================================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington D.C. 20594
                              ---------------------
                                   FORM 10-K/A
                                (AMENDMENT NO. 1)
                   ANNUAL REPORT PURSUANT TO SECTION 13 OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                              --------------------
For the Fiscal Year Ended December 31, 1998       Commission File Number 1-7543

                           FINOVA CAPITAL CORPORATION
             (Exact Name of Registrant as Specified in Its Charter)

                 Delaware
      (State or Other Jurisdiction of                   94-1278569
      Incorporation or Organization)       (I.R.S. Employer Identification No.)

  1850 North Central Ave., P. O. Box 2209
                Phoenix, AZ                                       85002-2209
  (Address of Principal Executive Offices)                        (Zip Code)


        Registrant's Telephone Number, Including Area Code - 602-207-4900

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

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

                                                     Name of Each Exchange
                  Title of Each Class                 on Which Registered
                  -------------------                 -------------------
             $175,000,000 Principal Amount           New York Stock Exchange
         of 9-1/8% Note Due February 27, 2002

Securities registered pursuant to Section 12(g) of the Act:
     NONE

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

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

As of May 5,  1999,  25,000  shares of  Common  Stock  ($1.00  par  value)  were
outstanding and held by an affiliate.

REGISTRANT  MEETS THE CONDITIONS SET FORTH IN GENERAL  INSTRUCTION I (1) (A) AND
(B) OF FORM 10-K AND IS THEREFORE  FILING THIS FORM WITH THE REDUCED  DISCLOSURE
FORMAT.

                       DOCUMENTS INCORPORATED BY REFERENCE
Document                                                 Part Where Incorporated
   None.

================================================================================
<PAGE>
                                TABLE OF CONTENTS
                                  Name of Item
                                  ------------
Item #                                                                     Page
--------------------------------------------------------------------------------
                                     Part I
Item 1    Business:
            Introduction                                                     1
            General                                                          1
              Business Groups                                                1
              Portfolio Composition                                          3
              Investment in Financing Transactions                           3
              Cost and Use of Borrowed Funds                                12
              Matched Funding Policy                                        12
              Credit Ratings                                                13
              Residual Realization Experience                               13
              Business Development and Competition                          14
              Credit Quality                                                14
              Risk Management                                               14
              Portfolio Management                                          15
              Delinquencies and Workouts                                    15
              Governmental Regulation                                       15
            Employees                                                       16
            Special Note Regarding Forward-Looking Statements               16

Item 2    Properties                                                        17
Item 3    Legal Proceedings                                                 17
Item 4    Submission of Matters to a Vote of Security Holders               17

                                     Part II

Item 5    Market Price of and Dividends on the Registrant's Common
                  Equity & Related Shareowner Matters                       17
Item 6    Selected Financial Data                                           17
Item 7    Management's Discussion and Analysis of Financial
                   Condition and Results of Operations                      17
Item 7A   Quantitative and Qualitative Disclosures About Market Risk        18
Item 8    Financial Statements & Supplementary Data                         18
Item 9    Changes in and Disagreements with Accountants
                  on Accounting & Financial Disclosure                      18

                                    Part III

Item 10   Directors & Executive Officers of the Registrant                  18
Item 11   Executive Compensation                                            18
Item 12   Security Ownership of Certain Beneficial Owners & Management      18
Item 13   Certain Relationships & Related Transactions                      18


                                     Part IV

Item 14   Exhibits, Financial Statement Schedules and Reports on Form 8-K   19
<PAGE>
                                     PART I

ITEM 1.       BUSINESS.

INTRODUCTION

         THE FOLLOWING  DISCUSSION RELATES TO FINOVA CAPITAL CORPORATION AND ITS
SUBSIDIARIES (COLLECTIVELY "FINOVA" OR THE "COMPANY").  FINOVA IS A WHOLLY OWNED
SUBSIDIARY OF THE FINOVA GROUP INC. ("FINOVA GROUP").

GENERAL

         FINOVA Capital  Corporation is a financial  services company engaged in
providing  a broad  range of  financing  and  capital  market  products.  FINOVA
concentrates  on lending to mid-size  businesses.  FINOVA has been in  operation
since 1954.

         FINOVA extends  revolving credit  facilities,  term loans and equipment
and real estate financing primarily to "middle-market" businesses with financing
needs falling generally between $100,000 and $35 million.

         FINOVA  operates in 18 specific  industry or market  niches under three
market groups.  FINOVA selected these niches because its expertise in evaluating
the  creditworthiness  of  prospective  customers  and its  ability  to  provide
value-added  services  enables  the  Company to  differentiate  itself  from its
competitors.  That  expertise and ability also enable FINOVA to command  pricing
that provides a satisfactory spread over its borrowing costs.

         FINOVA  seeks to  maintain a high  quality  portfolio  and to  minimize
non-earning  assets and  write-offs.  FINOVA uses clearly  defined  underwriting
criteria and stringent portfolio management techniques.  The Company diversifies
its lending activities geographically and among a range of industries, customers
and loan products.

         Due to the diversity of FINOVA's portfolio,  the Company believes it is
better able to manage  competitive  changes in its markets and to withstand  the
impact of  deteriorating  economic  conditions on a regional or national  basis.
There  can  be no  assurance,  however,  that  competitive  changes,  borrowers'
performance,  economic conditions or other factors will not result in an adverse
impact on FINOVA's results of operations or financial condition.

         FINOVA  generates  interest,  leasing,  fees and other  income  through
charges assessed on outstanding  loans, loan servicing,  leasing,  brokerage and
other  activities.  FINOVA's  primary expenses are the costs of funding the loan
and lease  business,  including  interest  paid on debt,  provisions  for credit
losses, marketing expenses, salaries and employee benefits,  servicing and other
operating expenses and income taxes.

         FINOVA's principal  executive offices are located at 1850 North Central
Avenue,  P.O. Box 2209, Phoenix,  Arizona 85002-2209,  telephone (602) 207-4900.
FINOVA also has business development offices throughout the U.S.
and in London, U.K. and Toronto, Canada.

BUSINESS GROUPS

         FINOVA  operates the following  principal lines of business under three
market groups:

         COMMERCIAL FINANCE

                  o        BUSINESS CREDIT offers collateral-oriented  revolving
                           credit  facilities and term loans for  manufacturers,
                           distributors,   wholesalers  and  service  companies.
                           Typical  transaction  sizes range from $500,000 to $3
                           million.
                  o        COMMERCIAL  SERVICES  (formerly  Factoring  Services)
                           offers full service factoring and accounts receivable
                           management  services for  entrepreneurial  and larger
                           firms,   primarily   in  the   textile   and  apparel
                           industries.  The  annual  factored  volume  of  these
                           companies  is  generally  between $5 million  and $25
                           million.   This  line  provides  accounts  receivable
                           financing  and loans  secured by  equipment  and real
                           estate.
<PAGE>
                  o        CORPORATE  FINANCE  provides  a full  range  of  cash
                           flow-oriented and asset-based term and revolving loan
                           products     for     manufacturers,      wholesalers,
                           distributors,  specialty retailers and commercial and
                           consumer  service  businesses.   Typical  transaction
                           sizes range from $2 million to $35 million.
                  o        DISTRIBUTION & CHANNEL  FINANCE  (formerly  Inventory
                           Finance)  provides  inbound  and  outbound  inventory
                           financing,   combined  inventory/accounts  receivable
                           lines of credit  and  purchase  order  financing  for
                           equipment  distributors,  value-added  resellers  and
                           dealers nationwide. Transaction sizes generally range
                           from $500,000 to $30 million.
                  o        GROWTH  FINANCE  provides  collateral  based  working
                           capital  financing   primarily  secured  by  accounts
                           receivable.  Typical  transaction  sizes  range  from
                           $100,000  to $1  million  and are made to  small  and
                           midsize   businesses  with  annual  sales  under  $10
                           million.
                  o        REDISCOUNT FINANCE offers revolving credit facilities
                           to  the   independent   consumer   finance   industry
                           including  sales,  automobile,  mortgage  and premium
                           finance  companies.  Typical  transaction sizes range
                           from $1 million to $35 million.

         SPECIALTY FINANCE

                  o        COMMERCIAL EQUIPMENT FINANCE offers equipment leases,
                           loans and  "turnkey"  financing  to a broad  range of
                           midsize  companies.  Specialty  markets  include  the
                           corporate  aircraft  and emerging  growth  technology
                           industries,  primarily biotechnology and electronics.
                           Typical  transaction sizes range from $500,000 to $15
                           million.
                  o        COMMUNICATIONS  FINANCE specializes in term financing
                           to advertising and  subscriber-supported  businesses,
                           including  radio  and  television   stations,   cable
                           operators,  outdoor advertising firms and publishers.
                           Typical  transaction  sizes  range from $1 million to
                           $40 million.
                  o        FRANCHISE FINANCE offers  equipment,  real estate and
                           acquisition  financing for  operators of  established
                           franchise concepts. Transaction sizes generally range
                           from $500,000 to $15 million.
                  o        HEALTHCARE  FINANCE  offers a full  range of  working
                           capital, equipment and real estate financing products
                           for the U.S. healthcare  industry.  Transaction sizes
                           typically range from $500,000 to $25 million.
                  o        PORTFOLIO  SERVICES  provides  customized  receivable
                           servicing and  collections  for timeshare  developers
                           and other generators of consumer receivables.
                  o        PUBLIC FINANCE provides  tax-exempt term financing to
                           state and local governments,  non-profit corporations
                           and entities using industrial  revenue or development
                           bonds.  Typical transaction sizes range from $100,000
                           to $5 million.
                  o        RESORT FINANCE focuses on  construction,  acquisition
                           and  receivables   financing  of  timeshare   resorts
                           worldwide,  second home  communities  and  fractional
                           interest  resorts.  Typical  transaction  sizes range
                           from $5 million to $35 million.
                  o        SPECIALTY REAL ESTATE FINANCE provides term financing
                           for hotel,  anchored retail office and owner-occupied
                           properties.  Typical  transaction sizes range from $5
                           million to $30 million.
                  o        TRANSPORTATION  FINANCE  structures  equipment loans,
                           leases,  acquisition  financing and  leveraged  lease
                           equity  investments for commercial and cargo airlines
                           worldwide,   railroads   and   operators   of   other
                           transportation related equipment. Typical transaction
                           sizes range from $5 million to $30  million.  Through
                           FINOVA Aircraft Investors,  LLC, FINOVA also seeks to
                           use its market  expertise  and  industry  presence to
                           purchase,   upgrade   and  resell   used   commercial
                           aircraft.

         CAPITAL MARKETS

                  o        REALTY  CAPITAL   specializes  in  providing  capital
                           markets-funded   commercial  real  estate   financing
                           products and commercial  mortgage  banking  services.
                           Typical transaction sizes range from $1 million to $5
                           million.
                  o        INVESTMENT   ALLIANCE   provides   equity   and  debt
                           financing for midsize  businesses in partnership with
                           institutional  investors and selected fund  sponsors.
                           Typical  transaction  sizes  range from $2 million to
                           $15 million.
                  o        LOAN  ADMINISTRATION  provides in-house servicing for
                           FINOVA's   commercial   loan   products  as  well  as
                           servicing  and  sub-servicing  of other  mortgage and
                           consumer loans,  including  residential  real estate,
                           mobile   homes,   automobiles   and  other   consumer
                           products.

                                       2
<PAGE>
         FINOVA is a Delaware corporation.  The Company was incorporated in 1991
to serve as the successor to The Dial Corp's financial services  businesses.  In
March 1992, Dial  transferred  those  businesses to FINOVA in a spin-off.  Since
that time,  FINOVA has  increased its total assets from $2.5 billion at December
31,  1992 to  $10.5  billion  at  December  31,  1998.  Income  from  continuing
operations  increased  from  $36.8  million  in 1992 to $164.1  million in 1998.
Management  believes  FINOVA  ranks  among the  largest  independent  commercial
finance  companies in the U.S., based on total assets.  FINOVA's common stock is
traded on the New York Stock Exchange under the symbol "FNV."

PORTFOLIO COMPOSITION

         The total assets under management consist of FINOVA's net investment in
financing  transactions plus certain assets that are owned by others but managed
by the Company and are not reported on the Company's balance sheet  (securitized
assets  and  participations   sold).  The  Company's   investment  in  financing
transactions is primarily settled in U.S. dollars.

INVESTMENT IN FINANCING TRANSACTIONS

         The   following   tables  detail   FINOVA's   investment  in  financing
transactions  (before  reserve for credit  losses) at December 31,  1998,  1997,
1996, 1995 and 1994.

                                       3
<PAGE>
                      INVESTMENT IN FINANCING TRANSACTIONS
                              BY TYPES OF FINANCING
                             (Dollars in Thousands)
<TABLE>
<CAPTION>
                                                                       December 31,
                          ----------------------------------------------------------------------------------------------
                              1998       %       1997       %       1996       %       1995       %       1994       %
                          -----------  -----  ----------  -----  ----------  -----  ----------  -----  ----------  -----
<S>                     <C>           <C>   <C>           <C>   <C>          <C>  <C>          <C>   <C>          <C>
Loans and other financing
  contracts:
  Commercial (2)         $ 5,705,801   56.9  $4,329,210   51.4  $ 3,614,877   49.4  $3,405,775  53.5  $2,744,381   51.3
  Real estate              1,648,935   16.4   1,656,075   19.7    1,713,485   23.4   1,534,177  24.1   1,237,488   23.1
Leveraged leases (2)         773,942    7.7     611,262    7.2      512,049    7.0     366,196   5.8     287,518    5.4
Operating leases             648,185    6.5     712,927    8.5      517,690    7.1     460,496   7.2     412,782    7.7
Fee-based receivables        626,499    6.3     750,399    8.9      564,430    7.7     189,486   3.0     157,862    2.9
Direct financing leases      396,759    4.0     360,589    4.3      396,388    5.4     408,059   6.4     514,595    9.6
Financing contracts held     220,100    2.2
  for sale (2)            ----------  -----   ---------  -----   ----------  -----   --------- -----   ---------  -----
Investment in financing   10,020,221  100.0   8,420,462  100.0    7,318,919  100.0   6,364,189 100.0   5,354,626  100.0
  transactions                        =====              =====               =====             =====              =====
Securitized assets           436,064            336,607             300,000            200,000
Participations sold          101,532            121,360              64,546
                         -----------          ---------          ----------         ----------       -----------  
Total managed assets     
  (1)(2)                 $10,557,817         $8,878,429         $ 7,683,465         $6,564,189       $ 5,354,626
                         ===========         ==========          ==========         ==========       ===========
                         
</TABLE>
  --------------------
  NOTES:
(1)   Excludes managed assets serviced under the mini-CMBS  structure due to the
      expected short-term nature of the servicing rights. For further discussion
      see Annex A, Note C.
(2)   As restated. See Note R of Notes to Consolidated Financial Statements.

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

                                       4
<PAGE>
                      INVESTMENT IN FINANCING TRANSACTIONS
                               BY LINE OF BUSINESS
                                DECEMBER 31, 1998
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                         Revenue Accruing                     Nonaccruing
                               ---------------------------------  -------------------------------    Total
                                   Market            Repossessed             Repossessed  Lease &   Carrying
                                  Rate (1) Impaired   Assets (2)  Impaired     Assets      Other     Amount       %
                               ----------  --------  -----------  ---------  -----------  -------  -----------  -----
<S>                            <C>         <C>         <C>        <C>          <C>        <C>      <C>          <C>
Transportation Finance (3)     $2,140,541  $ 61,895    $          $            $          $        $ 2,202,436   22.0
Resort Finance                  1,209,062                16,415                  24,800              1,250,277   12.5
Corporate Finance                 729,461    16,183                  41,007       1,115                787,766    7.9
Rediscount Finance                766,250                   999       3,762                            771,011    7.7
Commercial Equipment Finance      712,854     1,526       4,858      10,884      17,855     4,135      752,112    7.5
Communications Finance            694,863     7,169                  24,264                            726,296    7.2
Specialty Real Estate Finance     635,952    16,966      34,230       9,799       7,620       194      704,761    7.0
Healthcare Finance                597,201                 7,018       5,902                 1,102      611,223    6.1
Franchise Finance                 597,916     1,619       1,741       1,763       2,120       274      605,433    6.0
Distribution & Channel Finance    561,734                             6,029                            567,763    5.7
Business Credit                   292,696                             7,416                            300,112    3.0
Realty Capital (6)                243,278                                                              243,278    2.4
Public Finance                    183,099                                                              183,099    1.8
Commercial Services               160,012       648                   8,912         936                170,508    1.7
Other (5)(6)                       60,604                                                  25,344       85,948    0.9
Growth Finance                     45,901                                                               45,901    0.5
Investment Alliance                12,297                                                               12,297    0.1
                               ----------  --------  ----------   ---------   ---------   -------  -----------  -----
TOTAL (4)(6)                   $9,643,721  $106,006    $ 65,261   $ 119,738   $  54,446   $31,049  $10,020,221  100.0
                               ==========  ========  ==========   =========   =========   =======  ===========  =====
</TABLE>

--------------------
  NOTES:

(1)  Represents original or renegotiated  market rate terms,  excluding impaired
     transactions.
(2)  The Company  earned  income  totaling  $4.7 million on  repossessed  assets
     during 1998, including $2.4 million in Specialty Real Estate Finance,  $1.0
     million in Resort Finance, $0.9 million in Healthcare Finance, $0.2 million
     in Rediscount Finance and $0.2 million in Commercial Equipment Finance.
(3)  Transportation  Finance  includes  $419.7  million  of  aircraft  financing
     business booked through the London office.
(4)  Excludes $537.6 million of assets securitized and participations sold which
     the  Company  manages,  including  securitizations  of  $300.0  million  in
     Corporate   Finance   and  $136.1   million  in   Franchise   Finance   and
     participations  of $49.3  million in Corporate  Finance,  $21.4  million in
     Communications  Finance,  $5.4 million in Resort  Finance,  $6.9 million in
     Rediscount  Finance,  $3.8  million in Business  Credit,  $12.6  million in
     Transportation Finance and $2.1 million in Distribution & Channel Finance.
(5)  Primarily  includes  other assets  retained from  disposed or  discontinued
     operations.
(6)  As restated. See Note R of Notes to Consolidated Financial Statements.

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

                                       5
<PAGE>
                      INVESTMENT IN FINANCING TRANSACTIONS
                               BY LINE OF BUSINESS
                                DECEMBER 31, 1997
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                       Revenue Accruing                  Nonaccruing
                              ---------------------------------  ------------------------------    Total
                                Market              Repossessed            Repossessed  Lease &   Carrying
                               Rate (1)   Impaired   Assets (2)  Impaired     Assets     Other     Amount      %
                              ----------  --------  -----------  --------- -----------  -------  ----------   ----
<S>                           <C>          <C>         <C>        <C>          <C>        <C>     <C>          <C>
Transportation Finance (3)    $1,631,685  $           $          $            $         $        $1,631,685    19.4
Resort Finance                 1,166,199               14,450       3,974      26,240             1,210,863    14.4
Corporate Finance                791,733      981                  26,888                           819,602     9.7
Specialty Real Estate Finance    610,711   24,120      38,055       7,648      10,853        196    691,583     8.2
Communications Finance           628,947    8,724                  24,452                           662,123     7.9
Commercial Equipment Finance     614,712    1,816                  11,802                  4,030    632,360     7.5
Rediscount Finance               609,641                              993                           610,634     7.2
Distribution & Channel Finance   544,108                            4,333                           548,441     6.5
Healthcare Finance               525,846                            1,515                    666    528,027     6.3
Franchise Finance                430,651      808                   2,171                    305    433,935     5.2
Commercial Services              196,843                           30,205                           227,048     2.7
Business Credit                  195,897                            7,559                           203,456     2.4
Public Finance                   135,826                                                            135,826     1.6
Other (5)(6)                      61,353                                                  23,526     84,879     1.0
                              ----------  -------     -------    ---------    -------    -------  ----------  -----
TOTAL (4)(6)                  $8,144,152  $36,449     $52,505    $121,540     $37,093   $ 28,723  $8,420,462  100.0
                              ==========  =======     =======    =========    =======    =======  ==========  =====
</TABLE>

--------------------
NOTES:

(1)  Represents original or renegotiated  market rate terms,  excluding impaired
     transactions.
(2)  The Company  earned  income  totaling  $4.1 million on  repossessed  assets
     during 1997,  including  $3.1 million in Specialty  Real Estate Finance and
     $1.0 million in Resort Finance.
(3)  Transportation  Finance  includes  $302.9  million  of  aircraft  financing
     business booked through the London office.
(4)  Excludes  assets  securitized  and  participations  sold which the  Company
     manages,  including  securitizations of $300.0 million in Corporate Finance
     and $36.6 million in Franchise Finance and  participations of $40.2 million
     in Corporate Finance, $61.0 million in Communications Finance, $8.5 million
     in Transportation Finance, $4.6 million in Rediscount Finance, $5.1 million
     in Resort Finance and $1.9 million in Distribution & Channel Finance.
(5)  Primarily  includes  other assets  retained from  disposed or  discontinued
     operations.
(6)  As restated. See Note R of Notes to Consolidated Financial Statements.

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

                                       6
<PAGE>
                      INVESTMENT IN FINANCING TRANSACTIONS
                               BY LINE OF BUSINESS
                                DECEMBER 31, 1996
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                        Revenue Accruing                    Nonaccruing
                              ----------------------------------- -------------------------------    Total
                                 Market              Repossessed             Repossessed  Lease &   Carrying
                                Rate (1)   Impaired   Assets (2)  Impaired      Assets     Other     Amount      %
                              -----------  --------  -----------  ---------  -----------  -------  ----------  -----
<S>                           <C>           <C>        <C>         <C>          <C>       <C>      <C>          <C>
Transportation Finance (3)    $1,330,578    $          $           $            $         $        $1,330,578   18.2
Resort Finance                 1,124,462      2,963     13,878          77       25,136             1,166,516   15.9
Corporate Finance                630,399      3,211                 14,695          335               648,640    8.9
Specialty Real Estate Finance    700,932     30,245     46,068       6,748        9,853       940     794,786   10.8
Communications Finance           535,701      8,796                 14,129        3,095               561,721    7.7
Commercial Equipment Finance     570,574                             7,900                  6,564     585,038    8.0
Rediscount Finance               421,232                               245                            421,477    5.8
Distribution & Channel Finance   314,446                             1,273                            315,719    4.3
Healthcare Finance               497,540                             1,304                  1,194     500,038    6.8
Franchise Finance                366,202      1,104                  1,985                    996     370,287    5.0
Commercial Services              220,701                             3,419                            224,120    3.0
Business Credit                  160,006                            11,963                            171,969    2.4
Public Finance                   150,361                                13                            150,374    2.1
Other (6)                         73,158                                                    4,498      77,656    1.1
                              ----------    -------    -------     -------      -------   -------  ----------  -----
Total Continuing Operations
  (4)(6)                      $7,096,292    $46,319    $59,946     $63,751      $38,419   $14,192  $7,318,919  100.0
                              ==========    =======    =======     =======      =======            ==========  =====
Discontinued Operations (5)                                                                39,143
                                                                                          -------
TOTAL                                                                                     $53,335
                                                                                          =======
</TABLE>

--------------------
NOTES:

(1)  Represents original or renegotiated  market rate terms,  excluding impaired
     transactions.

(2)  The Company  earned  income  totaling  $5.1 million on  repossessed  assets
     during 1996,  including  $4.4 million in Specialty  Real Estate Finance and
     $0.7 million in Resort Finance.

(3)  Transportation  Finance  includes  $160.8  million  of  aircraft  financing
     business booked through the London office.

(4)  Excludes  assets  securitized  and  participations  sold which the  Company
     manages,  including  securitizations of $300.0 million in Corporate Finance
     and participations of $24.6 million in Corporate Finance,  $27.5 million in
     Communications Finance, $4.8 million in Rediscount Finance, $4.4 million in
     Resort Finance and $3.2 million in Distribution & Channel Finance.

(5)  Reflects  assets  retained  by  FINOVA   subsequent  to  the  sale  of  the
     Manufacturer and Dealer Services line of business.

(6)  As restated. See Note R of Notes to Consolidated Financial Statements.

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

                                       7
<PAGE>
                      INVESTMENT IN FINANCING TRANSACTIONS
                               BY LINE OF BUSINESS
                                DECEMBER 31, 1995
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                        Revenue Accruing                      Nonaccruing
                              ----------------------------------  --------------------------------     Total
                                 Market              Repossessed             Repossessed   Lease &    Carrying
                                Rate (1)   Impaired   Assets (2)  Impaired      Assets      Other      Amount      %
                              -----------  --------  -----------  ---------  -----------   -------   ---------   -----
<S>                           <C>           <C>        <C>        <C>          <C>           <C>      <C>        <C>
Transportation Finance (3)    $  929,043    $          $          $            $           $        $  929,043    14.6
Resort Finance                   943,661      2,849     12,064      2,583       26,559                 987,716    15.6
Corporate Finance (4)            631,295      5,274                19,592          335                 656,496    10.3
Specialty Real Estate Finance    703,018      3,898     42,304     15,264       18,231         988     783,703    12.3
Communications Finance           662,191      2,502      2,217     16,817        4,863                 688,590    10.8
Commercial Equipment Finance     345,039                               69                    6,079     351,187     5.5
Rediscount Finance               345,264                                                               345,264     5.4
Distribution & Channel Finance   202,879                              430                              203,309     3.2
Healthcare Finance               451,503                               81                    1,231     452,815     7.1
Franchise Finance                327,356      1,462                 6,408                    1,850     337,076     5.3
Commercial Services              188,892                              594                              189,486     3.0
Business Credit                  200,365                           12,685                              213,050     3.3
Public Finance                   121,956                                                        47     122,003     1.9
Other (5)                         94,755      1,275                 2,360                    6,061     104,451     1.7
                              ----------    -------    -------    -------      -------     -------  ----------   -----
Total Continuing Operations
  (4)(5)                      $6,147,217    $17,260    $56,585    $76,883      $49,988     $16,256  $6,364,189   100.0
                              ==========    =======    =======    =======      =======     =======  ==========   =====
</TABLE>

--------------------
NOTES:

(1)  Represents original or renegotiated  market rate terms,  excluding impaired
     transactions.
(2)  The Company  earned  income  totaling  $4.2 million on  repossessed  assets
     during 1995, including $3.2 million in Specialty Real Estate Finance,  $0.6
     million in Resort Finance and $0.4 million in Communications Finance.
(3)  Transportation Finance includes $144 million of aircraft financing business
     booked through the London office.
(4)  Excludes  $200  million  of  securitized  assets  which are  managed by the
     Company.
(5)  As  restated.  See Note R of Notes to  Consolidated  Financial  Statements.

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

                                       8
<PAGE>
                      INVESTMENT IN FINANCING TRANSACTIONS
                               BY LINE OF BUSINESS
                                DECEMBER 31, 1994
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                        Revenue Accruing                     Nonaccruing
                              ----------------------------------  -------------------------------    Total
                                Original   Rewritten Repossessed  Delinquent Repossessed  Leases &  Carrying
                                 Rate      Contracts   Assets (1)   Loans      Assets     Other      Amount      %
                              -----------  --------  -----------  ---------  -----------  -------  ----------  -----
<S>                           <C>           <C>        <C>         <C>         <C>        <C>      <C>         <C>
Transportation Finance (2)    $  706,242    $14,620    $           $           $         $        $  720,862   13.5
Resort Finance                   634,735      4,506      7,314       2,582      30,393               679,530   12.7
Corporate Finance                746,671     21,275                  6,952       2,674               777,572   14.5
Specialty Real Estate Finance    672,522      7,237     40,510       7,622      21,519               749,410   14.0
Communications Finance           551,218      6,288      7,282      17,377       5,863       671     588,699   11.0
Commercial Equipment Finance     293,609        769                                        7,589     301,967    5.6
Rediscount Finance                99,353                                                              99,353    1.9
Distribution & Channel Finance    58,595                               642                            59,237    1.1
Healthcare Finance               467,131                                                   1,719     468,850    8.8
Franchise Finance                281,890      7,632                 12,242                           301,764    5.6
Commercial Services              157,090                               772                           157,862    2.9
Business Credit                  181,741                            12,003                           193,744    3.6
Public Finance                    93,491                               144                            93,635    1.8
FINOVA Capital Limited (3)        93,700      1,561                  4,265           2     4,800     104,328    1.9
Other (4)                         48,598                             8,918                   297      57,813    1.1
                              ----------    -------    -------     -------     -------   -------  ----------  -----
Total Continuing
  Operations (4)              $5,086,586    $63,888    $55,106     $73,519     $60,451   $15,076  $5,354,626  100.0
                              ==========    =======    =======     =======     =======   =======  ==========  =====
</TABLE>
--------------------
NOTES:

(1)  The Company  earned  income  totaling  $3.3 million on  repossessed  assets
     during 1994, including $2.0 million in Specialty Real Estate Finance,  $0.8
     million in Communications Finance and $0.5 million in Resort Finance.
(2)  Transportation  Finance includes $66.9 million of aircraft finance business
     booked through the London office.
(3)  Includes   transactions  in  Europe  and  elsewhere  (including  the  U.S.)
     originated from the Company's London office.  Also,  includes $39.2 million
     of  Consumer  Finance  assets,  of which  $4.8  million  were  nonaccruing.
     Consumer Finance accounts were generally considered nonaccruing after being
     180 days delinquent.
(4)  As restated. See Note R of Notes to Consolidated Financial Statements.

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

                                       9
<PAGE>
         The  Company's  geographic  portfolio  diversification  at December 31,
1998, as restated, was as follows:

              State                        Total              Percent
        ---------------------------------------------------------------
                                          (Dollars in
                                          Thousands)
        California                   $     1,541,692            14.6%
        Florida                            1,065,801            10.1
        Texas                                827,422             7.8
        New York                             726,834             6.9
        Illinois                             467,083             4.4
        Arizona                              442,734             4.2
        Georgia                              370,541             3.5
        New Jersey                           330,958             3.1
        Virginia                             285,969             2.7
        Nevada                               283,520             2.7
        Pennsylvania                         274,323             2.6
        Missouri                             233,053             2.2
        Other (1)(2)                       3,707,887            35.2
                                     ------------------    ------------
                                     $    10,557,817           100.0%
                                     ==================    ============
--------------------
NOTE:

(1)  Other includes all other states which,  on an individual  basis,  represent
     less than 2% of the total and international, which represents approximately
     6% of the total.
(2)  As restated. See Note R of Notes to Consolidated Financial Statements.

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

      The following is an analysis of the reserve for credit losses for the
                            years ended December 31:

<TABLE>
<CAPTION>
                                   1998         1997         1996         1995         1994
                                 ---------    ---------    ---------    ---------    ---------
                                                     (Dollars in Thousands)
<S>                              <C>          <C>          <C>          <C>          <C>
Balance, beginning of year       $ 177,088    $ 148,693    $ 129,077    $ 110,903    $  64,280
Provision for credit losses (1)     82,200       69,200       41,751       39,568       10,439
Write-offs (1)                     (59,037)     (45,487)     (32,017)     (27,631)     (28,109)
Recoveries                           2,279        2,287        3,296        2,104        1,780
Acquisitions and other               5,088        2,395        6,586        4,133       62,513
                                 ---------    ---------    ---------    ---------    ---------
Balance, end of year             $ 207,618    $ 177,088    $ 148,693    $ 129,077    $ 110,903
                                 =========    =========    =========    =========    =========
</TABLE>                      

--------------------
NOTE:

(1)  As restated. See Note R of Notes of Consolidated Financial Statements.

         Included  above is a specific  impairment  reserve of $37.1  million at
December  31,  1998,  which  applies to $98.7  million of the $225.7  million of
impaired loans. The remaining $170.5 million of the reserve for credit losses is
designated  for general  purposes and represents  management's  best estimate of
potential losses in the portfolio considering delinquencies, loss experience and
collateral.  At December 31, 1997,  the  specific  impairment  reserve was $20.2
million, which applied to $52.3 million of the $158.0 million of impaired loans.
Additions to general and specific reserves are reflected in current  operations.
Management may transfer  reserves  between the general and specific  reserves as
appropriate.

                                       10
<PAGE>
         Write-offs and  recoveries by line of business,  during the years ended
December 31, were as follows:

                                   --------------------------------------------
                                     1998     1997     1996      1995     1994
                                   --------------------------------------------
 WRITE-OFFS                                   (Dollars in Thousands)
 Commercial Services               $36,286  $24,382  $ 5,098   $ 3,728  $ 1,148
 Corporate Finance                   6,728    6,577    9,470     4,660    4,233
 Commercial Equipment Finance        3,845    3,722    3,207     2,271    1,257
 Franchise Finance                   3,035      696    3,267     3,448    2,247
 Distribution & Channel Finance      2,609    1,777                201      442
 Specialty Real Estate Finance       1,785    2,106    1,793     2,275    1,461
 Rediscount Finance                  1,500
 Healthcare Finance                  1,502    1,798    1,018       314      377
 Business Credit                     1,253                         452      774
 Communications Finance                494      750    2,994     4,037    8,300
 Resort Finance                               2,700    4,275     2,000    2,730
 Other (1)(3)                                   979      895     4,245    5,140
                                   --------------------------------------------
 Total write-offs (3)               59,037   45,487   32,017    27,631   28,109
                                   --------------------------------------------

 RECOVERIES
 Commercial Services                   623    1,127    1,488       482      376
 Corporate Finance                      48       99       10       247       86
 Commercial Equipment Finance          200      514      829       116      428
 Franchise Finance                     255      263      422       115       66
 Distribution & Channel Finance                           33        20
 Specialty Real Estate Finance                           177        80
 Healthcare Finance                    542       94        8        52       63
 Business Credit                       434
 Communications Finance                                            250
 Resort Finance                                           26        22       10
 Other (1)                             177      190      303       720      751
                                   --------------------------------------------
 Total recoveries                    2,279    2,287    3,296     2,104    1,780
                                   --------------------------------------------
 Total net write-offs (3)          $56,758  $43,200  $28,721   $25,527  $26,329
                                   ============================================

 Net write-offs as a percentage
  of average managed assets (2)(3)    0.60%    0.53%    0.41%     0.44%    0.62%
                                   ============================================

-------
NOTES:

(1)  Includes FINOVA Capital Ltd. (UK).
(2)  Excludes average participations sold in which FINOVA has transferred credit
     risk.
(3)  As restated. See Note R of Notes to Consolidated Financial Statements.

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

      A further breakdown of the portfolio by line of business can be found
                           in Annex A, Notes C and D.

                                       11
<PAGE>
COST AND USE OF BORROWED FUNDS

         FINOVA  relies  on  borrowed  funds as well as  internal  cash  flow to
finance  its  operations.   It  also  has  raised  funds  through  the  sale  or
securitization of assets, but does not rely on those methods as a primary source
of capital.

         The following table reflects the approximate  average pre-tax effective
cost of borrowed funds and pre-tax equivalent rate earned on accruing assets for
FINOVA for each of the periods listed:
<TABLE>
<CAPTION>
                                                           Year Ended December 31,
                                                    ---------------------------------------
                                                      1998   1997    1996    1995    1994
                                                    ---------------------------------------
<S>                                                 <C>    <C>     <C>     <C>    <C>
 Short-term and variable rate long-term debt (1)      6.1%   6.4%    6.5%    7.2%   5.5%
 Fixed-rate long-term debt (1)                        7.0%   7.1%    7.2%    7.3%   8.1%
 Aggregate borrowed funds (1)                         6.4%   6.6%    6.8%    7.2%   6.3%
 Rate earned on average earning assets (2) (3)(5)    11.9%  11.5%   11.4%   11.7%  11.2%
 Operating margin percentage (4)(5)                   6.3%   5.9%    5.7%    5.6%   5.7%
</TABLE>

---------------------
NOTES:

(1)  Includes the effects of interest rate swap and hedge agreements.
(2)  Earning assets are net of average  nonaccruing  assets and average deferred
     taxes applicable to leveraged leases.
(3)  Earned amounts are net of depreciation.
(4)  Represents operating margin as a percentage of average earning assets.
(5)  As restated. See Note R of Notes to Consolidated Financial Statements.

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

         The effective  costs  presented  above include costs of commitment fees
and related  borrowing  costs.  They do not necessarily  predict future costs of
funds.  For further  information  on FINOVA's  cost of funds,  refer to Annex A,
Notes E and F.

         Following are the ratios of income to fixed charges  ("ratio") for each
of the past five years:

                     Year Ended December 31, (1)
                  ----------------------------------
                   1998   1997   1996   1995   1994
                  ------ ------ ------ ------ ------
                   1.55   1.54   1.51   1.45   1.59
                  ====== ====== ====== ====== ======

---------------------
NOTES:

(1)  As restated. See Note R of Notes to Consolidated Financial Statements.

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

         Variations in interest rates generally do not have a substantial impact
on the ratio because  fixed-rate and floating-rate  assets are generally matched
with liabilities of similar rate and term.

         Income for fixed charges,  for purposes of the computation of the above
ratio,  consists of income from  continuing  operations  before income taxes and
fixed charges.  Combined fixed charges include interest and related debt expense
and a portion of rental expense representative of interest.

MATCHED FUNDING POLICY

         FINOVA follows a "matched funding" policy.  Under that policy, it funds
its  floating-rate   assets  (loans  and  leases  to  FINOVA's  borrowers)  with
floating-rate  liabilities (FINOVA's debt) and fixed-rate assets with fixed-rate
liabilities,  to the extent  feasible.  This policy  helps  protect  FINOVA from
changes in interest rates.  For further  discussion on FINOVA's debt and matched
funding policy, see Annex A, Notes E and F.

                                       12
<PAGE>
CREDIT RATINGS

         FINOVA currently has investment-grade credit ratings from the following
rating agencies:

                                            Commercial       Senior
                                               Paper          Debt
                                          --------------   -----------
       Duff & Phelps Credit Rating Co.          D1             A
       Fitch Investors Services, Inc.           F1             A
       Moody's Investors Service, Inc.          P2            Baa1
       Standard & Poor's Ratings Group          A2             A-

         There can be no assurance  that these ratings will be  maintained.  The
ratings can be modified at any time. A credit rating is not a recommendation  to
buy, sell or hold securities.  Each rating should be evaluated  independently of
any other rating. None of FINOVA's subsidiaries have applied for credit ratings.

RESIDUAL REALIZATION EXPERIENCE

         Each year since its inception,  FINOVA and its predecessors have earned
total  proceeds  from the sale of assets  upon  lease  termination  (other  than
foreclosures) in excess of carrying amounts. There can be no assurance, however,
that those results can be achieved in future years.  Actual proceeds will depend
on current  market  values for those  assets at the time of sale.  While  market
values  are  generally  beyond  the  control of  FINOVA,  the  Company  has some
discretion  in the  timing  of  sales of the  assets.  Sales  proceeds  on lease
terminations in excess of carrying  amounts are reported as gains on disposal of
assets when the assets are sold.

         Income from leasing  transactions is affected by gains from asset sales
on lease  termination  and, hence,  can be somewhat less predictable than income
from non-leasing activities.  During the five years ended December 31, 1998, the
proceeds  to FINOVA from sales of assets on early  termination  of leases and at
the  expiration  of leases have  exceeded  the  carrying  amounts and  estimated
residual values as follows:

         Early Terminations (1)            Terminations at End of Lease Term (2)
-----------------------------------------  ------------------------------------
                                                                     Proceeds
                              Proceeds                   Estimated  as a % of
                    Carrying  as a % of                  Residual   Estimated
         Sales       Amount   Carrying         Sales     Value of    Residual
Year    Proceeds   of Assets   Amount        Proceeds     Assets      Value
----- ----------- -----------------------  ------------------------------------
                      (Dollars in Thousands)
1998  $    82,671 $    67,650   122%       $    40,571 $     35,647    114%
1997      114,680      96,656   119%            78,419       71,914    109%
1996       87,311      75,910   115%            16,334       13,872    118%
1995        1,402         905   155%            32,509       25,566    127%
1994        6,477       5,865   110%            15,287       14,164    108%

---------

NOTE:
(1)      Excludes foreclosures for credit reasons, which are immaterial.
(2)      As restated.  See Note R of Notes to Consolidated Financial Statements.

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

         The estimated  residual  value of direct  finance and  leveraged  lease
assets in the  accounts of FINOVA at December 31, 1998 was 37.2% of the original
cost of those  assets  (30.0%  excluding  the  original  costs of the assets and
residuals  applicable to real estate  leveraged  leases,  which  typically  have
higher  residuals  than  other  leases).  The  financing  contracts  and  leases
outstanding  at that date had initial  terms  ranging  generally  from one to 25
years. The average initial term weighted by carrying amount at inception and the
average  remaining  term  weighted by  remaining  carrying  amount of  financing
contracts  at December  31, 1998 for  financing  contracts  excluding  leveraged
leases  were 7.5 and 5.4 years,  respectively,  and for  leveraged  leases  were
approximately 18.7 and 11.2 years, respectively.  The comparable average initial
term and remaining term at December 31, 1997 for financing  contracts  excluding
leveraged leases were 7.6 and 5.1 years, respectively,  and for leveraged leases
were  approximately  17.3 and  11.7  years,  respectively.  FINOVA  uses  either
employed or outside appraisers to determine the collateral value of assets to be
leased or financed and the estimated residual or collateral value thereof at the
expiration  of each lease.  Actual  proceeds  could differ from those  appraised
values.

                                       13
<PAGE>
         For a discussion of accounting for lease  transactions,  refer to Annex
A, Notes A and C.

BUSINESS DEVELOPMENT AND COMPETITION

         FINOVA develops business  primarily through direct  solicitation by its
own sales  force.  Customers  are also  introduced  by  independent  brokers and
referred by other financial institutions and other sources.

         FINOVA is engaged in an  extremely  competitive  activity.  It competes
with  banks,  insurance  companies,  leasing  companies,  the  credit  units  of
equipment  manufacturers and other finance companies.  Some of these competitors
have substantially  greater financial  resources and are able to borrow at costs
below those of FINOVA.  FINOVA's  principal  means of  competition  is through a
combination of service,  structure and innovation in transactions,  the interest
rate charged for money and concentration in focused market niches.  The interest
rate  FINOVA  charges  for  money is a  function  of its  borrowing  costs,  its
operating costs and other factors. While many of FINOVA's larger competitors are
able to offer  lower  interest  rates based upon their  lower  borrowing  costs,
FINOVA seeks to maintain the  competitiveness of the interest rates it offers by
emphasizing  strict control of its operating  costs.  FINOVA's ability to manage
costs is, in part,  dependent on factors beyond the Company's  control,  such as
the cost of funds, outside litigation expenses and competitive salaries.

CREDIT QUALITY

         FINOVA has  maintained  a  high-quality  asset base  through the use of
clearly  defined  underwriting   standards,   portfolio  management  techniques,
monitoring of covenant compliance and active collections and workout efforts.

RISK MANAGEMENT

         FINOVA  generally  investigates  its  prospective  customers  through a
review of historical  financial  statements,  published  credit reports,  credit
references,  discussions  with  management,  analysis of  location  feasibility,
personal  visits and  collateral  appraisals  and  inspections.  In many  cases,
depending  upon the results of its credit  investigations  and the nature of the
financing being  provided,  FINOVA obtains  additional  collateral or guarantees
from  others.  As  part  of  its  underwriting  process,  FINOVA  considers  the
management,  industry,  financial  position and  collateral  being provided by a
proposed borrower or lessee. The purpose,  term,  amortization and amount of any
proposed  transaction  generally must be clearly defined and within  established
corporate guidelines. In addition, FINOVA attempts to avoid undue concentrations
in any one customer, industry or geographic region.

         o        MANAGEMENT.  FINOVA  considers the reputation,  experience and
                  depth  of   management;   quality  of   product  or   service;
                  adaptability  to  changing  markets  and  demand;   and  prior
                  banking, finance and trade relationships.

         o        INDUSTRY.  FINOVA evaluates  critical aspects of each industry
                  to which it lends,  including  general trend,  seasonality and
                  cyclicality;  governmental  regulation;  the effects of taxes;
                  the  economic  value  of  goods  or  services  provided;   and
                  potential environmental or other liabilities.

         o        FINANCIAL.  FINOVA's review of a prospective borrower normally
                  includes  a  thorough  analysis  of the  borrower's  financial
                  performance.  Items considered include net worth;  composition
                  of assets and liabilities;  debt service coverage;  liquidity;
                  sales growth and earning power;  and cash flow  generation and
                  reliability.

         o        COLLATERAL.  FINOVA regards  collateral as an important factor
                  in  a  credit   evaluation   and,  for  collateral   dependent
                  transactions,  has  established  maximum loan to value ratios,
                  normally  ranging  from 60% - 90%,  for  each of its  lines of
                  business.

         The underwriting  process includes,  in addition to the analysis of the
factors noted above, the design and implementation of transaction structures and
strategies  to  mitigate  identified  risks;  a review  of  transaction  pricing
relative to product-specific return requirements and acknowledged risk elements;
a multi-step,  interdepartmental review and approval process with varying levels
of   authority   based   on  the   size  of  the   transaction;   and   periodic
interdepartmental reviews and revision of underwriting guidelines.

                                       14
<PAGE>
         FINOVA also  monitors  portfolio  concentrations  in the areas of total
exposure to a single borrower and related entities,  within a given geographical
area and with  respect to an industry  and/or  product  type within an industry.
FINOVA  has  established  concentration  guidelines  for each line of  business.
Geographic  concentrations  are reviewed  periodically  and  evaluated  based on
historic loan experience and prevailing market and economic conditions.

         FINOVA's financing  contracts and leases generally require the customer
to pay taxes, license fees and insurance premiums and to perform maintenance and
repairs at the customer's  expense.  Contract payment rates are based on several
factors,   including   the   cost  of   borrowed   funds,   term  of   contract,
creditworthiness of the prospective customer,  type and nature of collateral and
other  security  and,  in leasing  transactions,  the timing of tax  effects and
estimated  residual  values.  In  direct  finance  lease  transactions,  lessees
generally  are granted an option to  purchase  the  equipment  at the end of the
lease  term at its then fair  market  value or, in some  cases,  are  granted an
option to renew the lease at its then fair  rental  value.  The  extent to which
lessees  exercise their options to purchase leased equipment varies from year to
year, depending on, among other factors, the state of the economy, the financial
condition of the lessee, interest rates and technological developments.

PORTFOLIO MANAGEMENT

         In addition to the review at the time of original underwriting,  FINOVA
attempts to preserve and enhance the earnings  quality of its portfolio  through
proactive  management  of its  financing  relationships  with its clients.  This
process  includes the periodic  appraisal or  verification  of the collateral to
determine loan exposure and residual values;  sales of residuals and warrants to
generate  supplemental income; and review and management of covenant compliance.
The Portfolio  Management  department or dedicated personnel within the business
units  regularly  review  financial  statements  to  assess  customer  cash flow
performance and trends; periodically confirm operations of the customer; conduct
periodic  reappraisals  of the underlying  collateral;  seek to identify  issues
concerning  the  vulnerabilities  of the customer;  seek to resolve  outstanding
issues with the borrower;  periodically  review and address covenant  compliance
issues;  and prepare periodic  summaries of the aggregate  portfolio quality and
concentrations for management review.

         Evaluation for loan  impairment is performed as a part of the portfolio
management  review  process.  When  a  loan  is  determined  to be  impaired,  a
write-down  is  taken  or an  impairment  reserve  is  established  based on the
difference between the recorded balance of the loan ("carrying  amount") and the
fair value of the asset.

DELINQUENCIES AND WORKOUTS

         FINOVA monitors the timing of payments on its accounts.  For term loans
and  leases,  when an invoice is 10 days past due,  the  customer  is  generally
contacted,  and a determination is made as to the extent of the problem, if any.
A  commitment  for  immediate  payment is pursued  and the  account is  observed
closely.  If  satisfactory  results are not obtained in  communication  with the
customer, the guarantor(s) are usually contacted to advise them of the situation
and the  potential  obligation  under the  guarantee  agreement.  If an  invoice
becomes 31 days past due, it is reported as  delinquent.  A notice of default is
generally sent prior to an invoice becoming 45 days past due and, between 60 and
90 days  past the due  date,  if  satisfactory  negotiations  are not  underway,
outside  counsel  generally is retained to help protect  FINOVA's  rights and to
pursue its remedies.

         When accounts  become more than 90 days past due income  recognition is
usually suspended, and FINOVA vigorously pursues its legal remedies.  Foreclosed
or repossessed  assets are considered to be  nonperforming,  and are reported as
such unless the assets  generate  sufficient cash to result in a reasonable rate
of return. Those accounts are continually reviewed, and write-downs are taken as
deemed  necessary.  While  pursuing  collateral and obligors,  FINOVA  generally
continues to negotiate  the  restructuring  or other  settlement of the debt, as
appropriate.

         Management  believes that collateral values  significantly  reduce loss
exposure  and that the reserve for credit  losses is  adequate.  For  additional
information regarding the reserve for credit losses, see Annex A, Note D.

GOVERNMENTAL REGULATION

         FINOVA's   domestic   activities,   including   the  financing  of  its
operations,  are subject to a variety of federal and state  regulations  such as
those  imposed by the Federal  Trade  Commission,  the  Securities  and Exchange
Commission, the Consumer Credit Protection Act, the Equal Credit Opportunity Act
and the Interstate Land Sales Full Disclosure Act.  Additionally,  a majority of
states have  ceilings on interest  rates  chargeable  to  customers in financing
transactions.  Some of  FINOVA's  financing  transactions  and  mortgage  broker
activities  are  subject  to  additional  government  regulation.  For  example,
aircraft  leasing is  regulated  by the  Federal  Aviation  Administration,  and
Communications  Finance is  regulated by the Federal  Communication  Commission.
FINOVA's  international  activities  are also  subject  to a variety of laws and
regulations of the countries in which the business is conducted.

                                       15
<PAGE>
EMPLOYEES

         At December 31, 1998, the Company had 1,227  employees  compared to 923
at December 31, 1997.  The increase  primarily  included  employees  from FINOVA
Realty Capital  ("FRC"),  which was not  consolidated  until 1998, and employees
from  companies  acquired  in  1998.  None  of the  employees  were  covered  by
collective  bargaining  agreements.  FINOVA believes its employee  relations are
satisfactory.


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

         Certain statements in this report are  "forward-looking,"  in that they
do  not  discuss   historical   fact  but  instead  note  future   expectations,
projections, intentions or other items. These forward-looking statements include
matters in the sections of this report  captioned  "Business" and  "Management's
Discussion and Analysis of Financial  Condition and Results of  Operations"  and
"Quantitative and Qualitative Disclosures About Market Risk". They are also made
in documents  incorporated in this report by reference,  or in which this report
may be incorporated, such as a prospectus.

         Forward-looking  statements  are  subject to known and  unknown  risks,
uncertainties  and other  factors  that may cause  FINOVA's  actual  results  or
performance to differ materially from those contemplated by the  forward-looking
statements.   Many  of  those  factors  are  noted  in   conjunction   with  the
forward-looking statements in the text. Other important factors that could cause
actual results to differ include:

         o        The  results of FINOVA's  efforts to  implement  its  business
                  strategy.  Failure to fully  implement  its business  strategy
                  might result in decreased market penetration,  adverse effects
                  on results of operations and other adverse results.

         o        The  effect of  economic  conditions  and the  performance  of
                  FINOVA's  borrowers.  Economic  conditions  in  general  or in
                  particular   market  segments  could  impact  the  ability  of
                  FINOVA's  borrowers  to  operate or expand  their  businesses,
                  which might result in decreased  performance  for repayment of
                  their  obligations or reduce demand for  additional  financing
                  needs.  The rate of  borrower  defaults  or  bankruptcies  may
                  increase.

         o        Actions  of  FINOVA's  competitors  and  FINOVA's  ability  to
                  respond to those  actions.  As noted in "Business  Development
                  and Competition,"  FINOVA seeks to remain competitive  without
                  sacrificing  prudent lending  standards.  Doing business under
                  those  standards   becomes  more  difficult,   however,   when
                  competitors   offer  financing  with  lower  pricing  or  less
                  stringent   criteria.   FINOVA  may  not  be   successful   in
                  maintaining and continuing asset growth at historic levels.

         o        The  cost of  FINOVA's  capital.  That  cost  depends  on many
                  factors,  some of which are beyond FINOVA's  control,  such as
                  its portfolio quality, ratings, prospects and outlook. Changes
                  in the  interest  rate  environment  may  reduce or  eliminate
                  profit margins.

         o        Changes  in  government  regulations,  tax rates  and  similar
                  matters.   For   example,    government    regulations   could
                  significantly  increase  the cost of doing  business  or could
                  eliminate certain tax advantages of some of FINOVA's financing
                  products.

         o        Necessary  technological  changes  (including those addressing
                  "Year  2000"  data  systems  issues)  may be  more  difficult,
                  expensive or time consuming than anticipated.

         o        Costs or difficulties related to integration of acquisitions.

         o        Other risks detailed in FINOVA's other SEC reports or filings.

                                       16
<PAGE>
         FINOVA does not intend to update forward-looking information to reflect
actual  results or changes in  assumptions  or other  factors  that could affect
those   statements.   FINOVA   cannot   predict   the  risk  from   reliance  on
forward-looking  statements in light of the many factors that could affect their
accuracy.

ITEM 2.           PROPERTIES.

         FINOVA's  principal  executive  offices are located in premises  leased
from FP Arizona,  Inc. in Phoenix,  Arizona.  FINOVA operates various additional
offices  in the  United  States,  one in  Canada  and one in  Europe.  All these
properties  are leased.  Alternative  office  space  could be  obtained  without
difficulties  in the event  leases are not  renewed.  FINOVA has entered  into a
lease   agreement   for  new  executive   offices  which  are  presently   under
construction.  Those  facilities  are  expected  to be  completed  in the fourth
quarter of 1999.


ITEM 3.           LEGAL PROCEEDINGS.

         FINOVA is a party either as plaintiff or defendant to various  actions,
proceedings and pending claims,  including legal actions,  some of which involve
claims for  compensatory,  punitive  or other  damages in  significant  amounts.
Litigation  often  results  from  FINOVA's   attempts  to  enforce  its  lending
agreements against borrowers and other parties to those transactions. Litigation
is subject to many uncertainties. It is possible that some of the legal actions,
proceedings  or claims could be decided  against  FINOVA.  Although the ultimate
amount for which FINOVA may be held liable, if any, is not ascertainable, FINOVA
believes that any resulting  liability would not materially affect its financial
position or results of operations.


ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         Omitted.

                                     PART II

ITEM 5.           MARKET  PRICE  OF AND  DIVIDENDS  ON THE  REGISTRANT'S  COMMON
                  EQUITY & RELATED SHAREOWNER MATTERS.


         There is no market for the  Company's  common  stock as the  Company is
wholly  owned by FINOVA  Group.  Dividends  paid on  common  stock for the first
through fourth quarters of 1998 were $7.9 million,  $7.9 million,  $43.0 million
and $36.2 million, respectively. Dividends paid to FINOVA Group in the third and
fourth  quarters  of 1998 were used for  repurchases  of  outstanding  shares of
FINOVA Group's common stock.

         The  agreements   pertaining  to  senior  debt  and  revolving   credit
agreements  of  FINOVA  include  various   restrictive   covenants  and  require
maintenance of certain defined  financial ratios with which FINOVA has complied.
Under one covenant, dividend payments from FINOVA to FINOVA Group are limited to
50 percent of  accumulated  earnings after December 31, 1991. As of December 31,
1998,  FINOVA had $114.9 million of excess  accumulated  earnings  available for
distribution.

ITEM 6.           SELECTED FINANCIAL DATA.

         Omitted.

ITEM 7.           MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF FINANCIAL  CONDITION
                  AND RESULTS OF OPERATIONS.

         See pages 1 - 11 of Annex A.

                                       17
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         See page 12 of Annex A.


ITEM 8.           FINANCIAL STATEMENTS & SUPPLEMENTARY DATA.

         1.       Financial Statements - See Item 14 hereof and Annex A.
         2.       Supplementary Data - See Condensed  Quarterly Results included
                  in   Supplemental   Selected   Financial   Data  of  Notes  to
                  Consolidated Financial Statements included in Annex A.

ITEM 9.           CHANGES IN AND DISAGREEMENTS  WITH ACCOUNTANTS ON ACCOUNTING &
                  FINANCIAL DISCLOSURE.

         NONE.


                                    PART III

ITEM 10.          DIRECTORS & EXECUTIVE OFFICERS OF THE REGISTRANT.

         Omitted.
ITEM 11.          EXECUTIVE COMPENSATION.

         Omitted.


ITEM 12.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS & MANAGEMENT.

         Omitted.


ITEM 13.          CERTAIN RELATIONSHIPS & RELATED TRANSACTIONS.

         Omitted.

                                       18
<PAGE>
                                     PART IV

ITEM 14.          EXHIBITS,  FINANCIAL  STATEMENT  SCHEDULES AND REPORTS ON FORM
            8-K.

(a Documents filed.
   1.  Financial Statements.
       (i) The following financial statements of FINOVA are included in
           Annex A:
                                                                     Annex A
                                                                       Page
                                                                    ---------

       Management's Discussion and Analysis of Financial
         Condition and Results of Operations                          1-11
       Quantitative and Qualitative Disclosures about Market Risk      12
       Report of Management and Independent Auditors' Report          13-14
       Consolidated Balance Sheets (restated)                          15
       Statements of Consolidated Income (restated)                    16
       Statements of Consolidated Shareowner's Equity (restated)       17
       Statements of Consolidated Cash Flows (restated)                18
       Notes to Consolidated Financial Statements                     19-39
       Supplemental Selected Financial Data                            40

   2.  All Schedules have been omitted  because they are not applicable
       or the required information is shown in the financial statements
       or related notes.

3. Exhibits.
    Exhibit No.
    -----------

    (3.A)    Certificate of  Incorporation,  as amended through the date of this
             filing (incorporated by reference from FINOVA's report on Form 10-K
             for the year ended  December  31, 1994 (the "1994  10-K"),  Exhibit
             3.A).

    (3.B)    Bylaws, as amended through the date of this filing (incorporated by
             reference  from  FINOVA's  report on Form  10-K for the year  ended
             December 31, 1995 (the "1995 10-K") Exhibit 3.B).

    (4.A)    Form  of  FINOVA's  Common  Stock   Certificate   (incorporated  by
             reference from the 1994 10-K, Exhibit 4.B).

    (4.B)    Relevant  portions of FINOVA's  Certificate  of  Incorporation  and
             Bylaws included in Exhibits 3.A, 3.B and 3.C above are incorporated
             by reference.

    (4.C)    Long-term debt instruments with principal amounts not exceeding 10%
             of FINOVA's total consolidated  assets are not filed as exhibits to
             this report.  FINOVA will furnish a copy of those agreements to the
             SEC upon its request.

    (4.D)    Form of Indenture  dated as of September 1, 1992 between FINOVA and
             the Trustee  named  therein  (incorporated  by  reference  from the
             Greyhound Financial Corporation Registration Statement on Form S-3,
             Registration No. 33-51216, Exhibit 4).

    (4.E)    Form of Indenture  dated as of October 1, 1995  between  FINOVA and
             the Trustee named therein  (incorporated by reference from FINOVA's
             report on Form 8-K dated October 25, 1995, Exhibit 4.1).

                                       19
<PAGE>
    Exhibit No.
    -----------

    (4.F)    Form of  Indenture,  dated as of March 20,  1998,  between  FINOVA,
             FINOVA  Group and The First  National  Bank of  Chicago  as Trustee
             (incorporated   by  reference   from  FINOVA  and  FINOVA   Group's
             registration  statement on Form S-3,  Registration  No.  333-38171,
             Exhibit 4.8).

    (10.A)   Sixth  Amendment  and  Restatement  dated as of May 16, 1994 of the
             Credit  Agreement,  dated as of May 31, 1976 among FINOVA Group and
             the lender parties thereto,  and Bank of America National Trust and
             Savings  Association,  Bank of Montreal,  Chemical Bank,  Citibank,
             N.A. and National  Westminister  Bank USA, as agents (the "Agents")
             and  Citibank,  N.A.,  as  Administrative  Agent  (incorporated  by
             reference  from  FINOVA's  report on Form 8-K  dated May 23,  1994,
             Exhibit 10.1).

    (10.A.1) First  Amendment  dated as of  September  30,  1994,  to the  Sixth
             Amendment and  Restatement,  noted in 10.A above  (incorporated  by
             reference from the 1994 10-K, Exhibit 10.A.1).

    (10.A.2) Second  Amendment  dated as of May 11, 1995 to the Sixth  Amendment
             and Restatement noted in 10.A above (incorporated by reference from
             FINOVA's  Quarterly  Report  on Form  10-Q  for the  period  ending
             September 30, 1995 ( the "3Q95 10-Q"), Exhibit 10.A).

    (10.A.3) Third  Amendment  dated as of November  1, 1995 to Sixth  Amendment
             noted in 10.A above  (incorporated by reference from the 3Q95 10-Q,
             Exhibit 10.B).

    (10.A.4) Fourth Amendment dated as of May 15, 1996, to Sixth Amendment noted
             in 10.A above  (incorporated  by reference from FINOVA's  report on
             form 10-K for the year ended  December 31, 1996 (the "1996  10-K"),
             Exhibit 10.A.4).

    (10.A.5) Fifth  Amendment  dated as of May 20, 1998 to Sixth Amendment noted
             in 10.A above (incorporated by reference from FINOVA Group's report
             on form 10-K for the year  ended  December  31,  1997 (the  "FINOVA
             Group 1997 10-K"), Exhibit 10.A.5).

    (10.B)   Credit  Agreement  (Short-Term  Facility)  dated as of May 16, 1994
             among FINOVA , the Lender parties thereto, the Agents and Citibank,
             N.A.,  as  Administrative  Agent  (incorporated  by reference  from
             FINOVA's report on Form 8-K dated May 23, 1994, Exhibit 10.2).

    (10.B.1) First  Amendment  dated  as of  September  30,  1994 to the  Credit
             Agreement noted in 10.B above  (incorporated  by reference from the
             1994 10-K, Exhibit 10.B.1).

    (10.B.2) Second  Amendment  to  Short-Term  Facility  noted  in  10.B  above
             (incorporated by reference from the 3Q95 10-Q, Exhibit 10.C).

    (10.B.3) Third  Amendment  to  Short-Term   Facility  noted  in  10.B  above
             (incorporated by reference from the 3Q95 10-Q, Exhibit 10.D).

    (10.B.4) Fourth  Amendment  to  Short-Term  Facility  noted  in  10.B  above
             (incorporated by reference from 1996 10-K, Exhibit B.4).

    (10.B.5) Fifth  Amendment  to  Short-Term   Facility  noted  in  10.B  above
             (incorporated by reference from the FINOVA Group 1997 10-K, Exhibit
             10.B.5).+

    (10.C)   Exhibits relating to management compensation are omitted due to the
             reduced  disclosure  format,  but can be found as  exhibits  to the
             FINOVA Group 1997 10-K.

                                       20
<PAGE>
    Exhibit No.
    -----------

    (10.D)   Documents  relating to the  mini-CMBS  Program:  FINOVA  Commercial
             Mortgage  Loan Owner Trust 1998-1.  Commercial  Mortgage Loan Asset
             Backed Certificates 1998 -1.*

    (10.D.1) Certificate  Purchase  Agreement  dated as of  September  29,  1998
             (incorporated  by reference  from FINOVA  Group 1998 10-K,  Exhibit
             10.T.1).

    (10.D.2) Trust  and  Servicing  Agreement  dated  as of  September  1,  1998
             (incorporated  by reference  from FINOVA  Group 1998 10-K,  Exhibit
             10.T.2).

    (10.D.3) Loan Purchase Agreement dated as of September 1, 1998 (incorporated
             by reference from FINOVA Group 1998 10-K, Exhibit 10.T.3).

    (10.D.4) Amendment  No. 1 to the Trust and Servicing  Agreement  dated as of
             December 8, 1998  (incorporated by reference from FINOVA Group 1998
             10-K, Exhibit 10.T.4).


    (10.D.5) Amendment  No. 2 to the Trust and Servicing  Agreement  dated as of
             December 29, 1998 (incorporated by reference from FINOVA Group 1998
             10-K, Exhibit 10.T.5).

    (10.D.6) Custodial  Agreement dated as of September 1, 1998 (incorporated by
             reference from FINOVA Group 1998 10-K, Exhibit 10.T.6).

    (10.D.7) Administration   Agreement   dated   as  of   September   1,   1998
             (incorporated  by reference  from FINOVA  Group 1998 10-K,  Exhibit
             10.T.7).

    (10.D.8) Amendment  No. 3 to the Trust and Servicing  Agreement  dated as of
             April 21, 1999  (incorporated  by reference  from FINOVA Group 1998
             10-K/A, Amendment No. 2, Exhibit 10.T.8).

    (10.D.9) Amendment  No. 4 to the Trust and Servicing  Agreement  dated as of
             April 26, 1999  (incorporated  by reference  from FINOVA Group 1998
             10-K/A, Amendment No. 2, Exhibit 10.T.9).

    (12)     Computation  of Ratio of  Restated  Income  to  Fixed  Charges,  as
             restated.**

    (23)     Independent Auditors' Consent.**

    (24)     Powers of Attorney.**

    (27)     Financial Data Schedule, as restated.**

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

*    Previously filed.
**   Filed with this report.
+    Relating to management compensation.

(b)  Reports on Form 8-K.

         A report on Form 8-K, dated January 15, 1999, was filed by FINOVA which
reported  under Items 5 and 7 the  revenues,  net income and selected  financial
data and  ratios  for the  fourth  quarter  and year  ended  December  31,  1998
(unaudited).

                                       21
<PAGE>
SIGNATURES


         Pursuant to the  requirements of Section 13 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  in  the  capacities
indicated, in Phoenix, Arizona on May 5, 1999.


                           FINOVA CAPITAL CORPORATION



      By:                        /s/ Samuel L. Eichenfield
         ---------------------------------------------------------------
                                   Samuel L. Eichenfield
                     Chairman, President  and Chief Executive Officer
                                 (Chief Executive Officer)




      By:                        /s/  Bruno A. Marszowski
         ---------------------------------------------------------------
                                    Bruno A. Marszowski
              Senior Vice President - Controller and Chief Financial Officer
                         (Chief Accounting and Financial Officer)

                                       22
<PAGE>
         Pursuant to the requirements of the Securities Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities and on the dates indicated:




                        *                                 *
          W. Carroll Bumpers(Director)         Meilee Smythe (Director)
       ---------------------------------    --------------------------------
                   May 5, 1999                         May 5, 1999





            /s/ Samuel L. Eichenfield                     *
       ---------------------------------    --------------------------------
        Samuel L. Eichenfield (Chairman)      Gregory C. Smalis (Director)
                   May 5, 1999                         May 5, 1999


        * Signed pursuant to Powers of Attorney dated February 11, 1999.


                             /s/ Bruno A. Marszowski
                         -------------------------------
                               Bruno A. Marszowski
                                Attorney-in-Fact
                                   May 5, 1999

                                       23
<PAGE>
                                     ANNEX A
                           FINOVA CAPITAL CORPORATION
             INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AS RESTATED


                                                                            Page
                                                                            ----
Management's Discussion and Analysis of Financial Condition
  and Results of Operations                                                 A-1
Quantitative and Qualitative Disclosure about Market Risk                   A-12
Management's Report on Responsibility for Financial Reporting               A-13
Independent Auditors' Report                                                A-14
Consolidated Balance Sheets                                                 A-15
Statements of Consolidated Income                                           A-16
Statements of Consolidated Shareowner's Equity                              A-17
Statements of Consolidated Cash Flows                                       A-18
Notes to Consolidated Financial Statements                                  A-19
Supplemental Selected Financial Data                                        A-40

                                       A-i
<PAGE>
                           FINOVA CAPITAL CORPORATION

          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS

     The following  discussion relates to the restated  financial  statements of
FINOVA Capital Corporation and its subsidiaries  (collectively,  "FINOVA" or the
"Company").  FINOVA  is a wholly  owned  subsidiary  of The  FINOVA  Group  Inc.
("FINOVA  Group").  The financial  statements are being restated  primarily as a
result of two accounting issues, as well as several other adjustments.

     The  first  issue  relates  to the  amount  of the gain on sale of  certain
commercial  mortgage-backed  securities (CMBS),  reported in 1998. In the latter
part of 1998,  the  Company  used for the first  time a private  CMBS  structure
("mini-CMBS") to sell loans  originated by FINOVA Realty Capital ("FRC").  Under
this structure, the Company sold loans originated by FRC to a trust with limited
recourse.  The  trust  held  those  loans  with  plans to  resell  them into the
permanent  CMBS market.  The trust paid cash to the Company upon  acquisition of
the assets,  issued a senior security interest to an investment banking firm and
a  subordinated  residual  interest to the  Company.  The Company  retained  the
servicing rights and obligations related to the assets transferred to the Trust.

     The Company was required to recognize gains on the transfer of the loans to
the mini-CMBS trust in accordance  with SFAS 125,  "Accounting for Transfers and
Servicing of Financial Assets and  Extinguishments  of Liability," and initially
reported gains in the gross amount of $46.1 million.  Subsequent to the issuance
of the Company's  1998 financial  statements,  the Company  determined  that the
original  estimate  of the fair value of the  Company's  retained  interest  was
overstated  and  accordingly  revalued  its retained  interest in the  mini-CMBS
transaction.  This  revaluation  resulted  in a  reduction  of the  value of the
retained  portion of the loans from the $91.7 million  previously  reported,  to
$65.0 million,  as now restated.  This  reduction in the value reduced  FINOVA's
previously  reported  1998 gross gains on  mini-CMBS  sales of $46.1  million to
$19.5 million,  as restated.  After  recognition for hedge losses,  commissions,
expenses and other  obligations,  the Company  reported a net mini-CMBS  loss of
$10.0 million. No gains were recognized on the subordinated interest retained by
the Company.

     In determining  the fair value of assets sold and interests  retained,  the
Company  employed a variety of  financial  assumptions.  To  establish  discount
rates,  the Company  referred to the subsequent April 1999 sale of approximately
70% of the  mini-CMBS  loans into a  permanent  CMBS  structure.  The  permanent
transaction was compared to the mini-CMBS  transaction  and similar  portions of
the interest  retained  were  discounted  using rates  present in the  permanent
structure,  after adjusting for general  movements in interest rates between the
date of the mini-CMBS transaction and the permanent  transaction.  Specifically,
servicing rights were discounted at approximately 6% and the remaining  residual
cash flows were  discounted  at rates  between 9% and 18%.  The Company  assumed
minimal  defaults  and  prepayments  due  to the  nature  and  structure  of the
commercial  mortgages.  The recourse obligation was recorded at fair value based
on prices obtained from the subsequent April 1999 sale.

     Once the trust sells the  remainder  of the loans into the  permanent  CMBS
market, there will be no further recourse or assumption risk.

     Further  discussion of the mini-CMBS  transaction can be found under "Gains
on  Disposal  of  Assets"  in this  discussion  and under the  "Securitizations"
Section  of  Note  C and  in  Note  R of the  Notes  to  Consolidated  Financial
Statements included in Annex A.

     The second  subject of the  restatement  relates to accounting for expenses
incurred  in  connection  with the  origination  of new loans under SFAS No. 91,
"Accounting for  Non-Refundable  Fees and Costs  Associated with  Originating or
Acquiring Loans and Initial Direct Costs of Leases."  Historically,  the Company
has deferred loan  origination  fees received and amortized that income over the
lives of loans,  while  electing to expense loan  origination  costs as incurred
rather than  deferring and  amortizing  them.  As now restated,  the Company has
deferred and amortized loan  origination  costs in accordance  with SFAS No. 91.
The  restated   financial   statements   include  several  other   miscellaneous
adjustments.

                                      A-1
<PAGE>
                           FINOVA CAPITAL CORPORATION

A summary of the significant effects of the restatements for 1998 is as follows:

<TABLE>
<CAPTION>
                                                                  1998
                                                               Adjustments
                                      -------------------------------------------------------------
                                      As Previously            Origination                   As
                                         Reported    CMBS Gain    Costs        Other       Restated
<S>                                    <C>           <C>         <C>         <C>         <C>
AT DECEMBER 31,
Investment in financing transactions   $10,011,536   $(21,847)   $ 37,426    $ (6,894)   $10,020,221
Goodwill and other assets                  650,144     (1,140)                (16,623)       632,381
Total liabilities                        9,161,824     (4,910)     15,045      (9,099)     9,162,860
Shareowner's equity                      1,341,757    (18,077)     22,381     (14,418)     1,331,643

FOR THE YEAR ENDED DECEMBER 31,
Interest margins earned                    472,536                (15,605)      2,584        459,515
Gains on disposal of assets                 55,024    (26,018)                 (1,094)        27,912
Operating expenses                         241,074                (23,731)       (690)       216,653
Net Income                                 173,519    (15,559)      4,859       1,304        164,123
----------------------------------------------------------------------------------------------------
</TABLE>

     The  restatement to reduce the mini-CMBS gain did not affect years prior to
1998.

     A summary  of the  significant  effects  of the  restatement  to defer loan
origination costs, as well as several other adjustments in 1997 and 1996, are as
follows:

<TABLE>
<CAPTION>
                                                1997                      1996
                                      -----------------------  -------------------------
                                      As Previously     As     As Previously      As
                                        Reported     Restated    Reported      Restated
                                        --------     --------    --------      --------
<S>                                    <C>          <C>          <C>          <C>
AT DECEMBER 31,
Investment in financing transactions   $8,399,456   $8,420,462   $7,298,759   $7,318,919
Goodwill and other assets                 502,362      486,142      370,575      362,137
Total liabilities                       7,497,855    7,500,841    6,482,883    6,491,617
Shareowner's equity                     1,260,068    1,261,868    1,069,043    1,072,031

FOR THE YEAR ENDED DECEMBER 31,
Interest margins earned                   408,914      392,124      340,517      329,107
Gain on disposal of assets                 30,261       30,333       12,949       12,562
Operating expenses                        190,525      168,444      154,481      140,218
Net Income                                143,090      141,902      117,000      118,475
</TABLE>

     A  prior  period   adjustment  of  $1.5  million  has  been   reflected  in
shareowner's equity at January 1, 1996. The effects of the restatement have been
reflected herein.

                                      A-2
<PAGE>
                           FINOVA CAPITAL CORPORATION

RESULTS OF OPERATIONS

     The following table  summarizes  FINOVA's  operating  results for the years
ended December 31, 1998, 1997 and 1996:

<TABLE>
<CAPTION>

                                                   Percent                       Percent
(Dollars in Millions)           1998      1997     Change    1997      1996      Change
---------------------           ----      ----     ------    ----      ----      ------
<S>                           <C>       <C>         <C>    <C>       <C>         <C>
Interest margins earned       $  459.5  $  392.1    17.2%  $  392.1  $  329.1     19.1%
Volume-based fees                 77.7      39.4    97.4%      39.4      28.6     37.7%
                              --------  --------           --------  --------
Operating margin                 537.2     431.5    24.5%     431.5     357.7     20.6%
Provision for credit losses      (82.2)    (69.2)   18.8%     (69.2)    (41.8)    65.7%
Gains on disposal of assets       27.9      30.3    (8.0)%     30.3      12.6    141.5%
Operating expenses              (216.7)   (168.4)   28.6%    (168.4)   (140.2)    20.1%
Income taxes                    (102.2)    (82.3)   24.2%     (82.3)    (70.3)    17.0%
                                                           --------  --------
Income from continuing
 operations                      164.1     141.9    15.7%     141.9     118.0     20.3%
                              --------  --------           --------  --------
Income and gain from
 discontinued operations                             n/a                  0.5      n/a
                              --------  --------    ----   --------  --------     ----
Net Income                    $  164.1  $  141.9    15.7%  $  141.9  $  118.5     19.8%
                              ========  ========           ========  ========
---------------------------------------------------------------------------------------
</TABLE>

1998 COMPARED TO 1997

     Net income for 1998  increased  15.7% to $164.1 million from $141.9 million
in 1997.  The increase was due to the growth in average  earning  assets and the
expansion of the  fee-related  businesses,  partially  offset by a $10.0 million
loss  on the  sale  of  commercial  mortgage-backed  securities  (CMBS)  through
mini-CMBS  transactions more fully described elsewhere in this discussion and in
Note C of Notes to Consolidated  Financial  Statements.  Other  offsetting items
included a higher provision for credit losses,  increased operating expenses and
a higher  effective tax rate.  Net income in 1998 included a full year of FINOVA
Realty Capital ("FRC") and AT&T Capital's  Inventory Finance unit, both of which
were acquired in the fourth quarter of 1997. See Note B of Notes to Consolidated
Financial Statements for further discussion.

     INTEREST  MARGINS EARNED.  The net spread from the portfolio is represented
by interest  margins earned,  which is the difference  between (a) income earned
from  financing  transactions  and (b)  interest  expense  and  depreciation  on
operating leases and other owned assets. Interest margins earned increased 17.2%
to $459.5  million in 1998 from $392.1 million in 1997, due primarily to a 16.1%
increase in average earning assets in 1998.

     Average earning assets, which represents the average of FINOVA's investment
in financing  transactions less nonaccruing assets and deferred taxes related to
leveraged leases, increased to $8.55 billion in 1998 from $7.36 billion in 1997.
The increase  was  primarily  due to a 20.2%  increase in funded new business of
$3.98  billion  compared to $3.31  billion in 1997,  partially  offset by normal
amortization of the portfolio and prepayments during the year.

     VOLUME-BASED FEES. Volume-based fees are generated by FINOVA's Distribution
& Channel Finance (formerly  Inventory  Finance),  Commercial Services (formerly
Factoring  Services)  and FRC lines of  business.  These fees are  predominantly
based on  volume-originated  business  rather  than the  balance of  outstanding
financing  transactions  during the year.  Fees are  generated  on the volume of
purchased  accounts  receivable  and mortgage loan  originations.  A majority of
FRC's mortgage loan  originations  are funded by other lenders and therefore are
not recorded on FINOVA's balance sheet.  FINOVA's  commercial mortgage operation
originates and sells loans and typically would only retain assets on the balance
sheet  for  a  short  period  of  time.   Due  to  the   short-term   nature  of
volume-originated business, these fees are recognized as income in the period of
origination.

     The 97.4% increase in volume-based fees to $77.7 million in 1998 from $39.4
million in 1997 was  primarily  due to fee-based  volume  increasing by 60.1% to
$7.26 billion in 1998 compared to $4.53  billion in 1997.  The increased  volume
was  attributable  to the addition of FRC and AT&T Capital's  Inventory  Finance
unit.

                                      A-3
<PAGE>
                           FINOVA CAPITAL CORPORATION

     The  increase  in  volume-based  fees in 1998 was the major  reason for the
growth of FINOVA's operating margin as a percentage of average earning assets to
6.3% in 1998 from 5.9% in 1997.  The interest rate spread portion of this margin
increased slightly to 5.4% in 1998 from 5.3% in 1997.

     PROVISION FOR CREDIT  LOSSES.  The  provision  for credit losses  increased
18.8% to $82.2 million in 1998  compared to $69.2 million in 1997.  The increase
in the  provision  reflected  the  growth in  managed  assets of 18.9% to $10.56
billion in 1998 from $8.88 billion in 1997 and an increase in net  write-offs in
1998 to $56.8  million  compared to $43.2  million in 1997.  The higher level of
write-offs  in 1998 was primarily due to prior credit  problems  experienced  in
FINOVA's  Commercial Services line of business which had net write-offs of $35.7
million  in  1998  principally   related  to  the  business'  wholesale  textile
customers. The 1998 Commercial Services write-offs represent problems identified
in 1997 that the  Company  believed  could be  worked  out.  Unfortunately,  the
results of those efforts were  unsuccessful,  resulting in increased  write-offs
for 1998. Commercial Services is refocusing its portfolio to include more retail
customers  and other  industries.  Net  write-offs by line of business and other
changes  in the  reserve  for  credit  losses can be found in Note D of Notes to
Consolidated Financial Statements.

     GAINS ON DISPOSAL OF ASSETS. Gains on disposal of assets were $27.9 million
in 1998 compared to $30.3 million in 1997.  Gains on disposal of assets  include
the sale of loans via the commercial mortgage backed securities ("CMBS") market,
the sale of assets coming off lease and the sale of other assets.  Sales of CMBS
transactions (permanent and mini-CMBS structures) resulted in a net loss of $7.2
million in 1998 and  consisted of gross gains of $25.0  million  offset by hedge
losses,  commissions,  expenses and recourse  obligations of $32.2 million.  The
total net loss on CMBS  transactions  of $7.2 million  includes a net  mini-CMBS
loss of $10.0 million from the  utilization  of the mini-CMBS  structure to sell
loans  warehoused by FINOVA Realty  Capital and gains of $2.8 million from other
CMBS securitizations.  In April 1999, approximately 70% of the assets within the
mini-CMBS  structure  were sold into a permanent  CMBS  structure.  Refer to the
Recent Developments section of Management's  Discussion and Analysis and Notes C
and R of Notes to the Consolidated Financial Statements for a further discussion
of the mini-CMBS transactions.

     The other  $35.1  million  of net gains in 1998  resulted  from the sale of
assets coming off lease, Franchise Finance loans and other assets. While, in the
aggregate, FINOVA has historically recognized gains on the disposal of assets it
holds, the timing and amount of these gains are sporadic in nature. There can be
no assurance FINOVA will recognize such gains in the future, depending, in part,
on market conditions at the time of disposal.

     OPERATING   EXPENSES.    Operating   expenses,   which   include   selling,
administrative and other expenses, were generally higher in all major categories
and increased to $216.7 million in 1998 compared to $168.4 million in 1997. This
increase was partially  attributable  to the growth in managed assets during the
year and to incentives paid to employees  based on performance  criteria such as
profitability  and the increased value of FINOVA's stock.  Also  contributing to
the  increase  was the  addition  of FRC,  which  has a  higher  operating  cost
structure  than other  FINOVA  lines of  business,  including  over 80  business
development  officers  and  support  staff.  Operating  expenses  were  40.3% of
operating  margin for 1998 compared to 39.0% in 1997. Due to FINOVA's  expansion
into  activities  that use gains from the disposal of assets to cover  operating
expenses,  a more appropriate ratio to measure  efficiency is operating expenses
as a  percentage  of  operating  margin  plus  gains.  Using  this  measurement,
operating  expenses were 38.3% of operating  margin plus gains for 1998 compared
to 36.5% in 1997. See Note M of Notes to Consolidated  Financial  Statements for
additional detail.

     INCOME  TAXES.  Income taxes were $102.2  million in 1998 compared to $82.3
million in 1997.  The increase was primarily due to higher  pre-tax income and a
higher  effective tax rate in 1998 due to the realization of certain tax credits
in 1997. See Note I of Notes to  Consolidated  Financial  Statements for further
discussion of income taxes.

1997 COMPARED TO 1996

     Net income for 1997  increased  19.8% to $141.9 million from $118.5 million
in 1996. The increase reflected growth in managed assets,  increased fee-related
business,  higher gains on disposal of assets and a lower  effective  income tax
rate,  partially  offset by higher  provisions  for credit  losses and increased
operating  expenses.  Income from  continuing  operations  for 1997 increased to
$141.9  million  from  $118.0  million in 1996.  Continuing  operations  in 1996
excluded the operating  results of FINOVA's  discontinued  Manufacturer & Dealer
Services line of business  ("MDS") and FINOVA  Medical  Systems and a $6 million
gain resulting from the sale of MDS.

                                      A-4
<PAGE>
                           FINOVA CAPITAL CORPORATION

     INTEREST MARGINS EARNED.  Interest margins earned increased 19.1% to $392.1
million in 1997 from $329.1  million in 1996 due  primarily to a higher level of
average earning assets.

     Average earning assets  increased 16.3% to $7.36 billion in 1997 from $6.33
billion a year earlier.  This increase  primarily resulted from a 20.8% increase
in funded new business of $3.31 billion  compared to $2.74 billion in 1996,  and
to a lesser  extent,  from  portfolios  purchased  during  1997  (totaling  $122
million).  These increases were partially  offset by the normal  amortization of
the portfolio and prepayments during the year.

     VOLUME-BASED  FEES.  Volume-based  fees increased 37.7% to $39.4 million in
1997  compared to $28.6  million in 1996.  The  increase  was  primarily  due to
fee-based  volume  of $4.53  billion  in 1997  that was  54.3%  higher  than the
fee-based  volume of $2.94  billion in 1996.  Contributing  to the  increase  in
fee-based  business were the  acquisitions  of FRC (formerly  Belgravia  Capital
Corporation) and AT&T Capital's  Inventory Finance unit in the fourth quarter of
1997.

     The 54.3% increase in fee-based  volume in 1997 was a primary factor in the
improvement  of FINOVA's  operating  margin as a percentage  of average  earning
assets to 5.9% in 1997 from 5.7% in 1996.  Lower  aggregate  borrowing costs and
lower  leverage in 1997 also  contributed  to the  improvement  in the operating
margin.

     PROVISION FOR CREDIT  LOSSES.  The  provision  for credit losses  increased
65.7% to $69.2 million in 1997 compared to $41.8 million in 1996. In addition to
growth in FINOVA's  managed  assets,  the increase in the  provision  for credit
losses primarily resulted from an increase in net write-offs to $43.2 million in
1997  from  $28.7  million  in 1996.  The  higher  net  write-offs  in 1997 were
primarily  attributable to FINOVA's Commercial Services line of business, due to
credit problems experienced among the line's wholesale textile customers.  Total
net  write-offs  for FINOVA's other lines of business were lower in 1997 than in
1996.

     FINOVA's net write-offs  during 1997  represented  0.53% of average managed
assets (excluding average participations)  compared to 0.41% in 1996. Details of
net  write-offs  and other changes in the reserve for credit losses can be found
in Note D of Notes to Consolidated Financial Statements.

     GAINS ON DISPOSAL OF ASSETS.  Gains on  disposal  of assets  totaled  $30.3
million in 1997,  higher than the $12.6 million in 1996. In addition to the sale
of assets coming off lease,  FINOVA recognized a significant gain from the early
termination of a real estate leveraged lease transaction in 1997.

     OPERATING EXPENSES.  Operating expenses,  as restated,  were higher in 1997
than in 1996,  primarily  as a result of  increased  costs  necessary  to manage
FINOVA's  larger  portfolio.  Also  contributing  to the  increase in  operating
expenses were incentives paid to employees based on performance criteria such as
profitability  and the increased value of FINOVA Group's stock (which  increased
by 54.7% to $49  11/16  per  share  at  year-end).  The  Company  also  incurred
additional  costs in administering  problem loan accounts in 1997,  including an
increase with respect to the Commercial Services line of business.

     As a percentage of operating margin,  operating  expenses declined slightly
to  39.0% in 1997  from  39.2%  in  1996.  See  Note M of Notes to  Consolidated
Financial Statements for further detail of operating expenses.

     INCOME  TAXES.  Income  taxes  were  higher in 1997 than in 1996 due to the
increase  in pre-tax  income.  Partially  offsetting  the  increase  was a lower
effective  tax rate in 1997 of  36.7%  compared  to  37.3% in 1996,  principally
caused by FINOVA's  ability to use certain capital loss  carryforwards  in 1997.
See Note I of Notes to Consolidated  Financial Statements for further discussion
of income taxes.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

     Managed assets at December 31, 1998 increased  18.9% to $10.56 billion from
$8.88  billion at December  31,  1997.  The  increase  was the result of a 20.2%
increase  in funded new  business  of $3.98  billion in 1998  compared  to $3.31
billion in 1997,  partially  offset by normal  loan and lease  amortization  and
prepayments.

                                      A-5
<PAGE>
                           FINOVA CAPITAL CORPORATION

     FINOVA's  reserve for credit losses increased to $207.6 million at December
31,  1998 from $177.1  million at  year-end  1997 that  primarily  consisted  of
provisions of $82.2 million  partially  offset by net write-offs  totaling $56.8
million.  At December 31, 1998 the reserve  represented  2.0% of managed  assets
(excluding  participations  sold and financing contracts held for sale) the same
level as one year  ago.  Nonaccruing  assets  increased  to  $205.2  million  at
December  31,  1998  representing  2.0%  of  ending  managed  assets  (excluding
participations  sold)  compared to $187.4  million in  nonaccruing  assets as of
December 31, 1997, which  constituted 2.1% of ending managed assets.  The single
most  significant   increase  in  nonaccruing  assets  was  the  addition  of  a
paper-manufacturing  customer  in  the  Commercial  Equipment  Finance  line  of
business.  At December 31, 1998, the reserve  represented  101.2% of nonaccruing
assets  compared  to  94.5%  at  December  31,  1997.  See  Note D of  Notes  to
Consolidated  Financial  Statements for more  information  on the reserves,  net
write-offs and nonaccruing assets.

     The Company had total debt  outstanding  of $8.39  billion at December  31,
1998 or 6.3 times its equity base of $1.33  billion.  At December 31, 1997,  the
Company  had debt  leverage of 5.4 times its equity  base  ($6.76  billion  debt
outstanding to $1.26 billion of equity).  Deferred income taxes,  which are used
to finance a portion  of  FINOVA's  assets,  grew  27.3%  during  1998 to $355.0
million from $278.8 million at year-end 1997.

     Growth in managed assets is generally financed by internally generated cash
flows and borrowings. During 1998, FINOVA issued $1.6 billion in new senior debt
and increased its  commercial  paper and other  short-term  borrowings by $739.5
million.  These funds were used to finance new  business and to redeem or retire
$689 million of debt. During 1997, FINOVA Group issued approximately 1.7 million
shares of its common stock as the primary  consideration  for the acquisition of
FRC. The FRC assets were contributed by FINOVA Group to FINOVA. FINOVA Group has
historically made its equity available to assist FINOVA in its capital needs and
growth strategy.  Although continued  contributions of equity proceeds is at the
discretion of FINOVA Group,  management  considers  FINOVA Group's  potential to
raise needed equity to be an integral part of the Company's  capital  resources.
See Note B of Notes to Consolidated Financial Statements for further detail.

     FINOVA  satisfies a  significant  portion of its cash  requirements  from a
diversified  group of worldwide  funding sources and is not dependent on any one
lender.  FINOVA  also  relies on the  issuance  of  commercial  paper as a major
funding source. During 1998, FINOVA issued $18.4 billion of commercial paper, at
a weighted  average cost of 5.67% (with an average of $3.5  billion  outstanding
during the year) and raised $1.6 billion, as noted above,  through new long-term
financings  of one to twelve  year  durations.  At  December  31, 1998 and 1997,
commercial  paper and short-term bank  borrowings  totaled $3.9 billion and $3.1
billion,  respectively,  and were supported by available unused revolving credit
lines  which,  if not renewed,  are  convertible  to long-term  debt at FINOVA's
option.

     At December  31,  1998,  FINOVA  maintained  a five-year  revolving  credit
facility  and a  364-day  facility  with  numerous  lenders,  in  the  aggregate
principal  amount of $2.0  billion.  Separately,  FINOVA also had two  five-year
facilities  with numerous  lenders for $700 million each,  one 364-day  facility
with numerous  lenders for $600 million and three 364-day  facilities with three
separate lenders for an aggregate  principal amount of $400 million.  These $4.4
billion of credit facilities support FINOVA's  outstanding  commercial paper and
short-term  borrowings.  The  Company  intends  to  borrow  under  the  domestic
revolving  credit  agreements to refinance  commercial paper and short-term bank
loans if it encounters significant  difficulties in rolling over its outstanding
commercial  paper and  short-term  bank loans.  The Company rarely borrows under
these  facilities.  The 364-day $1.0 billion and $600 million  revolving  credit
agreements  are subject to renewal in 1999,  while the two $700  million and the
other $1.0 billion credit facilities are subject to renewal in 2002. The 364-day
facilities  totaling $400 million are subject to renewal in 1999;  however,  the
Company does not anticipate extending these facilities.

     The  Company,  through  one  subsidiary,  uses a  five-year  multi-currency
facility  with a small  group of  lenders  for  $100  million.  Through  another
subsidiary, the Company maintains a 364-day revolving credit facility with three
lenders in Canada for 100 million Canadian  dollars.  FINOVA is the guarantor of
these credit facilities, which are subject to renewal in 1999.

     In 1998,  FINOVA commenced a Euro Medium-Term Note Program allowing for the
issuance of up to $1.0 billion of debt securities. As of December 31, 1998 there
was $750 million available under the program.

     In  1997,   FINOVA  and  FINOVA  Group  jointly  filed  a  universal  shelf
registration  statement  with the SEC allowing for the issuance of $2 billion of
senior debt securities,  common stock,  preferred stock,  depositary  shares and
warrants to purchase  common  stock or debt  securities,  $830  million of which
remained  available  as of December  31,  1998,  of which $105  million had been
designated for the issuance of medium term notes.

                                      A-6
<PAGE>
                           FINOVA CAPITAL CORPORATION

     The  agreements  pertaining to long-term debt include  various  restrictive
covenants and require the maintenance of certain defined  financial  ratios with
which  FINOVA  and FINOVA  Group have  complied.  Under one  covenant,  dividend
payments  by FINOVA to FINOVA  Group are  limited to 50  percent of  accumulated
earnings after December 31, 1991.

     FINOVA's  aggregate cost of funds  decreased to 6.4% for 1998 from 6.6% for
1997 as a result  of  declining  interest  rates  and the  elimination  of costs
associated with $1.15 billion of maturing interest rate hedges. FINOVA's cost of
and access to capital is dependent, in large part, on its credit ratings. FINOVA
has  maintained  investment-grade  ratings  since  1976.  FINOVA  currently  has
investment-grade ratings from the following agencies:

                                               Commercial     Senior
                                                  Paper        Debt
                                               ----------     ------
     Duff & Phelps Credit Rating Co.               D1           A
     Fitch Investors Services, Inc.                F1           A
     Moody's Investors Service, Inc.               P2          Baa1
     Standard & Poor's Ratings Group               A2           A-

     None of FINOVA's subsidiaries have applied for credit ratings.

DERIVATIVE FINANCIAL INSTRUMENTS

     FINOVA enters into  interest rate and basis swap  agreements as part of its
interest  rate  risk   management   policy  of  match  funding  its  assets  and
liabilities.  The  derivative  instruments  used  are  straightforward.   FINOVA
continually monitors its derivative position and uses derivative instruments for
non-trading and non-speculative purposes only.

     At December 31,  1998,  FINOVA had  outstanding  interest  rate  conversion
agreements with notional  principal  amounts totaling $1.80 billion.  Agreements
with notional  principal  amounts of $700 million were  arranged to  effectively
convert  certain  floating  interest rate  obligations  into fixed interest rate
obligations.  These agreements require interest payments on the stated principal
amount  at rates  ranging  from  5.84% to 8.09%  (remaining  terms of one to ten
years) in  return  for  receipts  calculated  on the same  notional  amounts  at
floating interest rates. In addition, agreements with notional principal amounts
of $1.10 billion were arranged to  effectively  convert  certain fixed  interest
rate obligations into floating interest rate obligations.  They require interest
payments on the stated  principal  amount at the three month or six month London
interbank  offered rates  ("LIBOR")  (remaining  terms of one to eight years) in
return for receipts  calculated on the same notional  amounts at fixed  interest
rates of 5.77% to 7.71%.

     FINOVA also enters into short-term treasury rate locks, options,  swaptions
and other  derivative  instruments to hedge interest rate risks  associated with
the  warehousing  of loans  primarily for FINOVA Realty  Capital.  See Note F of
Notes to Consolidated  Financial  Statements for further  discussion of FINOVA's
derivatives.

                                      A-7
<PAGE>
                           FINOVA CAPITAL CORPORATION

SEGMENT REPORTING

     Information  for  FINOVA's   reportable  segments  reconciles  to  FINOVA's
consolidated totals as follows:


Dollars in Thousands                                    1998            1997
--------------------                                    ----            ----
TOTAL NET REVENUE:
  Commercial Finance                                $    187,461    $   154,981
  Specialty Finance                                      344,541        313,841
  Capital Markets                                         24,170          2,099
  Corporate and other                                      8,978         (9,086)
                                                    ------------    -----------
Consolidated total                                  $    565,150    $   461,835
                                                    ============    ===========

INCOME (LOSS) BEFORE ALLOCATIONS:
  Commercial Finance                                $     67,013    $    72,454
  Specialty Finance                                      273,674        248,793
  Capital Markets                                         (2,775)         2,099
  Corporate and other, overhead and unallocated
     provision for credit losses                         (71,615)       (99,155)
                                                    ------------    -----------
Income from continuing operations before
  income taxes                                      $    266,297    $   224,191
                                                    ============    ===========

MANAGED ASSETS:
  Commercial Finance                                $  3,005,130    $ 2,755,826
  Specialty Finance                                    7,211,164      6,037,725
  Capital Markets                                        255,575
  Corporate and other                                     85,948         84,878
                                                    ------------    -----------
Consolidated total                                  $ 10,557,817    $ 8,878,429
Less securitizations and participations sold            (537,596)      (457,967)
                                                    ------------    -----------
Investment in financing transactions                $ 10,020,221    $ 8,420,462
                                                    ============    ===========

     FINOVA's business is organized into three market groups, which are also its
reportable segments:  Commercial Finance, Specialty Finance and Capital Markets.
Management  relies on total net revenue,  income before  allocations and managed
assets in evaluating the business  performance of each reportable  segment.  See
Note Q of Notes to Consolidated Financial Statements for additional detail.

     Total net revenue is the total of operating margin and gains on disposal of
assets.  Income before  allocations  is income  before  income taxes,  preferred
dividends,  corporate  overhead  expenses  and the  unallocated  portion  of the
provision for credit losses. Managed assets include each segment's investment in
financing transactions plus securitizations and participations sold.

     COMMERCIAL  FINANCE.  Commercial Finance includes  traditional  asset-based
businesses  that  lend  against  collateral  such  as  cash  flows,   inventory,
receivables  and leased  assets.  This segment  includes the following  lines of
business: Business Credit, Commercial Services, Corporate Finance,  Distribution
& Channel Finance, Growth Finance and Rediscount Finance.

     Total net revenue was $187.5  million in 1998 compared to $155.0 million in
1997,  an increase of 21.0%.  The  increase in 1998 was  primarily  due to 16.9%
growth in fee-based  volume,  which rose to $4.45 billion from $3.80 billion and
24.0% growth in average  earnings assets for the group in 1998. The 1998 results
include a full year of activity  from AT&T  Capital's  Inventory  Finance  unit,
which became part of  Distribution  & Channel  Finance's line of business in the
fourth quarter of 1997.

                                      A-8
<PAGE>
                           FINOVA CAPITAL CORPORATION

     Income  before  allocations  was $67.0  million in 1998  compared  to $72.5
million in 1997.  The decrease in 1998 was primarily due to previously  reported
problems  experienced in the Commercial Services line of business related to its
wholesale textile  customers,  which resulted in net write-offs of $35.7 million
in 1998  compared  to $23.3  million  in 1997.  As a  result  of the  Commercial
Services portfolio problems,  the unit experienced higher operating expenses and
a decline in fee-based volume.  Commercial Services is currently  refocusing its
portfolio towards more retail customers and other industries.  Excluding the net
effects of Commercial  Services,  income before  allocations  of the  Commercial
Finance group would have increased 20.2% in 1998.

     Managed assets grew to $3.01 billion in 1998 from $2.76 billion in 1997, an
increase of 9.0%.  The growth in managed assets was slowed due to compression in
the  Commercial  Services  unit,  partially  offset  by  strong  growth  in  the
Rediscount Finance operation.  Fee-based businesses,  which make up a portion of
Commercial  Finance,  rely more on volume  growth to increase  income than asset
growth. A significant  portion of the income growth (20.2% excluding  Commercial
Services) was due to increased fee-based volume.

     SPECIALTY  FINANCE.  Specialty  Finance includes  businesses that lend to a
variety of highly focused  industry-specific  niches.  This segment includes the
following  lines  of  business:  Commercial  Equipment  Finance,  Communications
Finance,  Franchise Finance,  Healthcare  Finance,  Portfolio  Services,  Public
Finance,  Resort  Finance,  Specialty  Real Estate  Finance  and  Transportation
Finance.

     Total net  revenue  increased  9.8% to $344.5  million in 1998  compared to
$313.8  million in 1997,  while income before  allocations  grew 10.0% to $273.7
million  in 1998  compared  to  $248.8  million  in 1997.  Both  increases  were
primarily due to 10.7% growth in average  earning  assets.  The unit was able to
keep net write-offs and operating expenses at a relatively constant rate.

     Managed assets grew to $7.21 billion in 1998 from $6.04 billion in 1997, an
increase  of 19.4%.  The  growth in managed  assets  was driven by new  business
growth of $3.08 billion in 1998  compared to $2.40 billion in 1997.  Much of the
growth in new  business  occurred  in the  second  half of 1998.  The growth was
spread  across all  business  units with  Transportation  Finance and  Franchise
Finance contributing the most to the growth in managed assets.

     CAPITAL  MARKETS.   Capital  Markets,  in  conjunction  with  institutional
investors,  provides  commercial  mortgage  banking services and debt and equity
capital funding.  This segment includes Realty Capital,  Investment Alliance and
Loan Administration.

     FINOVA Realty Capital was acquired in the fourth quarter of 1997. Total net
revenue was $24.2 million in 1998 compared to $2.1 million in 1997.  Loss before
allocations was $2.8 million in 1998 compared to income of $2.1 million in 1997.
The decrease in income before  allocations  was primarily  attributable to a net
loss of $10.0 million on mini-CMBS  transactions,  partially  offset by a higher
level of volume-based  fees due to increased volume in 1998. See Note C and Note
R of Notes to Consolidated  Financial  Statements for further  discussion of the
mini-CMBS structure.

     Capital  Markets was able to grow its managed asset base to $255.6 million,
of which $220.1 million represents financing contracts held for sale.

YEAR 2000 COMPLIANCE

     FINOVA  continues to implement  changes  necessary to help assure  accurate
date  recognition  and data processing with respect to the year 2000. To be year
2000 compliant means (1) significant  information  technology  ("IT") systems in
use by FINOVA  demonstrate  performance and functionality that is not materially
affected by  processing  dates on or after  January 1, 2000,  (2)  customers and
collateral  included in FINOVA's  portfolio of business are year 2000  compliant
and (3) vendors of services  critical to FINOVA's  business  processes  are year
2000 compliant.

     FINOVA's non-IT systems used to conduct business at its facilities  consist
primarily of office equipment (other than computer and communications equipment)
and other  equipment at leased office  facilities.  FINOVA has  inventoried  its
non-IT systems and has sent year 2000 questionnaires to office equipment vendors
and landlords to determine the status of their year 2000 readiness.

                                      A-9
<PAGE>
                           FINOVA CAPITAL CORPORATION

     Primary  internal  activities  related to this issue are  modifications  to
existing  computer  programs  and  conversions  to new  programs.  FINOVA  has a
five-phase plan for assuring year 2000 compliance of its internal systems:

1)   Identifying  each area,  function and application that could be affected by
     the change in date.

2)   Determining the extent to which each area,  function or application will be
     affected by the change in date and  identifying the proper course of action
     to eliminate adverse effects.

3)   Making the changes necessary to bring the system into year 2000 compliance.

4)   Testing the integrated system.

5)   Switching to year 2000 compliant applications.

     At December 31, 1998, FINOVA estimated that 95% of the changes necessary to
make mission critical  systems year 2000 compliant were complete.  All remaining
changes are expected to be made and the systems should be tested and implemented
by the end of the first quarter of 1999. Acquisitions made during 1998 are being
reviewed using the same  five-phase  plan. The necessary  modifications  to make
those new businesses  year 2000 compliant are expected to be complete by the end
of the second quarter of 1999.  Similarly,  acquisitions  made or proposed to be
made in 1999 are being reviewed with year 2000 compliance issues to be addressed
in a prompt manner.

     Costs incurred to bring FINOVA's internal systems into year 2000 compliance
are not expected to have a material  impact on FINOVA's  results of  operations.
Maintenance and modification costs are expensed as incurred,  while the costs of
new hardware and software are  capitalized  and amortized  over their  estimated
useful lives. FINOVA estimates it will incur approximately  $300,000 in expenses
and $1.8 million in capital costs related to year 2000 compliance. Estimates are
reviewed  and revised as necessary on a quarterly  basis.  Through  December 31,
1998,  FINOVA has  incurred  expenses  of  $158,000  and  capital  costs of $1.4
million.

     FINOVA's  aggregate  cost estimate does not include time and costs that may
be incurred as a result of the failure of any third  parties to become year 2000
compliant.  FINOVA is communicating with customers,  software vendors and others
to determine if their  applications  or services are year 2000  compliant and to
assess the potential impact on FINOVA related to this issue.

     Risks to FINOVA include that third parties may not have accurately assessed
their state of  readiness.  Similarly,  FINOVA cannot assure that the systems of
other companies and government agencies on which FINOVA relies will be converted
in a timely manner. While FINOVA believes all necessary work on internal systems
will be  completed  in a timely  fashion,  there  can be no  guarantee  that all
systems will be compliant by the year 2000 and within the estimated cost. Any of
these  occurrences  could cause a material adverse effect on FINOVA's results of
operations.

     FINOVA routinely  assesses the year 2000 compliance status of its borrowers
and generally requires that they provide  representations and warrants regarding
the status.  FINOVA also attempts to monitor their progress with  questionnaires
and other means.

     FINOVA  believes  under  its  reasonably  possible  worst  case  year  2000
scenario,  a number of its borrowers and service  providers would not be capable
of performing their contractual  obligations to FINOVA.  The financial impact of
this scenario and the Company's responses are currently under assessment.

     FINOVA is assessing  the need for  contingency  plans  related to year 2000
compliance in the first half of 1999. It plans to develop additional contingency
plans as necessary  throughout 1999.  FINOVA  maintains and deploys  contingency
plans designed to address various other  potential  business  interruptions.  In
some respects,  these plans may address interruptions resulting from FINOVA or a
third  party's  failure to be year 2000  compliant,  but the plans have not been
updated to specifically address the year 2000 issue as of December 31, 1998.

RECENT DEVELOPMENTS AND BUSINESS OUTLOOK

     In April 1999,  approximately  70% of the mini-CMBS  loans were sold into a
permanent CMBS structure.

                                      A-10
<PAGE>
                           FINOVA CAPITAL CORPORATION

     In March 1999, FINOVA Group acquired Sirrom Capital Corporation ("Sirrom"),
a  specialty  finance  company  headquartered  in  Nashville,   Tennessee,   for
approximately  $343 million in FINOVA Group common  stock,  excluding  converted
stock options. Sirrom provides secured loans to small, fast growing companies in
the U.S.  and Canada  with  revenues  between $5 million  and $50  million,  for
expansions,  acquisitions,  buyouts and other strategic ventures.  Completion of
the Sirrom  acquisition  resulted in an increase  in the  outstanding  equity of
FINOVA  Group and  lowered  the debt to equity  ratio to 5.5x at March 31,  1999
compared to FINOVA Group's leverage of 6.6x at December 31, 1998.

     In February 1999, FINOVA acquired Preferred Business Credit Inc. ("PBC"), a
west coast  provider of commercial  financing to small and mid-size  businesses.
PBC was added to Growth Finance to help expand its nationwide capabilities.

     In  October  1998,  FINOVA  acquired  United  Credit  Corporation,   a  New
York-based provider of commercial financing to small and midsize businesses, and
its Patriot  Funding  Division.  The addition formed a new division named FINOVA
Growth  Finance,  which provides  collateral-based  working  capital  financing,
primarily secured by accounts  receivable.  The new division provides  financing
ranging from $100,000 to $1 million to small and midsize  businesses with annual
sales under $10 million.  FINOVA anticipates that this new division will serve a
market segment of smaller, growth-oriented customers earlier in their maturation
cycle.

     In  October  1998,  FINOVA  acquired  Electronic  Payment  Systems,  Inc. a
commercial receivables servicing business headquartered in Salt Lake City, Utah,
to support the activities of its FINOVA Realty Capital business ("FRC").

NEW ACCOUNTING STANDARDS

     In June 1998,  the FASB  issued SFAS No. 133,  "Accounting  for  Derivative
Instruments  and Hedging  Activities,"  ("SFAS No. 133") which is effective  for
fiscal years  beginning  after June 15, 1999.  This statement  standardizes  the
accounting for derivative instruments,  including certain derivative instruments
embedded  in other  contracts,  by  recognition  of those  items  as  assets  or
liabilities  in the  statement of financial  position  and  measurement  at fair
value.  FINOVA will adopt this standard  effective January 1, 2000, as required.
The impact of SFAS No. 133 on the  Company's  financial  position and results of
operations has not yet been determined.

                                      A-11
<PAGE>
                           FINOVA CAPITAL CORPORATION

            QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

     FINOVA's  primary market risk exposure is the volatility of interest rates.
FINOVA  seeks to  manage  interest  rate  risk and  preserve  income  through  a
diversified borrowing base and a matched-funding policy. A diversified borrowing
base  consists  of short  and  long-term  debt  with a fixed or  variable  rate.
FINOVA's  matched-funding  policy, set by the FINOVA Group Board of Directors or
Audit  Committee  and  administered  by the  Finance  Committee,  requires  that
floating-rate  assets be financed  with similar  floating-rate  liabilities  and
fixed-rate  assets be financed with similar  fixed-rate  liabilities.  Under the
matched-funding   policy,  the  difference  between   floating-rate  assets  and
floating-rate  liabilities should not exceed 3% of total assets for any extended
period.

     FINOVA engages in hedging transactions using primarily interest rate swaps,
and to a lesser extent, other derivative instruments to lower its interest costs
and to manage  its  interest  rate  risk.  Derivative  instruments  are used for
non-trading  and  non-speculative  purposes only. A hedge consists of a position
that is substantially equal and opposite of the asset or liability being hedged.
It is structured to provide a high degree of correlation at the inception of the
hedge and throughout the hedge period so that hedging results will substantially
offset the effects of interest rate changes on the exposed item.

     Hedge  transactions  are  authorized  to be  entered  into  with  financial
institutions  rated "A" or better by  Standard & Poors  Rating  Group or Moody's
Investors Service, Inc., who must also be lenders or credit support providers to
FINOVA or its  subsidiaries.  Without approval from the Finance  Committee,  the
notional  principal  amount of  aggregate  hedges  on a net  basis  with a given
counter party cannot  exceed 10% of FINOVA's  total debt  outstanding  as of the
time of entering into the derivative transaction.

     FINOVA uses a  sensitivity  analysis  model to measure the  exposure of net
income to  increases  or decreases  in interest  rates.  The model  measures the
change  in  annual  net  income  if  interest  rates  on  floating-rate  assets,
liabilities  and  derivative  instruments  increased  or  decreased by 100 basis
points (1%), assuming no prepayments. Based on the model used, a 100 basis point
shift in interest rates would affect net income by less than 6.5%.

     Certain  limitations  are inherent in the model used in the above  interest
rate risk  measurements.  Modeling changes require certain  assumptions that may
oversimplify  the manner in which actual  yields and costs respond to changes in
the  market  interest  rates.  For  example,  the model  assumes  a more  static
composition of FINOVA's interest  sensitive  assets,  liabilities and derivative
instruments than would actually exist over the period being measured.  The model
also assumes that a particular  change in interest rates is reflected  uniformly
across the yield curve  regardless  of the  duration to maturity or repricing of
specific  assets  and  liabilities.  Although  the  sensitivity  analysis  model
provides an indication  of FINOVA's  interest rate risk exposure at a particular
point in time,  the  model is not  intended  to and does not  provide  a precise
forecast of the  effects of changes in market  interest  rates on  FINOVA's  net
income and will likely differ from actual results.

                                      A-12
<PAGE>
                           FINOVA CAPITAL CORPORATION

MANAGEMENT'S REPORT ON RESPONSIBILITY FOR FINANCIAL REPORTING

     The  management  of  FINOVA  Capital  Corporation  is  responsible  for the
preparation,  integrity and  objectivity  of the financial  statements and other
financial  information  included in this Annual Report. The financial statements
are  presented in  accordance  with  generally  accepted  accounting  principles
reflecting, where applicable, management's best estimates and judgments.

     FINOVA's  management  has  established  and  maintains a system of internal
controls to reasonably assure the fair presentation of the financial statements,
the  safeguarding  of  FINOVA's  assets  and  the  prevention  or  detection  of
fraudulent financial  reporting.  The internal control structure is supported by
careful selection and training of personnel, policies and procedures and regular
review by both internal auditors and the independent auditors.

     The Board of  Directors,  through its Audit  Committee,  also  oversees the
financial  reporting of FINOVA and its adherence to  established  procedures and
controls.  Periodically, the Audit Committee meets, jointly and separately, with
management,  the  internal  auditors  and the  independent  auditors  to  review
auditing, accounting and financial reporting matters.

     FINOVA's  financial  statements,  including  those that have been restated,
have been audited by Deloitte & Touche LLP, independent auditors. Management has
made  available to Deloitte & Touche LLP all of FINOVA's  financial  records and
related  data and has made valid and complete  written and oral  representations
and disclosures in connection with the audit.

     Management  believes it is essential to conduct its business in  accordance
with the highest ethical  standards,  which are  characterized  and set forth in
FINOVA's  written  Code of Conduct.  These  standards  are  communicated  to and
acknowledged by all of FINOVA's employees.


/s/ Samuel L. Eichenfield
--------------------------------
Samuel L. Eichenfield
Chairman, President and Chief Executive Officer


/s/ Bruno A. Marszowski
--------------------------------
Bruno A. Marszowski
Senior Vice President - Controller and Chief Financial Officer


/s/ Derek C. Bruns
--------------------------------
Derek C. Bruns
Senior Vice President - Internal Audit

                                      A-13
<PAGE>
                           FINOVA CAPITAL CORPORATION

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareowner of
FINOVA Capital Corporation

We have audited the accompanying  consolidated  balance sheets of FINOVA Capital
Corporation  and  subsidiaries as of December 31, 1998 and 1997, and the related
consolidated  statements of income,  shareowner's equity and cash flows for each
of the three  years in the period  ended  December  31,  1998.  These  financial
statements are the  responsibility of FINOVA Capital  Corporation's  management.
Our responsibility is to express an opinion on these financial  statements based
on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  such consolidated  financial  statements present fairly, in all
material  respects,  the financial  position of FINOVA Capital  Corporation  and
subsidiaries  as of  December  31,  1998  and  1997,  and the  results  of their
operations  and their cash flows for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted accounting principles.

As discussed in Note R, the 1998, 1997, and 1996 financial  statements have been
restated to properly defer and amortize loan origination  costs over the life of
the loan as well as to make several  other  adjustments  and the 1998  financial
statements  have been  restated to correct the amount of gain  recognized on the
sale of commercial mortgage-backed securities.


/s/ Deloitte & Touche LLP
------------------------------
Deloitte & Touche LLP
Phoenix, Arizona
February 10, 1999
(April 23, 1999 as to Note R)

                                      A-14
<PAGE>
                           FINOVA CAPITAL CORPORATION

                           CONSOLIDATED BALANCE SHEETS
                             As Restated, See Note R
                             (Dollars in Thousands)

December 31,                                          1998              1997
------------                                          ----              ----
ASSETS

Cash and cash equivalents                          $     49,519     $    33,193
Investment in financing transactions:
  Loans and other financing contracts                 7,354,736       5,985,285
  Leveraged leases                                      773,942         611,262
  Operating leases                                      648,185         712,927
  Fee-based receivables                                 626,499         750,399
  Direct financing leases                               396,759         360,589
  Financing contracts held for sale                     220,100
                                                   ------------     -----------
                                                     10,020,221       8,420,462
  Less reserve for credit losses                       (207,618)       (177,088)
                                                   ------------     -----------

Net investment in financing transactions              9,812,603       8,243,374
                                                   ------------     -----------
Goodwill and other assets                               632,381         486,142
                                                   ------------     -----------
                                                   $ 10,494,503     $ 8,762,709
                                                   ============     ===========

LIABILITIES AND SHAREOWNER'S EQUITY

Liabilities:
  Accounts payable and accrued expenses            $    141,782     $   124,491
  Due to clients                                        205,655         278,571
  Interest payable                                       65,817          54,418
  Senior debt                                         8,394,578       6,764,581
  Deferred income taxes                                 355,028         278,780
                                                   ------------     -----------
                                                      9,162,860       7,500,841
                                                   ------------     -----------
Commitments and contingencies (Note K)
Shareowner's equity:
  Common stock, $1.00 par value, 100,000
    shares authorized, 25,000 shares issued                  25              25
  Additional capital                                    870,485         870,485
  Retained income                                       460,447         391,368
  Accumulated other comprehensive income
    (deficit)                                               686             (10)
                                                   ------------     -----------
                                                      1,331,643       1,261,868
                                                   ------------     -----------
                                                   $ 10,494,503     $ 8,762,709
                                                   ============     ===========

                See notes to consolidated financial statements.

                                      A-15
<PAGE>
                           FINOVA CAPITAL CORPORATION

                        STATEMENTS OF CONSOLIDATED INCOME
                             As Restated, See Note R
                  (Dollars in Thousands, except per share data)

Years Ended December 31,                           1998        1997       1996
------------------------                        ----------   --------   --------
Interest, fees and other income                 $  795,790   $691,565   $601,416
Financing lease income                              95,781     71,278     59,461
Operating lease income                             116,202    116,920     96,119
                                                ----------   --------   --------
Income earned from financing transactions        1,007,773    879,763    756,996
Interest expense                                   478,177    414,650    365,603
Operating lease depreciation                        70,081     72,989     62,286
                                                ----------   --------   --------
Interest margins earned                            459,515    392,124    329,107
Volume-based fees                                   77,723     39,378     28,588
                                                ----------   --------   --------
Operating margin                                   537,238    431,502    357,695
Provision for credit losses                         82,200     69,200     41,751
                                                ----------   --------   --------
Net interest margins earned                        455,038    362,302    315,944
Gains on disposal of assets                         27,912     30,333     12,562
                                                ----------   --------   --------
                                                   482,950    392,635    328,506
Operating expenses                                 216,653    168,444    140,218
                                                ----------   --------   --------
Income from continuing operations before
  income taxes                                     266,297    224,191    188,288
Income taxes                                       102,174     82,289     70,320
                                                ----------   --------   --------
Income from continuing operations                  164,123    141,902    117,968
Income and gain from sale of discontinued
  operations, net of tax                                                     507
                                                ----------   --------   --------
NET INCOME                                      $  164,123   $141,902   $118,475
                                                ==========   ========   ========

                See notes to consolidated financial statements.

                                      A-16
<PAGE>
                           FINOVA CAPITAL CORPORATION

                 STATEMENTS OF CONSOLIDATED SHAREOWNER'S EQUITY
                             As Restated, See Note R
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                                     Accumulated
                                                                        Other
                                 Common  Additional    Retained     Comprehensive   Shareowners'  Comprehensive
                                 Stock     Capital      Income    (Deficit)/Income     Equity         Income
                                 -----     -------      ------    ----------------     ------         ------
<S>                               <C>     <C>          <C>            <C>           <C>             <C>
Balance, January 1, 1996
 (as previously reported)         $25     $677,948     $ 183,292      $(5,686)      $   855,579
                                  ---     --------     ---------      -------       -----------
Prior period adjustment                                    1,513                          1,513
                                  ---     --------     ---------      -------       -----------
BALANCE, JANUARY 1, 1996
 (AS RESTATED)                     25      677,948       184,805       (5,686)          857,092
                                  ---     --------     ---------      -------       -----------
Comprehensive income:
 Net income                                              118,475                        118,475      $ 118,475
                                                                                                     ---------
 Foreign currency translation                                                                            6,694
                                                                                                     ---------
 Other comprehensive income                                             6,694             6,694          6,694
                                                                                                     ---------
Comprehensive income                                                                                 $ 125,169
                                                                                                     =========
Capital contributions
 from FINOVA Group Inc.                    115,000                                      115,000
Dividends                                                (25,230)                       (25,230)
                                  ---     --------     ---------      -------       -----------
BALANCE, DECEMBER 31, 1996         25      792,948       278,050        1,008         1,072,031
                                  ---     --------     ---------      -------       -----------
Comprehensive income:
 Net income                                              141,902                        141,902      $ 141,902
                                                                                                     ---------
 Foreign currency translation                                                                           (1,018)
                                                                                                     ---------
 Other comprehensive income                                            (1,018)           (1,018)        (1,018)
                                                                                                     ---------
Comprehensive income                                                                                 $ 140,884
                                                                                                     =========
 Capital contributions
  from FINOVA Group Inc.                    77,537                                       77,537
Dividends                                                (28,584)                       (28,584)
                                  ---     --------     ---------      -------       -----------
BALANCE, DECEMBER 31, 1997         25      870,485       391,368          (10)        1,261,868
                                  ---     --------     ---------      -------       -----------
Comprehensive income:
 Net income                                              164,123                        164,123      $ 164,123
                                                                                                     ---------
 Unrealized holding gains                                                                                  904
 Foreign currency translation                                                                             (208)
                                                                                                     ---------
 Other comprehensive income                                               696               696            696
                                                                                                     ---------
Comprehensive income                                                                                 $ 164,819
                                                                                                     =========
Dividends                                                (95,044)                       (95,044)
                                  ---     --------     ---------      -------       -----------
BALANCE, DECEMBER 31, 1998        $25     $870,485     $ 460,447      $   686       $ 1,331,643
                                  ===     ========     =========      =======       ===========
</TABLE>

                 See notes to consolidated financial statements.

                                      A-17
<PAGE>
                           FINOVA CAPITAL CORPORATION

                      STATEMENTS OF CONSOLIDATED CASH FLOWS
                             As Restated, See Note R
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
Years Ended December 31,                                       1998           1997           1996
------------------------                                    -----------    -----------    -----------
<S>                                                         <C>            <C>            <C>
OPERATING ACTIVITIES:
 Net income                                                 $   164,123    $   141,902    $   118,475
 Adjustments to reconcile net income to net cash provided
  by operating activities:
   Provision for credit losses                                   82,200         69,200         41,751
   Depreciation and amortization                                 93,150         90,010         76,085
   Gains on disposal of assets                                  (27,912)       (30,333)       (12,562)
   Deferred income taxes                                         76,248         12,361         30,815
   Gains on dispositions of discontinued operations, net             --             --         (3,521)
   Net deferred acquisition costs                                (8,126)        (5,718)        (5,572)
Change in assets and liabilities, net of effects from
  acquisitions:
    Increase in other assets                                   (118,452)       (65,777)       (56,228)
    Increase (decrease) in accounts payable and accrued
      expenses                                                   14,803         20,922        (14,057)
    Increase (decrease) in interest payable                      11,399         (1,477)         6,184
 Other                                                            2,873            954          5,913
                                                            -----------    -----------    -----------
     Net cash provided by operating activities                  290,306        232,044        187,283
                                                            -----------    -----------    -----------
INVESTING ACTIVITIES:
 Proceeds from sales of assets                                  128,542        178,485        102,558
 Proceeds from sales of securitized assets                       99,967         36,565        100,000
 Proceeds from sales of commercial mortgage backed
   securities ("CMBS")                                          869,296
 Principal collections on financing transactions              2,158,103      2,081,319      1,777,094
 Expenditures for financing transactions                     (3,282,348)    (2,507,822)    (2,221,363)
 Expenditures for CMBS transactions                          (1,005,373)
 Net change in short-term financing transactions               (631,478)      (844,584)      (624,952)
 Acquisitions, net of cash acquired                             (61,164)      (120,883)        (7,455)
 Sales of discontinued operations                                                             616,434
 Other                                                            2,307          2,399          3,296
                                                            -----------    -----------    -----------
     Net cash used for investing activities                  (1,722,148)    (1,174,521)      (254,388)
                                                            -----------    -----------    -----------
FINANCING ACTIVITIES:
 Net borrowings under commercial paper and
    short-term loans                                            739,515        649,653         62,156
 Long-term borrowings                                         1,580,000      1,080,625        564,988
 Repayment of long-term borrowings                             (689,176)      (817,892)      (681,401)
 Net contributions from (advances to) parent                    (14,211)        20,088        119,691
 Dividends                                                      (95,044)       (28,584)       (25,230)
 Net change in due to clients                                   (72,916)        40,495        (32,143)
                                                            -----------    -----------    -----------
     Net cash provided by financing activities                1,448,168        944,385          8,061
                                                            -----------    -----------    -----------
Increase (decrease) in cash and cash equivalents                 16,326          1,908        (59,044)
Cash and cash equivalents, beginning of year                     33,193         31,285         90,329
                                                            -----------    -----------    -----------
Cash and cash equivalents, end of year                      $    49,519    $    33,193    $    31,285
                                                            ===========    ===========    ===========
</TABLE>
                 See notes to consolidated financial statements

                                      A-18
<PAGE>
                           FINOVA CAPITAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, AS RESTATED
                  YEARS ENDED DECEMBER 31, 1998, 1997 and 1996
             (Dollars in Thousands in Tables, except per share data)

NOTE A                 SIGNIFICANT ACCOUNTING POLICIES

     BASIS OF PRESENTATION  AND PRINCIPLES OF  CONSOLIDATION -- The consolidated
financial  statements present the financial position,  results of operations and
cash flows of FINOVA Capital  Corporation  and its  subsidiaries  (collectively,
"FINOVA" or the  "Company").  FINOVA is a wholly owned  subsidiary of The FINOVA
Group Inc. ("FINOVA Group").

     FINOVA  Capital  Corporation  is a financial  services  company  engaged in
providing   capital  and   collateralized   financing   products  to  commercial
enterprises   focusing  on  mid-size   businesses  in  various   market  niches,
principally in the United States.

     These  consolidated  financial  statements are prepared in accordance  with
generally accepted accounting principles.  All significant intercompany balances
have been  eliminated in  consolidation.  Described  below are those  accounting
policies  particularly  significant  to FINOVA,  including  those  selected from
acceptable alternatives:

     USE OF ESTIMATES -- The  preparation of financial  statements in conformity
with  generally  accepted  accounting  principles  requires  management  to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting period. Actual results could differ from those estimates.

     REVENUE  RECOGNITION  -- For loans and other  financing  contracts,  earned
income is recognized over the life of the contract, using the interest method.

     Leases that are financed by  nonrecourse  borrowings and meet certain other
criteria are classified as leveraged  leases.  For leveraged  leases,  aggregate
rental  receivables  are  reduced  by  the  related   nonrecourse  debt  service
obligation including interest ("net rental receivables"). The difference between
(a) the net  rental  receivables  and (b) the cost of the asset  less  estimated
residual  value at the end of the lease term is  recorded  as  unearned  income.
Earned  income is  recognized  over the life of the lease at a constant  rate of
return on the positive net  investment,  which  includes the effects of deferred
income taxes.

     For operating leases,  earned income is recognized on a straight-line basis
over the lease term and depreciation is taken on a straight-line  basis over the
estimated useful lives of the leased assets.

     Origination fees net of direct origination costs are deferred and amortized
over the life of the originated asset as an adjustment to yield.

     Fees received in connection with loan  commitments are deferred in accounts
payable and accrued  expenses until the loan is advanced and are then recognized
over the term of the loan as an  adjustment  to the yield.  Fees on  commitments
that expire unused are recognized at expiration.

     Fees are also generated on the volume of purchased accounts  receivable and
mortgage loan  originations.  A majority of FRC's mortgage loan originations are
funded by other  lenders and  therefore  are not  recorded  on FINOVA's  balance
sheet. Fees on the volume of purchased accounts  receivable  represent discounts
or  commissions  to  FINOVA in  return  for  handling  the  accounts  receivable
collection  process.  These  fees are  recognized  as income in the  period  the
receivables  are  purchased  due  to  the  short-term  nature  of  the  accounts
receivable,  which  are  generally  collected  from  one to three  months  after
purchase.  FINOVA's commercial mortgage operation originates and sells loans and
typically  would only retain  assets on the balance  sheet for a short period of
time. Fees on mortgage loan  originations  represent  broker  commissions on the
loan originations and are recognized as income in the period of origination.

                                      A-19
<PAGE>
                           FINOVA CAPITAL CORPORATION

     Income  recognition  is  generally  suspended  for leases,  loans and other
financing  contracts at the earlier of the date at which payments become 90 days
past due or when,  in the opinion of  management,  a full recovery of income and
principal becomes doubtful.  Income  recognition is resumed when the loan, lease
or other financing  contract  becomes  contractually  current and performance is
demonstrated to be resumed or when  foreclosed or repossessed  assets generate a
reasonable rate of return.

     CASH  EQUIVALENTS  -- FINOVA  classifies  highly  liquid  investments  with
original  maturities  of three  months  or less from  date of  purchase  as cash
equivalents.

     MARKETABLE  SECURITIES  -- As  discussed  in Note J,  FINOVA  owns  certain
marketable  securities,   which  are  considered  trading  securities.   Trading
securities  are stated at fair value with gains or losses  recorded in income in
the period they occur.

     FINANCING  CONTRACTS HELD FOR SALE -- Financing contracts held for sale are
composed of assets held for sale and retained  interest  from sales to a private
CMBS  ("mini-CMBS")  structure that are available for sale. Assets held for sale
are  carried at lower of cost or market  with  adjustment,  if any,  recorded in
operations.  Assets  available  for sale are  carried  at fair  value  using the
specific  identification  method with unrealized gains and losses being recorded
as a component  of  accumulated  other  comprehensive  income  within the equity
section of the balance sheet. See Notes C and N.

     RESERVE FOR CREDIT  LOSSES -- The reserve for credit losses is available to
absorb credit losses and is not provided for financing  contracts  held for sale
and other owned assets,  including  assets on operating lease. The provision for
credit  losses is the charge to income to increase the reserve for credit losses
to the level that management estimates to be adequate considering delinquencies,
loss  experience and  collateral.  Other factors  considered  include changes in
geographic  and  product  diversification,  size of the  portfolio  and  current
economic  conditions.  Accounts are either  written-off or written-down when the
loss is considered probable and determinable,  after giving consideration to the
customer's  financial  condition  and the  value of the  underlying  collateral,
including any guarantees. Any deficiency between the carrying amount of an asset
and the net sales price of repossessed  collateral is charged to the reserve for
credit losses. Recoveries of amounts previously written-off as uncollectible are
credited to the reserve for credit losses.

     REPOSSESSED  ASSETS -- Repossessed  assets are carried at the lower of cost
or fair value less estimated selling expenses.

     RESIDUAL  VALUES -- FINOVA has a significant  investment in residual values
in its leasing  portfolios.  These residual  values  represent  estimates of the
value of  leased  assets  at the end of the  contract  terms  and are  initially
recorded based upon appraisals and estimates.  Residual values are  periodically
reviewed to determine that recorded  amounts are  appropriate.  Actual  residual
values realized could differ from these estimates and updates.

     GOODWILL -- FINOVA  amortizes the excess of cost over the fair value of net
assets acquired  ("goodwill")  on a straight-line  basis primarily over 20 to 25
years.  Goodwill  at December  31,  1998 and 1997 was $286.0  million and $274.5
million (net of amortization),  respectively. Amortization totaled $14.5 million
($10.6  million  after-tax),  $9.7 million  ($6.1  million  after-tax)  and $9.2
million ($5.5 million after-tax) for the years ended December 31, 1998, 1997 and
1996,  respectively.  FINOVA  periodically  evaluates the carrying  value of its
intangible  assets  for  impairment.  This  evaluation  is based  on  projected,
undiscounted  cash flows  generated by the  underlying  assets.  At December 31,
1998,  approximately  $197.6  million  of  goodwill  (net of  amortization)  was
deductible  for federal  income tax purposes  over 15 years under Section 197 of
the Internal Revenue Code.

     PENSION AND OTHER BENEFITS -- Trusteed, noncontributory pension plans cover
substantially  all  employees.  Benefits are based  primarily  on final  average
salary and years of service.  Funding  policies provide that payments to pension
trusts  shall be at least equal to the minimum  funding  required by  applicable
regulations.

     Other  post-retirement  benefit  costs are  recorded  during the period the
employees  provide service to FINOVA.  Post-retirement  benefit  obligations are
funded as benefits are paid.

     Post-employment  benefits are any benefits other than retirement  benefits.
FINOVA records  post-employment benefit costs at the time employees leave active
service.

                                      A-20
<PAGE>
                           FINOVA CAPITAL CORPORATION

     SAVINGS PLAN -- FINOVA  participates in The FINOVA Group Inc.  Savings Plan
(the "Savings Plan"), a qualified 401(k) program.  The Savings Plan is available
to substantially all employees. The employee may elect voluntary wage reductions
ranging  from  0%  to  15%  of  taxable  compensation.  The  Company's  matching
contributions are based on employee pre-tax salary  reductions,  up to a maximum
of 100% of the  first 6% of  salary  contributions,  the  first 3% of which  are
matched in FINOVA  Group  stock  through  the  Employee  Stock  Ownership  Plan,
discussed below.

     EMPLOYEE  STOCK  OWNERSHIP  PLAN --  Employees  of FINOVA are  eligible  to
participate  in the Employee  Stock  Ownership  Plan in the month  following the
first 12 consecutive month period during which they have at least 1,000 hours of
service  with  FINOVA.  Company  contributions  are made in the form of matching
FINOVA  Group stock  contributions  of 100% of the first 3% of salary  reduction
contributions made by participants of the Savings Plan.

     Expenses under the Savings Plan and Employee Stock Ownership Plan were $3.1
million, $2.5 million and $2.1 million in 1998, 1997 and 1996, respectively.

     INCOME  TAXES - FINOVA and its U.S.  subsidiaries  are  included  in FINOVA
Group's Consolidated U.S. income tax return. Deferred tax assets and liabilities
are recognized for the estimated future tax effects  attributable to differences
between  the  financial  statement  carrying  amounts  of  existing  assets  and
liabilities and their respective tax bases.  Deferred tax assets and liabilities
are measured using enacted tax law.

     DERIVATIVE  FINANCIAL  INSTRUMENTS  -- As more fully  described  in Note F,
FINOVA uses derivative  financial  instruments as part of its interest rate risk
management  policy of match funding its assets and  liabilities.  The derivative
instruments  used include  interest  rate swaps,  which are  accounted for using
settlement or matched swap  accounting,  and to a lesser extent  treasury locks,
options and swaptions which are subject to hedge accounting determination.

     Each  derivative used as a hedge is matched with an asset or liability with
which it has a high  correlation.  The swap  agreements  are  generally  held to
maturity and FINOVA does not use derivative financial instruments for trading or
speculative purposes.  Upon early termination of the designated matched asset or
liability,  the related  derivative  is matched to another  appropriate  item or
marked to fair market value.

     SECURITIZATIONS  -- In  accordance  with  SFAS  No.  125,  "Accounting  for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,"
receivable transfers are accounted for as sales when legal and effective control
over the transferred receivables is surrendered.

     RECLASSIFICATIONS -- Certain  reclassifications have been made to the prior
years financial statements to conform to the 1998 presentation.

NOTE B                 ACQUISITIONS

     During 1998 and 1997,  FINOVA, in transactions  accounted for as purchases,
acquired  various  businesses  and  portfolios  having  initial  funds  employed
totaling $44 million and $122 million, respectively.

     In October 1998,  FINOVA  acquired  United Credit  Corporation,  a New York
based provider of commercial financing to small and mid-size businesses, and its
Patriot Funding Division. The addition formed a new division named FINOVA Growth
Finance which provides  collateral-based  working capital  financing,  primarily
secured by accounts receivable. The new division provides financing ranging from
$100,000 to $1 million to small and mid-size  businesses with annual sales under
$10  million.  This new  division  is  serving  a  market  segment  of  smaller,
growth-oriented  customers earlier in their maturation cycle.  Certain estimates
used in the allocation of the purchase price are preliminary, pending receipt of
acquiree's final audited financial statements.

     In October  1998,  FINOVA  acquired  Electronic  Payment  Systems,  Inc., a
commercial receivables servicing business headquartered in Salt Lake City, Utah,
to support the activities of FINOVA Realty Capital ("FRC").

                                      A-21
<PAGE>
                           FINOVA CAPITAL CORPORATION

     In October 1997, FINOVA Group purchased  Belgravia Capital  Corporation,  a
commercial  mortgage  banking  organization,  for $77.5  million  of the  FINOVA
Group's  common  stock  (1.7  million  shares),  $10.0  million  in cash  and an
agreement to pay additional amounts up to approximately $30 million per year for
the next three years, contingent upon future results of the operations. To date,
no  additional  amounts  have been paid  under the  contingency  agreement.  The
acquisition was composed of $91.5 million in assets,  including $88.0 million in
goodwill and $4.0 million in liabilities and acquisition  costs.  The results of
these  operations  have been  included  in  FINOVA's  results  since the date of
acquisition.  Goodwill  related to this  transaction is being  amortized over 25
years.

     In December  1997,  FINOVA  acquired  the  Inventory  Finance  unit of AT&T
Capital  Corporation.  The  acquisition,  which joined  FINOVA's  Distribution &
Channel  Finance line of business,  provided an opportunity for FINOVA to expand
into the fast-growing telecommunications market.

NOTE C                 INVESTMENT IN FINANCING TRANSACTIONS

     FINOVA provides secured financing to commercial and real estate enterprises
principally  under  financing  contracts  (such as  loans  and  other  financing
contracts,   direct  financing  leases,   operating  leases,  leveraged  leases,
fee-based  receivables  and financing  contracts held for sale). At December 31,
1998 and 1997, the carrying amount of the investment in financing  transactions,
including the estimated  residual value of leased assets upon lease termination,
was  $10.0  billion  and  $8.4  billion  (before  reserve  for  credit  losses),
respectively,  and consisted of the following  percentage of carrying  amount by
line of business:

                                                       Percent of Total
                                                       Carrying Amount
                                                     -------------------
                                                     1998           1997
                                                     ----           ----
Transportation Finance                                22.0%          19.4%
Resort Finance                                        12.5           14.4
Corporate Finance                                      7.9            9.7
Rediscount Finance                                     7.7            7.2
Commercial Equipment Finance                           7.5            7.5
Communications Finance                                 7.2            7.9
Specialty Real Estate Finance                          7.0            8.2
Healthcare Finance                                     6.1            6.3
Franchise Finance                                      6.0            5.2
Distribution & Channel Finance                         5.7            6.5
Business Credit                                        3.0            2.4
Realty Capital                                         2.4
Public Finance                                         1.8            1.6
Commercial Services                                    1.7            2.7
Other                                                  0.9            1.0
Growth Finance                                         0.5
Investment Alliance                                    0.1
                                                     -----          -----
                                                     100.0%         100.0%
                                                     =====          =====

                                      A-22
<PAGE>
                           FINOVA CAPITAL CORPORATION

     Aggregate installments on investments in financing transactions at December
31,  1998  (excluding  nonaccruing  repossessed  assets  of  $54.4  million  and
estimated   residual  values  of  $920.2  million)  are   contractually  due  or
anticipated  during  each of the  years  ending  December  31,  1999 to 2003 and
thereafter as follows:

<TABLE>
<CAPTION>
                                                                                              There-
                                1999         2000         2001        2002        2003        after
                                ----         ----         ----        ----        ----        -----
<S>                          <C>          <C>          <C>          <C>        <C>          <C>
Loans and other financing
 contracts:
  Commercial:
   Fixed interest rate       $  423,111   $  453,207   $  454,860   $286,238   $  233,499   $  767,796
   Floating interest rate     1,063,606      934,396      220,715    347,006      291,059      204,595
  Real estate:
   Fixed interest rate           99,368      100,513       72,716     37,213       41,192      168,911
   Floating interest rate       303,790      283,831      228,791     76,935      103,239      123,132
Leases, primarily at fixed
 interest rates:
   Operating leases             102,182       86,339       61,330     39,908       28,636       33,891
   Leveraged leases              45,860       41,943       10,491      3,153       18,790      361,492
   Direct financing leases       93,212       73,397       59,183     46,434       33,475       92,602
Fee-based receivables           626,499
Financing contracts held
  for sale                      220,100
                             ----------   ----------   ----------   --------   ----------   ----------
                             $2,977,728   $1,973,626   $1,108,086   $836,887   $  749,890   $1,752,419
                             ==========   ==========   ==========   ========   ==========   ==========
</TABLE>

     The  investment  in  operating  leases  at  December  31  consisted  of the
following:
<TABLE>
<CAPTION>

                                                                                   1998         1997
                                                                               ----------    ---------
<S>                                                                            <C>           <C>
Cost of assets                                                                 $  757,921    $ 855,670
Accumulated depreciation                                                         (109,736)    (142,743)
                                                                               ----------    ---------
Investment in operating leases                                                 $  648,185    $ 712,927
                                                                               ==========    =========
</TABLE>

     The net  investment  in  leveraged  leases at December 31  consisted of the
following:

<TABLE>
<CAPTION>
                                                                                  1998        1997
                                                                              -----------  -----------
<S>                                                                           <C>          <C>
Rental receivables                                                            $ 2,885,352  $ 2,262,656
Less principal and interest payable on nonrecourse debt                        (2,403,623)  (1,790,987)
                                                                              -----------  -----------
Net rental receivables                                                            481,729      471,669
Estimated residual values                                                         794,112      572,880
Less unearned income                                                             (501,899)    (433,287)
                                                                              -----------  -----------
Investment in leveraged leases                                                    773,942      611,262
Less deferred taxes from leveraged leases                                        (314,243)    (246,375)
                                                                              -----------  -----------
Net investment in leveraged leases                                            $   459,699  $   364,887
                                                                              ===========  ===========
</TABLE>

                                      A-23
<PAGE>
                           FINOVA CAPITAL CORPORATION

         The  components of income from leveraged  leases,  after the effects of
interest on  nonrecourse  debt and other related  expenses,  for the years ended
December 31 were as follows:


                                                1998         1997         1996
                                                ----         ----         ----
Lease and other income, net                    $60,484      $35,834      $27,706
Income tax expense                              24,063       17,156       10,306

     The investment in direct  financing  leases at December 31 consisted of the
following:


                                                         1998            1997
                                                         ----            ----
Rental receivables                                    $ 398,303       $ 367,780
Estimated residual values                               126,095         120,020
Unearned income                                        (127,639)       (127,211)
                                                      ---------       ---------
Investment in direct financing leases                 $ 396,759       $ 360,589
                                                      =========       =========

     FINOVA has a  substantial  number of loans and leases  with  payments  that
fluctuate  with changes in index rates,  primarily  prime interest rates and the
London  interbank  offered rates  ("LIBOR").  The investment in loans and leases
with floating  interest rates (excluding  nonaccruing  contracts and repossessed
assets)  was $4.75  billion  and $4.34  billion at  December  31, 1998 and 1997,
respectively.

     Income earned from financing  transactions with floating interest rates was
approximately  $562  million in 1998,  $491  million in 1997 and $436 million in
1996.  The  adjustments  which  arise  from  changes  in index  rates can have a
significant effect on income earned from financing  transactions;  however,  the
effects on interest  margins earned and net income are  substantially  offset by
related  interest  expense changes on debt  obligations  with floating  interest
rates. FINOVA's matched funding policy is more fully described in Note F.

     At December  31,  1998,  FINOVA had a committed  backlog of new business of
approximately  $1.9 billion  compared to $1.6 billion at December 31, 1997.  The
committed backlog includes unused lines of credit totaling $549 million and $666
million at December 31, 1998 and 1997,  respectively.  Historically,  FINOVA has
booked a substantial portion of its backlog,  although there can be no assurance
that the  trend  will  continue.  Loan  commitments  and  lines of  credit  have
generally  the  same  credit  risk  as  extending  loans  to  borrowers.   These
commitments  are  generally  subject to the same credit  quality and  collateral
requirements  involved in lending  transactions.  Commitments  generally  have a
fixed expiration and usually require payment of a fee.

     SECURITIZATIONS  - In  1998  and  1997,  under  a  separate  securitization
agreement,  FINOVA  sold loan  receivables  totaling  $103.2  million  and $36.8
million,  respectively with limited  recourse.  Outstanding  securitized  assets
under this  agreement  were $136.1  million at December  31,  1998.  FINOVA will
service these loan  contracts for the  transferee  and has deferred a portion of
the  proceeds  to be  recognized  as  service  fee  income  over the term of the
agreements.

     In the latter part of 1998,  the Company  used for the first time a private
CMBS structure  ("mini-CMBS")  to sell loans originated by FINOVA Realty Capital
("FRC").  Under this  structure,  the Company sold loans  originated by FRC to a
trust with  limited  recourse.  The trust held those  loans with plans to resell
them to the  permanent  CMBS  market.  The trust paid cash to the  Company  upon
acquisition of the assets,  issued a senior  security  interest to an investment
banking firm and a subordinated  residual  interest to the Company.  The Company
retained the servicing rights and obligations  related to the asset  transferred
to the Trust.

     In determining  the fair value of assets sold and interests  retained,  the
Company  employed a variety of  financial  assumptions.  To  establish  discount
rates,  the Company  referred to the subsequent April 1999 sale of approximately
70% of the  mini-CMBS  loans into a  permanent  CMBS  structure.  The  permanent
transaction was compared to the mini-CMBS  transaction  and similar  portions of
the interest  retained  were  discounted  using rates  present in the  permanent
structure,  after adjusting for general  movements in interest rates between the
date of the mini-CMBS transaction and the permanent  transaction.  Specifically,

                                      A-24
<PAGE>
                           FINOVA CAPITAL CORPORATION

servicing rights were discounted at approximately 6% and the remaining  residual
cash flows were  discounted  at rates  between 9% and 18%.  The Company  assumed
minimal  defaults  and  prepayments  due  to the  nature  and  structure  of the
commercial  mortgages.  The recourse obligation was recorded at fair value based
on prices obtained from the subsequent April 1999 sale.

     The Company was required to recognize gains on the transfer of the loans to
the mini-CMBS trust in accordance  with SFAS 125,  "Accounting for Transfers and
Servicing of Financial Assets and  Extinguishments  of Liability," and initially
reported gains in the gross amount of $46.1 million.  Subsequent to the issuance
of the Company's  1998 financial  statements,  the Company  determined  that the
original  estimate  of the fair value of the  Company's  retained  interest  was
overstated  and  accordingly  revalued  its retained  interest in the  mini-CMBS
transaction.  This  revaluation  resulted  in a  reduction  of the  value of the
retained  portion of the loans from the $91.7 million  previously  reported,  to
$65.0 million,  as now restated.  This  reduction in the value reduced  FINOVA's
previously  reported  1998 gross gains on  mini-CMBS  sales of $46.1  million of
$19.5 million,  as restated.  After  recognition for hedge losses,  commissions,
expenses  and  other  obligations,  the  Company  reported  a net  loss of $10.0
million.  No gains were reported on the  subordinated  interest  retained by the
Company.

     Activity for the retained subordinated interest is as follows:

                                                                         1998
                                                                       --------
Beginning retained interest                                            $
Retained interest added                                                  65,033
Principal payments applied                                                  (55)
Advances made                                                               386
                                                                       --------
Ending retained interest                                               $ 65,364
                                                                       ========

     Cash  received on the retained  interest  totaled $0.9  million,  which was
applied  against  principal  and  interest.  Advances  are made to the trust for
delinquencies in the underlying  loans,  which are recovered when the delinquent
payments are collected.

     In 1996 and 1995, FINOVA, under a securitization agreement, sold a total of
$300 million in undivided  proportionate interests in a revolving loan portfolio
totaling  approximately  $694.5  million as of  December  31,  1998.  Under this
agreement,  there is recourse to FINOVA based on the outstanding  balance of the
proportionate interest sold.

     In general,  the servicing fees earned on securitizations are approximately
equal to the cost of  servicing;  therefore,  no  material  servicing  assets or
liabilities have been recognized.

                                      A-25
<PAGE>
                           FINOVA CAPITAL CORPORATION

NOTE D                 RESERVE FOR CREDIT LOSSES

         The  following is an analysis of the reserve for credit  losses for the
years ended December 31:

                                           1998           1997           1996
                                        ---------      ---------      ---------
Balance, beginning of year              $ 177,088      $ 148,693      $ 129,077
Provision for credit losses                82,200         69,200         41,751
Write-offs                                (59,037)       (45,487)       (32,017)
Recoveries                                  2,279          2,287          3,296
Acquisitions and other                      5,088          2,395          6,586
                                        ---------      ---------      ---------
Balance, end of year                    $ 207,618      $ 177,088      $ 148,693
                                        =========      =========      =========

     Net  write-offs by line of business for the years ended  December 31 are as
follows:

                                                  1998        1997        1996
                                              --------     -------    --------
Commercial Services                           $ 35,663     $23,255    $  3,610
Corporate Finance                                6,680       6,478       9,460
Commercial Equipment Finance                     3,645       3,208       2,378
Franchise Finance                                2,780         433       2,845
Distribution & Channel Finance                   2,609       1,777         (33)
Specialty Real Estate Finance                    1,785       2,106       1,616
Rediscount Finance                               1,500
Healthcare Finance                                 960       1,704       1,010
Business Credit                                    819
Communications Finance                             494         750       2,994
Resort Finance                                               2,700       4,249
Other                                             (177)        789         592
                                              --------     -------    --------
Total net write-offs by line of
  business                                    $ 56,758     $43,200    $ 28,721
                                              ========     =======    ========

Net write-offs as a percentage of average
  managed assets (excluding average
  participations)                                 0.60%       0.53%       0.41%
                                              ========     =======    ========

     An analysis of nonaccruing  assets  included in the investment in financing
transactions at December 31 is as follows:


                                                             1998          1997

Contracts                                                $150,787      $150,263
Repossessed assets                                         54,446        37,093
                                                         --------      --------
Total nonaccruing assets                                 $205,233      $187,356
                                                         ========      ========
Nonaccruing assets as a percentage of
  managed assets (excluding participations)                   2.0%          2.1%
                                                         ========      ========

     In addition to the repossessed  assets included in the above table,  FINOVA
had  repossessed  assets with a total carrying amount of $65.3 million and $52.5
million at December 31, 1998 and 1997, respectively, which earned income of $4.7
million and $4.1 million during 1998 and 1997, respectively.

     At December  31,  1998,  the total  carrying  amount of impaired  loans was
$225.7  million,  of which $106.0 million were revenue  accruing.  A reserve for
credit  losses  of $30.9  million  has been  established  for $74.3  million  of
nonaccruing  impaired  loans and $6.2  million  has been  established  for $24.4
million of accruing  impaired  loans.  At December 31, 1997,  the total carrying
amount of impaired loans was $158.0 million, of which $36.4 million were revenue
accruing. At December 31, 1997, a reserve for credit losses of $17.8 million was
established for $39.0 million of nonaccruing impaired loans and $2.4 million was
established for $13.3 million of accruing  impaired  loans.  For the three years
ended December 31, 1998, 1997 and 1996, the average  carrying amount of impaired
loans was $172.0 million, $130.3 million and $85.1 million, respectively. Income

                                      A-26
<PAGE>
                           FINOVA CAPITAL CORPORATION

earned on accruing  impaired loans was  approximately  $4.0 million in all three
years. Income earned on impaired loans is recognized in the same manner as it is
on other accruing loans.  Cash collected on all nonaccruing  loans is applied to
the carrying amount.

     Had all nonaccruing  assets outstanding at December 31, 1998, 1997 and 1996
remained  accruing,  pre-tax income earned would have increased by approximately
$19 million, $22 million and $19 million, respectively.


NOTE E                 DEBT

     The  Company  satisfies  its  short-term  financing  requirements  from the
issuance of commercial paper supported by bank lines of credit, other bank loans
and public notes.  The Company's  commercial  paper  borrowings are supported by
unused revolving bank credit agreements totaling $4.4 billion.  FINOVA currently
maintains a five-year  revolving  credit  facility and a 364-day  facility  with
numerous lenders, in the aggregate principal amount of $2.0 billion. Separately,
FINOVA also has two five-year  facilities with numerous lenders for $700 million
each,  one 364-day  facility  with  numerous  lenders for $600 million and three
364-day facilities with three separate lenders for an aggregate principal amount
of $400  million.  The Company  intends to borrow under the  domestic  revolving
credit agreements to refinance  commercial paper and short-term bank loans if it
encounters  significant  difficulties in rolling over its outstanding commercial
paper and  short-term  bank  loans.  The  Company  rarely  borrows  under  these
facilities.  Under the terms of these agreements,  the Company has the option to
periodically  select  either  domestic  dollars or  Eurodollars  as the basis of
borrowings.  Interest is based on the lenders'  prime rate for  domestic  dollar
advances or London  interbank  offered rates ("LIBOR") for Eurodollar  advances.
The agreements also provide for a commitment fee,  approximately 10 basis points
on the unused credit. The 364-day $1.0 billion and $600 million revolving credit
agreements  are subject to renewal in 1999,  while the two $700  million and the
other $1.0 billion credit facilities are subject to renewal in 2002. The 364-day
facilities  totaling $400 million are subject to renewal in 1999;  however,  the
Company does not anticipate extending these facilities.

     The Company,  through one subsidiary,  utilizes a five-year  multi-currency
facility with a small group of lenders for $100 million. Under the terms of this
agreement,  the  subsidiary  has the  option  to  periodically  select  multiple
currencies  as the basis of  borrowings.  Interest is based on the  Eurocurrency
rate per annum for deposits in the relevant designated currency. Through another
subsidiary,  the Company  maintains one 364-day  revolving  credit facility with
three lenders in Canada for $100 million  Canadian,  supporting  the issuance of
Canadian commercial paper. Under the terms of this agreement, the subsidiary has
the option to borrow Canadian  dollars through either bankers'  acceptances or a
prime  rate  advance.  Interest  is based on the  lenders'  prime rate for prime
advances or bankers'  acceptance  rates.  FINOVA is the guarantor of this credit
facility, which is subject to renewal in 1999.

     In 1998,  FINOVA commenced a Euro Medium-Term Note Program allowing for the
issuance of up to $1 billion of debt  securities.  As of December 31, 1998 there
was $750 million available under the program.

     The following information pertains to all short-term  financing,  primarily
commercial paper, issued by FINOVA for the years ended December 31:

<TABLE>
<CAPTION>
                                                    1998          1997            1996
                                                    ----          ----            ----
<S>                                              <C>           <C>            <C>
Maximum amount of short-term debt outstanding
 during year                                     $ 4,006,576   $ 3,284,118    $ 3,087,876
Average short-term debt outstanding during year    3,529,528     2,886,668      2,551,316
Weighted average short-term interest rates
 at end of year:
  Short-term borrowings                                  5.6%          5.6%           5.4%
  Commercial paper*                                      5.7%          5.7%           5.6%
Weighted average interest rate on
  short-term debt outstanding during year*               5.7%          5.7%           5.6%

</TABLE>

                                      A-27
<PAGE>
                           FINOVA CAPITAL CORPORATION

*  Exclusive  of the cost of  maintaining  bank lines in support of  outstanding
commercial  paper and the effects of interest rate  conversion  agreements.  The
Company uses various  mechanisms to manage  interest rate risks.  See Note F for
further discussions.

     Senior debt at December 31 was as follows:

<TABLE>
<CAPTION>
                                                                 1998         1997
                                                              ----------   ----------
<S>                                                           <C>          <C>
Commercial paper and short-term bank loans supported
  by unused long-term bank revolving credit agreements,
  less unamortized discount                                   $3,871,350   $3,132,109
Medium-term notes due to 2010, 5.9% to 10.3%                   1,717,544    1,343,148
Term loans payable to banks due to 1999, 5.3% to 5.8%            190,000      190,000
Senior notes due to 2007, 5.9% to 16.0%, less unamortized
  discount                                                     2,604,762    2,083,761
Nonrecourse installment notes due to 2002, 10.6% (assets of
  $22,838 and $58,064, respectively, pledged as collateral)       10,922       15,563
                                                              ----------   ----------
Total senior debt                                             $8,394,578   $6,764,581
                                                              ==========   ==========
</TABLE>

     Annual  maturities  of senior debt  outstanding  at  December  31, 1998 due
through  June 2007  (excluding  the amount  supported  by the  revolving  credit
agreements  expected to be renewed)  approximate  $775.2 million (1999),  $821.3
million  (2000),  $951.0 million (2001),  $839.4 million (2002),  $504.9 million
(2003) and $631.4 million (thereafter).

     The agreements  pertaining to senior debt and revolving  credit  agreements
include  various  restrictive  covenants and require the  maintenance of certain
defined financial ratios with which FINOVA and FINOVA Group have complied. Under
one  covenant,  dividend  payments by FINOVA are  limited to 50% of  accumulated
earnings  after  December 31, 1991.  As of December 31, 1998,  FINOVA had $114.9
million of excess accumulated earnings available for distribution.

     Total interest paid is not significantly different from interest expense.

NOTE F            DERIVATIVE FINANCIAL INSTRUMENTS

     FINOVA enters into  interest rate and basis swap  agreements as part of its
interest  rate  risk   management   policy  of  match  funding  its  assets  and
liabilities.  The derivative  instruments used are straightforward.  The Company
continually monitors its derivative position and uses derivative instruments for
non-trading and non-speculative purposes only.

     FINOVA uses derivative instruments to minimize its exposure to fluctuations
in  interest  rates.  FINOVA  strives to minimize  its overall  debt costs while
limiting the short-term  variability of interest  expense and funds required for
debt  service.  To achieve this  objective,  FINOVA  diversifies  its  borrowing
sources  (short and long-term debt with a fixed or a variable rate) and seeks to
maintain a portfolio that is matched  funded.  FINOVA's  matched  funding policy
generally  requires that  floating-rate  assets be financed  with  floating-rate
liabilities  and  fixed-rate  assets be financed  with  fixed-rate  liabilities.
FINOVA's  matched  funding  policy also  requires  that the  difference  between
floating-rate  liabilities and  floating-rate  assets,  measured as a percent of
total  assets,  should  not vary by more than 3% for any  extended  period.  The
amount  of  derivatives  used  is a  function  of this 3% gap  policy  with  the
maturities of the derivatives  being  correlated to the maturities of the assets
being financed.

     The notional amounts of derivatives do not represent  amounts  exchanged by
the parties and, thus, are not a measure of FINOVA's exposure through its use of
derivatives.  The amounts  exchanged are determined by reference to the notional
amounts and the other terms of the derivatives.

     Under interest rate swaps,  FINOVA agrees to exchange with the other party,
at specified  intervals,  the payment streams calculated on a specified notional
amount, with at least one stream based on a floating interest rate. Generic swap
notional amounts do not change for the life of the contract. Basis swaps involve
the exchange of  floating-rate  indices,  such as the prime rate, the commercial
paper  composite  rate and  LIBOR and are used  primarily  to  protect  FINOVA's
margins on floating-rate  transactions by locking in the spread between FINOVA's
lending and borrowing rates.

                                      A-28
<PAGE>
                           FINOVA CAPITAL CORPORATION

     FINOVA's  off-balance  sheet  derivative  instruments  involve  credit  and
interest rate risks.  The credit risk would be the  nonperformance  by the other
parties  to the  financial  instruments.  All  financial  instruments  have been
entered  into with major  financial  institutions,  which are  expected to fully
perform under the terms of the  agreements,  thereby  mitigating the credit risk
from  the  transactions,  although  there  can be no  assurance  that  any  such
institution  will  perform  under  its  agreement.  FINOVA's  derivative  policy
stipulates that the maximum exposure to any one  counter-party,  relative to the
derivative  products,  is limited on a net basis to 10% of FINOVA's  outstanding
debt at the time of that  transaction.  Interest rate risks relate to changes in
interest rates and the impact on earnings.  FINOVA mitigates interest rate risks
through its matched funding policy.

     The use of derivatives  decreased interest expense by $5.3 million in 1998,
a decrease in the aggregate  cost of funds of 0.07%.  The use of  derivatives in
1997  decreased  interest  expense by $1.0 million,  a decrease in the aggregate
cost of  funds of  0.03%,  whereas  the use of  derivatives  increased  interest
expense  $3.0  million in 1996,  an increase in the  aggregate  cost of funds of
0.05%.  These changes in interest  expense from  off-balance  sheet  derivatives
effectively  alter  on-balance  sheet costs and must be viewed as total interest
rate  management.  There  were no  deferred  gains  or  losses  associated  with
derivatives.

     FINOVA also enters into short-term treasury rate locks, options,  swaptions
and other  derivative  investments to hedge interest rate risks  associated with
the warehousing of loans, primarily for FRC.

     In a treasury  rate lock,  FINOVA  agrees to lock in an interest  rate on a
U.S.  Treasury  security  until a  specified  date in the  future.  Prior to the
expiration date, if treasury rates decrease,  there is an associated loss on the
hedge.  If treasury  rates  increase,  FINOVA will  immediately  benefit from an
increase in the hedge value.

     In a treasury put option, FINOVA pays an up-front fee (premium) to have the
right, but not the obligation to sell a pre-determined  treasury  security at an
agreed-upon strike rate. Prior to the expiration date of the option, if treasury
rates decrease,  the option expires  worthless and there is no additional  hedge
loss. If treasury  rates  increase and surpass the strike rate, the value of the
option will  increase.  In addition to the level of interest  rates,  the option
value  also  depends on other  variables  including  volatility  and the time to
maturity.

     A swaption gives FINOVA the right, but not the obligation,  to enter into a
swap on the  exercise  date.  An up-front  premium is the only cost  incurred by
FINOVA.  If swap  rates  rise  above the  strike  rate,  the  option  value will
increase.  If swap rates  decrease,  the option will not be  exercised  and will
expire worthless.  In addition to the level of swap rates, the option value also
depends on other variables including volatility and time to maturity.

                                      A-29
<PAGE>
                           FINOVA CAPITAL CORPORATION

     The  following  table  provides  annual  maturities  and   weighted-average
interest rates for each significant derivative product type in place at December
31, 1998.  The rates  presented  are as of December 31, 1998. To the extent that
rates change, variable interest information will change:

<TABLE>
<CAPTION>

                                Outstanding at
                                 December 31,        Maturities of Derivative Products
                                ------------- -----------------------------------------------------
(Dollars in Millions)                1998      1999      2000     2001     2002    2003  Thereafter
---------------------                ----      ----      ----     ----     ----    ----  ----------
<S>                                <C>        <C>       <C>      <C>      <C>     <C>      <C>   
RECEIVE FIXED-RATE SWAPS:
 Notional value                    $ 1,077    $  377    $  150   $  150   $  200      --   $  200
 Weighted average receive rate        6.75%     6.45%     7.24%    6.66%    6.51%     --     7.26%
 Weighted average pay rate            5.35%     5.32%     5.39%    5.29%    5.30%     --     5.47%
PAY FIXED-RATE SWAPS:
 Notional value                    $   700    $  150    $  100   $  100       --   $ 150   $  200
 Weighted average receive rate        5.37%     5.30%     5.42%    5.34%      --    5.42%    5.37%
 Weighted average pay rate            6.49%     7.06%     7.38%    6.70%      --    5.98%    5.90%
TREASURY RATE LOCKS:
 Notional value                    $   153    $  153
 Weighted average rate                4.71%     4.71%
OPTIONS AND SWAPTIONS:
 Notional value                    $    64    $   64
 Weighted average strike rate         5.72%     5.72%
                                   -------    ------    ------   ------   ------   -----   ------
TOTAL NOTIONAL VALUE               $ 1,994    $  744    $  250   $  250   $  200   $ 150   $  400
                                   =======    ======    ======   ======   ======   =====   ======

Total weighted average rates
  on swaps:
  Receive rate                        6.21%     6.12%     6.51%    6.13%    6.51%   5.42%    6.32%
                                   =======    ======    ======   ======   ======   =====   ======
  Pay rate                            5.80%     5.82%     6.19%    5.85%    5.30%   5.98%    5.69%
                                   =======    ======    ======   ======   ======   =====   ======
</TABLE>

     For the benefit of its  customers,  FINOVA  enters into  interest  rate cap
agreements.  The total notional amount of these  agreements at December 31, 1998
was  $25.0  million,  none of  which  was in a pay or  receive  position.  These
agreements  will mature as follows:  $15.9 million in 1999, $1.5 million in 2000
and $7.6 million in 2001.

                                      A-30
<PAGE>
                           FINOVA CAPITAL CORPORATION

     Derivative  product activity for the three years ended December 31, 1998 is
as follows:

<TABLE>
<CAPTION>
                                                            Pay                  Interest
                              Receive         Pay        Fixed-Rate                Rate
                             Fixed-Rate    Fixed-Rate    Amortizing    Basis      Hedge
(Dollars in Millions)          Swaps         Swaps         Swaps       Swaps    Agreements    TOTAL
-----------------------------------------------------------------------------------------------------
<S>                          <C>            <C>            <C>         <C>       <C>        <C>
Balance, January 1, 1996     $ 1,300        $  800         $  95       $  878    $  750     $  3,823
Expired                         (100)         (325)          (95)                  (750)      (1,270)
Additions                        150           350                                               500
-----------------------------------------------------------------------------------------------------
Balance, December 31, 1996     1,350           825                        878                  3,053
Expired                         (275)         (275)                      (250)                  (800)
Additions                        327                                                             327
-----------------------------------------------------------------------------------------------------
Balance, December 31, 1997     1,402           550                        628                  2,580
Expired                         (325)         (200)                      (628)                (1,153)
Additions                                      350                                  217          567
-----------------------------------------------------------------------------------------------------
Balance, December 31, 1998   $ 1,077        $  700         $  --       $   --    $  217     $  1,994
=====================================================================================================
</TABLE>

NOTE G            REDEEMABLE PREFERRED SECURITIES

     In December 1996,  FINOVA Finance Trust, a subsidiary  trust  sponsored and
wholly-owned by FINOVA Group,  issued (a) 2,300,000 shares of convertible  trust
originated preferred securities to the public for gross proceeds of $115 million
(before  transaction  costs of $3.5  million)  and (b)  71,135  shares of common
securities to FINOVA Group.  The gross  proceeds  from these  transactions  were
invested by the trust in $118.6  million  aggregate  principal  amount of 5 1/2%
convertible  subordinated debentures due 2016 (the "Debentures") newly issued by
FINOVA  Group.  The  Debentures  represent  all of the assets of the trust.  The
proceeds from the issuance of the Debentures were contributed by FINOVA Group to
FINOVA,   which  used  the  proceeds  to  repay   commercial   paper  and  other
indebtedness.

NOTE H            STOCK OPTIONS

     FINOVA  Group  sponsors  the 1992  Stock  Incentive  Plan in  which  FINOVA
participates.  Consequently,  any compensation related to that plan is reflected
in  FINOVA's  operating  results.  The plan  provides  for the grant of options,
restricted stock and stock  appreciation  rights relating to FINOVA Group common
stock.  Those  awards are granted to  directors,  officers  and  employees.  The
balance  of FINOVA  Group's  unamortized  restricted  stock was $9.5  million at
December 31, 1998.

     The  Company  applies  APB  Opinion  25  and  related   Interpretations  in
accounting for its plans. No compensation cost has been recognized for its fixed
stock option plans because  FINOVA grants options at market price on the date of
grant.  The  compensation  cost that has been  charged  against  income  for its
performance-based plan was $5.5 million, $7.9 million and $2.9 million for 1998,
1997 and 1996, respectively. Had compensation cost for the Company's stock based
compensation  plans been  determined  based on the fair value at the grant dates
for awards  under those plans  consistent  with the fair  market  value  method,
FINOVA's net income would have been $157.1  million,  $138.4  million and $116.5
million for 1998, 1997 and 1996, respectively.

     The fair value of the options was  estimated on the date of grant using the
Black-Scholes   option   pricing  model  with  the  following   weighted-average
assumptions used for grants in 1998, 1997 and 1996, respectively: dividend yield
of 1.75%,  1.92% and 1.5%  expected  volatility  of 26%,  43% and 23%  risk-free
interest  rates on options with expected  lives of five years of 5.7%,  6.2% and
6.2% and risk-free  interest rates on options with expected lives of seven years
of 5.8%,  6.3% and 6.4%.  The weighted  average grant date fair value of options
issued for 1998, 1997 and 1996 were $17.45, $17.51 and $12.68, respectively.

                                      A-31
<PAGE>
                           FINOVA CAPITAL CORPORATION

NOTE I            INCOME TAXES

     The  consolidated  provision for income taxes consists of the following for
the years ended December 31:

                                            1998           1997           1996
                                          --------       --------        -------
Current:
 United States:
   Federal                                $ 15,356       $ 52,329        $30,574
   State                                     8,700         13,973          7,654
 Foreign                                     1,870          3,626          1,745
                                          --------       --------        -------
                                            25,926         69,928         39,973
                                          --------       --------        -------
Deferred:
 United States:
   Federal                                  61,443         15,393         25,088
   State                                     6,855         (3,032)         5,259
 Foreign                                     7,950
                                          --------       --------        -------
                                            76,248         12,361         30,347
                                          --------       --------        -------
Provision for income taxes                $102,174       $ 82,289        $70,320
                                          ========       ========        =======

     Income taxes paid in 1998, 1997 and 1996 were approximately  $26.0 million,
$30.3 million and $31.3 million, respectively.

     The  significant  components of deferred tax  liabilities  and deferred tax
assets at December 31, 1998 and 1997 consisted of the following:


                                                          1998           1997
                                                        --------      ---------
Deferred tax liabilities:
 Deferred income from leveraged leases                  $396,572      $ 305,429
 Deferred income from lease financing                    108,883         89,196
 Goodwill                                                 23,726         21,266
 Deferred acquisition costs                               15,045         11,779
 Other                                                    12,654           (537)
                                                        --------      ---------
Gross deferred tax liability                             556,880        427,133
                                                        --------      ---------
Deferred tax assets:
 Reserve for credit losses                                92,784         78,082
 Foreign                                                  10,792         16,802
 Alternative minimum tax                                  46,314         26,153
 Accrued expenses                                          9,051         14,478
 Net operating loss carryforward/carryback                20,625          4,875
 Other                                                    22,286          7,963
                                                        --------      ---------
Gross deferred tax asset                                 201,852        148,353
                                                        --------      ---------
Net deferred tax liability                              $355,028      $ 278,780
                                                        ========      =========

                                      A-32
<PAGE>
                           FINOVA CAPITAL CORPORATION

     The federal statutory income tax rate is reconciled to the effective income
tax rate as follows:

                                                 1998         1997         1996
                                                 ----         ----         ----
Federal statutory income tax rate                35.0%        35.0%        35.0%
State income taxes                                3.8          2.6          4.5
Foreign tax effects                               0.1         (0.1)        (0.8)
Municipal and ESOP income                        (1.6)        (2.0)        (2.2)
Other                                             1.1          1.2          0.8
                                                 ----         ----         ----
Provision for income taxes                       38.4%        36.7%        37.3%
                                                 ====         ====         ====

NOTE J            PENSION AND OTHER BENEFITS

     Net periodic pension costs were $3.0 million, $1.9 million and $1.7 million
for the years ended  December 31, 1998,  1997 and 1996,  respectively.  FINOVA's
pension costs were accrued at $5.5 million at December 31, 1998 and $2.8 million
at December 31, 1997.

     Net periodic  other  postretirement  benefit costs were $0.7 million,  $0.5
million and $0.7 million for each of the years ended December 31, 1998, 1997 and
1996,  respectively.  FINOVA's  accrued  postretirement  benefit costs were $3.5
million at December 31, 1998 and $2.8 million at December 31, 1997.

     FINOVA's  investment of $49 million in trust for nonqualified  compensation
plans consists of securities held for trading and is recorded at market.

NOTE K            LITIGATION AND CLAIMS

     FINOVA is party  either as  plaintiff  or  defendant  to  various  actions,
proceedings and pending claims,  including legal actions,  some of which involve
claims for compensatory,  punitive or other damages in significant amounts. That
litigation  often  results  from  FINOVA's   attempts  to  enforce  its  lending
agreements against borrowers and other parties to those transactions. Litigation
is  subject  to many  uncertainties  and it is  possible  that some of the legal
actions,  proceedings  or claims  referred  to above  could be  decided  against
FINOVA.  Although  the ultimate  amount for which FINOVA may be held liable,  if
any, is not ascertainable,  FINOVA believes that any resulting  liability should
not materially affect FINOVA's financial position, results of operations or cash
flows.

NOTE L            FAIR VALUE OF FINANCIAL INSTRUMENTS

     The  following   disclosure  of  the  estimated  fair  value  of  financial
instruments has been determined by FINOVA using market  information  obtained by
FINOVA and the valuation  methodologies  described below. However,  considerable
judgment is required in  interpreting  market data to develop the  estimates  of
fair value. Accordingly, the estimates presented herein may not be indicative of
the amounts that FINOVA could realize in a current market  exchange.  The use of
different  market  assumptions  or valuation  methodologies  may have a material
effect on the estimated fair value amounts.

                                      A-33
<PAGE>
                           FINOVA CAPITAL CORPORATION

     The  carrying  amounts and  estimated  fair  values of  FINOVA's  financial
instruments are as follows for the years ended December 31:

<TABLE>
<CAPTION>
                                                     1998                           1997
                                           ------------------------       -------------------------
                                           Carrying       Estimated       Carrying       Estimated
                                            Amount       Fair Value        Amount        Fair Value
                                            ------       ----------        ------        ----------
<S>                                        <C>           <C>             <C>             <C>
Balance Sheet -
 Financial Instruments:
 Assets:
  Loans and other financing contracts      $7,115,291    $ 7,151,296     $5,774,147      $5,872,082
 Liabilities:
  Senior debt                               8,394,578      8,472,603      6,764,581       6,832,327

Off-Balance Sheet -
  Financial Instruments:
    Interest rate swaps                            --         17,558             --          15,893
    Interest rate hedge agreements                 --           (459)            --              --
---------------------------------------------------------------------------------------------------
</TABLE>

     The carrying values of cash and cash  equivalents,  fee-based  receivables,
financing contracts held for sale, accounts payable and accrued expenses, due to
clients and interest payable (including accrued amounts related to interest rate
swaps and interest  rate hedge  agreements)  approximate  fair values due to the
short-term maturity of these items.

     The  methods  and  assumptions  used to  estimate  the fair values of other
financial instruments are summarized as follows:

LOANS AND OTHER FINANCING CONTRACTS:

     The fair value of loans and other  financing  contracts  was  estimated  by
discounting  expected  cash  flows  using the  current  rates at which  loans of
similar credit quality, size and remaining maturity would be made as of December
31, 1998 and 1997.  Management  believes  that the risk  factor  embedded in the
current  interest  rates on  performing  loans  results in a fair  valuation  of
performing  loans.  As of  December  31,  1998  and  1997,  the  fair  value  of
nonaccruing  impaired  contracts  with a carrying  amount of $119.7  million and
$121.5 million,  respectively,  was not estimated because it is not practical to
reasonably assess the credit adjustment that would be applied in the marketplace
for such loans.  As of December 31, 1998 and 1997, the carrying  amount of loans
and other financing contracts excludes  repossessed assets with a total carrying
amount of $119.7 million and $89.6 million, respectively.

SENIOR DEBT:

     The fair value of senior  debt was  estimated  by  discounting  future cash
flows using rates  currently  available  for debt of similar terms and remaining
maturities.  The  carrying  values  of  commercial  paper and  borrowings  under
revolving credit facilities, if any, were assumed to approximate fair values due
to their short maturities.

INTEREST RATE SWAPS:

     The fair values of interest  rate swaps are based on quoted  market  prices
obtained from participating banks and dealers.

INTEREST RATE HEDGE AGREEMENTS:

     The fair value of interest  rate hedge  agreements in place at December 31,
1998 are based on quoted market prices  obtained  from  participating  loans and
dealers for transactions of similar remaining durations.

     The fair  value  estimates  presented  herein  were  based  on  information
obtained by FINOVA as of December 31, 1998 and 1997.  Although management is not
aware of any factors that would significantly  affect the estimated fair values,
such values have not been updated since  December 31, 1998 and 1997.  Therefore,
current  estimates  of fair  value may  differ  significantly  from the  amounts
presented herein.

                                      A-34
<PAGE>
                           FINOVA CAPITAL CORPORATION

NOTE M            OPERATING EXPENSES

     The  following  represents a summary of the major  components  of operating
expenses for the three years ended December 31:


                                            1998          1997           1996
                                            ----          ----           ----
Salaries and employee benefits           $ 140,939      $ 109,514      $ 95,314
Depreciation and amortization               23,069         17,021        13,799
Travel and entertainment                    16,045         11,917         8,953
Occupancy expenses                          11,562          8,368         7,104
Problem account costs                       10,332         11,577         8,294
Professional services                        9,982          7,654         5,738
Deferred acquisition cost                  (22,409)       (16,847)      (15,899)



NOTE N            COMPREHENSIVE INCOME

     Effective  for the  year  ended  December  31,  1998,  FINOVA  adopted  the
provisions of SFAS No. 130, "Reporting  Comprehensive  Income" ("SFAS No. 130"),
which  establishes  standards for reporting and display of comprehensive  income
and its components in the financial statements.

Accumulated  other  comprehensive  income  activity  for the three  years  ended
December 31, 1998 is as follows:


                                                                    Accumulated
                                    Foreign       Unrealized           Other
                                   Currency    Holding Gains on    Comprehensive
                                  Translation     Securities          Income
                                  -----------     ----------          ------
Balance, January 1, 1996            $(5,686)         $ --           $(5,686)
Change during 1996                    6,694            --             6,694
--------------------------------------------------------------------------------
Balance, December 31, 1996            1,008            --             1,008
Change during 1997                   (1,018)           --            (1,018)
--------------------------------------------------------------------------------
Balance, December 31, 1997              (10)           --               (10)
Change during 1998                     (208)          904               696
--------------------------------------------------------------------------------
Balance, December 31, 1998          $  (218)         $904           $   686
================================================================================

     For 1998,  the  changes  in foreign  currency  translation  and  unrealized
holding gains on securities  are net of an income tax benefit of $140,000 and an
income tax expense of $608,000 respectively.

     For comparative  purposes,  financial  statements presented for prior years
have been  reclassified  to conform to the  requirements  of SFAS No.  130.  The
adoption  of SFAS No.  130 had no impact on  FINOVA's  consolidated  results  of
operations, financial position, or cash flows.

NOTE O            SEGMENT REPORTING

MANAGEMENT'S POLICY FOR IDENTIFYING REPORTABLE SEGMENTS

     FINOVA's  reportable  business  segments are strategic  business units that
offer  distinctive  products and services  that are marketed  through  different
channels.

                                      A-35
<PAGE>
                           FINOVA CAPITAL CORPORATION

TYPES OF PRODUCTS AND SERVICES

     FINOVA  has three  market  groups  that are also its  reportable  segments:
Commercial  Finance,  Specialty Finance and Capital Markets.  Commercial Finance
includes traditional asset-based businesses that lend against collateral such as
cash flows, inventory,  receivables and leased assets. This segment includes the
following lines of businesses:  Business Credit, Commercial Services,  Corporate
Finance,  Distribution & Channel Finance, Growth Finance and Rediscount Finance.
Specialty Finance includes businesses which lend to a variety of highly focused,
industry-specific   niches.   This  segment  includes  the  following  lines  of
businesses:  Commercial Equipment Finance,  Communications Financing,  Franchise
Finance, Healthcare Finance, Portfolio Services, Public Finance, Resort Finance,
Specialty Real Estate Finance and Transportation  Finance.  Capital Markets,  in
conjunction with institutional  investors,  provides commercial mortgage banking
services and debt and equity  capital  funding.  This segment  includes:  Realty
Capital, Investment Alliance and Loan Administration.

RECONCILIATION  OF  SEGMENT  INFORMATION  TO  CONSOLIDATED   AMOUNTS

     Management  evaluates the business performance of each group based on total
net revenue,  income before allocations and managed assets. Total net revenue is
operating margin plus gains on disposal of assets.  Income before allocations is
income  before  income taxes and preferred  dividends,  excluding  allocation of
corporate overhead expenses and the unallocated  portion of provision for credit
losses.   Managed  assets  includes  each  segment's   investment  in  financing
transactions plus securitizations and participations sold.

Information for FINOVA's reportable segments reconciles to FINOVA's consolidated
totals as follows:


                                                       1998            1997

TOTAL NET REVENUE:
  Commercial Finance                               $    187,461     $   154,981
  Specialty Finance                                     344,541         313,841
  Capital Markets                                        24,170           2,099
  Corporate and other                                     8,978          (9,086)
                                                   ------------     -----------
Consolidated total                                 $    565,150     $   461,835
                                                   ============     ===========

INCOME (LOSS) BEFORE ALLOCATIONS:
  Commercial Finance                               $     67,013     $    72,454
  Specialty Finance                                     273,674         248,793
  Capital Markets                                        (2,775)          2,099
  Corporate and other, overhead and unallocated
     provision for credit losses                        (71,615)        (99,155)
                                                   ------------     -----------
Income from continuing operations before
  income taxes                                     $    266,297     $   224,191
                                                   ============     ===========

MANAGED ASSETS:
  Commercial Finance                               $  3,005,130     $ 2,755,826
  Specialty Finance                                   7,211,164       6,037,725
  Capital Markets                                       255,575
  Corporate and other                                    85,948          84,878
                                                   ------------     -----------
Consolidated total                                 $ 10,557,817     $ 8,878,429
Less securitizations and participations sold           (537,596)       (457,967)
                                                   ------------     -----------
Investment in financing transactions               $ 10,020,221     $ 8,420,462
                                                   ============     ===========

     Segment information was not presented for 1996 due to restructuring  within
the Company which made such presentation impracticable.

                                      A-36
<PAGE>
                           FINOVA CAPITAL CORPORATION

GEOGRAPHIC INFORMATION

     FINOVA  attributes  income earned from financing  transactions  and managed
assets to geographic areas based on the location of the customer.  Income earned
from  financing  transactions  and  managed  assets  at  December  31,  1998  by
geographic area are as follows:


                                         Income Earned from
                                              Financing
                                            Transactions       Managed Assets
                                            ------------       --------------
     United States                          $   942,275         $10,030,078
     Canada                                       2,646              94,035
     United Kingdom                              62,852             433,704
                                            -----------         -----------
                                            $ 1,007,773         $10,557,817
                                            ===========         ===========

MAJOR CUSTOMER INFORMATION

     FINOVA has no single customer that accounts for 10% or more of revenue.

NOTE P                  NEW ACCOUNTING STANDARDS

     In June 1998,  the FASB  issued SFAS No. 133,  "Accounting  for  Derivative
Instruments  and  Hedging  Activities,"  (SFAS No. 133) which is  effective  for
fiscal years  beginning  after June 15, 1999.  This statement  standardizes  the
accounting for derivative instruments,  including certain derivative instruments
embedded  in other  contracts,  by  recognition  of those  items  as  assets  or
liabilities  in the  statement of financial  position  and  measurement  at fair
value.  FINOVA will adopt this standard  effective January 1, 2000, as required.
The impact of SFAS No. 133 on the  Company's  financial  position and results of
operations has not yet been determined.

NOTE Q       SUBSEQUENT EVENT - ACQUISITION OF SIRROM CAPITAL CORPORATION

     In March 1999, FINOVA Group acquired Sirrom Capital Corporation ("Sirrom"),
a specialty  finance company  headquartered in Nashville,  Tennessee.  Under the
terms of the agreement,  Sirrom  shareholders  received  0.1634 shares of FINOVA
Group  common  stock for each  share of Sirrom  common  stock  they  owned.  The
aggregate  purchase  price of the Sirrom  common  stock was  approximately  $343
million (excluding options).

NOTE R                 RESTATEMENT

     Subsequent to the issuance of the Company's 1998 financial statements,  the
Company's management  determined that it should revalue its retained interest in
the mini-commercial  mortgage-backed  securities ("mini-CMBS")  transaction (see
Note C). These revaluations resulted in a reduction of the value of the retained
portion of the loans from $91.7  million to $65.0  million and reduced  FINOVA's
previously  reported gross gains on the transactions from $46.1 million to $19.5
million.  As a result,  the Company has restated its 1998  financial  statements
from  amounts  previously  reported to reflect  the  reduction  of the  retained
interest and resulting gain.

     In  determining  the fair value of assets sold and interest  retained,  the
Company  employed a variety of  financial  assumptions.  To  establish  discount
rates,  the Company  referred to the subsequent April 1999 sale of approximately
70% of the  mini-CMBS  loans into a  permanent  CMBS  structure.  The  permanent
transaction was compared to the mini-CMBS  transaction  and similar  portions of
the interest  retained  were  discounted  using rates  present in the  permanent
structure,  after adjusting for general  movements in interest rates between the
date of the mini-CMBS transaction and the permanent  transaction.  Specifically,
servicing rights were discounted at approximately 6% and the remaining  residual
cash flows were  discounted  at rates  between 9% and 18%.  The Company  assumed
minimal  defaults  and  prepayments  due  to the  nature  and  structure  of the
commercial  mortgages.  The recourse obligation was recorded at fair value based
on prices obtained from the subsequent April 1999 sale.

                                      A-37
<PAGE>
                           FINOVA CAPITAL CORPORATION

     A summary of the  revaluation  of the  retained  interest in the  mini-CMBS
structure is as follows:


                                                      Mini-CMBS Structure - 1998
                                                      --------------------------
                                                      As Previously        As
                                                         Reported       Restated
                                                         --------       --------
Loans sold                                             $ 724,257      $ 724,257

Principal A (Senior security interest)                   678,686        678,686
Principal B (Subordinated retained interest)              91,708         65,033
                                                       ---------      ---------
Basis                                                    770,394        743,719

Gross gains                                               46,137         19,462

Commissions & expenses                                    (3,862)        (3,156)
Recourse obligations                                        (278)        (5,827)
Hedge loss                                               (20,443)       (20,443)
Valuation adjustments                                     (5,500)
                                                       ---------      ---------
Net gain/(loss)                                        $  16,054      $  (9,964)
                                                       =========      =========

     Activity for the retained subordinated interest is as follows:


                                                                         1998
                                                                       --------
Beginning retained interest                                            $
Retained interest added                                                  65,033
Principal payments applied                                                  (55)
Advances made                                                               386
                                                                       --------
Ending retained interest                                               $ 65,364
                                                                       ========

     Cash  received on the retained  interest  totaled $0.9  million,  which was
applied  against  principal  and  interest.  Advances  are made to the trust for
delinquencies in the underlying  loans,  which are recovered when the delinquent
payments are collected.

     Additionally,   the  Company's  management  has  determined  that  expenses
incurred  in  connection  with the  origination  of new loans under SFAS No. 91,
"Accounting for  Nonrefundable  Fees and Costs  Associated  with  Originating or
Acquiring  Loans and Initial Direct Costs of Leases" (SFAS No. 91),  should have
been  deferred and  amortized  over the  estimated  loan life.  Previously,  the
Company was deferring loan  origination  fees received and amortizing  them over
the lives of the loans in  accordance  with SFAS No. 91, but  elected to expense
loan  origination  costs as incurred.  The Company has  restated  its  financial
statements to now defer and amortize loan costs over the estimated loan life, in
accordance with SFAS No. 91 as well as to make several other adjustments.

                                      A-38
<PAGE>
                           FINOVA CAPITAL CORPORATION

     A summary of the  significant  effects of the  restatements  for 1998 is as
follows:

<TABLE>
<CAPTION>
                                                                      1998
                                                                   Adjustments
                                                                   -----------
                                        As Previously              Origination                  As
                                          Reported     CMBS Gain      Costs       Other      Restated
                                          --------     ---------      -----       -----      --------
<S>                                     <C>            <C>          <C>         <C>         <C>
AT DECEMBER 31,
Investment in financing transactions    $10,011,536    $(21,847)    $ 37,426    $  (6,894)  $10,020,221
Goodwill and other assets                   650,144      (1,140)                  (16,623)      632,381
Total liabilities                         9,161,824      (4,910)      15,045       (9,099)    9,162,860
Shareowner's equity                       1,341,757     (18,077)      22,381      (14,418)    1,331,643

FOR THE YEAR ENDED DECEMBER 31,
Interest margins earned                     472,536                  (15,605)       2,584       459,515
Gains on disposal of assets                  55,024     (26,018)                   (1,094)       27,912
Operating expenses                          241,074                  (23,731)        (690)      216,653
Net income                                  173,519     (15,559)       4,859        1,304       164,123
</TABLE>

     The  restatement to reduce the mini-CMBS gain did not affect years prior to
1998.

     A summary  of the  significant  effects  of the  restatement  to defer loan
origination  costs as well as to make several other adjustments in 1997 and 1996
are as follows:

<TABLE>
<CAPTION>

                                                    1997                        1996
                                        -------------------------    --------------------------
                                        As Previously       As       As Previously        As
                                           Reported      Restated      Reported        Restated
                                           --------      --------      --------        --------
<S>                                      <C>            <C>            <C>            <C>       
AT DECEMBER 31,
Investment in financing transactions     $8,399,456     $8,420,462     $7,298,759     $7,318,919
Goodwill and other assets                   502,362        486,142        370,575        362,137
Total liabilities                         7,497,855      7,500,841      6,482,883      6,491,617
Shareowner's equity                       1,260,068      1,261,868      1,069,043      1,072,031

FOR THE YEAR ENDED DECEMBER 31,
Interest margins earned                     408,914        392,124        340,517        329,107
Gain on disposal of assets                   30,261         30,333         12,949         12,562
Operating expenses                          190,525        168,444        154,481        140,218
Net Income                                  143,090        141,902        117,000        118,475
------------------------------------------------------------------------------------------------
</TABLE>

     A  prior  period   adjustment  of  $1.5  million  has  been   reflected  in
shareowner's equity at January 1, 1996.

                                      A-39
<PAGE>
                           FINOVA CAPITAL CORPORATION

                      SUPPLEMENTAL SELECTED FINANCIAL DATA
                     CONDENSED QUARTERLY RESULTS (UNAUDITED)
                                   As restated
                             (Dollars in Thousands)

     The  following  represents  the condensed  quarterly  results for the three
years ended December 31, 1998, 1997 and 1996:

<TABLE>
<CAPTION>
                                                First       Second        Third       Fourth
                                               Quarter      Quarter      Quarter      Quarter
----------------------------------------------------------------------------------------------
<S>                                          <C>          <C>          <C>          <C>       
 Income earned from financing transactions:
  1998                                       $  232,833   $  246,069   $  253,309   $  275,562
  1997                                          206,226      216,836      219,012      237,689
  1996                                          181,389      183,723      192,297      199,587
----------------------------------------------------------------------------------------------
 Interest expense:
  1998                                          110,280      114,692      121,937      131,268
  1997                                           96,793      101,501      105,208      111,148
  1996                                           88,138       89,631       91,247       96,587
----------------------------------------------------------------------------------------------
 Volume-based fees:
  1998                                           22,156       19,103       16,687       19,777
  1997                                            7,784        8,583        9,546       13,465
  1996                                            6,731        6,380        7,570        7,907
----------------------------------------------------------------------------------------------
 Gains on disposal of assets:
  1998                                            1,525        7,433        6,471       12,483
  1997                                            3,233        9,768       10,305        7,027
  1996                                            6,730        1,315          397        4,120
----------------------------------------------------------------------------------------------
 Non-interest expenses:
  1998                                           79,548       89,702       85,922      113,762
  1997                                           66,769       77,599       80,334       85,931
  1996                                           62,927       53,992       62,135       65,201
----------------------------------------------------------------------------------------------
 Income from continuing operations:
  1998                                           40,687       41,480       42,784       39,172
  1997                                           33,333       35,616       34,283       38,670
  1996                                           27,423       29,182       29,665       31,698
----------------------------------------------------------------------------------------------
Net income:
  1998                                           40,687       41,480       42,784       39,172
  1997                                           33,333       35,616       34,283       38,670
  1996                                           27,788       28,451       28,939       33,297
----------------------------------------------------------------------------------------------
</TABLE>

                                      A-40
<PAGE>
                           FINOVA CAPITAL CORPORATION

     AVERAGE BALANCES/OPERATING MARGIN/AVERAGE ANNUAL RATES (UNAUDITED) (1)
                                   AS RESTATED
                             (Dollars in Thousands)

     The following  represents the breakdown of FINOVA's  average balance sheet,
operating  margin and average annual rates for the years ended December 31, 1998
and 1997:
<TABLE>
<CAPTION>
                                                             1998                                  1997
---------------------------------------------------------------------------------------------------------------------------
                                                           Interest &                             Interest &
                                              Average     Volume-Based    Average      Average   Volume-Based    Average
                                              Balance        Fees           Rate       Balance       Fees         Rate
---------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>            <C>             <C>        <C>          <C>            <C>
ASSETS
 Cash and cash equivalents                  $    38,709    $                          $   36,899   $
 Investment in financing transactions         9,018,351     1,015,415(4)   11.88%(2)   7,767,391    846,152(4)    11.50%(2)
 Less reserve for credit losses                (184,162)                                (160,241)
---------------------------------------------------------------------------------------------------------------------------
 Net investment in financing transactions     8,834,189                                7,607,150
 Goodwill and other assets                      571,294                                  413,676
 Investment in discontinued operations                                                     2,704
---------------------------------------------------------------------------------------------------------------------------
                                            $ 9,444,192                               $8,060,429
===========================================================================================================================
LIABILITIES AND SHAREOWNER'S EQUITY
Liabilities:
 Other liabilities                          $   369,147    $                          $  390,651   $
 Senior debt                                  7,452,245       478,177       6.42%      6,253,588    414,650        6.63%
 Deferred income taxes                          309,965                                  275,059
---------------------------------------------------------------------------------------------------------------------------
                                              8,131,357                                6,919,298
Shareowner's equity                           1,312,835                                1,141,131
---------------------------------------------------------------------------------------------------------------------------
                                            $ 9,444,192                               $8,060,429
===========================================================================================================================
Interest income/average earning
  assets (2)                                               $1,015,415      11.88%                  $846,152       11.50%
Interest expense/average earning
  assets (2) (3)                                              478,177       5.59%                   414,650        5.63%
---------------------------------------------------------------------------------------------------------------------------
Operating margin (3)                                       $  537,238       6.29%                  $431,502        5.87%
===========================================================================================================================
</TABLE>

(1)  Averages are calculated based on monthly balances.
(2)  The average rate is calculated based on average earning assets  ($8,546,715
     and  $7,360,012 for 1998 and 1997,  respectively)  which are net of average
     deferred taxes on leveraged leases and average nonaccruing assets.
(3)  For the year ended December 31, 1998,  excluding the impact of derivatives,
     interest  expense  would have been  $472,893  or 5.53% of  average  earning
     assets and  operating  margin would have been  $542,522 or 6.35% of average
     earning assets. For the year ended December 31, 1997,  excluding the impact
     of  derivatives,  interest  expense  would have been  $415,697  or 5.65% of
     average  earning  assets and  operating  margin would have been $430,455 or
     5.85% of average earning assets.
(4)  For the years ended December 31, 1998 and 1997 interest income is shown net
     of operating lease depreciation. .

                                      A-41
<PAGE>
                           FINOVA CAPITAL CORPORATION
                          COMMISSION FILE NUMBER 1-7543
                                  EXHIBIT INDEX
                           DECEMBER 31, 1998 FORM 10-K

    Exhibit No.
    -----------

    (3.A)    Certificate of  Incorporation,  as amended through the date of this
             filing (incorporated by reference from FINOVA's report on Form 10-K
             for the year ended  December  31, 1994 (the "1994  10-K"),  Exhibit
             3.A).

    (3.B)    Bylaws, as amended through the date of this filing (incorporated by
             reference  from  FINOVA's  report on Form  10-K for the year  ended
             December 31, 1995 (the "1995 10-K") Exhibit 3.B).

    (4.A)    Form  of  FINOVA's  Common  Stock   Certificate   (incorporated  by
             reference from the 1994 10-K, Exhibit 4.B).

    (4.B)    Relevant  portions of FINOVA's  Certificate  of  Incorporation  and
             Bylaws included in Exhibits 3.A, 3.B and 3.C above are incorporated
             by reference.

    (4.C)    Long-term debt instruments with principal amounts not exceeding 10%
             of FINOVA's total consolidated  assets are not filed as exhibits to
             this report.  FINOVA will furnish a copy of those agreements to the
             SEC upon its request.

    (4.D)    Form of Indenture  dated as of September 1, 1992 between FINOVA and
             the Trustee  named  therein  (incorporated  by  reference  from the
             Greyhound Financial Corporation Registration Statement on Form S-3,
             Registration No. 33-51216, Exhibit 4).

    (4.E)    Form of Indenture  dated as of October 1, 1995  between  FINOVA and
             the Trustee named therein  (incorporated by reference from FINOVA's
             report on Form 8-K dated October 25, 1995, Exhibit 4.1).

    (4.F)    Form of  Indenture,  dated as of March 20,  1998,  between  FINOVA,
             FINOVA  Group and The First  National  Bank of  Chicago  as Trustee
             (incorporated   by  reference   from  FINOVA  and  FINOVA   Group's
             registration  statement on Form S-3,  Registration  No.  333-38171,
             Exhibit 4.8).

    (10.A)   Sixth  Amendment  and  Restatement  dated as of May 16, 1994 of the
             Credit  Agreement,  dated as of May 31, 1976 among FINOVA Group and
             the lender parties thereto,  and Bank of America National Trust and
             Savings  Association,  Bank of Montreal,  Chemical Bank,  Citibank,
             N.A. and National  Westminister  Bank USA, as agents (the "Agents")
             and  Citibank,  N.A.,  as  Administrative  Agent  (incorporated  by
             reference  from  FINOVA's  report on Form 8-K  dated May 23,  1994,
             Exhibit 10.1).

    (10.A.1) First  Amendment  dated as of  September  30,  1994,  to the  Sixth
             Amendment and  Restatement,  noted in 10.A above  (incorporated  by
             reference from the 1994 10-K, Exhibit 10.A.1).

    (10.A.2) Second  Amendment  dated as of May 11, 1995 to the Sixth  Amendment
             and Restatement noted in 10.A above (incorporated by reference from
             FINOVA's  Quarterly  Report  on Form  10-Q  for the  period  ending
             September 30, 1995 ( the "3Q95 10-Q"), Exhibit 10.A).

    (10.A.3) Third  Amendment  dated as of November  1, 1995 to Sixth  Amendment
             noted in 10.A above  (incorporated by reference from the 3Q95 10-Q,
             Exhibit 10.B).

                                      A-42
<PAGE>
    Exhibit No.
    -----------

    (10.A.4) Fourth Amendment dated as of May 15, 1996, to Sixth Amendment noted
             in 10.A above  (incorporated  by reference from FINOVA's  report on
             form 10-K for the year ended  December 31, 1996 (the "1996  10-K"),
             Exhibit 10.A.4).

    (10.A.5) Fifth  Amendment  dated as of May 20, 1998 to Sixth Amendment noted
             in 10.A above (incorporated by reference from FINOVA Group's report
             on form 10-K for the year  ended  December  31,  1997 (the  "FINOVA
             Group 1997 10-K"), Exhibit 10.A.5).

    (10.B)   Credit  Agreement  (Short-Term  Facility)  dated as of May 16, 1994
             among FINOVA , the Lender parties thereto, the Agents and Citibank,
             N.A.,  as  Administrative  Agent  (incorporated  by reference  from
             FINOVA's report on Form 8-K dated May 23, 1994, Exhibit 10.2).

    (10.B.1) First  Amendment  dated  as of  September  30,  1994 to the  Credit
             Agreement noted in 10.B above  (incorporated  by reference from the
             1994 10-K, Exhibit 10.B.1).

    (10.B.2) Second  Amendment  to  Short-Term  Facility  noted  in  10.B  above
             (incorporated by reference from the 3Q95 10-Q, Exhibit 10.C).

    (10.B.3) Third  Amendment  to  Short-Term   Facility  noted  in  10.B  above
             (incorporated by reference from the 3Q95 10-Q, Exhibit 10.D).

    (10.B.4) Fourth  Amendment  to  Short-Term  Facility  noted  in  10.B  above
             (incorporated by reference from 1996 10-K, Exhibit B.4).

    (10.B.5) Fifth  Amendment  to  Short-Term   Facility  noted  in  10.B  above
             (incorporated by reference from the FINOVA Group 1997 10-K, Exhibit
             10.B.5).+

    (10.C)   Exhibits relating to management compensation are omitted due to the
             reduced  disclosure  format,  but can be found as  exhibits  to the
             FINOVA Group 1997 10-K.

    (10.D)   Documents  relating to the  mini-CMBS  Program:  FINOVA  Commercial
             Mortgage  Loan Owner Trust 1998-1.  Commercial  Mortgage Loan Asset
             Backed Certificates 1998 -1.*

    (10.D.1) Certificate  Purchase  Agreement  dated as of  September  29,  1998
             (incorporated  by reference  from FINOVA  Group 1998 10-K,  Exhibit
             10.T.1).

    (10.D.2) Trust  and  Servicing  Agreement  dated  as of  September  1,  1998
             (incorporated  by reference  from FINOVA  Group 1998 10-K,  Exhibit
             10.T.2).

    (10.D.3) Loan Purchase Agreement dated as of September 1, 1998 (incorporated
             by reference from FINOVA Group 1998 10-K, Exhibit 10.T.3).

    (10.D.4) Amendment  No. 1 to the Trust and Servicing  Agreement  dated as of
             December 8, 1998  (incorporated by reference from FINOVA Group 1998
             10-K, Exhibit 10.T.4).


    (10.D.5) Amendment  No. 2 to the Trust and Servicing  Agreement  dated as of
             December 29, 1998 (incorporated by reference from FINOVA Group 1998
             10-K, Exhibit 10.T.5).

    (10.D.6) Custodial  Agreement dated as of September 1, 1998 (incorporated by
             reference from FINOVA Group 1998 10-K, Exhibit 10.T.6).

                                      A-43
<PAGE>
    Exhibit No.
    -----------

    (10.D.7) Administration   Agreement   dated   as  of   September   1,   1998
             (incorporated  by reference  from FINOVA  Group 1998 10-K,  Exhibit
             10.T.7).

    (10.D.8) Amendment  No. 3 to the Trust and Servicing  Agreement  dated as of
             April 21, 1999  (incorporated  by reference  from FINOVA Group 1998
             10-K/A, Amendment No. 2, Exhibit 10.T.8).

    (10.D.9) Amendment  No. 4 to the Trust and Servicing  Agreement  dated as of
             April 26, 1999  (incorporated  by reference  from FINOVA Group 1998
             10-K/A, Amendment No. 2, Exhibit 10.T.9).

    (12)     Computation  of Ratio of  Restated  Income  to  Fixed  Charges,  as
             restated.**

    (23)     Independent Auditors' Consent.**

    (24)     Powers of Attorney.**

    (27)     Financial Data Schedule, as restated.**

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*        Previously filed.
**       Filed with this report.
+        Relating to management compensation.

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