      We  announced  on January  15,  2004,  that we signed a purchase  and sale
agreement for the  disposition of the direct  investment  portfolio at an amount
approximating  the carrying  value at December 31, 2003. We are working toward a
closing in the second quarter of 2004. Results from venture capital  investments
include realized and unrealized gains and losses on both direct  investments and
venture capital fund investments for both quarters presented.

Provision for Credit Losses

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



                                                                                    Quarters Ended March 31,
                                                                                    ------------------------
                                                                                     2004              2003
                                                                                    ------            ------
                                                                                               
Balance beginning of period...............................................          $643.7           $760.8
                                                                                    ------           ------
Provision for credit losses...............................................            85.6            103.0
Reserves relating to acquisitions, other..................................             6.7              7.5
                                                                                    ------           ------
  Additions to reserve for credit losses, net.............................            92.3            110.5
                                                                                    ------           ------
Net credit losses:
Specialty Finance.........................................................            38.7             44.0
Commercial Finance........................................................            12.5             16.6
Equipment Finance.........................................................            26.3             38.1
Capital Finance...........................................................              --              1.8
Structured Finance........................................................            21.8             13.8
                                                                                    ------           ------
  Total net credit losses.................................................            99.3            114.3
                                                                                    ------           ------
Balance end of period.....................................................          $636.7           $757.0
                                                                                    ======           ======
Reserve for credit losses as a percentage of finance receivables..........            1.98%            2.64%
                                                                                    ======           ======
Reserve for credit losses as a percentage of past due receivables
  (60 days or more)(1)....................................................           104.5%            77.9%
                                                                                    ======           ======
Reserve for credit losses as a percentage of non-performing assets(2).....            95.4%            75.2%
                                                                                    ======           ======


--------------------------------------------------------------------------------
(1)   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  89.9% at March  31,  2004 and 51.5% at
      March 31, 2003.

(2)   The reserve for credit  losses as a percentage of  non-performing  assets,
      excluding  telecommunication  and  Argentine  reserves  and  corresponding
      non-performing  assets, was 88.3% at March 31, 2004 and 52.4% at March 31,
      2003.

      The  decreased  provision for the quarter ended March 31, 2004 in relation
to 2003 reflects lower  charge-offs and improving  credit  metrics.  See 'Credit
Metrics' for further discussion on net charge-offs and other related statistics.


                                       26


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):

                           March 31, 2004   December 31, 2003   March 31, 2003
                           --------------   -----------------   --------------
                           Amount     %       Amount     %      Amount     %
                           ------   -----     ------   -----    ------   -----
Finance receivables.....   $531.4    1.68%    $524.6    1.71%   $482.2    1.74%
Telecommunications(1)...     92.8   18.56%     106.6   19.16%    139.8   21.33%
Argentina(2)............     12.5   69.83%      12.5   55.07%    135.0   72.50%
                           ------             ------            ------
Total...................   $636.7    1.98%    $643.7    2.06%   $757.0    2.64%
                           ======             ======            ======

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

(2)   Percentage of finance receivables in Argentina.

      The decline in the  reserve  for credit  losses at March 31, 2004 from the
2003  periods,  in both  amount  and  percentage,  was due to  telecommunication
charge-offs  taken against the previously  established  specific reserve and the
improving  credit metrics.  The 2003 decline in the specific  Argentine  reserve
resulted largely from the fourth quarter 2003 charge-off of $101.0 million.

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.

      The  reserve  includes   specific  reserves  relating  to  impaired  loans
(excluding  telecommunication and Argentine) of $50.2 million at March 31, 2004,
compared to $66.4  million at December  31, 2003 and $52.8  million at March 31,
2003. The changes in the inherent  estimated loss and estimation risk components
of the reserve reflect trends in our key credit metrics.

      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  values,  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

      We added  $200.0  million  to the  reserve  for credit  losses  during the
quarter  ended  June 30,  2002 in light of the  continued  deterioration  in the
telecommunications  sector at that time,  particularly  with respect to our CLEC
portfolio.  In the subsequent  quarters through March 31, 2004, we have recorded
net charge-offs of $107.2 million against this specific reserve.

      Our  telecommunications  portfolio is included in  "Communications" in the
industry  composition  table  included in Note 4 to the  Consolidated  Financial
Statements.  This portfolio  includes  lending and leasing  transactions  to the
telecommunications sector. Lending and leasing of telecommunication equipment to
non-telecom  companies  is conducted in our  Specialty  Finance  business and is
categorized according to the customer's  ("obligor's")  industry in the industry
composition table.  Certain statistical data is presented in the following table
($ in millions).


                                       27




                                                                 March 31,        December 31,        March 31,
                                                                   2004               2003              2003
                                                                 ---------        ------------        ---------

                                                                                              
CLEC accounts.............................................        $191.3             $197.8            $238.0
Other telecommunication accounts..........................         327.3              381.2             440.7
                                                                  ------             ------            ------
Total telecommunications portfolio........................        $518.6             $579.0            $678.7
                                                                  ======             ======            ======
Portfolio as a % of total financing and leasing assets....           1.3%               1.5%              1.8%
Number of accounts........................................            42                 44                53
Top 10 accounts...........................................        $236.8             $253.4            $265.6
Largest account exposure..................................        $ 30.6             $ 31.0            $ 33.4
Non-performing accounts...................................        $ 65.7             $ 57.2            $ 85.5
Number of non-performing accounts.........................             8                  6                 9
Non-performing accounts as a percentage of portfolio......          12.7%               9.9%             12.6%


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 March 31, 2004,  we have
$17.9 million in Argentine  loans that remains to be collected and  repatriated,
down slightly from December 31, 2003.  Collections efforts of remaining balances
are ongoing.

      On April 20,  2004,  we signed an  agreement  to sell the  portfolio to an
Argentine bank at a price  approximating  our book value. The sale is subject to
certain Argentine regulatory approvals.

Credit Metrics

Net Charge-offs

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



                                                                   Quarter Ended March 31, 2004
                                                    -----------------------------------------------------------
                                                                              Before
                                                                          Liquidating and      Liquidating and
                                                          Total         Telecommunications   Telecommunications
                                                    -----------------   ------------------   ------------------
                                                                                 
Specialty Finance -- commercial................       $22.0   1.24%        $21.5   1.21%        $ 0.5      --
Commercial Finance.............................        12.5   0.48%         12.5   0.48%           --      --
Equipment Finance..............................        26.3   1.67%         21.0   1.37%          5.3   12.35%
Capital Finance................................          --     --            --     --            --      --
Structured Finance.............................        21.8   2.96%          8.1   1.34%         13.7   10.38%
                                                      -----                -----                -----
   Total Commercial Segments...................        82.6   1.19%         63.1   0.93%         19.5   11.13%
Specialty Finance -- consumer..................        16.7   1.84%         10.2   1.42%          6.5    3.45%
                                                      -----                -----                -----
   Total.......................................       $99.3   1.26%        $73.3   0.98%        $26.0    7.16%
                                                      =====                =====                =====


                                                                   Quarter Ended March 31, 2003
                                                   ------------------------------------------------------------
                                                                              Before
                                                                          Liquidating and      Liquidating and
                                                          Total         Telecommunications   Telecommunications
                                                   ------------------   ------------------   ------------------
                                                                                      
Specialty Finance -- commercial................      $ 31.0   1.73%        $30.6   1.76%        $ 0.4   8.65%
Commercial Finance.............................        16.6   0.80%         16.6   0.80%           --     --
Equipment Finance..............................        38.1   2.39%         29.7   2.02%          8.4   6.48%
Capital Finance................................         1.8   0.55%          1.8   0.55%           --     --
Structured Finance.............................        13.8   1.90%           --     --          13.8   8.23%
                                                     ------                -----                -----
   Total Commercial Segments...................       101.3   1.55%         78.7   1.27%         22.6   7.48%
Specialty Finance -- consumer..................        13.0   2.36%          6.6   1.92%          6.4   3.09%
                                                     ------                -----                -----
   Total.......................................      $114.3   1.61%        $85.3   1.30%        $29.0   5.70%
                                                     ======                =====                =====



                                       28


      Charge-offs  were  1.26%  for  the  first  quarter  of  2004,   reflecting
improvements across virtually all segments:

      o     Specialty  Finance -- commercial  improvements were primarily in the
            small-ticket and international portfolios.

      o     Commercial  Finance  charge-offs  fell well  below the prior year in
            both the asset-based lending and factoring business.

      o     Equipment Finance  improvement was considerable in relation to prior
            year due to  reductions  across all product  lines,  but  charge-off
            levels remain above management's expectations.

      o     Structured  Finance  charge-offs  continue to be driven primarily by
            telecommunication  charge-offs,  with  the  2004  increase  due to a
            project finance portfolio write-off.

      o     Specialty  Finance-consumer   charge-offs,   while  up  in  absolute
            amounts,  were down as a percentage of finance  receivables from the
            prior year reflecting the return to on balance sheet funding of this
            portfolio.

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):



                                                    March 31, 2004      December 31, 2003     March 31, 2003
                                                   ----------------     -----------------    ----------------
                                                                                      
Past Dues:
   Specialty Finance-- commercial..............     $185.8    2.60%       $226.4   3.17%     $  264.7   3.68%
   Commercial Finance..........................      107.2    1.02%        105.9   1.03%        152.8   1.76%
   Equipment Finance...........................      113.8    1.79%        137.9   2.18%        292.5   4.69%
   Capital Finance.............................       10.7    0.98%          9.5   0.87%         74.0   6.05%
   Structured Finance..........................       32.9    1.12%         47.0   1.59%         55.2   1.89%
                                                    ------                ------             --------
   Total Commercial Segments...................      450.4    1.60%        526.7   1.90%        839.2   3.19%
   Specialty Finance -- consumer...............      159.0    3.87%        149.6   4.26%        132.0   5.53%
                                                    ------                ------             --------
   Total.......................................     $609.4    1.89%       $676.3   2.16%     $  971.2   3.39%
                                                    ======                ======             ========
Non-performing assets:
   Specialty Finance-- commercial..............     $102.3    1.43%       $119.8   1.68%     $  160.4   2.23%
   Commercial Finance..........................       77.0    0.73%         75.6   0.74%        128.0   1.47%
   Equipment Finance...........................      213.9    3.36%        218.3   3.46%        338.5   5.43%
   Capital Finance.............................        3.4    0.31%          3.6   0.33%         86.9   7.10%
   Structured Finance..........................      104.9    3.57%        103.0   3.48%        143.4   4.91%
                                                    ------                ------             --------
   Total Commercial Segments...................      501.5    1.79%        520.3   1.87%        857.2   3.26%
   Specialty Finance-- consumer................      165.9    4.04%        156.2   4.45%        149.2   6.25%
                                                    ------                ------             --------
   Total.......................................     $667.4    2.07%       $676.5   2.16%     $1,006.4   3.51%
                                                    ======                ======             ========
Non accrual loans..............................     $558.8                $566.5             $  851.3
Repossessed assets.............................      108.6                 110.0                155.1
                                                    ------                ------             --------
   Total non-performing assets.................     $667.4                $676.5             $1,006.4
                                                    ======                ======             ========


      The March 31, 2004 delinquency rate of 1.89% marked the sixth  consecutive
quarter of improvement,  with the most notable declines in Specialty  Finance --
commercial and Equipment Finance.

      o  Specialty Finance -- commercial delinquency improvement from both prior
         year periods was driven primarily by the decline in past dues in the
         international portfolios, most notably in our European operations,
         where servicing was centralized during 2003, and in the Small Business
         Lending portfolio.

      o  Commercial Finance past due levels, while flat with December 2003, were
         down considerably from March 2003 due to improvements in both the
         Commercial Services (factoring) and Business Credit (asset-based
         lending) units.

      o  Equipment Finance delinquency improved across virtually all product
         lines in relation to both 2003 periods and was down 61% in absolute
         amounts from March 2003.


                                       29


      o  Structured Finance improvement during the March 2004 quarter reflected
         a project finance charge-off, and lower delinquency in the
         telecommunications and media portfolios.

      o  Specialty Finance -- consumer delinquency was up in dollar amount but
         down as a percentage of finance receivables from 2003, reflecting a
         return to on-balance growth in the home equity portfolio. However,
         consumer delinquency on a managed basis has been relatively stable in
         percentage terms over the periods presented.

      Non-performing  assets also  declined for the sixth  consecutive  quarter,
reflecting the same trends  discussed above.  Non-performing  telecommunications
accounts (in Structured Finance) totaled $65.7 million,  $57.2 million and $85.5
million at March 31, 2004, December 31, 2003, and March 31, 2003, respectively.

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



                                                     March 31, 2004     December 31, 2003      March 31, 2003
                                                    ----------------    -----------------     -----------------
                                                                                        
Past Dues:
   Specialty Finance-- commercial..............     $273.7     2.35%    $  321.2    2.77%     $  343.0    3.04%
   Commercial Finance..........................      107.2     1.02%       105.9    1.03%        152.8    1.76%
   Equipment Finance...........................      199.1     2.09%       243.6    2.49%        466.7    4.50%
   Capital Finance.............................       10.7     0.98%         9.5    0.87%         74.0    6.05%
   Structured Finance..........................       32.9     1.12%        47.0    1.59%         55.2    1.89%
                                                    ------              --------              --------
   Total Commercial............................      623.6     1.74%       727.2    2.04%      1,091.7    3.16%
   Specialty Finance-- consumer................      304.2     4.68%       294.8    4.78%        269.6    4.64%
                                                    ------              --------              --------
   Total.......................................     $927.8     2.20%    $1,022.0    2.44%     $1,361.3    3.38%
                                                    ======              ========              ========


      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.

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).



                                                                                   Quarters Ended March 31,
                                                                                   ------------------------
                                                                                    2004              2003
                                                                                   ------            ------
                                                                                            
Efficiency ratio..........................................................            41.1%            41.7%
Salaries and general operating expenses as a percentage of AMA............            2.15%            2.01%
Salaries and general operating expenses...................................        $  247.3         $  225.6
Average Managed Assets....................................................       $46,104.0        $44,967.8


      Salaries and general  operating  expenses for the quarter  ended March 31,
2004   increased   from  the  prior  year  quarter   primarily   due  to  higher
incentive-based  compensation,  including  restricted stock awards,  acquisition
activities,  and higher corporate expenses reflecting  increased  governance and
compliance-related  costs.  Personnel  decreased to approximately 5,795 at March
31, 2004, from 5,845 at March 31, 2003.

      Beginning  with the March  2004  quarter,  we made a  reporting  change to
reclassify debt commissions from general  operating  expense to interest expense
to reflect  all-in  funding  costs in margin.  This  change was also made in the
historical  comparative data and does not impact net income. As a result of this
change,  prior year  salaries  and general  operating  expenses  were reduced by
approximately  $8 million and are roughly 7 basis  points lower (as a percentage
of AMA) than historically reported ratios.

      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.


                                       30


Gain on Redemption of Debt

      In January 2004 and December  2003, we called at par $1.25 billion of term
debt  securities.  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 8.25% and 8.125%,  but were
marked  down to a  market  interest  rate  yield  of  approximately  7.5% in our
financial  statements through purchase  accounting.  In light of the high coupon
rates, we called the securities for redemption pursuant to the terms outlined in
the prospectuses. The call of the $512 million on January 15, 2004 resulted in a
pretax gain of $41.8 million  ($25.5  million  after tax).  The December call of
$735 million  resulted in a pretax gain of $50.4  million  ($30.8  million after
tax) during the fourth quarter of 2003.

Income Taxes

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

                                                    Quarters Ended March 31,
                                                    ------------------------
                                                     2004              2003
                                                    ------            ------
Provision for income taxes......................     $121.1            $82.9
Effective tax rate..............................       39.0%            39.0%

      The effective tax rate exceeds the U.S.  Federal tax rate of 35% primarily
due to state and local and foreign income taxes.

      At  March  31,  2004,  CIT  had  U.S.  federal  net  operating  losses  of
approximately $1,937.7 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  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, we do 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.  During the  quarter,  we  completed  processes  and
developed  the data for  preparing 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 the
tax basis balance sheet analysis is nearing completion. Future income tax return
filings and the completion of the aforementioned analysis of deferred tax assets
and liabilities  could result in  reclassifications  amongst deferred tax assets
and liabilities.


                                       31


Results by Business Segment

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

                                                    Quarters Ended March 31,
                                                    ------------------------
                                                     2004              2003
                                                    ------            ------
Net Income
Specialty Finance...............................     $ 78.2           $ 52.2
Commercial Finance..............................       60.6             54.1
Equipment Finance...............................       15.2             10.7
Capital Finance.................................       19.0              7.7
Structured Finance..............................       10.1             12.2
                                                     ------           ------
  Total Segments................................      183.1            136.9
Corporate, including certain charges............        6.2             (9.9)
                                                     ------           ------
  Total.........................................     $189.3           $127.0
                                                     ======           ======
Return on AEA
Specialty Finance...............................       2.47%            1.75%
Commercial Finance..............................       3.62%            3.58%
Equipment Finance...............................       0.88%            0.60%
Capital Finance.................................       1.04%            0.50%
Structured Finance..............................       1.31%            1.63%
  Total Segments................................       1.99%            1.60%
Corporate, including certain charges............       0.06%           (0.13)%
  Total.........................................       2.05%            1.47%

      For all periods  shown,  Corporate  includes the operating  results of the
venture  capital  business   including  gains  and  losses  of  venture  capital
investments  (losses of $3.8 million and $8.9 million after tax for the quarters
ended March 31, 2004 and 2003) and unallocated corporate operating expenses. For
the quarter ended March 31, 2004,  Corporate also includes the gain on the early
redemption of debt ($25.5 million after tax).

      Noteworthy trends by segment are as follows:

      o     Specialty  Finance  profitability  showed  broad  based  improvement
            across the vendor finance  business,  Small Business Lending and the
            small-ticket leasing businesses.

      o     Commercial   Finance  earnings  remained  strong,   benefiting  from
            continued high returns in both the factoring and asset-based lending
            businesses. The current year results also benefited from last year's
            factoring acquisitions.

      o     Equipment   Finance   returns,   while  still   below   management's
            expectations,   improved  from  the  prior  year,  reflecting  lower
            charge-offs and higher equipment gains.

      o     Capital Finance earnings reflected improved aerospace  profitability
            due to higher asset levels and increased aircraft equipment gains.

      o     Structured Finance returns for 2004 were below the prior year due to
            increased project finance charge-offs.  Results continued to benefit
            from strong fee activity.

      In April 2004, we initiated  the  combination  of Structured  Finance into
Capital  Finance,  and the transfer of the  Communication  and Media business of
Structured Finance to the Business Credit unit of Commercial Finance.  This will
better align our business with the markets that we serve.

                                       32


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).



                                                                                             Percentage Change
                                                                                        --------------------------
                                              March 31,    December 31,     March 31,   March 04 vs.   March 04 vs.
                                                2004           2003           2003         Dec. 03      March 03
                                              ---------    ------------     ---------   -----------    ------------
Specialty Finance
Commercial
                                                                                           
   Finance receivables...................     $ 7,135.6     $ 7,150.0      $ 7,201.5       (0.2)%          (0.9)%
   Operating lease equipment, net........         919.1         959.5        1,227.6       (4.2)%         (25.1)%
   Finance receivables held for sale.....         737.1         548.1          899.6       34.5%          (18.1)%
                                              ---------     ---------      ---------
     Owned assets........................       8,791.8       8,657.6        9,328.7        1.6%           (5.8)%
   Finance receivables securitized
     and managed by CIT..................       3,769.0       3,915.4        3,191.7       (3.7)%          18.1%
                                              ---------     ---------      ---------
     Managed assets......................      12,560.8      12,573.0       12,520.4       (0.1)%           0.3%
                                              ---------     ---------      ---------
Consumer
   Finance receivables-- home equity.....       3,315.1       2,664.3        1,391.3       24.4%          138.3%
   Finance receivables-- other...........         791.2         846.5          995.8       (6.5)%         (20.5)%
   Finance receivables held for sale.....         150.0         150.0          210.0         --           (28.6)%
                                              ---------     ---------      ---------
     Owned assets........................       4,256.3       3,660.8        2,597.1       16.3%           63.9%
   Home equity finance receivables
     securitized and managed by CIT......       1,651.9       1,867.6        2,358.6      (11.5)%         (30.0)%
   Other finance receivables securitized
     and managed by CIT..................         593.6         642.5          860.2       (7.6)%         (31.0)%
                                              ---------     ---------      ---------
     Managed assets......................       6,501.8       6,170.9        5,815.9        5.4%           11.8%
                                              ---------     ---------      ---------
Commercial Finance
Commercial Services
   Finance receivables...................       6,450.0       6,325.8        4,726.1        2.0%           36.5%
Business Credit
   Finance receivables...................       4,105.9       3,936.1        3,956.6        4.3%            3.8%
                                              ---------     ---------      ---------
     Owned assets........................      10,555.9      10,261.9        8,682.7        2.9%           21.6%
                                              ---------     ---------      ---------
Equipment Finance
   Finance receivables...................       6,367.0       6,317.9        6,237.4        0.8%            2.1%
   Operating lease equipment, net........         385.6         419.6          527.4       (8.1)%         (26.9)%
   Finance receivables held for sale.....         119.1         220.2          163.4      (45.9)%         (27.1)%
                                              ---------     ---------      ---------
     Owned assets........................       6,871.7       6,957.7        6,928.2       (1.2)%          (0.8)%
   Finance receivables securitized
     and managed by CIT..................       3,052.5       3,226.2        3,977.2       (5.4)%         (23.3)%
                                              ---------     ---------      ---------
     Managed assets......................       9,924.2      10,183.9       10,905.4       (2.6)%          (9.0)
                                              ---------     ---------      ---------
Capital Finance
   Finance receivables...................       1,087.1       1,097.4        1,223.7       (0.9)%         (11.2)%
   Operating lease equipment, net........       6,142.1       6,103.8        4,973.0        0.6%           23.5%
                                              ---------     ---------      ---------
     Owned assets........................       7,229.2       7,201.2        6,196.7        0.4%           16.7%
                                              ---------     ---------      ---------
Structured Finance
   Finance receivables...................       2,935.5       2,962.2        2,922.2       (0.9)%           0.5%
   Operating lease equipment, net........         129.4         132.6          103.4       (2.4)%          25.1%
                                              ---------     ---------      ---------
     Owned assets........................       3,064.9       3,094.8        3,025.6       (1.0)%           1.3%
                                              ---------     ---------      ---------
Other-- Equity Investments...............         251.8         249.9          334.3        0.8%          (24.7)%
                                              ---------     ---------      ---------
   Total Managed Assets..................     $50,088.6     $49,735.6      $47,481.0        0.7%            5.5%
                                              =========     =========      =========
Finance receivables......................     $32,187.4     $31,300.2      $28,654.6        2.8%           12.3%
Operating lease equipment, net...........       7,576.2       7,615.5        6,831.4       (0.5)%          10.9%
Finance receivables held for sale........       1,006.2         918.3        1,273.0        9.6%          (21.0)%
                                              ---------     ---------      ---------
Financing and leasing assets excluding
   equity investments....................      40,769.8      39,834.0       36,759.0        2.3%           10.9%
Equity investments (included in
   other assets).........................         251.8         249.9          334.3        0.8%          (24.7)%
                                              ---------     ---------      ---------
   Owned assets..........................      41,021.6      40,083.9       37,093.3        2.3%           10.6%
Finance receivables securitized and
   managed by CIT........................       9,067.0       9,651.7       10,387.7       (6.1)%         (12.7)%
                                              ---------     ---------      ---------
   Total Managed Assets..................     $50,088.6     $49,735.6      $47,481.0        0.7%            5.5%
                                              =========     =========      =========



                                       33


      The increase in owned assets from 2003 was driven by: the combination of a
strong mortgage  refinancing  market and  acquisitions in the Specialty  Finance
home equity portfolio;  two factoring  acquisitions in Commercial Services;  and
deliveries of aerospace  assets in Capital  Finance.  The decline in receivables
securitized reflects our return to funding home equity growth on balance sheet.

      The table below summarizes the targeted  non-strategic  business lines. 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  ($  in
millions):



                                                                  March 31,      December 31,      March 31,
                                                                    2004             2003            2003
                                                                  ---------      ------------      ---------
                                                                                           
Portfolio
Manufactured housing......................................          $578             $584           $  613
Recreational vehicle......................................            52               58               51
Recreational marine.......................................            79               86              114
Wholesale inventory finance...............................            --                2                4
Franchise finance.........................................            98              102              316
Owner-operator trucking...................................            67               91              184
                                                                    ----             ----           ------
  Total on-balance sheet financing and leasing assets.....          $874             $923           $1,282
                                                                    ====             ====           ======


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

                                                     Quarters Ended March 31,
                                                     ------------------------
                                                      2004              2003
                                                     ------            ------
Specialty Finance...............................    $3,575.9         $3,073.0
Commercial Finance..............................       374.0            227.0
Equipment Finance...............................       922.1            828.9
Capital Finance.................................       102.0            280.5
Structured Finance..............................       242.8            100.2
                                                    --------         --------
  Total new business volume.....................    $5,216.8         $4,509.6
                                                    ========         ========

      New  origination  volume for the quarter  ended  March 31,  2004  included
stronger  volume from our Specialty  Finance vendor finance,  international  and
home equity units, as well as improved demand for financing in Equipment Finance
and  working  capital  financings  in the  Business  Credit  unit of  Commercial
Finance.


                                       34


Concentrations

Ten Largest Accounts

      Our ten largest  financing  and leasing  asset  accounts in the  aggregate
represented  5.5% of our total  financing  and leasing  assets at March 31, 2004
(the largest account being less than 1.0%),  5.2% at December 31, 2003, and 5.0%
at March 31, 2003.

Leveraged Leases

      As of March 31, 2004,  net  investments  in leveraged  leases totaled $1.1
billion,  or 3.5% of finance  receivables,  with the major  components being (i)
$453.9 million in commercial aerospace transactions, including $218.9 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)  $325.3  million of project  finance  transactions,
primarily  in the power and utility  sector;  and (iii)  $227.8  million in rail
transactions.

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 March 31, 2004,  our financing  and leasing  assets  included  $1,587.4
million,  $1,099.1  million and $770.1 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 $2,408.5 million,  $70.8 million and $669.5 million
from the Dell, Snap-on and Avaya origination sources, respectively.

      A significant reduction in origination volumes from any of these alliances
could have a material impact on our asset and net income levels.  For additional
information  regarding  certain of our joint venture  activities,  see Note 8 --
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 March 31, 2004,  December 31, 2003 and March 31,
2003. For each period  presented,  our managed asset geographic  composition did
not differ significantly from our owned asset geographic composition.

                                      March 31,   December 31,   March 31,
                                        2004          2003         2003
                                      ---------   ------------   ---------
State
   California......................     10.3%        10.2%          9.7%
   Texas...........................      7.8%         7.7%          7.5%
   New York........................      6.6%         7.4%          6.9%
Total United States................     79.8%        79.3%         79.6%
Country
   Canada..........................      4.9%         5.1%          5.0%
   England.........................      2.6%         2.8%          3.3%
   Australia.......................      1.4%         1.3%          1.3%
   Germany.........................      1.1%         1.0%          1.0%
   Mexico..........................      1.1%         1.0%          (1)
   France..........................      1.0%         1.1%          1.0%
   China...........................      (1)          (1)           1.2%
   Brazil..........................      (1)          (1)           1.0%
Total Outside U.S..................     20.2%        20.7%         20.4%

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


                                       35


Industry Composition

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

Aerospace

      At March 31, 2004, our commercial  aerospace  portfolio in Capital Finance
consists of  financing  and  leasing  assets of $4,700.9  million  covering  209
aircraft,  with an average age of approximately 7 years (based on a dollar value
weighted average). The portfolio was comprised of 85 accounts, with the majority
placed with major airlines around the world. The commercial  aerospace portfolio
at December 31, 2003 was $4,716.1 million of financing and leasing assets, which
included  209  aircraft  and  84  customers,  with  a  weighted  average  age of
approximately 6 years.  The commercial  aircraft all comply with stage III noise
regulations.

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



                                              March 31, 2004        December 31, 2003       March 31, 2003
                                            -------------------    -------------------    -------------------
                                                Net                    Net                    Net
                                            Investment   Number    Investment   Number    Investment   Number
                                            ----------   ------    ----------   ------    ----------   ------
                                                                                       
Commercial Aerospace Portfolio:
By Region:
   Europe................................    $1,994.8       66       $1,991.0     65       $1,537.4       51
   North America(1)......................     1,001.7       72        1,029.7     72        1,110.1       78
   Asia Pacific..........................     1,040.8       40        1,013.6     40          886.5       36
   Latin America.........................       606.5       28          612.7     28          572.5       26
   Africa/Middle East....................        57.1        3           69.1      4           73.2        4
                                             --------      ---       --------    ---       --------      ---
Total....................................    $4,700.9      209       $4,716.1    209       $4,179.7      195
                                             ========      ===       ========    ===       ========      ===
By Manufacturer:
   Boeing................................    $2,577.0      140       $2,581.7    140       $2,514.2      138
   Airbus................................     2,104.8       57        2,114.6     57        1,640.8       42
   Other.................................        19.1       12           19.8     12           24.7       15
                                             --------      ---       --------    ---       --------      ---
Total....................................    $4,700.9      209       $4,716.1    209       $4,179.7      195
                                             ========      ===       ========    ===       ========      ===
By Body Type(2):
   Narrow body...........................    $3,416.5      159       $3,415.7    159       $2,909.8      144
   Intermediate body.....................       866.5       18          877.0     18          871.6       18
   Wide body.............................       398.8       20          403.6     20          373.6       18
   Other.................................        19.1       12           19.8     12           24.7       15
                                             --------      ---       --------    ---       --------      ---
Total....................................    $4,700.9      209       $4,716.1    209       $4,179.7      195
                                             ========      ===       ========    ===       ========      ===


--------------------------------------------------------------------------------
(1)   Comprised of net  investments in the U.S. and Canada of $781.2 million (65
      aircraft)  and  $220.5  million (7  aircraft)  at March 31,  2004,  $822.7
      million (66  aircraft)  and $207.0  million (6  aircraft)  at December 31,
      2003,  and $902.0 million (72 aircraft) and $208.1 million (6 aircraft) at
      March 31. 2003, 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 March 31,  2004,  operating  leases  were  approximately  85% of the
portfolio,  with the remainder consisting of capital leases (including leveraged
leases) and loans.  Total  leveraged  leases were $453.9  million or 9.7% of the
aerospace  portfolio  including tax  optimization  structures  of  approximately
$218.9 million. Of the 209 aircraft,  four are off-lease,  one of which has been
remarketed  with a lease  pending as of March 31, 2004.  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 $1,057.7 million at
March 31,  2004,  the largest of which was $266.6  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 $160.8  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.


                                       36


      The regional  aircraft  portfolio at March 31, 2004 consists of 119 planes
with a net investment of $291.7 million,  relatively unchanged from December 31,
2003,  and is  concentrated  primarily in Structured  Finance.  The carriers are
primarily  located in North  America and Europe.  Operating  leases  account for
about 43% of the  portfolio,  with the rest capital  leases or loans.  There are
currently 13 aircraft  off-lease with a total book value of approximately  $51.3
million.

      The following is a list of our exposure to bankrupt aerospace carriers and
the current status of the related aircraft at March 31, 2004.

      o     UAL Corp. -- United Airlines leases 4 CIT-owned narrow body aircraft
            (2  Boeing  757  aircraft  and 2  Boeing  737  aircraft)  with a net
            investment of $85.8 million.

      o     Avianca Airlines -- Lessee of one MD 80 aircraft and one Boeing 757,
            with a combined net investment of $31.9 million.

      o     Air Canada -- Our net investment in aircraft is approximately  $49.1
            million,  relating to one Boeing 767  aircraft  which was  converted
            from  an  investment  in  a  non-accrual   leveraged  lease  (not  a
            tax-optimized  structure)  to a  performing  operating  lease during
            2003, and a $1.8 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.  By agreement
            with  Sobelair's  trustee,  we took possession of our two Boeing 737
            aircraft on  operating  lease with the carrier in January  2004.  We
            have  leased one  aircraft  and have  agreed to lease  terms for the
            other aircraft.

      Additionally,   we  hold  Senior  A  tranche   Enhanced   Equipment  Trust
Certificates  ("EETCs")  issued by United  Airlines,  which are debt instruments
collateralized by aircraft  operated by the airline,  with a fair value of $45.7
million.  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 $25.8  million at March 31,  2004,  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.  Commercial  aerospace
equipment  utilization is high,  with only four aircraft  off-lease at March 31,
2004  (one of which  has a letter  of intent  signed),  which  demonstrates  our
ability to place aircraft.  However, current placements are at compressed rental
rates,  which reflects current market  conditions.  Generally,  leases are being
written for terms between three and five years.  See table in "Risk  Management"
section for additional  information regarding commitments to purchase additional
aircraft.


                                       37


Equity and Venture Capital Investments

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



                                                                        March 31,    December 31,    March 31,
                                                                          2004           2003          2003
                                                                        ---------    ------------    ---------
                                                                                             
Equity and Venture Capital Investments:
   Total investment balance......................................        $251.8         $249.9        $334.3
   Direct investments............................................        $100.6         $101.1        $179.6
   Number of companies...........................................            47             47            57
   Private equity funds..........................................        $151.2         $148.8        $154.7
   Number of funds...............................................            52             52            52
   Remaining fund and equity commitments.........................        $117.1         $124.2        $153.7


      See Note 4 -- Concentrations for further discussion on concentrations.

Other Assets

      Other  assets  totaled  $2.9 billion at March 31, 2004 and $3.3 billion at
December  31,  2003.  The  decline  in other  assets is  primarily  due to lower
receivables from derivative counterparties in 2004.

      Other  assets  primarily  consisted  of the  following  at March 31, 2004:
investments  in and  receivables  from  non-consolidated  subsidiaries  of  $0.7
billion, accrued interest and receivables from derivative counterparties of $0.4
billion,  deposits on  commercial  aerospace  flight  equipment of $0.3 billion,
direct and private fund equity investments of $0.3 billion,  prepaid expenses of
$0.1 billion and repossessed assets and off-lease equipment of $0.1 billion. The
remaining balance includes furniture and fixtures, miscellaneous receivables and
other assets.

Risk Management

      Our risk management process is described in more detail in our 2003 Annual
Report on Form 10-K.

      Interest Rate Risk Management -- We monitor our interest rate  sensitivity
on a regular  basis by  analyzing  the impact of interest  rate changes upon the
financial  performance  of the business.  We also  consider  factors such as the
strength  of  the  economy,   customer   prepayment   behavior  and   re-pricing
characteristics of our assets and liabilities.

      We evaluate and monitor various risk metrics:

      o     Value at Risk (VAR), which measures the net economic value of assets
            by assessing the duration of assets and liabilities.

      Our asset portfolio is generally comprised of loans and leases of short to
intermediate  term.  As such,  the duration of our asset  portfolio is generally
less than three years.  We target to closely match the duration of our liability
portfolio with that of our asset  portfolio.  As of March 31, 2004 our liability
portfolio  duration was slightly  longer than our asset  portfolio  duration.

      o     Margin at Risk (MAR), which measures the impact of changing interest
            rates upon interest income over the subsequent twelve months.

      At the date that interest rate sensitivity is modeled, 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. Market interest rates are then
raised 100 basis points  instantaneously  and  parallel  across the entire yield
curve, and a "rate shocked" simulation is run.

      An immediate  hypothetical 100 basis point parallel  increase in the yield
curve on April 1, 2004  modeled  against  interest  rate  sensitive  assets  and
liabilities  as shown in the table below would reduce net income by an estimated
$15 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. Although
management  believes that this measure provides an estimate of our interest rate
sensitivity,   there  are  certain  limitations  inherent  in  this  sensitivity
analysis,  as it is  unlikely  that rate  movements  would be  instantaneous  or
parallel,  nor would our assets and debt reprice immediately.  Additionally,  it
does not consider any potential remedial actions that management could take such
as the  pre-funding of liabilities  and other business  developments  consistent
with an  increasing  rate  environment  that may affect net income,  for example
asset


                                       38


growth and changes to our liability durations.  Further, it does not account for
potential  changes in the  credit  quality,  size,  composition  and  prepayment
characteristics  of the balance  sheet.  Accordingly,  no assurance can be given
that actual results would not differ  materially from the estimated  outcomes of
our simulations.  Such simulations do not represent management's current view of
future market interest rate movements.

      The following table  summarizes the composition of our interest  sensitive
assets (including  operating leases) and liabilities  (excluding  equity) before
and after derivatives:

                            Before Derivatives            After Derivatives
                        --------------------------    --------------------------
                        Fixed Rate   Floating Rate    Fixed Rate   Floating Rate
                        ----------   -------------    ----------   -------------
    March 31, 2004
Assets................      56%           44%             56%           44%
Liabilities...........      61%           39%             48%           52%

  December 31, 2003
Assets................      57%           43%             57%           43%
Liabilities...........      63%           37%             49%           51%

      Total  interest  sensitive  assets were $37.9 billion and $36.7 billion at
March 31, 2004 and December 31, 2003, while total interest sensitive liabilities
were $32.6  billion and $31.5  billion at March 31, 2004 and  December 31, 2003.
Certain  December 31, 2003 amounts have been  adjusted to conform to the current
period presentation.

      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.,  Canada and  Australia),  long-term
debt (U.S. and International) and asset-backed securities (U.S. and Canada).

      Outstanding  commercial  paper  totaled $4.8 million at March 31, 2004 and
$4.2  billion at December 31, 2003.  Our targeted  U.S.  program size remains at
$5.0  billion  with  modest  foreign  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.  Consistent  with our
liquidity  management strategy to extend our maturity profile, on April 14, 2004
we retired a $2.0 billion bank facility due in March 2005,  and $2.1 billion due
in October 2004,  and we negotiated  two new $2.1 billion  facilities  due April
2009 and April 2005. CIT now has aggregate U.S. bank  facilities of $6.3 billion
with $4.2 billion in multi-year facilities.

      CIT maintains  registration  statements  with the  Securities and Exchange
Commission  ("SEC") covering debt securities that we may sell in the future.  At
March 31, 2004, we had $7.4 billion of registered, but unissued, debt securities
available  under a shelf  registration  statement.  Term-debt  issued during the
quarter totaled $2.8 billion:  $1.5 billion in variable-rate  medium-term  notes
and $1.3 billion in fixed-rate notes.

      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  predominantly  in the  U.S.,  we  also  maintain
facilities  for  Canadian  domiciled  assets.  As of  March  31,  2004,  we  had
approximately  $3.7  billion  of  availability  in  our  committed  asset-backed
facilities,  including $1.0 billion relating to our trade  receivable  facility,
and $2.9 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.



                                                                                      March 31,    December 31,
Liquidity Measurement                                            Current Target         2004           2003
---------------------                                            --------------       ---------    ------------
                                                                                              
Commercial paper to total debt.............................      Maximum of 15%          14%           13%
Short-term debt to total debt..............................      Maximum of 45%          39%           36%
Bank lines to short-term debt..............................      Minimum of 45%          76%           76%
Aggregate alternate liquidity* to short-term debt..........      Minimum of 75%          86%           93%


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


                                       39


      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 of $4.0 billion.

      The following tables summarize various contractual  obligations,  selected
contractual cash receipts and contractual commitments as of March 31, 2004 ($ in
millions):



                                                      Contractual Payments and Collections by Period
                                           --------------------------------------------------------------------
                                            Total(3)     2004        2005       2006        2007        2008+
                                           ---------   ---------   ---------   --------   ---------   ---------
                                                                                    
Commercial Paper........................   $ 4,820.2   $ 4,820.2   $      --   $     --   $      --   $      --
Variable-rate term debt.................     9,170.7     3,112.3     3,350.8    1,451.3     1,042.1       214.2
Fixed-rate term debt....................    19,829.8     2,742.1     4,251.2    2,619.3     3,467.6     6,749.6
Preferred securities....................       255.1          --          --         --          --       255.1
Lease rental expense....................       162.9        37.5        42.6       30.8        24.2        27.8
                                           ---------   ---------   ---------   --------   ---------   ---------
   Total contractual obligations........    34,238.7    10,712.1     7,644.6    4,101.4     4,533.9     7,246.7
                                           ---------   ---------   ---------   --------   ---------   ---------
Finance receivables(1)..................    32,187.4    10,555.9     4,765.5    3,767.3     2,488.1    10,610.6
Operating lease rental income...........     2,522.4       641.1       645.5      442.7       280.2       512.9
Finance receivables held for sale(2)....     1,006.2     1,006.2          --         --          --          --
Cash-- current balance..................     1,356.5     1,356.5          --         --          --          --
Retained interest in securitizations....     1,364.6       527.5       367.8      212.2       131.3       125.8
                                           ---------   ---------   ---------   --------   ---------   ---------
   Total projected cash availability....    38,437.1    14,087.2     5,778.8    4,422.2     2,899.6    11,249.3
                                           ---------   ---------   ---------   --------   ---------   ---------
Net projected cash inflow (outflow).....   $ 4,198.4   $ 3,375.1   $(1,865.8)  $  320.8   $(1,634.3)  $ 4,002.6
                                           =========   =========   =========   ========   =========   =========


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



                                                              Commitment Expiration by Period
                                           --------------------------------------------------------------------
                                                                                                         After
                                              Total        2004       2005       2006       2007         2007
                                           ---------    --------    --------   --------    --------    --------
                                                                                     
Credit extensions.......................   $ 6,914.8    $1,428.8    $  754.0   $  940.4    $  776.0    $3,015.6
Aircraft purchases......................     2,889.0       715.0       918.0      996.0       260.0          --
Letters of credit.......................     1,230.8     1,135.7        21.5       73.2         0.2         0.2
Sale-leaseback payments.................       465.7         7.9        28.5       28.5        28.5       372.3
Manufacturer purchase commitments.......       206.7       206.7          --         --          --          --
Venture capital commitments.............       117.1         3.4         0.5         --         3.0       110.2
Guarantees..............................       109.9        97.5          --         --        10.5         1.9
Acceptances.............................        11.2        11.2          --         --          --          --
                                           ---------    --------    --------   --------    --------    --------
Total contractual commitments...........   $11,945.2    $3,606.2    $1,722.5   $2,038.1    $1,078.2    $3,500.2
                                           =========    ========    ========   ========    ========    ========



                                       40


Internal Controls

      The  Internal  Controls   Committee  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 have
entered the testing  phase.  Our  management  self-assessment  is targeted to be
completed during the second half of 2004.

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).

                                                   At or for the Quarters Ended
                                                             March 31,
                                                   ----------------------------
                                                       2004            2003
                                                     --------       ---------
Securitized Assets:
Specialty Finance-- commercial...................    $3,769.0       $ 3,191.7
Specialty Finance-- consumer.....................     2,245.5         3,218.8
Equipment Finance................................     3,052.5         3,977.2
                                                     --------       ---------
Total securitized assets.........................    $9,067.0       $10,387.7
                                                     ========       =========
Securitized assets as a % of managed assets......        18.1%           21.9%
                                                     ========       =========
Volume Securitized:
Specialty Finance-- commercial...................    $  963.3        $  409.3
Specialty Finance-- consumer.....................          --           367.1
Equipment Finance................................       273.1           461.0
                                                     ========       =========
Total volume securitized.........................    $1,236.4       $ 1,237.4
                                                     ========       =========

      Our securitization activity relating to commercial finance receivables was
$1.2  billion,  as the  economics  remained  favorable to complete  these sales.
During the  second  half of 2003 we decided  to grow the  consumer  home  equity
portfolio on-balance sheet.

      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


                                       41


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.

      The key assumptions  used in measuring the retained  interests at the date
of securitization for transactions  completed during the quarter ended March 31,
2004 were as follows:

                                                         Commercial Equipment
                                                      -------------------------
                                                      Specialty       Equipment
                                                       Finance         Finance
                                                      ---------       ---------
Weighted average prepayment speed...............       40.10%          11.62%
Weighted average expected credit losses.........        0.44%           0.84%
Weighted average discount rate..................        6.82%           9.00%
Weighted average life (in years)................        1.25            1.84

      Key  assumptions  used in  calculating  the  fair  value  of the  retained
interests  in  securitized  assets by  product  type at March  31,  2004 were as
follows:



                                                 Commercial Equipment                  Consumer
                                                ----------------------      -------------------------------
                                                                            Home Equity and    Recreational
                                                Specialty    Equipment       Manufactured      Vehicles and
                                                 Finance      Finance           Housing            Boat
                                                ---------    ---------      ---------------    ------------
                                                                                      
Weighted average prepayment speed.........        25.68%       13.38%            26.27%           17.77%
Weighted average expected credit losses...         1.13%        1.50%             1.33%            1.13%
Weighted average discount rate............         7.92%        9.76%            13.09%           14.18%
Weighted average life (in years)..........         1.08         1.40              3.08             3.04


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

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 $2.8
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  totaling  $2.8  billion in
notional amount at March 31, 2004.

      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 disclosure in Item 1. Financial  Statements,  Note 8 --
Certain Relationships and Related Transactions.


                                       42


Capitalization

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



                                                                                    March 31,       December 31,
                                                                                      2004              2003
                                                                                    ---------       ------------
                                                                                               
Commercial paper................................................................    $ 4,820.2        $ 4,173.9
Term debt.......................................................................     29,000.5         29,239.2
Preferred Capital Securities....................................................        255.1            255.5
Stockholders' equity(1).........................................................      5,584.3          5,427.8
                                                                                    ---------        ---------
Total capitalization............................................................     39,660.1         39,096.4
Goodwill and other intangible assets............................................       (485.5)          (487.7)
                                                                                    ---------        ---------
Total tangible capitalization...................................................    $39,174.6        $38,608.7
                                                                                    =========        =========
Tangible stockholders' equity(1) and Preferred Capital Securities
  to managed assets.............................................................        10.69%           10.45%
Total debt (excluding overnight deposits) to tangible stockholders'
  equity(1) and Preferred Capital Securities....................................         6.15x            6.14x


--------------------------------------------------------------------------------
(1)   Stockholders'  equity  excludes  the impact of the  accounting  change for
      derivative financial  instruments  described in Note 7 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."

      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.

      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.  We consider  accounting
estimates  relating to the  following to be critical in applying our  accounting
policies:

      o     Investments

      o     Charge-off of Finance Receivables

      o     Impaired Loans

      o     Reserve for Credit Losses

      o     Retained Interests in Securitizations

      o     Lease Residual Values

      o     Goodwill

      o     Deferred Income Taxes

      There have been no significant  changes to the methodologies and processes
used in developing  estimates  relating to these items from what is described in
our 2003 Annual Report on Form 10-K.


                                       43


Statistical Data

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



                                                                        Quarters Ended March 31,
                                                                        ------------------------
                                                                           2004          2003
                                                                        ----------    ----------
                                                                                 
Finance income.....................................................           9.80%        10.86%
Interest expense...................................................           3.23%         4.11%
                                                                         ---------     ---------
  Net finance income...............................................           6.57%         6.75%
Depreciation on operating lease equipment..........................           2.55%         3.22%
                                                                         ---------     ---------
  Net finance margin...............................................           4.02%         3.53%
Provision for credit losses........................................           0.93%         1.19%
                                                                         ---------     ---------
Net finance margin after provision for credit losses...............           3.09%         2.34%
Other revenue......................................................           2.50%         2.77%
Gain (loss) on venture capital investments.........................           0.01%        (0.05)%
                                                                         ---------     ---------
Operating margin...................................................           5.60%         5.06%
                                                                         ---------     ---------
Salaries and general operating expenses............................           2.68%         2.60%
Gain on redemption of debt.........................................           0.45%           --
                                                                         ---------     ---------
Income (loss) before provision for income taxes....................           3.37%         2.46%
Provision for income taxes.........................................          (1.32)%       (0.96)%
Dividends on preferred capital securities, after tax...............             --         (0.03)%
                                                                         ---------     ---------
  Net income (loss)................................................           2.05%         1.47%
                                                                         =========     =========
Average Earning Assets.............................................      $36,865.1     $34,600.6
                                                                         =========     =========


Non-GAAP Financial Measurements

      The 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,  are used by management in its analysis 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.


                                       44


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



                                                                       March 31,    December 31,   March 31,
                                                                         2004           2003         2003
                                                                       ---------    ------------   ---------
                                                                                          
Managed assets(1):
Finance receivables..........................................          $32,187.4     $31,300.2     $28,654.6
Operating lease equipment, net...............................            7,576.2       7,615.5       6,831.4
Finance receivables held for sale............................            1,006.2         918.3       1,273.0
Equity and venture capital investments (included in other assets)          251.8         249.9         334.3
                                                                       ---------     --------     ---------
Total financing and leasing portfolio assets.................           41,021.6      40,083.9      37,093.3
Securitized assets...........................................            9,067.0       9,651.7      10,387.7
                                                                       ---------     --------     ---------
Managed Assets...............................................          $50,088.6     $49,735.6     $47,481.0
                                                                       =========     =========     =========
Earning assets(2):
Total financing and leasing portfolio assets.................          $41,021.6     $40,083.9     $37,093.3
Credit balances of factoring clients.........................           (3,619.4)     (3,894.6)     (2,437.9)
                                                                       ---------     ---------     ---------
Earning assets...............................................          $37,402.2     $36,189.3     $34,655.4
                                                                       =========     =========     =========
Tangible equity(3):
Total equity.................................................          $ 5,492.7     $ 5,394.2     $ 4,996.6
Other comprehensive loss relating to derivative financial
instruments..................................................              102.9          41.3          92.6
Unrealized gain on securitization investments................              (11.3)         (7.7)        (12.5)
Goodwill and intangible assets...............................             (485.5)       (487.7)       (399.8)
                                                                       ---------     ---------     ---------
Tangible common equity.......................................            5,098.8       4,940.1       4,676.9
Preferred capital securities.................................              255.1         255.5         256.8
                                                                       ---------     ---------     ---------
Tangible equity..............................................          $ 5,353.9     $ 5,195.6     $ 4,933.7
                                                                       =========     =========     =========
Debt, net of overnight deposits(4):
Total Debt...................................................          $34,075.8     $33,668.6     $32,551.8
Overnight deposits...........................................             (884.0)     (1,529.4)     (1,432.5)
Preferred capital securities.................................             (255.1)       (255.5)           --
                                                                       ---------     ---------     ---------
Debt, net of overnight deposits..............................          $32,936.7     $31,883.7     $31,119.3
                                                                       =========     =========     =========
Earnings per share, excluding certain items(5)
GAAP Earnings per share......................................          $    0.88     $    0.72     $    0.60
Gain on debt redemption......................................              (0.12)        (0.14)           --
Loss on venture capital investments..........................                 --          0.17          0.01
                                                                       ---------     ---------     ---------
Adjusted earnings per share..................................          $    0.76     $    0.75     $    0.61
                                                                       =========     =========     =========


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

(5)   The EPS related to the items listed are shown separately, as the items are
      not indicative of our on-going operations.


                                       45


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.


                                       46


Item 4. Controls and Procedures

      As of the end of the period covered by this report,  the Company evaluated
the  effectiveness  of the design and operation of its  disclosure  controls and
procedures.  The Company's  disclosure  controls and  procedures are designed to
ensure that the information  that the Company must disclose in its reports filed
under the  Securities  Exchange Act 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, during
the last  fiscal  quarter  covered  by this  report,  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.  During the  quarter,  we  completed  processes  and
developed  the data for  preparing 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 the
tax basis balance sheet analysis is nearing completion. Future income tax return
filings and the completion of the aforementioned analysis of deferred tax assets
and liabilities  could result in  reclassifications  amongst deferred tax assets
and liabilities.


                                       47


                           PART II. OTHER INFORMATION

Item 1. Legal Proceedings

      On April 10, 2003, a putative class action lawsuit, asserting claims under
the Securities  Act of 1933,  was filed in the United States  District Court for
the Southern  District of New York against CIT, its Chief Executive  Officer and
its  Chief  Financial  Officer.  The  lawsuit  contained  allegations  that  the
registration  statement and  prospectus  prepared and filed in  connection  with
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 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, has been 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 2. Common Stock Repurchase Activity

      The following  table details the  repurchase  activity of CIT common stock
during the  quarter  ($ in  millions,  except  average  price  which is in whole
dollars).

                                          Number of     Average
                                           Shares        Price      Amount
                                          ----------    -------     ------
Balance at December 31, 2003........         43,529      $35.48     $  1.5
                                           --------      ------     ------
Purchases related to exercise of
options and other benefit plans
   January..........................        544,000      $39.16       21.3
   February.........................        221,800      $38.46        8.5
   March............................        185,000      $39.12        7.3
                                           --------      ------     ------
   Total Purchases..................        950,800      $38.99       37.1
                                           --------      ------     ------
Re-issuances........................       (976,807)     $38.83      (37.9)
                                           --------      ------     ------
Balance at March 31, 2004...........         17,522      $39.08     $  0.7
                                           ========      ======     ======

      None of the above  activity  relates  to the  recently  announced  program
described below.

      On  April  21,  2004,  our  Board of  Directors  approved  a common  stock
repurchase  program  to acquire up to three  million  shares of our  outstanding
common stock. The program  authorizes the company to purchase shares on the open
market from time to time over a two-year  period  beginning  April 23, 2004. The
repurchased common stock will be held as treasury shares and may be used for the
issuance of shares  under CIT's  employee  stock plans.  Acquisitions  under the
share repurchase  program will be made from time to time at prevailing prices as
permitted  by  applicable  laws,  and  subject  to market  conditions  and other
factors. The program may be discontinued at any time and is not expected to have
a significant impact on our capitalization.


                                       48


Item 6. Exhibits and Reports on Form 8-K

      (a)         Exhibits

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

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

            4.1   Indenture  dated as of August 26,  2002 by and among CIT Group
                  Inc.,  Bank One Trust  Company,  N.A., as Trustee and Bank One
                  NA,  London   Branch,   as  London  Paying  Agent  and  London
                  Calculation   Agent,   for  the  issuance  of  unsecured   and
                  unsubordinated  debt securities  (incorporated by reference to
                  Exhibit 4.18 to Form 10-K filed by CIT on February 26, 2003).

            4.2   Form of 364-Day Credit Agreement,  dated as of April 14, 2004,
                  among  CIT  Group  Inc.,   the  several  banks  and  financial
                  institutions  named therein,  J.P. Morgan  Securities Inc. and
                  Banc of America  Securities  LLC, as joint lead  arrangers and
                  bookrunners, JPMorgan Chase Bank as administrative agent, Bank
                  of America, N.A. and Citibank,  N.A. as syndication agents and
                  Barclays Bank PLC as documentation agent.

            4.3   Form of 5-Year Credit  Agreement,  dated as of April 14, 2004,
                  among  CIT  Group  Inc.,   the  several  banks  and  financial
                  institutions  named therein,  J.P. Morgan  Securities Inc. and
                  Citigroup  Global  Markets Inc.,  as joint lead  arrangers and
                  bookrunners,  JPMorgan  Chase Bank, as  administrative  agent,
                  Bank of America, N.A. and Citibank, N.A. as syndication agents
                  and Barclays Bank PLC, as documentation agent.

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

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

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

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

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

      (b) Reports on Form 8-K

                  Current  Report on Form 8-K filed January 22, 2004,  reporting
                  (i) that CIT  declared a dividend of $0.13 per share,  payable
                  February  27, 2004 to  shareholders  of record on February 15,
                  2004, and (ii) the financial  results of CIT as of and for the
                  quarter and year ended December 31, 2003.


                                       49


                                   SIGNATURES

      Pursuant to the  requirements of the Securities  Exchange Act of 1934, the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.

                                   CIT GROUP INC.

                                   By:            /s/ Joseph M. Leone
                                       .........................................
                                                    Joseph M. Leone
                                       Vice Chairman and Chief Financial Officer

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

May 7, 2004


                                       50