================================================================================
                       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, 1996        Commission File Number 1-7543

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

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

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

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

Securities registered pursuant to Section 12(b) of the Act:
                                                   Name of Each Exchange
         Title of Each Class                        on Which Registered
         -------------------                        -------------------
  $175,000,000 Principal Amount of                New York Stock Exchange
9 - 1/8% Notes Due February 27, 2002

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

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

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


As of March 10,  1997,  25,000  shares of Common  Stock  ($0.01 par value)  were
outstanding and held by an affiliate.

Registrant meets the conditions set forth in General Instruction J(1)(a) and (b)
of Form 10-K and is  therefore  filling  this Form with the  reduced  disclosure
format.

                       DOCUMENTS INCORPORATED BY REFERENCE
Document                                                            Part Where
--------                                                            Incorporated
   None                                                             ------------

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<PAGE>
                                TABLE OF CONTENTS
                                  Name of Item
                                  ------------
Item #                                                                      Page
--------------------------------------------------------------------------------
                                     Part I
Item 1    Business:
            Introduction                                                       1
            General                                                            1
              Lines of Business                                                2
              Portfolio Composition                                            3
              Investment in Financing Transactions                             3
              Cost and Use of Borrowed Funds                                  11
              Credit Ratings                                                  12
              Residual Realization Experience                                 13
              Business Development and Competition                            14
              Credit Quality                                                  14
              Risk Management                                                 14
              Portfolio Management                                            15
              Delinquencies and Workouts                                      16
              Governmental Regulation                                         16
            Employees                                                         16
            Special Note Regarding Forward-Looking Statements                 16

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

                                     Part II

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

                                    Part III

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

                                     Part IV


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

ITEM 1.           BUSINESS.

INTRODUCTION

         The following  discussion relates to FINOVA Capital Corporation and its
subsidiaries (collectively "FINOVA" or the "Company").  During 1996, the Company
sold its  Manufacturer  and Dealer  Services  line of business and closed FINOVA
Medical  Systems.  Amounts for 1995 and 1994 have been restated to reflect these
operations as discontinued.

         FINOVA is a wholly owned  subsidiary of The FINOVA Group Inc.  ("FINOVA
Group").  FINOVA  Group  is the  successor  to  the  former  financial  services
businesses of The Dial Corp ("Dial").  On March 18, 1992,  Dial  consummated the
spin-off (the  "Spin-Off") of FINOVA Group by  distributing  one share of FINOVA
Group's  common stock (the  "shares")  for every two shares of Dial common stock
held by each stockholder. Prior to the Spin-Off, Dial contributed to the Company
its 100% interest in FINOVA Capital Limited ("FCL") (formerly known as Greyhound
European  Financial  Group),  Dial's  European  commercial and consumer  finance
businesses  not  previously  managed by the Company,  and  Greyhound BID Holding
Corp.  ("Greyhound  BID") and contributed all of the common stock of the Company
to FINOVA Group.

GENERAL

         FINOVA is a financial  services company  primarily engaged in providing
collateralized  financing  and leasing  products to  commercial  enterprises  in
focused market niches, principally in the United States.

         FINOVA was  incorporated  in 1965 in Delaware and is the successor to a
California  corporation that commenced  operations in 1954. FINOVA has conducted
business  continuously  since that time. Foreign financial services are provided
primarily in the United  Kingdom,  where FCL has provided  such  services  since
1964.  Domestic and foreign financial  operations prior to the Spin-Off had been
conducted  independently  of each other for many years.  Following  the Spin-Off
they have been conducted as a consolidated  enterprise;  however,  subsequent to
the  Spin-Off,  FINOVA  announced  its  intention  to  phase  out  the  historic
businesses of London-based  FCL; in early 1996, this phase out was substantially
completed.  FCL  continues to originate  and service  transactions  on behalf of
FINOVA's Transportation Finance line of business.

         FINOVA extends  revolving credit  facilities,  term loans and equipment
and real estate  financing to  "middle-market"  businesses  with financing needs
falling  generally  between $500,000 to $35 million.  FINOVA currently  operates
primarily  in 15 specific  industry or market  niches in which its  expertise in
evaluating  the  creditworthiness  of  prospective  customers and its ability to
provide  value-added  services  enables  it to  differentiate  itself  from  its
competitors and to command product pricing which provides a satisfactory  spread
over the Company's borrowing costs.

         The Company seeks to maintain a high quality  portfolio and to minimize
nonaccruing  assets  and  write-offs  by  using  clearly  defined   underwriting
criteria,  stringent  portfolio  management  techniques and by diversifying  its
lending activities geographically and among a range of industries, customers and
loan products.  Because of the diversity of the Company's portfolio, the Company
believes it is better able to manage  competitive  changes in its markets and to
withstand  the impact of  deteriorating  economic  conditions  on a regional  or
national  basis,  although there can be no assurance that  competitive  changes,
borrowers'  performance  or  economic  conditions  will not result in an adverse
impact on the Company's results of operations or financial condition.

         FINOVA  generates  interest  income,  other  income  and gains  through
charges assessed on outstanding  loans,  loan servicing,  leasing and other fees
and   disposition  of  equipment   upon   termination  of  leases  or  in  other
circumstances.  FINOVA's  primary expenses are the costs of funding its loan and
lease business (including interest paid on debt), provisions for possible credit
losses, marketing expenses, salaries and employee benefits,  servicing and other
operating expenses and income taxes.
<PAGE>
         Lines of Business

         FINOVA's activities  currently include the following principal lines of
         business:

         o        Commercial  Equipment  Finance offers equipment leases,  loans
                  and turnkey  financing to a broad range of midsize  companies.
                  Specialty markets include the corporate  aircraft and emerging
                  growth  technology  industries,  primarily  biotechnology  and
                  electronics.  Typical transaction sizes range from $500,000 to
                  $15 million.

         o        Commercial Finance offers collateral-oriented revolving credit
                  facilities  and term  loans for  manufacturers,  distributors,
                  wholesalers and service companies.  Typical  transaction sizes
                  range from $500,000 to $3 million.

         o        Commercial  Real Estate  Finance  provides term  financing for
                  hotel, anchored retail, office and owner-occupied  properties.
                  Typical  transaction  sizes  range  from  $5  million  to  $25
                  million.

         o        Communications  Finance  specializes  in   term  financing  to
                  advertising  and  subscriber-supported   businesses  including
                  radio and  television  stations,  cable TV operators,  outdoor
                  advertising  firms and publishers.  Typical  transaction sizes
                  range from $1 million to $40 million.

         o        Corporate  Finance provides a full range of cash flow-oriented
                  and   asset-based   term  and  revolving   loan  products  for
                  manufacturers, wholesalers, distributors, specialty retailers,
                  commercial   and   consumer   service   businesses.    Typical
                  transaction sizes range from $2 million to $40 million.

         o        Factoring Services  offers full service factoring and accounts
                  receivable  management services for entrepreneurial and larger
                  firms,  primarily in the textile and apparel industries,  with
                  annual factored volume of $5 million to $25 million. This line
                  provides accounts receivable and inventory financing and loans
                  secured by equipment and real estate.

         o        Franchise   Finance   offers   equipment,   real  estate   and
                  acquisition  financing for operators of established  franchise
                  concepts. Typical transaction sizes range from $500,000 to $15
                  million.

         o        Government  Finance  provides  tax-exempt  term financing  for
                  state  and  local  governments  and  non-profit  corporations.
                  Typical transaction sizes range from $100,000 to $5 million.

         o        Healthcare  Finance  offers a full  range of working  capital,
                  equipment  and  real-estate  financing  products  for the U.S.
                  healthcare  industry.  Typical  transaction  sizes  range from
                  $500,000 to $25 million.

         o        Inventory  Finance  provides  inbound and  outbound  inventory
                  financing,  combined  inventory/accounts  receivable  lines of
                  credit   and   purchase   order    financing   for   equipment
                  distributors,  value-added  resellers and dealers  nationwide.
                  Typical transaction sizes range from $500,000 to $30 million.

         o        Rediscount  Finance offers revolving credit facilities to  the
                  independent   consumer  finance   industry   including  sales,
                  automobile,  mortgage and premium finance  companies.  Typical
                  transaction sizes range from $1 million to $35 million.

         o        Portfolio Services provides customized  receivables  servicing
                  and collections for time share developers and other generators
                  of consumer receivables.

         o        Resort  Finance  focuses   on  construction,  acquisition  and
                  receivables  financing  for  developers  of timeshare  resorts
                  worldwide,  as well as term  financing  for  established  golf
                  resorts  and  resort  hotels  and   receivables   funding  for
                  developers  of second home  communities.  Typical  transaction
                  sizes range from $5 million to $35 million.
<PAGE>
         o        Transportation  Finance structures  equipment  loans,  leases,
                  acquisition  financing and leveraged lease equity  investments
                  for  commercial and cargo  airlines  worldwide,  railroads and
                  operators of other transportation  related equipment.  Typical
                  transaction sizes range from $5 million to $30 million.

         o        FINOVA Investment Alliance provides equity and  mezzanine debt
                  financing   for   midsize   business   in   partnership   with
                  institutional  investors and selected fund  sponsors.  Typical
                  transaction sizes range from $2 million to $15 million.

         Portfolio Composition

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

         Investment in Financing Transactions

                  The following  tables detail FINOVA's  investment in financing
         transactions  (before  reserve for possible  credit losses) at December
         31, 1996, 1995, 1994, 1993, and 1992.
<PAGE>
                      INVESTMENT IN FINANCING TRANSACTIONS
                              BY TYPES OF FINANCING
                             (Dollars in Thousands)
<TABLE>
<CAPTION>

                                                                                  December 31,
                                   -------------------------------------------------------------------------------------------------
                                      1996       %      1995        %        1994        %       1993       %        1992         %
                                   -------------------------------------------------------------------------------------------------
<S>                               <C>          <C>    <C>         <C>    <C>          <C>    <C>          <C>     <C>          <C> 
Loans, conditional sale and other
financing contracts:
  Commercial                      $ 3,592,193   49.2  $3,389,363   53.4  $ 2,732,734   51.1  $ 1,397,863   49.1   $  1,028,181  42.3
  Real estate                       1,713,485   23.5   1,534,177   24.1    1,237,488   23.2      945,892   33.2        891,190  36.7
Factored receivables                  564,430    7.7     189,486    3.0      157,862    3.0
Operating leases                      517,690    7.1     460,798    7.3      412,782    7.7      147,222    5.2       100,911    4.2
Leveraged leases                      514,573    7.1     366,196    5.8      287,518    5.4      283,782   10.0       269,370   11.1
Direct financing leases               396,388    5.4     408,059    6.4      514,595    9.6       71,812    2.5       138,871    5.7
                                  -----------  -----  ----------  -----  -----------  -----  -----------  -----  ------------  -----
Total investment in financing       7,298,759  100.0   6,348,079  100.0  $ 5,342,979  100.0  $ 2,846,571  100.0   $ 2,428,523  100.0
                                               =====              =====  ===========  =====  ===========  =====  ============  =====
transactions
Securitized assets                    300,000            200,000
                                  -----------         ----------
Total managed assets              $ 7,598,759         $6,548,079
                                  ===========         ==========
</TABLE>
<PAGE>
                      INVESTMENT IN FINANCING TRANSACTIONS
                               BY LINE OF BUSINESS
                                DECEMBER 31, 1996
                             (Dollars in Thousands)
<TABLE>
<CAPTION>
                                               Revenue Accruing                           Nonaccruing
                                   ----------------------------------------  ----------------------------------
                                                                Repos-                     Repos-                   Total
                                       Market                   sessed                     sessed      Lease &     Carrying 
                                      Rate (1)      Impaired    Assets (2)    Impaired     Assets       Other       Amount        %
                                   ----------------------------------------  ----------------------------------  -------------------
<S>                                <C>             <C>         <C>           <C>         <C>         <C>         <C>            <C> 
Transportation Finance (3)         $  1,330,578    $           $             $           $           $           $  1,330,578   18.2
Resort Finance                        1,124,462        2,963      13,878            77      25,136                  1,166,516   16.0
Commercial Real Estate Finance          700,932       30,245      46,068         6,748       9,853         940        794,786   10.9
Corporate Finance (4)                   630,399        3,211                    14,695         335                    648,640    8.9
Commercial Equipment Finance            570,574                                  7,900                   6,564        585,038    8.0
Communications Finance                  535,701        8,796                    14,129       3,095                    561,721    7.7
Healthcare Finance                      497,540                                  1,304                   1,194        500,038    6.9
Rediscount Finance                      421,232                                    245                                421,477    5.8
Franchise Finance                       366,202        1,104                     1,985                     996        370,287    5.0
Inventory Finance                       314,446                                  1,273                                315,719    4.3
Factoring Services                      220,701                                  3,419                                224,120    3.1
Commercial Finance                      160,006                                 11,963                                171,969    2.3
Government Finance                      150,361                                     13                                150,374    2.1
Other                                    52,998                                                          4,498         57,496    0.8
                                   ------------    ---------   ---------     ---------   ---------   ---------   ------------  -----
Total Continuing Operations (4)    $  7,076,132    $  46,319   $  59,946     $  63,751   $  38,419   $  14,192   $  7,298,759  100.0
                                   ============    =========   =========     =========   =========               ============  =====
Discontinued Operations (5)                                                                             39,143
                                                                                                     ---------
TOTAL                                                                                                $  53,335
                                                                                                     =========
</TABLE>
--------------------
NOTES:
(1)  Represents original or renegotiated  market rate terms,  excluding impaired
     transactions.
(2)  The Company  earned  income  totaling  $5.1 million on  repossessed  assets
     during 1996,  including $4.4 million in Commercial  Real Estate Finance and
     $0.7 million in Resort Finance.
(3)  Transportation  Finance  includes  $160.8  million  of  aircraft  financing
     business booked through the London office.
(4)  Excludes  $300  million  of  securitized  assets  which are  managed by the
     Company.
(5)  Reflects  assets  retained  by  FINOVA   subsequent  to  the  sale  of  the
     Manufacturer and Dealer Services' line of business. 
                              --------------------
<PAGE>
                      INVESTMENT IN FINANCING TRANSACTIONS
                               BY LINE OF BUSINESS
                                DECEMBER 31, 1995
                             (Dollars in Thousands)
<TABLE>
<CAPTION>
                                                  Revenue Accruing                       Nonaccruing
                                      ------------------------------------- -----------------------------------
                                                                 Repos-                   Repos-                    Total
                                          Market                 sessed                   sessed      Lease &      Carrying 
                                         Rate (1)    Impaired   Assets (2)   Impaired     Assets       Other        Amount        %
                                      ------------------------------------- ----------------------------------- --------------------
<S>                                   <C>           <C>         <C>         <C>         <C>         <C>         <C>            <C>  
Transportation Finance (3)            $    929,043  $           $           $           $           $           $    929,043    14.6
Resort Finance                             943,661      2,849      12,064       2,583      26,559                    987,716    15.6
Commercial Real Estate Finance             703,018      3,898      42,304      15,264      18,231         988        783,703    12.3
Corporate Finance (4)                      631,295      5,274                  19,592         335                    656,496    10.3
Commercial Equipment Finance               345,039                                 69                   6,079        351,187     5.5
Communications Finance                     662,191      2,502       2,217      16,817       4,863                    688,590    10.8
Healthcare Finance                         451,503                                 81                   1,231        452,815     7.2
Rediscount Finance                         345,264                                                                   345,264     5.4
Franchise Finance                          327,356      1,462                   6,408                   1,850        337,076     5.3
Inventory Finance                          202,879                                430                                203,309     3.2
Factoring Services                         188,892                                594                                189,486     3.0
Commercial Finance                         200,365                             12,685                                213,050     3.4
Government Finance                         121,956                                                         47        122,003     1.9
Other                                       78,645      1,275                   2,360                   6,061         88,341     1.5
                                      ------------  ---------   ---------   ---------   ---------   ---------   ------------ -------
Total Continuing Operations (4)       $  6,131,107  $  17,260   $  56,585   $  76,883   $  49,988   $  16,256   $  6,348,079   100.0
                                      ============  =========   =========   =========   =========   =========   ============ =======
</TABLE>
--------------------
NOTES:

(1)  Represents original or renegotiated  market rate terms,  excluding impaired
     transactions.
(2)  The Company  earned  income  totaling  $4.2 million on  repossessed  assets
     during 1995, including $3.2 million in Commercial Real Estate Finance, $0.6
     million in Resort Finance and $0.4 million in Communications Finance.
(3)  Transportation Finance included $144 million of aircraft financing business
     booked through the London office.
(4)  Excludes  $200  million  of  securitized  assets  which are  managed by the
     Company. 
                              --------------------
<PAGE>
                      INVESTMENT IN FINANCING TRANSACTIONS
                               BY LINE OF BUSINESS
                                DECEMBER 31, 1994
                             (Dollars in Thousands)
<TABLE>
<CAPTION>
                                                Revenue Accruing                       Nonaccruing
                                    -------------------------------------- -----------------------------------           
                                                                  Repos-
                                                                  sessed      Delin-     Repos-       Leases       Total
                                      Original      Rewritten     Assets      quent      sessed         &         Carrying
                                        Rate        Contracts      (1)        Loans      Assets       Other        Amount         %
                                    -------------------------------------- ----------------------------------- ---------------------
<S>                                 <C>            <C>          <C>        <C>         <C>          <C>        <C>             <C> 
Transportation Finance (2)          $    706,242   $   14,620   $          $           $            $          $    720,862     13.5
Resort Finance                           634,735        4,506       7,314      2,582       30,393                   679,530     12.7
Commercial Real Estate Finance           672,522        7,237      40,510      7,622       21,519                   749,410     14.0
Corporate Finance                        746,671       21,275                  6,952        2,674                   777,572     14.5
Commercial Equipment Finance             293,609          769                                          7,589        301,967      5.6
Communications Finance                   551,218        6,288       7,282     17,377        5,863        671        588,699     11.0
Healthcare Finance                       467,131                                                       1,719        468,850      8.8
Rediscount Finance                        99,353                                                                     99,353      1.9
Franchise Finance                        281,890        7,632                 12,242                                301,764      5.6
Inventory Finance                         58,595                                 642                                 59,237      1.1
Factoring Services                       157,090                                 772                                157,862      3.0
Commercial Finance                       181,741                              12,003                                193,744      3.6
Government Finance                        93,491                                 144                                 93,635      1.8
FINOVA Capital Limited (3)                93,700        1,561                  4,265            2      4,800        104,328      2.0
Other                                     36,951                               8,918                     297         46,166      0.9
                                    ------------   ----------   ---------  ---------   ----------   --------   ------------    -----
Total Continuing Operations         $  5,074,939   $   63,888   $  55,106  $  73,519   $   60,451   $ 15,076   $  5,342,979    100.0
                                    ============   ==========   =========  =========   ==========   ========   ============    =====
</TABLE>
--------------------
NOTES:
(1)  The Company  earned  income  totaling  $3.3 million on  repossessed  assets
     during 1994, including $2.0 million in Commercial Real Estate Finance, $0.8
     million in Communications Finance and $0.5 million in Resort Finance.
(2)  Transportation  Finance included $66.9 million of aircraft finance business
     booked through the London office.
(3)  The FINOVA Capital  Limited  balance  included  transactions  in Europe and
     elsewhere (including the U.S.) originated from the Company's London office.
     Also,  FINOVA Capital  Limited  included $39.2 million of Consumer  Finance
     assets, of which $4.8 million were  nonaccruing.  Consumer Finance accounts
     were  generally  considered  nonaccruing  after being 180 days  delinquent.
                              --------------------
<PAGE>
                      INVESTMENT IN FINANCING TRANSACTIONS
                               BY LINE OF BUSINESS
                                DECEMBER 31, 1993
                             (Dollars in Thousands)
<TABLE>
<CAPTION>
                                              Revenue Accruing                     Nonaccruing
                                     ---------------------------------   -------------------------------
                                                               Repos-
                                                               sessed      Delin-     Repos-    Leases           Total
                                       Original   Rewritten    Assets      quent      sessed       &           Carrying
                                         Rate     Contracts     (1)        Loans      Assets     Other           Amount           %
                                     ---------------------------------   -------------------------------     ----------------------
<S>                                  <C>          <C>        <C>         <C>        <C>        <C>           <C>             <C> 
Transportation Finance (2) (3)       $   604,416  $          $           $     841  $          $             $     605,257     21.2
Resort Finance                           530,617      4,869     12,163      11,597      7,404        440           567,090     19.9
Commercial Real Estate Finance (2)       500,598      1,574     27,844       5,759     20,838                      556,613     19.6
Corporate Finance (2)                    397,779     27,921                  4,243      5,462        386           435,791     15.3
Communications Finance                   487,890      7,989      8,949      21,730     11,564                      538,122     18.9
Rediscount Finance                        19,439                                                                    19,439      0.7
FINOVA Capital Limited (4)               107,486      4,430                  2,720         23      9,600           124,259      4.4
                                     -----------  ---------  ---------   ---------  ---------  ---------     -------------   ------
                                     $ 2,648,225  $  46,783  $  48,956   $  46,890  $  45,291  $  10,426     $   2,846,571    100.0
                                     ===========  =========  =========   =========  =========  =========     =============   ======
</TABLE>
--------------------
NOTES:
(1)  The Company  earned income  totaling $2.7 million on  repossessed  accruing
     assets  during  1993,  including  $1.5  million in  Commercial  Real Estate
     Finance, $0.6 million in Communications  Finance and $0.6 million in Resort
     Finance.
(2)  Reclassifications  (effective January 1, 1993):  Approximately $169 million
     of accruing  assets were  reclassified  from  Corporate  Finance  with $163
     million going to Transportation  Finance because they primarily represented
     aircraft  financing  and $6  million to  Commercial  Real  Estate  Finance.
     Additionally,  $6.5 million of nonaccruing  assets ($5.1 million classified
     as repossessed  assets and $1.4 million  classified as 90 days  delinquent)
     were reclassified from Corporate Finance to Commercial Real Estate Finance.
(3)  Transportation  Finance included $31.9 million of aircraft finance business
     booked through the London office.
(4)  The FINOVA Capital  Limited  balance  included  transactions  in Europe and
     elsewhere (including the U.S.) originated from the Company's London office.
     Also,  FINOVA Capital  Limited  included $45.3 million of Consumer  Finance
     assets, of which $9.6 million were  nonaccruing.  Consumer Finance accounts
     were generally considered nonaccruing after being 180 days delinquent.
                              --------------------
<PAGE>
                      INVESTMENT IN FINANCING TRANSACTIONS
                               BY LINE OF BUSINESS
                                DECEMBER 31, 1992
                             (Dollars in Thousands)
<TABLE>
<CAPTION>
                                             Revenue Accruing                       Nonaccruing
                                  ------------------------------------   --------------------------------
                                                             Repos-       Delin-    Repos-      Leases         Total
                                    Original    Rewritten    sessed       quent     sessed        &           Carrying
                                      Rate      Contract    Assets (1)    Loans     Assets      Other          Amount         %
                                  ------------------------------------   --------------------------------   -----------------------
<S>                               <C>           <C>         <C>          <C>        <C>       <C>           <C>              <C>  
Transportation Finance            $    328,962  $           $            $          $         $             $     328,962      13.5
Resort Finance                         488,224      1,356                    6,524      7,365        635          504,104      20.8
Commercial Real Estate Finance         463,571     12,482      21,509        6,302     15,052                     518,916      21.4
Corporate Finance (2)                  420,006     16,081                   14,436      5,111        611          456,245      18.8
Communications Finance                 382,914     32,548                    8,744     13,182                     437,388      18.0
FINOVA Capital Limited (3)             154,609      5,839                    6,000         60     16,400          182,908       7.5
                                  ------------  ---------   ---------    ---------  --------- ----------    -------------    ------
                                  $  2,238,286  $  68,306   $  21,509    $  42,006  $  40,770 $   17,646    $   2,428,523     100.0
                                  ============  =========   =========    =========  ========= ==========    =============    ======
</TABLE>
--------------------
NOTES:

(1)  The Company earned income of $1.9 million on repossessed accruing assets in
     Commercial Real Estate Finance during 1992.
(2)  Included  $5.1  million of public  sector  Latin  American  loans that were
     written-down to estimated market value.  During 1992,  FINOVA  successfully
     liquidated  72% of the face value of public sector Latin  American loans at
     favorable market prices, which were approximately $3.1 million in excess of
     the carrying amount.
(3)  The FINOVA Capital  Limited  balance  included  transactions  in Europe and
     elsewhere (including the U.S.) originated from the Company's London office.
     FINOVA Capital Limited  included $57.8 million of Consumer  Finance assets,
     of which $16.4 million were  nonaccruing.  Consumer  Finance  accounts were
     generally   considered   nonaccruing   after  being  180  days  delinquent.
                              ---------------------
<PAGE>
         The Company's geographic portfolio diversification at December 31, 1996
was as follows (Dollars in Thousands):

                            State                    Total            Percent
               ----------------------------      -------------      ----------  
               California                        $   1,143,936            15.1
               Florida                                 763,109            10.0
               Texas                                   569,841             7.5
               New York                                485,909             6.4
               Arizona                                 294,603             3.9
               New Jersey                              289,004             3.8
               Virginia                                288,431             3.8
               Pennsylvania                            249,176             3.3
               Illinois                                241,706             3.2
               Nevada                                  207,897             2.7
               Michigan                                199,367             2.6
               Massachusetts                           150,109             2.0
               Other (1)                             2,715,671            35.7
                                                 -------------      ----------
                                                 $   7,598,759          100.0%
                                                 =============      ==========
--------------------
NOTE:
(1)  Other includes all other states which,  on an individual  basis,  represent
     less than 2% of the total and international, which represents approximately
     8% of the total.
                              --------------------

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

<TABLE>
<CAPTION>
                                                  1996          1995          1994        1993         1992
                                             -----------------------------------------------------------------     
                                                                  (Dollars in Thousands)
<S>                                          <C>           <C>           <C>          <C>          <C>        
Balance, beginning of year                   $   129,077   $   110,903   $   64,280   $   69,291   $    87,600
Provision for possible credit losses              41,751        37,568       10,439        5,706         6,740
Write-offs                                       (32,017)      (25,631)     (28,109)     (12,575)      (23,661)
Recoveries                                         3,296         2,104        1,780          717           749
Other (including reserves related to
acquisitions)                                      6,586         4,133       62,513        1,141       (2,137)
                                             -----------   -----------   ----------   ----------   -----------
Balance, end of year                         $   148,693   $   129,077   $  110,903   $   64,280   $    69,291
                                             ===========   ===========   ==========   ==========   ===========
</TABLE>
                              --------------------

         Included in the above is a specific  impairment reserve of $6.2 million
at December 31, 1996,  which applies to $14.1  million of the $110.1  million of
impaired loans.  The remaining $142.5 million of the reserve for possible credit
losses is  designated  for general  purposes and  represents  management's  best
estimate of potential losses in the portfolio  considering  delinquencies,  loss
experience and collateral. At December 31, 1995, the specific impairment reserve
was $16 million  which  applied to $35 million of the $94.1  million of impaired
loans.  Additions  to general and  specific  reserves  are  reflected in current
operations.  Management may transfer  reserves  between the general and specific
reserves as appropriate.
<PAGE>
         Write-offs by line of business,  experienced  by the Company during the
years ended December 31, were as follows:

                         WRITE-OFFS BY LINE OF BUSINESS
                             (Dollars in Thousands)
<TABLE>
<CAPTION>
                                                   1996           1995          1994          1993           1992
                                               ---------------------------------------------------------------------   
<S>                                            <C>            <C>           <C>           <C>            <C>        
Corporate Finance                              $     9,470    $     4,660   $     4,233   $     3,741    $     1,000
Factoring Services (2)                               5,098          3,728         1,148
Resort Finance                                       4,275          2,000         2,730
Franchise Finance (1)                                3,267          3,448         2,247
Commercial Equipment Finance (1)                     3,207          2,271         1,257
Communications Finance                               2,994          4,037         8,300         1,488          1,500
Commercial Real Estate Finance                       1,793          2,275         1,461         2,320          4,417
Healthcare Finance (1)                               1,018            314           377
FINOVA Capital Limited                                 895          1,523         5,140         5,026         15,838
Commercial Finance (1)                                                452           774
Inventory Finance (1)                                                 201           442
Other                                                                 722                                        906
                                               -----------    -----------   -----------   -----------    -----------
                                               $    32,017    $    25,631   $    28,109   $    12,575    $    23,661
                                               ===========    ===========   ===========   ===========    ===========
Write-offs as a percentage
 of managed assets                                   0.42%          0.39%         0.53%         0.44%          0.97%
                                               ===========    ===========   ===========   ===========    ===========
</TABLE>
--------------------
NOTES:
(1)  Acquired April, 1994.
(2)  Acquired February, 1994.

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

     A further  breakdown  of the  portfolio by line of business can be found in
Notes C and D of Notes to Consolidated Financial Statements in Annex A.

Cost and Use of Borrowed Funds

         FINOVA  relies  on  borrowed  funds as well as  internal  cash  flow to
finance its  operations.  FINOVA  follows a policy of  relating  terms under its
loans  and  leases  to the terms on which it  obtains  funds  so, to the  extent
feasible,  floating-rate  assets are funded with  floating-rate  borrowings  and
fixed-rate assets are funded with fixed-rate borrowings.  For further discussion
on  FINOVA's  debt and  matched  funding  policy,  see Notes E and F of Notes to
Consolidated Financial Statements included in Annex A.
<PAGE>
         The following table reflects the approximate  average pre-tax effective
cost of borrowed funds and pre-tax equivalent rate earned on accruing assets for
FINOVA for each of the periods listed:
<TABLE>
<CAPTION>
                                                                                Year Ended December 31,
                                                             -------------------------------------------------------
                                                                1996        1995       1994       1993        1992
                                                             -------------------------------------------------------
<S>                                                             <C>         <C>        <C>        <C>         <C>  
 Short-term and variable rate long-term debt (1)                 6.5%        7.2%       5.5%       4.7%        5.3%
 Fixed-rate long-term debt (1)                                   7.2%        7.3%       8.1%      11.4%       10.6%
 Aggregate borrowed funds (1)                                    6.8%        7.2%       6.3%       6.3%        7.2%
 Rate earned on average earning assets (2) (3)                  11.8%       12.1%      11.3%      10.9%       11.9%
 Spread percentage (4)                                           5.8%        5.7%       5.9%       5.4%        5.1%
</TABLE>
---------------------
NOTES:
(1)  Includes the effects of interest rate swap and hedge agreements.
(2)  Earning assets are net of average  nonaccruing  assets and average deferred
     taxes  applicable  to  leveraged  leases. 
(3)  Earned amounts are net of depreciation and include gains on sale of assets.
(4)  Spread  percentages  represent  interest  margins earned as a percentage of
     average earning assets.
                              --------------------

         The effective  costs  presented  above include costs of commitment fees
and related  borrowing costs and do not purport to predict the costs of funds in
the future.

         For further information on FINOVA's cost of funds, refer to Notes E and
F of the Notes to Consolidated Financial Statements included in Annex A.

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

                                      Year Ended December 31,
               --------------------------------------------------------------
                1996          1995          1994          1993         1992
               ---------   -----------   -----------   -----------  ---------
                1.50          1.44          1.58          1.46         1.34
               =========   ===========   ===========   ===========  =========

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

         Income available for fixed charges,  for purposes of the computation of
the ratio of income to combined  fixed  charges and preferred  stock  dividends,
consists of the sum of income from continuing operations before income taxes and
fixed charges.  Combined fixed charges include interest and related debt expense
and a portion of rental expense  determined to be representative of interest and
preferred stock dividends grossed up to a pre-tax basis.

Credit Ratings

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

                                                        Commercial     Senior
                                                           Paper        Debt
                                                        -----------   --------
                 Duff & Phelps Credit Rating Co.            D1           A
                 Fitch Investors Services, Inc.             F1           A
                 Moody's Investors Service, Inc.            P2          Baa1
                 Standard & Poor's Ratings Group            A2           A-
<PAGE>
         There can be no assurance that these ratings will be  maintained.  Such
ratings can be modified at any time. A credit rating is not a recommendation  to
buy, sell or hold securities.  Each rating should be evaluated  independently of
any other rating. None of FINOVA's subsidiaries have applied for credit ratings.

Residual Realization Experience

         Over the last 42 years, FINOVA has realized, in the aggregate, proceeds
from the sale of assets upon lease  terminations  (other than  foreclosures)  in
excess of carrying amounts; however, there can be no assurance that such results
will be realized in future  years.  Proceeds  actually  realized  will depend on
current  market  values for those assets at the time of sale which are generally
beyond the control of the Company,  although the Company has some  discretion in
the timing of subsequent  dispositions of such assets. Sales proceeds upon lease
terminations in excess of carrying amounts are reported as gains when the assets
are sold.

         Income from  leasing  activities  is affected by gains from asset sales
upon lease  termination and, hence, can be somewhat less predictable than income
from non-leasing activities.  During the five years ended December 31, 1996, the
proceeds to FINOVA from sales of assets upon early  termination of leases and at
the  expiration  of leases have  exceeded the  respective  carrying  amounts and
estimated residual values as follows:

       Early Terminations (Note 1)            Terminations at End of Lease Term
-------------------------------------------  -----------------------------------
                                                                      Proceeds
                                 Proceeds               Estimated    as a % of
                      Carrying   as a % of              Residual     Estimated
          Sales        Amount    Carrying      Sales    Value of      Residual
  Year   Proceeds    of Assets    Amount      Proceeds   Assets        Value
-------------------------------------------  -----------------------------------
         (Dollars in Thousands)                     (Dollars in Thousands)
-------------------------------------------  -----------------------------------
  1996  $  87,311   $  75,910     115%       $  15,634  $   13,872      113%
  1995      1,402         905     155%          44,395      37,053      120%
  1994      6,477       5,865     110%          15,287      14,164      108%
  1993        ---         ---     ---              486         248      196%
  1992     20,493      17,527     117%           2,164       1,768      122%

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

Notes:
(1)  Excludes foreclosures for credit reasons which are immaterial.
                              --------------------
<PAGE>
         The estimated  residual  value of direct  finance and  leveraged  lease
assets in the  accounts of FINOVA at December 31, 1996  aggregated  30.5% of the
original cost of such assets (23.8%  excluding the original  costs of the assets
and residuals  applicable to real estate leveraged leases,  which typically have
higher  residuals  than  other  leases).  The  financing  contracts  and  leases
outstanding  at that date had initial  terms  ranging  generally  from one to 25
years. The average initial term weighted by carrying amount at inception and the
average  remaining  term  weighted by  remaining  carrying  amount of  financing
contracts  at December  31, 1996 for  financing  contracts  excluding  leveraged
leases  were 7.2 and 4.6 years,  respectively,  and for  leveraged  leases  were
approximately 18.6 and 11.9 years, respectively.  The comparable average initial
term and remaining term at December 31, 1995 for financing  contracts  excluding
leveraged leases were 6.4 and 4.6 years, respectively,  and for leveraged leases
were  approximately  20 and  13  years,  respectively.  FINOVA  utilizes  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 such  appraised
values.

         For a discussion of accounting for lease transactions, refer to Notes A
and C of Notes to Consolidated Financial Statements included in Annex A.

Business Development and Competition

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

         At December 31, 1996, FINOVA's continuing operations consisted of 6,923
financing contracts with 4,119 customers  (including 799 contracts with consumer
finance customers),  compared to 6,705 contracts with 4,207 customers (including
881 contracts with consumer finance customers) at December 31, 1995.

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

Credit Quality

         As a  result  of the use of  clearly  defined  underwriting  standards,
portfolio  management  techniques,  monitoring of covenant compliance and active
collections and workout efforts,  FINOVA seeks to maintain a high-quality  asset
base.

Risk Management

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

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

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

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

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

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

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

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

Portfolio Management

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

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

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

         When accounts  become more than 90 days past due income  recognition is
usually suspended, and FINOVA vigorously pursues its legal remedies.  Foreclosed
or repossessed  assets are considered to be  nonperforming,  and are reported as
such unless such assets generate  sufficient cash to result in a reasonable rate
of return. Such 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  possible  credit  losses is  adequate.  For
additional  information  regarding the reserve for possible  credit losses,  see
Note D of Notes to Consolidated Financial Statements included in Annex A.

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 are subject to additional
government  regulation,  such as aircraft  leasing,  which is  regulated  by the
Federal Aviation Authority,  and communications  finance,  which is regulated by
the Federal Communication Commission. FINOVA's international activities are also
subject to a variety of laws and regulations  promulgated by the governments and
various agencies of the countries in which the business is conducted.

EMPLOYEES

         At December 31, 1996, the Company had 864 employees  compared to 950 at
December 31, 1995.  None of the employees were covered by collective  bargaining
agreements. The Company believes its employee relations are satisfactory.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

         Certain of the statements contained in documents incorporated herein by
reference  and under  the  captions  "Business,"  "Management's  Discussion  and
Analysis of Financial Condition and Results of Operations" and elsewhere in this
Form that are not historical facts, including, without limitation, statements of
future  expectations,   projections  of  results  of  operations  and  financial
condition,  statements of future economic performance and other  forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995,  are subject to known and unknown risks,  uncertainties  and other factors
which may cause the actual  results,  performance or achievements of the Company
to differ materially from those contemplated in such forward-looking statements.
In addition to the specific matters referred to herein,  important factors which
may  cause   actual   results  to  differ  from  those   contemplated   in  such
forward-looking  statements include: (1) the results of the Company's efforts to
implement its business strategy;  (2) the effect of economic  conditions and the
performance  of  borrowers;  (3) actions of the  Company's  competitors  and the
Company's  ability  to respond to such  actions;  (4) the cost of the  Company's
capital,  which depends in part on the  Company's  portfolio  quality,  ratings,
prospects and outlook;  (5) changes in  governmental  regulation,  tax rates and
similar  matters;  and (6) other risks  detailed in the Company's  other filings
with the Commission.
<PAGE>
ITEM 2.            PROPERTIES.

         The  Company's  principal  executive  offices  are  located in premises
leased  from Viad Corp.  (formerly  The Dial Corp) in Phoenix,  Arizona.  FINOVA
operates  various  additional  offices  in the  United  States and one office in
Europe.  All these  properties  are leased.  Alternative  office  space could be
obtained without difficulty in the event leases are not renewed.


ITEM 3.            LEGAL PROCEEDINGS.

         The Company 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.  Such litigation  often results from the Company's  attempts to enforce
its  lending   agreements   against   borrowers   and  other  parties  to  those
transactions.  Litigation  is subject to many  uncertainties  and it is possible
that some of the legal actions, proceedings or claims referred to above could be
decided against the Company.  Although the ultimate amount for which the Company
may be held liable, if any, is not ascertainable,  the Company believes that any
resulting liability would not materially affect the Company's financial position
or results of operations.


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

         Omitted.


                                     PART II

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

         There is no market for the  Company's  common  stock as the  Company is
wholly  owned by  FINOVA  Group.  The  preferred  stock was  redeemed  through a
contribution from FINOVA Group in March 1994 and none has been outstanding since
that time.  Dividends paid on common stock for the first through fourth quarters
of 1996 were $6,012,000,  $6,020,000,  $6,596,000 and $6,602,000,  respectively.
Dividends paid on the common stock for the first through fourth quarters of 1995
were $5,518,000, $5,520,000, $6,044,000 and $5,995,000, respectively.

         The  agreements   pertaining  to  senior  debt  and  revolving   credit
agreements  of FINOVA  include  various  restrictive  covenants  and require the
maintenance of certain defined  financial ratios with which FINOVA has complied.
Under  one such  covenant,  dividend  payments  are  limited  to 50  percent  of
accumulated  earnings after  December 31, 1991. As of December 31, 1996,  FINOVA
had $83,400,000 of excess accumulated earnings available for distribution.
<PAGE>
ITEM 6.           SELECTED FINANCIAL DATA.

         Omitted.


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

         See pages 1 - 5 of Annex A.


ITEM 8.           FINANCIAL STATEMENTS & SUPPLEMENTARY DATA.

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

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

         NONE.


                                    PART III

ITEM 10.          DIRECTORS & EXECUTIVE OFFICERS OF THE REGISTRANT.

         Omitted.
ITEM 11.          EXECUTIVE COMPENSATION.

         Omitted.


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

         Omitted.


ITEM 13.          CERTAIN RELATIONSHIPS & RELATED TRANSACTIONS.

         Omitted.
<PAGE>
                                     PART IV

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

(a)   Documents filed.
      1.  Financial Statements.
          (i)  The following  financial statements of FINOVA  are included
               in Annex A:
                                                                          Annex
                                                                           Page
                                                                         -------
               Management's Discussion and Analysis of Financial
               Condition and Results of Operations                         1 - 5
               Report of Management and Independent Auditors' Report       6 - 7
               Consolidated Balance Sheet                                  8 - 9
               Statement of Consolidated Income                               10
               Statement of Consolidated Stockholder's Equity                 11
               Statement of Consolidated Cash Flows                           12
               Notes to Consolidated Financial Statements                13 - 31
               Supplemental Selected Financial Data                      32 - 33

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

      3.  Exhibits.

             Exhibit No.
             -----------
                (3.A)          Certificate of Incorporation,  as amended through
                               the  date  of  this   filing   (incorporated   by
                               reference from the Company's  Report on Form 10-K
                               for the year ended  December  31, 1994 (the "1994
                               10-K"), Exhibit 3.A).

                (3.B)          By-Laws,  as  amended  through  the  date of this
                               filing  (incorporated  by reference from the 1994
                               10-K, Exhibit 3.B).
<PAGE>
                (4.A)          Instruments  with  respect to issues of long-term
                               debt  have not been  filed  as  exhibits  to this
                               Annual  Report  on Form  10-K  if the  authorized
                               principal amount of the issue does not exceed 10%
                               of  total   assets   of  the   Company   and  its
                               subsidiaries on a consolidated basis. The Company
                               agrees to furnish a copy of each such  instrument
                               to the  Securities and Exchange  Commission  upon
                               request.

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

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

                (4.D)          Indenture  dated as of November  1, 1990  between
                               the  Company  and  the  Trustee   named   therein
                               (incorporated   by   reference   from   Greyhound
                               Financial Corporation's Registration Statement on
                               Form S-3, Registration No. 33-37743, Exhibit 4).

                (4.E)          Fourth  Supplemental  Indenture dated as of April
                               17, 1992  between  FINOVA and the  Trustee  named
                               therein,  supplementing the Indenture  referenced
                               in Exhibit 4.D above  (incorporated  by reference
                               from GFC Financial Corporation's Annual Report on
                               Form 10-K for the year 1992  (the  "1992  10-K"),
                               Exhibit 4.F).

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

                (4.H)          1992  Stock  Incentive  Plan of  FINOVA  Group as
                               amended   through   the  date  of  this   filing,
                               including proposed amendments being considered at
                               the 1997 Annual Meeting of Shareholders.*+

               (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  Westminster
                               Bank USA, as agents (the  "Agents") and Citibank,
                               N.A., as  Administrative  Agent  (incorporated by
                               reference  from the Company's  Current  Report on
                               Form 8-K dated May 23, 1994, Exhibit 10.I).

              (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  the
                               Company's  Quarterly  Report on Form 10-Q for the
                               period  ending  September  30,  1995  (the  "3Q95
                               10-Q"), Exhibit 10.A).
<PAGE>
             Exhibit No
             ----------
              (10.A.3)         Third  Amendment  dated as of November 1, 1995 to
                               Sixth Amendment noted in 10.A above (incorporated
                               by reference from the 3Q95 10-Q, Exhibit 10.B).

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

               (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 the Company'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 the
                               1996 FINOVA Group 10-K, Exhibit 10.B.4).

              (10.C.1)         The Company's Executive Severance Plan for Tier 1
                               Employees  (incorporated  by  reference  from the
                               Company's 1995 10-K, Exhibit 10.C.1).+

              (10.C.2)         The Company's Executive Severance Plan for Tier 2
                               Employees  (incorporated  by  reference  from the
                               Company's 1995 10-K, Exhibit 10.C.2).+

               (10.D)          The  Company's  1996  Management  Incentive  Plan
                               (incorporated  by reference  from the 1996 FINOVA
                               Group 10-K, Exhibit 10.D).+

              (10.E.1)         The  Company's  1995  -  1997  Performance  Share
                               Incentive  Plan  (incorporated  by reference from
                               the 3Q95 10-Q, Exhibit 10.H).+

              (10.E.2)         The  Company's  1994  -  1996  Performance  Share
                               Incentive  Plan  (incorporated  by reference from
                               the 3Q95 10-Q, Exhibit 10.I).+

              (10.E.3)         The   Company's   1996-1998   Performance   Share
                               Incentive  Plan  (incorporated  by reference from
                               the 1996 FINOVA Group 10-K, Exhibit 10.E.3).+

              (10.F.1)         Employment  Agreement with Samuel L.  Eichenfield
                               dated March 16, 1996,  (incorporated by reference
                               from the Company's 1995 10-K, Exhibit 10.F.3).+

              (10.F.2)         Amendment  to Employee  Agreement  referenced  in
                               10.F.1 above  (incorporated by reference from the
                               1996 FINOVA Group 10-K, Exhibit 10.F.2).+

               (10.G)          Employment  Agreement  with William J.  Hallinan,
                               dated   February   25,  1992   (incorporated   by
                               reference from the 1992 10-K, Exhibit 10.I).+

               (10.H)          Employment  Agreement with Thomas C.  Parrinello,
                               dated   February   14,  1994   (incorporated   by
                               reference from the 1994 10-K, Exhibit 10.H).+

               (10.I)          The Company's  Amended and Restated  Supplemental
                               Pension Plan  (incorporated by reference from the
                               1996 FINOVA Group 10-K, Exhibit 10.I).+
<PAGE>
             Exhibit No.
             -----------
               (10.J)          FINOVA Group's  Value Sharing Plan for  Executive
                               Officers  and  Key  Employees   (incorporated  by
                               reference from the 3Q95 10-Q, Exhibit 10.K).+

               (10.K)          FINOVA Group's Value Sharing  Plan for  the Chief
                               Executive Officer (incorporated by reference from
                               the 3Q95 10-Q, Exhibit 10.L).+                   

               (10.L)          [Omitted]
                               
               (10.M)          [Omitted]
                               
               (10.N)          The   Company's   Deferred    Compensation   Plan
                               (incorporated  by  reference  from the  Company's
                               1995 10-K, Exhibit 10.N).+

               (10.O)          Form  of  FINOVA  Group's  Stock  Incentive  Plan
                               Nonqualified  Stock Option  Agreement (for exempt
                               employees)  (for grants  between  August 25, 1992
                               and   August   10,   1994)    (various    prices)
                               (incorporated  by  reference  from the 1992 10-K,
                               Exhibit 10.FF).+

               (10.P)          [Omitted]

               (10.Q)          [Omitted]

               (10.R)          Interim Services Agreement dated January 28, 1992
                               among  the  Company,  The Dial  Corp  and  others
                               (incorporated  by  reference  from the 1992 10-K,
                               Exhibit 10.JJ).

               (10.S)          Tax Sharing  Agreement  dated  February  19, 1992
                               among  the  Company,  The Dial  Corp  and  others
                               (incorporated  by  reference  from the 1992 10-K,
                               Exhibit 10.KK).

               (10.T)          Sublease  dated as of April 1,  1991,  among  the
                               Company,  The Dial Corp and  others,  relating to
                               the    Company's     principal    office    space
                               (incorporated  by  reference  from the 1992 10-K,
                               Exhibit 10.NN).

               (10.U)          FINOVA Group's  Executive  Officer  Loan  Program
                               Policies   and   Procedures    (incorporated   by
                               reference   from  the  1996  FINOVA  Group  10-K,
                               Exhibit 10.U).+

              (10.V.1)         Form of Non-qualified Stock Option Agreements for
                               grants  between  August  10,  1994  and August 7,
                               1996,  (for  exempt employees)  (various  prices)
                               (incorporated  by  reference  from the 1994 10-K,
                               Exhibit 10.DD).+

              (10.V.2)         Form of Non-Qualified  Stock Option Agreement for
                               exempt employees  subsequent to August 8, 1996 to
                               present  (incorporated by reference from the 1996
                               FINOVA Group 10-K, Exhibit 10.V.5).+

              (10.V.3)         Form  of  Non-Qualified  Stock  Option  Agreement
                               (multi-year  grants) (incorporated  by  reference
                               from  the  1996  FINOVA   Group   10-K,   Exhibit
                               10.V.6).+

              (10.W.1)         Form  of  Restricted  Stock  Agreements in effect
                               through July 1996 (incorporated by reference from
                               the 1994 10-K, Exhibit 10.GG).+

              (10.W.2)         Form of  Restricted  Stock  Agreement  in  effect
                               subsequent   to  July   1996   (incorporated   by
                               reference   from  the  1996  FINOVA  Group  10-K,
                               Exhibit 10.W.3).+
<PAGE>
             Exhibit No.
             -----------
              (10.X.1)         PBRS/Restricted Stock Retention Incentive Program
                               Policies   and   Procedures    (incorporated   by
                               reference   from  the  1996  FINOVA  Group  10-K,
                               Exhibit 10.X.1).+

              (10.X.2)         Form of  Restricted  Stock  Agreement  for use in
                               Stock Retention Incentive Program noted in 10.X.1
                               above  (incorporated  by reference  from the 1996
                               FINOVA Group 10-K, Exhibit 10.X.2).+

                (12)           Computation  of Ratio of Income to Combined Fixed
                               Charges and Preferred Stock Dividends.*

                (23)           Independent Auditor's Consent.*

                (27)           Financial Data Schedule.*

                               * Filed herewith.

                               + Relating to Management Compensation.

   (b)           Reports on Form 8-K

         A report on Form 8-K,  dated December 20, 1996, was filed by Registrant
which reported under Item 7 the issuance,  by FINOVA Finance Trust, of 2,300,000
5-1/2% Convertible Trust Originated Preferred  Securities,  guaranteed by FINOVA
Group to the extent provided in the Registration Statement filed on Form S-3.

         A report on Form 8-K,  dated January 23, 1997,  was filed by Registrant
which  reported  under  Items 5 and 7 the  revenues,  net  income  and  selected
financial  data and  ratios for the  fourth  quarter  ended  December  31,  1996
(unaudited).


<PAGE>
                                   SIGNATURES

         Pursuant to the  requirements of Section 13 of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf  by  the  undersigned,   thereunto  duly  authorized  in  the  capacities
indicated, in Phoenix, Arizona on the 25 day of March, 1997.


                           FINOVA CAPITAL CORPORATION



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




           By:                /s/  Bruno A. Marszowski
                 -----------------------------------------------
                                 Bruno A. Marszowski
           Senior Vice President - Controller and Chief Financial Officer
                      (Chief Accounting and Financial Officer)
<PAGE>
         Pursuant to the requirements of the Securities Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities and on the dates indicated:




     /s/ W. Carroll Bumpers                         /s/ Samuel L. Eichenfield
 W. Carroll Bumpers (Director))                 Samuel L. Eichenfield (Chairman)
         March 25, 1997                                 March 25, 1997





    /s/ Robert J. Fitzsimmons                           /s/ Gregory C. Smalis
Robert J. Fitzsimmons (Director)                   Gregory C. Smalis (Director)
         March 25, 1997                                    March 25, 1997
<PAGE>


                                     ANNEX A


<PAGE>
                           FINOVA CAPITAL CORPORATION
                          INDEX TO FINANCIAL STATEMENTS


                                                                          Page
                                                                        --------

Management's Discussion and Analysis of Financial Condition and
 Results of Operations                                                    1 - 5

Management's Report on Responsibility for
 Financial Reporting                                                        6

Independent Auditors' Report                                                7

Consolidated Balance Sheet at December 31, 1996 and 1995                  8 - 9

Statement of Consolidated Income for the Years Ended
 December 31, 1996, 1995 and 1994                                          10

Statement of Consolidated Stockholder's Equity for the Years
 Ended December 31, 1996, 1995 and 1994                                    11

Statement of Consolidated Cash Flows for the Years Ended
 December 31, 1996, 1995 and 1994                                          12

Notes to Consolidated Financial Statements for the Years
 Ended December 31, 1996, 1995 and 1994                                  13 - 31

Supplemental Selected Financial Data                                     32 - 33
                                       ii
<PAGE>
                           FINOVA CAPITAL CORPORATION
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

         The following  discussion relates to FINOVA Capital Corporation and its
subsidiaries (collectively, "FINOVA" or the "Company"). FINOVA is a wholly owned
subsidiary of The FINOVA Group Inc. ("FINOVA Group").  Amounts for 1995 and 1994
have been restated to reflect discontinued operations.  The 1994 results include
income  from  Ambassador  Factors,  acquired on February  14,  1994,  and TriCon
Capital, acquired on April 30, 1994, from their acquisition dates.

Results of Operations

      1996 Compared to 1995

         Income from  continuing  operations  for 1996  increased  24% to $116.5
million from $93.8 million in 1995.  Continuing operations exclude the operating
results and a $6 million gain,  after taxes and  allocation of related costs and
expenses,  resulting  from  the  sale of the  Company's  Manufacturer  &  Dealer
Services line of business,  and the operating results of FINOVA Medical Systems,
which was  liquidated  in 1996.  See Note B of Notes to  Consolidated  Financial
Statements  for  further  discussion.  Net income for 1996  increased  to $117.0
million from $97.6 million in 1995.

      Interest  Margins Earned.  Interest  margins  earned,  which represent the
difference  between (a) interest and income earned from  financing  transactions
and  operating  lease income and (b)  interest  expense and  depreciation,  were
$369.1  million for 1996,  compared with $309.1  million in 1995, an increase of
19%.  The  increase  was  primarily  due to a 16%  increase  in  managed  assets
(investment in financing transactions plus securitizations),  composed primarily
of $2.7 billion in funded new  business,  compared to $2.3 billion in 1995,  and
$2.9 billion in fee-based volume, compared to $2.0 billion in 1995. In addition,
the  Company  added  funds  employed  of  approximately   $318  million  through
acquisitions  in 1996.  These  increases  were  partially  offset by the  normal
amortization  of the portfolio as well as  significantly  higher  prepayments in
1996,  partially due to consolidation in the  communications  industry resulting
from changes in regulation at the federal level.

      Interest margins earned as a percentage of average earning assets (defined
as average  funds  employed  excluding  deferred  taxes on leveraged  leases and
nonaccruing  assets)  increased to 5.8% for 1996 compared to 5.7% for 1995. This
increase  was the result of the  Company's  ability to  maintain  rates and fees
charged on its financing  transactions  while  benefiting from reduced  interest
expense due to generally  declining interest rates,  improved credit ratings and
the maturity of certain interest rate hedges.

      Non-Interest  Expense.  The provision for possible  credit  losses,  which
increases the reserve for possible credit losses ("reserves") increased to $41.8
million in 1996 from $37.6  million in 1995,  primarily  due to the  increase in
managed  assets.  The  Company's  reserves  remained  at 2.0% of ending  managed
assets,  while the  credit  quality  of the  Company's  portfolio  continued  to
improve.  Reserves as a percentage of nonaccruing  assets  increased to 95.6% at
December 31, 1996 from 90.2% a year earlier.  Nonaccruing assets as a percentage
of ending managed assets  declined to 2.0% at December 31, 1996 from 2.2% at the
end of 1995. Details of write-offs and other changes in the reserve for possible
credit  losses  can be  found  in  Note D of  Notes  to  Consolidated  Financial
Statements.

      Selling,  administrative  and other operating  expenses were 17% higher in
1996 than in 1995,  due primarily to the growth in managed assets and incentives
related to the Company's improved results and stock performance.  However,  as a
percentage of interest margins earned, these expenses decreased to 41.9% in 1996
from 42.6% during 1995. See Note L of Notes to Consolidated Financial Statements
for additional detail.

      Gains on Sale of Assets.  Gains on sale of assets were higher in 1996 than
1995, primarily due to the amount and type of assets coming off lease during the
respective  years.  While the Company has  consistently  recognized gains on the
sale of assets it holds,  the amount and  timing of such  gains is  sporadic  in
nature.  There can be no assurance the Company will  recognize such gains in the
future, depending, in part, on market conditions at the time of the sale.

      Income Taxes.  Income taxes  increased  during the year ended December 31,
1996,  primarily due to the increase in pre-tax  income,  partially  offset by a
lower  effective tax rate. The lower tax rate,  which decreased to 37.3% in 1996
from 
                                       1
<PAGE>
                           FINOVA CAPITAL CORPORATION

37.8% in 1995, was primarily  related to lower foreign tax effects and increased
tax  exempt  municipal  and ESOP  income.  See  Note H of Notes to  Consolidated
Financial Statements for further discussion.

      1995 Compared to 1994

      Amounts  for 1995 and 1994  have been  restated  to  reflect  discontinued
operations.

      Net income  increased  31% during 1995 to $97.6 million from $74.3 million
in 1994; income from continuing  operations  increased 27% to $93.8 million from
$73.8  million in 1994.  The 1994 results  include  income from  Ambassador  and
TriCon from the acquisition dates.

      Interest Margins Earned.  Interest margins earned increased by 36% in 1995
to $309.1 million from $226.7 million in 1994. This increase was driven by a 23%
growth in managed assets. The primary source of the growth in managed assets was
new  business,  which totaled $2.3 billion for 1995 compared to $1.6 billion for
1994, an increase of 42%.  Also  contributing  to the improved  margins were the
fees associated with the Factoring Services  business,  which recorded factoring
volume  of  $1.1  billion  in 1995  compared  to $847  million  in 1994  and the
Inventory Finance business, which recorded floor planning volume of $898 million
in 1995 compared to $283 million in 1994.

      Interest  margins  earned as a percentage of average  earning  assets were
5.7% in 1995,  compared to 5.9% in 1994.  This reduction in the interest  margin
percentage  was  expected in 1995  primarily  due to the cost of hedges that the
Company  entered  into to lock in the spread  between its lending and  borrowing
rates on $1.5  billion of its  floating-rate  debt.  Growth in interest  margins
earned more than offset the higher provisions for possible credit losses and the
higher selling, administrative and other operating expenses in 1995.

      Non-interest Expense. Loss provisions were greater by $27.1 million during
1995 compared to 1994 primarily due to the growth in managed assets.  Management
believes  that the 1995 reserve  coverage  was adequate at 90.2% of  nonaccruing
assets  (nonaccruing  contracts  and  repossessed  assets)  and 2.0% of  managed
assets.  Details of write-offs and other changes in the reserves can be found in
Note D of Notes to Consolidated Financial Statements.

      Selling,  administrative  and other operating  expenses increased by $34.2
million  in 1995 due to the  growth  of the  Company,  the  large  volume of new
business  added and the inclusion of TriCon and Ambassador for the full year. As
a percentage of interest margins earned,  these costs decreased to 42.6% in 1995
from 42.9% in the previous year. See Note L of Notes to  Consolidated  Financial
Statements.

      Gains on Sale of Assets.  Gains on sale of assets were $7.0 million higher
in 1995  compared to 1994  primarily due to the inclusion of TriCon for the full
year and the amount and type of assets coming off lease.

      Income Taxes.  Income taxes for 1995 increased to $57.0 million from $49.1
million in 1994.  This  increase was caused by the  increase in pre-tax  income,
partially offset by certain tax credits recognized during 1995. The 1995 overall
effective income tax rate for the Company  approximated  37.8% compared to 40.0%
in 1994.  The  decrease  in the  effective  rate is  primarily  related to lower
foreign tax effects and an increase in tax exempt municipal income.  Details can
be found in Note H of Notes to Consolidated Financial Statements.
                                       2
<PAGE>
                           FINOVA CAPITAL CORPORATION

Financial Condition, Liquidity and Capital Resources

      Managed  assets  increased by $1.1 billion to $7.6 billion at December 31,
1996 from $6.5  billion at  December  31,  1995.  This  increase  was  primarily
attributable  to the $2.7 billion of new business  generated and $318 million of
portfolios acquired in 1996, less portfolio amortization.

      The  reserves  increased  by  $19.6  million  in  1996 to  $148.7  million
primarily due to loss provisions of $41.8 million provided for portfolio growth,
partially offset by charges for write-offs of $32.0 million.  Nonaccruing assets
increased to $155.5 million at December 31, 1996 from $143.1 million at December
31,  1995.  When  measured as a percent of managed  assets,  nonaccruing  assets
declined to 2.0% at December 31, 1996 from 2.2% at December  31, 1995.  For more
information  on the reserves,  write-offs and  nonaccruing  assets see Note D of
Notes to Consolidated Financial Statements.

      The Company had total debt of approximately  $5.9 billion or 5.5 times its
equity of $1,069.0  million at December 31, 1996.  The Company also had deferred
income taxes of $264.4  million,  generally used to reduce debt and,  therefore,
help finance lending activities.

      Growth in funds  employed is generally  financed by  internally  generated
cash flow and  additional  borrowings.  During 1996,  FINOVA  issued or acquired
$796.5 million in new senior debt, which,  together with general corporate funds
and net commercial paper borrowings,  was used to finance new business,  acquire
portfolios and redeem or retire $681 million of debt. In addition,  FINOVA Group
issued $115.0  million in  company-obligated  mandatory  redeemable  convertible
preferred  securities  ("TOPrS") through FINOVA Finance Trust. The proceeds from
the issuance of the TOPrS were  contributed by FINOVA Group to the Company.  See
Note G of Notes to Consolidated Financial Statements for additional detail.

      FINOVA  satisfies a significant  portion of its cash  requirements  from a
diversified group of worldwide funding sources and is not dependent upon any one
lender.  Additionally,  FINOVA relies on the issuance of  commercial  paper as a
major  funding  source.  During 1996,  FINOVA issued $19.8 billion of commercial
paper (with an average of $2.6 billion  outstanding  during the year) and raised
$796.5  million,  as noted above,  through new long-term  financing of one to 10
year durations.  At December 31, 1996 and 1995,  commercial paper and short-term
bank  borrowings  totaling  $2.5 billion and $2.4  billion,  respectively,  were
supported by available unused revolving credit lines which, if not renewed,  are
convertible to long-term debt at FINOVA's option.

      In 1995, FINOVA filed a shelf registration statement with the SEC allowing
for the  issuance of $1.5  billion of senior debt  securities,  $815  million of
which  remained  available as of December 31, 1996.  Also in 1996,  the Company,
under a securitization  agreement, sold an additional $100 million of assets for
a total  $300  million  undivided  proportionate  interest  in a loan  portfolio
totaling  $626.7  million  at  December  31,  1996.  See  Note  C  of  Notes  to
Consolidated  Financial  Statements for further discussion of the securitization
transaction.

      FINOVA  currently  maintains a five-year  revolving  credit  facility with
numerous lenders, in the aggregate principal amount of $1.0 billion. Separately,
FINOVA also has a 364 day revolving credit facility with the same lenders in the
aggregate principal amount of $1.0 billion and has two five-year facilities with
numerous lenders for $700 million each. These $3.4 billion of credit  facilities
support FINOVA's  outstanding  commercial paper and short-term  borrowings.  The
Company  intends to borrow under the domestic  revolving  credit  agreements  to
refinance   commercial   paper  and  short-term  bank  loans  if  it  encounters
significant  difficulties in rolling over its outstanding  commercial  paper and
short-term bank loans.  The Company rarely borrows under these  facilities.  The
364 day $1.0 billion  revolving credit  agreements will be subject to renewal in
1997,  while the two $700 million and the other $1.0 billion  credit  facilities
are subject to renewal in 2001.

      The  agreements  pertaining to long-term  debt of FINOVA  include  various
restrictive  covenants and require the maintenance of certain defined  financial
ratios  with  which  FINOVA  has  complied.  Under one such  covenant,  dividend
payments are limited to 50 percent of  accumulated  earnings  after December 31,
1991.
                                       3
<PAGE>
                           FINOVA CAPITAL CORPORATION

      FINOVA's  aggregate cost of funds decreased to 6.8% for 1996 from 7.2% for
1995 as a result of declining  interest rates,  higher credit  ratings,  and the
elimination  of costs  associated  with $750 million of maturing  interest  rate
hedges. The Company's cost of and access to capital is dependent, in large part,
on its credit  ratings.  FINOVA has  maintained  investment-grade  ratings since
1976,  and received an upgrade in those ratings from  Standard & Poor's  Ratings
Group  and  Duff & Phelps  Credit  Rating  Co.  in 1996.  FINOVA  currently  has
investment-grade ratings from the following agencies:
                                                       Commercial       Senior
                                                          Paper          Debt
                                                       ----------       ------
           Duff & Phelps Credit Rating Co.                 D1             A
           Fitch Investors Services, Inc.                  F1             A
           Moody's Investors Service, Inc.                 P2            Baa1
           Standard & Poor's Ratings Group                 A2             A-

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

      The  Company  enters  into  interest  rate swaps and  interest  rate hedge
agreements as part of its interest rate risk management  policy of match funding
its assets and liabilities.  The derivative instruments used are straightforward
and involve little  complexity.  The Company  continually  monitors its position
relative to derivatives and uses derivative instruments for non-trading purposes
only.

      At December 31, 1996,  FINOVA had  outstanding  interest  rate  conversion
agreements with notional  principal  amounts  totaling $3.1 billion.  Agreements
with notional  principal  amounts of $825 million were  arranged to  effectively
convert  certain  floating  interest rate  obligations  into fixed interest rate
obligations  and require  interest  payments on the stated  principal  amount at
rates  ranging  from 6.07% to 9.10%  (remaining  terms of one to four  years) in
return for receipts calculated on the same notional amounts at floating interest
rates. In addition, agreements with notional principal amounts of $1,350 million
were arranged to effectively  convert  certain fixed  interest rate  obligations
into floating  interest rate  obligations and require  interest  payments on the
stated principal amount at the three month or six month London interbank offered
rates  ("LIBOR")  (remaining  terms of one to nine years) in return for receipts
calculated  on the same  notional  amounts at fixed  interest  rates of 5.51% to
7.71%.  FINOVA  has also  entered  into  basis  swap  agreements  with  notional
principal amounts of $878 million and remaining terms of one to two years.

      For the benefit of its  customers,  the Company  enters into interest rate
cap agreements.  The total notional  amount of these  agreements at December 31,
1996 was $124 million, none of which was in a pay or receive position.

      At December  31,  1996,  the Company was a party to a  short-term  foreign
currency forward exchange  agreement with a notional amount of approximately $73
million to help mitigate its foreign  currency risk.  For further  discussion of
debt and  derivative  financial  instruments  see  Notes E and F of the Notes to
Consolidated Financial Statements.

Recent Developments and Business Outlook

      The  Company  continues  to seek  new  business  by  emphasizing  customer
service,  providing  competitive  interest rates and focusing on selected market
niches.  Additionally,  the Company continues to evaluate potential  acquisition
opportunities  that it believes are  consistent  with its  business  strategies.
During 1996, the Company  acquired LINC Financial  Services,  Inc. and Financing
for Science  International,  Inc. to supplement  existing lines of business.  In
total,  these  acquisitions  added  approximately  $318 million in investment in
financing transactions.

      In November  1996,  the Company sold its  Manufacturer  & Dealer  Services
business ("MDS") to Green Tree Financial  Corporation for $616.4 million. MDS is
a provider of  vendor-oriented  sales finance  programs  involving  small-ticket
leasing and financing products for commercial end-user customers.

      In December  1996,  FINOVA  Finance  Trust,  a subsidiary  trust of FINOVA
Group,  issued  $115.0  million of mandatory  redeemable  convertible  preferred
securities. The subsidiary trust solely holds convertible
                                       4
<PAGE>
                           FINOVA CAPITAL CORPORATION

debentures  of FINOVA Group.  At that time,  FINOVA Group  contributed  the $115
million gross proceeds to the equity of FINOVA Capital.

New Accounting Standards

      See Note M of Notes to Consolidated Financial Statements.
                                       5
<PAGE>
                           FINOVA CAPITAL CORPORATION

MANAGEMENT'S REPORT ON
RESPONSIBILITY FOR FINANCIAL REPORTING

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

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

      The Board of Directors of The FINOVA Group Inc. ("FINOVA  Group"), through
its Audit  Committee,  also  oversees the  financial  reporting and adherence to
established procedures and controls of FINOVA Group and all of its subsidiaries,
including  the Company.  Periodically,  FINOVA  Group's Audit  Committee  meets,
jointly and separately, with the Company's management, the internal auditors and
the independent auditors to review auditing,  accounting and financial reporting
matters.

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

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


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



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



/s/
Derek C. Bruns
Senior Vice President - Internal Audit
                                       6
<PAGE>
                           FINOVA CAPITAL CORPORATION

INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholder of FINOVA Capital Corporation.

      We have  audited the  accompanying  consolidated  balance  sheet of FINOVA
Capital  Corporation and  subsidiaries as of December 31, 1996 and 1995, and the
related consolidated  statements of income,  stockholder's equity and cash flows
for each of the  three  years in the  period  ended  December  31,  1996.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

      In our opinion, such consolidated  financial statements present fairly, in
all material respects,  the financial position of FINOVA Capital Corporation and
subsidiaries at December 31, 1996 and 1995, and the results of their  operations
and their cash flows for each of the three  years in the period  ended  December
31, 1996, in conformity with generally accepted accounting principles.



/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Phoenix, Arizona
February 12, 1997
                                       7
<PAGE>
                           FINOVA CAPITAL CORPORATION

                           CONSOLIDATED BALANCE SHEET
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                             ASSETS

------------------------------------------------------------------------------------------------------
December 31,                                                                  1996            1995
------------------------------------------------------------------------------------------------------
<S>                                                                       <C>            <C>         
Cash and cash equivalents                                                 $     31,285   $     90,329

Investment in financing transactions:
 Loans and other financing contracts, less unearned
  income of $396,247 and $338,267, respectively                              5,305,678      4,923,540
 Factored receivables                                                          564,430        189,486
 Operating leases                                                              517,690        460,798
 Leveraged leases                                                              514,573        366,196
 Direct financing leases                                                       396,388        408,059
------------------------------------------------------------------------------------------------------
                                                                             7,298,759      6,348,079

 Less reserve for possible credit losses                                      (148,693)      (129,077)
------------------------------------------------------------------------------------------------------

     Investment in financing transactions - net                              7,150,066      6,219,002

Other assets and deferred charges                                              353,249        278,865
Investment in discontinued operations                                           17,326        475,639
------------------------------------------------------------------------------------------------------

                                                                          $  7,551,926   $  7,063,835
======================================================================================================
</TABLE>
                 See notes to consolidated financial statements.
                                       8
<PAGE>
                           FINOVA CAPITAL CORPORATION


<TABLE>
<CAPTION>
                              LIABILITIES AND STOCKHOLDER'S EQUITY

------------------------------------------------------------------------------------------------------
December 31,                                                                  1996            1995
------------------------------------------------------------------------------------------------------
<S>                                                                       <C>            <C>         
Liabilities:
 Accounts payable and accrued expenses                                    $     97,080   $    103,990
 Due to clients                                                                218,494        181,548
 Interest payable                                                               52,677         45,553
 Senior debt                                                                 5,850,223      5,649,368
 Deferred income taxes                                                         264,409        227,797
------------------------------------------------------------------------------------------------------
                                                                             6,482,883      6,208,256
------------------------------------------------------------------------------------------------------

Stockholder's equity:
 Common stock, $1.00 par value, 100,000 shares
  authorized, 25,000 shares issued                                                  25             25
 Additional capital                                                            792,948        677,948
 Retained income                                                               275,062        183,292
 Cumulative translation adjustments                                              1,008         (5,686)
------------------------------------------------------------------------------------------------------
                                                                             1,069,043        855,579
------------------------------------------------------------------------------------------------------

                                                                          $  7,551,926   $  7,063,835
======================================================================================================
</TABLE>
                 See notes to consolidated financial statements.
                                       9
<PAGE>
                           FINOVA CAPITAL CORPORATION

                        STATEMENT OF CONSOLIDATED INCOME
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
Years Ended December 31,                                                     1996          1995           1994
--------------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>           <C>            <C>        
Interest and other income                                                $   640,132   $    568,115   $   376,845
Financing lease income                                                        61,985         49,310        43,560
Operating lease income                                                        95,817         84,691        53,795
--------------------------------------------------------------------------------------------------------------------
Interest earned from financing transactions                                  797,934        702,116       474,200
Interest expense                                                             366,543        337,814       210,730
Depreciation                                                                  62,286         55,218        36,736
--------------------------------------------------------------------------------------------------------------------
Interest margins earned                                                      369,105        309,084       226,734
Provision for possible credit losses                                          41,751         37,568        10,439
--------------------------------------------------------------------------------------------------------------------
Net interest margins earned                                                  327,354        271,516       216,295
Gains on sale of assets                                                       12,949         10,889         3,877
--------------------------------------------------------------------------------------------------------------------
                                                                             340,303        282,405       220,172
Selling, administrative and other operating
 expenses                                                                    154,481        131,571        97,325
--------------------------------------------------------------------------------------------------------------------
Income from continuing operations before income taxes                        185,822        150,834       122,847
Income taxes                                                                  69,329         57,036        49,077
--------------------------------------------------------------------------------------------------------------------
Income from continuing operations                                            116,493         93,798        73,770
Income and gain from sale of discontinued operations, net of tax                 507          3,831           543
--------------------------------------------------------------------------------------------------------------------
NET INCOME                                                               $   117,000   $     97,629   $    74,313
====================================================================================================================
</TABLE>
                 See notes to consolidated financial statements.
                                       10
<PAGE>
                           FINOVA CAPITAL CORPORATION

                 STATEMENT OF CONSOLIDATED STOCKHOLDER'S EQUITY
                             (Dollars in Thousands)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
Years Ended December 31,                                                    1996           1995          1994
------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>            <C>           <C>        
COMMON STOCK:
 Balance                                                                $        25    $        25   $        25
------------------------------------------------------------------------------------------------------------------
ADDITIONAL CAPITAL:
 Balance, beginning of year                                                 677,948        677,947       298,665
 Contributions from The FINOVA Group                                        115,000              1       379,282
------------------------------------------------------------------------------------------------------------------
 Balance, end of year                                                       792,948        677,948       677,947
------------------------------------------------------------------------------------------------------------------
RETAINED INCOME:
 Balance, beginning of year                                                 183,292        108,740        54,374
 Net income                                                                 117,000         97,629        74,313
 Dividends                                                                  (25,230)       (23,077)      (19,947)
------------------------------------------------------------------------------------------------------------------
 Balance, end of year                                                       275,062        183,292       108,740
------------------------------------------------------------------------------------------------------------------
CUMULATIVE TRANSLATION ADJUSTMENTS:
 Balance, beginning of year                                                  (5,686)        (4,726)       (7,773)
 Unrealized translation gain (loss)                                           6,694          (960)         3,047
------------------------------------------------------------------------------------------------------------------
 Balance, end of year                                                         1,008         (5,686)       (4,726)
------------------------------------------------------------------------------------------------------------------
STOCKHOLDER'S EQUITY                                                    $ 1,069,043    $   855,579   $   781,986
==================================================================================================================
</TABLE>
                 See notes to consolidated financial statements.
                                       11
<PAGE>
                           FINOVA CAPITAL CORPORATION
                      STATEMENT OF CONSOLIDATED CASH FLOWS
                             (Dollars in Thousands)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,                                                             1996           1995          1994
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>             <C>           <C>        
OPERATING ACTIVITIES:
 Net income                                                                    $      117,000  $     97,629  $     74,313
 Adjustments to reconcile net income to net cash provided
  by operating activities:
   Provision for possible credit losses                                                41,751        37,568        10,439
   Depreciation and amortization                                                       76,471        70,017        46,470
   Gains on sale of assets                                                            (12,949)      (10,889)       (3,877)
   Gains on dispositions of discontinued operations, net                               (3,521)
   Deferred income taxes                                                               31,272        17,617        17,001
Change in assets and liabilities, net of effects from subsidiaries purchased:
    Increase in other assets and deferred charges                                     (64,280)      (55,204)      (20,198)
    Decrease in accounts payable and accrued expenses                                 (17,563)      (11,583)      (85,716)
    Increase in interest payable                                                        5,853         7,843        14,077
 Other                                                                                  7,971           361        (3,923)
--------------------------------------------------------------------------------------------------------------------------
     Net cash provided by operating activities                                        182,005       153,359        48,586
--------------------------------------------------------------------------------------------------------------------------
 INVESTING ACTIVITIES:
 Proceeds from sales of assets                                                        102,945        50,028        15,048
 Proceeds from sales of securitized assets                                            100,000       200,000
 Principal collections on financing transactions                                    1,781,985     1,088,420       860,066
 Expenditures for financing transactions                                           (2,221,363)   (1,853,330)   (1,323,703)
 Net change in short-term financing transactions                                     (624,952)     (442,405)     (294,123)
 Acquisitions, net of cash acquired                                                    (7,455)     (261,868)     (590,497)
 Sale of discontinued operation                                                       616,434
 Other                                                                                  3,296         2,104         1,898
--------------------------------------------------------------------------------------------------------------------------
     Net cash used for investing activities                                          (249,110)   (1,217,051)   (1,331,311)
--------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
 Long-term borrowings                                                                 564,988     1,272,450       827,550
 Net borrowings under commercial paper                                                 62,156       373,566     1,508,564
 Repayment of long-term borrowings                                                   (681,401)     (570,002)   (1,186,191)
 Net advances and contributions from parent                                           119,691       (16,578)      211,941
 Dividends                                                                            (25,230)      (23,077)      (19,947)
 Net change in due to clients                                                         (32,143)       64,909        (9,298)
--------------------------------------------------------------------------------------------------------------------------
     Net cash provided by financing activities                                          8,061     1,101,268     1,332,619
--------------------------------------------------------------------------------------------------------------------------
(Decrease) increase in cash and cash equivalents                                      (59,044)       37,576        49,894
Cash and cash equivalents, beginning of year                                           90,329        52,753         2,859
--------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year                                         $       31,285  $     90,329  $     52,753
==========================================================================================================================
</TABLE>
                 See notes to consolidated financial statements.
                                       12
<PAGE>
                           FINOVA CAPITAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
                        (Dollars in Thousands in Tables)


NOTE A            SIGNIFICANT ACCOUNTING POLICIES

         Basis  of  Presentation   and  Principles  of   Consolidation   --  The
consolidated  financial  statements present the financial  position,  results of
operations and cash flows of FINOVA  Capital  Corporation  and its  subsidiaries
(collectively,  "FINOVA" or the "Company").  FINOVA is a wholly owned subsidiary
of The FINOVA Group Inc. ("FINOVA Group").

         FINOVA Capital  Corporation is a financial  services company engaged in
providing collateralized financing products to commercial enterprises in various
market niches, principally in the United States.

         These consolidated financial statements are prepared in accordance with
generally accepted accounting  principles.  Described below are those accounting
policies  particularly  significant  to FINOVA,  including  those  selected from
acceptable alternatives.

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

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

         At December 31, 1996,  $19.4 million of cash and cash  equivalents held
by a subsidiary of the Company are  restricted as to use,  pursuant to a secured
financing agreement.

         Marketable Securities -- As more fully described in Note I, the Company
owns certain  marketable  securities  which are considered  trading  securities.
Trading  securities  are stated at fair value with gains or losses  recorded  in
income in the period they occur.

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

         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.

         Leases that are  financed by  nonrecourse  borrowings  and meet certain
other  criteria  are  classified  as leveraged  leases.  For  leveraged  leases,
aggregate rentals receivable are reduced by the related nonrecourse debt service
obligation including interest ("net rentals receivable"). The difference between
(a) the net  rentals  receivable  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  leases  classified  as direct  financing  leases,  the  difference
between (a) aggregate  lease rentals and (b) the cost of the related assets 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 contracts  using the
interest method.

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

         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
                                       13
<PAGE>
                           FINOVA CAPITAL CORPORATION

principal becomes doubtful.  Income recognition is resumed when the loan becomes
contractually  current and  performance  is  demonstrated  to be resumed or when
foreclosed or repossessed assets generate a reasonable rate of return.

         Reserve for Possible  Credit Losses -- The reserve for possible  credit
losses is available to absorb credit losses.  The provision for possible  credit
losses is the charge to income to  increase  the  reserve  for  possible  credit
losses  to the  level  that  management  estimates  to be  adequate  considering
delinquencies,  loss experience and collateral. Other factors considered include
changes in  geographic  and product  diversification,  size of the portfolio and
current  economic  conditions.  Accounts are either  written-off or written-down
when  the  loss  is   considered   probable  and   determinable,   after  giving
consideration  to the  customer's  financial  condition  and  the  value  of the
underlying  collateral,  including any  guarantees.  Any deficiency  between the
carrying amount of an asset and the net sales price of repossessed collateral is
charged  to the  reserve  for  possible  credit  losses.  Recoveries  of amounts
previously written-off as uncollectible are credited to the reserve for possible
credit losses.

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

         Residual Values -- The Company 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.  Actual  residual values realized
could differ from these estimates.  Residual values are periodically reviewed to
determine that recorded amounts are appropriate.

         Goodwill  -- The  Company  amortizes  the  excess of cost over the fair
value of net assets  acquired  ("goodwill")  on a straight line basis  primarily
over 20  years.  Goodwill  at  December  31,  1996  is  $179.5  million,  net of
amortization, and is included in other assets. Amortization totaled $9.6 million
($5.7 million after-tax) and $8.2 million ($4.9 million after-tax) for the years
ended  December  31,  1996 and  1995,  respectively.  The  Company  periodically
evaluates  the carrying  value of its  intangible  assets for  impairment.  This
evaluation is based principally on projected,  undiscounted cash flows generated
by the underlying assets. At December 31, 1996,  approximately $167.8 million of
goodwill is  deductible  for  federal  income tax  purposes  over 15 years under
Section 197 of the Internal Revenue Code.

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

         Other  postretirement  benefit costs are recorded during the period the
employees provide service to the Company.  The Company funds its  postretirement
benefit obligation as benefits are paid.

         The Company records  postemployment benefit costs at the time employees
leave  active  service.  Postemployment  benefits  are any  benefits  other than
retirement benefits.

         Savings  Plan -- The  Company  participates  in The  FINOVA  Group Inc.
Savings Plan (the "Savings Plan"), a qualified 401(k) program.  The Savings Plan
is available to  substantially  all employees.  Voluntary wage reductions may be
elected by the  employee  ranging  from 1% to 15% of taxable  compensation.  The
Company's   matching   contributions   are  based  on  employee  pre-tax  salary
reductions, up to a maximum of 100% of the first 6% of salary contributions, the
first 3% of which are matched in FINOVA Group stock  through the Employee  Stock
Ownership Plan, discussed below.

         Employee Stock  Ownership Plan -- Employees of the Company are eligible
to  participate in FINOVA  Group's  Employee  Stock  Ownership Plan in the month
following the first 12 consecutive  month period during which they have at least
1,000 hours of service with the Company.  Company  contributions are 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.
                                       14
<PAGE>
                           FINOVA CAPITAL CORPORATION

         Expenses under the Savings Plan and Employee Stock  Ownership Plan were
$2.1  million,   $1.7  million,  and  $0.9  million  in  1996,  1995  and  1994,
respectively.

         Income Taxes -- Deferred tax assets and  liabilities are recognized for
the  estimated  future tax  effects  attributable  to  differences  between  the
financial  statement  carrying  amounts of existing  assets and  liabilities and
their  respective tax bases.  Deferred tax assets and  liabilities  are measured
using enacted tax law.

         Derivative  Financial  Instruments - As more fully described in Note F,
the Company uses derivative  financial  instruments as part of its interest rate
risk  management  policy  of match  funding  its  assets  and  liabilities.  The
derivative  instruments  used include interest rate swaps and a foreign currency
exchange  agreement,  all of which are accounted for using settlement or matched
swap  accounting.  In  addition,  the Company  enters  into a limited  amount of
interest rate caps for the benefit of customers.

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

         The foreign currency exchange agreement was entered into as a hedge for
the Company's  limited  exposure to fluctuations  from  investments in financing
transactions denominated in foreign currencies.

         Discontinued  Operations  -- As more  fully  described  in Note B,  the
Company's  Manufacturer  & Dealer  Services line of business and FINOVA  Medical
Systems are presented as discontinued  operations and,  accordingly,  prior year
amounts have been restated.

         Reclassifications  -- Certain  reclassifications  have been made to the
1995 and 1994 financial statements to conform to the 1996 presentation.

         Recent  Accounting   Developments  --  In  March  1995,  the  Financial
Accounting  Standards  Board ("FASB") issued  Statement of Financial  Accounting
Standards ("SFAS") No. 121,  "Accounting for Impairment of Long-Lived Assets and
for Long-Lived  Assets to Be Disposed Of," effective for fiscal years  beginning
after December 15, 1995. This statement establishes accounting standards for the
impairment of long-lived assets,  certain identifiable  intangibles and goodwill
related to those  assets to be held and used and  long-lived  assets and certain
identifiable  intangibles  to  be  disposed  of.  The  statement  requires  that
long-lived assets and certain identifiable intangibles to be held and used by an
entity be reviewed for impairment  whenever  events or changes in  circumstances
indicate  that the  carrying  amount  of an  asset  may not be  recoverable.  In
addition,  the statement requires that certain long-lived assets and intangibles
to be disposed of be reported at the lower of carrying amount or fair value less
cost to sell. The Company adopted this accounting  standard effective January 1,
1996,  as  required.  The effect on the  Company's  financial  position  and the
results of operations was not material.

         In  October  1995,  the FASB  issued  SFAS  No.  123,  "Accounting  for
Stock-Based  Compensation,"  effective for  transactions  entered into in fiscal
years that begin after December 15, 1995. This statement  establishes  financial
accounting and reporting for stock-based employee compensation plans,  including
stock  purchase  plans,   stock  option  plans,   restricted   stock  and  stock
appreciation  rights.  The  statement  requires  a fair  value  based  method of
accounting  for employee stock options or similar  instruments  and encourages a
similar method for all employee stock  compensation  plans. This method measures
compensation  cost  at the  grant  date  based  on the  value  of an  award  and
recognizes it over the service period, usually the vesting period.  However, the
statement also allows an entity to continue measuring compensation cost for such
plans using the intrinsic  value method of  accounting  prescribed by Accounting
Principles  Board Opinion No. 25,  "Accounting  for Stock issued to  Employees,"
provided pro forma disclosures are made. The
                                       15
<PAGE>
                           FINOVA CAPITAL CORPORATION

Company continues to account for its participation in FINOVA Group's stock-based
employee compensation plans using the method of accounting prescribed by APB No.
25. Had  compensation  cost for the Company's  participation  in FINOVA  Group's
plans  been  determined  based on the fair  value at the grant  dates for awards
under those plans  consistent  with the method of FASB Statement 123, the effect
on net income would not have been material.


NOTE B            ACQUISITIONS AND DISPOSITIONS

         During  1996  and  1995,  FINOVA,  in  transactions  accounted  for  as
purchases,  acquired  various  businesses  and  portfolios  having initial funds
employed  totaling $318 million and $262  million,  respectively.  In 1996,  the
Company  purchased  LINC  Financial  Services,  Inc.  for $3.2  million in cash,
comprised  of $139.9  million of assets and $136.7  million of  liabilities  and
acquisition   costs.   The  Company  also   purchased   Financing   for  Science
International,  Inc. for $36.0  million,  consisting of $226.6 million of assets
and $190.6 million in liabilities and acquisition costs.

         During  1996,  the  company  sold its  Manufacturer  & Dealer  Services
operations for $616.4 million, recognizing a gain on sale, net of taxes, of $6.0
million after  allocation of related costs and expenses.  In connection with the
sale, the Company  retained a small  portfolio of leases  relating to one vendor
program.

         Also  in  1996,   the  Company  closed  FINOVA   Medical   Systems,   a
remanufacturer  of  medical  equipment,   recognizing  a  loss  on  disposal  of
approximately $2.5 million, net of tax.

         Income (losses) from these operations,  net of tax, for the three years
ended  December 31, 1996 were ($3.0  million),  $3.8  million and $0.5  million,
respectively.  Assumptions used to calculate these results were similar to those
used by the Company to evaluate  its other lines of business  and  included  the
allocation  of  interest  expense  based  on  certain  leverage  ratios  and the
allocation of indirect operating expenses.

         The  consolidated  financial  statements  and  related  notes have been
restated to classify these operations as discontinued.
                                       16
<PAGE>
                           FINOVA CAPITAL CORPORATION

NOTE C            INVESTMENT IN FINANCING TRANSACTIONS

         The Company  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 factored receivables). At December 31, 1996 and 1995, the carrying amount of
the investment in financing transactions, including the estimated residual value
of leased  assets upon lease  termination,  was $7.3  billion  and $6.3  billion
(before reserve for possible credit losses),  respectively, and consisted of the
following percentage of carrying amount by line of business:

--------------------------------------------------------------------------------
                                                            Percent of Total
                                                            Carrying Amount
--------------------------------------------------------------------------------
                                                            1996         1995
--------------------------------------------------------------------------------
Transportation Finance                                       18.2%       14.6%
Resort Finance                                               16.0%       15.6%
Commercial Real Estate Finance                               10.9%       12.3%
Corporate Finance (1)                                         8.9%       10.3%
Commercial Equipment Finance                                  8.0%        5.5%
Communications Finance                                        7.7%       10.8%
Healthcare Finance                                            6.9%        7.2%
Rediscount Finance                                            5.8%        5.4%
Franchise Finance                                             5.0%        5.3%
Inventory Finance                                             4.3%        3.2%
Factoring Services                                            3.1%        3.0%
Commercial Finance                                            2.3%        3.4%
Government Finance                                            2.1%        1.9%
Other                                                         0.8%        1.5%
--------------------------------------------------------------------------------
                                                            100.0%      100.0%
================================================================================

(1)   Excludes assets  sold under  securitization  agreements of $300 million in
      1996 and $200 million in 1995.
                                       17
<PAGE>
                           FINOVA CAPITAL CORPORATION

         Aggregate  installments on loans and other financing contracts,  direct
financing leases, operating leases, leveraged leases and factored receivables at
December 31, 1996 (excluding  repossessed  assets of $38.4 million and estimated
residual  values) are due during each of the years  ending  December 31, 1997 to
2001 and thereafter as follows:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                                                                         There-
                                    1997          1998           1999          2000         2001          after
--------------------------------------------------------------------------------------------------------------------
<S>                             <C>           <C>            <C>           <C>           <C>          <C>        
Loans and other financing 
 contracts:
 Commercial:
  Fixed interest rate           $   382,481   $   324,871    $   282,111   $   281,515   $  212,165   $   507,594
  Floating interest rate            346,152       365,149        343,933       363,891      368,243       171,207
 Real Estate:
  Fixed interest rate               100,518        85,895         99,664        42,683       31,826       136,590
  Floating interest rate            388,468       375,637        226,982        95,623      105,240        25,068
Factored receivables                564,430
Leases, primarily at
 fixed interest rates:
 Operating leases                   102,148        85,628         77,000        71,457       61,666       112,232
 Leveraged leases                    33,085        21,814         19,166        16,006       13,683       308,993
 Direct financing leases            109,770        90,868         60,781        44,775       40,168        52,566
--------------------------------------------------------------------------------------------------------------------
                                $2,027,052    $ 1,349,862    $ 1,109,637   $   915,950   $  832,991   $ 1,314,250
====================================================================================================================
</TABLE>

         The  investment  in  operating  leases at December 31  consisted of the
following:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                                                            1996           1995
--------------------------------------------------------------------------------------------------------------------
<S>                                                                                    <C>            <C>         
Cost of assets                                                                         $    646,918   $    586,860
Accumulated depreciation                                                                   (129,228)      (126,062)
====================================================================================================================
Investment in operating leases                                                         $    517,690   $    460,798
====================================================================================================================
</TABLE>

         The net investment in leveraged  leases at December 31 consisted of the
following:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                                                         1996             1995
--------------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>              <C>            
Rentals receivable                                                                 $    1,898,996   $     1,454,754
Less principal and interest payable on nonrecourse debt                                (1,486,249)       (1,157,789)
--------------------------------------------------------------------------------------------------------------------
Net rentals receivable                                                                    412,747           296,965
Estimated residual values                                                                 479,850           344,766
Less unearned income                                                                     (378,024)         (275,535)
--------------------------------------------------------------------------------------------------------------------
Investment in leveraged leases                                                            514,573           366,196
Less deferred taxes arising from leveraged leases                                        (246,075)         (230,120)
--------------------------------------------------------------------------------------------------------------------
Net investment in leveraged leases                                                 $      268,498   $       136,076
====================================================================================================================
</TABLE>
                                       18
<PAGE>
                           FINOVA CAPITAL CORPORATION

         The  components of income from leveraged  leases,  after the effects of
interest on  nonrecourse  debt and other related  expenses,  for the years ended
December 31 were as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                                                     1996        1995       1994
--------------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>         <C>         <C>      
Lease and other income                                                            $  30,230   $  12,080   $   9,240
Income tax expense                                                                   11,321       4,201       3,143
--------------------------------------------------------------------------------------------------------------------
</TABLE>
         The investment in direct  financing  leases at December 31 consisted of
the following:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                                                           1996             1995
--------------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>              <C>         
Rentals receivable                                                                    $    398,928     $    443,139
Estimated residual values                                                                  100,039           73,121
Unearned income                                                                           (102,579)        (108,201)
--------------------------------------------------------------------------------------------------------------------
Investment in direct financing leases                                                 $    396,388     $    408,059
====================================================================================================================
</TABLE>
         The Company 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) at December 31 was as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                                                          1996            1995
--------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>             <C>          
Receivables due on financing transactions                                            $   3,749,575   $   3,390,139
Less unearned income                                                                       (53,075)        (78,333)
====================================================================================================================
Investment in floating-rate loans and leases                                         $   3,696,500   $   3,311,806
====================================================================================================================
</TABLE>

         Interest  earned from  financing  transactions  with floating  interest
rates was  approximately  $436.0  million in 1996,  $402.0  million in 1995, and
$269.0  million in 1994.  The  adjustments,  which  arise from  changes in index
rates,  can  have  a  significant  effect  on  interest  earned  from  financing
transactions; however, the effects on interest margins earned and net income are
substantially  offset by related  interest  expense changes on debt  obligations
with floating interest rates. The Company's matched funding policy is more fully
described in Note F.

         At December  31,  1996,  the  Company  had a  committed  backlog of new
business of approximately  $1.5 billion compared to $1.1 billion at December 31,
1995. The committed backlog includes lines of credit totaling $702.0 million and
$629.0 million for December 31, 1996 and 1995, respectively.  Historically,  the
Company has booked a substantial  portion of its backlog,  although there can be
no assurance that such trend will continue. Loan commitments and lines of credit
have  generally  the same credit risk as  extending  loans to  borrowers.  These
commitments  are  generally  subject to the same credit  quality and  collateral
requirements  involved in lending  transactions.  Commitments  generally  have a
fixed expiration and usually require payment of a fee.

         Receivable Transfer Agreements ("Securitizations") -- The Company sells
receivables in transactions subject to limited recourse provisions and remains a
servicer for which it is paid a fee. Normal servicing fees are earned on a level
yield basis over the remaining terms of the related receivables sold.
                                       19
<PAGE>
                           FINOVA CAPITAL CORPORATION

         During 1995, the Company, under a securitization agreement, sold a $200
million  undivided  proportionate  interest in a loan portfolio  totaling $610.5
million. Under this securitization  agreement,  there is recourse to the Company
based on the outstanding  balance of the  proportionate  interest sold. In 1996,
the Company sold an additional $100 million interest,  resulting in a total $300
million  undivided  proportionate  interest in a loan portfolio  totaling $626.7
million at December 31, 1996.

NOTE D            RESERVE FOR POSSIBLE CREDIT LOSSES

         The following is an analysis of the reserve for possible  credit losses
for the years ended December 31:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
                                                                                 1996          1995         1994
---------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>           <C>           <C>       
Balance, beginning of year                                                   $   129,077   $  110,903    $   64,280
Provision for possible credit losses                                              41,751       37,568        10,439
Write-offs                                                                       (32,017)     (25,631)      (28,109)
Recoveries                                                                         3,296        2,104         1,780
Other (including reserves related to acquisitions)                                 6,586        4,133        62,513
=====================================================================================================================
Balance, end of year                                                         $   148,693   $  129,077    $  110,903
=====================================================================================================================
</TABLE>
                                       20
<PAGE>
                           FINOVA CAPITAL CORPORATION

         Write-offs by lines of business  experienced  by the Company during the
years ended December 31 are as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
                                                                                1996         1995         1994
-----------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>          <C>          <C>       
Corporate Finance                                                           $    9,470   $    4,660   $    4,233
Factoring Services                                                               5,098        3,728        1,148
Resort Finance                                                                   4,275        2,000        2,730
Franchise Finance                                                                3,267        3,448        2,247
Commercial Equipment Finance                                                     3,207        2,271        1,257
Communications Finance                                                           2,994        4,037        8,300
Commercial Real Estate Finance                                                   1,793        2,275        1,461
Healthcare Finance                                                               1,018          314          377
FINOVA Capital Limited (UK)                                                        895        1,523        5,140
Commercial Finance                                                                              452          774
Inventory Finance                                                                               201          442
Other                                                                                           722
=================================================================================================================
                                                                            $   32,017   $   25,631   $   28,109
=================================================================================================================
Write-offs as a percentage of investment in
 managed assets                                                                   0.42%        0.39%        0.53%
=================================================================================================================
</TABLE>

         An  analysis  of  nonaccruing  assets  included  in the  investment  in
financing transactions at December 31 is as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
                                                                                         1996          1995
-----------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>           <C>        
Contracts                                                                            $   117,086   $    93,139
Repossessed assets                                                                        38,419        49,988
-----------------------------------------------------------------------------------------------------------------
Total nonaccruing assets                                                             $   155,505   $   143,127
=================================================================================================================
Nonaccruing assets as a percentage of managed assets                                         2.0%          2.2%
=================================================================================================================
</TABLE>

         In addition to the repossessed  assets included in the above table, the
Company had repossessed assets with a total carrying amount of $60.0 million and
$56.6 million at December 31, 1996 and 1995,  respectively,  which earned income
of $5.1 million and $4.2 million during 1996 and 1995, respectively.
                                       21
<PAGE>
                           FINOVA CAPITAL CORPORATION

         At December 31, 1996, the total  carrying  amount of impaired loans was
$110.1  million,  of which $46.3  million were revenue  accruing.  A reserve for
possible credit losses of $6.2 million has been established for $14.1 million of
nonaccruing  impaired  loans. At December 31, 1995, the total carrying amount of
impaired loans was $94.1 million,  of which $17.3 million were revenue accruing.
At December 31, 1995, the reserve for possible credit losses was $16 million for
$35 million of nonaccruing impaired loans. For the years ended December 31, 1996
and 1995,  the average  carrying  amount of impaired loans was $85.1 million and
$93.2 million,  respectively.  Income earned on accruing impaired loans was $4.0
million in both 1996 and 1995.  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, 1996, 1995 and
1994 remained accruing, income earned would have been increased by approximately
$19 million, $17 million, and $13 million, respectively.

NOTE E            DEBT

         The Company  satisfies its short-term  financing  requirements from the
issuance of commercial paper supported by bank lines of credit, other bank loans
and public notes.  The Company's  commercial  paper  borrowings are supported by
unused long-term revolving bank credit agreements totaling $3.4 billion.  FINOVA
currently maintains a five-year revolving credit facility with numerous lenders,
in the aggregate principal amount of $1.0 billion. Separately, FINOVA also has a
364 day  revolving  credit  facility  with the  same  lenders  in the  aggregate
principal  amount  of $1.0  billion,  amended  in  1996,  and has two  five-year
facilities with numerous lenders for $700 million each. Under the terms of these
agreements,  the Company has the option to  periodically  select either domestic
dollars or  Eurodollars  as the basis of  borrowings.  Interest  is based on the
lenders' prime rate for domestic  dollar  advances or London  interbank  offered
rates  ("LIBOR") for  Eurodollar  advances.  The  agreements  also provide for a
commitment fee on the unused credit.  The 364 day $1.0 billion  revolving credit
agreement  will be  subject to  renewal  in 1997  while the two  five-year  $700
million  facilities  and the other $1.0 billion  credit  facility are subject to
renewal in 2001.

         The  following   information  pertains  to  all  short-term  financing,
primarily commercial paper, issued by FINOVA for the years ended December 31:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
                                                                    1996            1995          1994
------------------------------------------------------------------------------------------------------------
<S>                                                            <C>             <C>           <C>        
Maximum amount of short-term debt outstanding
 during year                                                   $    3,087,876  $ 2,518,733   $ 2,024,441
Average short-term debt outstanding during year                     2,551,316    2,210,329     1,050,358
Weighted average short-term interest rates
 at end of year:
  Short-term borrowings                                                  5.4%         5.9%          6.2%
  Commercial paper*                                                      5.6%         6.0%          6.0%
Weighted average interest rate on short-term debt
 outstanding during year*                                                5.6%         6.1%          4.8%
------------------------------------------------------------------------------------------------------------
</TABLE>
*  Exclusive  of the cost of  maintaining  bank lines in support of  outstanding
commercial paper and the effects of interest rate conversion agreements.
                                       22
<PAGE>
                           FINOVA CAPITAL CORPORATION


         Senior debt at December 31 was as follows:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                                                         1996            1995
--------------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>             <C>          
 Commercial paper and short-term bank loans supported by unused long-term
  bank revolving credit agreements, less unamortized discount                       $   2,482,496   $   2,398,007
 Medium-term notes due to 2005, 5.4% to 10.3%                                           1,414,500       1,224,546
 Term loans payable to banks due  to 1999, 5.6% to 6.1%                                   180,000         180,000
 Senior notes due to 2006, 6.5% to 16.0%, less unamortized discount                     1,758,176       1,830,009
 Nonrecourse installment notes due to 2002, 10.6% (assets of
   $24,656 and $25,349, respectively, pledged as collateral)                               15,051          16,806
====================================================================================================================
Total senior debt                                                                   $   5,850,223   $   5,649,368
====================================================================================================================
</TABLE>

         Annual  maturities of senior debt  outstanding at December 31, 1996 due
through  May 2006  (excluding  the  amount  supported  by the  revolving  credit
agreements  expected to be renewed)  approximate  $742.3 million (1997),  $557.0
million  (1998),  $532.1 million (1999),  $563.7 million (2000),  $457.5 million
(2001) and $515.1 million (thereafter).

         The  agreements   pertaining  to  senior  debt  and  revolving   credit
agreements  of FINOVA  include  various  restrictive  covenants  and require the
maintenance of certain defined  financial ratios with which FINOVA has complied.
Under one such  covenant,  dividend  payments are limited to 50% of  accumulated
earnings  after  December  31, 1991.  As of December 31, 1996,  FINOVA had $83.4
million of excess accumulated earnings available for distribution.

         Total  interest  paid  is not  significantly  different  from  interest
expense.

NOTE F            DERIVATIVE FINANCIAL INSTRUMENTS

         The Company  enters into  interest  rate swaps and interest  rate hedge
agreements as part of its interest rate risk management  policy of match funding
its assets and liabilities.  The derivative instruments used are straightforward
and involve little  complexity.  The Company  continually  monitors its position
relative to derivatives and uses derivative instruments for non-trading purposes
only.

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

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

         Under  interest  rate swaps,  the Company  agrees to exchange  with the
counter  party,  at specified  intervals,  the payment  streams  calculated on a
specified notional amount, with at least one stream based on a floating interest
rate.  Generic swap notional amounts do not change for the life of the contract.
Amortizing  swap notional  amounts  amortize  over the life of the  transaction.
Basis swaps  involve the exchange of  floating-rate  indices,  such as the prime
rate,  the commercial  paper  composite rate and LIBOR and are used primarily to
protect the Company's  margins on  floating-rate  transactions by locking in the
spread between the Company's lending and borrowing rates.
                                       23
<PAGE>
                           FINOVA CAPITAL CORPORATION

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

         The use of derivatives  increased  interest  expense by $3.0 million in
1996, an increase in the aggregate  cost of funds of 0.05%,  and $9.8 million in
1995, an increase in the aggregate  cost of funds of 0.2%;  whereas,  the use of
derivatives  decreased interest expense by $13.7 million in 1994, a reduction in
the  aggregate  cost of funds of 0.4%.  These  changes in interest  expense from
off-balance sheet derivatives  effectively alter on-balance sheet costs and must
be viewed as total  interest rate  management.  There were no deferred  gains or
losses associated with derivatives.
                                       24
<PAGE>
                           FINOVA CAPITAL CORPORATION

         The following  table provides  annual  maturities and  weighted-average
interest rates for each significant derivative product type in place at December
31, 1996.  The rates  presented  are as of December 31, 1996. To the extent that
rates change, variable interest information will change.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
                                 December 31,                   Maturities of Derivative Products
                                              ------------------------------------------------------------------
(Dollars in Millions)                1996         1997        1998      1999       2000       2001    Thereafter
----------------------------------------------------------------------------------------------------------------
<S>                             <C>            <C>         <C>        <C>        <C>        <C>       <C>      
Receive fixed-rate swaps:
 Notional value                 $      1,350   $    275    $    325   $   250    $    150   $    150  $     200
 Weighted average receive
  rate                                  6.84%      6.77%       6.82%     6.62%       7.24%      6.66%      7.05%
 Weighted average pay rate              5.58%      5.54%       5.54%     5.57%       5.50%      5.67%      5.68%

Pay fixed-rate swaps:
 Notional value                 $        825   $    275    $    200   $   150    $    100   $    100
 Weighted average receive
  rate                                  5.56%      5.55%       5.54%     5.55%       5.60%      5.57%
 Weighted average pay rate              7.14%      7.15%       7.30%     7.06%       7.38%      6.70%

Basis swaps:
 Notional value                 $        878   $    250    $    628
 Weighted average receive
  rate                                  5.52%      5.51%       5.53%
 Weighted average pay rate              5.86%      5.83%       5.87%

TOTAL NOTIONAL VALUE            $      3,053   $    800    $  1,153   $   400    $    250   $    250  $     200
================================================================================================================
Total weighted average rates 
on swaps:
  Receive rate                          6.12%      5.96%       5.89%     6.22%       6.59%      6.22%      7.05%
================================================================================================================
  Pay rate                              6.08%      6.18%       6.02%     6.13%       6.25%      6.08%      5.68%
================================================================================================================
</TABLE>
         For the benefit of its customers, the Company enters into interest rate
cap agreements.  The total notional  amount of these  agreements at December 31,
1996 was $124  million,  none of which was in a pay or receive  position.  These
agreements will mature as follows: $90 million in 1997 and $34 million in 1998.

         At December 31, 1996,  the Company was a party to a short-term  foreign
currency forward exchange  agreement with a notional amount of approximately $73
million to mitigate its foreign currency risk.
                                       25
<PAGE>
                           FINOVA CAPITAL CORPORATION

         Derivative product activity for the three years ended December 31, 1996
is as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
                                                                     Pay                     Interest
                                       Receive         Pay        Fixed-Rate                   Rate
                                      Fixed-Rate    Fixed-Rate    Amortizing      Basis        Hedge
(Dollars in Millions)                   Swaps         Swaps          Swaps        Swaps     Agreements      TOTAL
---------------------------------------------------------------------------------------------------------------------
<S>                                  <C>           <C>           <C>            <C>        <C>            <C>      
Balance,
 December 31, 1993                   $     1,140   $       180   $              $          $       750    $   2,070
Expired                                      (50)          (50)          (148)                                 (248)
Additions                                    100           650            390        254                      1,394
---------------------------------------------------------------------------------------------------------------------
Balance,
 December 31, 1994                         1,190           780            242        254           750        3,216
Expired                                      (40)          (30)          (152)      (126)                      (348)
Additions                                    150            50              5        750                        955
---------------------------------------------------------------------------------------------------------------------
Balance,
  December 31, 1995                        1,300           800             95        878           750       3, 823
Expired                                     (100)         (325)           (95)                    (750)      (1,270)
Additions                                    150           350                                                  500
---------------------------------------------------------------------------------------------------------------------
Balance,
 December 31, 1996                   $     1,350   $       825   $         --   $    878   $        --    $   3,053
======================================================================================================================
</TABLE>

NOTE G            REDEEMABLE PREFERRED STOCK

         In  December  1996,   FINOVA  Finance  Trust,  a  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
the  Company,  which  used the  proceeds  to repay  commercial  paper  and other
indebtedness.

         In connection with the 1992 Spin-Off of the Company from The Dial Corp,
the Company issued 2,500 shares of its Series A Redeemable  Preferred Stock (the
"preferred stock") to a subsidiary of Dial for $25 million. In July 1993, FINOVA
Group acquired all 2,500 shares of the preferred  stock.  In March 1994,  FINOVA
Group  contributed  all  2,500  shares  of the  preferred  stock  to  FINOVA  as
additional paid in capital.
                                       26
<PAGE>
                           FINOVA CAPITAL CORPORATION

NOTE H            INCOME TAXES

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

--------------------------------------------------------------------------------
                                              1996         1995          1994
--------------------------------------------------------------------------------
Current:
 United States:
  Federal                                 $    28,658   $    32,225  $   25,686
  State                                         7,654         7,194       6,390
 Foreign                                        1,745
--------------------------------------------------------------------------------
                                               38,057        39,419      32,076
--------------------------------------------------------------------------------

Deferred:
 United States:
  Federal                                      26,210        12,278      13,787
  State                                         5,062         4,535       3,214
 Foreign                                                        804
--------------------------------------------------------------------------------
                                               31,272        17,617      17,001
--------------------------------------------------------------------------------
Provision for income taxes                $    69,329   $    57,036  $   49,077
================================================================================
                                       27
<PAGE>
                           FINOVA CAPITAL CORPORATION

         Income  taxes paid in 1996,  1995 and 1994  amounted  to  approximately
$31.3 million, $47.9 million, and $41.2 million, respectively.

         The significant components of deferred tax liabilities and deferred tax
assets at  December  31,  1996 and 1995  consisted  of the  following  including
discontinued operations:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
                                                                                    1996            1995
---------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>             <C>          
Deferred tax liabilities:
 Deferred income from leveraged leases                                         $     274,224   $     230,120
 Deferred income from lease financing                                                 72,300          62,681
 Other                                                                                22,486           6,408
---------------------------------------------------------------------------------------------------------------
Gross deferred tax liability                                                         369,010         299,209
---------------------------------------------------------------------------------------------------------------
Deferred tax assets:
 Reserve for possible credit losses                                                   55,883          39,094
 Investment in foreign subsidiary carrying value difference                           23,193          23,193
 Alternative minimum tax credit carryforward                                                           7,352
 Sale of discontinued operations                                                      16,400
 Other                                                                                 9,125           1,773
---------------------------------------------------------------------------------------------------------------
Gross deferred tax asset                                                             104,601          71,412
---------------------------------------------------------------------------------------------------------------
Net deferred tax liability                                                     $     264,409   $     227,797
===============================================================================================================
</TABLE>
         The federal  statutory  income tax rate is  reconciled to the effective
income tax rate as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                                                        1996        1995      1994
--------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>         <C>       <C>  
Federal statutory income tax rate                                                       35.0%       35.0%     35.0%
State income taxes                                                                       4.4%        5.1%      5.1%
Foreign tax effects                                                                     (0.9%)      (0.5%)     1.2%
Municipal and ESOP income                                                               (2.2%)      (1.7%)    (1.2%)
Other                                                                                    1.0%       (0.1%)    (0.1%)
====================================================================================================================
Provision for income taxes                                                              37.3%       37.8%     40.0%
====================================================================================================================
</TABLE>
                                       28
<PAGE>
                           FINOVA CAPITAL CORPORATION


NOTE I            PENSION AND OTHER BENEFITS

         Net periodic  pension costs were $1.7 million,  $1.3 million,  and $1.5
million for the years ended December 31, 1996, 1995 and 1994, respectively.  The
Company's  pension  costs were  prepaid by $0.6 million at December 31, 1996 and
$2.3 million at December 31, 1995.

         Net  periodic  postretirement  benefit  costs were $0.7  million,  $0.6
million,  and $0.5 million for each of the years ended  December 31, 1996,  1995
and 1994, respectively.  The Company's accrued postretirement benefit costs were
$2.2 million at December 31, 1996 and $1.5 million at December 31, 1995.

         The Company's  investment of $28 million in a trust for a  nonqualified
compensation  plan  consists of  securities  held for trading and is recorded at
market.

NOTE J            LITIGATION AND CLAIMS

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

NOTE K            FAIR VALUE OF FINANCIAL INSTRUMENTS

         The  following  disclosure  of the  estimated  fair value of  financial
instruments has been determined by the Company using market information obtained
by the  Company  and  the  valuation  methodologies  described  below.  However,
considerable  judgment is required  in  interpreting  market data to develop the
estimates of fair value. Accordingly,  the estimates presented herein may not be
indicative  of the amounts that the Company  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.
                                       29
<PAGE>
                           FINOVA CAPITAL CORPORATION

         The  carrying  amounts  and  estimated  fair  values  of the  Company's
financial instruments are as follows for the years ended December 31:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                                                    1996                          1995
-------------------------------------------------------------------------------------------------------------------
                                                           Carrying       Estimated      Carrying      Estimated
                                                            Amount       Fair Value       Amount      Fair Value
-------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>             <C>            <C>           <C>         
Balance Sheet -
 Financial Instruments:
 Assets:
  Loans and other financing contracts                   $  5,143,562    $  5,417,865   $ 4,740,085   $  4,726,465
 Liabilities:
  Senior debt                                              5,850,223       5,952,108     5,649,368      5,729,950

Off-Balance Sheet -
  Financial Instruments:
    Interest rate swaps                                        ---             1,462         ---             9,970
    Interest rate hedge agreements                             ---               ---         ---            (2,878)
-------------------------------------------------------------------------------------------------------------------
</TABLE>

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

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

         Loans and other financing contracts:

                  The fair  value of loans and  other  financing  contracts  was
         estimated by discounting expected cash flows using the current rates at
         which loans of similar  credit  quality,  size and  remaining  maturity
         would be made as of  December  31, 1996 and 1995.  Management  believes
         that the  risk  factor  embedded  in the  entry  value  interest  rates
         applicable  to  performing  loans for which  there are no known  credit
         concerns  results in a fair  valuation  of such loans on an entry value
         basis.  As of December 31, 1996 and 1995, the fair value of nonaccruing
         impaired  contracts  with a carrying  amount of $63.8 million and $76.9
         million, respectively, was not estimated because it is not practical to
         reasonably  assess the credit  adjustment  that would be applied in the
         marketplace  for such  loans.  As of December  31,  1996 and 1995,  the
         carrying  amount  of  loans  and  other  financing  contracts  excludes
         repossessed  assets with a total  carrying  amount of $98.4 million and
         $106.6 million, respectively.

         Senior debt:

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

         Interest rate swaps:

                  The fair  values of  interest  rate  swaps are based on quoted
         market  prices  obtained  from  participating  banks  and  dealers  for
         transactions of similar remaining duration.
                                       30
<PAGE>
                           FINOVA CAPITAL CORPORATION

         Interest rate hedge agreements:

                  The fair values of interest rate hedge  agreements in place at
         December  31,  1995 are based on quoted  market  prices  obtained  from
         participating  banks and dealers for transactions of similar  remaining
         duration.

         The fair value  estimates  presented  herein were based on  information
obtained by the Company as of December 31, 1996 and 1995. 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, 1996 and 1995;
therefore,  current  estimates of fair value may differ  significantly  from the
amounts presented herein.

NOTE L            SELLING, ADMINISTRATIVE AND OTHER OPERATING EXPENSES:

         The following  represents a summary of the major components of selling,
administrative  and other operating  expenses for the three years ended December
31:

--------------------------------------------------------------------------------
                                                     1996       1995      1994
--------------------------------------------------------------------------------
Salaries and employee benefits                    $  94,272  $  74,884  $ 54,875
Depreciation and amortization                        14,185     14,799     9,733
Travel and entertainment                              8,953      8,030     5,833
Problem account costs                                 7,753      7,941    11,927
Occupancy expenses                                    7,104      6,253     5,312
Professional services                                 5,738      6,121     6,813
--------------------------------------------------------------------------------

NOTE M            NEW ACCOUNTING STANDARDS

         In June 1996, the FASB issued SFAS No. 125,  "Accounting  for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities," effective
for transactions  entered into after December 31, 1996. Among other things, this
statement  changes  the  accounting  treatment  of  transactions  subsequent  to
December 31,  1996,  that  transfer  financial  assets but retain the  servicing
rights,  such as  securitizations.  The future effect on the Company's financial
position and the results of operations is not expected to be material.
                                       31
<PAGE>
                           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, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
                                                             First       Second        Third       Fourth
                                                            Quarter      Quarter      Quarter      Quarter
-------------------------------------------------------------------------------------------------------------
<S>                                                       <C>          <C>          <C>          <C>       
 Interest earned from financing transactions:
  1996                                                    $  190,652   $  192,635   $  204,972   $  209,675
  1995                                                       161,369      170,475      176,802      193,470
  1994                                                        73,961      114,798      137,473      147,968
-------------------------------------------------------------------------------------------------------------
 Interest expense:
  1996                                                        88,224       89,718       91,629       96,972
  1995                                                        78,275       83,248       85,544       90,747
  1994                                                        33,862       50,431       61,735       64,702
-------------------------------------------------------------------------------------------------------------
 Gains on sale of assets:
  1996                                                         6,730        1,315          397        4,507
  1995                                                         1,710          728        2,557        5,894
  1994                                                             3          390          894        2,590
-------------------------------------------------------------------------------------------------------------
 Non-interest expenses:
  1996                                                        66,489       56,989       65,480       69,560
  1995                                                        47,581       52,832       54,605       69,339
  1994                                                        21,448       36,840       38,089       48,123
-------------------------------------------------------------------------------------------------------------
 Income from continuing operations:
  1996                                                        26,756       28,852       30,489       30,396
  1995                                                        22,205       22,279       24,417       24,897
  1994                                                        11,596       15,933       23,107       23,134
-------------------------------------------------------------------------------------------------------------
 Income (loss) and gain from sale of discontinued
 operations:
  1996                                                           365         (731)        (726)       1,599
  1995                                                           163        1,350          733        1,585
  1994                                                                      1,584       (1,051)          10
-------------------------------------------------------------------------------------------------------------
 Net income:
  1996                                                        27,121       28,121       29,763       31,995
  1995                                                        22,368       23,629       25,150       26,482
  1994                                                        11,596       17,517       22,056       23,144
=============================================================================================================
</TABLE>
                                       32
<PAGE>
                           FINOVA CAPITAL CORPORATION

       AVERAGE BALANCES/INTEREST MARGINS/AVERAGE ANNUAL RATES (UNAUDITED)
                             (Dollars in Thousands)

The following  represents the breakdown of the Company's  average balance sheet,
interest  margins and average annual rates for the years ended December 31, 1996
and 1995:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
December 31,                                                        1996                                      1995
------------------------------------------------------------------------------------------------------------------------------------
                                                   Average                    Average        Average                     Average
                                                   Balance      Interest       Rate          Balance       Interest        Rate
------------------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>           <C>             <C>         <C>            <C>              <C>
ASSETS
 Cash and cash equivalents                       $    38,853   $                           $     45,917   $
 Investment in financing transactions              6,716,996     735,648  (3)  11.6%  (1)     5,815,019      646,898  (3)  11.9% (1)
 Less reserve for possible credit losses            (138,896)                                  (117,337)
------------------------------------------------------------------------------------------------------------------------------------
 Investment in financing transactions - net        6,578,100                                  5,697,682
 Other assets and deferred charges                   340,056                                    259,856
 Investment in discontinued operations               487,915                                    403,034
------------------------------------------------------------------------------------------------------------------------------------
                                                 $ 7,444,924                               $  6,406,489
====================================================================================================================================
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
 Other liabilities                               $   341,370                               $    285,483
 Senior debt                                       5,944,599     366,543        6.2%          5,084,145      337,814        6.6%
 Deferred income taxes                               249,164                                    218,727
------------------------------------------------------------------------------------------------------------------------------------
                                                   6,535,133                                  5,588,355
Stockholder's equity                                 909,791                                    818,134
------------------------------------------------------------------------------------------------------------------------------------
                                                 $ 7,444,924                               $  6,406,489
====================================================================================================================================
Interest income/average earning assets (1)                     $ 735,648       11.6%                      $  646,898       11.9%
Interest expense/average earning assets (1)(2)                   366,543        5.8%                         337,814        6.2%
------------------------------------------------------------------------------------------------------------------------------------
Interest margins earned (2)                                    $ 369,105        5.8%                      $  309,084        5.7%
====================================================================================================================================
</TABLE>
(1)  The average rate is calculated based on average earning assets  ($6,324,545
     and  $5,442,119 for 1996 and 1995,  respectively)  which are net of average
     deferred taxes on leveraged leases and average nonaccruing assets.
(2)  For the year ended December 31, 1996,  excluding the impact of derivatives,
     interest expense would have been $363,526 or 5.7% of average earning assets
     and interest  margins  earned  would have been  $372,122 or 5.9% of average
     earning assets. For the year ended December 31, 1995,  excluding the impact
     of  derivatives,  interest  expense  would  have been  $328,009  or 6.0% of
     average earning assets and interest margins earned would have been $318,889
     or 5.9% of average earning assets.
(3)  Interest income is shown net of depreciation.
                                       33
<PAGE>
                           FINOVA CAPITAL CORPORATION
                         COMMISSION FILE NUMBER 1-11011
                                  EXHIBIT INDEX
                           DECEMBER 31, 1996 FORM 10-K

                                                                       Page in
                                                                    Sequentially
                                                                       Numbered
  Exhibit No.                   Description                             Report
----------------    ----------------------------------------------  ------------

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

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

     (4.A)          Instruments   with   respect   to   issues  of
                    long-term debt have not been filed as exhibits
                    to this  Annual  Report  on  Form  10-K if the
                    authorized  principal amount of the issue does
                    not exceed 10% of total  assets of the Company
                    and its subsidiaries on a consolidated  basis.
                    The  Company  agrees to furnish a copy of each
                    such instrument to the Securities and Exchange
                    Commission upon request.

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

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


     (4.D)          Indenture dated as of November 1, 1990 between
                    the  Company  and the  Trustee  named  therein
                    (incorporated   by  reference  from  Greyhound
                    Financial Corporation's Registration Statement
                    on  Form  S-3,   Registration   No.  33-37743,
                    Exhibit 4).

     (4.E)          Fourth  Supplemental  Indenture  dated  as  of
                    April 17, 1992 between  FINOVA and the Trustee
                    named  therein,  supplementing  the  Indenture
                    referenced in Exhibit 4.D above  (incorporated
                    by reference from GFC Financial  Corporation's
                    Annual  Report  on Form 10-K for the year 1992
                    (the "1992 10-K"), Exhibit 4.F).
<PAGE>
                                                                       Page in
                                                                    Sequentially
                                                                       Numbered
  Exhibit No.                   Description                             Report
----------------    ----------------------------------------------  ------------

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

      (4.H)         1992 Stock  Incentive  Plan of FINOVA Group as
                    amended  through  the  date  of  this  filing,
                    including proposed amendments being considered
                    at the 1997 Annual Meeting of Sharefholders.*+

      (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  Westminster Bank USA, as agents (the
                    "Agents")    and     Citibank,     N.A.,    as
                    Administrative    Agent    (incorporated    by
                    reference from the Company's Current Report on
                    Form 8-K dated May 23, 1994, Exhibit 10.I).

     (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 the
                    Company's  Quarterly  Report  on Form 10-Q for
                    the  period  ending  September  30,  1995 (the
                    "3Q95 10-Q"), Exhibit 10.A).
<PAGE>
                                                                       Page in
                                                                    Sequentially
                                                                       Numbered
  Exhibit No.                   Description                             Report
----------------    ----------------------------------------------  ------------

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

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

      (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 the Company'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
                    the 1996 FINOVA Group 10-K, Exhibit 10.B.4).

     (10.C.1)       The  Company's  Executive  Severance  Plan for
                    Tier 1 Employees  (incorporated  by  reference
                    from  the   Company's   1995   10-K,   Exhibit
                    10.C.1).+

     (10.C.2)       The  Company's  Executive  Severance  Plan for
                    Tier 2 Employees  (incorporated  by  reference
                    from  the   Company's   1995   10-K,   Exhibit
                    10.C.2).+

      (10.D)        The Company's 1996  Management  Incentive Plan
                    (incorporated   by  reference  from  the  1996
                    FINOVA Group 10-K,  Exhibit 10.d).+ 

     (10.E.1)       The Company's  1995 - 1997  Performance  Share
                    Incentive Plan (incorporated by reference from
                    the 3Q95 10-Q, Exhibit 10.H).+

     (10.E.2)       The Company's  1994 - 1996  Performance  Share
                    Incentive Plan (incorporated by reference from
                    the 3Q95 10-Q, Exhibit 10.I).+

     (10.E.3)       The  Company's  1996-1998   Performance  Share
                    Incentive Plan (incorporated by reference from
                    the 1996 FINOVA Group 10-K,  Exhibit 10.E.3).+

     (10.F.1)       Employment    Agreement    with    Samuel   L.
                    Eichenfield     dated    March    16,    1996,
                    (incorporated  by reference from the Company's
                    1995 10-K, Exhibit 10.F.3).+

     (10.F.2)       Amendment to Employee Agreement  referenced in
                    10.F.1 above  (incorporated  by reference from
                    the 1996 FINOVA Group 10-K, Exhibit 10.F.2).+

       10.G         Employment Agreement with William J. Hallinan,
                    dated  February  25,  1992   (incorporated  by
                    reference from the 1992 10-K, Exhibit 10.I)+
<PAGE>
                                                                       Page in
                                                                    Sequentially
                                                                       Numbered
  Exhibit No.                   Description                             Report
----------------    ----------------------------------------------  ------------

      (10.H)        Employment    Agreement    with    Thomas   C.
                    Parrinello,    dated    February    14,   1994
                    (incorporated by reference from the 1994 10-K,
                    Exhibit 10.H).+

      (10.I)        The    Company's    Amended    and    Restated
                    Supplemental  Pension  Plan  (incorporated  by
                    reference  from the 1996  FINOVA  Group  10-K,
                    Exhibit 10.I).+

      (10.J)        FINOVA  Group's   Value   Sharing   Plan   for
                    Executive    Officers   and   Key    Employees
                    (incorporated by reference from the 3Q95 10-Q,
                    Exhibit 10.K).+

      (10.K)        FINOVA  Group's  Value  Sharing  Plan  for the
                    Chief  Executive   Officer   (incorporated  by
                    reference from the 3Q95 10-Q, Exhibit 10.L).+

      (10.L)        [Omitted]
                    
      (10.M)        [Omitted]

      (10.N)        The  Company's   Deferred   Compensation  Plan
                    (incorporated  by reference from the Company's
                    1995 10-K, Exhibit 10.N).+

      (10.O)        Form of FINOVA Group's  1992  Stock  Incentive
                    Plan Nonqualified  Stock Option Agreement (for
                    exempt  employees)  (for grants between August
                    25, 1992 and August 10, 1994) (various prices)
                    (incorporated by reference from the 1992 10-K,
                    Exhibit 10.FF).+

      (10.P)        [Omitted]

      (10.Q)        [Omitted]

      (10.R)        Interim  Services  Agreement dated January 28,
                    1992  among  the  Company,  The Dial  Corp and
                    others  (incorporated  by  reference  from the
                    1992 10-K, Exhibit 10.JJ).

      (10.S)        Tax Sharing  Agreement dated February 19, 1992
                    among the  Company,  The Dial Corp and  others
                    (incorporated by reference from the 1992 10-K,
                    Exhibit 10.KK).

      (10.T)        Sublease dated as of April 1, 1991,  among the
                    Company, The Dial Corp and others, relating to
                    the   Company's    principal    office   space
                    (incorporated by reference from the 1992 10-K,
                    Exhibit 10.NN).

      (10.U)        FINOVA Group's Executive  Officer Loan Program
                    Policies  and  Procedures   (incorporated   by
                    reference  from the 1996  FINOVA  Group  10-K,
                    Exhibit 10.U).+
<PAGE>
                                                                       Page in
                                                                    Sequentially
                                                                       Numbered
  Exhibit No.                   Description                             Report
----------------    ----------------------------------------------  ------------

   (10.V.1)         Form of the  Company's  1992  Stock  incentive
                    Plan  Stock  Option   Agreements   for  grants
                    between  August  10,  1994 and August 7, 1996,
                    (for  exempt   employees)   (various   prices)
                    (incorporated by reference from the 1994 10-K,
                    Exhibit 10.DD).+

   (10.V.2)         Form of  Non-Qualified  Stock Option Agreement
                    for exempt  employees  subsequent to August 8,
                    1996  to  present (incorporated  by  reference
                    from  the  1996  FINOVA  Group  10-K,  Exhibit
                    10.V.5).+

   (10.V.3)         Form of  Non-Qualified  Stock Option Agreement
                    (multi-year grants)(incorporated by  reference
                    from  the  1996  FINOVA  Group  10-K,  Exhibit
                    10.V.6).+

   (10.W.1)         Form  of  the   Company's   Restricted   Stock
                    Agreements  in   effect   through   July  1996
                    (incorporated by reference from the 1994 10-K,
                    Exhibit 10.GG).+

   (10.W.2)         Form of Restricted  Stock  Agreement in effect
                    subsequent  to  July  1996   (incorporated  by
                    reference  from  the 1996 FINOVA  Group  10-K,
                    Exhibit 10.W.3).+

   (10.X.1)         PBRS/Restricted   Stock  Retention   Incentive
                    Program Policies and  Procedures (incorporated
                    by  reference from the 1996 FINOVA Group  10-K,
                    Exhibit 10.X.1).+

   (10.X.2)         Form of Restricted  Stock Agreement for use in
                    Stock  Retention  Incentive  Program  noted in
                    10.X.1 above (incorporated  by  reference from 
                    the 1996 FINOVA Group 10-K, Exhibit 10.X.2)+

     (12)           Computation  of Ratio of  Income  to  Combined
                    Fixed Charges and Preferred Stock Dividends.*

     (23)           Independent Auditor's Consent.*

     (27)           Financial Data Schedule.*

                      * Filed herewith.

                      + Relating to Management Compensation.