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SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20594

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

For the Fiscal Year Ended December 31, 2000

Commission File Number 1-7543

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

|                                                                                   |  |                                                
|---------------------------------------------------------------------------------- |  | -----------------------------------------------
|Delaware
(State or Other Jurisdiction of
Incorporation or Organization)            |  | 94-1278569
(I.R.S. Employer Identification No.)
|                                                                                  
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|4800 North Scottsdale Road
Scottsdale, AZ
(Address of Principal Executive Offices) |  | 85251-7623
(Zip Code)                          

Registrants Telephone Number, Including Area Code: 480-636-4800
 
Securities registered pursuant to Section 12(b) of the Act:

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.

|    |  |   
|--- |  | --
|Yes |  | 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.

As of April 12, 2001, approximately 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

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TABLE OF CONTENTS



|                                                                                                      |                                                   |  |  |  |  |  |  | 
|----------------------------------------------------------------------------------------------------- | ------------------------------------------------- |  |  |  |  |  |  | 
|Part I                                                                                               
|Item 1. Business.                                                                                    
|                                                                                                      | Introduction                                     
|                                                                                                      | Recent Developments                              
|                                                                                                      | General                                          
|                                                                                                      | Business Groups                                  
|                                                                                                      | Portfolio Composition                            
|                                                                                                      | Investment in Financing Transactions             
|                                                                                                      | Cost and Use of Borrowed Funds                   
|                                                                                                      | Leased Asset Realization Experience              
|                                                                                                      | Business Development                             
|                                                                                                      | Customer Requirements                            
|                                                                                                      | Portfolio Management                             
|                                                                                                      | Delinquencies and Workouts                       
|                                                                                                      | Governmental Regulation                          
|                                                                                                      | Employees                                        
|                                                                                                      | Other Matters                                    
|                                                                                                      | Special Note Regarding Forward-looking Statements
|Item 2. Properties                                                                                   
|Item 3. Legal Proceedings                                                                            
|Item 4. Submission of Matters to a Vote of Security Holders.                                         
|Part II                                                                                              
|Item 5. Market Price of and Dividends On the Registrant's Common Equity & RELATED SHAREOWNER MATTERS.
|Item 6.   Selected Financial Data.                                                                   
|Item 7.   Management's Discussion and Analysis of Financial Condition and Results of Operations.     
|Item 7A. Quantitative and Qualitative Disclosure About Market Risk.                                  
|Item 8.   Financial Statements & Supplemental Data.                                                  
|Item 9.  Changes in and Disagreements With Accountants On Accounting & Financial Disclosure.         
|Part III                                                                                             
|Item 10.  Directors & Executive Officers of the Registrant.                                          
|Item 11.  Executive Compensation.                                                                    
|Item 12.  Security Ownership of Certain Beneficial Owners & Management.                              
|Item 13.  Certain Relationships & Related Transactions.                                              
|Part IV                                                                                              
|Item 14. Exhibits, Financial Statement Schedules and Reports On Form 8-K.                            
|ANNEX A                                                                                              
|Management's Discussion and Analysis of Financial Condition and Results of Operations                
|Quantitative and Qualitative Disclosure about Market Risk                                            
|                                                                                                      | Report of Independent Auditors                   
|                                                                                                      | Independent Auditors' Report                     
|                                                                                                      | Consolidated Balance Sheets                      
|                                                                                                      | Statements of Consolidated Operations            
|                                                                                                      | Statements of Consolidated Shareowner's Equity   
|                                                                                                      | Statements of Consolidated Cash Flows            
|                                                                                                      | Notes to Consolidated Financial Statements       
|                                                                                                      | Supplemental Selected Financial Data (unaudited) 
|EX-12                                                                                                
|EX-21                                                                                                
|EX-23                                                                                                
|EX-23.1                                                                                              
|EX-24                                                                                                

TABLE OF CONTENTS
Name of Item

|         |                                                                                                       |                                                   |  |    |    |  |  |  |  | 
|-------- | ----------------------------------------------------------------------------------------------------- | ------------------------------------------------- |  | -- | -- |  |  |  |  | 
|         |                                                                                                       | Part I                                           
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|Item 1.  | Business                                                                                              |                                                   |  | 1  |   
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|         |                                                                                                       | Introduction                                      |  |    | 1  | 
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|         |                                                                                                       | Recent Developments                               |  |    | 1  | 
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|         |                                                                                                       | General                                           |  |    | 2  | 
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|         |                                                                                                       | Business Groups                                   |  |    | 2  | 
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|         |                                                                                                       | Portfolio Composition                             |  |    | 4  | 
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|         |                                                                                                       | Investment In Financing Transactions              |  |    | 4  | 
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|         |                                                                                                       | Cost and Use of Borrowed Funds                    |  |    | 10 | 
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|         |                                                                                                       | Leased Asset Realization Experience               |  |    | 11 | 
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|         |                                                                                                       | Business Development                              |  |    | 11 | 
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|         |                                                                                                       | Customer Requirements                             |  |    | 12 | 
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|         |                                                                                                       | Portfolio Management                              |  |    | 12 | 
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|         |                                                                                                       | Delinquencies and Workouts                        |  |    | 12 | 
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|         |                                                                                                       | Governmental Regulation                           |  |    | 12 | 
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|         |                                                                                                       | Employees                                         |  |    | 13 | 
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|         |                                                                                                       | Other Matters                                     |  |    | 13 | 
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|         |                                                                                                       | Special Note Regarding Forward-Looking Statements |  |    | 13 | 
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|Item 2.  | Properties                                                                                            |                                                   |  | 14 |   
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|Item 3.  | Legal Proceedings                                                                                     |                                                   |  | 14 |   
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|Item 4.  | Submission of Matters to a Vote of Security Holders                                                   |                                                   |  | 16 |   
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|         |                                                                                                       | Part II                                          
|        
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|Item 5.  | Market Price of and Dividends on The Registrants
Common Equity &
         Related Shareowner Matters |                                                   |  | 16 |    |  |  |  | 
|        
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|Item 6.  | Selected Financial Data                                                                               |                                                   |  | 16 |   
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|Item 7.  | Managements Discussion and Analysis of Financial
Condition and
         Results Of Operations        |                                                   |  | 16 |   
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|Item 7a  | Quantitative and Qualitative Disclosure About Market Risk                                             |                                                   |  | 16 |   
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|Item 8.  | Financial Statements & Supplemental Data                                                              |                                                   |  | 16 |    |  |  |  | 
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|Item 9.  | Changes in and Disagreements with Accountants on
Accounting &
         Financial Disclosure           |                                                   |  | 16 |    |  |  |  | 
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|         |                                                                                                       | Part III                                         
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|Item 10. | Directors & Executive Officers of the Registrant                                                      |                                                   |  | 17 |    |  |  |  | 
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|Item 11. | Executive Compensation                                                                                |                                                   |  | 17 |   
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|Item 12. | Security Ownership of Certain Beneficial Owners & Management                                          |                                                   |  | 17 |    |  |  |  | 
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|Item 13. | Certain Relationships & Related Transactions                                                          |                                                   |  | 17 |    |  |  |  | 
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|         |                                                                                                       | Part IV                                          
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|Item 14. | Exhibits, Financial Statement Schedules and Reports on Form 8-K                                       |                                                   |  | 17 |   





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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 (FINOVA Group). FINOVA Group is a financial
services holding company. Through its principal operating subsidiary FINOVA,
FINOVA Group has provided a broad range of financing and capital markets
products, primarily to mid-size businesses. FINOVA Capital has been in
operation since 1954.

Recent Developments

On March 7, 2001, The FINOVA Group Inc., FINOVA Capital Corporation and
seven of their subsidiaries filed for protection pursuant to Chapter 11, Title
11, of the United States Code to enable them to restructure their debt (the
Reorganization Proceedings). Historically, the Company has relied upon
borrowed funds together with internal cash flow to finance its operations.
Profit has largely been recorded from the spread between the cost of borrowing
and the rates paid by its customers, less operating costs. The Company also
generates revenues through loan servicing and related activities and the sale
of assets. Beginning late in the first quarter of 2000, a series of events
impeded FINOVAs access to lower cost capital in the public and private
markets. These events are generally described below.

On March 27, 2000, FINOVA Group announced the retirement of its Chairman,
President and Chief Executive Officer, Samuel L. Eichenfield, for personal and
health reasons. The Company also announced an $80 million pre-tax
charge to earnings in the first quarter of 2000, to increase loss reserves and provide for payment of deferred compensation and executive
severance. The
additional loss reserves related to the replenishment of reserves
after a write-off of a loan to a single customer in the Distribution
& Channel Finance line of business that had previously been partially
reserved. Following these announcements, some of the credit rating
agencies downgraded or placed on credit watch its senior debt and
commercial paper ratings.

Historically, a significant
portion of its business was financed with commercial paper, which was
reissued when it matured. The Company also borrowed funds in the form
of publicly traded debt securities with staggered maturities. In May
2000, the Company was unable to renew in full its bank facilities,
which were in place to provide a back-up mechanism for the commercial
paper program. Without full coverage for outstanding commercial paper
under the back-up bank facilities, FINOVA drew down on the bank lines to
meet maturing commercial paper obligations and other debt
obligations. This resulted in additional debt rating downgrades.

The Company engaged Credit
Suisse First Boston in May 2000 to assist in the exploration of
strategic alternatives, including a sale of the Company.

As the year progressed, the U.S. economy began to show signs of weakening
and FINOVAs portfolio of leases and loans began to experience higher levels of
delinquencies and nonaccruing assets. The impact of these events and current
economic conditions resulted in increased levels of problem accounts and higher
cost of funds (resulting in lower interest margins earned), higher reserve
requirements, higher write-offs, losses on investments and disposal of assets,
impairment of intangible assets, reduced tax benefits, and the decision to exit
certain businesses.

On February 26, 2001,
FINOVA Group and FINOVA entered into a commitment letter with
Berkshire Hathaway Inc. ("Berkshire Hathaway"), Leucadia National Corporation
("Leucadia") and Berkadia LLC ("Berkadia"), an entity jointly owned by
Leucadia and Berkshire Hathaway, pursuant to which Berkadia committed
to lend $6.0 billion to FINOVA, to facilitate a Chapter 11
restructuring of the outstanding debt of FINOVA and its principal
subsidiaries. The $6.0 billion five-year term loan will be secured by
substantially all of the assets of FINOVA and its subsidiaries and
guaranteed on a secured basis by FINOVA Group and substantially all
of the subsidiaries of FINOVA (the "Berkadia Loan"). The balance of
FINOVA's bank and bond indebtedness will be restructured into
approximately $5 billion of new ten-year senior notes of FINOVA Group
("New Senior Notes"). Berkadia's commitment is subject to various
conditions, including Berkadia's satisfaction with FINOVA's Chapter
11 plan of reorganization (the "Plan") and bankruptcy court and
necessary creditor approvals. In connection with the commitment
letter, FINOVA also entered into a Management Services Agreement with
Leucadia and its subsidiary Leucadia International Corporation, which
has been amended and restated. For a more detailed description of
these agreements, see the section in this report captioned
"Management's Discussion and Analysis of Financial Condition and
Results of Operations."

1



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FINOVA received bankruptcy court approval to continue operating its
business in the ordinary course and, as a result, will continue funding
existing commitments to its customers. In light of these events, FINOVA has
effectively eliminated new business development activities other than
funding existing commitments and for the foreseeable future will focus on
managing and maximizing the value of its existing portfolio. These activities
will include the continued collection of its portfolio pursuant to contractual
terms and may include efforts to retain certain customer relationships,
restructure or terminate other relationships or sell certain assets if buyers
can be found at attractive prices. The Company will also continue to focus on
negotiating appropriate rates and fee structures with its customers. While it
is possible that new business opportunities may present themselves in the
future, no assurance can be given as to the Companys ability to take advantage
of those opportunities.

The following description of FINOVAs business includes a discussion of
the Companys historical business activities. As mentioned in
Management's Discussion and Analysis of Financial Condition and
Results of Operations, the Company
has effectively eliminated new business development activities. Accordingly,
the description is presented to provide an understanding of the Companys
current assets and liabilities but should not be interpreted to mean that the
Company continues to make similar investments. It should be read in conjunction
with the section of this report captioned Recent Developments and Business
Outlook in Managements Discussion and Analysis of Financial Condition and
Results of Operations.

GENERAL

FINOVAs principal executive offices are located at 4800 North Scottsdale
Road, Scottsdale, Arizona 85251-7623, telephone (480) 636-4800. FINOVA also has
offices throughout the U.S. and in London, U.K. and Toronto, Canada.

FINOVA is a Delaware
corporation. The Company was incorporated in 1965 as the successor to
a California Corporation founded in 1954.

FINOVA extends a broad range of customized financing and capital market
products, including revolving credit facilities, term loans, leases and equity
capital primarily to middle-market companies.

Historically, FINOVAs financing activities have been managed within three
market groups: Specialty Finance, Capital Markets and Commercial Finance. Lines
of business within each segment focus on providing tailored products and
services to specific market niches. The following business descriptions include
information regarding typical sizes of individual transactions. In some cases,
FINOVA provides multiple financing transactions to a borrower or to affiliates
of a borrower, which significantly increases the Companys total exposure to
that borrower beyond the typical transaction size. Certain FINOVA businesses
including Resort Finance, Transportation Finance and Rediscount Finance, have
multiple exposures exceeding $100 million. Discontinued Operations were
designated as such during the third quarter of 2000 when FINOVAs Board of
Directors voted to discontinue and offer the five businesses for sale.

Business Groups

Specialty Finance



| |  |  | Commercial Equipment Financeoffers equipment
leases and loans to a broad range of mid-size companies.
Specialty markets include emerging growth technology
industries (primarily biotechnology), electronics,
telecommunications, corporate aircraft,
supermarket/specialty retailers and most heavy industry.
Typical transaction sizes range from $1 million to $20
million.      
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Communications Financespecializes 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.

2



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| |  |  | Franchise Financeoffers equipment, real
estate and acquisition financing for operators of
established franchise concepts. Typical transaction sizes
generally range from $500,000 to $40 million.                                                                                                                                                              
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Healthcare Financeoffers 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 Servicesprovides customized
receivable servicing and collections for resort timeshare
developers and other holders of consumer receivables.                                                                                                                                                                                                          
|
| |  |  | Public Financeprovides 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 Financefocuses on acquisition,
construction and receivables financing for timeshare
resorts, second home communities and fractional interest
resorts. Typical transaction sizes range from $5 million to
$35 million or more, and in some instances exceed $100
million.                                                                                
|
| |  |  | Specialty Real Estate Financeprovides senior
term acquisition and bridge/interim loans from $5 million to
$30 million or more on 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 Financestructures equipment
loans, direct financing, operating and leveraged 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 or more, and in some
instances exceed $100 million.

Capital Markets



| |  |  | Investment Allianceprovides equity and debt
financing for mid-size businesses in partnership with
institutional investors and selected fund sponsors. Typical
transaction sizes range from $2 million to $15 million.                                                                   
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Loan Administrationprovides servicing and
subservicing of commercial mortgages, business leases and
prime and sub-prime consumer loans.                                                                                                                                                 
|
| |  |  | Mezzanine Capitalprovides secured
subordinated debt with warrants to mid-size North American
companies for expansion capital, buyouts or
re-capitalization. Typical transaction sizes range from $2
million to $15 million.                                                             
|
| |  |  | Realty Capitalprovides 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. This line of
business is being offered for sale and is classified as held
for sale.

Commercial Finance



| |  |  | Rediscount Financeoffers 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 or more, and in some instances exceed
$100 million.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Discontinued Operations



| |  |  | Corporate Financeprovided 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 ranged from $2 million
to $35 million. In February 2001, $309 million of assets
were sold. Although discontinued, Corporate Finance (which
includes Business Credit and Growth Finance) continues to
fund existing commitments to its customers until such
commitments expire. Corporate Finance is not entering into new
commitments. Net assets of discontinued operations at
December 31, 2000 were $1.0 billion for Corporate Finance.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - |  | Business Creditprovided
collateral-oriented revolving credit facilities and term
loans for manufacturers, retailers, distributors,
wholesalers and service companies. Typical transaction
sizes ranged from $1 million to $5 million. Fremont
Capital Corporation, acquired in December 1999, was added
to this line of business. Business Credit is not entering
into new commitments.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

3



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| | - |  | Growth Financeprovided
collateral-based working capital financing primarily
secured by accounts receivable for manufacturers,
wholesale distributors, service companies and importers.
Typical transaction sizes ranged from $100,000 to $1
million and were made to small and mid-size businesses
with annual sales under $10 million. Growth Finance is not
entering into new commitments.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Distribution & Channel Financehistorically
provided 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 ranged from $500,000 to $30 million. In December
2000, $46.4 million of assets were sold. Net assets of this
line of business at December 31, 2000 were $132.1 million.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Portfolio Composition

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

Investment in Financing Transactions

The following primarily relates to continuing operations, except as noted.

The following tables detail FINOVAs investment in financing transactions
(before reserve for credit losses) at December 31, 2000, 1999 and 1998.

4



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INVESTMENT IN FINANCING TRANSACTIONS
BY LINE OF BUSINESS
DECEMBER 31, 2000
(Dollars in thousands)

|                                                   |                                 |   |                  |           |             |   |         |         |             |   |        |        |         |   |             |         |       |   |        |       |   |   |       |       | 
|-------------------------------------------------- | ------------------------------- | - | ---------------- | --------- | ----------- | - | ------- | ------- | ----------- | - | ------ | ------ | ------- | - | ----------- | ------- | ----- | - | ------ | ----- | - | - | ----- | ----- | 
|                                                   |                                 |   | Revenue Accruing |           | Nonaccruing
|                                                   |                                 |   |                  |           |            
|                                                   |                                 |   | Performing at   
|                                                   |                                 |   | Contractual      |           |             |   |         |         | Repossessed |   |        |        |         |   | Repossessed |         | Lease
|                                                   |                                 |   | Terms            |           | Impaired    |   | Assets  |         | Impaired    |   | Assets |        | & Other
|                                                   |                                 |   |                  |           |             |   |         |         |             |   |        |        |        
|Specialty Finance Group
    Transportation Finance |                                 | $ | 2,194,415        |           |             | $ | 61,076  |         |             | $ |        |        |         | $ | 138,028     |         |       | $ |        |       | $ |  
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Resort Finance                  |   |                  | 1,538,712 |             |   |         | 133,851 |             |   |        | 13,293 |         |   |             | 136,889 |       |   |        | 5,107 |   |   |       |       | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Franchise Finance               |   |                  | 862,310   |             |   |         | 8,453   |             |   |        |        |         |   |             | 48,101  |       |   |        | 2,088 |   |   |       |       | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Healthcare Finance              |   |                  | 590,997   |             |   |         |         |             |   |        | 1,452  |         |   |             | 264,589 |       |   |        |       |   |   |       | 1,677 | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Communications
  Finance        |   |                  | 623,301   |             |   |         |         |             |   |        |        |         |   |             | 92,823  |       |   |        |       |   |   |       |       | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Specialty Real Estate
  Finance |   |                  | 660,983   |             |   |         |         |             |   |        | 25,602 |         |   |             | 12,950  |       |   |        | 7,923 |   |   |       |       | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Commercial
  Equipment Finance  |   |                  | 496,165   |             |   |         |         |             |   |        |        |         |   |             | 12,521  |       |   |        | 5,559 |   |   |       | 845   | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Public Finance                  |   |                  | 173,135   |             |   |         |         |             |   |        |        |         |   |             | 5,200   |       |   |        |       |   |   |       |       | 
|                                                   |                                 |   |                  |           |             |   |         |         |             |   |        |        |         |   |             |         |       |   |        |       |   |   |       |      
|                                                   |                                 |   | 7,140,018        |           |             |   | 203,380 |         |             |   | 40,347 |        |         |   | 711,101     |         |       |   | 20,677 |       |   |   | 2,522 |      
|                                                   |                                 |   |                  |           |             |   |         |         |             |   |        |        |         |   |             |         |       |   |        |       |   |   |       |      
|Commercial Finance Group
   Rediscount Finance     |                                 |   | 1,062,151        |           |             |   | 32,375  |         |             |   | 520    |        |         |   | 119,005     |         |       |   | 4,412  |       |   |   |       |      
|                                                   |                                 |   |                  |           |             |   |         |         |             |   |        |        |         |   |             |         |       |   |        |       |   |   |       |      
|                                                   |                                 |   | 1,062,151        |           |             |   | 32,375  |         |             |   | 520    |        |         |   | 119,005     |         |       |   | 4,412  |       |   |   |       |      
|                                                   |                                 |   |                  |           |             |   |         |         |             |   |        |        |         |   |             |         |       |   |        |       |   |   |       |      
|Capital Markets Group
      Realty Capital         |                                 |   | 406,080          |           |             |   |         |         |             |   |        |        |         |   | 15,876      |         |       |   |        |       |   |   |       |      
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Mezzanine Capital               |   |                  | 294,725   |             |   |         |         |             |   |        |        |         |   |             | 43,925  |       |   |        |       |   |   |       |       | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Investment Alliance             |   |                  | 35,892    |             |   |         |         |             |   |        |        |         |   |             | 3,833   |       |   |        |       |   |   |       |       | 
|                                                   |                                 |   |                  |           |             |   |         |         |             |   |        |        |         |   |             |         |       |   |        |       |   |   |       |      
|                                                   |                                 |   | 736,697          |           |             |   |         |         |             |   |        |        |         |   | 63,634      |         |       |   |        |       |   |   |       |      
|                                                   |                                 |   |                  |           |             |   |         |         |             |   |        |        |         |   |             |         |       |   |        |       |   |   |       |      
|Other                                              |                                 |   | 43,565           |           |             |   |         |         |             |   |        |        |         |   |             |         |       |   |        |       |   |   |       |      
|                                                   |                                 |   |                  |           |             |   |         |         |             |   |        |        |         |   |             |         |       |   |        |       |   |   |       |      
|Total Continuing Operations(1)                     |                                 |   | 8,982,431        |           |             |   | 235,755 |         |             |   | 40,867 |        |         |   | 893,740     |         |       |   | 25,089 |       |   |   | 2,522 |      
|                                                   |                                 |   |                  |           |             |   |         |         |             |   |        |        |         |   |             |         |       |   |        |       |   |   |       |      
|Discontinued Operations(2)                         |                                 |   | 737,658          |           |             |   | 3,633   |         |             |   |        |        |         |   | 473,724     |         |       |   | 7,769  |       |   |   | 4,695 |      
|                                                   |                                 |   |                  |           |             |   |         |         |             |   |        |        |         |   |             |         |       |   |        |       |   |   |       |      
|TOTAL                                              |                                 | $ | 9,720,089        |           |             | $ | 239,388 |         |             | $ | 40,867 |        |         | $ | 1,367,464   |         |       | $ | 32,858 |       |   | $ | 7,217 |      
|                                                   |                                 |   |                  |           |             |   |         |         |             |   |        |        |         |   |             |         |       |   |        |       |   |   |       |      

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                            |                               |   |            |           |   |  |       |      | 
|------------------------------------------- | ----------------------------- | - | ---------- | --------- | - |  | ----- | ---- | 
|                                            |                               |   | Total      |           |  
|                                            |                               |   | Carrying   |           |  
|                                            |                               |   | Amount     |           | %
|                                            |                               |   |            |           |  
|Specialty Finance Group                    
|                                           
|                                           
|                                           
|                                           
|                                            | Transportation Finance        |   | $          | 2,393,519 |   |  |       | 23.5 | 
|                                           
|                                           
|                                           
|                                           
|                                            | Resort Finance                |   |            | 1,827,852 |   |  |       | 18.0 | 
|                                           
|                                           
|                                           
|                                           
|                                            | Franchise Finance             |   |            | 920,952   |   |  |       | 9.0  | 
|                                           
|                                           
|                                           
|                                           
|                                            | Healthcare Finance            |   |            | 858,715   |   |  |       | 8.4  | 
|                                           
|                                           
|                                           
|                                           
|                                            | Communications Finance        |   |            | 716,124   |   |  |       | 7.0  | 
|                                           
|                                           
|                                           
|                                           
|                                            | Specialty Real Estate Finance |   |            | 707,458   |   |  |       | 6.9  | 
|                                           
|                                           
|                                           
|                                           
|                                            | Commercial Equipment Finance  |   |            | 515,090   |   |  |       | 5.1  | 
|                                           
|                                           
|                                           
|                                           
|                                            | Public Finance                |   |            | 178,335   |   |  |       | 1.8  | 
|                                            |                               |   |            |           |   |  |       |     
|                                            |                               |   | 8,118,045  |           |   |  | 79.7  |     
|                                            |                               |   |            |           |   |  |       |     
|Commercial Finance Group
Rediscount Finance |                               |   | 1,218,463  |           |   |  | 12.0  |     
|                                            |                               |   |            |           |   |  |       |     
|                                            |                               |   | 1,218,463  |           |   |  | 12.0  |     
|                                            |                               |   |            |           |   |  |       |     
|Capital Markets Group
Realty Capital        |                               |   | 421,956    |           |   |  | 4.2   |     
|                                           
|                                           
|                                           
|                                           
|                                            | Mezzanine Capital             |   |            | 338,650   |   |  |       | 3.3  | 
|                                           
|                                           
|                                           
|                                           
|                                            | Investment Alliance           |   |            | 39,725    |   |  |       | 0.4  | 
|                                            |                               |   |            |           |   |  |       |     
|                                            |                               |   | 800,331    |           |   |  | 7.9   |     
|                                            |                               |   |            |           |   |  |       |     
|Other                                       |                               |   | 43,565     |           |   |  | 0.4   |     
|                                            |                               |   |            |           |   |  |       |     
|Total Continuing Operations(1)              |                               |   | 10,180,404 |           |   |  | 100.0 |     
|                                            |                               |   |            |           |   |  |       |     
|Discontinued Operations(2)                  |                               |   | 1,227,479  |          
|                                            |                               |   |            |          
|TOTAL                                       |                               | $ | 11,407,883 |          
|                                            |                               |   |            |          



---

|NOTES: |  |                                                                                                                                                                    
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      
|      
|      
|      
|(1)    |  | Excludes $357.5 million of assets sold which the Company manages, including $243.0 million in Commercial Equipment Finance and $114.5 million in Franchise Finance.
|      
|      
|      
|      
|(2)    |  | Excludes $475 million of Corporate Finance assets that were sold and are managed by the Company.                                                                   

5



---



INVESTMENT IN FINANCING TRANSACTIONS
BY LINE OF BUSINESS
DECEMBER 31, 1999
(Dollars in thousands)

|                                                  |                               |   |                  |           |             |   |         |        |             |   |        |        |         |   |             |        |       |   |        |        |  |   |        |       | 
|------------------------------------------------- | ----------------------------- | - | ---------------- | --------- | ----------- | - | ------- | ------ | ----------- | - | ------ | ------ | ------- | - | ----------- | ------ | ----- | - | ------ | ------ |  | - | ------ | ----- | 
|                                                  |                               |   | Revenue Accruing |           | Nonaccruing
|                                                  |                               |   |                  |           |            
|                                                  |                               |   | Performing at   
|                                                  |                               |   | Contractual      |           |             |   |         |        | Repossessed |   |        |        |         |   | Repossessed |        | Lease
|                                                  |                               |   | Terms            |           | Impaired    |   | Assets  |        | Impaired    |   | Assets |        | & Other
|                                                  |                               |   |                  |           |             |   |         |        |             |   |        |        |        
|Specialty Finance Group
   Transportation Finance |                               | $ | 2,424,262        |           |             | $ | 64,073  |        |             | $ |        |        |         | $ |             |        |       | $ |        |        |  | $ |       
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Resort Finance                |   |                  | 1,584,508 |             |   |         |        |             |   |        | 14,383 |         |   |             | 2,699  |       |   |        | 19,318 |  |   |        |       | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Healthcare Finance            |   |                  | 692,876   |             |   |         | 17,695 |             |   |        | 5,137  |         |   |             | 35,076 |       |   |        | 1,162  |  |   |        | 5,945 | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Franchise Finance             |   |                  | 769,162   |             |   |         |        |             |   |        | 1,917  |         |   |             | 4,953  |       |   |        | 2,770  |  |   |        | 172   | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Communications Finance        |   |                  | 674,331   |             |   |         | 3,908  |             |   |        |        |         |   |             | 10,327 |       |   |        |        |  |   |        |       | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Specialty Real Estate Finance |   |                  | 726,788   |             |   |         |        |             |   |        | 35,807 |         |   |             | 9,042  |       |   |        | 6,151  |  |   |        | 152   | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Commercial Equipment Finance  |   |                  | 809,456   |             |   |         |        |             |   |        | 5,090  |         |   |             | 12,000 |       |   |        | 19,657 |  |   |        | 2,725 | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Public Finance                |   |                  | 168,778   |             |   |         |        |             |   |        |        |         |   |             |        |       |   |        |        |  |   |        |       | 
|                                                  |                               |   |                  |           |             |   |         |        |             |   |        |        |         |   |             |        |       |   |        |        |  |   |        |      
|                                                  |                               |   | 7,850,161        |           |             |   | 85,676  |        |             |   | 62,334 |        |         |   | 74,097      |        |       |   | 49,058 |        |  |   | 8,994  |      
|                                                  |                               |   |                  |           |             |   |         |        |             |   |        |        |         |   |             |        |       |   |        |        |  |   |        |      
|Commercial Finance Group
Rediscount Finance       |                               |   | 1,059,930        |           |             |   |         |        |             |   | 12,574 |        |         |   | 1,071       |        |       |   | 3,042  |        |  |   |        |      
|                                                  |                               |   |                  |           |             |   |         |        |             |   |        |        |         |   |             |        |       |   |        |        |  |   |        |      
|                                                  |                               |   | 1,059,930        |           |             |   |         |        |             |   | 12,574 |        |         |   | 1,071       |        |       |   | 3,042  |        |  |   |        |      
|                                                  |                               |   |                  |           |             |   |         |        |             |   |        |        |         |   |             |        |       |   |        |        |  |   |        |      
|Capital Markets Group
   Realty Capital           |                               |   | 578,808          |           |             |   |         |        |             |   |        |        |         |   | 4,614       |        |       |   |        |        |  |   |        |      
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Mezzanine Capital             |   |                  | 386,555   |             |   |         | 21,981 |             |   |        |        |         |   |             | 34,117 |       |   |        |        |  |   |        |       | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Investment Alliance           |   |                  | 25,292    |             |   |         |        |             |   |        |        |         |   |             |        |       |   |        |        |  |   |        |       | 
|                                                  |                               |   |                  |           |             |   |         |        |             |   |        |        |         |   |             |        |       |   |        |        |  |   |        |      
|                                                  |                               |   | 990,655          |           |             |   | 21,981  |        |             |   |        |        |         |   | 38,731      |        |       |   |        |        |  |   |        |      
|                                                  |                               |   |                  |           |             |   |         |        |             |   |        |        |         |   |             |        |       |   |        |        |  |   |        |      
|Other                                             |                               |   | 62,403           |           |             |   | 1,107   |        |             |   |        |        |         |   |             |        |       |   |        |        |  |   |        |      
|                                                  |                               |   |                  |           |             |   |         |        |             |   |        |        |         |   |             |        |       |   |        |        |  |   |        |      
|Total Continuing Operations(1)                    |                               |   | 9,963,149        |           |             |   | 108,764 |        |             |   | 74,908 |        |         |   | 113,899     |        |       |   | 52,100 |        |  |   | 8,994  |      
|                                                  |                               |   |                  |           |             |   |         |        |             |   |        |        |         |   |             |        |       |   |        |        |  |   |        |      
|Discontinued Operations(2)                        |                               |   | 2,548,671        |           |             |   | 131,362 |        |             |   |        |        |         |   | 92,305      |        |       |   | 3,736  |        |  |   | 24,089 |      
|                                                  |                               |   |                  |           |             |   |         |        |             |   |        |        |         |   |             |        |       |   |        |        |  |   |        |      
|TOTAL                                             |                               | $ | 12,511,820       |           |             | $ | 240,126 |        |             | $ | 74,908 |        |         | $ | 206,204     |        |       | $ | 55,836 |        |  | $ | 33,083 |      
|                                                  |                               |   |                  |           |             |   |         |        |             |   |        |        |         |   |             |        |       |   |        |        |  |   |        |      





|                                                  |                               |   |            |           |   |  |       |      | 
|------------------------------------------------- | ----------------------------- | - | ---------- | --------- | - |  | ----- | ---- | 
|                                                  |                               |   | Total     
|                                                  |                               |   | Carrying  
|                                                  |                               |   | Amount     |           | %
|                                                  |                               |   |            |           |  
|Specialty Finance Group
   Transportation Finance |                               | $ | 2,488,335  |           |   |  | 24.1  |     
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Resort Finance                |   |            | 1,620,908 |   |  |       | 15.7 | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Healthcare Finance            |   |            | 757,891   |   |  |       | 7.4  | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Franchise Finance             |   |            | 778,974   |   |  |       | 7.6  | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Communications Finance        |   |            | 688,566   |   |  |       | 6.7  | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Specialty Real Estate Finance |   |            | 777,940   |   |  |       | 7.5  | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Commercial Equipment Finance  |   |            | 848,928   |   |  |       | 8.2  | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Public Finance                |   |            | 168,778   |   |  |       | 1.6  | 
|                                                  |                               |   |            |           |   |  |       |     
|                                                  |                               |   | 8,130,320  |           |   |  | 78.8  |     
|                                                  |                               |   |            |           |   |  |       |     
|Commercial Finance Group
   Rediscount Finance    |                               |   | 1,076,617  |           |   |  | 10.4  |     
|                                                  |                               |   |            |           |   |  |       |     
|                                                  |                               |   | 1,076,617  |           |   |  | 10.4  |     
|                                                  |                               |   |            |           |   |  |       |     
|Capital Markets Group
   Realty Capital           |                               |   | 583,422    |           |   |  | 5.7   |     
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Mezzanine Capital             |   |            | 442,653   |   |  |       | 4.3  | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Investment Alliance           |   |            | 25,292    |   |  |       | 0.2  | 
|                                                  |                               |   |            |           |   |  |       |     
|                                                  |                               |   | 1,051,367  |           |   |  | 10.2  |     
|                                                  |                               |   |            |           |   |  |       |     
|Other                                             |                               |   | 63,510     |           |   |  | 0.6   |     
|                                                  |                               |   |            |           |   |  |       |     
|Total Continuing Operations(1)                    |                               |   | 10,321,814 |           |   |  | 100.0 |     
|                                                  |                               |   |            |           |   |  |       |     
|Discontinued Operations(2)                        |                               |   | 2,800,163  |          
|                                                  |                               |   |            |          
|TOTAL                                             |                               | $ | 13,121,977 |          
|                                                  |                               |   |            |          



---

|NOTES: |  |                                                                                                   
|------ |  | --------------------------------------------------------------------------------------------------
|      
|      
|      
|      
|(1)    |  | Excludes $121.3 million of Franchise Finance assets that were sold and are managed by the Company.
|      
|      
|      
|      
|(2)    |  | Excludes $300 million of Corporate Finance assets that were sold and are managed by the Company.  

6



---



|                                                    |                               |   |                  |           |             |   |         |        |             |   |        |        |         |   |             |        |       |   |        |        |  |   |        |       | 
|--------------------------------------------------- | ----------------------------- | - | ---------------- | --------- | ----------- | - | ------- | ------ | ----------- | - | ------ | ------ | ------- | - | ----------- | ------ | ----- | - | ------ | ------ |  | - | ------ | ----- | 
|                                                    |                               |   | Revenue Accruing |           | Nonaccruing
|                                                    |                               |   |                  |           |            
|                                                    |                               |   | Performing at   
|                                                    |                               |   | Contractual      |           |             |   |         |        | Repossessed |   |        |        |         |   | Repossessed |        | Lease
|                                                    |                               |   | Terms            |           | Impaired    |   | Assets  |        | Impaired    |   | Assets |        | & Other
|                                                    |                               |   |                  |           |             |   |         |        |             |   |        |        |        
|Specialty Finance Group

    Transportation Finance |                               | $ | 2,140,541        |           |             | $ | 61,895  |        |             | $ |        |        |         | $ |             |        |       | $ |        |        |  | $ |       
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Resort Finance                |   |                  | 1,209,062 |             |   |         |        |             |   |        | 16,415 |         |   |             |        |       |   |        | 24,800 |  |   |        |       | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Healthcare Finance            |   |                  | 597,201   |             |   |         |        |             |   |        | 7,018  |         |   |             | 5,902  |       |   |        |        |  |   |        | 1,102 | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Franchise Finance             |   |                  | 597,916   |             |   |         | 1,619  |             |   |        | 1,741  |         |   |             | 1,763  |       |   |        | 2,120  |  |   |        | 274   | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Communications    Finance     |   |                  | 694,863   |             |   |         | 7,169  |             |   |        |        |         |   |             | 24,264 |       |   |        |        |  |   |        |       | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Specialty Real Estate Finance |   |                  | 635,952   |             |   |         | 16,966 |             |   |        | 34,230 |         |   |             | 9,799  |       |   |        | 7,620  |  |   |        | 194   | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Commercial Equipment Finance  |   |                  | 712,854   |             |   |         | 1,526  |             |   |        | 4,858  |         |   |             | 10,884 |       |   |        | 17,855 |  |   |        | 4,135 | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Public Finance                |   |                  | 183,099   |             |   |         |        |             |   |        |        |         |   |             |        |       |   |        |        |  |   |        |       | 
|                                                    |                               |   |                  |           |             |   |         |        |             |   |        |        |         |   |             |        |       |   |        |        |  |   |        |      
|                                                    |                               |   | 6,771,488        |           |             |   | 89,175  |        |             |   | 64,262 |        |         |   | 52,612      |        |       |   | 52,395 |        |  |   | 5,705  |      
|                                                    |                               |   |                  |           |             |   |         |        |             |   |        |        |         |   |             |        |       |   |        |        |  |   |        |      
|Commercial Finance Group
Rediscount Finance         |                               |   | 766,250          |           |             |   |         |        |             |   | 999    |        |         |   | 3,762       |        |       |   |        |        |  |   |        |      
|                                                    |                               |   |                  |           |             |   |         |        |             |   |        |        |         |   |             |        |       |   |        |        |  |   |        |      
|                                                    |                               |   | 766,250          |           |             |   |         |        |             |   | 999    |        |         |   | 3,762       |        |       |   |        |        |  |   |        |      
|                                                    |                               |   |                  |           |             |   |         |        |             |   |        |        |         |   |             |        |       |   |        |        |  |   |        |      
|Capital Markets Group
   Realty Capital             |                               |   | 243,278          |           |             |   |         |        |             |   |        |        |         |   |             |        |       |   |        |        |  |   |        |      
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Investment Alliance           |   |                  | 12,297    |             |   |         |        |             |   |        |        |         |   |             |        |       |   |        |        |  |   |        |       | 
|                                                    |                               |   |                  |           |             |   |         |        |             |   |        |        |         |   |             |        |       |   |        |        |  |   |        |      
|                                                    |                               |   | 255,575          |           |             |   |         |        |             |   |        |        |         |   |             |        |       |   |        |        |  |   |        |      
|                                                    |                               |   |                  |           |             |   |         |        |             |   |        |        |         |   |             |        |       |   |        |        |  |   |        |      
|Other                                               |                               |   | 54,284           |           |             |   |         |        |             |   |        |        |         |   |             |        |       |   |        |        |  |   |        |      
|                                                    |                               |   |                  |           |             |   |         |        |             |   |        |        |         |   |             |        |       |   |        |        |  |   |        |      
|Total Continuing Operations(1)                      |                               |   | 7,847,597        |           |             |   | 89,175  |        |             |   | 65,261 |        |         |   | 56,374      |        |       |   | 52,395 |        |  |   | 5,705  |      
|                                                    |                               |   |                  |           |             |   |         |        |             |   |        |        |         |   |             |        |       |   |        |        |  |   |        |      
|Discontinued Operations(2)                          |                               |   | 1,796,124        |           |             |   | 16,831  |        |             |   |        |        |         |   | 63,364      |        |       |   | 2,051  |        |  |   | 25,344 |      
|                                                    |                               |   |                  |           |             |   |         |        |             |   |        |        |         |   |             |        |       |   |        |        |  |   |        |      
|TOTAL                                               |                               | $ | 9,643,721        |           |             | $ | 106,006 |        |             | $ | 65,261 |        |         | $ | 119,738     |        |       | $ | 54,446 |        |  | $ | 31,049 |      
|                                                    |                               |   |                  |           |             |   |         |        |             |   |        |        |         |   |             |        |       |   |        |        |  |   |        |      

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                                  |                               |   |            |           |   |  |       |      | 
|------------------------------------------------- | ----------------------------- | - | ---------- | --------- | - |  | ----- | ---- | 
|                                                  |                               |   | Total     
|                                                  |                               |   | Carrying  
|                                                  |                               |   | Amount     |           | %
|                                                  |                               |   |            |           |  
|Specialty Finance Group
   Transportation Finance |                               | $ | 2,202,436  |           |   |  | 27.1  |     
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Resort Finance                |   |            | 1,250,277 |   |  |       | 15.4 | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Healthcare Finance            |   |            | 611,223   |   |  |       | 7.5  | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Franchise Finance             |   |            | 605,433   |   |  |       | 7.5  | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Communications Finance        |   |            | 726,296   |   |  |       | 8.9  | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Specialty Real Estate Finance |   |            | 704,761   |   |  |       | 8.7  | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Commercial Equipment Finance  |   |            | 752,112   |   |  |       | 9.3  | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Public Finance                |   |            | 183,099   |   |  |       | 2.3  | 
|                                                  |                               |   |            |           |   |  |       |     
|                                                  |                               |   | 7,035,637  |           |   |  | 86.7  |     
|                                                  |                               |   |            |           |   |  |       |     
|Commercial Finance Group
   Rediscount Finance    |                               |   | 771,011    |           |   |  | 9.5   |     
|                                                  |                               |   |            |           |   |  |       |     
|                                                  |                               |   | 771,011    |           |   |  | 9.5   |     
|                                                  |                               |   |            |           |   |  |       |     
|Capital Markets Group
   Realty Capital           |                               |   | 243,278    |           |   |  | 3.0   |     
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Investment Alliance           |   |            | 12,297    |   |  |       | 0.1  | 
|                                                  |                               |   |            |           |   |  |       |     
|                                                  |                               |   | 255,575    |           |   |  | 3.1   |     
|                                                  |                               |   |            |           |   |  |       |     
|Other                                             |                               |   | 54,284     |           |   |  | 0.7   |     
|                                                  |                               |   |            |           |   |  |       |     
|Total Continuing Operations(1)                    |                               |   | 8,116,507  |           |   |  | 100.0 |     
|                                                  |                               |   |            |           |   |  |       |     
|Discontinued Operations(2)                        |                               |   | 1,903,714  |          
|                                                  |                               |   |            |          
|TOTAL                                             |                               | $ | 10,020,221 |          
|                                                  |                               |   |            |          



---

|NOTES: |  |                                                                                                   
|------ |  | --------------------------------------------------------------------------------------------------
|      
|      
|      
|      
|(1)    |  | Excludes $136.1 million of Franchise Finance assets that were sold and are managed by the Company.
|      
|      
|      
|      
|(2)    |  | Excludes $300 million of Corporate Finance assets that were sold and are managed by the Company.  

7



---



The Companys geographic portfolio diversification at December 31, 2000 in
the continuing operations was as follows:

|                     |  |                        |            |         |  |  |       |  
|-------------------- |  | ---------------------- | ---------- | ------- |  |  | ----- | -
|State                |  | Total                  |            | Percent
|                     |  |                        |            |        
|                     |  | (Dollars in thousands)
|                    
|                    
|                    
|                    
|                    
|Florida              |  | $                      | 1,175,886  |         |  |  | 11.2  | %
|                    
|                    
|                    
|                    
|California           |  |                        | 1,154,679  |         |  |  | 11.0  | %
|                    
|                    
|                    
|                    
|Texas                |  |                        | 851,048    |         |  |  | 8.1   | %
|                    
|                    
|                    
|                    
|Virginia             |  |                        | 408,647    |         |  |  | 3.9   | %
|                    
|                    
|                    
|                    
|New York             |  |                        | 402,698    |         |  |  | 3.8   | %
|                    
|                    
|                    
|                    
|Nevada               |  |                        | 391,411    |         |  |  | 3.7   | %
|                    
|                    
|                    
|                    
|Georgia              |  |                        | 333,515    |         |  |  | 3.2   | %
|                    
|                    
|                    
|                    
|Arizona              |  |                        | 312,870    |         |  |  | 3.0   | %
|                    
|                    
|                    
|                    
|South Carolina       |  |                        | 306,850    |         |  |  | 2.9   | %
|                    
|                    
|                    
|                    
|Missouri             |  |                        | 269,102    |         |  |  | 2.6   | %
|                    
|                    
|                    
|                    
|New Jersey           |  |                        | 264,173    |         |  |  | 2.4   | %
|                    
|                    
|                    
|                    
|Illinois             |  |                        | 255,161    |         |  |  | 2.4   | %
|                    
|                    
|                    
|                    
|Colorado             |  |                        | 223,335    |         |  |  | 2.1   | %
|                    
|                    
|                    
|                    
|Minnesota            |  |                        | 214,615    |         |  |  | 2.0   | %
|                    
|                    
|                    
|                    
|Washington           |  |                        | 213,112    |         |  |  | 2.0   | %
|                    
|                    
|                    
|                    
|Pennsylvania         |  |                        | 211,163    |         |  |  | 2.0   | %
|                    
|                    
|                    
|                    
|Other (1)            |  |                        | 3,549,610  |         |  |  | 33.7  | %
|                     |  |                        |            |         |  |  |       |  
|Total managed assets |  | $                      | 10,537,875 |         |  |  | 100.0 | %
|                     |  |                        |            |         |  |  |       |  



---

|NOTE: |  |                                                                                                                                                                  
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|     
|     
|     
|     
|(1)   |  | Other includes all states which on an individual basis represent less than 2% of the
total; and international, which represents approximately 12.5% of the total.

_______________________



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

|                            |  |                        |          |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|--------------------------- |  | ---------------------- | -------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | - |  | - | ------- | -
|                            |  | 2000                   |          | 1999 |  | 1998 |         | 1997 |  | 1996
|                            |  |                        |          |      |  |      |         |      |  |     
|                            |  | (Dollars in thousands)
|Balance, beginning of year  |  | $                      | 178,266  |      |  | $    | 141,579 |      |  | $    | 99,008  |   |  | $ | 84,874  |   |  | $ | 83,732  |  
|                           
|                           
|                           
|                           
|Provision for credit losses |  |                        | 643,000  |      |  |      | 22,390  |      |  |      | 48,470  |   |  |   | 23,429  |   |  |   | 10,240  |  
|                           
|                           
|                           
|                           
|Write-offs                  |  |                        | (240,655 | )    |  |      | (24,422 | )    |  |      | (12,161 | ) |  |   | (12,751 | ) |  |   | (17,449 | )
|                           
|                           
|                           
|                           
|Recoveries                  |  |                        | 1,018    |      |  |      | 1,830   |      |  |      | 1,174   |   |  |   | 1,061   |   |  |   | 1,765   |  
|                           
|                           
|                           
|                           
|Acquisitions and other      |  |                        | (2,879   | )    |  |      | 36,889  |      |  |      | 5,088   |   |  |   | 2,395   |   |  |   | 6,586   |  
|                            |  |                        |          |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Balance, end of year        |  | $                      | 578,750  |      |  | $    | 178,266 |      |  | $    | 141,579 |   |  | $ | 99,008  |   |  | $ | 84,874  |  
|                            |  |                        |          |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  

At December 31, 2000, the total carrying amount of impaired loans was $1.1
billion, of which $235.8 million were revenue accruing. A specific impairment
reserve for credit losses of $246.4 million has been established for $697.0
million of nonaccruing impaired loans and $1.8 million has been established for
$34.7 million of accruing impaired loans. Additionally, $2.2 million was
established for other accounts. As a result, 43.3% of FINOVAs reserve for
credit losses was allocated to specific reserves. The remaining $328.4 million
or 56.7% of the reserve for credit losses is designated for general purposes
and represents managements best estimate of inherent losses in the remaining
portfolio considering delinquencies, loss experience and collateral. At
December 31, 1999, the total amount of impaired loans was $222.7 million, of
which $108.8 million were revenue accruing. The specific impairment reserve for
credit losses at December 31, 1999 was $35.4 million for $89.0 million of
nonaccruing impaired loans and $25.3 million for $52.0 million of accruing
impaired loans. Actual results could differ from estimates and values, and
there can be no assurance that the reserves will be sufficient to cover
portfolio losses.
Additions to the general and specific reserves are reflected in current
operations. Management may transfer reserves between the general and specific
reserves as considered necessary.

At December 31, 2000, discontinued operations included $486.2 million of
nonaccruing assets, of which $421.9 million were in Corporate Finance. Since
the assets of the discontinued operations have been written down to estimated
net

8



---



realizable value, no reserve for credit losses are carried against those
assets. Net realizable value write-downs were $347.5 million.

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

|                                                         |                               |   |                        |        |      |   |        |       |      |   |        |       |  |   |        |       |  |   |        |       | 
|-------------------------------------------------------- | ----------------------------- | - | ---------------------- | ------ | ---- | - | ------ | ----- | ---- | - | ------ | ----- |  | - | ------ | ----- |  | - | ------ | ----- | 
|                                                         |                               |   | 2000                   |        | 1999 |   | 1998   |       | 1997 |   | 1996  
|                                                         |                               |   |                        |        |      |   |        |       |      |   |       
|                                                         |                               |   | (Dollars in thousands)
|WRITE-OFFS                                              
|                                                        
|                                                        
|                                                        
|                                                        
|Specialty Finance Group                                 
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Commercial Equipment Finance  |   | $                      | 19,998 |      |   | $      | 6,030 |      |   | $      | 3,845 |  |   | $      | 3,722 |  |   | $      | 3,207 | 
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Communications Finance        |   |                        | 3,953  |      |   |        | 3,100 |      |   |        | 494   |  |   |        | 750   |  |   |        | 2,994 | 
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Healthcare Finance            |   |                        | 60,171 |      |   |        | 1,327 |      |   |        | 1,502 |  |   |        | 1,798 |  |   |        | 1,018 | 
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Franchise Finance             |   |                        | 245    |      |   |        | 1,064 |      |   |        | 3,035 |  |   |        | 696   |  |   |        | 3,267 | 
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Public Finance                |   |                        | 4,648  |     
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Resort Finance                |   |                        | 61     |      |   |        | 656   |      |   |        |       |  |   |        | 2,700 |  |   |        | 4,275 | 
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Transportation Finance        |   |                        | 40,500 |     
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Specialty Real Estate Finance |   |                        | 2,646  |      |   |        | 500   |      |   |        | 1,785 |  |   |        | 2,106 |  |   |        | 1,793 | 
|                                                         |                               |   |                        |        |      |   |        |       |      |   |        |       |  |   |        |       |  |   |        |      
|                                                         |                               |   | 132,222                |        |      |   | 12,677 |       |      |   | 10,661 |       |  |   | 11,772 |       |  |   | 16,554 |      
|                                                         |                               |   |                        |        |      |   |        |       |      |   |        |       |  |   |        |       |  |   |        |      
|Commercial Finance Group                                
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Rediscount Finance            |   |                        | 19,233 |      |   |        | 3,523 |      |   |        | 1,500 | 
|                                                         |                               |   |                        |        |      |   |        |       |      |   |        |       |  |   |        |       |  |   |        |      
|                                                         |                               |   | 19,233                 |        |      |   | 3,523  |       |      |   | 1,500  |      
|                                                         |                               |   |                        |        |      |   |        |       |      |   |        |       |  |   |        |       |  |   |        |      
|Capital Markets Group                                   
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Mezzanine Capital             |   |                        | 86,009 |      |   |        | 8,222 |     
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Realty Capital                |   |                        | 3,000  |     
|                                                         |                               |   |                        |        |      |   |        |       |      |   |        |       |  |   |        |       |  |   |        |      
|                                                         |                               |   | 89,009                 |        |      |   | 8,222  |      
|                                                         |                               |   |                        |        |      |   |        |       |      |   |        |       |  |   |        |       |  |   |        |      
|Other                                                    |                               |   | 191                    |        |      |   |        |       |      |   |        |       |  |   | 979    |       |  |   | 895    |      
|                                                         |                               |   |                        |        |      |   |        |       |      |   |        |       |  |   |        |       |  |   |        |      
|                                                        
|                                                        
|                                                        
|                                                        
|Total Write-Offs                                         |                               |   | 240,655                |        |      |   | 24,422 |       |      |   | 12,161 |       |  |   | 12,751 |       |  |   | 17,449 |      
|                                                         |                               |   |                        |        |      |   |        |       |      |   |        |       |  |   |        |       |  |   |        |      
|RECOVERIES                                              
|                                                        
|                                                        
|                                                        
|                                                        
|Specialty Finance Group                                 
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Commercial Equipment Finance  |   |                        | 107    |      |   |        | 257   |      |   |        | 200   |  |   |        | 514   |  |   |        | 829   | 
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Healthcare Finance            |   |                        | 534    |      |   |        | 139   |      |   |        | 542   |  |   |        | 94    |  |   |        | 8     | 
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Franchise Finance             |   |                        | 326    |      |   |        | 824   |      |   |        | 255   |  |   |        | 263   |  |   |        | 422   | 
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Resort Finance                |   |                        |        |      |   |        |       |      |   |        |       |  |   |        |       |  |   |        | 26    | 
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Specialty Real Estate Finance |   |                        |        |      |   |        | 371   |      |   |        |       |  |   |        |       |  |   |        | 177   | 
|                                                         |                               |   |                        |        |      |   |        |       |      |   |        |       |  |   |        |       |  |   |        |      
|                                                         |                               |   | 967                    |        |      |   | 1,591  |       |      |   | 997    |       |  |   | 871    |       |  |   | 1,462  |      
|                                                         |                               |   |                        |        |      |   |        |       |      |   |        |       |  |   |        |       |  |   |        |      
|Commercial Finance Group                                
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Rediscount Finance            |   |                        | 25     |      |   |        | 51    |     
|                                                         |                               |   |                        |        |      |   |        |      
|                                                         |                               |   | 25                     |        |      |   | 51     |      
|                                                         |                               |   |                        |        |      |   |        |      
|Capital Markets Group                                   
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Mezzanine Capital             |   |                        | 14     |      |   |        | 68    |     
|                                                         |                               |   |                        |        |      |   |        |      
|                                                         |                               |   | 14                     |        |      |   | 68     |      
|                                                         |                               |   |                        |        |      |   |        |      
|Other                                                    |                               |   | 12                     |        |      |   | 120    |       |      |   | 177    |       |  |   | 190    |       |  |   | 303    |      
|                                                         |                               |   |                        |        |      |   |        |       |      |   |        |       |  |   |        |       |  |   |        |      
|                                                        
|                                                        
|                                                        
|                                                        
|Total Recoveries                                         |                               |   | 1,018                  |        |      |   | 1,830  |       |      |   | 1,174  |       |  |   | 1,061  |       |  |   | 1,765  |      
|                                                         |                               |   |                        |        |      |   |        |       |      |   |        |       |  |   |        |       |  |   |        |      
|Total Net Write-Offs                                     |                               | $ | 239,637                |        |      | $ | 22,592 |       |      | $ | 10,987 |       |  | $ | 11,690 |       |  | $ | 15,684 |      
|                                                         |                               |   |                        |        |      |   |        |       |      |   |        |       |  |   |        |       |  |   |        |      
|Net write-offs as a percentage of average managed assets |                               |   | 2.25                   | %      |      |   | 0.24   | %     |      |   | 0.15   | %     |  |   | 0.19   | %     |  |   | 0.28   | %    
|                                                         |                               |   |                        |        |      |   |        |       |      |   |        |       |  |   |        |       |  |   |        |      

A further breakdown of the portfolio by line of business can be found in
Consolidated Financial Statements  Annex A (Annex A), Notes C and D.

9



---



Pre-tax charges of $347.5 were incurred in 2000 to write-down the
investment in financing transactions included in discontinued operations to net
realizable value. The carrying amount of investments in financing transactions
in discontinued operations at December 31, 2000 was $1.2 billion, down from
$2.8 billion at December 31, 1999.

Cost and Use of Borrowed Funds

Historically, the Company has relied on borrowed funds as well as internal
cash flow to finance its operations. It has also raised funds through the sale
or securitization of assets. The Company managed its exposure to changes in
interest rates through the issuance of swaps and other hedging techniques. In
addition, the Company historically attempted to match its assets and
liabilities by borrowing fixed and floating-rate debt in amounts and tenor that
approximated the character of its assets.

As a result of the recent developments described above, the Company does
not expect to have access to the capital markets in the foreseeable future. In
addition, most of the Companys interest rate swap agreements were terminated
as a result of the bankruptcy filing. During the pendancy of the bankruptcy,
the interest rate which will be applied to the Companys debt prior to plan
confirmation obligations is also uncertain.

Under the terms of the Companys Plan, the New Senior Notes will be
fixed-rate obligations, at the weighted average rate of the existing debt
excluding default interest or penalties, if any. The Berkadia Loan bears
interest at the greater of 9% or LIBOR plus 3%. Therefore, if LIBOR is below
6%, the Berkadia Loan will be fixed at 9%. If LIBOR rises above 6%, the
Berkadia Loan will be a floating-rate obligation. If approved, the Plan will
result in a significantly higher cost of funds than the Company has
traditionally incurred in the past. Regardless of whether the Companys Plan is
approved, during the pendancy of the bankruptcy the Company is not able to
match its floating-rate assets with floating-rate liabilities. No assurance can
be given that the Plan will be approved or that the Company will be able to
employ hedging techniques to mitigate its exposure to changes in market
interest rates. For further information, see Quantitative and Qualitative
Disclosure about Market Risk.

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:

|                                                                      |  |                         |      |      |  |      |      |      |  |      |      |   |  |  |      |   |  |  |      |  
|--------------------------------------------------------------------- |  | ----------------------- | ---- | ---- |  | ---- | ---- | ---- |  | ---- | ---- | - |  |  | ---- | - |  |  | ---- | -
|                                                                      |  | Year Ended December 31,
|                                                                      |  |                        
|                                                                      |  | 2000                    |      | 1999 |  | 1998 |      | 1997 |  | 1996
|                                                                      |  |                         |      |      |  |      |      |      |  |     
|Short-term and variable rate long-term debt                           |  |                         | 7.2  | %    |  |      | 5.7  | %    |  |      | 6.1  | % |  |  | 6.4  | % |  |  | 6.5  | %
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Fixed-rate long-term debt                                             |  |                         | 7.1  | %    |  |      | 6.7  | %    |  |      | 7.0  | % |  |  | 7.1  | % |  |  | 7.2  | %
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Aggregate borrowed funds (1)                                          |  |                         | 7.1  | %    |  |      | 6.1  | %    |  |      | 6.4  | % |  |  | 6.6  | % |  |  | 6.8  | %
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Rate earned on average earning assets (2) (3)                         |  |                         | 11.3 | %    |  |      | 10.8 | %    |  |      | 11.0 | % |  |  | 10.8 | % |  |  | 10.3 | %
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Interest margins earned as a percentage of average
earning assets (1) |  |                         | 4.7  | %    |  |      | 5.4  | %    |  |      | 5.5  | % |  |  | 5.3  | % |  |  | 4.8  | %



---

|NOTES: |  |                                                                                                                                                                   
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      
|      
|      
|      
|(1)    |  | If the transaction with Berkadia is approved by the creditors and the bankruptcy court, the cost of funds will increase and interest margins earned
will decrease.
|      
|      
|      
|      
|(2)    |  | Earning assets are net of average nonaccruing assets and average deferred taxes applicable to leveraged leases.                                                   
|      
|      
|      
|      
|(3)    |  | 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 F
and G.

Following are the ratios of (losses) income to fixed charges and preferred
stock dividends (ratio) for each of the past five years:

|                        |  |      |      |      |  |      |      |      |  |  |      |  |  |  |      | 
|----------------------- |  | ---- | ---- | ---- |  | ---- | ---- | ---- |  |  | ---- |  |  |  | ---- | 
|Year Ended December 31,
|                       
|2000                    |  | 1999 |      | 1998 |  | 1997 |      | 1996
|                        |  |      |      |      |  |      |      |     
|(0.19)                  |  |      | 1.77 |      |  |      | 1.63 |      |  |  | 1.64 |  |  |  | 1.56 | 
|                        |  |      |      |      |  |      |      |      |  |  |      |  |  |  |      | 

For purposes of the ratio calculation, (losses) income consists of
(losses) income from continuing operations before income taxes and fixed
charges. Fixed charges include interest and related debt expense, a portion of
rental expense

10



---



representative of interest, and preferred stock dividends
grossed up to a pre-tax basis. The ratio declined in 2000 due to a loss from
continuing operations and an increase in the cost of funds, and income was
insufficient to cover fixed charges by $123.1 million. Declines in the interest
coverage ratio for FINOVA below a level of 1.25 to 1 constituted a default in
the covenants in the bank back-up facilities.

Leased Asset Realization Experience

FINOVA has historically 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, and in 2000 FINOVA
received proceeds from the sale of assets upon early lease termination that
were less than the carrying amounts. 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. During 1996 through 1999, the Company was able
to negotiate a number of early terminations on transactions where the market
value exceeded the residual value effectively reducing the number of such
transactions remaining in the portfolio at December 31, 2000. Sales proceeds on
lease terminations in excess of or less than carrying amounts are reported as
gains or losses on disposal of assets, respectively when the assets are sold.

Estimated residual values at December 31, 2000 were $1.023 billion and
consisted of $533.3 million of aircraft residuals, $397.3 million of real
estate residuals and $92.6 million for all other residuals. Estimated residual
values at December 31, 1999 were $998.7 million and consisted of $578.4 million
of aircraft residuals, $332 million of real estate residuals and $88.3 million
for all other residuals. Additionally, the Company had $235.2 million and
$135.9 million of assets off lease (primarily aircraft) that were held for sale
or lease, at December 31, 2000 and 1999, respectively. The estimated residual
values of direct finance and leveraged lease assets, in the accounts of FINOVA
at December 31, 2000 were 34.0% of the original cost of those assets (28.3%
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 December 31, 2000
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,
2000 for financing contracts excluding leveraged leases were approximately 7.4
and 5.2 years, respectively, and for leveraged leases were approximately 20.0
and 11.6 years, respectively. The comparable average initial term and remaining
term at December 31, 1999 for financing contracts excluding leveraged leases
were approximately 7.0 and 5.1 years, respectively, and for leveraged leases
were approximately 18.4 and 10.3 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.

Income from leasing transactions is affected by gains from asset sales on
lease termination and therefore, can be significantly less predictable than
income from lending activities. During the five years ended December 31, 2000,
the proceeds to FINOVA from sales of assets on early termination and at the
expiration of leases and the related carrying amounts are as follows:

|                       |  |                                   |         |           |  |                 |        |          |  |                |     |                |  |           |        |                 |  |   |        |  |  |  |     |  
|---------------------- |  | --------------------------------- | ------- | --------- |  | --------------- | ------ | -------- |  | -------------- | --- | -------------- |  | --------- | ------ | --------------- |  | - | ------ |  |  |  | --- | -
|Early Terminations     |  | Terminations at End of Lease Term
|                       |  |                                  
|                       |  |                                   |         |           |  | Carrying        |        | Proceeds |  |                |     |                |  | Estimated |        | Proceeds as a %
|                       |  | Sales                             |         | Amount    |  | as a % of       |        | Sales    |  | Residual Value |     | of Estimated  
|Year                   |  | Proceeds                          |         | of Assets |  | Carrying Amount |        | Proceeds |  | of Assets      |     | Residual Value
|                       |  |                                   |         |           |  |                 |        |          |  |                |     |               
|(Dollars in thousands)
|                      
|                      
|                      
|                      
|                      
|2000                   |  | $                                 | 27,695  |           |  | $               | 28,102 |          |  |                | 99  | %              |  | $         | 61,597 |                 |  | $ | 57,088 |  |  |  | 108 | %
|                      
|                      
|                      
|                      
|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 | %              |  |           | 78,372 |                 |  |   | 71,914 |  |  |  | 109 | %
|                      
|                      
|                      
|                      
|1996                   |  |                                   | 87,311  |           |  |                 | 75,910 |          |  |                | 115 | %              |  |           | 16,334 |                 |  |   | 13,872 |  |  |  | 118 | %

For a discussion of accounting for lease transactions, refer to Annex A,
Notes B and C.

Business Development

In light of the recent developments, FINOVA has effectively eliminated new
business development activities, and for the foreseeable future, intends to
focus on managing and maximizing the value of its existing portfolio. These
activities include the continued collection of its portfolio pursuant to
contractual terms and may include efforts to retain certain customer
relationships, restructure or terminate other relationships or sell certain
assets if buyers can be found at attractive prices. The

11



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Company will also
continue to focus on negotiating appropriate rates and fee structures with its
customers. While it is possible that new business opportunities may present
themselves in the future, no assurance can be given as to the Companys ability
to take advantage of those opportunities.

Customer Requirements

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 for existing
customers were 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 true 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s
Portfolio Management department or dedicated personnel within the business
units generally review financial statements to assess customer cash flow
performance and trends; periodically confirm operations of the customer as
practical; conduct periodic assessments, appraisals and/or verification 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 an impaired loan is determined to have
measurable impairment, 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 either the fair value of the collateral or
the present value of anticipated cash flows.

Delinquencies and Workouts

FINOVA monitors the timing of payments on its accounts, and has
established detailed centralized policies and procedures for collection of
delinquencies. Generally, 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, guarantors, if any, are usually
contacted to advise them of the situation and the potential obligation under
the guarantee agreement. If an invoice for interest becomes 31 days past due at
the end of the month, it is reported as delinquent. A notice of default is
generally sent prior to an invoice becoming 45 days past due if satisfactory
discussions are not in progress. 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.

While accounts may be moved to nonaccrual status prior to the 90th day of
delinquency, income recognition is generally suspended when accounts become
more than 90 days past due on the payment of interest, at which time FINOVA
vigorously pursues its legal remedies. Foreclosed or repossessed assets are
considered to be nonperforming, and are reported as such unless the assets
generate sufficient cash to result in a reasonable rate of return. Those
accounts are continually reviewed, and write-downs are taken as deemed
necessary. While pursuing collateral and obligors, FINOVA generally continues
to negotiate the restructuring or other settlement of the debt, as appropriate.

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

Governmental Regulation

FINOVAs domestic activities, including the financing of its operations,
are subject to a variety of federal and state regulations such as those imposed
by the Federal Trade Commission, the Securities and Exchange Commission, the
Consumer Credit Protection Act, the Equal Credit Opportunity Act and the
Interstate Land Sales Full Disclosure Act. Additionally, a majority of states
have ceilings on interest rates chargeable to customers in financing
transactions. Some of FINOVAs financing transactions and servicing 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

12



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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. FINOVAs operations during the
Reorganization Proceedings are also subject to oversight by the bankruptcy
court discussed more fully below in Legal Proceedings.

EMPLOYEES

At December 31, 2000, the
Company had 1,064 employees compared to 1,426 at
December 31, 1999. Of the employees, 715 were in its continuing operations and
349 were in discontinued operations at December 31, 2000, compared to 890 in
its continuing operations and 536 in discontinued operations at December 31,
1999. The decrease relates primarily to discontinuance and/or sale of certain
business units, the Companys efforts to trim operating expenses, and attrition
caused by the events of the past year. FINOVA believes it continues to retain
sufficient personnel to operate in the ordinary course. None of these employees
are covered by collective bargaining agreements. FINOVA believes its employee
relations are satisfactory.

As of April 13, 2001, the
employee headcount has been reduced to 733. A
substantial portion of the reductions since December 31, 2000 were employees
involved in originating and underwriting new transactions. Although the Company
has significantly reduced its workforce, it has continued to implement
retention plans throughout the organization designed to help retain employees
to enable it to efficiently operate its businesses, maximize recovery of its
portfolio and to be successful in its reorganization efforts. In connection
with this effort, the bankruptcy court has approved the final payment due
employees under a retention plan that was in effect since May of 2000 and
expires in April 2001. This plan was in effect for virtually all employees,
except the executive officers. New retention and severance plans covering all
employees, including the executive officers, have been approved by the Board of
Directors of FINOVA Group and are in the process of being submitted to the
bankruptcy court for approval.

OTHER MATTERS

The Company is working diligently toward finalization of a plan of
reorganization and intends to file the Plan with the bankruptcy court in the
second quarter of 2001. The Plan is subject to approval by the Companys
creditors as well as the bankruptcy court.

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, including successful completion of the Reorganization
Proceedings. Failure to fully implement its business strategy might result in adverse effects including materially adverse
impacts on its financial position and results of operations. The current focus on maximizing portfolio values and liquidity
while minimizing or eliminating new business generation will likely result in financial results that differ materially from
prior periods.                                                                                                                                                                                      
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | 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, impacting repayment of their obligations. 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 and estimated residual values. 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.

13



---





| |  | The cost of FINOVAs capital. That cost has increased significantly as a result of the events of 2000 and will increase
further if the Berkadia transaction is consummated. The impact of these developments will be a significant reduction in
profit margins.                                                                                                                 
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Loss of employees. FINOVA must retain a sufficient amount of employees to continue to monitor and collect its portfolio.
Failure to do so could result in additional losses.                                                                                                                                                                                                    
| 
| |  | Changes in air worthiness directives. These changes could have a significant impact on airplane values, especially FINOVAs
portfolio of airplanes, which are of an older vintage.                                                                                                                                                                                              
| 
| |  | 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. The
current financial condition of FINOVA also makes it difficult to record potential tax benefits that may never be
recognized.
| 
| |  | Necessary technological changes, such as implementation of information management systems, may be more difficult, expensive
or time consuming than anticipated.                                                                                                                                                                                                                 
| 
| |  | Potential liabilities associated with dispositions of assets or lines of business.                                                                                                                                                                                                                                                                                              
| 
| |  | Changes in interest rates could adversely affect financial results.                                                                                                                                                                                                                                                                                                             
| 
| |  | 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.

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 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. Other
than the matters described below, FINOVA believes that any resulting liability
for their litigation matters should not materially affect FINOVAs financial
position, results of operations or cash flows. One or more of the following
matters, for which nominal accruals have been made, could have a material
adverse impact on FINOVAs financial position, results of operations or cash
flows.

Between March 29 and May 23, 2000, five shareowner lawsuits were filed
against FINOVA Group and Samuel Eichenfield, FINOVA Groups former chairman,
president, and chief executive officer; two of the lawsuits also named FINOVA
as a defendant, and one named three other executive officers. All of the
lawsuits purport to be on behalf of the named plaintiffs (William K. Steiner,
Uri Borenstein, Jerry Krim, Mark Kassis, and the Louisiana School
Employees Retirement System), and others who purchased FINOVA common stock
during the class period of July 15, 1999, through either March 26, 2000, or May
7, 2000. The suit brought by the Louisiana School Employees Retirement System
also purports to be on behalf of all those who purchased FINOVA 7.25% Notes
which are due November 8, 2004, pursuant to the registration statement and
prospectus supplement dated November 1, 1999.

14



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In an order by the U.S. District Court for the District of Arizona dated
August 30, 2000, these five lawsuits were consolidated and captioned In re:
FINOVA Group, Inc. Securities Litigation. The court also selected the
Louisiana School Employees Retirement System (LSERS) as the lead plaintiff in
the consolidated cases. LSERS filed its Amended Consolidated Complaint on
September 29, 2000, naming FINOVA Group, FINOVA, Samuel Eichenfield, Matthew
Breyne, and Bruno Marszowski as defendants. The consolidated amended complaint
generally alleges that the defendants made materially misleading statements
regarding FINOVAs loss reserves, and otherwise violated the federal securities
laws in an effort to bolster FINOVA Groups stock price, among other reasons.
Among other things, the complaint seeks unspecified damages for losses incurred
by shareowners, plus interest, and other relief, and rescission with regard to
the notes purchased.

Since consolidation of the original five shareowner lawsuits, other
related lawsuits have been initiated against the Company and current and former
officers and directors. Three shareowner lawsuits were filed in the United
States District Court for the Middle District of Tennessee, in which the named
plaintiffs (John Cartwright, Sirrom Partners and Sirrom G-1, and Caldwell
Travel) assert claims relating to the Companys acquisition in 1999 of Sirrom
Capital Corporation, and the exchange of shares of Sirrom stock for shares of
FINOVA Group stock. The Cartwright complaint purports to be a class action
lawsuit on behalf of all Sirrom shareowners that exchanged their Sirrom stock
for FINOVA Group stock as a result of the acquisition. The defendants named are
Sirrom Capital Corporation, Samuel Eichenfield, John W. Teets, Constance
Curran, G. Robert Durham, James L. Johnson, Kenneth Smith, Shoshana Tancer,
Bruno Marszowski, and FINOVA Group. The complaints allege that the defendants
made materially misleading statements regarding FINOVAs loss reserves, and
otherwise violated the federal securities laws in an effort to reduce the total
consideration provided to Sirrom shareowners at the time of the acquisition.
The complaints seek unspecified damages for losses incurred by shareowners,
plus interest, and other relief.

On January 4, 2001, the United States District Court for the Middle
District of Tennessee granted a motion brought by FINOVA and the other
defendants to transfer the Cartwright and Sirrom Partners cases to the United
States District Court for the District of Arizona. The plaintiff in Caldwell
Travel agreed to dismiss that case without prejudice. Pursuant to a
Stipulation and Order entered in March 2001, the Cartwright case has been
consolidated for all purposes with the previous five cases in the FINOVA Group
Securities Litigation, and the Sirrom Partners case has been consolidated for
all pre-trial purposes. In April 2001, the lead plaintiffs are scheduled to
file a Second Amended Consolidated Complaint.

There have also been two shareowners derivative lawsuits filed against
current and former officers and directors of FINOVA Group, one in the United
States District Court for the District of Arizona, and one in the Court of
Chancery for Newcastle County, Delaware. Both complaints were filed on
September 11, 2000, and both purport to be brought by the named plaintiffs
(William Kass and Cindy Burkholter) derivatively on behalf of the Company
against the officers and directors, alleging generally breaches of fiduciary
and other duties as directors. These actions seek unspecified money damages
and other relief. As with the consolidated securities litigation, the
allegations center generally on claims that there were materially misleading
statements regarding FINOVAs loss reserves. In both of these actions, the
plaintiffs have agreed to a stay of all proceedings pending the final
determination of the motion to dismiss in the consolidated securities
litigation.

Finally, another shareowners derivative lawsuit was filed on September
13, 2000, in the Circuit Court for Davidson County, Tennessee, by Ronald
Benkler, purportedly on behalf of Sirrom Capital Corporation, against several
former officers of Sirrom Capital Corporation. The complaint alleges that the
Sirrom officers breached various duties to Sirrom in connection with the
acquisition of Sirrom by the Company in 1999, and the exchange of Sirrom stock
for FINOVA Group stock as a result of the acquisition. The plaintiffs have
agreed to a stay of discovery in this case, pending the final determination of
the motion to dismiss the consolidated securities litigation.

FINOVA believes the claims in all of these securities and derivative cases
are without merit. FINOVA and the other defendants intend to vigorously defend
against these claims.

On March 6, 2001, one of FINOVAs subsidiaries, FINOVA (Canada) Capital
Corporation, had an involuntary Petition for Receiving Order filed against it
in the Ontario, Canada, Superior Court of Justice in Bankruptcy. The action was
filed by the Bank of Nova Scotia, as agent for the lenders on a $150 million
(Canadian) bank facility. That same day, the courts in Canada issued a
temporary injunction prohibiting transfers of assets out of the Canadian
subsidiary to its other affiliates. FINOVA has not received service of process
in those proceedings, but has agreed to refrain from transferring assets to its
affiliates without court order.

On March 7, 2001, FINOVA Group, FINOVA and seven of their subsidiaries
filed voluntary petitions for protection from creditors pursuant to Chapter 11,
Title 11, United States Code, in the United States Bankruptcy Court for the
District of Delaware (the Bankruptcy Court) (the Reorganization
Proceedings). The other subsidiaries were FINOVA (Canada) Capital Corporation,

15



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FINOVA Capital plc, FINOVA Loan Administration Inc., FINOVA Mezzanine Capital
Inc., FINOVA Portfolio Services, Inc., FINOVA Technology Finance Inc., and
FINOVA Finance.

FINOVA obtained orders from the bankruptcy court on the first day
permitting FINOVA to continue its operations in the ordinary course including
honoring its obligations to borrowers. The orders also permit the Filing
Entities to pay certain prepetition expenses and claims, such as to employees
(other than executive officers, with exceptions), taxing authorities and
foreign trade vendors. The cases will be jointly administered.

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 quarter of 2000 were $11 million, $11 million, $11 million and
$0 million, respectively.

ITEM 6. SELECTED FINANCIAL DATA.

Omitted.

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

See pages 1  14 of Annex A.

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

See page 15 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.

Not applicable.

16



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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.

PART IV

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



|a) |  | Documents filed.
|-- |  | ----------------



| | 1. |  | Financial Statements.
| | -- |  | ---------------------



| |                                                                       
| | ----------------------------------------------------------------------
| | The following financial information of FINOVA are included in Annex A:

|                                                                                      |  |        
|------------------------------------------------------------------------------------- |  | -------
|                                                                                      |  | Annex A
|                                                                                      |  | Page   
|                                                                                      |  |        
|Managements Discussion and Analysis of Financial
Condition and Results of Operations |  | 1-14   
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Quantitative and Qualitative Disclosure about Market Risk                             |  | 15     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Report of Independent Auditors
and Independent Auditors Report                       |  | 16-17  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Consolidated Balance Sheets                                                           |  | 18     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Statements of Consolidated Operations                                                 |  | 19     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Statements of Consolidated Shareowners Equity                                        |  | 20     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Statements of Consolidated Cash Flows                                                 |  | 21     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Notes to Consolidated Financial Statements                                            |  | 22-50  
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Supplemental Selected Financial Data (unaudited)                                      |  | 51     



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

17



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| | 3. |  | Exhibits.
| | -- |  | ---------

|            |  |                                                                                                                                                                                                                                                                                      
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No.
|           
|(3.A)       |  | Certificate of Incorporation, as amended (incorporated by
reference from FINOVAs Report on Form 10-K for the year
ended December 31, 1994 (the 1994 10-K) Exhibit 3.A).                                                                                                           
|           
|           
|           
|           
|           
|           
|           
|           
|           
|(3.B)       |  | Bylaws, as amended (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 Capital and the Trustee named therein
(incorporated by reference from the Greyhound Financial
Corporation Registration Statement on Form S-3,
Registration No. 33-51216, Exhibit 4).                                  
|           
|           
|           
|           
|           
|           
|           
|           
|           
|(4.E)       |  | Form of Indenture dated as of October 1, 1995 between
FINOVA and the Trustee named therein (incorporated by
reference from FINOVAs report on Form 8-K dated October
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, filed on
May 28, 1999, Exhibit 4.8.B).                                   
|           
|           
|           
|           
|           
|           
|           
|           
|           
|(4.G)       |  | 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, filed on May 28, 1999, Exhibit 4.8.C).                                                                       
|           
|           
|           
|           
|           
|           
|           
|           
|           
|(4.H)       |  | 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, filed on May 28, 1999,
Exhibit 4.8.A).                                              
|           
|           
|           
|           
|           
|           
|           
|           
|           
|(4.I)       |  | 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
from FINOVA Group's Report on Form 10-K for the year ended December
31, 1999, Exhibit 4.6.4).           
|           
|           
|           
|           
|           
|           
|           
|           
|           
|(4.J)       |  | 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, Exhibit 4.8).                
|           
|           
|           
|           
|           
|           
|           
|           
|           
|(4.K)       |  | Commitment Letter dated February 26, 2001 among FINOVA
Group, FINOVA, Berkshire Hathaway Inc., Leucadia National
Corporation and Berkadia, LLC (incorporated by reference
from FINOVA Groups Report on Form 8-K dated February 26,
2001 (the February 26, 2001 8-K), Exhibit 10.A.

18



---



|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No.
|           
|           
|           
|           
|           
|           
|           
|           
|           
|           
|(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 1999
10-K, Exhibit 10.A.6).                                                                                                                                                                                                                                                                                   
|           
|           
|           
|           
|           
|           
|           
|           
|           
|(10.B)      |  | Credit Agreement (Short-Term Facility) dated as of May
16, 1994 among FINOVA Capital, 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 2000 10-K,
Exhibit 10.B.6).                                                                                                                                                                                                                                                                                                                                                
|           
|           
|           
|           
|           
|           
|           
|           
|           
|(10.C)      |  | Exhibits relating to management compensation and omitted
due to the reduced disclosure format, and can be found as
exhibits to FINOVA Groups 2000 10-K.                                                                                                                                                                                                                                                                                                                   

19



---



|            |  |                                                                                                                                                                                                                                               
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No.
|           
|           
|           
|           
|           
|           
|           
|           
|           
|           
|(10.D)      |  | Management Agreement dated February 26, 2001 among
FINOVA, Leucadia National Corporation and Leucadia
International Corporation (incorporated by reference from
FINOVAs Report on Form 8-K dated February 26, 2001,
Exhibit 10.B).+          
|           
|           
|           
|           
|           
|           
|           
|           
|           
|(10.D.1)    |  | Amended and Restated Management Services Agreement dated
as of April 3, 2001 among FINOVA Group, Leucadia National
Corporation and Leucadia International Corporation (incorporated by
reference from FINOVA Group's 2000 10K, Exhibit 10.7).+
|           
|           
|           
|           
|           
|           
|           
|           
|           
|(12)        |  | Computation of Ratio of (Losses) Income to Fixed Charges
and Preferred Stock Dividends.*                                                                                                                                                      
|           
|           
|           
|           
|           
|           
|           
|           
|           
|(21)        |  | Subsidiaries.*                                                                                                                                                                                                                                
|           
|           
|           
|           
|           
|           
|           
|           
|           
|(23)        |  | Consent of Independent Auditors from Ernst & Young LLP.*                                                                                                                                                                                      
|           
|           
|           
|           
|           
|           
|           
|           
|           
|(23.1)      |  | Independent Auditors Consent from Deloitte & Touche LLP.*                                                                                                                                                                                    
|           
|           
|           
|           
|           
|           
|           
|           
|           
|(24)        |  | Powers of Attorney.*                                                                                                                                                                                                                          



---

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



| | 4. |  | Reports on Form 8-K.
| | -- |  | --------------------

A report on Form 8-K was filed on January 29, 2001, which reported under
Item 5 the termination with Leucadia National Corporation
noted above.

A report on Form 8-K was filed on February 28, 2001, which reported under
Item 5 the agreements among FINOVA Group, FINOVA, Berkshire Hathaway Inc.,
Leucadia National Corporation, Berkadia LLC and Leucadia International
Corporation.

A report on Form 8-K was filed on March 13, 2001 which reported under Item
5 the filing by FINOVA Group, FINOVA and seven subsidiaries for protection
pursuant to Chapter 11, Title 11, United States Code in the United States
Bankruptcy Court, changes in executive management and other matters.

A report on Form 8-K, dated April 2, 2001, was filed by FINOVA which
reported under Items 5 and 7 the unaudited revenues, net income and selected
financial information for fourth quarter and year ended December 31, 2000.

20



---



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 April 13, 2001.

|    |  |                                                                                                                            
|--- |  | ---------------------------------------------------------------------------------------------------------------------------
|    |  | FINOVA CAPITAL CORPORATION                                                                                                 
|   
|   
|   
|   
|    |  |                                                                                                                            
|   
|   
|   
|   
|By: |  | /s/ William J. Hallinan                                                                                                    
|    |  |                                                                                                                            
|    |  | William J. Hallinan
President and Chief Executive Officer
(Chief Executive Officer)                                        
|   
|   
|   
|   
|    |  |                                                                                                                            
|   
|   
|   
|   
|By: |  | /s/ Bruno A. Marszowski                                                                                                    
|    |  |                                                                                                                            
|    |  | Bruno A. Marszowski
Senior Vice President  Controller and Chief Financial Officer
(Chief Accounting and Financial Officer)

21



---



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:

|                            |  |                            
|--------------------------- |  | ---------------------------
|*                           |  | *                          
|                            |  |                            
|G. Robert Durham (Chairman) |  | Kenneth R. Smith (Director)

* Signed on April 13, 2001 pursuant to Powers of Attorney dated February 8, 2001.

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

22



---






ANNEX A

FINOVA CAPITAL CORPORATION
INDEX TO CONSOLIDATED FINANCIAL INFORMATION

|                                                                                      |                                                |  |      |      | 
|------------------------------------------------------------------------------------- | ---------------------------------------------- |  | ---- | ---- | 
|                                                                                      |                                                |  | Page
|                                                                                      |                                                |  |     
|Managements Discussion and Analysis of Financial Condition and Results of Operations |                                                |  | A-1  |     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Quantitative and Qualitative Disclosure about Market Risk                             |                                                |  | A-15 |     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Consolidated Financial Statements                                                     |                                                |  |      |     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Report of Independent Auditors                 |  |      | A-16 | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Independent Auditors Report                   |  |      | A-17 | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Consolidated Balance Sheets                    |  |      | A-18 | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Statements of Consolidated Operations          |  |      | A-19 | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Statements of Consolidated Shareowners Equity |  |      | A-20 | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Statements of Consolidated Cash Flows          |  |      | A-21 | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                      | Notes to Consolidated Financial Statements     |  |      | A-22 | 
|                                                                                     
|                                                                                     
|                                                                                     
|                                                                                     
|Supplemental Selected Financial Data (unaudited)                                      |                                                |  | A-51 |     

A-i





---



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 (FINOVA Group). FINOVA Group is a financial
services holding company. Through its principal operating subsidiary FINOVA,
the FINOVA Group has provided a broad range of financing and capital markets
products, primarily to mid-size businesses. FINOVA Capital has been in
operation since 1954.

On March 7, 2001, The FINOVA Group Inc., FINOVA Capital Corporation and
seven of their subsidiaries filed for protection pursuant to Chapter 11, Title
11, of the United States Code to enable them to restructure their debt (the
Reorganization Proceedings). Historically, the Company has relied upon
borrowed funds together with internal cash flow to finance its operations.
Profit has largely been recorded from the spread between the cost of borrowing
and the rates paid by its customers, less operating costs. The Company also
generates revenues through loan servicing and related activities and the sale
of assets. Beginning late in the first quarter of 2000, a series of events
impeded FINOVAs access to lower cost capital in the public and private
markets. These events are generally described below.

Recent Developments and Business Outlook

On March 27, 2000, FINOVA Group announced the retirement of its Chairman,
President and Chief Executive Officer, Samuel L. Eichenfield, for personal and
health reasons. Following Mr. Eichenfields retirement as a director and
officer, FINOVA Groups board of directors elected Matthew M. Breyne as a
director, President and Chief Executive Officer of FINOVA Group and Chairman,
President and Chief Executive Officer and a director of FINOVA. FINOVA also
announced that it would take an $80 million pre-tax charge to earnings in the
first quarter of 2000 to increase loss reserves and provide for payment of
deferred compensation and executive severance. The additional loss reserves
related to the replenishment of reserves after a write-off of a loan to a
single customer in the Distribution & Channel Finance line of business which
had previously been partially reserved. The remainder of the charge was used to
provide for payment of deferred compensation and executive severance to Mr.
Eichenfield. Following these announcements, some of the credit rating agencies
downgraded or placed on credit watch FINOVAs senior debt and commercial paper
ratings.

In May 2000, $2.1 billion of FINOVAs 364-day revolving credit agreements
were scheduled to expire. These agreements were part of the Companys $4.7
billion bank facilities, which were in place to provide a back-up mechanism for
its commercial paper program. On May 5, 2000, FINOVAs banks renewed a $500
million facility but committed to renewing only approximately $1.1 billion of
the $1.6 billion of back-up facilities that expired on May 15, 2000.
Historically, a significant portion of FINOVAs business was financed with
commercial paper, which was reissued when it matured. The Company also borrowed
funds in the form of publicly traded debt securities with staggered maturities.
Without full coverage after May 15 for outstanding commercial paper under the
back-up bank facilities, FINOVA drew down on approximately $4.5 billion of
domestic back-up bank lines to meet maturing commercial paper obligations and
other debt obligations. This resulted in additional debt rating downgrades.

In May 2000, FINOVA structured a 364-day commitment with a bank to sell at
FINOVAs option up to $375 million of commercial equipment loans and direct
financing lease receivables on a revolving basis.

On May 8, 2000, FINOVA announced that it had engaged Credit Suisse First
Boston to assist in the exploration of strategic alternatives with financial,
strategic and other potential partners. Alternatives included a sale of the
Company or obtaining a significant equity investment.

During July 2000, FINOVA structured a sale with an independent third party
acting as structuring agent, which included a commitment to purchase beneficial
interests up to $500 million in corporate finance loans on a revolving basis.
In February 2001, FINOVA purchased the outstanding beneficial
interests.

During the third quarter of 2000, FINOVA discontinued and offered for sale
its Corporate Finance (including Business Credit and Growth Finance) and
Distribution & Channel Finance businesses. On August 28, 2000, FINOVA completed the sale of substantially all the
assets of its Commercial Services division to GMAC Commercial Credit LLC, a
wholly owned subsidiary of General Motors Corporation, for approximately $235
million.

In October 2000, FINOVA engaged Jay Alix & Associates to assist in
connection with the development of strategic and financial planning, including
re-negotiation of its bank debt. The engagement was generally concluded in
March 2001, following the execution of the agreements with Berkshire Hathaway
Inc. (Berkshire Hathaway), Leucadia National Corporation (Leucadia) and
Berkadia, LLC (Berkadia), noted below.

A-1



---



FINOVA CAPITAL CORPORATION

On November 9, 2000, the board of directors voted to suspend the Companys
quarterly common stock dividend.

On November 10, 2000, FINOVA announced that it entered into a letter
agreement with Leucadia with respect to an equity investment in the Company. A
Securities Purchase Agreement was entered into on December 20, 2000. On January
20, 2001, FINOVA and Leucadia mutually agreed to terminate the Securities
Purchase Agreement.

On February 1, 2001, FINOVA sold approximately $309 million of Corporate
Finance assets to Guaranty Business Credit Corporation at a discount of $9.2
million.

On February 26, 2001,
FINOVA Group and FINOVA entered into a commitment
letter with Berkshire Hathaway, Leucadia and Berkadia, an entity jointly owned
by Leucadia and Berkshire Hathaway, pursuant to which Berkadia committed to
lend $6.0 billion to FINOVA, to facilitate a Chapter 11 restructuring of the
outstanding debt of FINOVA and its principal subsidiaries. The
$6.0 billion five-year term loan will be secured by substantially all of
the assets of FINOVA and its subsidiaries and guaranteed on a secured basis by
FINOVA Group and substantially all of the subsidiaries of FINOVA (the Berkadia
Loan). The balance of FINOVAs bank and bond indebtedness will be restructured
into approximately $5 billion of new ten-year senior notes of FINOVA Group
(the New Senior Notes). Berkadias commitment is subject to various conditions,
including Berkadias satisfaction with FINOVAs
Chapter 11 Plan and bankruptcy court and necessary creditor
approvals. In connection with the commitment letter, FINOVA also entered into a
Management Services Agreement with Leucadia and its subsidiary, Leucadia
International Corporation, which has been amended and restated. The terms of
this commitment letter and the management services agreement are described more
fully below in Berkadia Commitment  Proposed Restructuring Plan.

On February 27, 2001, FINOVA announced a moratorium on repayment of
principal on its outstanding bank and bond debt. The purpose of the moratorium
was to enable all creditors to be treated equitably in the debt restructuring
process. In connection with that moratorium, FINOVA did not make a $50 million
principal payment due on February 27, 2001 with respect to its 5.98% notes due
2001, which constituted an event of default under the trust indenture related
to those notes and a cross default under substantially all of FINOVAs $11
billion of bank and bond indebtedness. The event of default also affected the
interest rate swaps and securitizations the Company had entered into by
allowing for immediate termination or other modifications, and substantially all of
the Companys swaps were terminated. In the first quarter of 2001, in
conjunction with the Reorganization Proceedings, the Company suspended paying
dividends on the convertible trust originated preferred securities
and interest on the underlying convertible debentures.

On March 5, 2001, FINOVA
announced that Matthew M. Breyne resigned as a director and the Companys President and Chief Executive Officer. The board of
directors elected FINOVA Group board member G. Robert Bull Durham as Chairman
and elected General Counsel and Secretary William J. Hallinan to the additional
positions of President and Chief Executive Officer of FINOVA Group and the
President, Chief Executive Officer and General Counsel of FINOVA.

On March 6, 2001, one of FINOVAs subsidiaries, FINOVA (Canada) Capital
Corporation, had a petition for Receiving Order filed against it in Ontario,
Canada. That action has not been served on FINOVA. See Legal Proceedings for
more information on this matter.

On March 7, 2001, The FINOVA Group Inc., FINOVA Capital Corporation and
seven of their subsidiaries filed for protection pursuant to Chapter 11, Title
11, of the United States Code, in the United States Bankruptcy Court for the
District of Delaware to enable them to restructure their debt (the
Reorganization Proceedings).

The bankruptcy court approved first-day orders pertaining to, among other
items, customers, employees and vendors. The purpose of the first-day orders
was to allow FINOVA and its subsidiaries to continue conducting their
businesses substantially without hindrance from the Reorganization Proceedings.
FINOVA has been authorized to continue honoring all customer commitments, and
to pay certain prepetition claims (excluding, among other items, all amounts
related to its $11 billion of bank and bond debt), in its discretion, including
those to employees (other than executive officers with certain exceptions),
taxing and other governmental authorities, claims essential to the ability to
honor commitments, and to foreign trade vendors. See Legal Proceedings for
more information on the Reorganization Proceedings.

In light of these events, FINOVA has effectively eliminated all new
business development activities, and for the foreseeable future,
intends to focus on
managing and maximizing the value of its existing portfolio. These activities
will include the continued collection of its portfolio pursuant to contractual
terms and may include efforts to retain certain customer relationships,
restructure or terminate

A-2



---



FINOVA CAPITAL CORPORATION

other relationships or sell certain assets if buyers can be found at
attractive prices. The Company will also continue to focus on negotiating
appropriate rates and fee structures with its customers. While it is possible
that new business opportunities may present themselves in the future, no
assurance can be given as to the Companys ability to take advantage of those
opportunities.

Berkadia Commitment  Proposed Restructuring Plan

The following describes the Berkadia Commitment as set forth in the
Commitment Letter signed on February 26, 2001, Consummation of the Berkadia
Loan and related transactions contemplated by the Commitment Letter is subject
to approval of the bankruptcy court, necessary creditor approvals, and other
material conditions, including Berkadias satisfaction with the Companys
Chapter 11 Plan. There can be no assurance that those approvals will be
obtained or that the other conditions will be satisfied.

The commitment expires on August 31, 2001, or earlier, if certain
conditions are not satisfied, or certain events occur. The $6 billion Berkadia Loan will be made to FINOVA. Berkadias commitment
for the loan has been guaranteed 90% by Berkshire Hathaway and 10% by Leucadia,
with Berkshire Hathaway providing a secondary guarantee of the obligations
guaranteed by Leucadia. Berkadia expects to finance its funding commitment and
Berkshire Hathaway will provide Berkadias lenders with a 90% primary guarantee
of that financing, with Leucadia providing a 10% primary guarantee and
Berkshire Hathaway providing a secondary guarantee of Leucadias guarantee.
Upon completion of the Plan as currently contemplated, Berkadia (or Berkshire
Hathaway and Leucadia in the aggregate) will receive common stock representing
51% of FINOVA Groups outstanding shares on a fully diluted basis and the
existing shareowners of FINOVA Group will retain their existing shares.
Berkadia will be entitled to designate a majority of FINOVAs board of
directors upon effectiveness of the Plan. The Berkadia Loan will be guaranteed
on a secured basis by FINOVA and substantially all subsidiaries of FINOVA Group
and FINOVA.

The Berkadia Loan will bear interest at an annual rate equal to the
greater of 9% or LIBOR on each day plus 3%. Interest on the Berkadia Loan will
be calculated daily and will be payable quarterly pursuant to the terms of the
Berkadia Loan. In addition, an annual facility fee will be payable monthly at
the rate of 25 basis points on the outstanding principal amount of the Berkadia
Loan. After payment of interest on the Berkadia Loan, payment of operating
expenses and taxes and establishing reserves for customer commitments and other
corporate expenses, any remaining available cash (as determined under the
Berkadia Loan) will then be used for payment of interest due on the New Senior
Notes. Thereafter, 100% of any available cash flow and net proceeds from asset
sales will be used to pay principal on the Berkadia Loan without premium. Any
remaining principal and accrued and unpaid interest on the Berkadia Loan will
be due at maturity, which will be five years from funding.

Subject to necessary approval of creditors and the bankruptcy court and
various other conditions, pursuant to the proposed Plan, FINOVA will use the
proceeds of the Berkadia Loan to pay down its existing bank and publicly traded
indebtedness on a pro rata basis. The balance of FINOVAs bank and bond
indebtedness (approximately $5.3 billion) will be restructured into ten-year
New Senior Notes of FINOVA.

The New Senior Notes will bear interest at the weighted average rate of
FINOVAs outstanding bank and bond debt (excluding default interest and
penalties, if any) and will be secured by a second priority security interest
in the stock of FINOVA. Enforcement of the New Senior Note security interests
will not be allowed until the Berkadia Loan is paid in full. Interest on the
New Senior Notes will be payable semi-annually only out of available cash, if
any, determined in accordance with the terms of the New Senior Notes. No
payments of principal will be made on the New Senior Notes until the Berkadia
Loan is paid in full. After payment in full of the Berkadia Loan, available
cash flow from FINOVA, after paying operating expenses and taxes and
establishing reserves for customer commitments and other corporate expenses,
will first be used for payment of interest on the New Senior Notes. Thereafter,
available cash determined in accordance with the terms of the New Senior Notes
will be used first to pay or to fund a reserve to pay interest on FINOVAs
outstanding 5-1/2% Convertible Subordinated Debentures due 2016
(which will be
distributed upon consummation of the proposed Plan to the holders of the FINOVA
Group Trust Originated Preferred Securities) and then to make semi-annual prepayments
of principal on the New Senior Notes and distributions (or reserves for distributions) to FINOVA common
shareowners with a total of 95% of the remaining available cash to be used for
principal payments on the New Senior Notes and 5%to be used for distributions
to shareowners. After payment in full of the outstanding principal of the New
Senior Notes, 95% of any available cash of FINOVA Capital will be used to pay
contingent cash flows rights to holders of the New Senior Notes in an aggregate amount
up to $100 million.

Completion of the transactions contemplated by the Berkadia Commitment Letter is
subject to a number of conditions, including the negotiation and approval of
definitive loan documentation, Berkadias approval of the terms and conditions
of FINOVA Group and FINOVAs Plan, bankruptcy court and necessary creditor
approval of the Plan, the issuance of up to 51% of FINOVA Groups common stock
to Berkshire, Leucadia or their designees, and designation by Berkadia of a majority of
directors as noted above.

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FINOVA CAPITAL CORPORATION

Berkadia has received a $60 million commitment fee and subject to
bankruptcy court approval, will receive an additional $60 million fee upon
funding or if the commitment is not funded (except in certain limited
circumstances). In addition, FINOVA has agreed to reimburse Berkadia, Berkshire
Hathaway and Leucadia for all fees and expenses incurred in connection with
Berkadias commitment and the financing of its funding obligation under the
commitment.

In connection with the Commitment Letter, the Company entered into a
ten-year management agreement with Leucadia pursuant to which, prior to the
effective date of the Plan, Leucadia will provide advice and assistance to
FINOVA related to the restructuring and management of FINOVAs asset portfolio, subject to oversight by
the Board of Directors of FINOVA Group or a special committee of the Board.
After the effective date, Leucadia will have responsibility for the general
management of FINOVA, subject to the authority of the Board. For these
services, Leucadia will receive an annual fee of $8 million, the first of which
was paid when the agreement was signed.

For further details, see FINOVAs Report on Form 8-K filed on February 28,
2001. There can be no assurance these transactions will be consummated on the
proposed terms or otherwise.

Results of Operations

The following table summarizes FINOVAs operating results for the years
ended December 31, 2000, 1999 and 1998:

|                                                     |  |      |        |      |  |      |        |   |  |   |        |  
|---------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|(Dollars in millions)                                |  | 2000 |        | 1999 |  | 1998
|                                                     |  |      |        |      |  |     
|Interest margins earned                              |  | $    | 453.6  |      |  | $    | 473.2  |   |  | $ | 379.8  |  
|                                                    
|                                                    
|                                                    
|                                                    
|Volume-based fees                                    |  |      | 1.3    |      |  |      | 10.3   |   |  |   | 24.8   |  
|                                                     |  |      |        |      |  |      |        |   |  |   |        |  
|Operating margin                                     |  |      | 454.9  |      |  |      | 483.5  |   |  |   | 404.6  |  
|                                                    
|                                                    
|                                                    
|                                                    
|Provision for credit losses                          |  |      | (643.0 | )    |  |      | (22.4  | ) |  |   | (48.5  | )
|                                                    
|                                                    
|                                                    
|                                                    
|(Losses) gains on investments and disposal of assets |  |      | (168.6 | )    |  |      | 67.9   |   |  |   | 27.9   |  
|                                                    
|                                                    
|                                                    
|                                                    
|Operating expenses                                   |  |      | (399.4 | )    |  |      | (168.7 | ) |  |   | (147.1 | )
|                                                    
|                                                    
|                                                    
|                                                    
|Income tax benefit (expense)                         |  |      | 213.2  |      |  |      | (138.3 | ) |  |   | (90.4  | )
|                                                     |  |      |        |      |  |      |        |   |  |   |        |  
|(Loss) income from continuing operations             |  |      | (542.9 | )    |  |      | 222.0  |   |  |   | 146.5  |  
|                                                    
|                                                    
|                                                    
|                                                    
|(Loss) income from discontinued operations           |  |      | (55.4  | )    |  |      | (3.0   | ) |  |   | 17.6   |  
|                                                    
|                                                    
|                                                    
|                                                    
|Loss on disposal of discontinued operations          |  |      | (337.7 | )   
|                                                     |  |      |        |      |  |      |        |   |  |   |        |  
|                                                    
|                                                    
|                                                    
|                                                    
|Net (loss) income                                    |  | $    | (936.0 | )    |  | $    | 219.0  |   |  | $ | 164.1  |  
|                                                     |  |      |        |      |  |      |        |   |  |   |        |  

The following description of FINOVAs business includes a discussion of
the Companys historical business activities. Since the Companys filing for
bankruptcy protection, FINOVA has effectively eliminated all new business
development activities, and for the foreseeable future, intends to focus on
managing and maximizing the value of its existing portfolio. These activities
will include the continued collection of its portfolio pursuant to contractual
terms and may include efforts to retain certain customer relationships,
restructure or terminate other relationships or sell certain assets if buyers
can be found at attractive prices. The Company will also continue to focus on
negotiating appropriate rates and fee structures with its customers. While it
is possible that new business opportunities may present themselves in the
future, no assurance can be given as to the Companys ability to take advantage
of those opportunities. Accordingly, the description is presented to provide an
understanding of the Companys current assets, liabilities and results of
operations but should not be interpreted to mean that the Company can continue
to make such investments.

2000 Compared to 1999

The results for 2000 were adversely impacted by a number of events, which
are generally listed in chronological order in the section of this report
captioned Recent Developments and Business Outlook. As the
year progressed, the U.S. economy began to show signs of weakening and FINOVAs
portfolio of leases and loans began to experience higher levels of
delinquencies and nonaccruing assets. The impact of these events and current
economic conditions resulted in increased levels of problem accounts and higher
cost of funds (resulting in lower interest margins earned), higher reserve
requirements, higher write-offs, losses on investments and disposal of assets,
impairment of intangible assets, reduced tax benefits, and the decision to exit
certain businesses.

The impact of these adverse developments resulted in FINOVA reporting a
loss from continuing operations of $542.9 million and a loss from discontinued
operations of $393.1 million for a total net loss of $936.0 million for the
year 2000. The

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FINOVA CAPITAL CORPORATION

comparable results for 1999 were net income of $222.0 million from
continuing operations and a net loss of $3.0 million from discontinued
operations, resulting in net income of $219.0 million. A discussion of the
major variances in the individual profit and loss categories follows:

Continuing Operations

Loss from Continuing Operations.The decrease from continuing operations
in 2000 when compared to 1999 was primarily due to the following:



| |  | Higher loss provisions to bolster the reserve for credit losses.
|- |  | ----------------------------------------------------------------
| 
| |  | Higher write-offs of financing contracts.                       
| 
| |  | Losses on investments and assets held for sale.                 
| 
| |  | Increases in the Companys cost of funds due to                 

-  Several reductions in credit ratings

-  Higher
costs associated with borrowing under the Companys domestic
commercial paper back-up bank
          facilities



| |  | An increase in the level of nonaccruing
assets due in part to the weakening economy.                                                                                 
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | The costs to exit the origination and sale of commercial real estate loans to the Commercial Mortgaged Back Securities
(CMBS) market in the second quarter of 2000.
| 
| |  | Higher operating expenses, including employee retention and severance expenses and the charge-off of unamortized goodwill
that was determined to be impaired.        
| 
| |  | The inability to fully recognize all federal and state income tax benefits during 2000.                                                                              

Interest Margins Earned.Interest margins earned represents the difference
between (a) interest, fee, lease and other income earned from financing
transactions and (b) interest expense and depreciation on operating leases.
Interest margins earned declined by $19.6 million to $453.6 million in 2000
from $473.2 million in 1999. Interest margins earned as a percent of average
earning assets also declined in 2000 to 4.7% from 5.4% in 1999. The decreases
were due primarily to higher cost of funds caused by the events of 2000,
increased levels of nonaccruing assets and investments and lower nonrecurring
income. Various downgrades of its senior debt ratings and the elimination of
its commercial paper program (caused by the inability to renew its back-up bank
facilities and resulting draw downs under those facilities) resulted in
FINOVAs annual cost of funds (in the form of the all in spread over LIBOR)
applicable to the $4.5 billion term-out of its domestic commercial paper
back-up bank facilities, to increase by 1.16%.

The negative impact to income from higher cost of funds more than offset
the income effects from the higher level of average earning assets during 2000
which were up $890 million over 1999 ($9.604 billion in 2000 vs. $8.714 billion
in 1999). The increase in average earning assets was much higher than the
increase in ending managed assets which totaled $10.5 billion at December 31,
2000 compared to $10.4 billion at year-end 1999. The size of the portfolio has
been declining since March of 2000 due to lower volumes of new business during
the latter quarters of 2000. New business for 2000 was $2.9 billion compared to
$4.1 billion in 1999, with fourth quarter 2000 volume declining to $518 million
from $1.3 billion in the fourth quarter of 1999. New business volume is
expected to be minimal as the Company focuses on managing and maximizing the
value of its existing portfolio by funding existing commitments to its
customers and providing extensions or modifying loans to existing customers.
The backlog, which includes commitments for existing revolving lines of credit
of $576 million, declined to $1.3 billion at December 31, 2000.

Volume-Based Fees.Volume-based fees historically were generated by
FINOVAs Distribution & Channel Finance, Commercial Services and Realty Capital
lines of business. Since Distribution & Channel Finance and Commercial Services
are discontinued operations, the fees included in continuing operations applied
only to Realty Capital. Those fees are predominately related to
volume-originated business rather than the balance of outstanding financing
transactions during the period. Volume-based fees for 2000 were $1.3 million,
down from $10.4 million reported in 1999. The decline in 2000 was due to Realty
Capital exiting from the origination and sale of commercial real estate loans
to the CMBS market in April 2000.

Provision for Credit Losses.The provision for credit losses on continuing
operations was significantly higher in 2000 compared to 1999 ($643.0 million
vs. $22.4 million) due to the need to bolster loss reserves in light of
increasing problem accounts and higher net write-offs in 2000 ($239.6 million
compared to $22.6 million in 1999). The largest component of net write-offs in
2000 was from multiple customers in Mezzanine Capital totaling $86.0 million,
$59.6 million in Healthcare Finance, $40.5 million in Transportation Finance,
$19.9 million in Commercial Equipment Finance, $19.2 million in Rediscount
Finance and the balance of $14.4 million spread over six other businesses. Net
write-offs as a percent of average managed assets was 2.25% in 2000, up from
0.24% in 1999. A discussion of the increase in problem accounts is included
under Financial Condition, Liquidity and Capital Resources.

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FINOVA CAPITAL CORPORATION

FINOVA monitors developments affecting loans and leases in its portfolio,
taking into account each borrowers financial developments and prospects, the
estimated value of collateral, legal developments and other available
information. Based upon that information, FINOVA adjusts its loan loss reserves
and when considered appropriate, writes down the values of the loans. Depending
on developments, there is the possibility that the loan loss reserves and/or
write-downs will increase in the future.

(Losses) Gains on Investments and Disposal of Assets.Losses of $168.6
million in 2000 were primarily due to the write-off of equity positions in the
Resort Finance, Communications Finance and Mezzanine Capital businesses,
charges to write-down repossessed assets in Resort Finance and residual
positions in Transportation Finance and a charge to write-down the assets in
Realty Capital to estimated fair value in connection with designating that
business as being held for sale. The most significant charge was in Resort
Finance which wrote-off a $54.8 million equity investment in a major timeshare
developer that experienced a decline in earnings and a significant reduction in
its net worth. The write-down of residual positions in Transportation Finance
totaled $40.4 million and principally related to assets held for sale or lease.
The write-down of Realty Capitals assets to fair value approximated $43.2
million. The total charges of $249.5 million from the write-off of investments,
repossessed assets and assets held for sale or lease were partially offset by
gains of $80.9 million, the largest of which was $20.7 million from the sale of
Healtheon WebMD stock.

The timing and amount of gains and losses from asset dispositions are
sporadic in nature. There can be no assurance FINOVA will recognize gains in
the future, depending, in part, on market conditions at the time of sale.
FINOVA recognized losses on dispositions of assets in 2000 and attempted to
sell some of its more marketable assets (held for sale, investments and assets
coming off lease) to generate liquidity during 2000. As a result, the ability
to recognize gains in future periods is more uncertain.

Operating Expenses.Operating expenses were $399.4 million in 2000
compared to $168.7 million in 1999. The 2000 amount included a charge of $193.3
million representing the charge-off of unamortized goodwill that was considered
impaired as a result of evaluating the cash flow analyses prepared using the
information and assumptions resulting from the recent developments. Excluding
the charges for impaired goodwill, operating expenses in 2000 were $206.1
million, an increase of $37.4 million over 1999. The increases in 2000 were
primarily due to increased professional services of $24.4 million, consisting
of consulting, accounting and legal expenses incurred in connection with
unsuccessful negotiations to sell the Company, restructuring debt obligations
with creditors and litigation matters and $11.8 million of costs incurred to
exit the origination and sale of commercial real estate loans to the CMBS
market in the second quarter of 2000. Operating efficiency, which is the ratio
of operating expenses to operating margins, was 45.3% in 2000 excluding the
charges from writing-off goodwill, compared to 34.9% in 1999.

Income Taxes.The effective income tax expense (benefit) rates in 2000
were (28.2%) compared to 38.4% in 1999 for continuing operations and (30%) in
2000 compared to (40%) in 1999 for discontinued operations. The lower rates in
2000 were due to a valuation allowance established for the potential inability
to fully utilize both federal and state net operating loss carryforwards, and
to certain non-deductible expenses for tax purposes, such as the write-off of
goodwill and certain professional expenses incurred in connection with the
attempted sale of the Company. For the year ended December 31, 2000, a
valuation allowance of $97.8 million has been recorded due to the uncertainty
over the Companys ability to fully utilize its net operating loss
carryforwards. The difference in effective income tax rates between continuing
and discontinued operations is principally due to a small amount of income
exempt from income taxes in continuing operations and to a greater amount of
expenses, not deductible for tax purposes.

Discontinued Operations

During the third quarter of 2000, FINOVA Groups Board of Directors
approved the sale or liquidation of some of its more broad based businesses so
the Company could focus more on its niche-based businesses. The businesses
included in discontinued operations consist of Commercial Services
(substantially sold during the third quarter of 2000), Corporate Finance (which
includes Business Credit and Growth Finance) and Distribution & Channel
Finance. In December 2000, $46.4 million of Distribution & Channel Finances
assets were sold. During the first quarter of 2001, $309 million of Corporate
Finance assets were sold. Sales of additional assets could occur for all or
portions of the discontinued business assets. To the extent assets are not
sold, the Company intends to liquidate the remaining assets in an orderly
manner.

Losses from discontinued operations in 2000 totaled $393.1 million
(after-tax) and primarily consisted of charges to value the assets to be sold
or liquidated at estimated net realizable amounts, a write-off of unamortized
goodwill, accrual of retention and severance payments for employees of those
businesses, higher nonaccruing assets and operating losses. The additional
losses of $140.1 million in the fourth quarter of 2000 were primarily
attributable to a further deterioration in those portfolios, caused in part by
the impact of the weakening economy on FINOVAs customers. Nonaccruing assets
in discontinued operations were $486.2 million at December 31, 2000. Also
during the fourth quarter, the Company received a recovery of approximately
$4.0 million from the sale of a portion of the collateral supporting the $70
million transaction written-off in the Distribution & Channel Finance line of
business in March 2000. See Note R of Notes to Consolidated Financial
Statements in Annex A for more information on discontinued operations.

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FINOVA CAPITAL CORPORATION

1999 Compared to 1998  Continuing Operations

Net income for 1999 increased
52% to $222.0 million from $146.5 million in
1998. The increase was due to 27% 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 Q of Notes to Consolidated Financial Statements for further discussion.

Interest Margins Earned.Interest margins earned increased 25% to $473.2
million in 1999 from $379.8 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 $8.71 billion in 1999 from $6.86
billion in 1998. The increase was primarily due to an increase in funded new
business to $4.13 billion from $3.5 billion in 1998 and $411.3 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 were generated by Realty Capital 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.

Volume-based fees were down by $14.4 million to $10.4 million in 1999 from
$24.8 million in 1998 due to lower fee-based volume in 1999. Fee-based volume
was down by $740 million to $2.07 billion in 1999 from $2.81 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 average commission rate to 0.50% from 0.88% in 1998.
Structured finance deals carry a lower net rate than CMBS transactions.

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 5.5% in 1999 from 5.9% in 1998. The interest rate spread portion of
this margin decreased slightly to 5.4% in 1999 from 5.5% 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 was 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.

Provision for Credit Losses.The provision for credit losses was $22.4
million in 1999 compared to $48.5 million in 1998. Provisions for credit losses
are made to maintain the reserve for credit losses at a level deemed by
management to be adequate to cover inherent losses in the portfolio.

The provision for credit losses was affected by net write-offs, which
amounted to $22.6 million in 1999 compared to $11.0 million in 1998. As a
percent of average managed assets, net write-offs in 1999 were 0.24% compared
to 0.15% in 1998. The increase in net write-offs was primarily due to $8.2
million of net write-offs for the Mezzanine Capital (Sirrom) portfolio which
was acquired in the first quarter of 1999.

Gains on Investments and 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.

Operating Expenses.Operating expenses, which include selling,
administrative and other expenses, were generally higher in all major
categories and increased to $168.7 million in 1999 compared to $147.1 million
in 1998. Personnel costs increased due to the acquisition of Sirrom Capital
Corporation (included in Mezzanine Capital and Harris Williams & Co.) in March
1999 and due to higher sales incentive compensation related to the increased
new business levels in 1999. Problem account costs increased

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FINOVA CAPITAL CORPORATION

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 was 34.9% in 1999, an improvement
from 36.4% in 1998. See Note N of Notes to Consolidated Financial Statements
for additional detail.

Income Taxes.Income taxes were $138.3 million in 1999 compared to $90.4
million in 1998. The increase was primarily due to higher pre-tax income in
1999. See Note J of Notes to Consolidated Financial Statements for further
discussion of income taxes.

Financial Condition, Liquidity and Capital Resources

The following primarily relates to continuing operations, except as noted.

Managed assets were $10.54 billion at December 31, 2000 compared to $10.44
billion at December 31, 1999. Included in managed assets at December 31, 2000
were $10.18 billion in funds employed and $357.5 million of securitized assets.
The small increase in managed assets was due to funded new business of $2.88
billion for the year ended December 31, 2000 (compared to $4.13 billion in
1999), offset by prepayments, asset sales and normal portfolio amortization.
Total assets of FINOVA declined to $12.02 billion at December 31, 2000 from
$13.88 billion at December 31, 1999, primarily due to the reduction in net
assets in discontinued operations, which declined to $1.16 billion at December
31, 2000 from $2.70 billion at December 31, 1999.

The reserve for credit losses increased to $578.8 million at December 31,
2000 from $178.3 million at December 31, 1999, primarily due to higher levels
of nonaccruing and other problem accounts.

The higher level of problem accounts in 2000 was caused by a number of
factors, including the continued weakening of the overall U.S. economy. As has
been widely reported, many U.S. banks have witnessed significant increases in
borrower defaults, and those banks, having a lower cost of funds than FINOVAs,
serve a customer base that typically has a better credit profile than FINOVAs
traditional middle-market borrower.

While customers of FINOVAs Corporate Finance and Mezzanine Capital
divisions were most affected by the countrys general economic weakening,
industry-specific problems were more to blame for financial problems
experienced by FINOVA borrowers in the airline, information technology, nursing
home and wireless messaging sectors, which are served, respectively, by
FINOVAs Transportation Finance, Distribution & Channel Finance, Healthcare
Finance and Communications Finance divisions. Other FINOVA divisions, notably
Resort Finance, Rediscount Finance and Franchise Finance, experienced higher
levels of problem account classifications due to defaults, or identified
potential near-term defaults, of a small number of relatively large borrowers.

Account classifications were significantly influenced by the weakening of
the economy during the latter part of 2000. Additionally, in the fourth quarter
of 2000, FINOVA moved several accounts to nonaccruing status before the 90th
day of delinquency, since it was determined to be more likely than not that
those borrowers would ultimately become more than 90 days delinquent. Prior to
the fourth quarter of 2000, FINOVA typically reclassified accounts to
nonaccruing status in the quarter that interest payments became more than 90
days past-due. As of December 31, 2000, approximately $336.9 million of
FINOVAs total $921.4 million of nonaccruing transactions were paying at least
the interest portion of their payment obligation.

The reserve for credit losses increased substantially in dollar terms;
however, it declined as a percent of nonaccruing assets from 101.9% at December
31, 1999 to 62.8% at December 31, 2000, due to the significant increase in
accounts classified as nonaccruing. Accounts classified as nonaccruing assets
increased to $921.4 million or 8.7% of ending managed assets at December 31,
2000, from $175.0 million or 1.7% at the end of 1999. The largest increases to
the nonaccruing classification during 2000 occurred in Healthcare Finance
($224.1 million), Transportation Finance ($138.0 million), Resort Finance
($120.0 million), Rediscount Finance ($119.3 million), Communications Finance
($82.5 million) and Franchise Finance ($42.3 million).

The $224.1 million increase in nonaccruing assets in FINOVAs Healthcare
Finance division was driven primarily by the reclassification to nonaccruing
status of loans totaling $205 million to several nursing home and senior living
operators and developers. The Healthcare problems are industry wide and have
resulted from the governments change in medical insurance reimbursement
policies. The largest components of nonaccruing assets in that sector at
December 31, 2000 were mortgage-secured loans totaling $54.7 million to three
special-purpose corporations affiliated with a large operator of assisted
living facilities that filed for bankruptcy in November 2000; three
mortgage-secured loans totaling $40.3 million to another developer of
assisted-living facilities; four loans totaling $24.9 million to four unrelated
borrowers secured by nursing home facilities leased to a large nursing-home
operator which filed for bankruptcy in February 2000; two mortgage-secured
loans totaling $13.1 million to subsidiaries of the

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FINOVA CAPITAL CORPORATION

aforementioned nursing home operator; the $14.1 million combined carrying
amount of FINOVAs participations in two bank-led syndicated loan facilities
for the affiliated borrowers, both of which filed for bankruptcy in June 2000;
a $12.7 million mortgage-secured loan to a special-purpose corporation owned by
a large national senior-living developer, for which FINOVA financed the
development of an assisted living facility; a $12.4 million mortgage-secured
loan to a special-purpose corporation affiliated with another large
senior-living developer, for which FINOVA financed the development of an
assisted living center; FINOVAs $11.8 million participation in a large
bank-led syndicated loan to a special-purpose corporation to finance
development of a continuous care retirement community. The Healthcare Finance
Divisions largest nonaccruing loan outside of the nursing home and assisted
living sector was a combined $17.7 million working capital and term loan to a
home-health services provider. At December 31, 2000, FINOVA had written off
$60.2 million and established specific reserves totaling $79.4 million related
to the remaining $266.3 million of nonaccruing accounts in Healthcare Finance.

The $138 million increase in nonaccruing assets in Transportation Finance
was attributable to ten aircraft-secured transactions, eight of which, totaling
$116.8 million, were added to nonaccrual status in the fourth quarter of 2000.
The increase in nonaccruing assets in Transportation Finance was due to the
effects of higher fuel prices on the financial condition of some of FINOVAs
customers as well as to an overall weakening of the economy. The largest
components of Transportation Finances nonaccruals at year-end 2000 were a
$21.4 million investment in two re-engined B727-200 aircraft leased to a
charter carrier; FINOVAs $20.7 million exposure on one B747-100 freighter and
two B747-200 passenger aircraft which FINOVA repossessed in 2000 from a
bankrupt borrower; a $20.5 million loan to a U.K. special-purpose corporation
secured by a mortgage on one DC10-30 freighter aircraft leased to a financially
troubled cargo airline; a loan of $17.5 million to a financially troubled
midwest-based scheduled airline, secured primarily by mortgages on three Stage
3 B737-200 passenger aircraft; FINOVAs $16.8 million carrying amount in a loan
to a special-purpose corporation, secured by one B747-300 passenger aircraft
which, subsequent to year end, is off-lease after being returned by its
former operator, a European flag carrier; a $13.3 million conditional sale to a
special-purpose operating lessor, secured by two MD-81 aircraft which are
presently being remarketed by the lessor after being returned by their former
operator, another European flag carrier; a $13.0 million loan to a
special-purpose corporation, secured by one MD-82 aircraft leased to a large
domestic borrower, which filed for bankruptcy in January 2001; and a $12.8
million loan to a U.S. operating lessor, secured by mortgages on four Stage 3
DC9-32 passenger aircraft leased to a financially troubled scheduled carrier.
At December 31, 2000, FINOVA had written off $40.5 million and established
specific reserves totaling $6.8 million related to the remaining $138.0 million
of nonaccruing accounts in Transportation Finance.

Resort Finances increase in nonaccruing assets in 2000 were due
principally to the addition of the working capital components of FINOVAs loans
to seven related special-purpose project development entities, and loans
totaling approximately $116.3 million to an unrelated developer. The seven
working capital loans totaled $20.6 million at December 31, 2000, and each is
cross-secured with its related mortgage and receivables loans. Those working
capital loans were classified as nonaccruing due to concerns over each
borrowers financial condition and FINOVAs potential collateral shortfall if
there were to be a default and forced liquidation. The seven borrowing entities
are all special-purpose subsidiaries of a major resort developer in which
FINOVA has a $54.8 million equity investment that was written off in the third
quarter. The unrelated borrower filed for bankruptcy in the second quarter of
2000, and became 90 days delinquent on FINOVAs loans in the third quarter. The
unrelated borrowers loans are secured by marketable assets, including
completed but unsold timeshare intervals at 13 of its approximately 90 resorts
operated by the developer and a portfolio of consumer notes receivable serviced
by the developer. At December 31, 2000, FINOVA had written off $61 thousand and
established specific reserves totaling $36.9 million relating to the remaining
$142.0 million of non-earning accounts in Resort Finance.

The $119.3 million increase in nonaccruing assets in Rediscount Finance
was driven principally by the addition of an $88.7 million loan to a sub-prime
automobile finance company and a $25.3 million loan to an unrelated sub-prime
automobile finance company. Both loans are secured by portfolios of consumer
notes, and both were moved to nonaccruing status in the fourth quarter when
FINOVA established that it had the possibility of significant collateral
shortfalls in the event of forced liquidation. At December 31, 2000, FINOVA had
written off $19.2 million and established specific reserves totaling $43.9
million relating to the remaining $123.4 million of non-earning accounts in
Rediscount Finance.

The $82.5 million increase in nonaccruing assets in Communications Finance
was attributable to the addition of seven accounts, six of which were moved
into nonaccruing status in the fourth quarter. The increase in nonaccruing
assets in Communications Finance was due to collection problems with customers
in the paging industry, which is experiencing a significant downturn resulting
from more innovative and efficient products replacing pagers. The largest
component of this divisions nonaccruals at December 31, 2000 were three loans
totaling $74.3 million to unrelated providers of wireless messaging services.
At December 31, 2000, FINOVA had written off $4.0 million and established
specific reserves totaling $39.5 million covering those three loans, as well as
the $18.5 million of other nonaccruals in Communications Finance.

A-9



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FINOVA CAPITAL CORPORATION

The $42.3 million increase in nonaccruing assets in Franchise Finance was
driven principally by the addition of two accounts totaling $38.3 million,
which were moved into nonaccrual status in the fourth quarter of 2000. The
first is a $21.4 million loan to a franchisee which owns and operates a chain
of casual-dining restaurants. The second is FINOVAs $16.9 million share of a
syndicated loan to a major restaurant franchiser, which owns and franchises
casual-dining restaurants throughout the U.S. At December 31, 2000, FINOVA had
written off $245 thousand and established specific reserves totaling $13.5
million for those two loans.

Discontinued operations, with total net assets of $1.2 billion at December
31, 2000, also carried $486.2 million of nonaccruing assets at year-end,
primarily from the Corporate Finance division.

Earning impaired assets increased during the twelve months ended December
31, 2000 to $235.8 million, or 2.2% of ending managed assets, from $108.8
million, or 1.0% of ending managed assets at December 31, 1999. The largest
additions to earning impaired assets were in Resort Finance ($133.9 million)
and Rediscount Finance ($32.4 million). Additions of $133.9 million in Resort
Finance represent the balances of the obligations, other than the working
capital loans, owed by five of the seven related project developers mentioned
above. These impaired but still accruing loans are secured by receivables and
real property which FINOVA believes are sufficient to repay the loans with
interest. The loans are considered impaired because the parent company of the
special-purpose obligors has experienced a decline in earnings and a
significant reduction in its net worth, which could conceivably cause FINOVA to
have to manage the underlying resort projects without support from the parent
company. The increase in earning impaired loans in Rediscount Finance relates
to two loans totaling $32.4 million ($20.7 million and $11.7 million,
respectively) to two unrelated operators of rental-purchase stores. Both of
those borrowers were current in their payments as of December 31, 2000;
however, FINOVA believes there is significant doubt concerning their ability to
continue to pay principal and interest in accordance with contractual terms. In
addition to the Resort and Rediscount Finance accounts noted above, four loans
totaling $61.1 million in Transportation Finance were recognized as earning
impaired in the fourth quarter. Those accounts are all loans to related
special-purpose corporations, secured by mortgages on a total of five MD-80
series aircraft leased to a large domestic carrier which filed for bankruptcy
in January 2001. The rents, and thus the underlying mortgage payments to
FINOVA, were contractually current as of year-end 2000; however, the bankruptcy
filing was seen as lending doubt to whether the borrowers would be able to
continue to pay in accordance with contractual terms.

For all of the above accounts, as well as its other nonaccruing and
earning impaired assets, FINOVA believes it is engaging in appropriate
activities to enforce its contractual rights and remedies and to mitigate its
losses; however, there can be no assurance on the outcome of any collection or
workout effort. Likewise, while FINOVA believes its specific reserves
accurately reflect the best estimate of its potential future loss exposure in
the respective accounts, there can be no assurance that actual losses will be
limited to the reserved amounts.

The carrying amount of FINOVAs accounts that were 31-90 days delinquent
in payment at December 31, 2000 increased to 1.2% of managed assets, from 0.6%
of managed assets at the end of 1999. The increases in 31-90 day delinquent
accounts were in Transportation Finance ($33.5 million), Commercial Equipment
Finance ($26.8 million), Communications Finance ($22.9 million) and Healthcare
Finance ($18.4 million).

At December 31, 2000, FINOVA had $11.0 billion of debt outstanding,
representing 14.8 times the Companys common equity base of $743.8 million. As
a result of its moratorium on debt payments, its subsequent filing of
Bankruptcy under Chapter 11 and defaults under various financial covenants
under its bank agreements, FINOVA is in default under its debt agreements.

FINOVAs internally generated funds, available credit lines and asset
sales financed new business and liquidity during the twelve months ended
December 31, 2000. During May and June 2000, FINOVA drew down $4.5 billion
against domestic commercial paper back-up bank facilities and used the proceeds
primarily for repayment of commercial paper, maturing debt and to fund general
operations. Of this amount, $2.1 billion was due on or before May 15,
2001, although $500 million could have been extended had a default not existed
at the time. The other $2.4 billion was scheduled to be repaid between 2002 to
2003. FINOVA also had $150 million (Canadian) scheduled to be due under a bank
facility that matured in July 2001. Term debt maturities over the next twelve
months by quarter included $242.0 million in the first quarter of 2001, $2.4
billion in the second quarter of 2001 (included $2.1 billion of bank
facilities), $449.2 million in the third quarter of 2001 and $345.7 million in
the fourth quarter of 2001. During 2000, FINOVA issued $225 million of new
public notes and repaid $1.4 billion of long-term borrowings. FINOVAs credit
ratings were reduced several times during 2000.

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FINOVA CAPITAL CORPORATION

The Reorganization Proceedings seek to enable FINOVA to restructure the
debt maturities, among other items. No principal or interest payments will be
made on the debt until the Plan defining repayment terms has been approved by
the court.

On February 27, 2001, FINOVA announced a moratorium on repayments of
principal on its outstanding bank and bond debt. On March 7, 2001, FINOVA filed
for protection from its creditors as noted above to enable it to restructure
the timing of its debt repayments. See Recent Developments and Business
Outlook for further discussion of the rating agency downgrades, the moratorium
on the repayment of debt and the Reorganization Proceedings.

Derivative Financial Instruments

Substantially all of FINOVAs derivative financial instruments were
terminated subsequent to December 31, 2000 as a result of the Reorganization
Proceedings. Historically, FINOVA entered into derivative transactions as part
of its interest rate risk management policy of match funding its assets and
liabilities. The derivative instruments used were straightforward. FINOVA
continually monitored its derivative position and used derivative instruments
for non-trading and non-speculative purposes only.

At December 31, 2000, FINOVA had outstanding interest rate conversion
agreements with notional principal amounts totaling $1.7 billion. Agreements
with notional principal amounts of $100 million were arranged to effectively
convert certain floating interest rate obligations into fixed interest rate
obligations. These agreements required interest payments on the stated
principal amount at rates ranging from 6.67% to 6.73% in return for receipts
calculated on the same notional amounts at floating interest rates. Agreements
with notional principal amounts of $1.625 billion were arranged to effectively
convert certain fixed interest rate obligations into floating interest rate
obligations. They required interest payments on the stated principal amount at
the three-month or six-month London interbank offered rates (LIBOR) in return
for receipts calculated on the same notional amounts at fixed interest rates of
5.70% to 7.40%. FINOVA also entered into a fixed-rate foreign
currency-denominated borrowing (Japanese Yen (JPY) 5 billion) maturing in
2002. Two derivatives are associated with this borrowing, a receive fixed-rate
swap (JPY 5 billion) versus three-month JPY LIBOR and a cross-currency basis
swap, converting JPY LIBOR to US Dollar (USD) LIBOR, both of which mature in
2002. The receive side of the basis swap had a notional amount of JPY 5 billion
paying three-month JPY LIBOR and the pay side had a notional amount of USD
$43.6 million paying three-month USD LIBOR. See Note G of Notes to Consolidated
Financial Statements for further discussion of FINOVAs derivatives. See
Qualitative and Quantitative Disclosure About Market Risk below.

Substantially all of the interest rate swaps derivatives were terminated
in 2001, and had an estimated fair value of approximately $70 million at
termination. Pursuant to the Companys various agreements, the institutions
exercised their right to offset the amounts due the Company upon the
termination of the swaps against the amount due by the Company on the debt
outstanding.

A-11



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FINOVA CAPITAL CORPORATION

Segment Reporting

Information for FINOVAs reportable segments that are part of continuing
operations reconciles to FINOVAs consolidated totals as follows:

|                                                                                     |                                                                           |   |            |           |      |   |            |           |  
|------------------------------------------------------------------------------------ | ------------------------------------------------------------------------- | - | ---------- | --------- | ---- | - | ---------- | --------- | -
|                                                                                     |                                                                           |   | 2000       |           | 1999
|                                                                                     |                                                                           |   |            |           |     
|Total net revenue:                                                                  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Specialty Finance                                                         |   | $          | 187,297   |      |   | $          | 384,789   |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Commercial Finance                                                        |   |            | 59,889    |      |   |            | 51,708    |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Capital Markets                                                           |   |            | 56,443    |      |   |            | 101,414   |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Corporate and other                                                       |   |            | (17,317   | )    |   |            | 13,515    |  
|                                                                                     |                                                                           |   |            |           |      |   |            |           |  
|Consolidated total                                                                   |                                                                           | $ | 286,312    |           |      | $ | 551,426    |          
|                                                                                     |                                                                           |   |            |           |      |   |            |           |  
|(Loss) income before income taxes, preferred dividends and allocations:             
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Specialty Finance                                                         |   | $          | (9,577    | )    |   | $          | 307,377   |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Commercial Finance                                                        |   |            | 30,890    |      |   |            | 38,244    |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Capital Markets                                                           |   |            | (139,308  | )    |   |            | 31,235    |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Corporate and other, overhead and unallocated provision for credit losses |   |            | (638,105  | )    |   |            | (16,517   | )
|                                                                                     |                                                                           |   |            |           |      |   |            |           |  
|(Loss) income from continuing operations before income taxes and preferred
dividends |                                                                           | $ | (756,100   | )         |      | $ | 360,339    |          
|                                                                                     |                                                                           |   |            |           |      |   |            |           |  
|Managed assets:                                                                     
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Specialty Finance                                                         |   | $          | 8,475,515 |      |   | $          | 8,251,642 |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Commercial Finance                                                        |   |            | 1,218,463 |      |   |            | 1,076,617 |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Capital Markets                                                           |   |            | 800,331   |      |   |            | 1,051,367 |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Corporate and other                                                       |   |            | 43,566    |      |   |            | 63,510    |  
|                                                                                     |                                                                           |   |            |           |      |   |            |           |  
|Consolidated total                                                                   |                                                                           | $ | 10,537,875 |           |      | $ | 10,443,136 |          
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|Less securitizations                                                                 |                                                                           |   | (357,471   | )         |      |   | (121,322   | )        
|                                                                                     |                                                                           |   |            |           |      |   |            |           |  
|Investment in financing transactions                                                 |                                                                           | $ | 10,180,404 |           |      | $ | 10,321,814 |          
|                                                                                     |                                                                           |   |            |           |      |   |            |           |  

FINOVAs business is organized into three market groups, which are also
its reportable segments: Specialty Finance, Commercial Finance and Capital
Markets. Management has not yet determined whether its reportable segments will
be reorganized as a result of the recent announcement to discontinue several
lines of business and pending Reorganization Proceedings. Management relies
principally on total revenue, income before allocations and managed assets in
evaluating the business performance of each reportable segment.

Total net revenue is the sum of operating margin and (losses) gains on
investments and disposal of assets. Income before allocations is income before
income taxes, preferred dividends, corporate overhead expenses and the
unallocated portion of the provision for credit losses. Managed assets include
each segments investment in financing transactions plus securitizations. The
Company expects that managed assets in all segments will decline significantly
over the next several years as available cash flow will be used principally for
debt service rather than the funding of new business.

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.

Total net revenue was $187.3 million in 2000 compared to $384.8 million in
1999. The decrease in net revenue was primarily due to the write-off of equity
positions in Resort Finance and Communications Finance as well as charges to
write-down repossessed assets in Resort Finance and the value of residual
positions in both Transportation Finance and to a lesser extent in Specialty
Real Estate Finance. The most significant charge was in Resort Finance, which
wrote-off a $54.8 million equity investment in a major developer that has
experienced a decline in earnings and a significant reduction in net worth. The
write-down of residual positions amounted to $35.7 million in Transportation
Finance and $11.7 million in Specialty Real Estate Finance. Also contributing
to the decline in net revenue was an increase of $602 million in nonaccruing
assets, the effects of higher cost of funds and lower gains from the disposal
of assets. These reductions were partially offset by increases in income due to
a higher level of managed assets in 2000. The largest increases in nonaccruing
assets were in Healthcare Finance, which increased by $224.1 million in 2000,
followed by a $138.0 million increase in Transportation Finance, $120.0 million
in Resort Finance and $82.5 million in Communications Finance. The lower gains
were primarily attributable to the timing of assets coming off lease and the
Companys inability to re-lease assets at end of term. While in the aggregate
FINOVA has historically recognized gains on disposals, the timing and amount of
these gains are sporadic in nature. No assurance can be made that the Company
will continue to recognize gains on disposal. Additionally, certain business
units within this segment will sometimes receive equity interests to complement
their financing arrangements. Depending on various factors, including
managements

A-12



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FINOVA CAPITAL CORPORATION

discretion, FINOVA may opt to exercise and sell its position in these equities
when permitted to do so. As of year-end 2000, FINOVA had recorded
$24.4 million
of pre-tax gains from the sale of these equity positions in 2000 and also
recorded pre-tax unrealized gains of $23.5 million through other comprehensive
income on the balance sheet related to the market value of equities held.

The segment reported a loss before allocations for the year of $9.6
million compared to income of $307.4 million for 1999. The decrease was
primarily due to the charge-offs mentioned above, increased nonaccruing assets,
a higher cost of funds, lower gains and an increase in net write-offs of
financing contracts, which rose to $131.3 million in 2000 from $11.1 million in
1999. The bulk of the write-offs were in Healthcare Finance ($59.6 million) and
Transportation Finance ($40.5 million).

Managed assets grew to $8.476 billion in 2000 from $8.252 billion in 1999,
an increase of 2.7%. The growth in managed assets was only 2.7% because new
business in 2000 of $2.5 billion was down from $3.3 billion in 1999. The
reduced volume was in line with the Companys decision to conserve cash during
the last half of 2000 by only funding outstanding commitments. The largest new
business volume in this segment came from Resort Finance ($1.0 billion) and
Transportation Finance ($379 million). The group as a whole experienced a
decrease in backlog to $1.1 billion at December 31, 2000 from $1.6 billion at
December 31, 1999. The largest portion of backlog consisted of $668.7 million
of revolving loan commitments in Resort Finance.

Commercial Finance.Commercial Finance currently includes only the
Rediscount Finance business unit, which provides financing through revolving
credit facilities to finance companies. This segment previously included
traditional asset-based businesses that provided financing through revolving
credit facilities and term loans secured by assets such as receivables and
inventory, as well as providing factoring and management services. In the third
quarter of 2000, FINOVA announced that the Corporate Finance/Business
Credit/Growth Finance and Distribution & Channel Finance business units would
be discontinued. The Company also completed the sale of its Commercial Services
business line to GMAC Commercial Credit LLC in the third quarter. For further
discussion on activity previously reported within the Commercial Finance
segment, see Discontinued Operations.

Total net revenue was $59.9 million in 2000 compared to $51.7 million in
1999, an increase of 15.8%. The increase was primarily due to a 13.2% increase
in managed assets over the last twelve months, partially offset by the effects
of higher cost of funds and higher nonaccruing assets. The level of nonaccruing
assets increased to $123.4 million in 2000 from $4.1 million in 1999, primarily
attributable to two customers with carrying amounts of $88.7 million and $25.3
million, respectively. The level of assets considered impaired but
revenue-accruing increased to $32.4 million in 2000 from zero in 1999.

Income before allocations decreased to $30.9 million in 2000 from $38.2
million in 1999 primarily due to an increase in nonaccruing assets, higher net
write-offs and a higher cost of funds, partially offset by a higher level of
managed assets. Net write-offs for the unit totaled $19.2 million in 2000
compared to $3.5 million in 1999. The majority of the net write-offs in 2000
were concentrated among three finance companies which have been adversely
impacted by the weakening economy, especially its impact on sub-prime auto
lenders. Net write-offs as a percent of average managed assets were 1.7%
compared to 0.4% in 1999.

Managed assets grew to $1.22 billion over the last twelve months from
$1.07 billion, an increase of 13.2%. The growth in managed assets was primarily
due to increased net utilization under existing revolving commitments.

Capital Markets.Capital Markets, in conjunction with institutional
investors, provides debt and equity capital funding, third-party loan
administration services and provided commercial mortgage banking services until
those operations were terminated.

Total net revenue was $56.4 million in 2000 compared to $101.4 million in
1999, a decrease of 44.3%. The decrease was primarily due to $31.6 million of
losses on various equity and warrant positions compared to $28.7 million in
gains from the sale of equity and warrant positions in 1999. The 2000 loss was
primarily due to a $43.2 million Realty Capital charge to write-down its assets
to estimated fair value in connection with designating that business as being
held for sale. Partially offsetting the charge was $14.7 million of net gains
on sales of investments in Mezzanine Capital.

Also contributing to the decline in revenue was the Companys decision in
April 2000 to exit from the origination and sale of commercial real estate
loans to the CMBS market, which resulted in a reduction of volume-based fees to
$1.3 million in 2000 from $10.4 million in 1999. Additionally, the decline in
net revenue was partially attributable to a higher level of nonaccruing assets,
which increased to $63.6 million in 2000 from $38.7 million in 1999.

Losses before allocations in 2000 were $139.3 million compared to income
of $31.2 million in 1999. The reduction was primarily attributable to the
aforementioned decline in net revenue, increased net write-offs in Mezzanine
Capital of $86.0 million in

A-13



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FINOVA CAPITAL CORPORATION

2000 compared to $8.2 million in 1999, the write-down of goodwill created
by the acquisition of Sirrom Capital and the costs incurred to exit the CMBS
market in 2000.

The segments managed assets decreased to $800.3 million in 2000 from
$1.05 billion in 1999. This is primarily due to FINOVAs exit from the CMBS
marketplace and to lower new business volumes. See Recent Developments and
Business Outlook for further discussion.

Corporate. The $638.1 million loss from continuing operations before
income taxes and preferred dividends in 2000 was significantly higher than the
1999 loss of $16.5 million. The increased loss was primarily attributable to
higher unallocated provision for credit losses due to the need to bolster loss
reserves in light of increasing problem accounts. Also contributing to the
increased loss were higher corporate operating expenses, which included
employee retention and severance programs, increased professional services
related to the current state of events and the charge-off of unallocated
impaired goodwill.

New Accounting StandardsIn June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which establishes new accounting and
reporting standards for derivative instruments. In June 1999, the FASB issued
SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities 
Deferral of the Effective Date of FASB Statement No. 133, and in June 2000,
the FASB issued SFAS No. 138, Accounting for Certain Derivative Instruments
and Certain Hedging Activities  An Amendment of FASB Statement No. 133. SFAS
133, as amended, establishes accounting and reporting standards requiring that
derivative instruments, including certain derivative instruments embedded in
other contracts, be recorded in the statement of financial position as either
an asset or liability measured at its fair value. SFAS 133 requires that
changes in the derivatives fair value be recognized currently in earnings
unless specific hedge accounting criteria are met.FINOVA adopted the provisions of SFAS 133, as amended, on January 1, 2001,
which resulted in an immaterial impact on FINOVAs consolidated results of
operations and financial position.FINOVA adopted the disclosure provisions of SFAS 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities, as of December 31, 2000. These provisions required additional
disclosures about the Companys receivables transfers, servicing
responsibilities, retained interests, and key assumptions made in its
valuations. The implementation of the disclosure provisions of SFAS 140 did not
have a material impact on FINOVAs consolidated results of operations and
financial position. The remaining provisions of SFAS 140, related to the
accounting requirements for transfers of financial assets, are effective for
transfers after March 31, 2001 and may impact FINOVAs treatment of any future
transfers of receivables, including gain or loss recognition on sales.A-14



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FINOVA CAPITAL CORPORATION

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

FINOVAs primary market risk has been exposure to the volatility of
interest rates. FINOVA sought to manage interest rate risk and preserve income
through a diversified borrowing base and a matched funding policy. A
diversified borrowing base consisted of short and long-term debt with a fixed
or variable rate. FINOVAs matched funding policy, approved by the Board of
Directors or Audit Committee and administered by the Finance Committee,
required 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 was managed to not exceed 3%
of total assets for any extended period.

As a result of the developments described earlier in Recent Developments
and Business Outlook, the Company can not determine the nature of its
borrowing base or achieve a matched funding policy. In addition, substantially
all of the Companys interest rate swap agreements were terminated as a result
of the bankruptcy filing. During the pendancy of the bankruptcy, the interest
rate which will be applied to the Companys debt obligations is also uncertain.

Since approximately 50% of the Companys assets earn at a floating-rate,
any decline in market rates could adversely affect the Company since it would
earn less on its assets while the nature of its financing cost is uncertain.
Alternatively, any increase in market rates would increase its return on
floating-rate assets; however, if its financing costs also become floating any
potential increases in asset returns could be offset by rising costs of
capital. Until such time as a plan of reorganization is approved and its
financing costs determined, the Company will not be able to identify a strategy
to mitigate its exposure to changes in interest rates.

Under the terms of Berkadias commitment, the New Senior Notes will be
fixed-rate obligations, at the weighted average rate of the existing debt
(excluding default interest or penalties, if any). If LIBOR is above 6%, the
Berkadia Loan will be a floating-rate loan; if LIBOR is below 6%, the Berkadia
Loan will be fixed at 9%. If this transaction is consummated, a successful
strategy to mitigate the Companys exposure to changes in market interest rates
could be developed; however, no assurance can be given that the Company will be
able to implement any such strategy at an acceptable cost. In addition, no
assurance can be given that the transaction will be consummated.

A-15



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REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareowner of FINOVA Capital Corporation

We have audited the accompanying consolidated balance sheets of FINOVA Capital
Corporation and subsidiaries as of December 31, 2000 and 1999, and the related
statements of consolidated operations, shareowners equity, and cash flows for
the years 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 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 audits provide 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, 2000 and 1999 and the consolidated
results of their operations and their cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States.

The accompanying consolidated financial statements have been prepared assuming
that FINOVA Capital Corporation will continue as a going concern. As more
fully described in Note A, the Company has incurred a substantial operating
loss, is in default of its debt covenants, and filed for relief under Chapter
11 of the United States Bankruptcy Code on March 7, 2001. These conditions
raise substantial doubt about the Companys ability to continue as a going
concern. The consolidated financial statements do not include any adjustments
to reflect the possible future effects on the recoverability and classification
of assets or the amounts and classification of liabilities that may result from
the outcome of this uncertainty.

Ernst & Young LLP

Phoenix, Arizona
March 30, 2001

A-16



---



INDEPENDENT AUDITORS REPORT

To the Board of Directors and Shareowner of FINOVA Capital Corporation

We have audited the accompanying consolidated statements of operations,
shareowners equity and cash flows of FINOVA Capital Corporation and
subsidiaries for the year ended December 31, 1998. These financial statements
are the responsibility of FINOVA Capital Corporations management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with auditing standards
generally accepted in the United States of America. 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, such consolidated financial statements present fairly, in all
material respects, the results of operations and cash flows of FINOVA Capital
Corporation and subsidiaries for the year ended December 31, 1998 in conformity
with accounting principles generally accepted in the United States of
America.

/s/ Deloitte & Touche llp
Deloitte & Touche llp
Phoenix, Arizona
April 23, 1999

A-17



---



FINOVA CAPITAL CORPORATION

CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)

|                                          |                                                                                |   |            |            |      |   |            |            |  
|----------------------------------------- | ------------------------------------------------------------------------------ | - | ---------- | ---------- | ---- | - | ---------- | ---------- | -
|                                          |                                                                                |   | 2000       |            | 1999
|                                          |                                                                                |   |            |            |     
|ASSETS                                   
|                                         
|                                         
|                                         
|                                         
|Cash and cash equivalents                 |                                                                                | $ | 699,557    |            |      | $ | 100,344    |           
|                                         
|                                         
|                                         
|                                         
|Investment in financing transactions:    
|                                         
|                                         
|                                         
|                                         
|                                          | Loans and other financing contracts                                            |   |            | 7,835,698  |      |   |            | 8,235,850  |  
|                                         
|                                         
|                                         
|                                         
|                                          | Leveraged leases                                                               |   |            | 803,581    |      |   |            | 837,083    |  
|                                         
|                                         
|                                         
|                                         
|                                          | Direct financing leases                                                        |   |            | 557,471    |      |   |            | 493,615    |  
|                                         
|                                         
|                                         
|                                         
|                                          | Operating leases                                                               |   |            | 561,698    |      |   |            | 587,283    |  
|                                         
|                                         
|                                         
|                                         
|                                          | Financing contracts held for sale                                              |   |            | 421,956    |      |   |            | 167,983    |  
|                                          |                                                                                |   |            |            |      |   |            |           
|                                          |                                                                                |   | 10,180,404 |            |      |   | 10,321,814 |           
|                                         
|                                         
|                                         
|                                         
|                                          | Less reserve for credit losses                                                 |   |            | (578,750   | )    |   |            | (178,266   | )
|                                          |                                                                                |   |            |            |      |   |            |           
|Net investment in financing transactions  |                                                                                |   | 9,601,654  |            |      |   | 10,143,548 |           
|                                         
|                                         
|                                         
|                                         
|Investments                               |                                                                                |   | 222,719    |            |      |   | 435,680    |           
|                                         
|                                         
|                                         
|                                         
|Goodwill, net of accumulated amortization |                                                                                |   | 45,417     |            |      |   | 264,014    |           
|                                         
|                                         
|                                         
|                                         
|Other assets                              |                                                                                |   | 292,314    |            |      |   | 233,287    |           
|                                         
|                                         
|                                         
|                                         
|Net assets of discontinued operations     |                                                                                |   | 1,162,223  |            |      |   | 2,702,236  |           
|                                          |                                                                                |   |            |            |      |   |            |           
|                                          |                                                                                | $ | 12,023,884 |            |      | $ | 13,879,109 |           
|                                          |                                                                                |   |            |            |      |   |            |           
|LIABILITIES AND SHAREOWNERS EQUITY      
|                                         
|                                         
|                                         
|                                         
|Liabilities:                             
|                                         
|                                         
|                                         
|                                         
|                                          | Accounts payable and accrued expenses                                          |   | $          | 92,032     |      |   | $          | 147,492    |  
|                                         
|                                         
|                                         
|                                         
|                                          | Interest payable                                                               |   |            | 129,402    |      |   |            | 114,397    |  
|                                         
|                                         
|                                         
|                                         
|                                          | Senior debt                                                                    |   |            | 10,997,687 |      |   |            | 11,407,767 |  
|                                         
|                                         
|                                         
|                                         
|                                          | Deferred income taxes, net                                                     |   |            | 61,000     |      |   |            | 461,252    |  
|                                          |                                                                                |   |            |            |      |   |            |           
|                                          |                                                                                |   | 11,280,121 |            |      |   | 12,130,908 |           
|                                          |                                                                                |   |            |            |      |   |            |           
|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  |      |   |            | 1,173,995  |  
|                                         
|                                         
|                                         
|                                         
|                                          | Retained (deficit) income                                                      |   |            | (330,386   | )    |   |            | 638,733    |  
|                                         
|                                         
|                                         
|                                         
|                                          | Accumulated other comprehensive income                                         |   |            | 15,154     |      |   |            | 33,812     |  
|                                         
|                                         
|                                         
|                                         
|                                          | Net advances to parent                                                         |   |            | (115,025   | )    |   |            | (98,364    | )
|                                          |                                                                                |   |            |            |      |   |            |           
|                                          |                                                                                |   | 743,763    |            |      |   | 1,748,201  |           
|                                          |                                                                                |   |            |            |      |   |            |           
|                                          |                                                                                | $ | 12,023,884 |            |      | $ | 13,879,109 |           
|                                          |                                                                                |   |            |            |      |   |            |           

See notes to consolidated financial statements.

A-18



---



FINOVA CAPITAL CORPORATION

STATEMENTS OF CONSOLIDATED OPERATIONS
(Dollars in thousands, except per share data)

|                                                                                                                                           |  |      |           |      |  |      |           |   |  |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------ |  | ---- | --------- | ---- |  | ---- | --------- | - |  | - | ------- | -
|Years Ended December 31,                                                                                                                   |  | 2000 |           | 1999 |  | 1998
|                                                                                                                                           |  |      |           |      |  |     
|Interest, fees and other income                                                                                                            |  | $    | 947,848   |      |  | $    | 795,954   |   |  | $ | 611,697 |  
|                                                                                                                                          
|                                                                                                                                          
|                                                                                                                                          
|                                                                                                                                          
|Financing lease income                                                                                                                     |  |      | 95,018    |      |  |      | 96,241    |   |  |   | 95,772  |  
|                                                                                                                                          
|                                                                                                                                          
|                                                                                                                                          
|                                                                                                                                          
|Operating lease income                                                                                                                     |  |      | 105,457   |      |  |      | 114,083   |   |  |   | 115,822 |  
|                                                                                                                                           |  |      |           |      |  |      |           |   |  |   |         |  
|Income earned from financing transactions                                                                                                  |  |      | 1,148,323 |      |  |      | 1,006,278 |   |  |   | 823,291 |  
|                                                                                                                                          
|                                                                                                                                          
|                                                                                                                                          
|                                                                                                                                          
|Interest expense                                                                                                                           |  |      | 628,839   |      |  |      | 465,256   |   |  |   | 373,581 |  
|                                                                                                                                          
|                                                                                                                                          
|                                                                                                                                          
|                                                                                                                                          
|Operating lease depreciation                                                                                                               |  |      | 65,919    |      |  |      | 67,835    |   |  |   | 69,954  |  
|                                                                                                                                           |  |      |           |      |  |      |           |   |  |   |         |  
|Interest margins earned                                                                                                                    |  |      | 453,565   |      |  |      | 473,187   |   |  |   | 379,756 |  
|                                                                                                                                          
|                                                                                                                                          
|                                                                                                                                          
|                                                                                                                                          
|Volume-based fees                                                                                                                          |  |      | 1,336     |      |  |      | 10,353    |   |  |   | 24,759  |  
|                                                                                                                                           |  |      |           |      |  |      |           |   |  |   |         |  
|Operating margin                                                                                                                           |  |      | 454,901   |      |  |      | 483,540   |   |  |   | 404,515 |  
|                                                                                                                                          
|                                                                                                                                          
|                                                                                                                                          
|                                                                                                                                          
|Provision for credit losses                                                                                                                |  |      | 643,000   |      |  |      | 22,390    |   |  |   | 48,470  |  
|                                                                                                                                           |  |      |           |      |  |      |           |   |  |   |         |  
|Net interest margins earned                                                                                                                |  |      | (188,099  | )    |  |      | 461,150   |   |  |   | 356,045 |  
|                                                                                                                                          
|                                                                                                                                          
|                                                                                                                                          
|                                                                                                                                          
|(Losses) gains on investments and disposal of assets                                                                                       |  |      | (168,589  | )    |  |      | 67,886    |   |  |   | 27,912  |  
|                                                                                                                                           |  |      |           |      |  |      |           |   |  |   |         |  
|                                                                                                                                           |  |      | (356,688  | )    |  |      | 529,036   |   |  |   | 383,957 |  
|                                                                                                                                          
|                                                                                                                                          
|                                                                                                                                          
|                                                                                                                                          
|Operating expenses                                                                                                                         |  |      | 399,412   |      |  |      | 168,697   |   |  |   | 147,128 |  
|                                                                                                                                           |  |      |           |      |  |      |           |   |  |   |         |  
|(Loss) income from continuing operations
before income taxes                                                                               |  |      | (756,100  | )    |  |      | 360,339   |   |  |   | 236,829 |  
|                                                                                                                                          
|                                                                                                                                          
|                                                                                                                                          
|                                                                                                                                          
|Income tax benefit (expense)                                                                                                               |  |      | 213,173   |      |  |      | (138,316  | ) |  |   | (90,386 | )
|                                                                                                                                           |  |      |           |      |  |      |           |   |  |   |         |  
|(Loss) income from continuing operations                                                                                                   |  |      | (542,927  | )    |  |      | 222,023   |   |  |   | 146,443 |  
|                                                                                                                                           |  |      |           |      |  |      |           |   |  |   |         |  
|Discontinued operations (net of tax benefit of $18,198 and $1,998
for 2000
and
   1999, respectively, and tax expense of $11,787 for 1998) |  |      | (55,397   | )    |  |      | (2,997    | ) |  |   | 17,680  |  
|                                                                                                                                          
|                                                                                                                                          
|                                                                                                                                          
|                                                                                                                                          
|Net loss on disposal of operations (net of tax benefit of $150,664)                                                                        |  |      | (337,711  | )   
|                                                                                                                                           |  |      |           |      |  |      |           |   |  |   |         |  
|Net (loss) income                                                                                                                          |  | $    | (936,035  | )    |  | $    | 219,026   |   |  | $ | 164,123 |  
|                                                                                                                                           |  |      |           |      |  |      |           |   |  |   |         |  

See notes to consolidated financial statements.

A-19



---



FINOVA CAPITAL CORPORATION

STATEMENTS OF CONSOLIDATED SHAREOWNERS EQUITY
(Dollars in thousands)

|                                  |                                                 |             |    |              |  |                    |           |        |         |                  |          |                    |   |               |        |                   |   | 
|--------------------------------- | ----------------------------------------------- | ----------- | -- | ------------ |  | ------------------ | --------- | ------ | ------- | ---------------- | -------- | ------------------ | - | ------------- | ------ | ----------------- | - | 
|                                  |                                                 |             |    |              |  |                    |           |        |         |                  |          |                    |   |               |        | Accumulated Other
|                                  |                                                 |             |    |              |  |                    |           |        |         |                  |          | Retained (Deficit) |   | Comprehensive
|                                  |                                                 |             |    | Common Stock |  | Additional Capital |           | Income |         | Income/(Deficit)
|                                  |                                                 |             |    |              |  |                    |           |        |         |                 
|Balance, January 1, 1998          |                                                 | $           | 25 |              |  | $                  | 870,485   |        |         | $                | 391,368  |                    |   | $             | (10    | )                
|                                  |                                                 |             |    |              |  |                    |           |        |         |                  |          |                    |   |               |        |                   |  
|Comprehensive income:            
|                                 
|                                 
|                                 
|                                 
|                                  | Net income                                      |             |    |              |  |                    |           |        |         |                  |          | 164,123            |   |               |        |                   |  
|                                 
|                                 
|                                 
|                                 
|                                  | Net change in unrealized
holding      gains     |             |    |              |  |                    |           |        |         |                  |          |                    |   |               |        |                   |  
|                                 
|                                 
|                                 
|                                 
|                                  | Net change in foreign currency      translation |             |    |              |  |                    |           |        |         |                  |          |                    |   |               |        |                   |  
|                                 
|                                 
|                                 
|                                 
|                                  | Other comprehensive income                      |             |    |              |  |                    |           |        |         |                  |          |                    |   |               |        | 696               |  
|                                 
|                                 
|                                 
|                                 
|Comprehensive income              |                                                 |             |    |              |  |                    |           |        |         |                  |          |                    |   |               |        |                  
|                                 
|                                 
|                                 
|                                 
|Dividends                         |                                                 |             |    |              |  |                    |           |        |         |                  | (95,044  | )                  |   |               |        |                  
|                                 
|                                 
|                                 
|                                 
|Net advance to Parent            
|                                  |                                                 |             |    |              |  |                    |           |        |         |                  |          |                    |   |               |        |                   |  
|Balance, December 31, 1998        |                                                 |             | 25 |              |  |                    | 870,485   |        |         |                  | 460,447  |                    |   |               | 686    |                  
|                                  |                                                 |             |    |              |  |                    |           |        |         |                  |          |                    |   |               |        |                   |  
|Comprehensive income:            
|                                 
|                                 
|                                 
|                                 
|                                  | Net income                                      |             |    |              |  |                    |           |        |         |                  |          | 219,026            |   |               |        |                   |  
|                                 
|                                 
|                                 
|                                 
|                                  | Net change in unrealized
holding      gains     |             |    |              |  |                    |           |        |         |                  |          |                    |   |               |        |                   |  
|                                 
|                                 
|                                 
|                                 
|                                  | Net change in foreign currency      translation |             |    |              |  |                    |           |        |         |                  |          |                    |   |               |        |                   |  
|                                 
|                                 
|                                 
|                                 
|                                  | Other comprehensive income                      |             |    |              |  |                    |           |        |         |                  |          |                    |   |               |        | 33,126            |  
|                                 
|                                 
|                                 
|                                 
|Comprehensive income              |                                                 |             |    |              |  |                    |           |        |         |                  |          |                    |   |               |        |                  
|                                 
|                                 
|                                 
|                                 
|Capital contributions from FINOVA
|                                 
|                                 
|                                 
|                                 
|                                  |                                                 | Group, Inc. |    |              |  |                    |           |        | 303,510 |                  |          |                    |   |               |        |                   |   | 
|                                 
|                                 
|                                 
|                                 
|Dividends                         |                                                 |             |    |              |  |                    |           |        |         |                  | (40,740  | )                  |   |               |        |                  
|                                 
|                                 
|                                 
|                                 
|Net advance to Parent             |                                                 |             |    |              |  |                    |           |        |         |                  |          |                    |   |               |        |                  
|                                  |                                                 |             |    |              |  |                    |           |        |         |                  |          |                    |   |               |        |                   |  
|Balance, December 31, 1999        |                                                 |             | 25 |              |  |                    | 1,173,995 |        |         |                  | 638,733  |                    |   |               | 33,812 |                  
|                                  |                                                 |             |    |              |  |                    |           |        |         |                  |          |                    |   |               |        |                   |  
|Comprehensive income:            
|                                 
|                                 
|                                 
|                                 
|                                  | Net loss                                        |             |    |              |  |                    |           |        |         |                  |          | (936,035           | ) |               |        |                   |  
|                                 
|                                 
|                                 
|                                 
|                                  | Net change in unrealized
holding      gains     |             |    |              |  |                    |           |        |         |                  |          |                    |   |               |        |                   |  
|                                 
|                                 
|                                 
|                                 
|                                  | Net change in foreign currency      translation |             |    |              |  |                    |           |        |         |                  |          |                    |   |               |        |                   |  
|                                 
|                                 
|                                 
|                                 
|                                  | Other comprehensive income                      |             |    |              |  |                    |           |        |         |                  |          |                    |   |               |        | (18,658           | )
|                                 
|                                 
|                                 
|                                 
|Comprehensive income              |                                                 |             |    |              |  |                    |           |        |         |                  |          |                    |   |               |        |                  
|                                 
|                                 
|                                 
|                                 
|Dividends                         |                                                 |             |    |              |  |                    |           |        |         |                  | (33,084  | )                  |   |               |        |                  
|                                 
|                                 
|                                 
|                                 
|Net advance to Parent             |                                                 |             |    |              |  |                    |           |        |         |                  |          |                    |   |               |        |                  
|                                  |                                                 |             |    |              |  |                    |           |        |         |                  |          |                    |   |               |        |                   |  
|Balance, December 31, 2000        |                                                 | $           | 25 |              |  | $                  | 1,173,995 |        |         | $                | (330,386 | )                  |   | $             | 15,154 |                  
|                                  |                                                 |             |    |              |  |                    |           |        |         |                  |          |                    |   |               |        |                   |  

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                           |             |   |          |                 |  |              |           |               |  |   |          |   |  | 
|------------------------------------------ | ----------- | - | -------- | --------------- |  | ------------ | --------- | ------------- |  | - | -------- | - |  | 
|                                           |             |   |          | Net Advances to |  | Shareowner's |           | Comprehensive
|                                           |             |   |          | Parent          |  | Equity       |           | Income       
|                                           |             |   |          |                 |  |              |           |              
|Balance, January 1, 1998                   |             | $ |          |                 |  | $            | 1,261,868 |              
|                                           |             |   |          |                 |  |              |           |               |  |   |          |   | 
|Comprehensive income:                     
|                                          
|                                          
|                                          
|                                          
|Net income                                 |             |   |          |                 |  |              | 164,123   |               |  | $ | 164,123  |  
|                                           |             |   |          |                 |  |              |           |               |  |   |          |   | 
|Net change in unrealized
holding gains     |             |   |          |                 |  |              |           |               |  |   | 904      |  
|                                          
|                                          
|                                          
|                                          
|Net change in foreign currency translation |             |   |          |                 |  |              |           |               |  |   | (208     | )
|                                           |             |   |          |                 |  |              |           |               |  |   |          |   | 
|Other comprehensive income                 |             |   |          |                 |  |              | 696       |               |  |   | 696      |  
|                                           |             |   |          |                 |  |              |           |               |  |   |          |   | 
|Comprehensive income                       |             |   |          |                 |  |              |           |               |  | $ | 164,819  |  
|                                           |             |   |          |                 |  |              |           |               |  |   |          |   | 
|                                          
|                                          
|                                          
|                                          
|Dividends                                  |             |   |          |                 |  |              | (95,044   | )            
|                                          
|                                          
|                                          
|                                          
|Net advance to Parent                     
|                                           |             |   |          |                 |  |              |           |               |  |   |          |   | 
|Balance, December 31, 1998                 |             |   |          |                 |  |              | 1,331,643 |              
|                                           |             |   |          |                 |  |              |           |               |  |   |          |   | 
|Comprehensive income:                     
|                                          
|                                          
|                                          
|                                          
|Net income                                 |             |   |          |                 |  |              | 219,026   |               |  | $ | 219,026  |  
|                                           |             |   |          |                 |  |              |           |               |  |   |          |   | 
|Net change in unrealized
holding gains     |             |   |          |                 |  |              |           |               |  |   | 37,054   |  
|                                          
|                                          
|                                          
|                                          
|Net change in foreign currency translation |             |   |          |                 |  |              |           |               |  |   | (3,928   | )
|                                           |             |   |          |                 |  |              |           |               |  |   |          |   | 
|Other comprehensive income                 |             |   |          |                 |  |              | 33,126    |               |  |   | 33,126   |  
|                                           |             |   |          |                 |  |              |           |               |  |   |          |   | 
|Comprehensive income                       |             |   |          |                 |  |              |           |               |  | $ | 252,152  |  
|                                           |             |   |          |                 |  |              |           |               |  |   |          |   | 
|Capital contributions from FINOVA         
|                                          
|                                          
|                                          
|                                          
|                                           | Group, Inc. |   |          |                 |  |              |           | 303,510       | 
|                                          
|                                          
|                                          
|                                          
|Dividends                                  |             |   |          |                 |  |              | (40,740   | )            
|                                          
|                                          
|                                          
|                                          
|Net advance to Parent                      |             |   | (98,364  | )               |  |              | (98,364   | )            
|                                           |             |   |          |                 |  |              |           |               |  |   |          |   | 
|Balance, December 31, 1999                 |             |   | (98,364  | )               |  |              | 1,748,201 |              
|                                           |             |   |          |                 |  |              |           |               |  |   |          |   | 
|Comprehensive income:                     
|                                          
|                                          
|                                          
|                                          
|Net loss                                   |             |   |          |                 |  |              | (936,035  | )             |  | $ | (936,035 | )
|                                           |             |   |          |                 |  |              |           |               |  |   |          |   | 
|Net change in unrealized
holding gains     |             |   |          |                 |  |              |           |               |  |   | (22,709  | )
|                                          
|                                          
|                                          
|                                          
|Net change in foreign currency translation |             |   |          |                 |  |              |           |               |  |   | 4,051    |  
|                                           |             |   |          |                 |  |              |           |               |  |   |          |   | 
|Other comprehensive income                 |             |   |          |                 |  |              | (18,658   | )             |  |   | (18,658  | )
|                                           |             |   |          |                 |  |              |           |               |  |   |          |   | 
|Comprehensive income                       |             |   |          |                 |  |              |           |               |  | $ | (954,693 | )
|                                           |             |   |          |                 |  |              |           |               |  |   |          |   | 
|                                          
|                                          
|                                          
|                                          
|Dividends                                  |             |   |          |                 |  |              | (33,084   | )            
|                                          
|                                          
|                                          
|                                          
|Net advance to Parent                      |             |   | (16,661  | )               |  |              | (16,661   | )            
|                                           |             |   |          |                 |  |              |           |               |  |   |          |   | 
|Balance, December 31, 2000                 |             | $ | (115,025 | )               |  | $            | 743,763   |              
|                                           |             |   |          |                 |  |              |           |               |  |   |          |   | 

See notes to consolidated financial statements.

A-20



---



FINOVA CAPITAL CORPORATION

STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in thousands)

|                                                |                                                                                                                      |                                                        |         |            |           |      |         |            |            |   |        |            |            |  
|----------------------------------------------- | -------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------ | ------- | ---------- | --------- | ---- | ------- | ---------- | ---------- | - | ------ | ---------- | ---------- | -
|Years Ended December 31,                        |                                                                                                                      | 2000                                                   |         | 1999       |           | 1998
|                                                |                                                                                                                      |                                                        |         |            |           |     
|OPERATING ACTIVITIES:                          
|                                               
|                                               
|                                               
|                                               
|                                                | Net (loss) income                                                                                                    |                                                        | $       | (936,035   | )         |      | $       | 219,026    |            |   | $      | 164,123    |           
|                                               
|                                               
|                                               
|                                               
|                                                | Discontinued operations, net of tax benefit                                                                          |                                                        |         | 55,397     |           |      |         | 2,997      |            |   |        | (17,680    | )         
|                                               
|                                               
|                                               
|                                               
|                                                | Net loss on disposal of operations, net of tax benefit                                                               |                                                        |         | 337,711    |          
|                                                |                                                                                                                      |                                                        |         |            |           |      |         |            |            |   |        |            |           
|                                                | (Loss) income from continuing operations                                                                             |                                                        |         | (542,927   | )         |      |         | 222,023    |            |   |        | 146,443    |           
|                                               
|                                               
|                                               
|                                               
|                                                | Adjustments to reconcile (loss) income from continuing operations to net
cash
    provided by continuing operations:
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                                                      | Provision for credit losses                            |         |            | 643,000   |      |         |            | 22,390     |   |        |            | 48,470     |  
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                                                      | Gains on disposal of assets                            |         |            | (62,592   | )    |         |            | (70,633    | ) |        |            | (30,520    | )
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                                                      | Impairment write-down on leases and other owned assets |         |            | 89,784    |     
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                                                      | Impairment write-down on investments                   |         |            | 98,188    |      |         |            | 2,613      |   |        |            | 2,608      |  
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                                                      | Valuation adjustment on loans held for sale            |         |            | 43,209    |     
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                                                      | Depreciation and amortization                          |         |            | 89,607    |      |         |            | 89,854     |   |        |            | 85,815     |  
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                                                      | Impairment charge-off of goodwill                      |         |            | 193,337   |     
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                                                      | Deferred income taxes, net                             |         |            | (384,736  | )    |         |            | 124,969    |   |        |            | 76,249     |  
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                                                      | Other amortization                                     |         |            | 42,849    |      |         |            | 26,018     |   |        |            | 20,609     |  
|                                               
|                                               
|                                               
|                                               
|                                                | Change in assets and liabilities, net of effects from companies purchased:                                          
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                                                      | Decrease (increase) in other assets                    |         |            | (14,480   | )    |         |            | (4,615     | ) |        |            | (30,436    | )
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                                                      | Decrease in accounts payable and accrued expenses      |         |            | (40,768   | )    |         |            | (43,880    | ) |        |            | (22,780    | )
|                                               
|                                               
|                                               
|                                               
|                                                |                                                                                                                      | Increase in interest payable                           |         |            | 15,005    |      |         |            | 46,564     |   |        |            | 11,400     |  
|                                                |                                                                                                                      |                                                        |         |            |           |      |         |            |            |   |        |            |           
|                                                |                                                                                                                      | NET CASH PROVIDED BY CONTINUING OPERATING ACTIVITIES   |         |            | 169,476   |      |         |            | 415,303    |   |        |            | 307,858    |  
|                                                |                                                                                                                      |                                                        |         |            |           |      |         |            |            |   |        |            |           
|INVESTING ACTIVITIES:                          
|                                               
|                                               
|                                               
|                                               
|                                                | Proceeds from disposal of
leases and other owned assets                                                              |                                                        |         | 112,556    |           |      |         | 132,958    |            |   |        | 125,612    |           
|                                               
|                                               
|                                               
|                                               
|                                                | Proceeds from sales of investments                                                                                   |                                                        |         | 147,672    |           |      |         | 61,378     |            |   |        | 2,930      |           
|                                               
|                                               
|                                               
|                                               
|                                                | Proceeds from securitizations                                                                                        |                                                        |         | 302,751    |           |      |         |            |            |   |        | 99,967     |           
|                                               
|                                               
|                                               
|                                               
|                                                | Proceeds from sales of commercial mortgage backed securities ("CMBS")                                                |                                                        |         | 110,676    |           |      |         | 504,138    |            |   |        | 869,296    |           
|                                               
|                                               
|                                               
|                                               
|                                                | Principal collections on financing transactions                                                                      |                                                        |         | 1,963,831  |           |      |         | 2,538,862  |            |   |        | 1,850,906  |           
|                                               
|                                               
|                                               
|                                               
|                                                | Expenditures for investments and other income producing activities                                                   |                                                        |         | (57,097    | )         |      |         | (58,671    | )          |   |        | (75,933    | )         
|                                               
|                                               
|                                               
|                                               
|                                                | Expenditures for CMBS
transactions                                                                                   |                                                        |         |            |           |      |         | (529,232   | )          |   |        | (1,005,373 | )         
|                                               
|                                               
|                                               
|                                               
|                                                | Expenditures for financing transactions                                                                              |                                                        |         | (2,882,589 | )         |      |         | (4,132,150 | )          |   |        | (3,495,160 | )         
|                                               
|                                               
|                                               
|                                               
|                                                | Cash received in acquisition                                                                                         |                                                        |         |            |           |      |         | (85,278    | )          |   |        | (61,164    | )         
|                                               
|                                               
|                                               
|                                               
|                                                | Recoveries of loans previously written-off                                                                           |                                                        |         | 1,018      |           |      |         | 1,830      |            |   |        | 1,174      |           
|                                                |                                                                                                                      |                                                        |         |            |           |      |         |            |            |   |        |            |           
|                                                |                                                                                                                      | NET CASH USED BY INVESTING ACTIVITIES                  |         |            | (301,182  | )    |         |            | (1,566,165 | ) |        |            | (1,687,745 | )
|                                                |                                                                                                                      |                                                        |         |            |           |      |         |            |            |   |        |            |           
|FINANCING ACTIVITIES:                          
|                                               
|                                               
|                                               
|                                               
|                                                | Proceeds from draw down on back-up facilities                                                                        |                                                        |         | 4,690,990  |          
|                                               
|                                               
|                                               
|                                               
|                                                | Net change in commercial paper and short term borrowings                                                             |                                                        |         | (3,876,971 | )         |      |         | (305,030   | )          |   |        | 739,515    |           
|                                               
|                                               
|                                               
|                                               
|                                                | Proceeds from issuance of term notes                                                                                 |                                                        |         | 225,000    |           |      |         | 3,443,592  |            |   |        | 1,580,000  |           
|                                               
|                                               
|                                               
|                                               
|                                                | Repayment of term notes                                                                                              |                                                        |         | (1,446,800 | )         |      |         | (809,245   | )          |   |        | (689,176   | )         
|                                               
|                                               
|                                               
|                                               
|                                                | Net advances to Parent                                                                                               |                                                        |         | 24,879     |           |      |         | (98,364    | )          |   |        | (14,211    | )         
|                                               
|                                               
|                                               
|                                               
|                                                | Dividends                                                                                                            |                                                        |         | (33,084    | )         |      |         | (40,739    | )          |   |        | (95,045    | )         
|                                                |                                                                                                                      |                                                        |         |            |           |      |         |            |            |   |        |            |           
|                                                |                                                                                                                      | NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES       |         |            | (415,986  | )    |         |            | 2,190,214  |   |        |            | 1,521,083  |  
|                                                |                                                                                                                      |                                                        |         |            |           |      |         |            |            |   |        |            |           
|                                                |                                                                                                                      | NET CASH PROVIDED (USED) BY DISCONTINUED OPERATIONS    |         |            | 1,146,905 |      |         |            | (988,527   | ) |        |            | (124,870   | )
|                                                |                                                                                                                      |                                                        |         |            |           |      |         |            |            |   |        |            |           
|INCREASE IN CASH AND CASH EQUIVALENTS           |                                                                                                                      |                                                        | 599,213 |            |           |      | 50,825  |            |            |   | 16,326 |           
|                                               
|                                               
|                                               
|                                               
|CASH AND CASH EQUIVALENTS, beginning
 of period |                                                                                                                      |                                                        | 100,344 |            |           |      | 49,519  |            |            |   | 33,193 |           
|                                                |                                                                                                                      |                                                        |         |            |           |      |         |            |            |   |        |            |           
|CASH AND CASH EQUIVALENTS, end of
period        |                                                                                                                      | $                                                      | 699,557 |            |           | $    | 100,344 |            |            | $ | 49,519 |           
|                                                |                                                                                                                      |                                                        |         |            |           |      |         |            |            |   |        |            |           

See notes to consolidated financial statements.

A-21



---



FINOVA CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(Dollars in thousands in tables)

NOTE A    ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT BUSINESS
    DEVELOPMENTS

Organization and Basis of Presentation

The consolidated financial statements present the financial position,
results of operations and cash flows of FINOVA Capital Corporation and its
subsidiaries (collectively, FINOVA). FINOVA is a wholly
owned subsidiary of The FINOVA Group, Inc. (FINOVA
Group). FINOVA is a Delaware
Corporation. All significant intercompany balances have been eliminated in
consolidation.

FINOVA is engaged, principally in providing collateralized financing
products to commercial enterprises focusing on mid-size businesses in various
market niches, primarily in the United States.

Going Concern

The consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States. During the
year ended December 31, 2000, the Company experienced a significant
deterioration in the credit quality of its portfolio, the loss of its
investment grade credit ratings and the resulting loss in access to capital and
increase in cost of funds. The Company was not in compliance with its debt
covenants as of December 31, 2000 and filed for protection from its creditors
under Chapter 11 of the United States Bankruptcy Code on March 7, 2001.

These conditions and events, more fully described below raise substantial
doubt about the Companys ability to continue as a going concern. The ability
of the Company to continue as a going concern is dependent on many factors
including the confirmation of a plan of reorganization (the Plan) and
successful execution of managements plans for the collection of its portfolio
pursuant to contractual terms and negotiation of appropriate rates and fee
structures with its customers. The accompanying consolidated financial
statements do not include any adjustments relating to the recoverability and
classification of asset amounts or the amounts and classification of
liabilities that might be necessary should the Company be unable to continue as
a going concern.

Significant Business Developments

On March 27, 2000, FINOVA announced the retirement of its Chairman,
President and Chief Executive Officer, Samuel L. Eichenfield, for personal and
health reasons. Following Mr. Eichenfields retirement as a director and
officer, FINOVA Groups board of directors elected Matthew M. Breyne as a
director, President and Chief Executive Officer of FINOVA Group and Chairman,
President and Chief Executive Officer and the chairman of the board of FINOVA.
FINOVA also announced that it would take an $80 million pre-tax charge to
earnings in the first quarter of 2000 to increase loss reserves and provide for
payment of deferred compensation and executive severance. The additional loss
reserves related to the replenishment of reserves after a write-off of a loan
to a single customer in the Distribution & Channel Finance line of business
which had previously been partially reserved. The remainder of the charge was
used to provide for payment of deferred compensation and executive severance to
Mr. Eichenfield. Following these announcements, some of the credit rating
agencies downgraded or placed on credit watch FINOVAs senior debt and
commercial paper ratings.

In May 2000, $2.1 billion of FINOVAs 364-day revolving credit agreements
were scheduled to expire. These agreements were part of the Companys $4.7
billion bank facilities, which were in place to provide a back-up mechanism for
its commercial paper program. On May 5, 2000, FINOVAs banks renewed a $500
million facility but committed to renewing only approximately $1.1 billion of
the $1.6 billion of back-up facilities that expired on May 15, 2000.
Historically, a significant portion of FINOVAs business was financed with
commercial paper, which was reissued when it matured. The Company also borrowed
funds in the form of publicly traded debt securities with staggered maturities.
Without full coverage after May 15 for outstanding commercial paper under the
domestic back-up bank facilities, FINOVA drew down on approximately $4.5
billion of domestic back-up bank lines to meet maturing commercial paper
obligations and other debt obligations. This resulted in additional debt rating
downgrades.

In May 2000, FINOVA structured a 364-day commitment with a bank to sell at
FINOVAs option up to $375 million of commercial equipment loans and direct
financing lease receivables on a revolving basis.

On May 8, 2000, FINOVA announced that it had engaged an independent third
party to assist in the exploration of strategic alternatives with financial,
strategic and other potential partners. Alternatives included a sale of the
Company or obtaining a significant equity investment.

A-22



---



FINOVA CAPITAL CORPORATION

During July 2000, FINOVA structured a sale with an independent third party
acting as structuring agent, which included a commitment to purchase beneficial
interests up to $500 million in corporate finance loans on a revolving basis.
In February 2001, FINOVA purchased the outstanding beneficial interests.

During the third quarter of 2000, FINOVA discontinued and offered for sale
its Commercial Services, Corporate Finance (including Business Credit and
Growth Finance) and Distribution & Channel Finance businesses. On August 28,
2000, FINOVA completed the sale of substantially all the assets of its
Commercial Services division to an independent third party for approximately
$235 million.

In October 2000, FINOVA engaged an independent third party to assist in
connection with the development of strategic and financial planning, including
re-negotiation of its bank debt. The engagement was generally concluded in
March 2001, following the execution of the agreements with Berkshire Hathaway
Inc. (Berkshire Hathaway), Leucadia National Corporation (Leucadia) and
Berkadia, LLC (Berkadia), noted below.

On November 10, 2000, FINOVA announced that it entered into a letter
agreement with Leucadia with respect to an equity
investment in the Company. A Securities Purchase Agreement was entered into on
December 20, 2000. On January 20, 2001, FINOVA and Leucadia mutually agreed to
terminate the Securities Purchase Agreement.

On February 1, 2001, FINOVA sold approximately $309 million of Corporate
Finance assets to an independent third party at a discount of $9.2 million.

On February 26, 2001, FINOVA, FINOVA Capital entered into a commitment
letter with Berkshire Hathaway, Leucadia and Berkadia, an entity jointly owned
by Leucadia and Berkshire Hathaway pursuant to which Berkadia committed to lend
$6.0 billion to FINOVA, to facilitate a Chapter 11 restructuring of the
outstanding debt of FINOVA and its principal subsidiaries. The $6.0
billion five-year term loan will be secured by substantially all of
the assets of FINOVA and its subsidiaries and guaranteed on a secured basis by
FINOVA Group and substantially all of the subsidiaries of FINOVA (the Berkadia
Loan). The balance of FINOVAs bank and bond indebtedness will be restructured
into approximately $5 billion of new ten-year senior notes of FINOVA (the New
Senior Notes). Berkadias commitment is subject to various conditions,
including Berkadias satisfaction with FINOVAs
Chapter 11 Plan and bankruptcy
court and necessary creditor approvals. In connection with the commitment
letter, FINOVA also entered into a Management Services Agreement with Leucadia
and its subsidiary, Leucadia International Corporation, which has been amended
and restated. The terms of this commitment letter and the management services
agreement are described more fully below in Berkadia Commitment  Proposed
Restructuring Plan.

On February 27, 2001, FINOVA announced a moratorium on repayment of
principal on its outstanding bank and bond debt. The purpose of the moratorium
was to enable all creditors to be treated equitably in the debt restructuring
process. In connection with that moratorium, FINOVA did not make a $50 million
principal payment due on February 27, 2001 with respect to its 5.98% notes due
2001, which constituted an event of default under the trust indenture related
to those notes and a cross default under substantially all of FINOVAs $11
billion of bank and bond indebtedness. The event of default also affected the
interest rate swaps and securitizations the Company had entered into by
allowing for immediate termination or other modifications, and substantially
all of the Companys swaps were terminated. FINOVA Group suspended paying dividends on the convertible trust
originated preferred securities and interest on the underlying
convertible debentures.

On March 5, 2001, FINOVA
announced that Matthew M. Breyne resigned as a director and the Companys President and Chief Executive Officer. The board of
directors elected FINOVA Group board member G. Robert Bull Durham as Chairman
and elected General Counsel and Secretary William J. Hallinan to the additional
positions of President and Chief Executive Officer of FINOVA Group and the
President, Chief Executive Officer and General Counsel of FINOVA.

On March 6, 2001, one of FINOVAs subsidiaries, FINOVA (Canada) Capital
Corporation, had a petition for Receiving Order filed against it in Ontario, Canada.
That action has not been served on FINOVA. See "Legal Proceedings"
for more information on this matter.

On March 7, 2001, FINOVA Group, FINOVA and seven of their subsidiaries
filed for protection pursuant to Chapter 11, Title 11, of the United States
Code, in the United States Bankruptcy Court for the District of Delaware to
enable them to restructure their debt (the Reorganization Proceedings).

A-23



---



FINOVA CAPITAL CORPORATION

The bankruptcy court approved first-day orders pertaining to, among other
items, customers, employees and vendors. The purpose of the first-day orders
was to allow FINOVA and its subsidiaries to continue conducting their
businesses substantially without hindrance from the Reorganization Proceedings.
FINOVA has been authorized to continue honoring all customer commitments, and
to pay certain prepetition claims (excluding, among other items, all amounts
related to its $11 billion of bank and bond debt), in its discretion, including
those to employees (other than executive officers with certain exceptions),
taxing and other governmental authorities, claims essential to the ability to
honor commitments, and to foreign trade vendors.

In light of these events, FINOVA has effectively eliminated new
business development activities, and for the foreseeable future,
intends to focus on
managing and maximizing the value of its existing portfolio. These activities
will include the continued collection of its portfolio pursuant to contractual
terms and may include efforts to retain certain customer relationships,
restructure or terminate other relationships or sell certain assets if buyers
can be found at attractive prices. The Company also expects to continue to focus on
negotiating appropriate rates and fee structures with its customers. While it
is possible that new business opportunities may present themselves in the
future, no assurance can be given as to the Companys ability to take advantage
of those opportunities.

Berkadia Commitment  Proposed Restructuring Plan

The following describes the Berkadia Commitment as set forth in the
Commitment Letter signed on February 26, 2001. Consummation of the Berkadia
Loan and related transactions contemplated by the Commitment Letter is subject
to approval of the bankruptcy court, necessary creditor approvals, and other
material conditions, including Berkadias satisfaction with the Companys
Chapter 11 plan. There can be no assurance that
those approvals will be obtained or that the other conditions will be
satisfied.

The commitment expires on August 31, 2001, or earlier, if certain
conditions are not satisfied, or certain events occur. The
$6 billion Berkadia Loan will be made to FINOVA. Berkadias commitment for the loan has been guaranteed 90% by
Berkshire Hathaway and 10% by Leucadia, with Berkshire Hathaway providing a
secondary guarantee of the obligations guaranteed by Leucadia. Berkadia expects
to finance its funding commitment and Berkshire Hathaway will provide
Berkadias lenders with a 90% primary guarantee of that financing, with
Leucadia providing a 10% primary guarantee and Berkshire Hathaway providing a
secondary guarantee of Leucadias guarantee. Upon completion of the Plan as
currently contemplated, Berkadia (or Berkshire Hathaway and Leucadia in the
aggregate) will receive common stock representing 51% of FINOVA Groups
outstanding shares on a fully diluted basis and the existing shareowners of
FINOVA Group will retain their existing shares. Berkadia will be entitled to
designate a majority of FINOVAs board of directors upon effectiveness of
the Plan. The Berkadia Loan will be guaranteed on a secured basis by FINOVA and
substantially all subsidiaries of FINOVA Group and FINOVA.

The Berkadia Loan will bear interest at an annual rate equal to the
greater of 9% or LIBOR on each day plus 3%. Interest on the Berkadia Loan will
be calculated daily and will be payable quarterly pursuant to the terms of the
Berkadia Loan. In addition, an annual facility fee will be payable monthly at
the rate of 25 basis points on the outstanding principal amount of the Berkadia
Loan. After payment of interest on the Berkadia Loan, payment of operating
expenses and taxes and establishing reserves for customer commitments and other
corporate expenses, any remaining available cash (as determined under the
Berkadia Loan) will then be used for payment of interest due on the New Senior
Notes. Thereafter, 100% of any available cash flow and net proceeds from asset
sales will be used to pay principal on the Berkadia Loan without premium. Any
remaining principal and accrued and unpaid interest on the Berkadia Loan will
be due at maturity, which will be five years from funding.

Subject to necessary approval of creditors and the bankruptcy court and
various other conditions, pursuant to the proposed Plan, FINOVA will use the
proceeds of the Berkadia Loan to pay down its existing bank and publicly traded
indebtedness on a pro rata basis. The balance of FINOVAs bank and bond
indebtedness (approximately $5.3 billion) will be restructured
into ten-year New Senior Notes of FINOVA.

The New Senior Notes will bear interest at the weighted average rate of
FINOVAs outstanding bank and bond debt (excluding default interest and
penalties, if any) and will be secured by a second priority security interest
in the stock of FINOVA. Enforcement of the New Senior Note security interests
will not be allowed until the Berkadia Loan is paid in full. Interest on the
New Senior Notes will be payable semi-annually only out of available cash, if
any, determined in accordance with the terms of the New Senior Notes. No
payments of principal will be made on the New Senior Notes until the Berkadia
Loan is paid in full. After payment in full of the Berkadia Loan, available
cash flow from FINOVA, after paying operating expenses and taxes and
establishing reserves for customer commitments and other corporate expenses,
will first be used for payment of interest on the New Senior Notes. Thereafter,
available cash determined in accordance with the terms of the New Senior Notes
will be used first to pay or to fund a reserve to pay interest on FINOVAs
outstanding 5-1/2% Convertible Subordinated Debentures due 2016 (which shall be
distributed upon

A-24



---



FINOVA CAPITAL CORPORATION

consummation of the proposed Plan to the holders of the FINOVA
Group Trust
Originated Preferred Securities) and then to make semi-annual prepayments of
principal on the New Senior Notes and distributions (or reserves for
distributions) to FINOVA common
shareowners used with a total of 95% of the remaining available cash to be used for
principal payments on the New Senior Notes and 5% to be used for distributions
to shareowners. After payment in full of the outstanding principal of the New
Senior Notes, 95% of any available cash of FINOVA Capital will be used to pay
contingent cash flow rights to holders of the New Senior Notes in an aggregate amount
up to $100 million.

Completion of the transactions contemplated by the Berkadia Commitment
Letter is subject to a number of conditions, including the negotiation and
approval of definitive loan documentation, Berkadias approval of the terms and
conditions of the FINOVA Group and FINOVA Plan, bankruptcy court and necessary
creditor approval of the Plan, the issuance of a majority of
FINOVA Groups common stock to Berkshire, Leucadia or their
designees, and
designation by Berkadia of a majority of directors as noted above.

Berkadia has received a $60 million commitment fee and subject to
bankruptcy court approval, will receive an additional $60 million fee upon
funding or if the commitment is not funded (except in certain limited
circumstances). In addition, FINOVA has agreed to reimburse Berkadia, Berkshire
Hathaway and Leucadia for all fees and expenses incurred in connection with
Berkadias commitment and the financing of its funding obligation under the
commitment.

In connection with the commitment letter, the Company entered
into a ten-year management agreement with Leucadia pursuant to which, prior to
the effective date of the Plan, Leucadia will provide advice and assistance to FINOVA related to the restructuring and
management of FINOVAs asset portfolio, subject to oversight by the Board of
Directors of FINOVA Group or a special committee of the Board. After the
effective date, Leucadia will have responsibility for the general management of
FINOVA, subject to the authority of the Board. For these services, Leucadia
will receive an annual fee of $8 million, the first of which was paid in 2001
when the agreement was signed.

NOTE B SIGNIFICANT ACCOUNTING POLICIES

Described below are those accounting policies particularly significant to
FINOVA, including those selected from acceptable alternatives:

Discontinued Operations Certain reclassifications have been made to
reflect discontinued operations. These reclassifications resulted from the
Companys decision in the third quarter of 2000 to sell or liquidate some of
its more broad based businesses and focus on providing financing through its
niche-based businesses. The businesses discontinued include Corporate Finance,
Business Credit, Growth Finance (all of which are included under the caption
Corporate Finance), Distribution & Channel Finance and Commercial Services.
See Note R for more information on discontinued operations.

Use of Estimates The preparation of financial statements in conformity
with accounting principles generally accepted in the United States 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. Such estimates and assumptions could
change as more information becomes available, which could impact the amounts
reported and disclosed herein.

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.

A-25



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FINOVA CAPITAL CORPORATION

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 until the
loan is advanced and are then recognized as income 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
commercial mortgage loan originations. Fees on the volume of purchased accounts
receivable were generated by FINOVAs Commercial Services and Distribution &
Channel Finance divisions, which were discontinued in the third quarter of
2000, and 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. FINOVA ceased operation of its commercial mortgage operation in
the second quarter of 2000.

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

Cash Equivalents FINOVA classifies highly liquid investments with
original maturities of three months or less from date of purchase as cash
equivalents.

The December 31, 2000 Statement of Consolidated Cash Flows excluded the
non-cash activity for the transfers of $38.2 million from the purchase of
assets previously held in a joint venture with a third party from investments
to other assets, $44.8 million in convertible debt investment securities from
investment in financing contracts to investments, that were subsequently
written-off, and $13.7 million of assets coming off lease from investment in
financing contracts to other assets. The December 31, 1999 Statement of
Consolidated Cash Flows excluded the non-cash activity for the transfers of
$61.8 million of debt investment securities from investment in financing
contracts to investments and $59.6 million of assets coming off lease from
investment in financing contracts to other assets.

Financing Contracts Held for Sale Financing contracts held for sale are
composed of assets held for sale. Assets held for sale are carried at lower of
cost or market with adjustment, if any, recorded in operations. During 2000,
the Company designated loans generated by the Realty Capital line of business
as being held for sale and recorded a loss of $43.2 million to write-down the
assets to fair value.

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 and residuals. The
provision for credit losses is the charge to operations 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 operations as incurred. 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. 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 debt securities, equity
securities and partnership interests.

A-26



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FINOVA CAPITAL CORPORATION

Certain marketable securities, as discussed in Note E, are considered
trading securities and are stated at fair value with gains or losses recorded
in operations in the period they occur.

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.

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

Other Assets Included in other assets are aircraft either undergoing
conversion from passenger to cargo configuration or otherwise available for
lease of approximately $231.2 million and $98.4 million at December 31, 2000
and 1999, respectively. Conversion costs are capitalized as incurred.

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 $16.3 million ($11.0 million after-tax), $16.1
million ($10.3 million after-tax) and $11.1 million ($7.0 million after-tax)
for the years ended December 31, 2000, 1999 and 1998, 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. Management evaluated the impairment of all
goodwill at December 31, 2000, and $193.3 million ($146.3 million was tax
deductible) of the Companys goodwill was considered impaired and was written
off to amortization expense. Additionally, in connection with adjusting the
discontinued business to net realizable value, $107.3 million ($95.7 million
was tax deductible) of goodwill associated with discontinued operations was
written off and is included in the loss on disposal of operations. At December
31, 2000, approximately $29.5 million of goodwill (net of amortization), or 69%
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.
Generally, FINOVA records post-employment benefit costs if the obligation
attributable to the employees services have been rendered, the employees
rights to those benefits have accumulated or vested, payment of the benefits is
probable, and the amount of the benefits can be reasonably estimated.

Employees are covered by one of several severance arrangements with the
Company. Severance accruals are recorded when management approves the
termination, which specifically identifies the employees to be terminated. At
December 31, 2000, the Company accrued $4.1 million in severance related costs
in continuing operations for 80 employees terminated in the first quarter of
2001.

Employees included as part of the Companys continuing operations were
also covered by retention plans in place as of December 31, 2000. The cost
associated with a retention plan is charged to operations over the period of
service for the corresponding plan. The Company recorded $21.6 million in
retention expense during 2000.

Savings Plan FINOVA maintains 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 were
matched in FINOVA Group stock through the Employee Stock Ownership Plan
(ESOP), discussed below, until year-end. Thereafter, the ESOP was terminated
and merged into the Savings Plan.

A-27



---



FINOVA CAPITAL CORPORATION

Employee Stock Ownership Plan Employees of FINOVA were eligible to
participate in the Employee Stock Ownership Plan in the month following the
first 12 consecutive month period during which they have at least 1,000 hours
of service with FINOVA. Company contributions were made in the form of matching
stock contributions of 100% of the first 3% of salary reduction contributions
made by participants of the Savings Plan. Effective January 1, 2001, up to the
entire 6% of salary is matched and invested at the employees discretion, and
the ESOP was terminated and merged into the Savings Plan.

Expenses under the Savings Plan and Employee Stock Ownership Plan were
$4.4 million, $4.0 million and $3.1 million in 2000, 1999 and 1998,
respectively.

Income Taxes
FINOVA files a consolidated income tax return with FINOVA Group. 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 G,
FINOVA has used 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 was matched with an asset or liability
with which it had a high correlation. Historically, during 2000 the swap
agreements were generally held to maturity and FINOVA did not use derivative
financial instruments for trading or speculative purposes.

As of December 31, 2000, the interest rate swaps were generally not
recognized on the balance sheet. However, the receipts and disbursements on the
interest rate swaps were generally accrued as earned or incurred in the results
of operations.

Receivable Sales In accordance with SFAS No. 125, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities, when the Company sells receivables, it may retain subordinated
interests, which are retained interests in the transferred receivables. These
receivable transfers are accounted for as sales when legal and effective
control of the transferred receivables is surrendered. Gain or loss on sale of
the receivables depends in part on the previous carrying amount of the
financial assets involved in the transfer, allocated between the receivables
sold and the retained interests based on their relative fair value at the date
of transfer. Active markets with quoted prices for retained interests generally
do not exist. Therefore, the Company estimates fair value based on the present
value of future expected cash flows estimated using managements best estimates
of the key assumptions i.e., net credit losses, prepayment speeds and discount
rates commensurate with the risks involved. In general, the servicing fees
earned are approximately equal to the cost of servicing; therefore, no material
servicing assets or liabilities have been recognized in those transactions.

FINOVAs retained interests in transferred receivables are generally
treated as assets available for sale, which are carried at estimated 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; however, if a decline in value is
considered other than temporary, the valuation adjustment is recorded through
the statement of operations. These retained interests are on the balance sheet
within investment in financing transactions.

FINOVAs retained interests in transferred receivables that relate to
discontinued operations are recorded within discontinued operations.

FINOVA adopted the disclosure provisions of SFAS 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities, as of December 31, 2000. These provisions required additional
disclosures about the Companys receivables transfers, servicing
responsibilities, retained interests, and key assumptions made in its
valuations. The implementation of the disclosure provisions of SFAS 140 did not
have a material impact on FINOVAs consolidated results of operations and
financial position. The remaining provisions of SFAS 140, related to the
accounting requirements for transfers of financial assets, are effective for
transfers after March 31, 2001 and may impact FINOVAs treatment of any future
transfers of receivables, including gain or loss recognition on sales.

Reclassifications Certain reclassifications have been made to the prior
years financial statements to conform with the 2000 presentation.

A-28



---



FINOVA CAPITAL CORPORATION

NOTE C INVESTMENT IN FINANCING TRANSACTIONS

FINOVA provides secured financing to commercial and real estate
enterprises principally under financing contracts (such as loans and other
financing contracts, direct financing leases, operating leases, leveraged
leases and financing contracts held for sale). The following discussion
excludes discontinued operations. At December 31, 2000 and 1999, the carrying
amount of the investment in financing transactions, including the estimated
residual value of leased assets upon lease termination, was $10.2 billion and
$10.3 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 
|                                              |                               |  |                 
|                                              |                               |  | 2000             |      | 1999
|                                              |                               |  |                  |      |     
|Specialty Finance Group                      
|                                             
|                                             
|                                             
|                                             
|                                              | Transportation Finance        |  |                  | 23.5 | %    |  |       | 24.1 | %
|                                             
|                                             
|                                             
|                                             
|                                              | Resort Finance                |  |                  | 18.0 |      |  |       | 15.7 |  
|                                             
|                                             
|                                             
|                                             
|                                              | Commercial Equipment Finance  |  |                  | 5.1  |      |  |       | 8.2  |  
|                                             
|                                             
|                                             
|                                             
|                                              | Franchise Finance             |  |                  | 9.0  |      |  |       | 7.6  |  
|                                             
|                                             
|                                             
|                                             
|                                              | Specialty Real Estate Finance |  |                  | 6.9  |      |  |       | 7.5  |  
|                                             
|                                             
|                                             
|                                             
|                                              | Healthcare Finance            |  |                  | 8.4  |      |  |       | 7.4  |  
|                                             
|                                             
|                                             
|                                             
|                                              | Communications Finance        |  |                  | 7.0  |      |  |       | 6.7  |  
|                                             
|                                             
|                                             
|                                             
|                                              | Public Finance                |  |                  | 1.8  |      |  |       | 1.6  |  
|                                              |                               |  |                  |      |      |  |       |      |  
|                                              |                               |  | 79.7             | %    |      |  | 78.8  | %   
|                                              |                               |  |                  |      |      |  |       |      |  
|Commercial Finance Group
  Rediscount Finance |                               |  | 12.0             |      |      |  | 10.4  |     
|                                              |                               |  |                  |      |      |  |       |      |  
|                                              |                               |  | 12.0             | %    |      |  | 10.4  | %   
|                                              |                               |  |                  |      |      |  |       |      |  
|Capital Markets Group                        
|                                             
|                                             
|                                             
|                                             
|                                              | Realty Capital                |  |                  | 4.2  |      |  |       | 5.7  |  
|                                             
|                                             
|                                             
|                                             
|                                              | Mezzanine Capital             |  |                  | 3.3  |      |  |       | 4.3  |  
|                                             
|                                             
|                                             
|                                             
|                                              | Investment Alliance           |  |                  | 0.4  |      |  |       | 0.2  |  
|                                              |                               |  |                  |      |      |  |       |      |  
|                                              |                               |  | 7.9              | %    |      |  | 10.2  | %   
|                                              |                               |  |                  |      |      |  |       |      |  
|Other                                         |                               |  | 0.4              |      |      |  | 0.6   |     
|                                              |                               |  |                  |      |      |  |       |      |  
|                                              |                               |  | 100.0            | %    |      |  | 100.0 | %   
|                                              |                               |  |                  |      |      |  |       |      |  

FINOVAs loan and lease portfolio as indicated in the above table is
concentrated in several specialized businesses and accordingly is subject to
both the normal lending risk of general economic downturns and additional risk
of economic downturn in individual sectors of the economy. Additionally, the
Company may complete multiple lending or leasing transactions to individual
borrowers and their affiliates resulting in an increase in the risk
concentration to economic events affecting such single borrowers and their
affiliates. At December 31, 2000, FINOVAs portfolio includes aggregate
exposures to 12 borrowers and their affiliates exceeding $100 million each and
aggregating to approximately $1.8 billion.

Aggregate installments on investments in financing transactions at
December 31, 2000 (excluding nonaccruing repossessed assets of $25.1 million
and estimated residual values of $1,023.3 million) are contractually due or
anticipated during each of the years during December 31, 2001 to 2005 and
thereafter as follows:

A-29



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FINOVA CAPITAL CORPORATION

|                                          |                         |   |           |           |      |   |           |           |      |   |           |           |            |   |           |         |  |   |         |         |  |   |           |         | 
|----------------------------------------- | ----------------------- | - | --------- | --------- | ---- | - | --------- | --------- | ---- | - | --------- | --------- | ---------- | - | --------- | ------- |  | - | ------- | ------- |  | - | --------- | ------- | 
|                                          |                         |   | 2001      |           | 2002 |   | 2003      |           | 2004 |   | 2005      |           | Thereafter
|                                          |                         |   |           |           |      |   |           |           |      |   |           |           |           
|Loans and other financing contracts:     
|                                         
|                                         
|                                         
|                                         
|                                          | Fixed interest rate     |   | $         | 718,920   |      |   | $         | 471,874   |      |   | $         | 544,391   |            |   | $         | 387,034 |  |   | $       | 276,316 |  |   | $         | 867,298 | 
|                                         
|                                         
|                                         
|                                         
|                                          | Floating interest rate  |   |           | 1,348,052 |      |   |           | 1,055,528 |      |   |           | 1,108,394 |            |   |           | 706,943 |  |   |         | 155,355 |  |   |           | 170,504 | 
|                                         
|                                         
|                                         
|                                         
|Leases, primarily at fixed interest rate:
|                                         
|                                         
|                                         
|                                         
|                                          | Operating leases        |   |           | 197,494   |      |   |           | 151,223   |      |   |           | 63,708    |            |   |           | 64,662  |  |   |         | 27,736  |  |   |           | 56,875  | 
|                                         
|                                         
|                                         
|                                         
|                                          | Leveraged leases        |   |           | 14,762    |      |   |           | 4,707     |      |   |           | 14,292    |            |   |           | 15,848  |  |   |         | 21,001  |  |   |           | 357,439 | 
|                                         
|                                         
|                                         
|                                         
|                                          | Direct financing leases |   |           | 102,425   |      |   |           | 76,823    |      |   |           | 63,455    |            |   |           | 65,280  |  |   |         | 45,576  |  |   |           | 321,331 | 
|                                         
|                                         
|                                         
|                                         
|Financing contracts held for sale         |                         |   | 194,423   |           |      |   | 100,582   |           |      |   | 23,888    |           |            |   | 71,633    |         |  |   | 1,374   |         |  |   | 30,056    |        
|                                          |                         |   |           |           |      |   |           |           |      |   |           |           |            |   |           |         |  |   |         |         |  |   |           |         | 
|                                          |                         | $ | 2,576,076 |           |      | $ | 1,860,737 |           |      | $ | 1,818,128 |           |            | $ | 1,311,400 |         |  | $ | 527,358 |         |  | $ | 1,803,503 |        
|                                          |                         |   |           |           |      |   |           |           |      |   |           |           |            |   |           |         |  |   |         |         |  |   |           |         | 

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

|                               |  |      |          |      |  |   |          |  
|------------------------------ |  | ---- | -------- | ---- |  | - | -------- | -
|                               |  | 2000 |          | 1999
|                               |  |      |          |     
|Cost of assets                 |  | $    | 711,835  |      |  | $ | 720,617  |  
|                              
|                              
|                              
|                              
|Accumulated depreciation       |  |      | (150,137 | )    |  |   | (133,334 | )
|                               |  |      |          |      |  |   |          |  
|Investment in operating leases |  | $    | 561,698  |      |  | $ | 587,283  |  
|                               |  |      |          |      |  |   |          |  

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

|                                                        |  |      |            |      |  |   |            |  
|------------------------------------------------------- |  | ---- | ---------- | ---- |  | - | ---------- | -
|                                                        |  | 2000 |            | 1999
|                                                        |  |      |            |     
|Rental receivables                                      |  | $    | 2,991,130  |      |  | $ | 2,987,277  |  
|                                                       
|                                                       
|                                                       
|                                                       
|Less principal and interest payable on nonrecourse debt |  |      | (2,563,081 | )    |  |   | (2,517,839 | )
|                                                        |  |      |            |      |  |   |            |  
|Net rental receivables                                  |  |      | 428,049    |      |  |   | 469,438    |  
|                                                       
|                                                       
|                                                       
|                                                       
|Estimated residual values                               |  |      | 874,334    |      |  |   | 848,236    |  
|                                                       
|                                                       
|                                                       
|                                                       
|Less unearned income                                    |  |      | (498,802   | )    |  |   | (480,591   | )
|                                                        |  |      |            |      |  |   |            |  
|Investment in leveraged leases                          |  |      | 803,581    |      |  |   | 837,083    |  
|                                                       
|                                                       
|                                                       
|                                                       
|Less deferred taxes from leveraged leases               |  |      | (483,319   | )    |  |   | (411,642   | )
|                                                        |  |      |            |      |  |   |            |  
|Net investment in leveraged leases                      |  | $    | 320,262    |      |  | $ | 425,441    |  
|                                                        |  |      |            |      |  |   |            |  

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:

|                            |  |      |        |      |  |      |        |  |  |   |        | 
|--------------------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | ------ | 
|                            |  | 2000 |        | 1999 |  | 1998
|                            |  |      |        |      |  |     
|Lease and other income, net |  | $    | 46,251 |      |  | $    | 60,936 |  |  | $ | 60,484 | 
|                           
|                           
|                           
|                           
|Income tax expense          |  |      | 16,832 |      |  |      | 24,136 |  |  |   | 24,063 | 
|                            |  |      |        |      |  |      |        |  |  |   |        | 

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

|                                      |  |      |          |      |  |   |          |  
|------------------------------------- |  | ---- | -------- | ---- |  | - | -------- | -
|                                      |  | 2000 |          | 1999
|                                      |  |      |          |     
|Rental receivables                    |  | $    | 674,890  |      |  | $ | 574,874  |  
|                                     
|                                     
|                                     
|                                     
|Estimated residual values             |  |      | 148,926  |      |  |   | 150,483  |  
|                                     
|                                     
|                                     
|                                     
|Unearned income                       |  |      | (266,345 | )    |  |   | (231,742 | )
|                                      |  |      |          |      |  |   |          |  
|Investment in direct financing leases |  | $    | 557,471  |      |  | $ | 493,615  |  
|                                      |  |      |          |      |  |   |          |  

FINOVA has a substantial number of loans and leases with payments that
fluctuate with changes in index rates, primarily prime interest rates and the
London interbank offered rates (LIBOR). The investment in loans and leases
with floating interest rates (excluding nonaccruing contracts and repossessed
assets) was $4.6 billion and $4.5 billion at December 31, 2000 and 1999,
respectively.

Income earned from financing transactions with floating interest rates was
approximately $505 million in 2000, $356 million in 1999 and $295 million in
1998. The adjustments which arise from changes in index rates can have a
significant effect on income earned from financing transactions.

A-30



---



FINOVA CAPITAL CORPORATION

FINOVA had loans and leases of $2.74 billion in 2000 and $1.87 billion in
1999 collateralized by real estate.

At December 31, 2000, FINOVA had a committed backlog of business of
approximately $1.3 billion compared to $1.9 billion at December 31, 1999. The
committed backlog includes unused lines of credit totaling $576 million and
$710 million at December 31, 2000 and 1999, respectively. There can be no
assurance that FINOVA will book all or any part of the backlog. 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.

Historically, the amount reported as committed backlog was FINOVAs
estimate of expected draw downs of the total commitments outstanding,
especially the revolving unused lines of credit. That amount at December 31,
2000 was $1.3 billion for continuing operations, and assumed a percentage of
the outstanding commitments would not be drawn down. Assuming full
utilization, the total amount of unused lines of credit at December 31, 2000, was $2.7
billion, included outstanding commitments in discontinued operations.

In light of the significant business developments described in Note A,
FINOVA has effectively eliminated new business development activities, and
for the foreseeable future, intends to focus on managing and maximizing the value of
its existing portfolio.

Sales of Receivables

Commercial Equipment Finance In the second quarter of 2000, the
Commercial Equipment Finance unit completed the sale of $322.1 million of
commercial equipment loans and direct financing lease receivables for cash
proceeds of $302.8 million. The structure of the transaction included a 364-day
commitment to sell at FINOVAs option up to $375 million of receivables on a
revolving basis. The Company also receives annual servicing fees approximating
50 basis points on the outstanding balance of the receivables and the right to
future cash flows after investors have received the return for which they have
contracted. There is no recourse to the Companys other assets for failure of
debtors to pay when due. The Companys retained interests are subordinate to
investors interests. The value of the retained interests is subject to credit,
prepayment, and interest rate risks on the transferred financial assets.

At sale dates, the Company recognized a pre-tax gain of $0.2 million. In
the determination of the gain, the Company assumed an annual prepayment rate of
6.0%, weighted average life of approximately 3.5 years, an annual net credit
loss rate of 1.5%, delinquencies of 5.0% and a discount rate of 15%.

At December 31, 2000, the outstanding balance of the sold receivables
totaled $267.7 million. A revaluation of the retained interest resulted in a
$6.2 million unrealized holding loss based on the following revised
assumptions: an annual prepayment rate of 8.0%, weighted average life of
approximately 3.0 years, an annual net credit loss rate of 1.5%, delinquencies
of 6.3%, and a discount rate of 20%. The unrealized holding loss is included in
other comprehensive income. The retained interests had an estimated fair value,
net of the valuation adjustment, totaling $25.6 million at December 31, 2000
and are included in loans and other financing contracts.

In connection with the retained interests, a hypothetical analysis was
performed to determine the impact of a 10% and 20% adverse change in any
individual assumption from the expected levels. Based on this analysis, a 10%
and 20% adverse change in the level of prepayments would result in a $0.5
million and $1.0 million reduction in its value, respectively. A 10% and 20%
adverse change in the level of net credit losses would result in a $0.3 million
and $0.6 million reduction in its value, respectively. A 10% and 20% adverse
change in the level of delinquencies would result in a $0.04 million and $0.1
million reduction in its value, respectively. A 10% and 20% adverse change in
the discount rate would result in a $1.5 million and $2.9 million reduction in
its value, respectively. These sensitivities are hypothetical and should be
used with caution. As the figures indicate, changes in fair value based on a
percentage variation in assumptions generally cannot be extrapolated because
the relationship of the change in assumption to the change in fair value may
not be linear. Also, the effect of a variation in a particular assumption on
the fair value of the retained interest is calculated without changing any
other assumption; in reality, changes in one factor may result in changes in
another (for example, increases in market interest rates may result in lower
prepayments and increased credit losses), which might magnify or counteract the
sensitivities.

At December 31, 2000, the total funds employed in Commercial Equipment
Finances portfolio were $515.1 million, total delinquencies were $48.1 million
and annual net credit losses equaled $19.9 million.

A-31



---



FINOVA CAPITAL CORPORATION

On February 27, 2001, FINOVA Capital announced a moratorium on repayment
of principal on its outstanding bank and bond debt, which constitutes an event
of default and a cross default under substantially all of FINOVAs bank
and bond indebtedness. The debt default triggered a cross default under this
sale and servicing agreement. As a result, the revolving feature was terminated
and FINOVA was required to obtain a backup servicer in the event that FINOVA
would not be able to perform its servicing duties. The backup servicer was
retained in the first quarter of 2001.

Corporate Finance (included in discontinued operations) In the third
quarter of 2000, FINOVAs Corporate Finance division sold $827 million of
loans, on a revolving basis. Cash proceeds to FINOVA aggregated
approximately $475 million. The Company also received annual servicing fees
approximating 200 basis points on the outstanding balance of the receivables
and the right to future cash flows after investors have received the return for
which they have contracted. There is no recourse to the Companys other assets
for failure of debtors to pay when due. The Companys retained interests are
subordinate to the investors interests. The value of the retained interests is
subject to credit, prepayment, and interest rate risks on the transferred
financial assets.

During 2000, the Company recognized a pre-tax loss of $13.1 million,
including transaction fees. At December 31, 2000, the outstanding balance of
the sold loans totaled $708.8 million. At December 31, 2000, the Companys
retained interests had an estimated value totaling $419.3 million. The Company
used the following assumptions in determining the value of its retained
interests: an annual prepayment rate of 28.6%, annual net credit loss rate of
2.1% and a discount rate of 12%. On February 1, 2001, FINOVA negotiated an
agreement and purchased the outstanding beneficial interests.

In February 2000, FINOVA repurchased the $300 million outstanding
undivided proportionate interests in a revolving loan portfolio originated in
1996 and 1995. The revolving loan portfolio totaled $717.9 million as of
December 31, 1999.

Franchise Finance Previously in 1998 and 1997, the Company sold
receivables totaling $140.0 million with limited recourse. At December 31, 2000
and 1999, the outstanding balance of the sold loans totaled $116.8 million and
$123.2 million, respectively. In these securitizations, the Company retained
servicing responsibilities and subordinated interests. As of December 31, 2000
and 1999, the Company continued to service these assets and held subordinated
interests totaling $8.2 million and $14.4 million, respectively. The value of
the retained interests is subject to credit, prepayment, and interest rate
risks on the transferred financial assets.

NOTE D RESERVE FOR CREDIT LOSSES

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

|                            |  |      |          |      |  |      |         |   |  |   |         |  
|--------------------------- |  | ---- | -------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                            |  | 2000 |          | 1999 |  | 1998
|                            |  |      |          |      |  |     
|Balance, beginning of year  |  | $    | 178,266  |      |  | $    | 141,579 |   |  | $ | 99,008  |  
|                           
|                           
|                           
|                           
|Provision for credit losses |  |      | 643,000  |      |  |      | 22,390  |   |  |   | 48,470  |  
|                           
|                           
|                           
|                           
|Write-offs                  |  |      | (240,655 | )    |  |      | (24,422 | ) |  |   | (12,161 | )
|                           
|                           
|                           
|                           
|Recoveries                  |  |      | 1,018    |      |  |      | 1,830   |   |  |   | 1,174   |  
|                           
|                           
|                           
|                           
|Acquisitions and other      |  |      | (2,879   | )    |  |      | 36,889  |   |  |   | 5,088   |  
|                            |  |      |          |      |  |      |         |   |  |   |         |  
|Balance, end of year        |  | $    | 578,750  |      |  | $    | 178,266 |   |  | $ | 141,579 |  
|                            |  |      |          |      |  |      |         |   |  |   |         |  

A-32



---



FINOVA CAPITAL CORPORATION

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

|                                                         |                               |   |         |        |      |   |        |       |  |   |        |       | 
|-------------------------------------------------------- | ----------------------------- | - | ------- | ------ | ---- | - | ------ | ----- |  | - | ------ | ----- | 
|                                                         |                               |   | 2000    |        | 1999 |   | 1998  
|                                                         |                               |   |         |        |      |   |       
|Specialty Finance Group                                 
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Commercial Equipment Finance  |   | $       | 19,891 |      |   | $      | 5,773 |  |   | $      | 3,645 | 
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Communications Finance        |   |         | 3,953  |      |   |        | 3,100 |  |   |        | 494   | 
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Healthcare Finance            |   |         | 59,637 |      |   |        | 1,188 |  |   |        | 960   | 
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Franchise Finance             |   |         | (81    | )    |   |        | 240   |  |   |        | 2,780 | 
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Public Finance                |   |         | 4,648  |     
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Resort Finance                |   |         | 61     |      |   |        | 656   | 
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Transportation Finance        |   |         | 40,500 |     
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Specialty Real Estate Finance |   |         | 2,646  |      |   |        | 129   |  |   |        | 1,785 | 
|                                                         |                               |   |         |        |      |   |        |       |  |   |        |       | 
|                                                         |                               |   | 131,255 |        |      |   | 11,086 |       |  |   | 9,664  |      
|                                                         |                               |   |         |        |      |   |        |       |  |   |        |       | 
|Commercial Finance
Group                                
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Rediscount Finance            |   |         | 19,208 |      |   |        | 3,472 |  |   |        | 1,500 | 
|                                                         |                               |   |         |        |      |   |        |       |  |   |        |       | 
|                                                         |                               |   | 19,208  |        |      |   | 3,472  |       |  |   | 1,500  |      
|                                                         |                               |   |         |        |      |   |        |       |  |   |        |       | 
|Capital Markets Group                                   
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Mezzanine Capital             |   |         | 85,995 |      |   |        | 8,154 | 
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Realty Capital                |   |         | 3,000  |     
|                                                         |                               |   |         |        |      |   |        |       |  |   |        |       | 
|                                                         |                               |   | 88,995  |        |      |   | 8,154  |      
|                                                         |                               |   |         |        |      |   |        |       |  |   |        |       | 
|Other                                                    |                               |   | 179     |        |      |   | (120   | )     |  |   | (177   | )    
|                                                         |                               |   |         |        |      |   |        |       |  |   |        |       | 
|Total net write-offs                                     |                               | $ | 239,637 |        |      | $ | 22,592 |       |  | $ | 10,987 |      
|                                                         |                               |   |         |        |      |   |        |       |  |   |        |       | 
|Net write-offs as a percentage of average managed assets |                               |   | 2.25    | %      |      |   | 0.24   | %     |  |   | 0.15   | %    
|                                                         |                               |   |         |        |      |   |        |       |  |   |        |       | 

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

|                                                            |  |      |         |      |  |   |         |  
|----------------------------------------------------------- |  | ---- | ------- | ---- |  | - | ------- | -
|                                                            |  | 2000 |         | 1999
|                                                            |  |      |         |     
|Contracts                                                   |  | $    | 896,262 |      |  | $ | 122,893 |  
|                                                           
|                                                           
|                                                           
|                                                           
|Repossessed assets                                          |  |      | 25,089  |      |  |   | 52,100  |  
|                                                            |  |      |         |      |  |   |         |  
|Total nonaccruing assets                                    |  | $    | 921,351 |      |  | $ | 174,993 |  
|                                                            |  |      |         |      |  |   |         |  
|Nonaccruing assets as a
percentage of ending managed
assets |  |      | 8.7     | %    |  |   | 1.7     | %
|                                                            |  |      |         |      |  |   |         |  

In addition to the repossessed assets included in the above table, FINOVA
had repossessed assets with a total carrying amount of $40.9 million and $74.9
million at December 31, 2000 and 1999, respectively, which earned income of
$5.2 million and $5.5 million during 2000 and 1999, respectively.

At December 31, 2000, the total carrying amount of impaired loans in
continuing operations was $1.1 billion, of which $235.8 million were revenue
accruing. A specific impairment reserve for credit losses of $246.4 million has
been established for $697.0 million of nonaccruing impaired loans and $1.8
million has been established for $34.7 million of accruing impaired loans.
Additionally, $2.2 million was established for other accounts. As a result,
43.3% of FINOVAs reserve for credit losses was allocated to specific reserves.
The remaining $328.4 million or 56.7% of the reserve for credit losses is
designated for general purposes and represents managements best estimate of
inherent losses in the remaining portfolio considering delinquencies, loss
experience and collateral. At December 31, 1999, the total amount of impaired
loans was $222.7 million, of which $108.8 million were revenue accruing. The
specific impairment reserve for credit losses at December 31, 1999 was $35.4
million for $89.0 million of nonaccruing impaired loans and $25.3 million for
$52.0 million of accruing impaired loans. Actual results could differ from
estimates and values, and there can be no assurance that the reserves will be
sufficient to cover portfolio losses. Additions to the general and specific
reserves are reflected in current operations. Management may transfer reserves
between the general and specific reserves as considered necessary.

At December 31, 2000, discontinued operations included $486.2 million of
nonaccruing assets, of which $421.9 million were in Corporate Finance. Since
the assets of the discontinued operations have been written down to estimated
net realizable value, no reserve for credit losses are carried against those
assets. Net realizable value write-downs for the year ended December 31, 2000
were $347.5 million.

A-33



---



FINOVA CAPITAL CORPORATION

For the three years ended December 31, 2000, 1999 and 1998, the average
carrying amount of impaired loans in continuing operations was $507 million,
$184.8 million and $99.7 million, respectively. Income earned on accruing
impaired loans was approximately $2.5 million in 2000, $7.9 million in 1999 and
$3.3 million in 1998. 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, 2000, 1999 and 1998
in continuing operations remained accruing, pre-tax income earned would have
increased by approximately $36 million, $16 million and $12 million,
respectively.

NOTE E 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:

|                      |  |      |         |      |  |   |         | 
|--------------------- |  | ---- | ------- | ---- |  | - | ------- | 
|                      |  | 2000 |         | 1999
|                      |  |      |         |     
|Partnership interests |  | $    | 135,284 |      |  | $ | 121,995 | 
|                     
|                     
|                     
|                     
|Equity securities     |  |      | 87,435  |      |  |   | 172,819 | 
|                     
|                     
|                     
|                     
|Debt securities       |  |      |         |      |  |   | 54,553  | 
|                     
|                     
|                     
|                     
|Other                 |  |      |         |      |  |   | 15,798  | 
|                      |  |      |         |      |  |   |         | 
|                      |  | $    | 222,719 |      |  | $ | 365,159 | 
|                      |  |      |         |      |  |   |         | 

The net unrealized holding gains were $15.2 million and $38.0 million (net
of deferred tax liability of $8.1 million and $25.2 million) at
December 31, 2000 and 1999, respectively. The decline in the unrealized gains
during 2000 was due primarily to the realization of gains through the sale of
certain investment securities, including Healtheon/WebMD stock ($20.7 million).
Net gains of $57.4 million and $35.4 million were recognized on sales of
marketable investments in 2000 and 1999, respectively.

FINOVA also carried investments held for trading of $70.5 million at
December 31, 1999 in a trust for nonqualified compensation plans. The securities held in the trust were transferred at the
carrying amounts to FINOVA Group in 2000. The Companys
investments in trading securities are marked to market on a quarterly basis
through current operations.

FINOVA maintains no investments that are classified as held to maturity at
December 31, 2000 and 1999.

NOTE F DEBT

FINOVAs internally generated funds, available credit lines and asset
sales financed new business and liquidity during the twelve months ended
December 31, 2000. During May and June 2000, FINOVA drew down $4.5 billion
against domestic commercial paper back-up bank facilities and used the proceeds
primarily for repayment of commercial paper, maturing debt and to fund general
operations. Of this amount, $2.1 billion was due on or before May 15, 2001,
although $500 million could have been extended had a default not existed at the
time. The other $2.4 billion was scheduled to be repaid between 2002 to 2003.
FINOVA also had $150 million (Canadian) scheduled to be due under a bank
facility that matured in July 2001. Term debt maturities over the next twelve
months by quarter included $242.0 million in the first quarter of 2001, $2.4
billion in the second quarter of 2001 (included $2.1 billion of bank
facilities), $449.2 million in the third quarter of 2001 and $345.7 million in
the fourth quarter of 2001. During 2000, FINOVA issued $225 million of new
public notes and repaid $1.4 billion of long-term borrowings. FINOVAs credit
ratings were reduced several times during 2000.

As noted in Notes A and L,
FINOVA Group, FINOVA and seven of their
affiliates filed for protection of the courts under Chapter 11, Title 11, of
the United States Code, (the Reorganization Proceedings) to enable them to
restructure the debt maturities, among other items. No principal or interest
payments will be made on the debt until the Plan defining repayment terms has
been approved by the court.

The following information pertains to commercial paper, bank and other
short-term borrowings, issued by FINOVA Capital for the years ended December
31:

A-34



---



FINOVA CAPITAL CORPORATION

|     |                                                                      |  |              |           |                |  |   |           |  
|---- | -------------------------------------------------------------------- |  | ------------ | --------- | -------------- |  | - | --------- | -
|     |                                                                      |  | Commercial   |           | Bank and Other
|     |                                                                      |  | Paper (1)(2) |           | Borrowings    
|     |                                                                      |  |              |           |               
|2000
|    
|    
|    
|    
|     | Maximum amount of borrowings outstanding at any month-end            |  | $            | 4,403,096 |                |  | $ | 2,201,090 |  
|    
|    
|    
|    
|     | Average borrowings outstanding during year                           |  |              | 1,716,853 |                |  |   | 1,418,069 |  
|    
|    
|    
|    
|     | Weighted average interest rate on borrowings outstanding at year-end |  |              | None      |                |  |   | 8.6       | %
|    
|    
|    
|    
|     | Weighted average interest rate on borrowings outstanding during year |  |              | 6.0       | %              |  |   | 8.4       | %
|    
|    
|    
|    
|1999
|    
|    
|    
|    
|     | Maximum amount of borrowings outstanding at any month-end            |  | $            | 4,390,656 |                |  | $ | 70,630    |  
|    
|    
|    
|    
|     | Average borrowings outstanding during year                           |  |              | 3,976,509 |                |  |   | 28,352    |  
|    
|    
|    
|    
|     | Weighted average interest rate on borrowings outstanding at year-end |  |              | 6.1       | %              |  |   | 5.3       | %
|    
|    
|    
|    
|     | Weighted average interest rate on borrowings outstanding during year |  |              | 5.4       | %              |  |   | 5.2       | %
|    
|    
|    
|    
|1998
|    
|    
|    
|    
|     | Maximum amount of borrowings outstanding at any month-end            |  | $            | 3,898,243 |                |  | $ | 65,162    |  
|    
|    
|    
|    
|     | Average borrowings outstanding during year                           |  |              | 3,524,162 |                |  |   | 31,159    |  
|    
|    
|    
|    
|     | Weighted average interest rate on borrowings outstanding at year-end |  |              | 5.6       | %              |  |   | 5.5       | %
|    
|    
|    
|    
|     | Weighted average interest rate on borrowings outstanding during year |  |              | 5.7       | %              |  |   | 5.3       | %



---

|(1) |  | Included in outstanding balances at December 31, 1999 were commercial paper obligations of a foreign subsidiary in Canada of $162.1 million.
There were no commercial paper obligations of the Company or the foreign subsidiary at December 31, 2000.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Exclusive of the cost of maintaining bank lines in support of outstanding commercial paper and the effects of interest rate conversion
agreements. The Company used various mechanisms to manage interest rate risks. See Note G.                     

Senior debt at December 31 was as follows:

|                                                                                                                        |  |      |            |      |  |   |            | 
|----------------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | ---- |  | - | ---------- | 
|                                                                                                                        |  | 2000 |            | 1999
|                                                                                                                        |  |      |            |     
|Commercial paper and bank loans, less unamortized discount, 5.7% to 5.8% (1) (2)                                        |  | $    | 4,690,990  |      |  | $ | 4,126,955  | 
|                                                                                                                       
|                                                                                                                       
|                                                                                                                       
|                                                                                                                       
|Medium term notes due to 2010, 5.7% to 10.2% (2)                                                                        |  |      | 2,128,772  |      |  |   | 2,353,091  | 
|                                                                                                                       
|                                                                                                                       
|                                                                                                                       
|                                                                                                                       
|Senior notes due to 2009, 5.9% to 16.0%, less unamortized discount (2)                                                  |  |      | 4,172,112  |      |  |   | 4,919,218  | 
|                                                                                                                       
|                                                                                                                       
|                                                                                                                       
|                                                                                                                       
|Nonrecourse installment notes due to 2002, 10.6% (assets of $9,381 and $21,877
respectively, pledged as collateral) (2) |  |      | 5,813      |      |  |   | 8,503      | 
|                                                                                                                        |  |      |            |      |  |   |            | 
|                                                                                                                        |  | $    | 10,997,687 |      |  | $ | 11,407,767 | 
|                                                                                                                        |  |      |            |      |  |   |            | 



---

|(1) |  | Includes commercial paper back-up facilities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Interest rates are included at the contractual rates absent a default.
The agreements provide for increased interest rates in the event of a
default. Subsequently to year-end, grounds to declare a default existed,
but no defaults were declared under these facilities prior to the
institution of the Reorganization Proceedings, which have prevented
declarations of a default without court authorization. The plan of
reorganization may provide for payment of a different interest rate than
the contractual rate.

Annual maturities of senior debt outstanding at December 31, 2000 due
through 2010 were approximately $3.43 billion (2001), $1.91 billion (2002),
$2.79 billion (2003), $1.8 billion (2004), and $115.0 million (2005) and $960.0
million (thereafter). The senior debt balances are net of an unamortized
discount of $8.9 million and $11.2 million at December 31, 2000 and 1999,
respectively. The unamortized discount relates to costs directly associated
with the issuance of the debt and is amortized as an adjustment to interest
expense over the period of the corresponding debt.

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 was not in
compliance at December 31, 2000. Due to the noncompliance, the failure to repay
certain debt in 2001 and the Reorganization Proceedings, the Company is in
default under all of its debt arrangements.

A-35



---



FINOVA CAPITAL CORPORATION

Total interest paid, including amounts allocated to discontinued
operations, was $767.2 million, $521.9 million and $455.4 million for the years
ended December 31, 2000, 1999 and 1998, respectively. Presently while FINOVA
has filed for bankruptcy protection, no interest payments are being made.

NOTE G DERIVATIVE FINANCIAL INSTRUMENTS

FINOVA entered 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 were
primarily used to match fund assets and liabilities. Currency swaps were used
to convert both principal and interest payments on debt issued from one
currency to the appropriate functional currency. Futures contracts were used to
target index returns, lock funding costs, and for portfolio hedging. The
Company continually monitored its derivative position and used derivative
instruments for non-trading and non-speculative purposes only.

FINOVA has used derivative instruments to minimize its exposure to
fluctuations in interest rates, reduce debt expense and lock funding costs over
predetermined periods of time. FINOVA attempted 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 had diversified
its borrowing sources (short and long-term debt with a fixed or a variable
rate) and sought to maintain a portfolio that was match funded. FINOVAs
matched funding policy generally required 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, were not to vary
by more than 3% for any extended period.

The notional amounts of derivatives did 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 were determined by reference to the
notional amounts and the other terms of the derivatives.

Under interest rate swap agreements, FINOVA agreed 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 did 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 were 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 involved credit and
interest rate risks. Credit risk included the nonperformance by counterparties
to the financial agreements. All financial agreements were executed with major
financial institutions to mitigate the credit risk from transactions. There was
no assurance that any such institution would perform under its agreement.
FINOVAs derivative policy stipulated that the maximum exposure to any one
counterparty relative to the derivative products was limited on a net basis to
10% of FINOVAs outstanding debt at the time of that transaction. Interest rate
risks related to changes in interest rates and the impact on earnings.

The use of derivatives decreased interest expense by $1.0 million in 2000,
a decrease in the aggregate cost of funds of 0.02%. The use of derivatives in
1999 decreased interest expense by $5.1 million, a decrease in the aggregate
cost of funds of 0.07%, and the use of derivatives in 1998 decreased interest
expense by $5.3 million, a decrease in the aggregate cost of funds of 0.07%.
These changes in interest expense from off-balance sheet derivatives
effectively altered on-balance sheet costs and must be viewed as total interest
rate management.

Subsequent to December 31, 2000, substantially all of FINOVAs interest
rate swaps were terminated, as a result of the Reorganization Proceedings.
Therefore, FINOVAs asset and liabilities are not match funded going forward.
At termination, the interest rate swaps had an estimated value of approximately
$70 million. Pursuant to the Companys various agreements, the institutions
exercised their right to offset the amounts due to the Company upon the
termination of the swaps against the amount due by the Company on the debt
outstanding.

The following table provides annual maturities and weighted-average
interest rates for each significant derivative product type in place at
December 31, 2000. The rates presented are as of December 31, 2000. To the
extent that rates change, variable interest information will change:

A-36



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FINOVA CAPITAL CORPORATION

|                                |                               |      |                |       |                                   |      |     |      |   |      |     |            |   |   |     |      |   |   |     |      |   |   |     |      |  
|------------------------------- | ----------------------------- | ---- | -------------- | ----- | --------------------------------- | ---- | --- | ---- | - | ---- | --- | ---------- | - | - | --- | ---- | - | - | --- | ---- | - | - | --- | ---- | -
|                                |                               |      | Outstanding at
|                                |                               |      | December 31    |       | Maturities of Derivative Products
|(Dollars in millions)           |                               | 2000 |                | 2001  |                                   | 2002 |     | 2003 |   | 2004 |     | Thereafter
|                                |                               |      |                |       |                                   |      |     |      |   |      |     |           
|Receive fixed-rate swaps:      
|                               
|                               
|                               
|                               
|                                | Notional value                |      | $              | 1,625 |                                   |      | $   | 150  |   |      | $   | 300        |   |   | $   | 100  |   |   | $   | 475  |   |   | $   | 600  |  
|                               
|                               
|                               
|                               
|                                | Weighted average receive
rate |      |                | 6.68  | %                                 |      |     | 6.66 | % |      |     | 6.20       | % |   |     | 6.54 | % |   |     | 6.57 | % |   |     | 6.82 | %
|                               
|                               
|                               
|                               
|                                | Weighted average pay rate     |      |                | 6.77  | %                                 |      |     | 6.71 | % |      |     | 6.82       | % |   |     | 6.68 | % |   |     | 6.75 | % |   |     | 7.02 | %
|                               
|                               
|                               
|                               
|Pay fixed-rate swaps:          
|                               
|                               
|                               
|                               
|                                | Notional value                |      | $              | 100   |                                   |      | $   | 100  |  
|                               
|                               
|                               
|                               
|                                | Weighted average receive
rate |      |                | 6.70  | %                                 |      |     | 6.70 | %
|                               
|                               
|                               
|                               
|                                | Weighted average pay rate     |      |                | 6.62  | %                                 |      |     | 6.62 | %
|                                |                               |      |                |       |                                   |      |     |      |   |      |     |            |   |   |     |      |   |   |     |      |   |   |     |      |  
|TOTAL NOTIONAL VALUE            |                               | $    | 1,725          |       |                                   | $    | 250 |      |   | $    | 300 |            |   | $ | 100 |      |   | $ | 475 |      |   | $ | 600 |     
|                                |                               |      |                |       |                                   |      |     |      |   |      |     |            |   |   |     |      |   |   |     |      |   |   |     |      |  
|Total weighted average
rates on
|                               
|                               
|                               
|                               
|                                | Swaps:                       
|                               
|                               
|                               
|                               
|                                | Receive rate                  |      |                | 6.68  | %                                 |      |     | 6.65 | % |      |     | 6.20       | % |   |     | 6.54 | % |   |     | 6.57 | % |   |     | 6.82 | %
|                                |                               |      |                |       |                                   |      |     |      |   |      |     |            |   |   |     |      |   |   |     |      |   |   |     |      |  
|                                | Pay rate                      |      |                | 6.77  | %                                 |      |     | 6.71 | % |      |     | 6.82       | % |   |     | 6.68 | % |   |     | 6.75 | % |   |     | 7.02 | %
|                                |                               |      |                |       |                                   |      |     |      |   |      |     |            |   |   |     |      |   |   |     |      |   |   |     |      |  

For the benefit of its customers, FINOVA also entered into (sold) interest
rate cap agreements. The total notional amount of these agreements at December
31, 2000 was $131.1 million. FINOVA also entered into (purchased) offsetting
interest rate cap agreements with financial institutions. At December 31, 2000,
none of the caps were in a receive or pay position. These agreements will mature
as follows: $75.1 million in 2001, $21 million in 2002 and $35 million in
2003.

FINOVA has also entered into a fixed-rate foreign currency-denominated
borrowing (Japanese Yen (JPY) 5 billion) maturing in 2002. Two derivatives
are associated with this borrowing, a receive fixed-rate swap (JPY 5 billion)
versus three-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 amount of JPY 5 billion paying three-month JPY LIBOR
and the pay side has a notional amount of USD 43.6 million paying three-month
USD LIBOR. These derivatives are not reflected in the table above.

Derivative product activity for the three years ended December 31, 2000 is
as follows:

|                          |  |                    |       |                  |  |             |      |            |  |            |      |   |  |          |        |   |  |   |        |  
|------------------------- |  | ------------------ | ----- | ---------------- |  | ----------- | ---- | ---------- |  | ---------- | ---- | - |  | -------- | ------ | - |  | - | ------ | -
|                          |  |                    |       |                  |  |             |      |            |  |            |      |   |  | Interest
|                          |  | Receive Fixed-Rate |       | Pay              |  |             |      |            |  | Rate Hedge
|(Dollars in millions)     |  | Swaps              |       | Fixed-Rate Swaps |  | Basis Swaps |      | Agreements |  | TOTAL     
|                          |  |                    |       |                  |  |             |      |            |  |           
|Balance January 1, 1998   |  | $                  | 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  |  
|Expired                   |  |                    | (300  | )                |  |             | (100 | )          |  |            | (75  | ) |  |          | (131   | ) |  |   | (606   | )
|                         
|                         
|                         
|                         
|Additions                
|                          |  |                    |       |                  |  |             |      |            |  |            |      |   |  |          |        |   |  |   |        |  
|Balance December 31, 2000 |  | $                  | 1,625 |                  |  | $           | 100  |            |  |            | $    |   |  |          | $      |   |  | $ | 1,725  |  
|                          |  |                    |       |                  |  |             |      |            |  |            |      |   |  |          |        |   |  |   |        |  

The table above does not include the JPY 5 billion receive fixed-rate swap
or a basis swap converting JPY LIBOR to USD 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.

In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which establishes new accounting and
reporting standards for derivative instruments. In June 1999, the FASB issued
SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities 
Deferral of the Effective Date of FASB Statement No. 133, and in June 2000,
the FASB issued SFAS No. 138, Accounting for Certain Derivative Instruments
and Certain Hedging Activities  An Amendment of FASB Statement No. 133. SFAS
133, as amended, establishes accounting and reporting standards requiring that
derivative instruments, including certain derivatives embedded in other
contracts, be recorded in the statement of financial position

A-37



---



FINOVA CAPITAL CORPORATION

as either an asset or liability measured at its fair value. SFAS 133
requires that changes in the derivatives fair value be recognized currently in
earnings, unless specific hedge accounting criteria are met.

FINOVA adopted the provisions of SFAS 133, as amended, on January 1, 2001,
which resulted in an immaterial impact on FINOVAs consolidated results of
operations and financial position.

NOTE H 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 I 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 $11.3 million at
December 31, 2000.

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 Group grants options at or above market
price on the date of grant. Vesting criteria for restricted stock was not met
in 2000 and 1999. Therefore, no compensation expense was charged against income
in 2000 and 1999. The compensation cost charged against income for
performance-based plans in 1998 was $5.5 million. Had compensation cost for
FINOVA Group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 (loss) income would have
been $(945.4)
million, $216.7 million and $157.2 million for 2000, 1999 and 1998,
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 2000, 1999 and 1998, respectively: dividend
yield of 0.0%, 2.12% and 1.75%, expected volatility of 392%, 27%, and 26%,
risk-free interest rates on options with expected lives of five years of 5.2%,
5.4% and 5.7% and risk-free interest rates on options with expected lives of
seven years of 5.3%, 5.5% and 5.8%. The weighted average grant date fair value
of options issued for 2000, 1999 and 1998 were $21.69, $13.25 and $17.45,
respectively.

With the acquisition of Sirrom Capital Corporation in March 1999, the
Board of Directors of FINOVA Group 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. During the year ended December 31, 2000, 13,253 and 85,502
options with a weighted average price of $21.80 were exercised and cancelled,
respectively.

A-38



---



FINOVA CAPITAL CORPORATION

NOTE J INCOME TAXES

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

|                                     |         |   |          |          |      |   |         |         |   |   |        |        | 
|------------------------------------ | ------- | - | -------- | -------- | ---- | - | ------- | ------- | - | - | ------ | ------ | 
|                                     |         |   | 2000     |          | 1999 |   | 1998   
|                                     |         |   |          |          |      |   |        
|Current:                            
|                                    
|                                    
|                                    
|                                    
|United States:                      
|                                    
|                                    
|                                    
|                                    
|                                     | Federal |   | $        | (7,217   | )    |   | $       | 1,063   |   |   | $      | 2,079  | 
|                                    
|                                    
|                                    
|                                    
|                                     | State   |   |          | 784      |      |   |         | (612    | ) |   |        | 5,539  | 
|                                    
|                                    
|                                    
|                                    
|Foreign                              |         |   | 11,043   |          |      |   | 4,637   |         |   |   | 1,870  |       
|                                     |         |   |          |          |      |   |         |         |   |   |        |        | 
|                                     |         |   | 4,610    |          |      |   | 5,088   |         |   |   | 9,488  |       
|                                     |         |   |          |          |      |   |         |         |   |   |        |        | 
|Deferred:                           
|                                    
|                                    
|                                    
|                                    
|United States:                      
|                                    
|                                    
|                                    
|                                    
|                                     | Federal |   |          | (202,114 | )    |   |         | 107,980 |   |   |        | 65,200 | 
|                                    
|                                    
|                                    
|                                    
|                                     | State   |   |          | (14,237  | )    |   |         | 20,781  |   |   |        | 7,748  | 
|                                    
|                                    
|                                    
|                                    
|Foreign                              |         |   | (1,433   | )        |      |   | 4,467   |         |   |   | 7,950  |       
|                                     |         |   |          |          |      |   |         |         |   |   |        |        | 
|                                     |         |   | (217,784 | )        |      |   | 133,228 |         |   |   | 80,898 |       
|                                     |         |   |          |          |      |   |         |         |   |   |        |        | 
|(Benefit) provision for income taxes |         | $ | (213,174 | )        |      | $ | 138,316 |         |   | $ | 90,386 |       
|                                     |         |   |          |          |      |   |         |         |   |   |        |        | 

For continuing operations, net income taxes were paid in 2000 and were
approximately zero; income taxes paid in 1999 and 1998 were approximately $6
million and $10 million, respectively.

The federal statutory income tax rate applied to (loss) income before
taxes is reconciled to the effective income tax rate as follows:

|                                     |  |      |       |      |  |      |      |   |  |  |      |  
|------------------------------------ |  | ---- | ----- | ---- |  | ---- | ---- | - |  |  | ---- | -
|                                     |  | 2000 |       | 1999 |  | 1998
|                                     |  |      |       |      |  |     
|Federal statutory income tax rate    |  |      | (35.0 | )%   |  |      | 35.0 | % |  |  | 35.0 | %
|                                    
|                                    
|                                    
|                                    
|State income taxes                   |  |      | (2.7  | )    |  |      | 3.6  |   |  |  | 3.8  |  
|                                    
|                                    
|                                    
|                                    
|Foreign tax effects                  |  |      |       |      |  |      |      |   |  |  | 0.1  |  
|                                    
|                                    
|                                    
|                                    
|Valuation allowance                  |  |      | 7.5   |     
|                                    
|                                    
|                                    
|                                    
|Municipal and ESOP income            |  |      | (0.6  | )    |  |      | (1.3 | ) |  |  | (1.6 | )
|                                    
|                                    
|                                    
|                                    
|Non-deductible goodwill              |  |      | 2.3   |     
|                                    
|                                    
|                                    
|                                    
|Other                                |  |      | 0.3   |      |  |      | 1.1  |   |  |  | 1.1  |  
|                                     |  |      |       |      |  |      |      |   |  |  |      |  
|(Benefit) provision for income taxes |  |      | (28.2 | )%   |  |      | 38.4 | % |  |  | 38.4 | %
|                                     |  |      |       |      |  |      |      |   |  |  |      |  

A-39



---



FINOVA CAPITAL CORPORATION

The significant components of deferred tax liabilities and deferred tax
assets at December 31, 2000 and 1999 consisted of the following:

|                                      |  |      |         |      |  |   |         |  
|------------------------------------- |  | ---- | ------- | ---- |  | - | ------- | -
|                                      |  | 2000 |         | 1999
|                                      |  |      |         |     
|Deferred tax liabilities:            
|                                     
|                                     
|                                     
|                                     
|Deferred income from leveraged leases |  | $    | 558,400 |      |  | $ | 511,233 |  
|                                     
|                                     
|                                     
|                                     
|Deferred income from lease financing  |  |      | 146,645 |      |  |   | 135,889 |  
|                                     
|                                     
|                                     
|                                     
|Other comprehensive income            |  |      | 7,942   |      |  |   | 23,467  |  
|                                     
|                                     
|                                     
|                                     
|Deferred acquisition costs            |  |      | 15,099  |      |  |   | 19,963  |  
|                                     
|                                     
|                                     
|                                     
|Foreign taxes                         |  |      | 14,495  |      |  |   | 8,458   |  
|                                     
|                                     
|                                     
|                                     
|Other                                 |  |      | 8,521   |      |  |   | 9,617   |  
|                                      |  |      |         |      |  |   |         |  
|Gross deferred tax liability          |  |      | 751,102 |      |  |   | 708,627 |  
|                                      |  |      |         |      |  |   |         |  
|Deferred tax assets:                 
|                                     
|                                     
|                                     
|                                     
|Reserve for credit losses             |  |      | 263,107 |      |  |   | 77,818  |  
|                                     
|                                     
|                                     
|                                     
|Goodwill                              |  |      | 55,381  |      |  |   | (42,335 | )
|                                     
|                                     
|                                     
|                                     
|Alternative minimum tax               |  |      | 54,831  |      |  |   | 65,416  |  
|                                     
|                                     
|                                     
|                                     
|Net operating loss carryforward       |  |      | 183,995 |      |  |   | 62,965  |  
|                                     
|                                     
|                                     
|                                     
|Basis difference in loans/investments |  |      | 66,090  |      |  |   | 23,324  |  
|                                     
|                                     
|                                     
|                                     
|Accrued expenses                      |  |      | 6,568   |      |  |   | 11,261  |  
|                                     
|                                     
|                                     
|                                     
|Discontinued operations               |  |      | 145,303 |      |  |   | 34,861  |  
|                                     
|                                     
|                                     
|                                     
|Other                                 |  |      | 12,608  |      |  |   | 14,065  |  
|                                      |  |      |         |      |  |   |         |  
|Gross deferred tax asset              |  |      | 787,883 |      |  |   | 247,375 |  
|                                     
|                                     
|                                     
|                                     
|Valuation allowance                   |  |      | (97,781 | )    |  |   |        |  
|                                      |  |      |         |      |  |   |         |  
|Net deferred tax asset                |  |      | 690,102 |      |  |   | 247,375 |  
|                                      |  |      |         |      |  |   |         |  
|                                     
|                                     
|                                     
|                                     
|Net deferred tax liability            |  | $    | 61,000  |      |  | $ | 461,252 |  
|                                      |  |      |         |      |  |   |         |  

The effective income tax rates in 2000 were 28.2% benefit compared to
38.4% provision in 1999 for continuing operations and 30% benefit in 2000
compared to 40% benefit in 1999 for discontinued operations. The lower rates in
2000 were due to the possibility that the Company may not be able to utilize
all of the deferred tax assets created during the year to reduce federal or
state tax liabilities in future years. Besides potential Section 382
limitations discussed below, the reasons the Company may not be able to utilize
all the deferred tax assets created during the year include: a variety of loss
or other tax attribute carryover limitations in the various jurisdictions in
which the Company files tax returns; uncertainty about the amount of future
earnings; and, uncertainty about the timing of the reversal of deferred tax
liabilities.

The deferred tax benefit related to the Companys net operating losses
(NOLs) from continuing operations is $184 million. Subject to certain
material limitations, NOLs are available as an offset against income earned in
tax years following the creation of the NOLs. The federal net operating loss
carryforwards expire beginning 2014 through 2020. The state net operating loss
carryforwards expire beginning 2003 through 2020. The Companys ability to
preserve and utilize the benefits of the NOLs and other built-in losses depends
among other things, on the potential for application of Section 382 of the
Internal Revenue Code of 1986 (the Tax Code).

Section 382 of the Tax Code generally provides that if a corporation
undergoes an ownership change, the amount of taxable income that the
corporation may offset after the date of the ownership change (the change
date) with net operating loss carryforwards and certain built-in losses
existing on the change date will be subject to an annual limitation. In
general, the annual limitation equals the product of (i) the fair market value
of the corporations equity on the change date (with certain adjustments) and
(ii) a long-term tax exempt bond rate of return published by the Internal
Revenue Service. This limitation may be either increased or decreased, but not
both, if a corporation has net unrealized built-in gains or losses at the change
date and recognizes such built-in gains or losses within a specified timeframe
after the change date.

The Company believes that no ownership change has occurred to place a
limitation on the use of the NOLs or other built-in losses. However, in the
future, there can be no assurance that there will not be an ownership change
which could place a limitation on the use of the NOLs or other built-in losses.
If there is an ownership change in connection with the plan of reorganization
for the Company to emerge from bankruptcy, several significant variables will
impact the amount of any NOLs and other deferred tax assets which may be
utilized in future periods. These variables include: the debt forgiveness rules
of Section 108

A-40



---



FINOVA CAPITAL CORPORATION

of the Tax Code; the ability of a decision by the Company to elect the
special rules under Section 382(I)(5) of the Tax Code for calculating Section
382 limitations applicable to a corporation under the jurisdiction of a court
pursuant to Chapter 11 of the Bankruptcy Act; and, the application of similar
rules in the many jurisdictions in which the Company is subject to taxation.
These variables which cannot currently be determined or quantified could
materially impact the availability of the Companys prebankruptcy NOLs and
other deferred tax assets.

NOTE K PENSION AND OTHER BENEFITS

FINOVA Group sponsors a trusteed, noncontributory pension plan
that covers substantially all of its employees; therefore, the data presented
below contains information related to all employees, including those of The
FINOVA Group Inc. Benefits are based primarily on final average salary and
years of service. Post retirement health benefits are any benefits other than
retirement benefits and are recorded at the time employees leave active
service. The Companys funding policy for the pension plan is to make the
minimum annual contribution required by applicable regulations. Post retirement
benefits are funded as benefits are paid.

Change in Benefit Obligations

|                                        |  |                  |        |                 |  |      |        |      |  |                 |        |   |  |   |       |  
|--------------------------------------- |  | ---------------- | ------ | --------------- |  | ---- | ------ | ---- |  | --------------- | ------ | - |  | - | ----- | -
|                                        |  |                  |        |                 |  |      |        |      |  | Post retirement
|                                        |  | Pension benefits |        | health benefits
|                                        |  |                  |        |                
|                                        |  | 2000             |        | 1999            |  | 2000 |        | 1999
|                                        |  |                  |        |                 |  |      |        |     
|Benefit obligation at end of prior year |  | $                | 44,770 |                 |  | $    | 41,345 |      |  | $               | 5,352  |   |  | $ | 4,804 |  
|                                       
|                                       
|                                       
|                                       
|Service cost                            |  |                  | 3,535  |                 |  |      | 3,485  |      |  |                 | 341    |   |  |   | 459   |  
|                                       
|                                       
|                                       
|                                       
|Interest cost                           |  |                  | 3,273  |                 |  |      | 2,758  |      |  |                 | 210    |   |  |   | 293   |  
|                                       
|                                       
|                                       
|                                       
|Curtailment gain                        |  |                  | (2,563 | )               |  |      |        |      |  |                 | (519   | )
|                                       
|                                       
|                                       
|                                       
|Actuarial loss/(gain)                   |  |                  | 2,645  |                 |  |      | (1,364 | )    |  |                 | (1,744 | ) |  |   | (192  | )
|                                       
|                                       
|                                       
|                                       
|Benefits paid                           |  |                  | (2,204 | )               |  |      | (1,454 | )    |  |                 | (257   | ) |  |   | (12   | )
|                                        |  |                  |        |                 |  |      |        |      |  |                 |        |   |  |   |       |  
|End of year benefit obligation (1)      |  | $                | 49,456 |                 |  | $    | 44,770 |      |  | $               | 3,383  |   |  | $ | 5,352 |  
|                                        |  |                  |        |                 |  |      |        |      |  |                 |        |   |  |   |       |  

Change in Qualified Plan Assets

|                                               |  |                  |        |                 |  |      |        |      |  |                 |      |   |  |  |     |  
|---------------------------------------------- |  | ---------------- | ------ | --------------- |  | ---- | ------ | ---- |  | --------------- | ---- | - |  |  | --- | -
|                                               |  |                  |        |                 |  |      |        |      |  | Post retirement
|                                               |  | Pension benefits |        | health benefits
|                                               |  |                  |        |                
|                                               |  | 2000             |        | 1999            |  | 2000 |        | 1999
|                                               |  |                  |        |                 |  |      |        |     
|Fair value of plan assets at beginning of year |  | $                | 34,225 |                 |  | $    | 33,155 |      |  |                 | $    |   |  |  | $   |  
|                                              
|                                              
|                                              
|                                              
|Actual return on plan assets                   |  |                  | (3,577 | )               |  |      | 2,059  |     
|                                              
|                                              
|                                              
|                                              
|Employer contributions                         |  |                  | 1,012  |                 |  |      | 465    |      |  |                 | 257  |   |  |  | 12  |  
|                                              
|                                              
|                                              
|                                              
|Benefits paid                                  |  |                  | (2,203 | )               |  |      | (1,454 | )    |  |                 | (257 | ) |  |  | (12 | )
|                                               |  |                  |        |                 |  |      |        |      |  |                 |      |   |  |  |     |  
|Fair value of plan assets (2)                  |  | $                | 29,457 |                 |  | $    | 34,225 |      |  |                 | $    |   |  |  | $   |  
|                                               |  |                  |        |                 |  |      |        |      |  |                 |      |   |  |  |     |  



---

|(1) |  | End of year benefit obligation includes obligations of $16.909 million
and $14.905 million at December 31, 2000 and 1999, respectively,
representing obligations of an unfunded non-qualified Supplemental
Retirement Plan (SERP) for certain highly compensated employees, which
is not covered by the qualified plan assets presented above.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Plan assets include 90,348 shares of FINOVA stock which had a fair value
at December 31, 2000 of approximately $90.348 thousand.                                                                                                                                                                                                                

A-41



---



FINOVA CAPITAL CORPORATION

Funded Status of Plan

|                                         |  |                  |         |                 |  |      |         |      |  |                 |        |   |  |   |        |  
|---------------------------------------- |  | ---------------- | ------- | --------------- |  | ---- | ------- | ---- |  | --------------- | ------ | - |  | - | ------ | -
|                                         |  |                  |         |                 |  |      |         |      |  | Post retirement
|                                         |  | Pension benefits |         | health benefits
|                                         |  |                  |         |                
|                                         |  | 2000             |         | 1999            |  | 2000 |         | 1999
|                                         |  |                  |         |                 |  |      |         |     
|Plan assets less than benefit obligation |  | $                | (19,999 | )               |  | $    | (10,545 | )    |  | $               | (3,383 | ) |  | $ | (5,352 | )
|                                        
|                                        
|                                        
|                                        
|Unrecognized net (gain) loss             |  |                  | 9,248   |                 |  |      | 492     |      |  |                 | (2,574 | ) |  |   | (983   | )
|                                        
|                                        
|                                        
|                                        
|Unrecognized prior service cost          |  |                  | 783     |                 |  |      | 537     |      |  |                 | 647    |   |  |   | 986    |  
|                                        
|                                        
|                                        
|                                        
|Unrecognized net obligation (asset)      |  |                  | (20     | )               |  |      | (82     | )    |  |                 | 607    |   |  |   | 935    |  
|                                         |  |                  |         |                 |  |      |         |      |  |                 |        |   |  |   |        |  
|Net amount recognized                    |  | $                | (9,988  | )               |  | $    | (9,598  | )    |  | $               | (4,703 | ) |  | $ | (4,414 | )
|                                         |  |                  |         |                 |  |      |         |      |  |                 |        |   |  |   |        |  

Weighted Average Assumptions Used

|                                                 |  |                  |      |                 |  |      |      |      |  |      |      |      |  |                 |      |   |  |  |      |   |  |  |      |  
|------------------------------------------------ |  | ---------------- | ---- | --------------- |  | ---- | ---- | ---- |  | ---- | ---- | ---- |  | --------------- | ---- | - |  |  | ---- | - |  |  | ---- | -
|                                                 |  |                  |      |                 |  |      |      |      |  |      |      |      |  | Post retirement
|                                                 |  | Pension benefits |      | health benefits
|                                                 |  |                  |      |                
|                                                 |  | 2000             |      | 1999            |  | 1998 |      | 2000 |  | 1999 |      | 1998
|                                                 |  |                  |      |                 |  |      |      |      |  |      |      |     
|Discount rate                                    |  |                  | 7.25 | %               |  |      | 7.50 | %    |  |      | 7.00 | %    |  |                 | 7.50 | % |  |  | 7.50 | % |  |  | 7.00 | %
|                                                
|                                                
|                                                
|                                                
|Expected long term
rate of return on
plan assets |  |                  | 9.50 | %               |  |      | 9.50 | %    |  |      | 9.50 | %    |  |                 | n/a  |   |  |  | n/a  |   |  |  | n/a  |  
|                                                
|                                                
|                                                
|                                                
|Rate of increase in
future compensation
levels   |  |                  | 3.75 | %               |  |      | 4.00 | %    |  |      | 3.50 | %    |  |                 | n/a  |   |  |  | n/a  |   |  |  | n/a  |  
|                                                
|                                                
|                                                
|                                                
|Current years rate                              |  |                  | n/a  |                 |  |      | n/a  |      |  |      | n/a  |      |  |                 | 5.00 | % |  |  | 5.00 | % |  |  | 6.00 | %
|                                                
|                                                
|                                                
|                                                
|Ultimate years rate                             |  |                  | n/a  |                 |  |      | n/a  |      |  |      | n/a  |      |  |                 | 5.00 | % |  |  | 5.00 | % |  |  | 5.00 | %
|                                                
|                                                
|                                                
|                                                
|Ultimate year                                    |  |                  | n/a  |                 |  |      | n/a  |      |  |      | n/a  |      |  |                 | 2000 |   |  |  | 2000 |   |  |  | 2000 |  

Components of Net Periodic Benefit Cost

|                                                 |  |                  |        |                 |  |      |        |      |  |      |        |      |  |                 |      |   |  |   |     |   |  |   |     |  
|------------------------------------------------ |  | ---------------- | ------ | --------------- |  | ---- | ------ | ---- |  | ---- | ------ | ---- |  | --------------- | ---- | - |  | - | --- | - |  | - | --- | -
|                                                 |  |                  |        |                 |  |      |        |      |  |      |        |      |  | Post retirement
|                                                 |  | Pension benefits |        | health benefits
|                                                 |  |                  |        |                
|                                                 |  | 2000             |        | 1999            |  | 1998 |        | 2000 |  | 1999 |        | 1998
|                                                 |  |                  |        |                 |  |      |        |      |  |      |        |     
|Service cost                                     |  | $                | 3,535  |                 |  | $    | 3,485  |      |  | $    | 2,548  |      |  | $               | 341  |   |  | $ | 459 |   |  | $ | 324 |  
|                                                
|                                                
|                                                
|                                                
|Interest cost                                    |  |                  | 3,273  |                 |  |      | 2,758  |      |  |      | 2,369  |      |  |                 | 210  |   |  |   | 293 |   |  |   | 280 |  
|                                                
|                                                
|                                                
|                                                
|Expected return on plan assets                   |  |                  | (2,813 | )               |  |      | (2,471 | )    |  |      | (2,173 | )   
|                                                
|                                                
|                                                
|                                                
|Recognized net actuarial (gain) loss             |  |                  | 279    |                 |  |      | 283    |      |  |      | 168    |      |  |                 | (152 | ) |  |   | (39 | ) |  |   | (41 | )
|                                                
|                                                
|                                                
|                                                
|Amortization of prior service cost               |  |                  | 171    |                 |  |      | 171    |      |  |      | 171    |      |  |                 | 66   |   |  |   | 66  |   |  |   | 66  |  
|                                                
|                                                
|                                                
|                                                
|Amortization of transition obligation or (asset) |  |                  | (62    | )               |  |      | (62    | )    |  |      | (62    | )    |  |                 | 72   |   |  |   | 72  |   |  |   | 72  |  
|                                                 |  |                  |        |                 |  |      |        |      |  |      |        |      |  |                 |      |   |  |   |     |   |  |   |     |  
|Net periodic benefit cost                        |  |                  | 4,383  |                 |  |      | 4,164  |      |  |      | 3,021  |      |  |                 | 537  |   |  |   | 851 |   |  |   | 701 |  
|                                                
|                                                
|                                                
|                                                
|SFAS 88 credits                                  |  |                  | (2,980 | )               |  |      |        |      |  |      |        |      |  |                 | 10   |  
|                                                 |  |                  |        |                 |  |      |        |      |  |      |        |      |  |                 |      |   |  |   |     |   |  |   |     |  
|Total benefit cost                               |  | $                | 1,403  |                 |  | $    | 4,164  |      |  | $    | 3,021  |      |  | $               | 547  |   |  | $ | 851 |   |  | $ | 701 |  
|                                                 |  |                  |        |                 |  |      |        |      |  |      |        |      |  |                 |      |   |  |   |     |   |  |   |     |  

Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plans. A 1% point change in assumed health
care cost trend rates would have the following effects:

|                                                        |  |                |     |                |  |   |      |  
|------------------------------------------------------- |  | -------------- | --- | -------------- |  | - | ---- | -
|                                                        |  | One Percentage |     | One Percentage
|                                                        |  | Point Increase |     | Point Decrease
|                                                        |  |                |     |               
|Effect on total of service and interest cost components |  | $              | 14  |                |  | $ | (13  | )
|                                                       
|                                                       
|                                                       
|                                                       
|Effect on post retirement benefit obligation            |  |                | 157 |                |  |   | (149 | )

NOTE L LITIGATION AND CLAIMS

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. Other
than the matters described below, FINOVA believes that any resulting liability
for their litigation matters should not materially affect FINOVAs financial
position, results of operations or cash flows. One or more of the following
matters, for which nominal accruals have been made, could have a material
adverse impact on FINOVAs financial position, results of operations or cash
flows.

A-42



---



FINOVA CAPITAL CORPORATION

Between March 29 and May 23, 2000, five shareowner lawsuits were filed
against FINOVA Group and Samuel Eichenfield, FINOVAs former chairman, president, and
chief executive officer; two of the lawsuits also named FINOVA as a defendant,
and one named three other executive officers. All of the lawsuits purport to
be on behalf of the named plaintiffs (William K. Steiner, Uri Borenstein, Jerry
Krim, Mark Kassis, and the Louisiana School Employees Retirement System), and
others who purchased FINOVA Group common stock during the class period of July 15,
1999, through either March 26, 2000, or May 7, 2000. The suit brought by the
Louisiana School Employees Retirement System also purports to be on behalf of
all those who purchased FINOVA 7.25% Notes which are due November 8, 2004,
pursuant to the registration statement and prospectus supplement dated November
1, 1999.

In an order by the U.S. District Court for the District of Arizona dated
August 30, 2000, these five lawsuits were consolidated and captioned In re:
FINOVA Group, Inc. Securities Litigation. The court also selected the
Louisiana School Employees Retirement System (LSERS) as the lead plaintiff in
the consolidated cases. LSERS filed its Amended Consolidated Complaint on
September 29, 2000, naming FINOVA Group, FINOVA, Samuel Eichenfield, Matthew
Breyne, and Bruno Marszowski as defendants. The consolidated amended complaint
generally alleges that the defendants made materially misleading statements
regarding FINOVAs loss reserves, and otherwise violated the federal securities
laws in an effort to bolster FINOVA Groups stock price, among other reasons.
Among other things, the complaint seeks unspecified damages for losses incurred
by shareowners, plus interest, and other relief, and rescission with regard to
the notes purchased.

Since consolidation of the original five shareowner lawsuits, other
related lawsuits have been initiated against the Company and current and former
officers and directors. Three shareowner lawsuits were filed in the United
States District Court for the Middle District of Tennessee, in which the named
plaintiffs (John Cartwright, Sirrom Partners and Sirrom G-1, and Caldwell
Travel) assert claims relating to the Companys acquisition in 1999 of Sirrom
Capital Corporation, and the exchange of shares of Sirrom stock for shares of
FINOVA Group stock. The Cartwright complaint purports to be a class action
lawsuit on behalf of all Sirrom shareowners that exchanged their Sirrom stock
for FINOVA Group stock as a result of the acquisition. The defendants named are
Sirrom Capital Corporation, Samuel Eichenfield, John W. Teets, Constance
Curran, G. Robert Durham, James L. Johnson, Kenneth Smith, Shoshana Tancer,
Bruno Marszowski, and FINOVA Group. The complaints allege that the defendants
made materially misleading statements regarding FINOVAs loss reserves, and
otherwise violated the federal securities laws in an effort to reduce the total
consideration provided to Sirrom shareowners at the time of the acquisition.
The complaints seek unspecified damages for losses incurred by shareowners,
plus interest, and other relief.

On January 4, 2001, the United States District Court for the Middle
District of Tennessee granted a motion brought by FINOVA and the other
defendants to transfer the Cartwright and Sirrom Partners cases to the United
States District Court for the District of Arizona. The plaintiff in Caldwell
Travel agreed to dismiss that case without prejudice. Pursuant to a
Stipulation and Order entered in March 2001, the Cartwright case has been
consolidated for all purposes with the previous five cases in the FINOVA Group
Securities Litigation, and the Sirrom Partners case has been consolidated for
all pre-trial purposes. In April 2001, the lead plaintiffs are scheduled to
file a Second Amended Consolidated Complaint.

There have also been two shareowners derivative lawsuits filed against
current and former officers and directors of FINOVA Group, one in the United
States District Court for the District of Arizona, and one in the Court of
Chancery for Newcastle County, Delaware. Both complaints were filed on
September 11, 2000, and both purport to be brought by the named plaintiffs
(William Kass and Cindy Burkholter) derivatively on behalf of the Company
against the officers and directors, alleging generally breaches of fiduciary
and other duties as directors. These actions seek unspecified money damages
and other relief. As with the consolidated securities litigation, the
allegations center generally on claims that there were materially misleading
statements regarding FINOVAs loss reserves. In both of these actions, the
plaintiffs have agreed to a stay to all proceedings pending the final
determination of the motion to dismiss in the consolidated securities
litigation.

Finally, another shareowners derivative lawsuit was filed on September
13, 2000, in the Circuit Court for Davidson County, Tennessee, by Ronald
Benkler, purportedly on behalf of Sirrom Capital Corporation, against several
former officers of Sirrom Capital Corporation. The complaint alleges that the
Sirrom officers breached various duties to Sirrom in connection with the
acquisition of Sirrom by the Company in 1999, and the exchange of Sirrom stock
for FINOVA Group stock as a result of the acquisition. The plaintiffs have
agreed to a stay of discovery in this case, pending the final determination of
the motion to dismiss the consolidated securities litigation.

FINOVA believes the claims in all of these securities and derivative cases
are without merit. FINOVA and the other defendants intend to vigorously defend
against these claims.

On March 6, 2001, one of FINOVAs subsidiaries, FINOVA (Canada) Capital
Corporation, had an involuntary Petition for Receiving Order filed against it
in the Ontario, Canada, Superior Court of Justice in Bankruptcy. The action was
filed by the Bank of Nova

A-43



---



FINOVA CAPITAL CORPORATION

Scotia, as agent for the lenders on a $150 million (Canadian) bank
facility. That same day, the courts in Canada issued a temporary injunction
prohibiting transfers of assets out of the Canadian subsidiary to its other
affiliates. FINOVA has not received service of process in those proceedings,
but has agreed to refrain from transferring assets to its affiliates without
court order.

On March 7, 2001, FINOVA Group, FINOVA and seven of their subsidiaries
filed voluntary petitions for protection from creditors pursuant to Chapter 11,
Title 11, United States Code, in the United States Bankruptcy Court for the
District of Delaware (the Bankruptcy Court) (the Reorganization
Proceedings). The other subsidiaries were FINOVA (Canada) Capital Corporation,
FINOVA Capital plc, FINOVA Loan Administration Inc., FINOVA Mezzanine Capital
Inc., FINOVA Portfolio Services, Inc., FINOVA Technology Finance Inc., and
FINOVA Finance.

FINOVA obtained orders from the bankruptcy court on the first day
permitting FINOVA to continue its operations in the ordinary course including
honoring its obligations to borrowers. The orders also permit the Filing
Entities to pay certain prepetition expenses and claims, such as to employees
(other than executive officers, with exceptions), taxing authorities and
foreign trade vendors. The cases will be jointly administered.

NOTE M 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. Fair value is defined
as the amount at which a financial instrument could be exchanged in a current
transaction between willing parties in other than a forced sale or liquidation.
These values do not present the liquidation value of the Company. 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:

|                                                               |                                     |  |          |            |                |  |          |           |                |  |   |            |  |  |   |           |  
|-------------------------------------------------------------- | ----------------------------------- |  | -------- | ---------- | -------------- |  | -------- | --------- | -------------- |  | - | ---------- |  |  | - | --------- | -
|                                                               |                                     |  | 2000     |            | 1999          
|                                                               |                                     |  |          |            |               
|                                                               |                                     |  | Carrying |            | Estimated Fair |  | Carrying |           | Estimated Fair
|                                                               |                                     |  | Amount   |            | Value          |  | Amount   |           | Value         
|                                                               |                                     |  |          |            |                |  |          |           |               
|Balance Sheet Financial Instruments:                         
|                                                              
|                                                              
|                                                              
|                                                              
|Assets:                                                       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Loans and other financing contracts |  | $        | 6,891,878  |                |  | $        | 6,771,318 |                |  | $ | 8,027,207  |  |  | $ | 7,890,021 |  
|                                                              
|                                                              
|                                                              
|                                                              
|Liabilities:                                                  
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Senior debt                         |  |          | 10,997,687 |                |  |          | N/A       |                |  |   | 11,407,767 |  |  |   | N/A       |  
|                                                              
|                                                              
|                                                              
|                                                              
|Off-Balance Sheet
Financial Instruments
assets (liabilities):
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Interest rate swaps                 |  |          |            |                |  |          | 47,472    |                |  |   |            |  |  |   | (18,306   | )
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Interest rate hedge agreements      |  |          |            |                |  |          |           |                |  |   |            |  |  |   | 2,681     |  

The carrying values of cash and cash equivalents, investments, net assets
of discontinued operations, financing contracts held for sale, accounts payable
and accrued expenses 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 the on-balance sheet valuation of net
realizable value 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, 2000 and 1999. 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, 2000 and 1999, the fair value of
nonaccruing impaired contracts with a carrying amount of $877.8 million (total
nonaccruing impaired contracts of $893.7 million included $15.9 million of
financing contracts held for sale for Realty Capital) and $113.9 million,
respectively, was not estimated because it is not practical to reasonably
assess the credit

A-44



---



FINOVA CAPITAL CORPORATION

adjustment that would be applied in the marketplace for such loans. As of
December 31, 2000 and 1999, the carrying amount of loans and other financing
contracts excludes repossessed assets with a total carrying amount of $66.0
million and $127.0 million, respectively.

Senior debt:

The fair value of senior debt estimated by discounting future cash
flows using rates currently available for debt of similar terms and remaining
maturities is not meaningful in light of the
uncertainties described in Note A. Senior debt is actively trading at
substantial discounts to its carrying amount.

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 was based on quoted market prices obtained from participating loans and
dealers for transactions of similar remaining durations.

The fair value estimates presented herein were based on information
obtained by FINOVA as of December 31, 2000 and 1999. 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, 2000 and 1999. Therefore,
subsequent estimates of fair value may differ significantly from the amounts
presented herein.

NOTE N OPERATING EXPENSES

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

|                                    |  |      |         |   |  |      |       |    |  |      |         |   |  |  |       |    |  |   |         |   |  |  |       |   
|----------------------------------- |  | ---- | ------- | - |  | ---- | ----- | -- |  | ---- | ------- | - |  |  | ----- | -- |  | - | ------- | - |  |  | ----- | --
|                                    |  | 2000 |         | % |  | 1999 |       | %  |  | 1998 |         | %
|                                    |  |      |         |   |  |      |       |    |  |      |         |  
|Salaries and employee benefits      |  | $    | 95,124  |   |  |      | 46.1  | %  |  | $    | 100,035 |   |  |  | 59.3  | %  |  |   | 96,081  |   |  |  | 65.3  | % 
|                                   
|                                   
|                                   
|                                   
|Parent company overhead             |  |      | 47,613  |   |  |      | 23.1  | %  |  |      | 22,723  |   |  |  | 13.5  | %  |  |   | 3,438   |   |  |  | 2.3   | % 
|                                   
|                                   
|                                   
|                                   
|Goodwill amortization (1)           |  |      | 16,300  |   |  |      | 7.9   | %  |  |      | 16,062  |   |  |  | 9.5   | %  |  |   | 11,101  |   |  |  | 7.6   | % 
|                                   
|                                   
|                                   
|                                   
|Occupancy expenses                  |  |      | 12,374  |   |  |      | 6.0   | %  |  |      | 8,986   |   |  |  | 5.3   | %  |  |   | 8,335   |   |  |  | 5.7   | % 
|                                   
|                                   
|                                   
|                                   
|Problem account costs               |  |      | 11,865  |   |  |      | 5.8   | %  |  |      | 8,317   |   |  |  | 4.9   | %  |  |   | 7,466   |   |  |  | 5.1   | % 
|                                   
|                                   
|                                   
|                                   
|Travel and entertainment            |  |      | 8,631   |   |  |      | 4.2   | %  |  |      | 10,187  |   |  |  | 6.0   | %  |  |   | 10,953  |   |  |  | 7.4   | % 
|                                   
|                                   
|                                   
|                                   
|Professional services               |  |      | 7,912   |   |  |      | 3.8   | %  |  |      | 5,211   |   |  |  | 3.1   | %  |  |   | 6,275   |   |  |  | 4.3   | % 
|                                   
|                                   
|                                   
|                                   
|Depreciation/leasehold amortization |  |      | 7,425   |   |  |      | 3.6   | %  |  |      | 5,957   |   |  |  | 3.5   | %  |  |   | 4,760   |   |  |  | 3.2   | % 
|                                   
|                                   
|                                   
|                                   
|Deferred acquisition costs          |  |      | (19,415 | ) |  |      | (9.4  | %) |  |      | (28,237 | ) |  |  | (16.7 | %) |  |   | (19,740 | ) |  |  | (13.4 | %)
|                                   
|                                   
|                                   
|                                   
|Other operating expenses            |  |      | 18,283  |   |  |      | 8.9   | %  |  |      | 19,456  |   |  |  | 11.6  | %  |  |   | 18,459  |   |  |  | 12.5  | % 
|                                    |  |      |         |   |  |      |       |    |  |      |         |   |  |  |       |    |  |   |         |   |  |  |       |   
|Total operating expenses            |  | $    | 206,112 |   |  |      | 100.0 | %  |  | $    | 168,697 |   |  |  | 100.0 | %  |  | $ | 147,128 |   |  |  | 100.0 | % 
|                                    |  |      |         |   |  |      |       |    |  |      |         |   |  |  |       |    |  |   |         |   |  |  |       |   



---

|(1) |  | Excludes the write-down of impaired goodwill
of $193.3 million in 2000.
|--- |  | -----------------------------------------------------------------------

A-45



---



FINOVA CAPITAL CORPORATION

NOTE O OTHER COMPREHENSIVE INCOME

Accumulated other comprehensive income activity for the three years ended
December 31, 2000 was as follows:

|                           |  |                  |        |             |  |                |         |             |  |   |         |  
|-------------------------- |  | ---------------- | ------ | ----------- |  | -------------- | ------- | ----------- |  | - | ------- | -
|                           |  |                  |        |             |  | Net Unrealized |         | Accumulated
|                           |  |                  |        |             |  | Holding Gains  |         | Other      
|                           |  | Foreign Currency |        | (Losses) on |  | Comprehensive 
|                           |  | Translation      |        | Securities  |  | Income (Loss) 
|                           |  |                  |        |             |  |               
|Balance, January 1, 1998   |  | $                | (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  |  
|                          
|                          
|                          
|                          
|Change during 2000         |  |                  | 4,051  |             |  |                | (22,709 | )           |  |   | (18,658 | )
|                           |  |                  |        |             |  |                |         |             |  |   |         |  
|Balance, December 31, 2000 |  | $                | (95    | )           |  | $              | 15,249  |             |  | $ | 15,154  |  
|                           |  |                  |        |             |  |                |         |             |  |   |         |  

For 2000 and 1999, the changes in foreign currency translation were net of
income tax benefits of $0.1 million and $2.1 million, respectively. Net
unrealized holding gains were net of income tax expenses of $8.1 million in
2000 and $25.6 million in 1999.

NOTE P 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s business is organized into three market groups, which are also
its reportable segments: Specialty Finance, Commercial Finance and Capital
Markets. Management relies principally on total net revenue, (loss) income
before income taxes, preferred dividends and allocations, and managed assets in
evaluating the business reportable segment.

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.

Commercial Finance currently includes only the Rediscount Finance business
unit, which provides financing through revolving credit facilities to finance
companies. This segment previously included traditional asset-based businesses
that provided financing through revolving credit facilities and term loans
secured by assets such as receivables and inventory, as well as providing
factoring and management services. In the third quarter of 2000, FINOVA
announced that the Corporate Finance/Business Credit/Growth Finance and
Distribution & Channel Finance business units would be discontinued. The
Company also completed the sale of its Commercial Services business line in the
third quarter. For further discussion on activity previously reported within
the Commercial Finance segment, see Discontinued Operations.

Capital Markets, in conjunction with institutional investors, provides
debt and equity capital funding, third-party loan administration services and
provided commercial mortgage banking services until those operations were
terminated. This segment includes: Realty Capital, Investment Alliance, Loan
Administration, Mezzanine Capital and Harris Williams & Co. The latter was sold
in the second quarter 2000. During 2000, the Company designated loans generated
by the Realty Capital line of business as being held for sale.

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 (losses) gains on investments and disposal of assets.
Income before allocations is income before income taxes and preferred
dividends, excluding allocation of corporate overhead expenses and the
unallocated portion of provision for credit losses. Managed assets includes
each segments investment in financing transactions plus securitizations and
participations sold.

A-46



---



FINOVA CAPITAL CORPORATION

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

|                                                                                     |                                                                           |   |            |           |      |   |            |           |   |   |         |         |  
|------------------------------------------------------------------------------------ | ------------------------------------------------------------------------- | - | ---------- | --------- | ---- | - | ---------- | --------- | - | - | ------- | ------- | -
|                                                                                     |                                                                           |   | 2000       |           | 1999 |   | 1998      
|                                                                                     |                                                                           |   |            |           |      |   |           
|Total net revenue:                                                                  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Specialty Finance                                                         |   | $          | 187,297   |      |   | $          | 384,789   |   |   | $       | 344,541 |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Commercial Finance                                                        |   |            | 59,889    |      |   |            | 51,708    |   |   |         | 38,954  |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Capital Markets                                                           |   |            | 56,443    |      |   |            | 101,414   |   |   |         | 24,170  |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Corporate and other                                                       |   |            | (17,317   | )    |   |            | 13,515    |   |   |         | 24,762  |  
|                                                                                     |                                                                           |   |            |           |      |   |            |           |   |   |         |         |  
|Consolidated total                                                                   |                                                                           | $ | 286,312    |           |      | $ | 551,426    |           |   | $ | 432,427 |        
|                                                                                     |                                                                           |   |            |           |      |   |            |           |   |   |         |         |  
|(Loss) income before income taxes, preferred dividends and allocations:             
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Specialty Finance                                                         |   | $          | (9,577    | )    |   | $          | 307,377   |   |   | $       | 273,674 |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Commercial Finance                                                        |   |            | 30,890    |      |   |            | 38,244    |   |   |         | 28,450  |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Capital Markets                                                           |   |            | (139,308  | )    |   |            | 31,235    |   |   |         | (2,775  | )
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Corporate and other, overhead and unallocated provision for credit
losses |   |            | (638,105  | )    |   |            | (16,517   | ) |   |         | (62,520 | )
|                                                                                     |                                                                           |   |            |           |      |   |            |           |   |   |         |         |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|(Loss) income from continuing operations before income taxes and
preferred dividends |                                                                           | $ | (756,100   | )         |      | $ | 360,339    |           |   | $ | 236,829 |        
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     |                                                                           |   |            |           |      |   |            |           |   |   |         |         |  
|Managed assets:                                                                     
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Specialty Finance                                                         |   | $          | 8,475,515 |      |   | $          | 8,251,642 |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Commercial Finance                                                        |   |            | 1,218,463 |      |   |            | 1,076,617 |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Capital Markets                                                           |   |            | 800,331   |      |   |            | 1,051,367 |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                     | Corporate and other                                                       |   |            | 43,566    |      |   |            | 63,510    |  
|                                                                                     |                                                                           |   |            |           |      |   |            |          
|Consolidated total                                                                   |                                                                           | $ | 10,537,875 |           |      | $ | 10,443,136 |          
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|Less securitizations                                                                 |                                                                           |   | (357,471   | )         |      |   | (121,322   | )        
|                                                                                     |                                                                           |   |            |           |      |   |            |          
|Investment in financing transactions                                                 |                                                                           | $ | 10,180,404 |           |      | $ | 10,321,814 |          
|                                                                                     |                                                                           |   |            |           |      |   |            |          

Geographic information

FINOVA attributes managed assets to geographic areas based on the location
of the asset. Managed assets at December 31, 2000 and 1999 by geographic area
were as follows:

|              |  |      |            |   |  |      |       |   |  |   |            |  |  |  |       |  
|------------- |  | ---- | ---------- | - |  | ---- | ----- | - |  | - | ---------- |  |  |  | ----- | -
|              |  | 2000 |            | % |  | 1999 |       | %
|              |  |      |            |   |  |      |       |  
|United States |  | $    | 9,224,439  |   |  |      | 87.5  | % |  | $ | 9,165,796  |  |  |  | 87.8  | %
|             
|             
|             
|             
|Europe        |  |      | 728,604    |   |  |      | 6.9   | % |  |   | 806,678    |  |  |  | 7.7   | %
|             
|             
|             
|             
|Other foreign |  |      | 584,832    |   |  |      | 5.6   | % |  |   | 470,662    |  |  |  | 4.5   | %
|              |  |      |            |   |  |      |       |   |  |   |            |  |  |  |       |  
|              |  | $    | 10,537,875 |   |  |      | 100.0 | % |  | $ | 10,443,136 |  |  |  | 100.0 | %
|              |  |      |            |   |  |      |       |   |  |   |            |  |  |  |       |  

Other foreign includes customer relationships in geographic areas which,
on an individual basis represent less than 2.0% of the total. Currently, it is
impracticable to report revenues attributed to foreign countries.

Major customer information

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

NOTE Q ACQUISITIONS

FINOVA had no acquisitions in 2000. During 1999, FINOVA acquired various
businesses and portfolios under the purchase method with initial managed assets
totaling $1.15 billion.

In December 1999, FINOVA acquired Fremont Financial Corporation
(Fremont), the commercial lending subsidiary of Fremont General Corporation,
headquartered in Santa Monica, California. Fremont, which provides secured
working capital and term loans averaging $2 million to $4 million to mid-size
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

A-47



---



FINOVA CAPITAL CORPORATION

assumed liabilities of $592 million. Managed assets purchased were $662
million. Goodwill was being amortized over 20 years; however, the balance was
written off when it was classified as a discontinued operation.

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 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 was being amortized over
25 years; however, the balance was considered impaired and written off at
year-end 2000.

In February 1999, FINOVA acquired Preferred Business Credit, a Los
Angeles-based provider of accounts receivable loans to small and mid-size
businesses for $12 million in FINOVA common stock. It is functioning as the
West Coast operation for the Growth Finance division, acquired in October 1998.
Total assets purchased were $30 million, including $12 million in goodwill that
was being amortized over 25 years; however, the balance was written off when it
was classified as a discontinued operation.

NOTE R DISCONTINUED OPERATIONS

During the third quarter of 2000, FINOVA Groups Board of Directors
approved a plan to discontinue and offer for sale its Corporate Finance,
Distribution & Channel Finance and Commercial Services lines of business. As a
result, the Company has reported these divisions as discontinued operations in
accordance with Accounting Principles Board Opinion (APB) No. 30, Reporting
the Results of Operations  Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions.

The consolidated financial statements of the Company have been
reclassified to reflect the disposition of these businesses as discontinued
operations for all years presented. Accordingly, the revenues, costs and
expenses, assets and liabilities expected to be assumed by an acquiring entity,
and cash flows of these discontinued operations have been excluded from the
respective captions in the consolidated balance sheet and statements of
consolidated operations and cash flows for all years presented.

Management believes that net assets of discontinued operations represents
a reasonable estimate of the net realizable values of such businesses. This
estimate is subject to change based on market conditions, interest rates and
other factors that could cause the ultimate amount to be significantly
different.

On August 28, 2000 FINOVA Capital completed the sale of substantially all
of the assets of its Commercial Services division to an independent third party
for approximately $235 million. The Commercial Services division provided
factoring and accounts receivable management services for entrepreneurial and
larger firms primarily in the textile and apparel industry. The sale and
additional net realizable mark-downs made in the fourth quarter resulted in an
after-tax loss from disposition of $7.0 million, which included a $16.7 million
after-tax charge for unamortized goodwill. Upon completion of the sale, the
Company retained a small portfolio, which after the write-downs, totaled $11.1
million at December 31, 2000. The Company estimates the remaining portfolio
will be liquidated within six to nine months. For the twelve months ended
December 31, 2000, the Company recorded $13.0 million in after-tax losses from
Commercial Services discontinued operations and maintained an accrual for
future operating losses totaling $2.9 million.

The Corporate Finance division includes the Corporate Finance, Business
Credit and Growth Finance lines of business. Corporate Finance provided cash
flow-oriented, asset based term and revolving loan products. Business Credit
offered collateral-oriented revolving credit facilities and term loans, while
Growth Finance provided collateral-based working capital financing primarily
secured by accounts receivable. The Companys formal plan, which is estimated
to take approximately one year to complete, includes finding a buyer, or if a
buyer is not located a substantial liquidation of the assets is estimated to be
accomplished within the year. At December 31, 2000, the Company had net
Corporate Finance assets in discontinued operations of $1.0 billion and had
recorded after-tax losses in 2000 of $21.4 million from Corporate Finance, as
part of discontinued operations. The Corporate Finance division is estimated to
operate near breakeven during the next nine to twelve months. FINOVA sold
approximately $309 million of Corporate Finance assets to an independent third
party on February 1, 2001. These assets were adjusted to net realizable value
as of December 31, 2000.

Distribution & Channel Finance provided inbound and outbound inventory
financing. The Companys formal plan of disposal, which is estimated to take up
to one year to complete, included finding a buyer, or if a buyer was not
located a liquidation of the assets. On December 29, 2000, FINOVA sold $46.4
million of Distribution & Channel Finance receivables at par to an independent
third party which resulted in remaining net assets in discontinued operations
of $132.1 million as of December 31, 2000.

A-48



---



FINOVA CAPITAL CORPORATION

For the year ended December 31, 2000, FINOVA had recorded after-tax losses
of $21.0 million from Distribution & Channel Finance, as part of discontinued
operations. The Company has assumed Distribution & Channel Finance will operate
near breakeven during the next six to nine months.

At December 31, 2000, FINOVA had total net assets of discontinued
operations of $1.16 billion, which includes the following:

|                                          |  |           |           |                 |  |            |         |       |  |   |        |   |  |   |           |  
|----------------------------------------- |  | --------- | --------- | --------------- |  | ---------- | ------- | ----- |  | - | ------ | - |  | - | --------- | -
|                                          |  | Corporate |           | Distribution &  |  | Commercial
|                                          |  | Finance   |           | Channel Finance |  | Services   |         | TOTAL
|                                          |  |           |           |                 |  |            |         |      
|Investment in financing transactions      |  | $         | 1,042,489 |                 |  | $          | 168,494 |       |  | $ | 16,496 |   |  | $ | 1,227,479 |  
|                                         
|                                         
|                                         
|                                         
|Investments                               |  |           | 7,282     |                 |  |            |         |       |  |   |        |   |  |   | 7,282     |  
|                                         
|                                         
|                                         
|                                         
|Accounts payable and accrued expenses (1) |  |           | (29,852   | )               |  |            | (4,517  | )     |  |   | (5,407 | ) |  |   | (39,776   | )
|                                         
|                                         
|                                         
|                                         
|Due to clients (2)                        |  |           | (898      | )               |  |            | (31,864 | )     |  |   |        |   |  |   | (32,762   | )
|                                          |  |           |           |                 |  |            |         |       |  |   |        |   |  |   |           |  
|Net assets of discontinued operations     |  | $         | 1,019,021 |                 |  | $          | 132,113 |       |  | $ | 11,089 |   |  | $ | 1,162,223 |  
|                                          |  |           |           |                 |  |            |         |       |  |   |        |   |  |   |           |  



---

|(1) |  | FINOVA has assumed that all liabilities directly relate to the remaining assets of the corresponding discontinued
business and will be assumed by an acquiring entity. The amounts include accruals for future operating losses. A
substantial portion of the balance at December 31, 2000 relates to the various cash incentive, retention and severance
plans developed for the employees of the discontinued lines of business.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Due to clients represents the amount due to third party vendors on behalf of our customers.                                                                                                                                                                                                                                                                                                                                       

Loss from discontinued operations in the Consolidated Statement of
Operations for the year ended December 31, 2000 includes the following:

|                                    |  |           |          |                 |  |            |         |       |  |   |         |   |  |   |          |  
|----------------------------------- |  | --------- | -------- | --------------- |  | ---------- | ------- | ----- |  | - | ------- | - |  | - | -------- | -
|                                    |  | Corporate |          | Distribution &  |  | Commercial
|                                    |  | Finance   |          | Channel Finance |  | Services   |         | TOTAL
|                                    |  |           |          |                 |  |            |         |      
|Income from financing transactions  |  | $         | 200,520  |                 |  | $          | 14,394  |       |  | $ | 17,034  |   |  | $ | 231,948  |  
|                                   
|                                   
|                                   
|                                   
|Interest expense (1)                |  |           | (137,417 | )               |  |            | (25,053 | )     |  |   | (13,184 | ) |  |   | (175,654 | )
|                                   
|                                   
|                                   
|                                   
|Volume based fees                   |  |           | 538      |                 |  |            | 27,494  |       |  |   | 7,839   |   |  |   | 35,871   |  
|                                   
|                                   
|                                   
|                                   
|Losses on disposal (2)              |  |           | (11,441  | )               |  |            |         |       |  |   | (15,723 | ) |  |   | (27,164  | )
|                                   
|                                   
|                                   
|                                   
|Net write-offs (2)                  |  |           | (25,665  | )               |  |            | (33,551 | )     |  |   | (2,120  | ) |  |   | (61,336  | )
|                                   
|                                   
|                                   
|                                   
|Operating expenses                  |  |           | (50,925  | )               |  |            | (13,642 | )     |  |   | (12,692 | ) |  |   | (77,259  | )
|                                    |  |           |          |                 |  |            |         |       |  |   |         |   |  |   |          |  
|Loss from operations                |  |           | (24,390  | )               |  |            | (30,358 | )     |  |   | (18,846 | ) |  |   | (73,594  | )
|                                   
|                                   
|                                   
|                                   
|Income tax benefit                  |  |           | 2,981    |                 |  |            | 9,402   |       |  |   | 5,814   |   |  |   | 18,197   |  
|                                    |  |           |          |                 |  |            |         |       |  |   |         |   |  |   |          |  
|Discontinued operations, net of tax |  | $         | (21,409  | )               |  | $          | (20,956 | )     |  | $ | (13,032 | ) |  | $ | (55,397  | )
|                                    |  |           |          |                 |  |            |         |       |  |   |         |   |  |   |          |  



---

|(1) |  | Interest expense was allocated to discontinued operations based on the debt identified to the
discontinued business and the Companys applicable cost of funds.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | These charges to discontinued operations occurred prior to the measurement date.                                                                               

A-49



---



FINOVA CAPITAL CORPORATION

The net loss on disposal of assets for the year ended December 31, 2000 is
comprised of the following adjustments from September 30, 2000:

|                                                            |                                            |   |           |          |                 |   |            |         |       |   |        |         |   |   |          |          |  
|----------------------------------------------------------- | ------------------------------------------ | - | --------- | -------- | --------------- | - | ---------- | ------- | ----- | - | ------ | ------- | - | - | -------- | -------- | -
|                                                            |                                            |   | Corporate |          | Distribution &  |   | Commercial
|                                                            |                                            |   | Finance   |          | Channel Finance |   | Services   |         | TOTAL
|                                                            |                                            |   |           |          |                 |   |            |         |      
|As of September 30, 2000 on a pre-tax basis:               
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Net realizable value mark-downs            |   | $         | (215,760 | )               |   | $          | (17,000 | )     |   |        | $       |   |   | $        | (232,760 | )
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Goodwill written off                       |   |           | (54,729  | )               |   |            | (24,940 | )     |   |        | (27,669 | ) |   |          | (107,338 | )
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Proceeds in excess of assets sold          |   |           |          |                 |   |            |         |       |   |        | 29,172  |   |   |          | 29,172   |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Accrued expenses                           |   |           | (28,922  | )               |   |            | (5,198  | )     |   |        | (10,377 | ) |   |          | (44,497  | )
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Income tax benefit                         |   |           | 118,417  |                 |   |            | 18,643  |       |   |        | 3,510   |   |   |          | 140,570  |  
|                                                            |                                            |   |           |          |                 |   |            |         |       |   |        |         |   |   |          |          |  
|Net loss on disposal of operations as of
September 30, 2000 |                                            |   | (180,994  | )        |                 |   | (28,495    | )       |       |   | (5,364 | )       |   |   | (214,853 | )       
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Additional net realizable value mark-downs |   |           | (112,543 | )               |   |            | (893    | )     |   |        | (1,315  | ) |   |          | (114,751 | )
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Additional accrued expenses                |   |           | (13,385  | )               |   |            | (4,815  | )     |   |        |         |   |   |          | (18,200  | )
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Income tax benefit (expense)               |   |           | 12,800   |                 |   |            | (2,337  | )     |   |        | (370    | ) |   |          | 10,093   |  
|                                                            |                                            |   |           |          |                 |   |            |         |       |   |        |         |   |   |          |          |  
|Net loss on disposal of operations as of
December 31, 2000  |                                            | $ | (294,122  | )        |                 | $ | (36,540    | )       |       | $ | (7,049 | )       |   | $ | (337,711 | )       
|                                                            |                                            |   |           |          |                 |   |            |         |       |   |        |         |   |   |          |          |  

The additional losses in the fourth quarter of 2000 were primarily
attributable to a further deterioration in the portfolios caused in part by the
weakening economy.

The income tax benefit on discontinued operations has been computed using
the effective tax rate at September 30, 2000 and December 31, 2000, which is,
in part, based on the Companys ability to utilize the deferred tax assets. See
Note J for further explanation.

NOTE S OPERATING LEASES

The Company leases various office properties under operating leases
expiring through 2014.

Minimum future rental payments under non-cancelable operating leases
having remaining terms in excess of one year as of December 31, 2000 are:

|                                     |  |   |         | 
|------------------------------------ |  | - | ------- | 
|2001                                 |  | $ | 15,499  | 
|                                    
|                                    
|                                    
|                                    
|2002                                 |  |   | 13,840  | 
|                                    
|                                    
|                                    
|                                    
|2003                                 |  |   | 12,945  | 
|                                    
|                                    
|                                    
|                                    
|2004                                 |  |   | 11,591  | 
|                                    
|                                    
|                                    
|                                    
|2005                                 |  |   | 8,661   | 
|                                    
|                                    
|                                    
|                                    
|Thereafter                           |  |   | 46,157  | 
|                                     |  |   |         | 
|Total minimum future rental payments |  | $ | 108,693 | 
|                                     |  |   |         | 

Total minimum future rental payments have not been reduced by $9,653 of
sublease rentals to be received in the future under non-cancelable subleases.

Rent expenses, net of sublease rentals of $1.8 million, $2.4 million and
$1.9 million, was $12.4 million, $9.0 million, and $8.3 million for the years
ended December 31, 2000, 1999 and 1998, respectively.

A-50



---



FINOVA CAPITAL CORPORATION

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, 2000, 1999 and 1998:

|                                                      |      |  |         |         |         |  |         |         |         |  |   |          |   |  |   |          |  
|----------------------------------------------------- | ---- |  | ------- | ------- | ------- |  | ------- | ------- | ------- |  | - | -------- | - |  | - | -------- | -
|                                                      |      |  | First   |         | Second  |  | Third   |         | Fourth 
|                                                      |      |  | Quarter |         | Quarter |  | Quarter |         | Quarter
|                                                      |      |  |         |         |         |  |         |         |        
|Income earned from financing transactions:           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | 2000 |  | $       | 293,378 |         |  | $       | 288,777 |         |  | $ | 292,941  |   |  | $ | 273,227  |  
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | 1999 |  |         | 222,560 |         |  |         | 241,950 |         |  |   | 262,470  |   |  |   | 279,298  |  
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | 1998 |  |         | 187,419 |         |  |         | 201,656 |         |  |   | 205,846  |   |  |   | 228,370  |  
|                                                     
|                                                     
|                                                     
|                                                     
|Interest expense:                                    
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | 2000 |  |         | 141,813 |         |  |         | 151,043 |         |  |   | 161,565  |   |  |   | 174,418  |  
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | 1999 |  |         | 103,384 |         |  |         | 109,558 |         |  |   | 117,738  |   |  |   | 134,576  |  
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | 1998 |  |         | 84,918  |         |  |         | 88,778  |         |  |   | 95,248   |   |  |   | 104,637  |  
|                                                     
|                                                     
|                                                     
|                                                     
|Gains (losses) on investments and disposal of assets:
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | 2000 |  |         | 21,031  |         |  |         | 13,462  |         |  |   | (90,042  | ) |  |   | (113,040 | )
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | 1999 |  |         | 12,370  |         |  |         | 18,627  |         |  |   | 14,880   |   |  |   | 22,009   |  
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | 1998 |  |         | 1,526   |         |  |         | 7,432   |         |  |   | 6,471    |   |  |   | 12,483   |  
|                                                     
|                                                     
|                                                     
|                                                     
|Non-interest expenses:                               
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | 2000 |  |         | 93,562  |         |  |         | 62,382  |         |  |   | 156,677  |   |  |   | 795,710  |  
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | 1999 |  |         | 55,847  |         |  |         | 57,727  |         |  |   | 73,099   |   |  |   | 72,249   |  
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | 1998 |  |         | 55,175  |         |  |         | 64,918  |         |  |   | 64,415   |   |  |   | 81,044   |  
|                                                     
|                                                     
|                                                     
|                                                     
|Income (loss) from continuing operations:            
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | 2000 |  |         | 48,527  |         |  |         | 56,622  |         |  |   | (70,065  | ) |  |   | (578,011 | )
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | 1999 |  |         | 47,694  |         |  |         | 58,870  |         |  |   | 55,851   |   |  |   | 57,564   |  
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | 1998 |  |         | 35,578  |         |  |         | 37,470  |         |  |   | 35,960   |   |  |   | 37,435   |  
|                                                     
|                                                     
|                                                     
|                                                     
|Net income (loss):                                   
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | 2000 |  |         | 11,358  |         |  |         | 43,878  |         |  |   | (273,115 | ) |  |   | (718,156 | )
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | 1999 |  |         | 51,003  |         |  |         | 54,608  |         |  |   | 55,851   |   |  |   | 57,564   |  
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | 1998 |  |         | 40,687  |         |  |         | 41,480  |         |  |   | 42,784   |   |  |   | 39,172   |  

A-51



---



AVERAGE BALANCES/OPERATING MARGIN/AVERAGE ANNUAL RATES (UNAUDITED) (1)
(Dollars in thousands)

The following represents the breakdown of FINOVAs average balance sheet,
operating margin and average annual rates for the years ended December 31, 2000
and 1999:

|                                                                  |                                          |                            |            |            |            |              |           |            |         |  |      |      |      |  
|----------------------------------------------------------------- | ---------------------------------------- | -------------------------- | ---------- | ---------- | ---------- | ------------ | --------- | ---------- | ------- |  | ---- | ---- | ---- | -
|                                                                  |                                          |                            |            | 2000      
|                                                                  |                                          |                            |            |           
|                                                                  |                                          |                            |            |            |            |              |           | Interest &
|                                                                  |                                          |                            |            | Average    |            | Volume-Based |           | Average   
|                                                                  |                                          |                            |            | Balance    |            | Fees         |           | Rate      
|                                                                  |                                          |                            |            |            |            |              |           |           
|ASSETS                                                           
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Cash and cash equivalents                |                            | $          | 410,720    |            |              |           | $          |         |  |      |      |     
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Investment in financing transactions     |                            |            | 10,372,539 |            |              |           | 1,083,740  | (2)     |  |      | 11.3 | %(3)
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Less reserve for credit losses           |                            |            | (230,824   | )          |              |           |            |         |  |      |      |     
|                                                                  |                                          |                            |            |            |            |              |           |            |         |  |      |      |     
|                                                                  | Net investment in financing transactions |                            |            | 10,141,715 |            |              |           |            |         |  |      |      |     
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Investments                              |                            |            | 406,327    |            |              |           |            |         |  |      |      |     
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Goodwill and other assets                |                            |            | 538,460    |            |              |           |            |         |  |      |      |     
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Net assets of discontinued operations    |                            |            | 2,246,338  |            |              |           |            |         |  |      |      |     
|                                                                  |                                          |                            |            |            |            |              |           |            |         |  |      |      |     
|                                                                  |                                          | $                          | 13,743,560 |            |            |              |           |            |         |  |      |     
|                                                                  |                                          |                            |            |            |            |              |           |            |         |  |      |      |     
|LIABILITIES AND SHAREOWNERS EQUITY                              
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Liabilities:                            
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  |                                          | Other liabilities          |            | $          | 246,350    |              |           |            | $       |  |      |      |      |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  |                                          | Senior debt                |            |            | 11,466,141 |              |           |            | 628,839 |  |      |      | 5.5  | %
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  |                                          | Deferred income taxes, net |            |            | 395,225    |              |           |            |         |  |      |      |      |  
|                                                                  |                                          |                            |            |            |            |              |           |            |         |  |      |      |     
|                                                                  |                                          |                            | 12,107,716 |            |            |              |           |            |         |  |      |     
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Shareowners equity                                               |                                          |                            | 1,635,846  |            |            |              |           |            |         |  |      |     
|                                                                  |                                          |                            |            |            |            |              |           |            |         |  |      |      |     
|                                                                  |                                          | $                          | 13,743,560 |            |            |              |           |            |         |  |      |     
|                                                                  |                                          |                            |            |            |            |              |           |            |         |  |      |      |     
|Interest income and volume based fees/
average earning assets (3) |                                          |                            |            |            |            | $            | 1,083,740 |            |         |  | 11.3 | %   
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Less: interest expense/average earning assets
(3)(4)              |                                          |                            |            |            |            |              | (628,839  | )          |         |  | 6.6  | %   
|                                                                  |                                          |                            |            |            |            |              |           |            |         |  |      |      |     
|Operating margin (4)                                              |                                          |                            |            |            |            | $            | 454,901   |            |         |  | 4.7  | %   
|                                                                  |                                          |                            |            |            |            |              |           |            |         |  |      |      |     

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                                                  |                                          |                            |            |           |           |              |          |            |         |  |      |      |      |  
|----------------------------------------------------------------- | ---------------------------------------- | -------------------------- | ---------- | --------- | --------- | ------------ | -------- | ---------- | ------- |  | ---- | ---- | ---- | -
|                                                                  |                                          |                            |            | 1999     
|                                                                  |                                          |                            |            |          
|                                                                  |                                          |                            |            |           |           |              |          | Interest & |         | 
|                                                                  |                                          |                            |            | Average   |           | Volume-Based |          | Average   
|                                                                  |                                          |                            |            | Balance   |           | Fees         |          | Rate      
|                                                                  |                                          |                            |            |           |           |              |          |           
|ASSETS                                                           
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Cash and cash equivalents                |                            | $          | 70,248    |           |              |          |           
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Investment in financing transactions     |                            |            | 9,212,153 |           |              | $        | 948,795    | (2)     |  |      | 10.9 | %(3)
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Less reserve for credit losses           |                            |            | (162,358  | )        
|                                                                  |                                          |                            |            |           |           |              |          |            |         |  |      |      |     
|                                                                  | Net investment in financing transactions |                            |            | 9,049,795 |          
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Investments                              |                            |            | 287,150   |          
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Goodwill and other assets                |                            |            | 422,366   |          
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Net assets of discontinued operations    |                            |            | 2,008,470 |          
|                                                                  |                                          |                            |            |           |           |              |          |            |         |  |      |      |     
|                                                                  |                                          | $                          | 11,838,029 |          
|                                                                  |                                          |                            |            |           |           |              |          |            |         |  |      |      |     
|LIABILITIES AND SHAREOWNERS EQUITY                              
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Liabilities:                            
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  |                                          | Other liabilities          |            | $         | 190,733   |              |          |            |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  |                                          | Senior debt                |            |           | 9,646,010 |              |          | $          | 465,256 |  |      |      | 4.8  | %
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  |                                          | Deferred income taxes, net |            |           | 382,154   |             
|                                                                  |                                          |                            |            |           |           |              |          |            |         |  |      |      |     
|                                                                  |                                          |                            | 10,218,897 |          
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Shareowners equity                                               |                                          |                            | 1,619,132  |          
|                                                                  |                                          |                            |            |           |           |              |          |            |         |  |      |      |     
|                                                                  |                                          | $                          | 11,838,029 |          
|                                                                  |                                          |                            |            |           |           |              |          |            |         |  |      |      |     
|Interest income and volume based fees/
average earning assets (3) |                                          |                            |            |           |           | $            | 948,795  |            |         |  | 10.9 | %   
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Less: interest expense/average earning assets
(3)(4)              |                                          |                            |            |           |           |              | (465,256 | )          |         |  | 5.3  | %   
|                                                                  |                                          |                            |            |           |           |              |          |            |         |  |      |      |     
|Operating margin (4)                                              |                                          |                            |            |           |           | $            | 483,539  |            |         |  | 5.6  | %   
|                                                                  |                                          |                            |            |           |           |              |          |            |         |  |      |      |     



---

|(1) |  | Averages are calculated based on monthly balances.                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | For the years ended December 31, 2000 and 1999 interest income is
shown net of operating lease depreciation.                                                                                                                                                                                                                                                                                                                                                                     
|   
|   
|   
|   
|(3) |  | The average rate is calculated based on average earning assets
($9,603,774 and $8,713,535 for 2000 and 1999, respectively) which are
net of average deferred taxes on leveraged leases and average
nonaccruing assets.                                                                                                                                                                                                                                                           
|   
|   
|   
|   
|(4) |  | For the year ended December 31, 2000, excluding the impact of
derivatives, interest expense would have been $627,517 or 6.5% of
average earning assets and operating margin would have been $453,579
or 4.7% of average earning assets. For the year ended December 31,
1999, excluding the impact of derivatives, interest expense would have
been $469,228 or 5.39% of average earning assets and operating margin
would have been $487,512 or 5.59% of average earning assets.

A-52



---



Exhibit Index

|            |  |                                                                                                                                                                                                                                                                                      
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                          
|           
|(3.A)       |  | Certificate of Incorporation, as amended (incorporated by
reference from FINOVAÎs Report on Form 10-K for the year ended
December 31, 1994 (the 1994 10-K Exhibit 3.A).                                                                                                            
|           
|           
|           
|           
|(3.B)       |  | Bylaws, as amended (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
Capital and the Trustee named therein (incorporated by reference
from the Greyhound Financial Corporation Registration Statement on
Form S-3, Registration No. 33-51216, Exhibit 4).                                  
|           
|           
|           
|           
|(4.E)       |  | Form of Indenture dated as of October 1, 1995 between FINOVA and
the Trustee named therein (incorporated by reference from FINOVAs
report on Form 8-K dated October 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, filed on May 28, 1999, Exhibit 4.8.B).                                   
|           
|           
|           
|           
|(4.G)       |  | 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, filed on May 28, 1999, Exhibit
4.8.C).                                                                       
|           
|           
|           
|           
|(4.H)       |  | 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,
filed on May 28, 1999, Exhibit 4.8.A).                                              
|           
|           
|           
|           
|(4.I)       |  | Form of Trust Indenture among FINOVA (Canada) Finance Inc., FINOVA
Capital Corporation and CIBC Mellon Trust Company made as of
February 25, 2000.                                                                                                                                   
|           
|           
|           
|           
|(4.J)       |  | 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,
Exhibit 4.8).                
|           
|           
|           
|           
|(4.K)       |  | Commitment Letter dated February 26, 2001 among FINOVA Group,
FINOVA, Berkshire Hathaway Inc., Leucadia National Corporation and
Berkadia, LLC (incorporated by reference from FINOVA Groups
Report on Form 8-K dated February 26, 2001 (the February 26, 2001
8-K), Exhibit 10.A.





---



|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|           
|(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 1999 10-K, Exhibit 10.A.6).                                                                                                                                                                                                                                                                                   
|           
|           
|           
|           
|(10.B)      |  | Credit Agreement (Short-Term Facility) dated as of May 16, 1994
among FINOVA Capital, 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 2000 10-K, Exhibit 10.B.6).                                                                                                                                                                                                                                                                                                                                                
|           
|           
|           
|           
|(10.C)      |  | Exhibits relating to management compensation and omitted due to
the reduced disclosure format, and can be found as exhibits to
FINOVA Groups 2000 10-K.                                                                                                                                                                                                                                                                                                                   





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|            |  |                                                                                                                                                                                                                                     
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                         
|           
|(10.D)      |  | Management Agreement dated February 26, 2001 among FINOVA,
Leucadia National Corporation and Leucadia International
Corporation (incorporated by reference from FINOVAs Report on
Form 8-K dated February 26, 2001, Exhibit 10.B).+
|           
|           
|           
|           
|(10.D.1)    |  | Amended and Restated Management Services Agreement dated as of
April 3, 2001 among FINOVA Group, Leucadia National Corporation
and Leucadia International Corporation.*+                                                            
|           
|           
|           
|           
|(12)        |  | Computation of Ratio of (Losses) Income to Fixed Charges and
Preferred Stock Dividends.*                                                                                                                                            
|           
|           
|           
|           
|(21)        |  | Subsidiaries.*                                                                                                                                                                                                                      
|           
|           
|           
|           
|(23)        |  | Consent of Independent Auditors from Ernst & Young LLP                                                                                                                                                                              
|           
|           
|           
|           
|(23.1)      |  | Independent Auditors Consent from Deloitte & Touche LLP                                                                                                                                                                            
|           
|           
|           
|           
|(24)        |  | Powers of Attorney.*                                                                                                                                                                                                                



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