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

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON D.C. 20594

                                    FORM 10-K
                   ANNUAL REPORT PURSUANT TO SECTION 13 OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                          Commission File Number 1-7543

                   For the Fiscal Year Ended December 31, 1999


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

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

      4800 North Scottsdale Road
            Scottsdale, AZ                                       85251-7623
(Address of Principal Executive Offices)                         (Zip Code)

        Registrant's Telephone Number, Including Area Code: 480-636-4800

          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 of 9-1/8%                  New York Stock Exchange
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 10-K or any amendment of this
Form 10-K. [X]

As of March 8, 2000,  25,000  shares of Common  Stock  ($1.00  par  value)  were
outstanding and were 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: None

                        Website address is www.finova.com
================================================================================
<PAGE>
                                TABLE OF CONTENTS
                                  Name of Item

                                     Part I
Item 1.  Business: .........................................................   1
           Introduction ....................................................   1
           General .........................................................   1
           Business Groups .................................................   1
           Portfolio Composition ...........................................   3
           Investment In Financing Transactions ............................   3
           Cost And Use Of Borrowed Funds ..................................  11
           Matched Funding Policy ..........................................  11
           Credit Ratings ..................................................  12
           Residual Realization Experience .................................  12
           Business Development And Competition ............................  13
           Credit Quality ..................................................  13
           Risk Management .................................................  13
           Portfolio Management ............................................  14
           Delinquencies And Workouts ......................................  14
           Governmental Regulation .........................................  14
           Employees .......................................................  15
           Special Note Regarding Forward-Looking Statements ...............  15
Item 2.  Properties ........................................................  16
Item 3.  Legal Proceedings .................................................  16
Item 4.  Submission Of Matters To A Vote Of Security Holders ...............  16

                                     Part II
Item 5.  Market Price of and Dividends on the Registrant's Common
           Equity & Related Shareowner Matters .............................  16
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 Disclosure About Market Risk .........  17
Item 8.  Financial Statements & Supplemental Data ..........................  17
Item 9.  Changes in and Disagreements with Accountants on
           Accounting & Financial Disclosure ...............................  17

                                    Part III
Item 10. Directors & Executive Officers of the Registrant ..................  17
Item 11. Executive Compensation ............................................  17
Item 12. Security Ownership of Certain Beneficial Owners & Management ......  17
Item 13. Certain Relationships & Related Transactions ......................  17

                                     Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K....  18
<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  Capital  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 20 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 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,  lease rentals,  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 4800 North Scottsdale
Road,  Scottsdale,  Arizona 85251,  telephone  (480)  636-4800.  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

          *    BUSINESS  CREDIT  offers  collateral-oriented   revolving  credit
               facilities   and  term   loans  for   manufacturers,   retailers,
               distributors,   wholesalers   and  service   companies.   Typical
               transaction  sizes range from $1 million to $5  million.  Fremont
               Capital Corporation, acquired in December 1999, was added to this
               line of business.
          *    COMMERCIAL  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 $2
               million and $100 million.  This line provides accounts receivable
               and inventory financing in addition to loans secured by equipment
               and real estate.

                                       1
<PAGE>
          *    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.
          *    DISTRIBUTION  & CHANNEL  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.
          *    GROWTH  FINANCE   provides   collateral-based   working   capital
               financing   primarily   secured  by   accounts   receivable   for
               manufacturers,  wholesale  distributors,  service  companies  and
               importers.  Typical  transaction  sizes range from $100,000 to $1
               million and are made to small and midsize  businesses with annual
               sales under $10 million.
          *    REDISCOUNT  FINANCE  offers  revolving  credit  facilities to the
               independent  consumer  finance  industry  including  direct loan,
               automobile,  mortgage  and  premium  finance  companies.  Typical
               transaction sizes range from $1 million to $35 million.

     SPECIALTY FINANCE

          *    COMMERCIAL EQUIPMENT FINANCE offers equipment leases and loans to
               a broad range of midsize  companies.  Specialty  markets  include
               emerging growth technology industries (primarily  biotechnology),
               electronics,     telecommunications,      corporate     aircraft,
               supermarket/specialty   retailers  and  most  heavy   industries.
               Typical transaction sizes range from $1 million to $20 million.
          *    COMMUNICATIONS   FINANCE   specializes   in  term   financing  to
               advertising and subscriber-supported  businesses, including radio
               and television  broadcasting,  cable television,  paging, outdoor
               advertising,   publishing  and  emerging   technologies  such  as
               internet  service   providers  and  competitive   local  exchange
               carriers.  Typical transaction sizes range from $3 million to $40
               million.
          *    FRANCHISE FINANCE offers  equipment,  real estate and acquisition
               financing  for  operators  of  established   franchise  concepts.
               Typical  transaction  sizes  generally range from $500,000 to $40
               million.
          *    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 $35 million.
          *    PORTFOLIO SERVICES provides customized  receivable  servicing and
               collections for resort timeshare  developers and other holders of
               consumer receivables.
          *    PUBLIC FINANCE  provides  tax-exempt term financing to non-profit
               corporations,  manufacturers,  and state  and local  governments.
               Typical transaction sizes range from $2 million to $15 million.
          *    RESORT  FINANCE   focuses  on   construction,   acquisition   and
               receivables   financing  for  timeshare   resorts,   second  home
               communities and fractional interest resorts.  Typical transaction
               sizes ranges from $5 million to $35 million.
          *    SPECIALTY REAL ESTATE FINANCE  provides  senior term  acquisition
               and  bridge/interim  loans from $5 million to $30 million or more
               for hotel and  resort  properties  in the  U.S.,  Canada  and the
               Caribbean.  Through this  division,  FINOVA also provides  equity
               investments in credit-oriented real estate sale leasebacks.
          *    TRANSPORTATION  FINANCE  structures  equipment loans,  leases and
               acquisition   financing  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  remarket  used  commercial
               aircraft.

                                       2
<PAGE>
     CAPITAL MARKETS

          *    HARRIS WILLIAMS & CO.  provides  merger and acquisition  advisory
               services targeting middle market businesses.
          *    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.
          *    LOAN  ADMINISTRATION   provides  servicing  and  subservicing  of
               commercial  mortgages,  business  leases and prime and  sub-prime
               consumer loans.
          *    MEZZANINE   CAPITAL  provides  secured   subordinated  debt  with
               warrants  to  midsize  North  American  companies  for  expansion
               capital, buyouts or recapitalizations.  Typical transaction sizes
               range from $2 million to $15 million.
          *    REALTY CAPITAL  provides  commercial  real estate  bridge/interim
               mortgage loans and capital markets-funded  commercial real estate
               loans.  Typical  transaction  sizes  range from $1 million to $25
               million.

     FINOVA is a Delaware corporation.  The Company was incorporated in 1965 and
is the successor to a California  Corporation  that was formed in 1954. In March
1992, The Dial  Corporation  transferred  its financial  services  businesses to
FINOVA  Group in a spin-off.  Since that time,  FINOVA has  increased  its total
assets  from $2.5  billion at  December  31,  1992 to $14.0  billion at December
31,1999.  Income from continuing operations increased from $36.8 million in 1992
to $219.0 million in 1999.  Management  believes  FINOVA ranks among the largest
independent commercial finance companies in the U.S., based on total assets.

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 serviced
by the Company.  Managed assets 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, 1999,  1998,  1997, 1996 and
1995.

                                       3
<PAGE>
                      INVESTMENT IN FINANCING TRANSACTIONS
                               BY LINE OF BUSINESS
                                DECEMBER 31, 1999
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                         Revenue Accruing                      Nonaccruing
                                ----------------------------------   --------------------------------
                                  Market                 Repossessed            Repossessed  Lease &   Total Carrying
                                  Rate(1)     Impaired    Assets(2)  Impaired     Assets      Other        Amount        %
                                -----------   ---------   --------   ---------   ---------   --------   -----------   ------
<S>                             <C>           <C>         <C>        <C>         <C>         <C>        <C>          <C>
Commercial Finance Group
 Rediscount Finance             $ 1,059,930   $           $12,574    $  1,071    $ 3,042     $          $ 1,076,617      8.2
 Business Credit                    953,635      4,800                 29,853        905                    989,193      7.5
 Corporate Finance                  845,778     49,792                 43,169        901                    939,640      7.2
 Distribution & Channel Finance     467,720     76,770                 13,867                               558,357      4.3
 Commercial Services                217,518                             2,791      1,930                    222,239      1.7
 Growth Finance                      55,276                             2,625                                57,901      0.4
                                -----------   --------    -------    --------    -------     -------    -----------    -----
                                  3,599,857    131,362     12,574      93,376      6,778                  3,843,947     29.3
                                -----------   --------    -------    --------    -------     -------    -----------    -----
Specialty Finance Group
 Transportation Finance           2,424,262     64,073                                                    2,488,335     19.0
 Resort Finance                   1,584,508                14,383       2,699     19,318                  1,620,908     12.4
 Commercial Equipment Finance       809,456                 5,090      12,000     19,657       2,725        848,928      6.5
 Franchise Finance                  769,162                 1,917       4,953      2,770         172        778,974      5.9
 Specialty Real Estate Finance      726,788                35,807       9,042      6,151         152        777,940      5.9
 Healthcare Finance                 692,876     17,695      5,137      35,076      1,162       5,945        757,891      5.8
 Communications Finance             674,331      3,908                 10,327                               688,566      5.2
 Public Finance                     168,778                                                                 168,778      1.3
                                -----------   --------    -------    --------    -------     -------    -----------    -----
                                  7,850,161     85,676     62,334      74,097     49,058       8,994      8,130,320     62.0
                                -----------   --------    -------    --------    -------     -------    -----------    -----
Capital Markets Group
 Realty Capital                     578,808                             4,614                               583,422      4.4
 Mezzanine Capital                  386,555     21,981                 34,117                               442,653      3.4
 Investment Alliance                 25,292                                                                  25,292      0.2
                                -----------   --------    -------    --------    -------     -------    -----------    -----
                                    990,655     21,981                 38,731                             1,051,367      8.0
                                -----------   --------    -------    --------    -------     -------    -----------    -----
Other (3)                            71,147      1,107                                        24,089         96,343      0.7
                                -----------   --------    -------    --------    -------     -------    -----------    -----
TOTAL (4)                       $12,511,820   $240,126    $74,908    $206,204    $55,836     $33,083    $13,121,977    100.0
                                ===========   ========    =======    ========    =======     =======    ===========    =====
</TABLE>
----------
NOTES:
(1)  Represents original or renegotiated  market rate terms,  excluding impaired
     transactions.
(2)  The Company  earned  income  totaling  $5.5 million on  repossessed  assets
     during 1999, including $2.2 million in Specialty Real Estate Finance,  $1.0
     million in Resort Finance, $0.5 million in Healthcare Finance, $1.4 million
     in Rediscount  Finance,  $0.3 million in Commercial  Equipment  Finance and
     $0.1 million in Franchise Finance.
(3)  Primarily  includes  other assets  retained from  disposed or  discontinued
     operations.
(4)  Excludes $483.4 million of assets securitized and participations sold which
     the Company  manages,  composed  of  securitizations  of $300.0  million in
     Corporate   Finance   and  $121.3   million  in   Franchise   Finance   and
     participations  of $28.8  million in  Corporate  Finance,  $3.0  million in
     Communications  Finance,  $12.3 million in Rediscount Finance, $4.6 million
     in Transportation Finance, $6.7 million in Business Credit, $6.3 million in
     Resort Finance and $0.4 million in Other.

                                       4
<PAGE>
                      INVESTMENT IN FINANCING TRANSACTIONS
                               BY LINE OF BUSINESS
                                DECEMBER 31, 1998
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                          Revenue Accruing                       Nonaccruing
                                -----------------------------------   ---------------------------------
                                  Market                 Repossessed             Repossessed   Lease &   Total Carrying
                                  Rate(1)     Impaired    Assets(2)   Impaired     Assets       Other       Amount       %
                                -----------   ---------   ---------   ---------   ---------   ---------   -----------  -----
<S>                             <C>           <C>         <C>         <C>         <C>         <C>         <C>          <C>
Commercial Finance Group
 Rediscount Finance             $  766,250    $           $   999     $  3,762    $            $          $   771,011    7.7
 Business Credit                   292,696                               7,416                                300,112    3.0
 Corporate Finance                 729,461      16,183                  41,007      1,115                     787,766    7.9
 Distribution & Channel Finance    561,734                               6,029                                567,763    5.7
 Commercial Services               160,012         648                   8,912        936                     170,508    1.7
 Growth Finance                     45,901                                                                     45,901    0.5
                                ----------    --------    -------     --------    -------      -------    -----------  -----
                                 2,556,054      16,831        999       67,126      2,051                   2,643,061   26.5
                                ----------    --------    -------     --------    -------      -------    -----------  -----
Specialty Finance Group
 Transportation Finance          2,140,541      61,895                                                      2,202,436   22.0
 Resort Finance                  1,209,062                 16,415                  24,800                   1,250,277   12.5
 Commercial Equipment Finance      712,854       1,526      4,858       10,884     17,855        4,135        752,112    7.5
 Franchise Finance                 597,916       1,619      1,741        1,763      2,120          274        605,433    6.0
 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
 Communications Finance            694,863       7,169                  24,264                                726,296    7.2
 Public Finance                    183,099                                                                    183,099    1.8
                                ----------    --------    -------     --------    -------      -------    -----------  -----
                                 6,771,488      89,175     64,262       52,612     52,395        5,705      7,035,637   70.1
                                ----------    --------    -------     --------    -------      -------    -----------  -----
Capital Markets Group
 Realty Capital                    243,278                                                                    243,278    2.4
 Investment Alliance                12,297                                                                     12,297    0.1
                                ----------    --------    -------     --------    -------      -------    -----------  -----
                                   255,575                                                                    255,575    2.5
                                ----------    --------    -------     --------    -------      -------    -----------  -----
Other (3)                           60,604                                                      25,344         85,948    0.9
                                ----------    --------    -------     --------    -------      -------    -----------  -----
TOTAL (4)                       $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)  Primarily  includes  other assets  retained from  disposed or  discontinued
     operations.
(4)  Excludes $537.6 million of assets securitized and participations sold which
     the Company  manages,  composed  of  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
<PAGE>
                      INVESTMENT IN FINANCING TRANSACTIONS
                               BY LINE OF BUSINESS
                                DECEMBER 31, 1997
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                         Revenue Accruing                      Nonaccruing
                                 --------------------------------   ---------------------------------
                                  Market                Repossessed             Repossessed  Lease &  Total Carrying
                                  Rate(1)     Impaired   Assets(2)   Impaired     Assets      Other       Amount       %
                                 ----------   --------   --------   ----------   --------   ---------   ----------   -----
<S>                              <C>          <C>        <C>        <C>          <C>        <C>         <C>          <C>
Commercial Finance Group
 Rediscount Finance             $  609,641   $           $           $    993    $           $          $  610,634     7.2
 Business Credit                   195,897                              7,559                              203,456     2.4
 Corporate Finance                 791,733       981                   26,888                              819,602     9.7
 Distribution & Channel Finance    544,108                              4,333                              548,441     6.5
 Commercial Services               196,843                             30,205                              227,048     2.7
                                ----------   -------     -------     --------    -------     -------    ----------   -----
                                 2,338,222       981                   69,978                            2,409,181    28.5
                                ----------   -------     -------     --------    -------     -------    ----------   -----
Specialty Finance Group
 Transportation Finance          1,631,685                                                               1,631,685    19.4
 Resort Finance                  1,166,199                14,450        3,974     26,240                 1,210,863    14.4
 Commercial Equipment Finance      614,712     1,816                   11,802                  4,030       632,360     7.5
 Franchise Finance                 430,651       808                    2,171                    305       433,935     5.2
 Specialty Real Estate Finance     610,711    24,120      38,055        7,648     10,853         196       691,583     8.2
 Healthcare Finance                525,846                              1,515                    666       528,027     6.3
 Communications Finance            628,947     8,724                   24,452                              662,123     7.9
 Public Finance                    135,826                                                                 135,826     1.6
                                ----------   -------     -------     --------    -------     -------    ----------   -----
                                 5,744,577    35,468      52,505       51,562     37,093       5,197     5,926,402    70.5
                                ----------   -------     -------     --------    -------     -------    ----------   -----
Other (3)                           61,353                                                    23,526        84,879     1.0
                                ----------   -------     -------     --------    -------     -------    ----------   -----
TOTAL (4)                       $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)  Primarily  includes  other assets  retained from  disposed or  discontinued
     operations.
(4)  Excludes  assets  securitized  and  participations  sold which the  Company
     manages, composed of 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.

                                       6
<PAGE>
                      INVESTMENT IN FINANCING TRANSACTIONS
                               BY LINE OF BUSINESS
                                DECEMBER 31, 1996
                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
                                         Revenue Accruing                    Nonaccruing
                                 --------------------------------   ------------------------------
                                   Market               Repossessed          Repossessed  Lease &  Total Carrying
                                  Rate(1)     Impaired   Assets(2)  Impaired    Assets     Other       Amount      %
                                 ----------   --------   --------   --------   --------   --------   ----------  -----
<S>                              <C>          <C>        <C>        <C>        <C>        <C>        <C>          <C>
Commercial Finance Group
 Rediscount Finance             $  421,232    $          $          $   245    $          $         $  421,477     5.8
 Business Credit                   160,006                           11,963                            171,969     2.4
 Corporate Finance                 630,399      3,211                14,695        335                 648,640     8.9
 Distribution & Channel Finance    314,446                            1,273                            315,719     4.3
 Commercial Services               220,701                            3,419                            224,120     3.0
                                ----------    -------    -------    -------    -------    -------   ----------   -----
                                 1,746,784      3,211                31,595        335               1,781,925    24.4
                                ----------    -------    -------    -------    -------    -------   ----------   -----
Specialty Finance Group
 Transportation Finance          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
 Commercial Equipment Finance      570,574                            7,900                 6,564      585,038     8.0
 Franchise Finance                 366,202      1,104                 1,985                   996      370,287     5.0
 Specialty Real Estate Finance     700,932     30,245     46,068      6,748      9,853        940      794,786    10.8
 Healthcare Finance                497,540                            1,304                 1,194      500,038     6.8
 Communications Finance            535,701      8,796                14,129      3,095                 561,721     7.7
 Public Finance                    150,361                               13                            150,374     2.1
                                ----------    -------    -------    -------    -------    -------   ----------   -----
                                 5,276,350     43,108     59,946     32,156     38,084      9,694    5,459,338    74.5
                                ----------    -------    -------    -------    -------    -------   ----------   -----
Other                               73,158                                                  4,498       77,656     1.1
                                ----------    -------    -------    -------    -------    -------   ----------   -----
TOTAL (3)                       $7,096,292    $46,319    $59,946    $63,751    $38,419    $14,192   $7,318,919   100.0
                                ==========    =======    =======    =======    =======    =======   ==========   =====
</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)  Excludes  assets  securitized  and  participations  sold which the  Company
     manages, composed of 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.

                                       7
<PAGE>
                      INVESTMENT IN FINANCING TRANSACTIONS
                               BY LINE OF BUSINESS
                                DECEMBER 31, 1995
                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
                                        Revenue Accruing                     Nonaccruing
                                 --------------------------------   ------------------------------
                                  Market                Repossessed          Repossessed  Lease &  Total Carrying
                                  Rate(1)     Impaired   Assets(2)  Impaired    Assets     Other         Amount     %
                                 ----------   --------   --------   --------   --------   --------   ----------   -----
<S>                              <C>          <C>        <C>        <C>        <C>        <C>        <C>          <C>
Commercial Finance Group
 Rediscount Finance             $  345,264    $          $          $          $          $         $  345,264      5.4
 Business Credit                   200,365                           12,685                            213,050      3.3
 Corporate Finance (3)             631,295      5,274                19,592         335                656,496     10.3
 Distribution & Channel Finance    202,879                              430                            203,309      3.2
 Commercial Services               188,892                              594                            189,486      3.0
                                ----------    -------    -------    -------    --------   -------   ----------    -----
                                 1,568,695      5,274                33,301         335              1,607,605     25.2
                                ----------    -------    -------    -------    --------   -------   ----------    -----
Specialty Finance Group
 Transportation Finance            929,043                                                             929,043     14.6
 Resort Finance                    943,661      2,849     12,064      2,583      26,559                987,716     15.6
 Commercial Equipment Finance      345,039                               69                 6,079      351,187      5.5
 Franchise Finance                 327,356      1,462                 6,408                 1,850      337,076      5.3
 Specialty Real Estate Finance     703,018      3,898     42,304     15,264      18,231       988      783,703     12.3
 Healthcare Finance                451,503                               81                 1,231      452,815      7.1
 Communications Finance            662,191      2,502      2,217     16,817       4,863                688,590     10.8
 Public Finance                    121,956                                                     47      122,003      1.9
                                ----------    -------    -------    -------    --------   -------   ----------    -----
                                 4,483,767     10,711     56,585     41,222      49,653    10,195    4,652,133     73.1
                                ----------    -------    -------    -------    --------   -------   ----------    -----
Other                               94,755      1,275                 2,360                 6,061      104,451      1.7
                                ----------    -------    -------    -------    --------   -------   ----------    -----
TOTAL (3)                       $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)  Excludes  $200  million  of  securitized  assets  which are  managed by the
     Company.

                                       8
<PAGE>
     The Company's geographic portfolio diversification at December 31, 1999 was
as follows:

            State                               Total             Percent
            -----                               -----             -------
                                       (Dollars in Thousands)
          California                        $ 2,014,346             14.8%
          Florida                             1,365,676             10.0%
          Texas                               1,081,933              8.0%
          New York                              866,821              6.4%
          Illinois                              477,287              3.5%
          Georgia                               440,981              3.2%
          New Jersey                            429,370              3.2%
          Arizona                               389,931              2.9%
          Pennsylvania                          339,866              2.5%
          Virginia                              334,518              2.5%
          Nevada                                318,775              2.3%
          Missouri                              303,266              2.2%
          South Carolina                        298,393              2.2%
          Minnesota                             274,281              2.0%
          Other (1)                           4,669,930             34.3%
                                            -----------             ----
          Total managed assets              $13,605,374              100%
                                            ===========             ====

----------
NOTE:
(1)  Other includes all states which on an individual  basis represent less than
     2% of the total; and international,  which represents  approximately 10% of
     the total.

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

                              1999      1998       1997       1996       1995
                            --------  --------   --------   --------   --------
                                             (Dollars in Thousands)
Balance, beginning of year  $207,618  $177,088   $148,693   $129,077   $110,903
Provision for credit losses   76,800    82,200     69,200     41,751     39,568
Write-offs                   (60,372)  (59,037)   (45,487)   (32,017)   (27,631)
Recoveries                     3,518     2,279      2,287      3,296      2,104
Acquisitions and other        37,419     5,088      2,395      6,586      4,133
                            --------  --------   --------   --------   --------
Balance, end of year        $264,983  $207,618   $177,088   $148,693   $129,077
                            ========  ========   ========   ========   ========

     Included  above is a  specific  impairment  reserve  of $146.7  million  at
December  31, 1999,  which  applies to $298.6  million of the $446.3  million of
impaired  loans.  The remaining  $118.3 million of the reserve for credit losses
represents  management's  best  estimate  of  inherent  losses in the  remaining
portfolio considering delinquencies, loss experience and collateral. At December
31, 1998, the specific  impairment  reserve was $37.1 million,  which applied to
$98.7 million of the $225.7 million of impaired loans. Additions to reserves are
reflected in current operations and are fungible between impairment reserves and
other reserves. Included in the $37.4 million in acquisitions and other is $20.5
million in reserves for credit losses  acquired with the  acquisition  of Sirrom
and $12.2 million in reserves acquired in the acquisition of Fremont.

                                       9
<PAGE>
     Write-offs  and  recoveries  by line of  business,  during the years  ended
December 31, were as follows:

<TABLE>
<CAPTION>
                                        1999      1998      1997       1996      1995
                                        ----      ----      ----       ----      ----
                                                        (Dollars in thousands)
<S>                                     <C>        <C>        <C>        <C>        <C>
WRITE-OFFS
Commercial Finance Group
 Corporate Finance                     $18,088   $ 6,728   $ 6,577   $ 9,470   $ 4,660
 Commercial Services                     8,385    36,286    24,382     5,098     3,728
 Distribution & Channel Finance          3,996     2,609     1,777                 201
 Rediscount Finance                      3,523     1,500
 Growth Finance                          2,590
 Business Credit                         2,367     1,253                           452
                                       -------   -------   -------   -------   -------
                                        38,949    48,376    32,736    14,568     9,041
                                       -------   -------   -------   -------   -------
Specialty Finance Group
 Commercial Equipment Finance            6,030     3,845     3,722     3,207     2,271
 Communications Finance                  3,100       494       750     2,994     4,037
 Healthcare Finance                      1,327     1,502     1,798     1,018       314
 Franchise Finance                       1,064     3,035       696     3,267     3,448
 Resort Finance                            656               2,700     4,275     2,000
 Specialty Real Estate Finance             500     1,785     2,106     1,793     2,275
                                       -------   -------   -------   -------   -------
                                        12,677    10,661    11,772    16,554    14,345
                                       -------   -------   -------   -------   -------
Capital Markets Group
 Mezzanine Capital                       8,222
                                       -------   -------   -------   -------   -------
                                         8,222
                                       -------   -------   -------   -------   -------
Other                                      524                 979       895     4,245
                                       -------   -------   -------   -------   -------
Total Write-Offs                        60,372    59,037    45,487    32,017    27,631
                                       -------   -------   -------   -------   -------
RECOVERIES
Commercial Finance Group
 Corporate Finance                         234        48        99        10       247
 Commercial Services                     1,007       623     1,127     1,488       482
 Distribution & Channel Finance             72                            33        20
 Rediscount Finance                         46
 Business Credit                           381       434
                                       -------   -------   -------   -------   -------
                                         1,740     1,105     1,226     1,531       749
                                       -------   -------   -------   -------   -------
Specialty Finance Group
 Commercial Equipment Finance              257       200       514       829       116
 Communications Finance                                                            250
 Healthcare Finance                        139       542        94         8        52
 Franchise Finance                         824       255       263       422       115
 Resort Finance                                                           26        22
 Specialty Real Estate Finance             371                           177        80
                                       -------   -------   -------   -------   -------
                                         1,591       997       871     1,462       635
                                       -------   -------   -------   -------   -------
Capital Markets Group
 Mezzanine Capital                          68
                                       -------   -------   -------   -------   -------
                                            68
                                       -------   -------   -------   -------   -------
Other                                      119       177       190       303       720
                                       -------   -------   -------   -------   -------
Total Recoveries                         3,518     2,279     2,287     3,296     2,104
                                       -------   -------   -------   -------   -------
Total Net Write-Offs                   $56,854   $56,758   $43,200   $28,721   $25,527
                                       =======   =======   =======   =======   =======
Net write-offs as a percentage
 of average managed assets (excluding
 participations sold)                     0.48%     0.60%     0.53%     0.41%     0.44%
                                       =======   =======   =======   =======   =======
</TABLE>

     A further  breakdown  of the  portfolio by line of business can be found in
     Consolidated Financial Statements - Annex A ("Annex A"), Notes B and C.

                                       10
<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,
                                                              ------------------------------------
                                                              1999    1998    1997    1996    1995
                                                              ----    ----    ----    ----    ----
<S>                                                          <C>     <C>     <C>     <C>     <C>
Short-term and variable rate long-term debt                   5.7%    6.1%    6.4%    6.5%    7.2%
Fixed-rate long-term debt                                     6.7%    7.0%    7.1%    7.2%    7.3%
Aggregate borrowed funds                                      6.1%    6.4%    6.6%    6.8%    7.2%
Rate earned on average earning assets (1) (2)                11.3%   11.9%   11.5%   11.4%   11.7%
Operating margin as a percentage of average earning assets    5.8%    6.3%    5.9%    5.7%    5.6%
</TABLE>
----------
NOTES:
(1)  Earning assets are net of average  nonaccruing  assets and average deferred
     taxes applicable to leveraged leases.
(2)  Earned amounts are net of depreciation.

     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,
            ---------------------------------------------------------
            1999         1998         1997         1996          1995
            ----         ----         ----         ----          ----
            1.59         1.55         1.54         1.51          1.45
            ====         ====         ====         ====          ====

     Income for fixed  charges  consists  of income from  continuing  operations
before  income  taxes and fixed  charges.  Fixed  charges  include  interest and
related debt expense and a portion of rental expense representative of interest.

     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.

MATCHED FUNDING POLICY

     FINOVA follows a "matched funding" policy.  Under that policy, it generally
funds the  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.

                                       11
<PAGE>
CREDIT RATINGS

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

                                                COMMERCIAL
                                                  PAPER         SENIOR 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-

     FINOVA (Canada) Capital  Corporation,  a subsidiary of FINOVA, has a rating
with Dominion Bond Rating Service Limited of R-1 (low) for commercial paper.

     In February  2000,  FINOVA  (Canada)  Finance Inc., a subsidiary of FINOVA,
received a rating with Dominion Bond Rating  Service  Limited of A (low) for the
Medium Term Note Program.

     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.

RESIDUAL REALIZATION EXPERIENCE

     Each year since its  inception,  FINOVA has earned total  proceeds from the
sale of assets upon lease termination 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
lending activities.  During the five years ended December 31, 1999, the proceeds
to FINOVA from sales of assets on early termination and the expiration of leases
have exceeded the carrying amounts and estimated residual values as follows:

<TABLE>
<CAPTION>
               Early Terminations                                 Terminations at End of Lease Term
---------------------------------------------------------  -----------------------------------------------
                                                                             Estimated      Proceeds as a %
                      Carrying Amount   Proceeds as a %                    Residual Value    of Estimated
Year   Sales Proceeds    of Assets     of Carrying Amount  Sales Proceeds    of Assets      Residual Value
----   --------------    ---------     ------------------  --------------    ---------      --------------
                                     (Dollars in Thousands)
<S>      <C>             <C>                  <C>             <C>            <C>                 <C>
1999     $  95,721       $ 81,000             118%            $ 29,474       $ 23,559            125%
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%
</TABLE>

     The estimated  residual value of direct finance and leveraged  lease assets
in the accounts of FINOVA at December 31, 1999 was 34.4% of the original cost of
those assets  (30.3%  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 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,
1999 for financing  contracts  excluding leveraged leases were generally 7.0 and
5.1 years,  respectively,  and for leveraged leases were  approximately 18.4 and
10.4 years, respectively. The comparable average initial term and remaining term
at December 31, 1998 for financing  contracts  excluding  leveraged  leases were
generally  7.5 and  5.4  years,  respectively,  and for  leveraged  leases  were
approximately 18.7 and 11.2 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.

                                       12
<PAGE>
     For a discussion of accounting  for lease  transactions,  refer to Annex A,
Notes A and B.

BUSINESS DEVELOPMENT AND COMPETITION

     FINOVA seeks to develop 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, savings and thrift institutions,  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 competitive advantages
are  customer  service,  middle-market  and industry  niche  focus,  structuring
expertise  and its broad array of financial  products.  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 due  chiefly to their lower  borrowing  costs,  FINOVA  seeks to
maintain  the  competitiveness  of the  rates it offers  by  emphasizing  strict
discipline  over 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  its asset base generally  through the use of 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,
discussion 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 other parties.
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.

     *    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.

     *    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.

     *    FINANCIAL POSITION. 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.

     *    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  structure 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   dependent  on  the  size  of  the   transaction;   and  periodic
interdepartmental reviews and revision of underwriting guidelines.

     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.

                                       13
<PAGE>
     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  costs  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. Generally,
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.   Generally,   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  assessments  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,  if required, based
on the difference  between the recorded balance of the loan ("carrying  amount")
and the fair value of the collateral.

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  typically
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 any.  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. 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 C.

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.

                                       14
<PAGE>
EMPLOYEES

     At December 31,1999,  the Company had 1,426 employees  compared to 1,227 at
December 31, 1998.  The increase  primarily  included  employees  from companies
acquired in 1999. None of these 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,"  "Management's  Discussion and
Analysis of Financial Condition and Results of Operations" and "Quantitative and
Qualitative  Disclosure  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:

*    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.

*    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.  Economic  conditions
     could  adversely  affect  FINOVA's  ability to realize  gains from sales of
     assets and  investments.  Those items could be  particularly  sensitive  to
     changing market  conditions.  Certain changes in fair market values must be
     reflected in FINOVA's reported financial results.

*    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.

*    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
     profit margins.

*    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.

*    Necessary  technological  changes may be more difficult,  expensive or time
     consuming than anticipated.

*    Costs or difficulties related to integration of acquisitions.

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

     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.

                                       15
<PAGE>
ITEM 2. PROPERTIES.

     FINOVA's  principal  executive offices are located in Scottsdale,  Arizona.
FINOVA operates various  additional  offices in the United States, one in Canada
and one in Europe. All of these properties are leased.  Alternative office space
could be obtained without difficulties in the event leases are not renewed.

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 1999 were $9.0 million, $9.8 million, $11.0 million and $11.0
million, respectively.

                                       16
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.

     Omitted.

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

     See pages 1 - 9 of Annex A.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

     See page 10 of Annex A.

ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTAL 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.

     See Recent Developments and Business Outlook on pages 8 - 9 of Annex A.

                                    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.

                                       17
<PAGE>
                                     PART IV

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

(a)  Documents filed.

     1.   Financial Statements.

          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                                 1-9
     Quantitative and Qualitative Disclosure about Market Risk              10
     Report of Management, Report of Independent Auditors
       and Independent Auditors' Report                                   11-13
     Consolidated Balance Sheets                                            14
     Statements of Consolidated Income                                      15
     Statements of Consolidated Shareowner's Equity                         16
     Statements of Consolidated Cash Flows                                  17
     Notes to Consolidated Financial Statements                           18-36
     Supplemental Selected Financial Data                                   37

     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
                    of 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 and 3.B  (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).

                                       18
<PAGE>
        Exhibit No.
        -----------
          (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 24,  1995,
                    Exhibit 4.1).

          (4.F)     Indenture,  dated as of May 15,  1999,  between  FINOVA  and
                    Norwest Bank Minnesota,  National Association  (incorporated
                    by reference  from FINOVA's  Registration  Statement on Form
                    S-3/A,  SEC File No.  333-74473-01,  filed on May 28,  1999,
                    Exhibit 4.8.B).

          (4.F.1)   Indenture,  dated as of May 15, 1999, between FINOVA and FMB
                    Bank  (incorporated by reference from FINOVA's  Registration
                    Statement on Form S-3/A, SEC File No. 333-74473-01, filed on
                    May 28, 1999, Exhibit 4.8.C).

          (4.F.2)   Indenture,  dated as of May 15, 1999 between  FINOVA and The
                    First  National Bank of Chicago  (incorporated  by reference
                    from FINOVA's Registration Statement on Form S-3/A, SEC File
                    No. 333-74473-01, filed on May 28, 1999, Exhibit 4.8.A).

          (4.F.3)   Form of Trust Indenture among FINOVA (Canada)  Finance Inc.,
                    FINOVA  Capital  Corporation  and CIBC Mellon Trust  Company
                    made as of February  25,  2000  (incorporated  by  reference
                    report on Form 10-K for year ended  December  31,  1999 (the
                    "FINOVA Group 1999 10-K") Exhibit 4.G.4).

          (4.G)     Form of  Indenture,  dated as of  March  20,  1998,  between
                    FINOVA Group,  FINOVA and The First National Bank of Chicago
                    as Trustee  (incorporated by reference from FINOVA Group and
                    FINOVA's  registration  statement on Form S-3,  Registration
                    No. 333-38171-01, 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
                    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 the 1996 10-K, Exhibit 10.A.4).

          (10.A.5)  Fifth  Amendment dated as of May 20, 1997 to Sixth Amendment
                    noted in 10.A above (incorporated by reference from the 1997
                    10-K, Exhibit 10.A.5).

          (10.A.6)  Sixth  Amendment dated as of May 17, 1999 to Sixth Amendment
                    and Restatement of Credit Agreement dated as of May 16, 1994
                    (incorporated  by reference from The FINOVA Group 1999 10-K,
                    Exhibit 10.A.6).

                                       19
<PAGE>
        Exhibit No.
        -----------
          (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 1997  10-K,  Exhibit
                    10.B.5).

          (10.B.6)  Sixth  Amendment to Short-Term Facility  noted in 10.B above
                    (incorporated  by reference from The FINOVA Group 1999 10-K,
                    Exhibit 10.B.6).

          (10.C)    Exhibits relating to management compensation are omitted due
                    to the  reduced  disclosure  format,  which  can be found as
                    exhibits to FINOVA Group 1999 10-K.

          (12)      Computation of Ratio of Income to Fixed Charges.*

          (23)      Consent of Independent Auditors from Ernst & Young LLP.*

          (23.1)    Independent Auditors' Consent from Deloitte & Touche LLP.*

          (24)      Powers of Attorney.*

          (27)      Financial  Data  Schedule  for the year ended  December  31,
                    1999.*

----------
*    Filed with this report.
+    Relating to management compensation

(b)  Reports on Form 8-K.

     A report on Form 8-K,  dated  January 21,  2000,  was filed by FINOVA which
reported under Items 5 and 7 the revenues, net income and selected Financial and
ratios for fourth quarter and year ended December 31, 1999.

                                       20
<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
Scottsdale, Arizona on March 8, 2000.

                           FINOVA CAPITAL CORPORATION


                          By /s/ Samuel L. Eichenfield
                      -------------------------------------
                              Samuel L. Eichenfield
                      Chairman 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)

                                       21
<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)


   /s/ Samuel L. Eichenfield                              *
--------------------------------           --------------------------------
Samuel L. Eichenfield (Chairman)             Gregory C. Smalis (Director)


               *
--------------------------------
  Matthew M. Breyne (Director)

 * Signed March 8, 2000 pursuant to Powers of Attorney dated February 22, 2000.

                             /s/ Bruno A. Marszowski
                        --------------------------------
                               Bruno A. Marszowski
                                Attorney-in-Fact

                                       22
<PAGE>
                                     ANNEX A

                           FINOVA CAPITAL CORPORATION
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


                                                                            Page
                                                                            ----
Management's Discussion and Analysis of Financial Condition
  and Results of Operations                                                  A-1

Quantitative and Qualitative Disclosure about Market Risk                   A-10

Management's Report on Responsibility for Financial Reporting               A-11

Report of Independent Auditors                                              A-12

Independent Auditors' Report                                                A-13

Consolidated Balance Sheet                                                  A-14

Statements of Consolidated Income                                           A-15

Statements of Consolidated Shareowner's Equity                              A-16

Statements of Consolidated Cash Flows                                       A-17

Notes to Consolidated Financial Statements                                  A-18

Supplemental Selected Financial Data                                        A-37

                                      A-i
<PAGE>
                           FINOVA CAPITAL CORPORATION

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

     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").

RESULTS OF OPERATIONS

     The following table  summarizes  FINOVA's  operating  results for the years
ended December 31, 1999, 1998 and 1997:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
                                                     Percent                          Percent
(Dollars in Millions)            1999       1998      Change      1998        1997     Change
---------------------------------------------------------------------------------------------
<S>                            <C>        <C>         <C>       <C>         <C>         <C>
Interest margins earned        $  567.8   $  459.5     23.6%    $  459.5    $  392.1    17.2%
Volume-based fees                  50.1       77.7    (35.5%)       77.7        39.4    97.4%
                               --------   --------              --------    --------
Operating margin                  617.9      537.2     15.0%       537.2       431.5    24.5%
Provision for credit losses       (76.8)     (82.2)    (6.6%)      (82.2)      (69.2)   18.8%
Gains on disposal of assets        68.0       27.9    143.7%        27.9        30.3    (8.0%)
Operating expenses               (253.8)    (216.7)    17.1%      (216.7)     (168.4)   28.6%
Income taxes                     (136.3)    (102.2)    33.4%      (102.2)      (82.3)   24.2%
                               --------   --------              --------    --------
Net Income                     $  219.0   $  164.0     33.5%    $  164.0    $  141.9    15.7%
                               ========   ========              ========    ========
</TABLE>

1999 COMPARED TO 1998

     Net income for 1999  increased 33% to $219.0 million from $164.1 million in
1998. The increase was due to 25% growth in average earning assets, higher gains
on disposal of assets and a lower provision for credit losses,  partially offset
by lower  volume-based fees and higher operating expenses in 1999. Net income in
1999  included  activity  from the Sirrom  Capital  Corporation  ("Sirrom")  and
Preferred  Business  Credit  acquisitions,  which were acquired during the first
quarter of 1999 and to a much lesser extent,  the Fremont Financial  Corporation
acquisition,  which  occurred late in the fourth  quarter of 1999. See Note P 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 24%
to $567.8  million in 1999 from $459.5  million in 1998,  due  primarily  to the
growth in average earning assets.

     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 $10.72  billion in 1999 from $8.55  billion in
1998.  The increase was  primarily  due to an increase in funded new business to
$4.87 billion from $3.98 billion in 1998 and $453.7  million of average  earning
assets  added  through   acquisitions  in  1999,   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,  Commercial  Services and Realty Capital lines of business on
the volume of  purchased  accounts  receivable  and mortgage  loan  originations
transacted  during the year. Due to the short-term  nature of  volume-originated
business, these fees are recognized as income in the period of origination.

     A majority of Realty  Capital's  mortgage loan  originations  are funded by
other lenders and, therefore, are not recorded on FINOVA's balance sheet. FINOVA
took steps to  eliminate  balance  sheet  exposure  in 2000 from the  commercial
mortgage backed securities ("CMBS") product by entering into a Preferred Partner
Program with a prominent  investment  banking firm during the fourth  quarter of
1999. See the Recent  Developments  and Business  Outlook  section for a further
discussion.

     Volume-based  fees were down by $27.6 million to $50.1 million in 1999 from
$77.7 million in 1998 due to lower fee-based  volume in 1999 and returns on that
volume  that were  lower by 0.27%  (0.80%  in 1999 vs 1.07% in 1998).  Fee-based
volume was down by $942 million to $6.32  billion in 1999 from $7.26  billion in
1998 primarily due to lower volume originated by Realty Capital.  Realty Capital
curtailed its CMBS volume in 1999,  which  declined to $757.8 million from $1.76
billion in 1998; while its structured  finance volume increased to $1.31 billion
from $1.05  billion in 1998.  The shift in product mix  resulted in a decline in
Realty Capital's commission rate to 0.50% from 0.88% in 1998. Structured finance
deals carry a lower net rate than CMBS transactions.

                                       A-1
<PAGE>
                           FINOVA CAPITAL CORPORATION

     OPERATING MARGIN.  Lower volume-based fees in 1999 was the major reason for
the decrease in FINOVA's  operating  margin as a percentage  of average  earning
assets to 5.8% in 1999 from 6.3% in 1998.  The interest  rate spread  portion of
this margin  decreased  slightly to 5.3% in 1999 from 5.4% in 1998 primarily due
to the effects of competitive pricing pressures and increased debt costs related
to the strategic  decisions to utilize a global debt offering,  which  increased
debt costs in the short-term, but is anticipated to help control costs in future
periods and the extension of maturities on commercial  paper over year end 1999,
thereby avoiding potential  liquidity issues associated with Year 2000 concerns.
The  liquidity  issues  anticipated   ultimately  did  not  materialize  in  the
marketplace.  The proceeds  from the global debt  offering were used to pay down
lower costing commercial paper. FINOVA expects competitive  pressures on pricing
to continue, which may offset any cost of funds benefit realized from the global
debt offering and by reducing  maturities on commercial paper to an average term
of 30 to 60 days in 2000.

     PROVISION  FOR CREDIT  LOSSES.  The  provision  for credit losses was $76.8
million in 1999 compared to $82.2  million in 1998.  Provision for credit losses
is taken to  maintain  the  reserve  for  credit  losses  at a level  deemed  by
management  to be adequate to cover  inherent  losses in the  portfolio.  During
1999,  it was  determined  that the  Company  did not need to  record as large a
provision for credit losses as was necessary in 1998 to maintain the reserve for
credit losses at an appropriate level.

     The  provision  for  credit  losses was  affected  by net  write-offs.  Net
write-offs  in 1999 of $56.9  million  were  comparable  to 1998 levels of $56.8
million.  As a percent of average  managed  assets,  net write-offs in 1999 were
0.48%  compared to 0.60% in 1998.  The decline in the write-off  percentage  was
primarily due to the  Commercial  Services line of business,  which  experienced
problems in 1998 with its wholesale textile customers. As a result of refocusing
its  portfolio  toward more retail  customers in 1999,  net  write-offs  in this
business unit decreased to $7.4 million from $35.7 million in 1998.  Conversely,
Corporate  Finance  experienced a higher level of problem accounts  resulting in
$17.9  million  of net  write-offs  in 1999  compared  to $6.7  million in 1998,
accompanied by $8.2 million of net write-offs for the Mezzanine Capital (Sirrom)
portfolio which was acquired in the first quarter of 1999.

     GAINS ON DISPOSAL OF ASSETS. Gains on disposal of assets were $68.0 million
in 1999 compared to $27.9 million in 1998.  Gains in 1999 included $20.6 million
from the sale of  residuals  coming off lease,  $35.6  million  from the sale of
investments and $11.8 million of CMBS gains as compared to 1998 gains which were
predominately  related to residual sales and included a net loss of $7.2 million
on CMBS transactions. This shift in the composition of gain activity is expected
to continue due to FINOVA's expansion into capital markets activities.

     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.  The
range of gain activity is dependent upon the level of residuals coming off lease
and the level of capital  market  activity  which  will  fluctuate  with  market
conditions and management's  discretion whether to sell marketable  investments.
FINOVA  generally  anticipates  gains on disposal of assets to range from 15% to
25% of pretax income.

     OPERATING   EXPENSES.    Operating   expenses,   which   include   selling,
administrative and other expenses, were generally higher in all major categories
and  increased  to $253.8  million in 1999  compared to $216.7  million in 1998.
Personnel costs increased due to the  acquisitions of Preferred  Business Credit
(included  in Growth  Finance)  in February  1999,  Sirrom  Capital  Corporation
(included  in  Mezzanine  Capital  and Harris  Williams & Co.) in March 1999 and
Fremont Financial Corporation (included in Business Credit) in December 1999 and
due to higher sales incentive compensation related to the increased new business
levels in 1999.  Problem  account  costs  increased  in 1999 due to increases in
nonearning  and  impaired  accounts.  Additions  to deferred  acquisition  costs
increased in 1999 due to acquisitions  and the deferral of expenses  incurred to
book new business.  Operating  expenses as a percentage of operating margin plus
gains was 37.0% in 1999, an improvement  from 38.3% in 1998. See Note M of Notes
to Consolidated Financial Statements for additional detail.

     INCOME TAXES.  Income taxes were $136.3  million in 1999 compared to $102.2
million in 1998.  The increase was  primarily  due to higher  pre-tax  income in
1999.  See Note I of Notes to  Consolidated  Financial  Statements  for  further
discussion of income taxes.

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. See Note B of Notes to Consolidated Financial Statements
for a further discussion. Other offsetting items included a higher provision for
credit losses, increased operating expenses and a higher effective tax rate. Net

                                       A-2
<PAGE>
                           FINOVA CAPITAL CORPORATION

income  in 1998  included  a full  year of  Realty  Capital  and AT&T  Capital's
Inventory  Finance unit,  both of which were  acquired in the fourth  quarter of
1997.

     INTEREST MARGINS EARNED.  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  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. 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 Realty Capital and AT&T
Capital's Inventory Finance unit.

     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   represented  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. Net write-offs by line of business and other changes in the
reserve  for  credit  losses  can be found  in Note C 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 included
the sale of loans via the 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  included  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.  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.  In April 1999,  approximately
70% of the assets within the mini-CMBS structure were sold into a permanent CMBS
structure.  See Note B of Notes to the Consolidated  Financial  Statements for a
further discussion of the mini-CMBS transactions.

     OPERATING  EXPENSES.  Operating 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 Realty  Capital,  which had a
higher  operating cost structure than other FINOVA lines of business,  including
over 80 business development officers and support staff. 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 data.

     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.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

     Managed  assets at December 31, 1999  increased 29% to $13.61  billion from
$10.56 billion at December 31, 1998. The increase was due to funded new business
of $4.9 billion in 1999  compared to $4.0 billion in 1998,  plus $1.1 billion of
assets acquired in 1999, partially offset by normal loan and lease amortization,
asset sales and prepayments.  Excluding acquired assets,  managed assets grew by
$1.9 billion or 18% during 1999. See Note P of Notes to  Consolidated  Financial
Statements for a further discussion of acquisitions.

                                      A-3
<PAGE>
                           FINOVA CAPITAL CORPORATION

     FINOVA's  reserve for credit losses increased to $265.0 million at December
31, 1999 from $207.6 million at year-end 1998. The increase primarily  consisted
of provisions of $76.8 million and acquired reserves of $37.4 million, partially
offset by net  write-offs  totaling  $56.9  million.  At December 31, 1999,  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 $295.1  million at December 31, 1999  representing  2.2% of
ending managed assets (excluding participations sold) compared to $205.2 million
in nonaccruing  assets as of December 31, 1998, which constituted 2.0% of ending
managed  assets.  The increase in  nonaccruing  assets was  primarily due to the
transition of FINOVA's $33 million share of a large  syndicated  credit facility
held by its  Healthcare  Finance line of business to  nonaccruing  status in the
third  quarter and the addition of  nonaccruing  assets in the  acquired  Sirrom
portfolio.  At December 31, 1999, the reserve  represented  89.8% of nonaccruing
assets  compared  to  101.2%  at  December  31,  1998.  See  Note C of  Notes to
Consolidated  Financial  Statements for more  information  on the reserves,  net
write-offs and nonaccruing assets.

     Revenue accruing  impaired assets increased to $240.1 million in 1999, from
$106.0  million in 1998.  This  increase was  primarily due to the addition of a
large computer and computer components  distribution  account ($69.6 million) in
Distribution  & Channel  Finance,  the  addition  of 9 accounts  included in the
acquired  Sirrom  portfolio  ($22.0  million),  the  addition  of a home  health
services  account  ($17.7  million) in Healthcare  Finance and the addition of a
trucking company account ($17.1 million) in Corporate Finance.

     The Company had total debt  outstanding  of $11.41  billion at December 31,
1999 or 6.5 times its equity base of $1.75  billion.  At December 31, 1998,  the
Company  had debt  leverage of 6.3 times its equity  base  ($8.39  billion  debt
outstanding to $1.33 billion of equity).  Deferred income taxes,  which are used
to finance a portion  of  FINOVA's  assets,  grew  29.9%  during  1999 to $461.3
million from $355.0 million at year-end 1998.

     Growth in managed assets is generally financed by internally generated cash
flows and  borrowings.  During  1999,  FINOVA  issued $3.4 billion in new senior
debt. These funds were used to finance new business and to redeem or retire $809
million of debt.

     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 1999, FINOVA issued $19.0 billion of commercial paper, at
a weighted  average  cost of 5.4% (with an average of $4.1  billion  outstanding
during the year) and raised $3.4 billion, as noted above,  through new long-term
financings of one to ten year  maturities.  Commercial paper and short-term bank
borrowings  totaled  $3.9  billion  at  December  31,  1999 and  1998,  and were
supported by available unused revolving credit lines which, if not renewed,  are
convertible to long-term debt at FINOVA's option.  During 1999,  FINOVA extended
maturities  on  commercial  paper  over  year end,  beyond  the  average  58-day
maturity,  thereby avoiding potential liquidity issues associated with Year 2000
concerns. The liquidity issues anticipated ultimately did not materialize.

     At December 31, 1999,  FINOVA  maintained  a  multi-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  multi-year
facilities  with  numerous  lenders  for  $700  million  each  and  two  364-day
facilities   with   numerous   lenders  for  $600  million  and  $500   million,
respectively.  These  credit  facilities,   aggregating  $4.5  billion,  support
FINOVA's  outstanding  commercial paper and short-term  borrowings.  The Company
does not intend to borrow  under the domestic  revolving  credit  agreements  to
refinance  commercial  paper and  short-term  bank  loans  unless it  encounters
significant  difficulties in rolling over its outstanding  commercial  paper and
short-term bank loans.  The 364-day $1.0 billion,  $600 million and $500 million
revolving  credit  agreements are subject to renewal in 2000, while the two $700
million and the other $1.0 billion  credit  facilities are subject to renewal in
2002.

     The Company, through one subsidiary,  utilizes a multi-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 C$150  million.  FINOVA is the  guarantor  of these credit
facilities, which are subject to renewal in 2002 and 2000, respectively.

     The Company,  through the acquisition of Fremont  Financial  Corporation in
December 1999,  assumed a trust financed with  floating-rate debt and commercial
paper. The commercial paper program is backed by a 364-day facility with a small
group of lenders for $150 million.  The facility is drawn upon to fund assets in
the  trust.  As of  December  31,  1999,  $46  million of  commercial  paper was
outstanding under this program.

     In 1998,  FINOVA commenced a Euro Medium-Term Note Program allowing for the
issuance of up to $1.0 billion of debt securities.  In 1999, FINOVA Capital plc,
FINOVA's  U.K.  subsidiary,  was added to the program.  As of December 31, 1999,
there was $581 million available to issue under the program.

                                      A-4
<PAGE>
                           FINOVA CAPITAL CORPORATION

     In  1999,   FINOVA  and  FINOVA  Group  jointly  filed  a  universal  shelf
registration statement with the SEC allowing for the issuance of $3.0 billion of
senior debt securities,  common stock,  preferred stock,  depositary  shares and
warrants to purchase  common  stock or debt  securities.  Under this shelf,  the
Company  issued an aggregate  $2.35  billion of debt in 1999  including a global
debt  offering of $1.5 billion in November  1999.  At December  31,  1999,  $645
million remained available under the shelf  registration,  of which $120 million
had been designated for the issuance of medium term notes.

     The  agreements  pertaining to long-term debt include  various  restrictive
covenants and require the maintenance of certain defined  financial  ratios with
which FINOVA, FINOVA Group and FINOVA Capital plc have complied, as applicable.

     FINOVA's  aggregate cost of funds  decreased to 6.1% for 1999 from 6.4% for
1998  as a  result  of a  decline  in  market  rates,  partially  offset  by the
additional cost related to the extension of maturities on commercial  paper over
year end 1999 to avoid  potential  liquidity  issues  associated  with Year 2000
concerns. 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:

                                                                         Senior
                                                   Commercial 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-

     FINOVA (Canada) Capital Corporation,  a subsidiary of FINOVA Capital, has a
rating with Dominion  Bond Rating  Service  Limited of R-1 (low) for  commercial
paper.

     In February  2000,  FINOVA  (Canada)  Finance  Inc., a subsidiary of FINOVA
Capital,  received a rating with Dominion Bond Rating Service Limited of A (low)
for the Medium Term Note Program.

DERIVATIVE FINANCIAL INSTRUMENTS

     FINOVA  enters into  derivative  transactions  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,  1999,  FINOVA had  outstanding  interest  rate  conversion
agreements with notional  principal  amounts  totaling $2.4 billion.  Agreements
with notional  principal  amounts of $200 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  6.67% to 8.09%  (remaining  terms of one to two
years) in  return  for  receipts  calculated  on the same  notional  amounts  of
floating  interest rates.  Agreements with notional  principal  amounts of $1.93
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 ten  years) in
return for receipts  calculated on the same notional  amounts at fixed  interest
rates of 5.70% to 7.71%.  FINOVA  has also  entered  into a  fixed-rate  foreign
currency-denominated  transaction  (Japanese Yen ("JPY") 5 billion)  maturing in
2002. Two derivatives are associated with this transaction, a receive fixed-rate
swap (JPY 5 billion)  versus 3-month JPY LIBOR and a basis swap,  converting JPY
LIBOR to US Dollar ("USD") LIBOR, both of which mature in 2002. The receive side
of the basis swap has a notional of JPY 5 billion  paying  3-month JPY LIBOR and
the pay side has a notional of USD 43.6 million  paying  3-month USD LIBOR.  See
Note F of Notes to Consolidated  Financial  Statements for further discussion of
FINOVA's derivatives.

     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 CMBS loans  primarily  for FINOVA  Realty  Capital.  FINOVA
entered into a partnership with a prominent  investment  banking firm which will
reduce the hedging activity previously associated with the CMBS program. See the
Recent Developments and Business Outlook section for a further discussion.

                                       A-5
<PAGE>
                           FINOVA CAPITAL CORPORATION

SEGMENT REPORTING

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

-------------------------------------------------------------------------------
Dollars in Thousands                                    1999           1998
-------------------------------------------------------------------------------
TOTAL NET REVENUE:
   Commercial Finance                                $   216,083    $   187,461
   Specialty Finance                                     384,789        344,541
   Capital Markets                                       101,414         24,170
   Corporate and other                                   (16,388)         8,978
                                                     -----------    -----------
 Consolidated total                                  $   685,898    $   565,150
                                                     ===========    ===========

INCOME (LOSS) BEFORE ALLOCATIONS:
   Commercial Finance                                $    87,406    $    67,013
   Specialty Finance                                     307,377        273,674
   Capital Markets                                        31,235         (2,775)
   Corporate and other, overhead and unallocated
     provision for credit losses                         (70,674)       (71,615)
                                                     -----------    -----------
 Income before income taxes and preferred dividends  $   355,344    $   266,297
                                                     ===========    ===========

MANAGED ASSETS:
   Commercial Finance                                $ 4,195,237    $ 3,005,130
   Specialty Finance                                   8,265,497      7,211,164
   Capital Markets                                     1,051,367        255,575
   Corporate and other                                    93,273         85,948
                                                     -----------    -----------
 Consolidated total                                  $13,605,374    $10,557,817
 Less securitizations and participations sold           (483,397)      (537,596)
                                                     -----------    -----------
 Investment in financing transactions                $13,121,977    $10,020,221
                                                     ===========    ===========

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

     Total net revenue is the sum of  operating  margin and gains on disposal of
assets.  Income before  allocations  is income  before  income taxes,  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 provide  financing  through revolving credit facilities and term
loans  secured  by  assets  such  as  receivables  and  inventories,  as well as
providing factoring and management services. This segment includes the following
lines of business:  Business Credit,  Commercial  Services,  Corporate  Finance,
Distribution  & Channel  Finance,  Growth  Finance and  Rediscount  Finance.  In
December 1999, the Company acquired  Fremont  Financial  Corporation,  which was
added to Business Credit.

     Total net revenue was $216.1  million in 1999 compared to $187.5 million in
1998,  an increase of 15.3%.  The increase was  primarily due to 24.1% growth in
average earnings assets in 1999,  partially offset by the effects of competitive
pricing  pressures,  a 4.5%  decrease in fee-based  volume,  which fell to $4.24
billion  from $4.45  billion in 1998,  and a reduction in the rate earned on the
volume in 1999.  Distribution  & Channel  Finance had fee-based  volume of $2.87
billion in 1999 compared to $3.21 billion in 1998. The rate earned on the volume
declined from 1.27% to 0.99%. Commercial Services fee-based volume rose to $1.37
billion from $1.24 billion in 1998, an increase of $136.7 million;  however, the
rate earned on that volume declined to 0.82% from 0.94% in 1998.

     Income  before  allocations  was $87.4  million in 1999  compared  to $67.0
million in 1998. The increase in 1999,  which was twice the increase in revenue,
was primarily due to lower net write-offs  ($37.2 million in 1999 as compared to
$47.3 million for 1998) and to a lesser  extent to the growth in earning  assets
noted above,  partially  offset by higher  operating  expenses.  The  Commercial
Services line of business, which experienced problems in 1998 with its wholesale

                                       A-6
<PAGE>
                           FINOVA CAPITAL CORPORATION

textile customers, refocused its portfolio toward more retail customers in 1999.
As a result, the net write-offs  decreased to $7.4 million from $35.7 million in
1998.  Conversely,  Corporate  Finance  experienced  a higher  level of  problem
accounts  resulting in $17.9 million of net  write-offs in 1999 compared to $6.7
million in 1998.  Net  write-offs as a percentage of average  managed assets for
the Commercial Finance Group declined to 1.2% compared to 1.8% in 1998.

     Managed assets grew to $4.20 billion in 1999 from $3.01 billion in 1998, an
increase  of 39.6%.  The  growth in  managed  assets  was  primarily  due to the
addition of $661.9  million of managed  assets  acquired in connection  with the
acquisition of Fremont Financial Corporation and strong growth in the Rediscount
Finance operation,  which grew to $1.09 billion from $777.9 million, an increase
of 40.0%.  Excluding the acquired  assets,  managed assets for the group grew by
$528.2  million,  or 17.6% during 1999.  This internal  growth was driven by new
loan business of $1.12 billion in 1999 compared to $792.8 million in 1998.

     SPECIALTY  FINANCE.  Specialty  Finance  provides a wide variety of lending
products  such as  leases,  loans,  accounts  receivable  and  cash  flow  based
financing,  as well as servicing and  collection  services to a number 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  11.7% to $384.8  million in 1999  compared to
$344.5  million in 1998,  while income before  allocations  grew 12.3% to $307.4
million  in 1999  compared  to  $273.7  million  in 1998.  Both  increases  were
primarily due to 18.1% growth in average earning assets, partially offset by the
effects of competitive  pricing pressures in certain of the business units and a
lower  level of  prepayment  related  penalties  and fees.  The lower  amount of
prepayment income was not based solely on the level of prepayments, since $538.1
million of contracts  prepaid in 1999 compared to $560.0 million in 1998. Income
will vary depending on where the deal is in its life cycle at time of prepayment
and which businesses are experiencing the prepayments because only certain lines
of business can structure prepayment penalties into their transactions.

     Managed assets grew to $8.27 billion in 1999 from $7.21 billion in 1998, an
increase of 14.6%.  The growth in managed  assets was driven by new  business of
$3.33 billion in 1999  compared to $3.08 billion in 1998.  The growth in managed
assets was spread across most  business  units with Resort  Finance,  Healthcare
Finance and  Franchise  Finance  contributing  the most to the growth in managed
assets,  while Communications  Finance and Public Finance experienced  declines.
The  Communications  Finance line of business  experienced  a greater  amount of
prepayments  in 1999 than  1998,  which  partially  offset the growth in managed
assets for the segment as a whole.  Communications' higher prepayments primarily
resulted from customers  opting to seek capital infusion from the equity markets
and continued consolidation in the industry.

     CAPITAL  MARKETS.   Capital  Markets,  in  conjunction  with  institutional
investors,  provides  commercial  mortgage  banking services and debt and equity
capital funding.  The Capital Markets Group expanded its product base to include
mezzanine  debt with  associated  warrant  positions and merger and  acquisition
advisory  services  through the  acquisition of Sirrom Capital  Corporation  and
Harris  Williams & Co. in the first  quarter of 1999.  This segment now includes
Realty Capital, Investment Alliance, Loan Administration,  Mezzanine Capital and
Harris Williams & Co.

     Total net revenue was $101.4  million in 1999  compared to $24.2 million in
1998.  The  increase in 1999 was  primarily  due to the  addition  of  Mezzanine
Capital and Harris  Williams & Co. to this  segment.  Also  contributing  to the
increase in net revenue was the continued  growth of Realty Capital's bridge and
mezzanine financing activities.

     The  Mezzanine  Capital  and Harris  Williams & Co.  units  provided  $59.9
million of net revenue during 1999, of which $16.9 million related to gains from
the sale of equity  and  warrant  positions.  Included  in this  amount was $4.6
million of gains  generated from the sale of 140,000  shares of  Healtheon/WebMD
stock.  FINOVA recorded a pretax  unrealized gain of $36.9 million through other
comprehensive  income  on the  balance  sheet  related  to  1,246,332  shares of
Healtheon/WebMD stock in its portfolio at December 31, 1999.

     Mezzanine Capital provides mezzanine financing with the intent of receiving
stock warrants or other equity  instruments in  anticipation  that the customers
will ultimately seek equity capital. As such, FINOVA  periodically  assesses its
position in this unit's  investment  portfolio  and will  exercise  its position
based on various factors, including management's discretion.

     Realty  Capital  increased  its net revenue  over 1998  primarily  due to a
higher level of average  earning assets related to the expansion of their bridge
and mezzanine  financing  products and higher CMBS gains,  partially offset by a
reduction in volume-based  fees.  Realty Capital had $11.8 million of CMBS gains

                                      A-7
<PAGE>
                           FINOVA CAPITAL CORPORATION

in 1999,  compared to a net loss on CMBS  transactions  of $7.2 million in 1998.
Realty  Capital  curtailed  its CMBS  volume in 1999,  which  declined to $757.8
million  from  $1.76  billion  in 1998;  while  its  structured  finance  volume
increased to $1.31 billion from $1.05 billion in 1998.  The shift in product mix
resulted in a decline in Realty Capital's commission rate to 0.50% from 0.88% in
1998.  Structured  finance deals carry a lower net rate than CMBS  transactions.
FINOVA took steps to eliminate the balance sheet  exposure from the CMBS product
entirely in 2000 by entering into a Preferred  Partner  Program with a prominent
investment  banking  firm  during  the fourth  quarter  of 1999.  See the Recent
Developments and Business Outlook section for a further discussion.

     Income before allocations grew to $31.2 million in 1999 from a loss of $2.8
million in 1998 for the segment. This increase was primarily attributable to the
addition of Mezzanine  Capital and Harris  Williams & Co. and the  turnaround in
gain  activity for Realty  Capital,  all of which was  partially  offset by $8.2
million of net  write-offs  in the  Mezzanine  Capital  portfolio  and increased
operating expenses associated with the acquired operations.

     Capital  Markets was able to grow its managed  asset base to $1.05  billion
from $255.6  million in 1998.  This growth was  primarily due to the addition of
$469.3 million of acquired  assets  combined with $339.1 million of new business
related  to Realty  Capital's  bridge  and  mezzanine  financing  products.  The
acquired  assets of Mezzanine  Capital  declined to $442.7  million by year end.
FINOVA expects this portfolio to further  compress during the first part of 2000
as it  transitions  to  originating  new business  using  FINOVA's  underwriting
standards.

YEAR 2000 COMPLIANCE

     FINOVA   successfully   completed   all   work   necessary   to  make   its
mission-critical  systems  Year  2000  compliant  in  1999  and  experienced  no
significant problems during the transition to the new year. The Company incurred
expenses of $207,000 and capital costs of $1.7 million  related to its Year 2000
compliance efforts. No material  expenditures related to the Year 2000 issue are
expected to be incurred in the future.

     FINOVA's  estimate of future costs 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 monitoring  activity with  customers and others during the
first quarter of 2000 to determine if their applications are Year 2000 compliant
and to assess the potential  impact on FINOVA related to this issue. At the date
of this filing, no significant impact has been noted.

RECENT DEVELOPMENTS AND BUSINESS OUTLOOK

     In December  1999,  FINOVA  acquired  Fremont  Financial  Corporation,  the
commercial lending subsidiary of Fremont General Corporation.  Fremont Financial
Corporation was headquartered in Santa Monica,  Calif.,  had account  management
and operations in Santa Monica and Atlanta and provided  secured working capital
and term  loans  averaging  $2  million  to $4  million  to  midsize  businesses
throughout the U.S. Those  operations  were  integrated into the Business Credit
line of business.

     In December 1999, FINOVA entered into a formal partnership with a prominent
investment  banking firm known as the  "Preferred  Partner  Program."  Under the
program,  FINOVA  Realty  Capital  will  originate  and close  CMBS  loans;  the
investment  banking firm will fund and warehouse the loans, then securitize them
in pools mixed with other similar loans  originated  by the  investment  banking
firm.  FINOVA and the  investment  banking firm will share in all aspects of the
transactions (fees, commissions, interest margin, hedge costs and gains). FINOVA
is  contractually  exposed  to losses  from  sales only up to its share of fees,
margin and commissions related to the transactions; therefore, FINOVA expects to
maintain no balance  sheet  exposure  or  additional  downside  risk to the CMBS
product.

     FINOVA and FINOVA Group dismissed their  independent  auditors,  Deloitte &
Touche  LLP,  effective  July  15,  1999  and  appointed  Ernst &  Young  LLP as
independent  auditors.   These  actions  were  approved  by  FINOVA's  Board  of
Directors.  The change was also  approved by FINOVA  Group's  Board of Directors
upon recommendation of its audit committee.

     The  selection  of Ernst & Young was  approved  by FINOVA and FINOVA  Group
after  an  extended   evaluation  process  initiated  by  FINOVA  Group's  Audit
Committee.  Neither company sought the advice of Ernst & Young on specific audit
issues relating to their financial statements prior to engagement of that firm.

     The change in  independent  auditors  did not occur due to any  existing or
previous accounting  disagreements with Deloitte & Touche. Deloitte & Touche has
expressed no disclaimer of opinion, adverse opinion, qualification or limitation
regarding  the  financial  statements  of FINOVA  or  FINOVA  Group or the audit
process,  for the years ended December 31, 1998 or 1997, or the interim  periods
ended March 31, 1999 or June 30, 1999.  Neither  have there been any  accounting
disagreements  or  reportable  events  within  the  meaning  of Item  304 of SEC

                                       A-8
<PAGE>
                           FINOVA CAPITAL CORPORATION

Regulation  S-K for those  periods.  Deloitte  & Touche  has  stated in a letter
addressed  to the SEC its  concurrence  with the  foregoing  statements  in this
paragraph.

     In February  2000,  FINOVA  commenced a Canadian  Medium-Term  Note Program
through a newly formed  subsidiary,  FINOVA (Canada) Finance Inc.,  allowing for
the issuance of up to C$300 million of debt securities.

     On February 15, 2000, FINOVA terminated all agreements and paid all amounts
associated with Corporate Finance's $300 million securitization.

     On February 23, 2000,  FINOVA began seeking  consents from security holders
of the Fremont  Small  Business Loan Master Trust  ("Trust") to  accelerate  the
first  date on which  FINOVA can cause an  optional  redemption  of the  Trust's
Series D  Securities.  A proposed  amendment to the Trust would  accelerate  the
first optional  redemption date to March 15, 2000 from April 16, 2001. The Trust
was acquired with Fremont  Financial  Corporation in December 1999.  Approval of
the amendment  would permit FINOVA to redeem or retire the debt in the trust and
to terminate its activities during the first half of 2000.

NEW ACCOUNTING STANDARDS

     In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivatives and
Hedging  Activities - Deferral of the Effective Date of FASB Statement No. 133."
This  statement  defers the  effective  date of SFAS No.  133,  "Accounting  for
Derivative  Instruments and Hedging  Activities," ("SFAS No. 133") to all fiscal
quarters  of all  fiscal  years  beginning  after  June 15,  2000.  SFAS No. 133
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. The impact of SFAS No. 133 on the Company's financial
position and results of operations has not yet been determined.

                                       A-9
<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,  approved by the Board of Directors,  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 during the term
of the hedge.

     Hedge   transactions   are   authorized  to  be  executed  with   financial
institutions  rated "A" or better by Standard & Poor's  Rating  Group or Moody's
Investors  Service,  Inc. The notional principal amount of aggregate hedges on a
net basis with a given  counterparty  cannot  exceed 10% of FINOVA's  total debt
outstanding as of the time of entering into the derivative transaction.

     FINOVA uses various sensitivity  analysis models to measure the exposure of
net income to increases or decreases in interest rates. These models measure the
change  in  annual  net  income  if  interest  rates  on  floating-rate  assets,
liabilities  and  derivative  instruments  increase  or  decrease,  assuming  no
prepayments.  Based on models  used,  a 100 basis point shift in interest  rates
would affect net income by less than 1%.

     Certain  limitations are inherent in the models used for interest rate risk
measurements. Modeling changes require certain assumptions that may oversimplify
the  manner in which  actual  yields  and costs  respond  to  changes  in market
interest  rates.  For example,  the models assume a more static  composition  of
FINOVA's interest sensitive assets,  liabilities and derivative instruments than
would actually exist over the period being measured. The models also assume that
a particular  change in interest rates is reflected  uniformly  across the yield
curve   regardless  of  the  maturity  or  repricing  of  specific   assets  and
liabilities.  Although the sensitivity  analysis models provide an indication of
FINOVA's  interest rate risk exposure at a particular  point in time, the models
are not  intended  to and do 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-10
<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 FINOVA Group Inc. 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  have been  audited  by Ernst & Young  LLP,
independent auditors.  Management has made available to Ernst & Young 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 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-11
<PAGE>
                           FINOVA CAPITAL CORPORATION

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareowner of FINOVA Capital Corporation

We have audited the  accompanying  consolidated  balance sheet of FINOVA Capital
Corporation  and   subsidiaries  as  of  December  31,  1999,  and  the  related
consolidated  statements of income,  shareowner's equity, and cash flows for the
year then ended.  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 audit.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the consolidated  financial  position of FINOVA Capital
Corporation and subsidiaries at December 31, 1999 and the  consolidated  results
of their  operations  and their cash flows for the year then ended in conformity
with accounting principles generally accepted in the United States.

/s/ Ernst & Young LLP

Phoenix, Arizona
January 19, 2000

                                      A-12
<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 sheet of FINOVA Capital
Corporation  and   subsidiaries  as  of  December  31,  1998,  and  the  related
consolidated  statements of income,  shareowner's equity and cash flows for each
of the two years in the period then ended.  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 the results of their  operations and
their  cash  flows  for  each of the two  years  in the  period  then  ended  in
conformity with generally accepted accounting principles.


/s/ Deloitte & Touche LLP

Deloitte & Touche LLP
Phoenix, Arizona

April 23, 1999

                                      A-13
<PAGE>
                           FINOVA CAPITAL CORPORATION

                           CONSOLIDATED BALANCE SHEETS
                             (Dollars in Thousands)

                                                       1999            1998
                                                   ------------    ------------
ASSETS

Cash and cash equivalents                          $    100,344    $     49,519
Investment in financing transactions:
  Loans and other financing contracts                10,446,356       7,354,736
  Leveraged leases                                      837,083         773,942
  Operating leases                                      592,495         648,185
  Fee-based receivables                                 583,885         626,499
  Direct financing leases                               494,175         396,759
  Financing contracts held for sale                     167,983         220,100
                                                   ------------    ------------
                                                     13,121,977      10,020,221
  Less reserve for credit losses                       (264,983)       (207,618)
                                                   ------------    ------------
Net investment in financing transactions             12,856,994       9,812,603
Investments                                             439,507         167,977
Goodwill                                                367,241         286,042
Other assets                                            275,427         178,362
                                                   ------------    ------------
                                                   $ 14,039,513    $ 10,494,503
                                                   ============    ============
LIABILITIES AND SHAREOWNER'S EQUITY

Liabilities:
  Accounts payable and accrued expenses            $    161,289    $    141,782
  Due to clients                                        146,607         205,655
  Interest payable                                      114,397          65,817
  Senior debt                                        11,407,767       8,394,578
  Deferred income taxes                                 461,252         355,028
                                                   ------------    ------------
                                                     12,291,312       9,162,860
                                                   ------------    ------------
Commitments and contingencies
Shareowner's equity:
  Common stock, $1.00 par value, 100,000
    shares authorized, 25,000 shares issued                  25              25
  Additional capital                                  1,173,995         870,485
  Retained income                                       638,733         460,447
  Accumulated other comprehensive income                 33,812             686
  Net advances to parent                                (98,364)
                                                   ------------    ------------
                                                      1,748,201       1,331,643
                                                   ------------    ------------
                                                   $ 14,039,513    $ 10,494,503
                                                   ============    ============

                 See notes to consolidated financial statements.

                                      A-14
<PAGE>
                           FINOVA CAPITAL CORPORATION

                        STATEMENTS OF CONSOLIDATED INCOME
                             (Dollars in Thousands)

--------------------------------------------------------------------------------
Years Ended December 31,                       1999         1998         1997
--------------------------------------------------------------------------------
Interest, fees and other income             $1,017,940   $  795,790   $  691,565
Financing lease income                          96,241       95,781       71,278
Operating lease income                         114,462      116,202      116,920
                                            ----------   ----------   ----------
Income earned from financing transactions    1,228,643    1,007,773      879,763
Interest expense                               592,858      478,177      414,650
Operating lease depreciation                    67,987       70,081       72,989
                                            ----------   ----------   ----------
Interest margins earned                        567,798      459,515      392,124
Volume-based fees                               50,080       77,723       39,378
                                            ----------   ----------   ----------
Operating margin                               617,878      537,238      431,502
Provision for credit losses                     76,800       82,200       69,200
                                            ----------   ----------   ----------
Net interest margins earned                    541,078      455,038      362,302
Gains on disposal of assets                     68,020       27,912       30,333
                                            ----------   ----------   ----------
                                               609,098      482,950      392,635
Operating expenses                             253,754      216,653      168,444
                                            ----------   ----------   ----------
Income before income taxes                     355,344      266,297      224,191
Income taxes                                   136,318      102,174       82,289
                                            ----------   ----------   ----------
NET INCOME                                  $  219,026   $  164,123   $  141,902
                                            ==========   ==========   ==========

                 See notes to consolidated financial statements.

                                      A-15
<PAGE>
                           FINOVA CAPITAL CORPORATION

                 STATEMENTS OF CONSOLIDATED SHAREOWNER'S EQUITY
                             (Dollars in Thousands)
<TABLE>
<CAPTION>
                                                                       Accumulated
                                                                          Other          Net
                                 Common    Additional    Retained     Comprehensive    Advances  Shareowner's  Comprehensive
                                  Stock     Capital       Income     Income/(Deficit) To Parent     Equity         Income
                                 -----   ----------     ---------      ---------     ---------   ----------    ------------
<S>                              <C>       <C>           <C>            <C>           <C>         <C>            <C>
BALANCE, JANUARY 1, 1997         $  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                        77,537                                                  77,537
  from FINOVA Group Inc.
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
                                                                                                                ----------
  Net unrealized holding gains                                                                                         904
  Foreign currency translation                                                                                        (208)
                                                                                                                ----------
  Other comprehensive income                                                 696                        696            696
                                                                                                                ----------
Comprehensive income                                                                                            $  164,819
                                                                                                                ==========
Capital contributions
  from FINOVA Group Inc.
Dividends                                                 (95,044)                                  (95,044)
                                 -----   ----------     ---------      ---------     ---------   ----------
BALANCE, DECEMBER 31, 1998          25      870,485       460,447            686                  1,331,643
                                 -----   ----------     ---------      ---------     ---------   ----------
Comprehensive income:
  Net income                                              219,026                                   219,026     $  219,026
                                                                                                                ----------
  Net unrealized holding gains                                                                                      37,054
  Foreign currency translation                                                                                      (3,928)
                                                                                                                ----------
  Other comprehensive income                                              33,126                     33,126         33,126
                                                                                                                ----------
Comprehensive income                                                                                            $  252,152
                                                                                                                ==========
Capital contributions
  from FINOVA Group Inc.                    303,510                                                 303,510
Dividends                                                 (40,740)                                  (40,740)
Net advance to Parent                                                                  (98,364)     (98,364)
                                 -----   ----------     ---------      ---------     ---------   ----------
BALANCE, DECEMBER 31, 1999       $  25   $1,173,995     $ 638,733      $  33,812     $ (98,364)  $1,748,201
                                 =====   ==========     =========      =========     =========   ==========
</TABLE>
                 See notes to consolidated financial statements.

                                      A-16
<PAGE>
                           FINOVA CAPITAL CORPORATION

                      STATEMENTS OF CONSOLIDATED CASH FLOWS
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
Years Ended December 31,                                                       1999           1998          1997
------------------------                                                   -----------    -----------    -----------
<S>                                                                        <C>            <C>            <C>
OPERATING ACTIVITIES:
Net income                                                                 $   219,026    $   164,123    $   141,902
Adjustments to reconcile net income to net
  cash provided by operating activities:
    Provision for credit losses                                                 76,800         82,200         69,200
    Depreciation and amortization                                               99,847         93,150         90,010
    Deferred income taxes                                                      124,968         76,248         12,361
    Net deferred acquisition costs                                             (12,232)        (8,126)        (5,718)
Change in assets and liabilities, net of
  effects from acquisitions:
    Increase in other assets                                                   (35,343)       (33,848)       (55,577)
    (Decrease) increase in accounts payable
      and accrued expenses                                                     (37,290)        14,803         20,922
    Increase (decrease) in interest payable                                     46,564         11,399         (1,477)
Other                                                                           (7,211)         2,873            954
                                                                           -----------    -----------    -----------
  Net cash provided by operating activities                                    475,129        402,822        272,577
                                                                           -----------    -----------    -----------
INVESTING ACTIVITIES:
Proceeds from sales of investments, net of gains                                26,711
Proceeds from sales of residual positions, net of gains                        104,559         99,647        165,890
Proceeds from sales of securitized assets, net of gains                                        99,967         36,565
Proceeds from sales of commercial mortgage backed securities
 ("CMBS"), net of gains or losses                                              511,024        869,296
Expenditures for investments and other income producing activities            (126,017)       (84,604)       (10,200)
Expenditures for CMBS transactions                                            (529,232)    (1,005,373)
Principal collections on financing transactions                              1,925,796      1,656,320      1,675,186
Expenditures for financing transactions                                     (3,961,705)    (3,282,348)    (2,507,822)
Net change in fee-based receivables                                             42,614        123,900        (64,169)
Net change in revolving credit facilities                                     (467,460)      (252,612)      (392,020)
Acquisitions, net of cash received                                             (85,278)       (61,164)      (120,883)
Other                                                                            3,519          2,307          2,399
                                                                           -----------    -----------    -----------
  Net cash used for investing activities                                    (2,555,469)    (1,834,664)    (1,215,054)
                                                                           -----------    -----------    -----------
FINANCING ACTIVITIES:
Net (repayments)/ borrowings under commercial
 paper and short-term loans                                                   (305,030)       739,515        649,653
Long-term borrowings                                                         3,443,592      1,580,000      1,080,625
Repayment of long-term borrowings                                             (809,245)      (689,176)      (817,892)
Net (advances to) contributions from Parent                                    (98,364)       (14,211)        20,088
Dividends                                                                      (40,740)       (95,044)       (28,584)
Net change in due to clients                                                   (59,048)       (72,916)        40,495
                                                                           -----------    -----------    -----------
  Net cash provided by financing activities                                  2,131,165      1,448,168        944,385
                                                                           -----------    -----------    -----------
Increase in cash and cash equivalents                                           50,825         16,326          1,908
Cash and cash equivalents, beginning of year                                    49,519         33,193         31,285
                                                                           -----------    -----------    -----------
Cash and cash equivalents, end of year                                     $   100,344    $    49,519    $    33,193
                                                                           ===========    ===========    ===========
</TABLE>
                 See notes to consolidated financial statements.

                                      A-17
<PAGE>
                           FINOVA CAPITAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
                        (Dollars in Thousands in Tables)

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 is a financial  services  company  engaged  principally in providing
collateralized financing products to commercial enterprises focusing on mid-size
businesses in various market niches, primarily 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.

     Original issue discounts are established when equity interests are received
in connection with a funded loan based on the fair value of the equity interest.
The  assigned  value  is  amortized  to  income  over the term of the loan 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.  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.

     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.

                                      A-18
<PAGE>
                           FINOVA CAPITAL CORPORATION

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

     FINANCING  CONTRACTS HELD FOR SALE - Financing  contracts held for sale are
composed of assets held for sale and retained  interests from sales to a private
CMBS  ("mini-CMBS")  structure that are available for sale. Assets held for sale
are carried at the 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. FINOVA had no retained interest available for sale
at December 31, 1999.

     Since  FINOVA is exposed to losses  from asset  sales  under the  Preferred
Partner  Program  with a prominent  investment  banking  firm up to its share of
fees, margin and commissions related to the transactions,  revenues and expenses
associated  with the  origination  of CMBS loans under this program are deferred
until a  determination  of the  gain or loss  on  sale  of the  loans  has  been
finalized.

     FINOVA   anticipates   that  the  investment   banking  firm  will  execute
securitizations   every   four   months  on   average.   The   timing  of  those
securitizations could vary, depending on market conditions, available volume for
securitization and other factors. See Notes B 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.

     IMPAIRED LOANS - Impaired loans represent  loans with probable  significant
delays in collection of all of the scheduled  principal and interest payments in
accordance  with  the  original  contractual  terms  or a  deterioration  of the
collateral net present value position below FINOVA's loan balance. The amount of
the specific  impairment  reserve is equal to the difference between the current
carrying  amount  of a loan  and the  greater  of (a) the net  present  value of
expected  cash flows from the  borrower,  discounted  at the original  effective
interest  rate of the  transaction,  or (b) the net fair  value  of  collateral.
Accruing  impaired loans are paying in accordance with the current modified loan
agreement or have adequate collateral protection.

     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.

     INVESTMENTS - The Company's investments include government debt securities,
equity  securities and partnership  interests.  The Company's  investments  have
increased  significantly  in connection  with the  acquisition of Sirrom Capital
Corporation ("Sirrom") in March 1999.

     Certain  marketable  securities,  as  discussed  in  Notes  D  and  J,  are
considered  trading securities and are stated at fair value with gains or losses
recorded in income in the period they occur.

     Debt and equity  securities that are being held for an indefinite period of
time are  designated  as available  for sale and carried at fair value using the
specific identification method.

     Partnership  interests  are  accounted  for under either the cost or equity
method depending on the Company's level of influence in the investee.  Under the
equity  method,  the  Company  recognizes  its  share of income or losses of the
partnership in the period in which they are earned.  Under the cost method,  the
Company recognizes income based on distributions received.

                                      A-19
<PAGE>
                           FINOVA CAPITAL CORPORATION

     The carrying value of debt and equity securities and partnership  interests
are periodically reviewed for impairment which, if identified,  is recorded as a
charge to current operations.

     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.  Amortization  totaled $20.4 million  ($13.2  million  after-tax),  $14.5
million ($10.6 million  after-tax) and $9.7 million ($6.1 million after tax) for
the  years  ended  December  31,  1999,  1998  and  1997,  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.  No portion of the Company's  goodwill was
considered  impaired  at  December  31, 1999 and 1998.  At  December  31,  1999,
approximately  $289.8 million of goodwill (net of  amortization),  or 81% of the
original goodwill  balance,  was deductible for federal income tax purposes over
15 years.

     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.

     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's  stock  through the Employee  Stock  Ownership  Plan,
discussed below.

     EMPLOYEE  STOCK  OWNERSHIP  PLAN -  Employees  of FINOVA  are  eligible  to
participate  in the FINOVA Group's  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 $4.0
million, $3.1 million and $2.5 million in 1999, 1998 and 1997, 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,  and to a lesser extent treasury
locks,  options,  futures 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.  Any  resulting  gain or loss is not  recognized
immediately but is amortized to operations over the remaining life of the hedged
transaction.

     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.

                                      A-20
<PAGE>
                           FINOVA CAPITAL CORPORATION

     RECLASSIFICATIONS - Certain  reclassifications  have been made to the prior
years financial statements to conform to the 1999 presentation.

NOTE B 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,
1999 and 1998, the carrying amount of the investment in financing  transactions,
including the estimated  residual value of leased assets upon lease termination,
was  $13.1  billion  and $10.0  billion  (before  reserve  for  credit  losses),
respectively,  and consisted of the following  percentage of carrying  amount by
segment and line of business:

                                                              Percent of Total
                                                              Carrying Amount
                                                              ----------------
                                                              1999        1998
                                                              ----        ----
Commercial Finance Group
  Rediscount Finance                                           8.2%        7.7%
  Business Credit                                              7.5         3.0
  Corporate Finance                                            7.2         7.9
  Distribution & Channel Finance                               4.3         5.7
  Commercial Services                                          1.7         1.7
  Growth Finance                                               0.4         0.5
                                                             -----       -----
                                                              29.3%       26.5%
                                                             -----       -----
Specialty Finance Group
  Transportation Finance                                      19.0        22.0
  Resort Finance                                              12.4        12.5
  Commercial Equipment Finance                                 6.5         7.5
  Franchise Finance                                            5.9         6.0
  Specialty Real Estate Finance                                5.9         7.0
  Healthcare Finance                                           5.8         6.1
  Communications Finance                                       5.2         7.2
  Public Finance                                               1.3         1.8
                                                             -----       -----
                                                              62.0%       70.1%
                                                             -----       -----
Capital Markets Group
  Realty Capital                                               4.4         2.4
  Mezzanine Capital                                            3.4
  Investment Alliance                                          0.2         0.1
                                                             -----       -----
                                                               8.0%        2.5%
                                                             -----       -----
Other                                                          0.7         0.9
                                                             -----       -----
                                                             100.0%      100.0%
                                                             =====       =====

                                      A-21
<PAGE>
                           FINOVA CAPITAL CORPORATION

     Aggregate installments on investments in financing transactions at December
31,  1999  (excluding  nonaccruing  repossessed  assets  of  $55.8  million  and
estimated   residual  values  of  $998.7  million)  are   contractually  due  or
anticipated  during  each of the  years  during  December  31,  2000 to 2004 and
thereafter as follows:

<TABLE>
<CAPTION>
                                              2000         2001         2002        2003        2004     Thereafter
                                           ----------   ----------   ----------   ---------   --------   ----------
<S>                                        <C>          <C>          <C>          <C>         <C>        <C>
Loans and other financing contracts:
  Fixed interest rate                      $  961,915   $  765,171   $  606,896   $ 341,873   $253,564   $  830,205
  Floating interest rate                    2,624,654    2,123,244    1,052,339     237,353    329,092      269,091
Leases, primarily at fixed interest rate:
  Operating leases                            105,755       93,346       73,664      59,021     22,799       47,519
  Leveraged leases                             34,835       10,684        2,427      18,064     16,371      387,057
  Direct financing leases                      87,611       83,119       70,636      58,441     49,812      225,815
Fee-based receivables                         583,885
Financing contracts held for sale             167,983
                                           ----------   ----------   ----------   ---------   --------   ----------
                                           $4,566,638   $3,075,564   $1,805,962   $ 714,752   $671,638   $1,759,687
                                           ==========   ==========   ==========   =========   ========   ==========
</TABLE>

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

                                                          1999           1998
                                                       ---------      ---------
Cost of assets                                         $ 725,829      $ 757,921
Accumulated depreciation                                (133,334)      (109,736)
                                                       ---------      ---------
Investment in operating leases                         $ 592,495      $ 648,185
                                                       =========      =========

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

                                                          1999          1998
                                                      -----------   -----------
Rental receivables                                    $ 2,987,277   $ 2,885,352
Less principal and interest payable
  on nonrecourse debt                                  (2,517,839)   (2,403,623)
                                                      -----------   -----------
Net rental receivables                                    469,438       481,729
Estimated residual values                                 848,236       794,112
Less unearned income                                     (480,591)     (501,899)
                                                      -----------   -----------
Investment in leveraged leases                            837,083       773,942
Less deferred taxes from leveraged leases                (411,642)     (314,243)
                                                      -----------   -----------
Net investment in leveraged leases                    $   425,441   $   459,699
                                                      ===========   ===========

     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:

                                                    1999      1998       1997
                                                 --------   --------   --------
Lease and other income, net                      $ 60,936   $ 60,484   $ 35,834
Income tax expense                                 24,136     24,063     17,156

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

                                                             1999        1998
                                                          ---------   ---------
Rental receivables                                        $ 575,434   $ 398,303
Estimated residual values                                   150,483     126,095
Unearned income                                            (231,742)   (127,639)
                                                          ---------   ---------
Investment in direct financing leases                     $ 494,175   $ 396,759
                                                          =========   =========

     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 $7.10  billion  and $4.75  billion at  December  31, 1999 and 1998,
respectively.

                                      A-22
<PAGE>
                           FINOVA CAPITAL CORPORATION

     FINOVA had loans and leases of $1.87  billion in 1999 and $1.65  billion in
1998 collateralized by real estate.

     Income earned from financing  transactions with floating interest rates was
approximately  $655  million in 1999,  $562  million in 1998 and $491 million in
1997.  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,  1999,  FINOVA had a committed  backlog of new business of
approximately  $2.0 billion  compared to $1.9 billion at December 31, 1998.  The
committed backlog includes unused lines of credit totaling $710 million and $549
million at December 31, 1999 and 1998,  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 the later 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 $724.3 million of
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 assets  transferred to the trust.  FINOVA maintained no retained interest
in CMBS  transactions  at December 31, 1999  compared to a retained  interest at
December 31, 1998 that was valued at $65.4 million.

     In April 1999,  approximately  70% of the mini-CMBS assets were sold into a
permanent CMBS structure and in June 1999 the remaining 30% were sold, resulting
in the elimination of the trust.  The majority of the remaining assets were sold
to an  investment  banking firm,  with an amount below  cleanup call  provisions
being repurchased by the Company.

     In December 1999, FINOVA took steps to eliminate the balance sheet exposure
from the CMBS  product  entirely by entering  into a formal  partnership  with a
prominent  investment  banking firm known as the  "Preferred  Partner  Program."
Under the  program,  FRC will  originate  and close CMBS loans;  the  investment
banking firm will fund and warehouse the loans,  then  securitize  them in pools
mixed with other similar loans originated by the investment banking firm. FINOVA
and the  investment  banking firm will share in all aspects of the  transactions
(fees,  commissions,  interest margin, hedge costs and gains).  FINOVA will only
have contractual liability for losses from sales up to its share of fees, margin
and  commissions  related  to the  transactions;  therefore,  FINOVA  expects to
maintain no balance  sheet  exposure  or  additional  downside  risk to the CMBS
product.

     In 1998 and 1997, under a separate  securitization  agreement,  FINOVA sold
receivables totaling $103.2 million and $36.8 million, respectively with limited
recourse.  Outstanding  securitized  assets  under this  agreement  were  $123.2
million at December 31, 1999.  FINOVA will service these loan  contracts for the
transferee and has defined a portion of the proceeds to be recognized as service
fee income over the term of the agreements.

     In 1996 and 1995, FINOVA, under securitization agreements,  sold a total of
$300 million in undivided  proportionate interests in a revolving loan portfolio
totaling  approximately  $717.9  million as of  December  31,  1999.  Under this
agreement, there was limited recourse to FINOVA based on the outstanding balance
of the proportionate interest sold. This securitization was paid off in February
2000.

     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 in those transactions.

                                      A-23
<PAGE>
                           FINOVA CAPITAL CORPORATION

NOTE C RESERVE FOR CREDIT LOSSES

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

                                           1999           1998           1997
                                        ---------      ---------      ---------
Balance, beginning of year              $ 207,618      $ 177,088      $ 148,693
Provision for credit losses                76,800         82,200         69,200
Write-offs                                (60,372)       (59,037)       (45,487)
Recoveries                                  3,518          2,279          2,287
Acquisitions and other                     37,419          5,088          2,395
                                        ---------      ---------      ---------
Balance, end of year                    $ 264,983      $ 207,618      $ 177,088
                                        =========      =========      =========

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

                                                    1999      1998       1997
                                                 --------   --------   --------
Commercial Finance Group
  Corporate Finance                              $ 17,854   $  6,680   $  6,478
  Commercial Services                               7,378     35,663     23,255
  Distribution & Channel Finance                    3,924      2,609      1,777
  Rediscount Finance                                3,477      1,500
  Growth Finance                                    2,590
  Business Credit                                   1,986        819
                                                 --------   --------   --------
                                                   37,209     47,271     31,510
                                                 --------   --------   --------
Specialty Finance Group
  Commercial Equipment Finance                      5,773      3,645      3,208
  Communications Finance                            3,100        494        750
  Healthcare Finance                                1,188        960      1,704
  Resort Finance                                      656                 2,700
  Franchise Finance                                   240      2,780        433
  Specialty Real Estate Finance                       129      1,785      2,106
                                                 --------   --------   --------
                                                   11,086      9,664     10,901
                                                 --------   --------   --------
Capital Markets Group
  Mezzanine Capital                                 8,154
                                                 --------   --------   --------
                                                    8,154
                                                 --------   --------   --------
Other                                                 405       (177)       789
                                                 --------   --------   --------
Total net write-offs by segment
  and line of business                           $ 56,854   $ 56,758   $ 43,200
                                                 ========   ========   ========
Net write-offs as a percentage of
  average managed assets (excluding
  average participations)                           0.48%      0.60%      0.53%
                                                 ========   ========   ========

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

                                                             1999        1998
                                                          ---------   ---------
Contracts                                                 $ 239,287   $ 150,787
Repossessed assets                                           55,836      54,446
                                                          ---------   ---------
Total nonaccruing assets                                  $ 295,123   $ 205,233
                                                          =========   =========
Nonaccruing assets as a percentage of
  managed assets (excluding participations)                     2.2%        2.0%
                                                          =========   =========

     In addition to the repossessed  assets included in the above table,  FINOVA
had  repossessed  assets with a total carrying amount of $74.9 million and $65.3
million at December 31, 1999 and 1998, respectively, which earned income of $5.5
million and $4.7 million during 1999 and 1998, respectively.

     At December  31,  1999,  the total  carrying  amount of impaired  loans was
$446.3  million,  of which $240.1 million were revenue  accruing.  A reserve for
credit  losses of $78.2  million  has been  established  for  $153.7  million of
nonaccruing  impaired loans and $68.5 million has been established for $144.9 of

                                      A-24
<PAGE>
                           FINOVA CAPITAL CORPORATION

accruing  impaired  loans.  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 was established for $74.3
million of nonaccruing impaired loans and $6.2 million was established for $24.4
million of accruing impaired loans. For the three years ended December 31, 1999,
1998 and 1997, the average carrying amount of impaired loans was $341.7 million,
$172.0  million  and $130.3  million,  respectively.  Income  earned on accruing
impaired loans was approximately $13.9 million in 1999, $4.0 million in 1998 and
$4.0 million in 1997.  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, 1999, 1998 and 1997
remained  accruing,  pre-tax income earned would have increased by approximately
$26 million, $19 million and $22 million, respectively.

NOTE D INVESTMENTS

     Debt and equity  securities that are being held for an indefinite period of
time,  including  those  securities  which may be sold in  response to needs for
liquidity are  classified  as  securities  available for sale and are carried at
fair value using the specific  identification  method with unrealized  gains and
losses,  net of deferred  taxes,  reported as a component of  accumulated  other
comprehensive  income in the equity  section of the balance  sheet. A summary of
securities classified as available for sale at December 31 is as follows:

                                                             1999         1998
                                                          ---------    ---------
Debt securities                                           $  54,553    $   1,311
Equity securities                                           183,622       32,415
Partnership interests                                       115,013       57,909
Other                                                        15,798       27,157
                                                          ---------    ---------
                                                          $ 368,986    $ 118,792
                                                          =========    =========

     The net  unrealized  holding  gains were $37.1  million and net  unrealized
holding losses were $0.9 million (net of deferred tax liability of $26.1 million
and $0.6 million, respectively) at December 31, 1999 and 1998, respectively. The
increase in the unrealized  gains during 1999 was due primarily to $36.9 million
of pretax unrealized gains on Healtheon/WebMD  stock. Net gains of $35.6 million
and $0.2 million were recognized on sales of marketable  investments in 1999 and
1998,  respectively.  Scheduled maturities of debt securities range from 2012 to
2014.

     FINOVA  also  carried  investments  held for trading of $71 million and $49
million at December 31, 1999 and 1998, respectively, in a trust for nonqualified
compensation  plans. The Company's  investments in trading securities are marked
to market on a quarterly basis through current operations.

     FINOVA  currently  maintains  no  assets  that  are  classified  as held to
maturity.

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 $4.5 billion.  FINOVA currently
maintains a multi-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 multi-year facilities with numerous lenders for $700 million
each and two 364-day  facilities with numerous lenders for $600 million and $500
million,  respectively. The Company does not intend to borrow under the domestic
revolving  credit  agreements to refinance  commercial paper and short-term bank
loans  unless  it  encounters  significant  difficulties  in  rolling  over  its
outstanding commercial paper and short-term bank loans. 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,  $600 million and $500 million  revolving  credit  agreements  are
subject  to  renewal  in 2000,  while the two $700  million  and the other  $1.0
billion credit facilities are subject to renewal in 2002.

     The Company, through one subsidiary,  utilizes a multi-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

                                      A-25
<PAGE>
                           FINOVA CAPITAL CORPORATION

subsidiary,  the Company  maintains one 364-day  revolving  credit facility with
three lenders in Canada for C$150  million,  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 these credit facilities,
which are subject to renewal in 2002 and 2000, respectively.

     The Company,  through the acquisition of Fremont  Financial  Corporation in
December 1999,  assumed a trust financed with  floating-rate debt and commercial
paper. The commercial paper program is backed by a 364-day facility with a small
group of lenders for $150 million.  The facility is drawn upon to fund assets in
the  trust.  As of  December  31,  1999,  $46  million of  commercial  paper was
outstanding.

     In 1998,  FINOVA  commenced a Euro  Medium-Term  Note Program  allowing the
issuance of up to $1 billion of debt  securities.  In 1999,  FINOVA Capital plc,
FINOVA's  U.K.  subsidiary,  was added to the  program.  As of December 31, 1999
there was $581 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:

                                                1999         1998         1997
                                             -----------  -----------  ---------
Maximum amount of short-term debt
 outstanding during year                     $4,708,392  $4,006,576  $3,284,118
Average short-term debt outstanding
 during year                                  4,080,529   3,529,528   2,886,668
Weighted average interest rate on short-term
 debt outstanding at year end*                      6.1%        5.7%        5.7%
Weighted average interest rate on short-term
 debt outstanding during year*                      5.5%        5.7%        5.7%

*  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:

                                                         1999             1998
                                                         ----             ----
Commercial paper and short-term bank loans
 supported by unused bank revolving credit
 agreements, less unamortized discount               $ 3,876,955      $3,871,350
Medium term notes due to 2010, 5.7% to 10.2%           2,353,091       1,717,544
Term loans payable to banks due to 2000, 6.2%            250,000         190,000
Senior notes due to 2009, 5.9% to 16.0%, less
 unamortized discount                                  4,919,218       2,604,762
Nonrecourse installment notes due to 2002, 10.6%
 (assets of $21,877 and $22,838 respectively,
 pledged as collateral)                                    8,503          10,922
                                                     -----------      ----------
                                                     $11,407,767      $8,394,578
                                                     ===========      ==========

     Annual  maturities  of senior debt  outstanding  at  December  31, 1999 due
through 2010 (excluding the amount supported by the revolving credit  agreements
expected to be renewed) were approximately  $1.17 billion (2000),  $1.00 billion
(2001),  $1.32 billion (2002),  $893.5 million (2003),  $1.80 billion (2004) and
$1.08 billion (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.

     Total interest paid is not significantly different from interest expense.

NOTE F DERIVATIVE FINANCIAL INSTRUMENTS

     FINOVA  enters  into  interest  rate swap,  basis  swap,  foreign  currency
exchange,  swaption and futures  agreements  as part of its  interest  rate risk
management policy.  Interest rate swap, basis swap, and swaption  agreements are
primarily used to match fund assets and liabilities.  Currency swaps are used to
convert both principal and interest payments on debt issued from one currency to
the appropriate functional currency.  Futures contracts are used to target index
returns,  lock funding costs, and for portfolio hedging. The Company continually
monitors its derivative position and uses derivative instruments for non-trading
and non-speculative purposes only.

                                      A-26
<PAGE>
                           FINOVA CAPITAL CORPORATION

     FINOVA uses derivative instruments to minimize its exposure to fluctuations
in interest rates, reduce debt expense and lock funding costs over predetermined
periods of time.  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 match  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,
measured as a percent of total assets, which should not vary by more than 3% for
any extended period.

     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 swap  agreements,  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.

     FINOVA's  off-balance  sheet  derivative  instruments  involve  credit  and
interest rate risks.  Credit risk includes the  nonperformance by counterparties
to the financial  agreements.  All financial  agreements have been executed with
major  financial  institutions  to mitigate  the credit risk from  transactions.
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  counterparty  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.

     The use of derivatives  decreased interest expense by $5.1 million in 1999,
a decrease in the aggregate  cost of funds of 0.07%.  The use of  derivatives in
1998  decreased  interest  expense by $5.3 million,  a decrease in the aggregate
cost of funds of 0.07%,  and the use of derivatives  in 1997 decreased  interest
expense by $1.0  million,  a decrease in the  aggregate  cost of funds of 0.03%.
Premiums on swaptions  sold during 1999 were $4.1 million and are amortized on a
straight line basis through 2009. Market values received on swap terminations in
1999 of $3.2 million were  deferred and are being  amortized on a straight  line
basis through 2003.  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.

     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. FINOVA took steps to remove balance
sheet  exposure  from the CMBS  product  in 2000 by  entering  into a  Preferred
Partner Program with a prominent investment banking firm. See Note B of Notes to
Consolidated Financial Statements for additional discussion.

     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 the swap rates, the option value
also depends on other variables including volatility and time to maturity.

                                      A-27
<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
31,1999.  The rates  presented  are as of December 31, 1999.  To the extent that
rates change, variable interest information will change:

<TABLE>
<CAPTION>
                                       Outstanding
                                           at
                                       December 31,         Maturities of Derivative Products
                                       ------------  -----------------------------------------------
(Dollars in Millions)                     1999       2000     2001     2002      2003    Thereafter
---------------------                     ----       ----     ----     ----      ----    ----------
<S>                                     <C>         <C>       <C>      <C>       <C>       <C>
RECEIVE FIXED-RATE SWAPS:
  Notional value                        $1,925      $ 150    $ 150    $ 300     $ 100     $1,225
  Weighted average receive rate           6.73%      7.24%    6.66%    6.20%     6.54%      6.82%
  Weighted average pay rate               6.14%      6.07%    5.89%    6.18%     6.01%      6.19%
PAY FIXED-RATE SWAPS:
  Notional value                        $  200      $ 100    $ 100
  Weighted average receive rate           5.64%      5.59%    5.69%
  Weighted average pay rate               7.04%      7.38%    6.70%
INTEREST RATE HEDGES:
  Notional value                        $  131      $ 131
  Weighted average rate                   6.89%      6.89%
                                        ------      -----    -----    -----     -----     ------
TOTAL NOTIONAL VALUE                    $2,256      $ 381    $ 250    $ 300     $ 100     $1,225
                                        ======      =====    =====    =====     =====     ======
Total weighted average rates on Swaps:
  Receive rate                            6.63%      6.58%    6.27%    6.20%     6.54%      6.82%
                                        ======      =====    =====    =====     =====     ======
  Pay rate                                6.23%      6.59%    6.21%    6.18%     6.01%      6.19%
                                        ======      =====    =====    =====     =====     ======
</TABLE>

     For the benefit of its  customers,  FINOVA  enters into  interest  rate cap
agreements.  The total notional amount of these  agreements at December 31, 1999
was  $35.1  million,  none of  which  was in a pay or  receive  position.  These
agreements  will mature as follows:  $1.5 million in 2000, $7.6 million in 2001,
$21.0  million in 2002 and $5.0 million in 2003.  FINOVA has also entered into a
fixed-rate  foreign  currency-denominated  transaction  (Japanese  Yen ("JPY") 5
billion) maturing in 2002. Two derivatives are associated with this transaction,
a receive  fixed-rate  swap (JPY 5 billion) versus 3-month JPY LIBOR and a basis
swap,  converting JPY LIBOR to US Dollar ("USD") LIBOR , both of which mature in
2002.  The receive side of the basis swap has a notional of JPY 5 billion paying
3-month  JPY LIBOR and the pay side has a notional  of USD 43.6  million  paying
3-month USD LIBOR.  In  addition,  FINOVA has  another  $75  million  basis swap
maturing in 2000. These derivatives are not reflected in the table above.

                                      A-28
<PAGE>
                           FINOVA CAPITAL CORPORATION

     Derivative  product activity for the three years ended December 31, 1999 is
as follows:

                            Receive       Pay               Interest
                           Fixed-Rate  Fixed-Rate  Basis   Rate Hedge
(Dollars in Millions)        Swaps       Swaps     Swaps   Agreements    TOTAL
---------------------        -----       -----     -----   ----------    -----
Balance, January 1, 1997    $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
Expired                       (427)      (500)               (1,254)     (2,181)
Additions                    1,275                    75      1,168       2,518
                            ------      -----      -----    -------     -------
Balance December 31, 1999   $1,925      $ 200      $  75    $   131     $ 2,331
                            ======      =====      =====    =======     =======

     The table above does not include a JPY 5 billion receive fixed-rate swap or
a basis swap  converting  JPY LIBOR to US Dollar LIBOR.  The receive side of the
basis swap has a notional  of JPY 5 billion  and the pay side has a notional  of
USD 43.6 million.

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 $12.3  million at
December 31, 1999.

     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 or above market price on the
date of  grant.  Vesting  criteria  for  restricted  stock  was not met in 1999.
Therefore,  no  compensation  expense was charged  against  income in 1999.  The
compensation cost charged against income for performance-based plans in 1998 and
1997 was $5.5 million and $7.9 million,  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 $216.7 million, $157.1
million and $138.4 million for 1999, 1998 and 1997, 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 1999, 1998 and 1997, respectively: dividend yield
of 2.12%,  1.75% and 1.92%,  expected  volatility of 27%, 26% and 43%, risk-free
interest  rates on options with expected  lives of five years of 5.4%,  5.7% and
6.2% and risk-free  interest rates on options with expected lives of seven years
of 5.5%,  5.8% and 6.3%.  The weighted  average grant date fair value of options
issued for 1999, 1998 and 1997 were $13.25, $17.45 and $17.51, respectively.

     With the acquisition of Sirrom Capital Corporation in March 1999, the Board
of Directors of FINOVA  adopted  Sirrom's three existing stock option plans (the
"Sirrom Plans").  Each option  outstanding under the Sirrom Plans at the time of
the  acquisition  was converted into an option  exercisable for 0.1634 shares of
FINOVA Group common stock.  No new options are expected to be issued under these
plans.

                                      A-29
<PAGE>
                           FINOVA CAPITAL CORPORATION

NOTE I INCOME TAXES

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

                                                1999        1998        1997
                                              ---------   ---------   ---------
Current:
 United States:
    Federal                                   $   5,068   $  15,356   $  52,329
    State                                           341       8,700      13,973
 Foreign                                          5,941       1,870       3,626
                                              ---------   ---------   ---------
                                                 11,350      25,926      69,928
                                              ---------   ---------   ---------
Deferred:
 United States:
    Federal                                     101,308      61,443      15,393
    State                                        19,193       6,855      (3,032)
 Foreign                                          4,467       7,950
                                              ---------   ---------   ---------
                                                124,968      76,248      12,361
                                              ---------   ---------   ---------
Provision for income taxes                    $ 136,318   $ 102,174   $  82,289
                                              =========   =========   =========

     Income taxes paid in 1999, 1998 and 1997 were approximately  $11.5 million,
$26.0 million and $30.3 million, respectively.

                                      A-30
<PAGE>
                           FINOVA CAPITAL CORPORATION

     The  significant  components of deferred tax  liabilities  and deferred tax
assets at December 31, 1999 and 1998 consisted of the following:

                                                            1999        1998
                                                          ---------   ---------
Deferred tax liabilities:
  Deferred income from leveraged leases                   $ 511,233   $ 396,572
  Deferred income from lease financing                      135,889     108,883
  Goodwill                                                   42,335      23,726
  Other comprehensive income                                 23,467
  Deferred acquisition costs                                 19,963      15,045
  Foreign taxes                                               8,458
  Other                                                       9,617      12,654
                                                          ---------   ---------
Gross deferred tax liability                                750,962     556,880
                                                          ---------   ---------
Deferred tax assets:
  Reserve for credit losses                                 112,679      92,784
  Alternative minimum tax                                    65,416      46,314
  Net operating loss carryforward/carryback                  62,965      20,625
  Basis difference in loans/investments                      23,324
  Accrued expenses                                           11,261       9,051
  Foreign                                                                10,792
  Other                                                      14,065      22,286
                                                          ---------   ---------
Gross deferred tax asset                                    289,710     201,852
                                                          ---------   ---------
Net deferred tax liability                                $ 461,252   $ 355,028
                                                          =========   =========

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

                                                       1999      1998      1997
                                                       ----      ----      ----
Federal statutory income tax rate                      35.0%     35.0%     35.0%
State income taxes                                      3.6       3.8       2.6
Foreign tax effects                                               0.1      (0.1)
Municipal and ESOP income                              (1.3)     (1.6)     (2.0)
Other                                                   1.1       1.1       1.2
                                                       ----      ----      ----
Provision for income taxes                             38.4%     38.4%     36.7%
                                                       ====      ====      ====

NOTE J PENSION AND OTHER BENEFITS

     Net periodic pension costs were $4.2 million, $3.0 million and $1.9 million
for the years ended  December 31, 1999,  1998 and 1997,  respectively.  FINOVA's
pension costs were accrued at $9.6 million at December 31, 1999 and $5.5 million
at December 31, 1998.

     Net periodic other  postretirement  benefits costs were $0.9 million,  $0.7
million and $0.5 million for each of the years ended December 31, 1999, 1998 and
1997,  respectively.  FINOVA's  accrued  postretirement  benefit costs were $4.4
million at December 31, 1999 and $3.5 million at December 31, 1998.

     FINOVA's  investment of $71 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

                                      A-31
<PAGE>
                           FINOVA CAPITAL CORPORATION

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.

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

<TABLE>
<CAPTION>
                                                       1999                        1998
                                             -------------------------    ------------------------
                                              Carrying    Estimated Fair   Carrying    Estimated
                                               Amount         Value         Amount     Fair Value
                                             -----------   -----------    -----------  -----------
<S>                                          <C>           <C>            <C>          <C>
Balance Sheet - Financial Instruments:
 Assets:
  Loans and other financing contracts        $10,109,408   $ 9,972,222    $7,115,291   $7,151,296
 Liabilities:
  Senior debt                                 11,407,767    11,227,306     8,394,578    8,472,603

Off-Balance Sheet - Financial Instruments:
  Interest rate swaps                                          (18,306)                    17,558
  Interest rate hedge agreements                                 2,681                       (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, 1999 and 1998.  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,  1999  and  1998,  the  fair  value  of
nonaccruing  impaired  contracts  with a carrying  amount of $206.2  million and
$119.7 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, 1999 and 1998, the carrying  amount of loans
and other financing contracts excludes  repossessed assets with a total carrying
amount of $130.7 million and $119.7 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,
1999 and 1998 were based on quoted  market prices  obtained  from  participating
loans and dealers for transactions of similar remaining durations.

                                      A-32
<PAGE>
                           FINOVA CAPITAL CORPORATION

     The fair  value  estimates  presented  herein  were  based  on  information
obtained by FINOVA as of December 31, 1999 and 1998.  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, 1999 and 1998.  Therefore,
current  estimates  of fair  value may  differ  significantly  from the  amounts
presented herein.

NOTE M OPERATING EXPENSES

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

<TABLE>
<CAPTION>
                                   1999        %        1998         %       1997         %
                                 ---------   -----    --------     -----   --------     -----
<S>                              <C>         <C>     <C>          <C>     <C>          <C>
Salaries and employee benefits   $162,183     63.9%   $140,939     65.1%   $109,514     65.0%
Depreciation and amortization      31,860     12.6%     23,069     10.6%     17,021     10.1%
Travel and entertainment           18,667      7.4%     16,045      7.4%     11,917      7.1%
Problem account costs              18,636      7.3%     10,332      4.8%     11,577      6.9%
Occupancy expenses                 13,356      5.3%     11,562      5.3%      8,368      5.0%
Professional services              10,504      4.1%      9,982      4.6%      7,654      4.5%
Deferred acquisition costs        (32,197)   (12.7%)   (22,409)   (10.3%)   (16,847)   (10.0%)
Other operating expenses           30,745     12.1%     27,133     12.5%     19,240     11.4%
                                 --------    -----    --------    -----    --------    -----
Total operating expenses         $253,754    100.0%   $216,653    100.0%   $168,444    100.0%
                                 ========    =====    ========    =====    ========    =====
</TABLE>

NOTE N OTHER COMPREHENSIVE INCOME

     Accumulated other  comprehensive  income activity for the three years ended
December 31, 1999 was as follows:

                                                          Net
                                                       Unrealized   Accumulated
                                                         Holding       Other
                                     Foreign Currency   Gains on   Comprehensive
                                       Translation     Securities     Income
                                         --------       --------     --------
Balance, January 1, 1997                 $  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
Change during 1999                         (3,928)        37,054       33,126
                                         --------       --------     --------
Balance, December 31, 1999               $ (4,146)      $ 37,958     $ 33,812
                                         ========       ========     ========

     For 1999 and 1998, the changes in foreign currency  translation were net of
income tax benefits of $2.1 million and $140,000,  respectively.  Net unrealized
holding  gains  were net of income  tax  expenses  of $25.6  million in 1999 and
$608,000 in 1998.

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.

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 provide  financing  through
revolving credit facilities and term loans secured by assets such as receivables
and  inventory,  as well as providing  factoring and management  services.  This
segment includes the following lines of business:  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  business:  Commercial  Equipment  Finance,  Communications

                                      A-33
<PAGE>
                           FINOVA CAPITAL CORPORATION

Finance,  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,  Loan  Administration,
Mezzanine Capital and Harris Williams & Co.

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,  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:

                                                          1999          1998
                                                     ------------   ------------
TOTAL NET REVENUE:
  Commercial Finance                                 $   216,083    $  187,461
  Specialty Finance                                      384,789       344,541
  Capital Markets                                        101,414        24,170
  Corporate and other                                    (16,388)        8,978
                                                     -----------    -----------
Consolidated total                                   $   685,898    $  565,150
                                                     ===========    ==========
INCOME (LOSS) BEFORE ALLOCATIONS:
  Commercial Finance                                 $    87,406    $   67,013
  Specialty Finance                                      307,377       273,674
  Capital Markets                                         31,235        (2,775)
  Corporate and other, overhead and unallocated
    provision for credit losses                          (70,674)      (71,615)
                                                     -----------    -----------
Income before income taxes and preferred dividends   $   355,344    $  266,297
                                                     ===========    ==========
MANAGED ASSETS:
  Commercial Finance                                 $ 4,195,237    $3,005,130
  Specialty Finance                                    8,265,497     7,211,164
  Capital Markets                                      1,051,367       255,575
  Corporate and other                                     93,273        85,948
                                                     -----------    -----------
Consolidated total                                   $13,605,374    $10,557,817
Less securitizations and participations sold            (483,397)     (537,596)
                                                     -----------    -----------
Investment in financing transactions                 $13,121,977    $10,020,221
                                                     ===========    ===========

Geographic Information

     FINOVA attributes  managed assets to geographic areas based on the location
of the asset.  Managed  assets at December 31, 1999 and 1998 by geographic  area
were as follows:

                                       1999        %         1998        %
                                   -----------   -----    -----------  -----
United States                      $12,248,105    90.0%   $9,932,318    94.1%
Canada                                 258,990     1.9%       94,035     0.9%
United Kingdom                         214,781     1.6%      156,021     1.5%
Other foreign                          883,498     6.5%      375,443     3.5%
                                   -----------   -----    -----------  -----
                                   $13,605,374   100.0%   $10,557,817  100.0%
                                   ===========   =====    ===========  =====

     Other foreign includes customer relationships in geographic areas which, on
an individual basis represent less than 1.0% of the total.

     Currently,  it is  impracticable  to report revenues  attributed to foreign
countries.

                                      A-34
<PAGE>
                           FINOVA CAPITAL CORPORATION

Major Customer Information

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

NOTE P ACQUISITIONS

     During 1999 and 1998,  FINOVA  acquired  various  businesses and portfolios
under the purchase method with initial managed assets totaling $1.15 billion and
$44 million, respectively.

     In December  1999,  FINOVA  acquired  Fremont  Financial  Corporation,  the
commercial lending subsidiary of Fremont General  Corporation,  headquartered in
Santa Monica,  California.  The company,  which provides secured working capital
and term  loans  averaging  $2  million  to $4  million  to  midsize  businesses
throughout  the U.S.,  was  added to  FINOVA's  Commercial  Finance  Group.  The
purchase  price was  approximately  $131  million,  paid in cash.  Total  assets
acquired  were $723  million,  including  $23  million in  goodwill  and assumed
liabilities  of $592  million.  Managed  assets  purchased  were  $662  million.
Goodwill,  amortizing  over 20 years,  is subject to change due to a preliminary
estimate of loan balances at the date of acquisition.

     In March 1999,  FINOVA  acquired  Sirrom Capital  Corporation,  a specialty
finance company  headquartered in Nashville,  Tennessee.  The purchase price was
approximately  $343 million in FINOVA Group common  stock,  excluding  converted
stock options. Total assets acquired were $621 million, including $67 million in
goodwill with $278 million in assumed liabilities and transaction costs. Managed
Assets acquired were $469 million. Goodwill is being amortized over 25 years and
covenants not to compete,  which are included in goodwill,  are being  amortized
over 3 years.

     The following unaudited pro forma information gives effect to the merger as
if it had  occurred  on January  1, 1999 and 1998 and  combines  the  historical
consolidated  information  of FINOVA and Sirrom for the year ended  December 31,
1999 and 1998.

     The comparative pro forma information is not necessarily  indicative of the
results that actually would have occurred had the merger been consummated on the
dates  indicated or that may be obtained in the future.  The pro forma financial
information  does not give  effect  to the  potential  cost  savings  and  other
synergies  that may result from the merger or the possible  cash-out of existing
stock  options held by employees of Sirrom that became fully vested by reason of
the  adoption of the merger  agreement  by Sirrom  shareowners.  There can be no
assurance  that FINOVA will realize  cost savings or synergies  from this or any
other acquisition.  Included in the historical operations of Sirrom for the year
ended 1999 are approximately $27 million of nonrecurring  charges, a significant
portion of which related to the acquisition.

                                                     Years Ended December 31,
                                                   ----------------------------
                                                      1999             1998
                                                   -----------      -----------
Total revenue                                      $ 1,243,970      $ 1,080,507
Net Income                                         $   166,842      $    91,635

     The  acquisition  resulted in an excess  purchase price over the historical
net assets  acquired.  The excess is  allocated  to the net assets  acquired and
liabilities assumed, as follows:

Allocation of purchase price:
Purchase price                                                      $   342,730
Elimination of historical shareowners' equity of Sirrom                (262,046)
                                                                    -----------
Excess purchase price                                               $    80,684
                                                                    ===========
Allocation of excess purchase price:
Elimination of unamortized debt costs                               $    (3,227)
Deferred income taxes                                                    44,152
Assumed liabilities                                                     (26,802)
Goodwill                                                                 66,561
                                                                    -----------
Excess purchase price                                               $    80,684
                                                                    ===========

     In  February  1999,  FINOVA  acquired  Preferred  Business  Credit,  a  Los
Angeles-based  provider  of  accounts  receivable  loans  to small  and  midsize
businesses  for $12 million in FINOVA Group common stock.  It is  functioning as
the West Coast  operation for the Growth Finance  division,  acquired in October

                                      A-35
<PAGE>
                           FINOVA CAPITAL CORPORATION

1998. Total assets purchased were $30 million, including $12 million in goodwill
that is  being  amortized  over 25  years.  Managed  assets  purchased  were $18
million.

     In October 1998, FINOVA acquired United Credit  Corporation for $26 million
cash.  The New  York-based  provider of  commercial  financing  serves small and
mid-size  growth-oriented  businesses.  Total assets purchased were $62 million,
including  $16  million in  goodwill,  which is being  amortized  over 25 years.
Managed  assets  acquired were $45 million.  The addition  formed a new division
named  FINOVA  Growth  Finance,   providing   collateral-based  working  capital
financing,  primarily  secured by accounts  receivable.  The  division  provides
financing  ranging from $100,000 to $1 million to  businesses  with annual sales
under $10 million.

     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.

NOTE Q NEW ACCOUNTING STANDARDS

     In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivatives and
Hedging  Activities - Deferral of the Effective Date of FASB Statement No. 133,"
("SFAS No. 137").  This  statement  defers the  effective  date of SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," ("SFAS No. 133")
to all fiscal  quarters of all fiscal years  beginning after June 15, 2000. SFAS
No. 133  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. The impact of SFAS No. 133 on the Company's financial
position and results of operations has not yet been determined.

                                      A-36
<PAGE>
                      SUPPLEMENTAL SELECTED FINANCIAL DATA
                     CONDENSED QUARTERLY RESULTS (UNAUDITED)
                             (Dollars in Thousands)

     The  following  represents  the condensed  quarterly  results for the three
years ended December 31, 1999, 1998 and 1997:

                                    First      Second       Third      Fourth
                                   Quarter     Quarter     Quarter     Quarter
                                  ---------   ---------   ---------   ---------
Income earned from financing transactions:
  1999                            $ 273,075   $ 295,846   $ 318,688   $ 341,034
  1998                              232,833     246,069     253,309     275,562
  1997                              206,226     216,836     219,012     237,689
                                  ---------   ---------   ---------   ---------
Interest expense:
  1999                              131,183     139,153     150,142     172,380
  1998                              110,280     114,692     121,937     131,268
  1997                               96,793     101,501     105,208     111,148
                                  ---------   ---------   ---------   ---------
Volume-based fees:
  1999                               12,735      11,264      14,317      11,764
  1998                               22,156      19,103      16,687      19,777
  1997                                7,784       8,583       9,546      13,465
                                  ---------   ---------   ---------   ---------
Gains on disposal of assets:
  1999                               12,370      18,760      14,880      22,010
  1998                                1,525       7,433       6,471      12,483
  1997                                3,233       9,768      10,305       7,027
                                  ---------   ---------   ---------   ---------
Non-interest expenses:
  1999                               84,225      97,059     107,485     109,772
  1998                               79,548      89,702      85,922     113,762
  1997                               66,769      77,599      80,334      85,931
                                  ---------   ---------   ---------   ---------
Net income:
  1999                               51,003      54,608      55,851      57,564
  1998                               40,687      41,480      42,784      39,172
  1997                               33,333      35,616      34,283      38,670
                                  ---------   ---------   ---------   ---------

                                      A-37
<PAGE>
      AVERAGE BALANCES/OPERATING MARGIN/AVERAGE ANNUAL RATES (UNAUDITED)(1)
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                                  1999                                      1998
------------------------------------------------------------------------------------------------------------------------------------
                                                 Average        Interest &     Average     Average        Interest &      Average
                                                 Balance    Volume-Based Fees   Rate       Balance     Volume-Based Fees    Rate
------------------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>             <C>              <C>        <C>            <C>              <C>
ASSETS
  Cash and cash equivalents                   $    70,248    $                          $   38,709    $
  Investment in financing transactions         11,352,204     1,210,736(2)    11.3%(3)   9,018,351     1,015,415(2)     11.9%(3)
  Less reserve for credit losses                 (237,146)                                (184,162)
                                              -----------     ---------      -----      ----------    ----------       -----
  Net investment in financing transactions     11,115,058                                8,834,189
  Investments                                     234,154
  Goodwill and other assets                       583,482                                  571,294
                                              -----------     ---------      -----      ----------    ----------       -----
                                              $12,002,942                               $9,444,192
                                              ===========    ==========      =====      ==========    ==========       =====
LIABILITIES AND SHAREOWNERS' EQUITY
  Liabilities:
    Other liabilities                         $   367,740    $                          $  369,147    $
    Senior debt                                 9,646,010       592,858        6.1%      7,452,245       478,177         6.4%
    Deferred income taxes                         382,938                                  309,965
                                              -----------     ---------      -----      ----------    ----------       -----
                                               10,396,688                                8,131,357
Shareowner's equity                             1,606,254                                1,312,835
                                              -----------     ---------      -----      ----------    ----------       -----
                                              $12,002,942                               $9,444,192
                                              ===========    ==========      =====      ==========    ==========       =====
Interest income and volume based fees/
  average earning assets (3)                                 $1,210,736       11.3%                   $1,015,415        11.9%
Interest expense/average earning assets(3)(4)                   592,858        5.5%                      478,177         5.6%
                                              -----------     ---------      -----      ----------    ----------       -----
Operating margin (4)                                         $  617,878        5.8%                   $  537,238         6.3%
                                              ===========    ==========      =====      ==========    ==========       =====
</TABLE>

     The following  represents the breakdown of FINOVA's  average balance sheet,
operating  margin and average annual rates for the years ended December 31, 1999
and 1998:

(1)  Averages are calculated based on monthly balances.
(2)  For the years ended December 31, 1999 and 1998 interest income is shown net
     of operating lease depreciation.
(3)  The average rate is calculated based on average earning assets ($10,718,941
     and  $8,546,715 for 1999 and 1998,  respectively)  which are net of average
     deferred taxes on leveraged leases and average nonaccruing assets.
(4)  For the year ended December 31, 1999,  excluding the impact of derivatives,
     interest  expense  would have been  $597,919  or 5.58% of  average  earning
     assets and  operating  margin would have been  $612,817 or 5.72% of average
     earning assets. 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.

                                      A-38