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SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-K





(Mark One)





ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)


x


OF THE SECURITIES EXCHANGE ACT OF 1934





For the Fiscal Year Ended December 31, 1999





OR





TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE


 ̈


SECURITIES EXCHANGE ACT OF 1934





Commission file number 1-6157





Heller Financial, Inc.


(Exact name of registrant as specified in its charter)





|Delaware
   (State or other jurisdiction of
   
   incorporation or organization) |  | 36-1208070
   (I.R.S. Employer Identification No.) | 
|--------------------------------------------------------------------------------- |  | -------------------------------------------------- | 




|500 West Monroe
     Street, Chicago, Illinois
   (Address of principal executive offices) |  | 60661
   (Zip Code) | 
|------------------------------------------------------------------------------------------ |  | ------------------- | 




Registrants telephone number, including area code: (312)
   441-7000





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





|Title of Each Class                                        |  | Name of Exchange on which
     Registered   
|---------------------------------------------------------- |  | --------------------------------------------
|Class A Common
     Stock                                  |  | New York Stock Exchange, Inc.               
|                                                           |  | The Chicago Stock Exchange
     Incorporated
|Cumulative Perpetual
     Senior Preferred Stock, Series A |  | New York Stock Exchange, Inc.               




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 ü No .





Indicate
   by check mark if disclosure of delinquent filers pursuant to Item 405 of
   Regulation 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 to this Form 10-K.





As of
   February 10, 2000, the aggregate market value of voting stock held by
   non-affiliates of the registrant, based upon the closing sales price for the
   registrants Class A common stock, as reported on the New York Stock
   Exchange was approximately $932,725,765.





Number of shares of Common Stock outstanding at February 10,
   2000:


Class A Common Stock45,429,868


Class B Common Stock51,050,000





Documents incorporated by reference: Portions of the definitive Proxy
   Statement prepared for the 2000 Annual Meeting of Stockholders to be filed
   no later than April 2, 2000 are incorporated by reference into Part III of
   this report.


Web site address is www.hellerfinancial.com





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TABLE OF CONTENTS





|Item
   
   No. |  | Name of Item                                                                                                |  | Page
|--------------- |  | ----------------------------------------------------------------------------------------------------------- |  | ----
|Part I          |  |                                                                                                             |  |     
|Item 1.         |  | Business                                                                                                    |  | 4   
|                |  | General                                                                                                     |  | 4   
|                |  | Domestic Commercial Finance Segment                                                                         |  | 7   
|                |  | Corporate Finance                                                                                           |  | 7   
|                |  | Real Estate Finance                                                                                         |  | 8   
|                |  | Leasing Services                                                                                            |  | 11  
|                |  | Small Business Finance                                                                                      |  | 14  
|                |  | Healthcare Finance                                                                                          |  | 15  
|                |  | International Factoring and Asset Based Finance Segment                                                     |  | 16  
|                |  | Sales and Marketing                                                                                         |  | 19  
|                |  | Competition                                                                                                 |  | 20  
|                |  | Regulation                                                                                                  |  | 21  
|                |  | Employees                                                                                                   |  | 23  
|                |  | Risk Management                                                                                             |  | 23  
|                |  | Credit Risk Management                                                                                      |  | 23  
|                |  | Asset/Liability Management                                                                                  |  | 24  
|                |  | Interest Rate Risk Management                                                                               |  | 25  
|                |  | Foreign Exchange Risk Management                                                                            |  | 26  
|                |  | Liquidity Risk Management                                                                                   |  | 27  
|                |  | Operational Risk Management                                                                                 |  | 27  
|                |  | Portfolio Quality                                                                                           |  | 28  
|Item 2.         |  | Properties                                                                                                  |  | 30  
|Item 3.         |  | Legal Proceedings                                                                                           |  | 30  
|Item 4.         |  | Submission of Matters to a Vote of Security Holders                                                         |  | 30  
|               
|Part II         |  |                                                                                                             |  |     
|Item 5.         |  | Market for Registrants Common Equity and Related
     Stockholder Matters                                  |  | 31  
|Item 6.         |  | Selected Financial Data                                                                                     |  | 32  
|Item 7.         |  | Managements Discussion and Analysis of Financial
     Condition and Results
   
         
   of Operations |  | 34  
|                |  | General                                                                                                     |  | 34  
|                |  | Year Ended December 31, 1999 Compared to Year Ended December
     31,
   
         
   1998                 |  | 36  
|                |  | Results of Operations                                                                                       |  | 36  
|                |  | Lending Assets and Investments                                                                              |  | 40  
|                |  | Year Ended December 31, 1998 Compared to Year Ended December
     31,
   
         
   1997                 |  | 43  
|                |  | Results of Operations                                                                                       |  | 43  
|                |  | Lending Assets and Investments                                                                              |  | 47  
|                |  | Liquidity and Capital Resources                                                                             |  | 49  

|Item
   
   No. |  | Name of Item                                                                                           |  | Page
|--------------- |  | ------------------------------------------------------------------------------------------------------ |  | ----
|
|                |  | Accounting Developments                                                                                |  | 51  
|                |  | Year 2000 Compliance                                                                                   |  | 52  
|                |  | Cautionary Note Regarding Forward-Looking Statements                                                   |  | 53  
|Item 7a.        |  | Quantitative and
     Qualitative Disclosures about Market Risks                                       |  | 53  
|Item 8.         |  | Financial Statements and
     Supplementary Data                                                       |  | 54  
|Item 9.         |  | Changes in and
     Disagreements with Accountants on Accounting and
   
         Financial Disclosure |  | 96  
|               
|Part III        |  |                                                                                                        |  |     
|Item 10.        |  | Directors and Executive
     Officers of the Registrant                                                |  | 97  
|Item 11.        |  | Executive
     Compensation                                                                            |  | 98  
|Item 12.        |  | Security Ownership of
     Certain Beneficial Owners and Management                                    |  | 98  
|Item 13.        |  | Certain Relationships and
     Related Transactions                                                    |  | 98  
|               
|Part IV         |  |                                                                                                        |  |     
|Item 14.        |  | Exhibits, Financial
     Statement Schedules and Reports on Form 8-K                                   |  | 99  




PART I





ITEM 1. BUSINESS





The following discussion contains certain forward-looking
   statements as defined in the Securities Exchange Act of 1934 which are
   generally identified by the words anticipates, believes, estimates,
   expects, plans, intends and other similar expressions. Those
   statements are subject to certain risks, uncertainties and contingencies,
   which could cause our actual results, performance or achievements to differ
   materially from those expressed in, or implied by, such statements. See Item
   7. Managements Discussion and Analysis of Financial Condition and
   Results of OperationsSpecial Note Regarding Forward-Looking
   Statements.





General





Heller Financial, Inc. (including its consolidated subsidiaries,
   Heller or the Company,which may be referred to as we, usor our) is a worldwide commercial finance company providing a
   broad range of financing solutions to middle-market and small business
   clients.





Primary Business Segments





We deliver our products and services principally through two business
   segments:





| |  | Domestic Commercial
     Finance; and
| | - | -------------------------------------




| |  | International Factoring
     and Asset Based Finance.
| | - | -----------------------------------------------------




Domestic Business





Our Domestic Commercial Finance segment is made up of five business
   units:





| | (1) | Corporate Finance,
     providing collateralized cash flow and asset based lending;
| | --- | -----------------------------------------------------------------------------------




| | (2) | Real Estate Finance,
     primarily providing secured real estate financing;
| | --- | ----------------------------------------------------------------------------




| | (3) | Leasing Services,
     providing debt and lease financing of small, medium and large ticket
     equipment sourced directly or through manufacturers, distributors and
     dealers;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | (4) | Small Business Finance,
     providing financing to small businesses, primarily under U.S. Small
     Business Administration (SBA) loan programs; and
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------




| | (5) | Healthcare Finance,
     providing asset-based, collateralized cash flow and secured real estate
     financing to healthcare service providers.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------




International Business





Our International Factoring and Asset Based Finance segment, known as
   Heller International Group (International Group),provides factoring
   services and financings secured primarily by receivables, inventory and
   equipment. It does so through wholly-owned subsidiaries and joint ventures
   which provide financing to small and mid-sized companies primarily in
   Europe, but also in Asia and Latin America.





Market Position





We concentrate primarily on senior secured lending, with 86% of
   lending assets and investments at December 31, 1999 being made on that
   basis. Also, to a more limited extent, we make subordinated loans and invest
   in select debt and equity instruments.





We believe that, as of December 31, 1999, our subsidiary,
   Factofrance-Heller (Factofrance),is the largest factoring operation
   in France. We were named the #1 Small
 Business Administration 7(a) lender nationwide based upon volume for the SBA
   s 1999 fiscal year. We are among the largest lenders to private
   equity-sponsored companies in the U.S. middle market. We believe we are the
   leading provider of secured finance to small and mid-sized healthcare
   companies. Additionally, we are a recognized leader in real estate finance,
   vacation ownership lending, vendor finance and middle-market equipment
   finance and leasing in the United States.





We have built our portfolio through:





| |  | effective asset
     origination capabilities;
| | - | ----------------------------------------------




| |  | disciplined underwriting
     and credit approval processes;
| | - | ------------------------------------------------------------




| |  | effective portfolio
     management; and
| | - | ----------------------------------------




| |  | acquisitions.
| | - | -------------




Our business groups have the ability to manage asset, client,
   industry and geographic concentrations and enhance profitability by
   distributing assets through securitizations, syndications and loan
   sales.





Heller History and Recent Activities





Heller was founded in 1919. From our inception, we have primarily
   targeted our commercial financing activities at mid-sized and small
   businesses in the United States. Since 1964, we have also competed in
   selected international markets through our consolidated subsidiaries and
   investments in international joint ventures.





Heller was purchased by a subsidiary of The Fuji Bank, Limited
   (Fuji Bank)in 1984. Fuji Bank owned 100% of Hellers common
   stock between that time and April 1998. In May 1998, we issued 38,525,000
   shares of Class A Common Stock in an initial public offering (the IPO).The IPO reduced Fuji Banks ownership, through its direct
   subsidiary Fuji America Holdings, Inc. (FAHI),to 79% of the voting
   interest and 57% of the economic interest of our issued common stock. Fuji
   Banks ownership was further reduced to 77% of the voting interest and
   52% of the economic interest when we issued approximately 7.3 million shares
   of our Class A Common Stock in conjunction with our acquisition of
   HealthCare Financial Partners, Inc. (HCFP)in July 1999. As a result
   of such voting interest, FAHI has the unilateral power to elect all of the
   members of our Board of Directors.





In May 1998, Heller increased its ownership of International Group to
   100% from 79% by purchasing the 21% interest held by Fuji Bank.





From the time of Fuji Banks purchase of Heller through 1990, the
   substantial majority of our portfolio consisted of Corporate Finance and
   Real Estate Finance assets. Since 1990, we have diversified our portfolio.
   While continuing to build our Corporate Finance and Real Estate Finance
   franchises, we also invested significant resources in building other secured
   lending businesses through start-ups of new business units, acquisitions and
   the expansion of smaller existing operations. Products include asset based
   working capital and term financings secured by accounts receivable and
   inventory and various types of equipment finance and leasing product
   offerings.





In the past several years, we selectively expanded our overseas
   operations, most significantly by completing the acquisition, in April 1997,
   of the interest of our joint venture partner in Factofrance, the leading
   factoring company in France.





We further expanded our leasing operations in 1998 by acquiring
   certain U.S. assets of the Dealer Products Group of Dana Commercial Credit
   Corporation and the stock of the Dealer Products Groups international
   subsidiaries (collectively, Dealer Products Group).





In July 1999, we believe we became the leading financing provider to
   small and middle-market healthcare companies nationally by acquiring HCFPand combining it with our existing healthcare finance
   activities.





In August 1999, we opened our new Canadian subsidiary, Heller
   Financial Canada, Ltd. which allows us to offer Canadian borrowers all of
   the lending and leasing products we are able to offer our customers in the
   U.S.





In December 1999, we completed the sale of the assets of our
   Commercial Services business unit, part of our Domestic Commercial Finance
   segment. We believe that long-term success in the domestic factoring
   business would have required substantial economies of scale, which
   Commercial Services would not have been able to achieve through internal
   growth. We plan on using the capital and other resources made available from
   this sale to increase our investment in our other business groups that, in
   our opinion, offer greater opportunities for long-term growth and
   profitability.





As the result of the above activities, we believe that we have built a
   lending portfolio that is well diversified, has strong asset
   collateralization and provides us with a consistent and diversified income
   stream.





Summary 1999 Results





For the year ended December 31, 1999:





| |  | Net income increased 47%
     to $284 million, from $193 million for the prior year. This was our
     seventh consecutive year of record earnings.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------




| |  | Net income applicable to
     common stock was $256 million for the year ended December 31, 1999, which
     represented an increase of 49% from $172 million for the prior
     year.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | Net income includes a
     one-time after-tax gain of $48 million relating to the sale of assets of
     our Commercial Services unit. Excluding this gain, net income was $236
     million for the year, an increase of 22% over the prior year.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | New business volume
     increased 12% over the prior year, from $7.2 billion to a record $8.1
     billion.
| | - | ------------------------------------------------------------------------------------------------------------




| |  | Total lending assets and
     investments increased to $16.8 billion, an increase of $3.4 billion, or
     25% from the prior year.
| | - | -----------------------------------------------------------------------------------------------------------------------------------




| |  | Common stockholders
     equity increased to $1.9 billion.
| | - | -----------------------------------------------------------




| |  | Nonearning assets were
     only $228 million, or 1.5% of total lending assets at December 31, 1999.
     This is favorable to our targeted range for nonearning assets of
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 2 to 4% of total lending
     assets.
| |  | -------------------------------------




| |  | Operating efficiency was
     47.9% for 1999, a significant improvement from 1998, and in line with our
     target of 48% for the year.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------




See Note 23Operating Segmentsof our Consolidated
   Financial Statements for disclosure regarding certain financial information
   with respect to each of our business segments.





Domestic Commercial Finance Segment





| | Corporate Finance
| | -----------------




Corporate Finance is a leading provider of secured financing solutions
   to middle market oriented equity sponsors, intermediaries and enterprises.
   Corporate Finance primarily offers:





| |  | cash flow based
     lending;
| | - | -----------------------------




| |  | asset based lending;
     and
| | - | -----------------------------




| |  | on a more limited basis,
     makes mezzanine and equity investments.
| | - | ---------------------------------------------------------------------




Through Corporate Finance, we provide cash flow lending primarily for
   corporate acquisitions, leveraged buyouts, recapitalizations, refinancings
   and growth financing for publicly and privately held companies. These
   companies are in a wide variety of industries, including manufacturing,
   services, metals, plastics, consumer products and defense. In almost all
   cases, these transactions involve professional or private equity investors
   which acquire businesses for financial or strategic purposes.





We also provide secured term and revolving credit facilities with
   durations averaging five to eight years. To a lesser extent, we provide
   unsecured or subordinated financings and invest in limited partnership
   funds. From time to time, we make modest non-voting equity investments in
   conjunction with senior debt facilities, receive warrants or equity
   interests as a result of providing financing and make stand-alone equity
   co-investments with known equity sponsors. We also serve as co-lender or
   participant in larger senior secured transactions originated by other
   lenders.





We provide asset based working capital and term financing to
   middle-market companies for corporate acquisitions, recapitalizations
   refinancings, verifiable turnarounds, debtor-in-possession (DIP),post-DIP transactions and growth financing. We do this through
   revolvers, term loans and letters of credit supported by accounts
   receivable, inventory, equipment and real estate. Middle market enterprises
   we serve through our asset based lending unit include manufacturers,
   retailers, wholesalers, distributors and service firms. We provide financing
   both as an agent (lead lender) and as a co-lender or a participant in senior
   secured transactions agented by other asset-based lenders.





We generate the majority of our new business through our relationships
   with private equity sponsors, investment and commercial banks, accountants,
   lawyers and a variety of brokers and other financial intermediaries. We have
   developed and maintain close relationships with over 200 equity sponsors,
   many of whom have been our clients for ten or more years and have financed
   several transactions with us.





Our portfolio has loans in a wide range of industries including
   industrial machinery, business services, metals, chemicals/plastics,
   consumer products and automotive. The portfolio is diversified among
   approximately 30 industries and no particular industry represented more than
   10% of the portfolio.





The following table gives information about Corporate
   Finance:





|                                                       |  | As of, or For the Year
     Ended,
   
   December 31,
|------------------------------------------------------ |  | ------------------------------------------------------
|
|
|New business
     volume                               |  | $3,130                                                
|Total lending assets and
     investments              |  | 4,937                                                 
|Revenues                                               |  | 471                                                   
|                                                      
|Revenues as a percentage
     of total revenues        |  | 28.8                                                  
|Ratio of net writedowns to
     average lending assets |  | 0.5                                                   
|Ratio of nonearning assets
     to lending assets      |  | 0.6                                                   




The level of nonearning assets at December 31, 1999 of $29 million,
   or 0.6% of Corporate Finance lending assets, indicates the high credit
   quality of the portfolio. For the year ended December 31, 1999, Corporate
   Finance had:





| |  | net writedowns of only
     0.5% of average lending assets; and
| | - | ---------------------------------------------------------------




| |  | total revenues of $471
     million, or 29% of the Companys total revenues.
| | - | ----------------------------------------------------------------------------




As of December 31, 1999, Corporate Finance had total lending assets
   and investments of $4.9 billion, or 29% of Hellers total lending and
   investments. Of this amount:





| |  | about $4.0 billion
     represents cash flow financings; and
| | - | ------------------------------------------------------------




| |  | about $900 million
     represents asset based financings.
| | - | ----------------------------------------------------------




We base our commitment to finance cash flow lending transactions on
   our assessment of the borrowers ability to generate cash flows to
   repay the loan. To do this, we consider, among other factors, the borrower
   s:





| |  | historical and projected
     profitability;
| | - | --------------------------------------------




| |  | market
     position;
| | - | ---------------------




| |  | ability to withstand
     competitive challenges; and
| | - | -----------------------------------------------------




| |  | relationships with clients
     and suppliers.
| | - | ----------------------------------------------




Cash flow based transactions are generally cross-collateralized and
   secured by liens on the borrowers current and fixed assets and capital
   stock.





Asset based lending transactions concentrate on balancing collateral
   values, cash flow and capital structure. We protect against deterioration of
   a borrowers performance by using established advance rates against
   eligible collateral and cross-collateralizing revolving credit facilities
   and term loans. We also actively manage credit risk through portfolio
   diversification by industry and individual client exposure.





We manage the Corporate Finance portfolio centrally to ensure
   consistent application of credit policy and efficient documentation and
   approval of transaction modifications.





Corporate Finance has an established syndication capability. This
   enables us to commit to larger transactions while still managing the
   ultimate size of our retained position and to generate additional income. In
   1999, we acted as agent for 52 private equity-sponsored syndicated
   transactions. We believe this level of agented transactions makes us the
   fifth largest syndicator of such deals in the United States. In 1999, we
   syndicated a total of $1.5 billion in commitments. Although we can provide
   commitments of up to $200 million per transaction, we generally syndicate
   our ultimate retained position to $20 million or less. As of December 31,
   1999, our average retained transaction size was approximately $18 million in
   commitments and $10 million in fundings.





As of December 31, 1999, Corporate Finance had contractual commitments
   to finance an additional $1.6 billion to new and existing borrowers,
   generally contingent on their maintaining specific credit standards. Since
   we expect many of these commitments to remain unused, the total commitment
   amounts do not necessarily represent future cash requirements. We do not
   have any significant commitments to provide additional financing related to
   nonearning assets.





| | Real Estate Finance
| | -------------------




Real Estate Finance provides secured financing to owners, investors
   and developers for the acquisition, refinancing and renovation of commercial
   income producing properties in a
 wide range of property types and geographic areas. We serve these markets by
   offering tailored senior secured debt and junior participating structures
   and by originating fixed rate commercial mortgages which we may securitize
   in the future (CMBS).We also purchase interests in syndicated debt
   and selected CMBS bonds. We believe we are the third largest lender to the
   U.S. vacation ownership industry, providing timeshare resort developers with
   full life-cycle financing secured by time share receivables and unsold real
   estate inventory.





Our transactions are secured by a variety of property types
   including:





| |  | offices;
| | - | --------




| |  | apartments;
| | - | -----------




| |  | retail
     properties;
| | - | -----------------------




| |  | industrial
     properties;
| | - | ---------------------------




| |  | manufactured housing
     communities;
| | - | --------------------------------------




| |  | affordable housing
     properties;
| | - | -----------------------------------




| |  | self storage facilities;
     and
| | - | ---------------------------------




| |  | hotels and vacation
     ownership units.
| | - | -----------------------------------------




Senior secured loan transactions range in size from $4 million to $25
   million, with an average transaction size in 1999 of about $10 million.
   Typical junior secured loan transactions range in size from $1 million to
   $12 million, with an average transaction size in 1999 of about $4 million.
   Typical vacation ownership transactions range in size from $5 million to $40
   million, with an average transaction size in 1999 of about $15
   million.





Real Estate Finance has 9 offices throughout the United States and one
   office in Toronto. Origination efforts are focused predominantly on domestic
   U.S. borrowers and, to a lesser degree, Canadian and Mexican borrowers. We
   generate new business through our relationships with real estate brokers and
   through direct calling on prospective borrowers. We market our products
   through the use of trade advertising, direct marketing, newsletters and
   trade show attendance and sponsorship.





The following table gives information about Real Estate
   Finance:





|                                                       |  | As of, or For the Year
     Ended,
   
   December 31,
|------------------------------------------------------ |  | ------------------------------------------------------
|
|
|New business
     volume                               |  | $1,422                                                
|Total lending assets and
     investments              |  | 2,626                                                 
|Revenues                                               |  | 221                                                   
|                                                      
|Revenues as a percentage
     of total revenues        |  | 13.5                                                  
|Ratio of net writedowns to
     average lending assets |  | 0.1                                                   
|Ratio of nonearning assets
     to lending assets      |  | 1.0                                                   




As of December 31, 1999, Real Estate Finance had total lending assets
   and investments of $2.6 billion, or 15.6% of Hellers total lending
   assets and investments. Of this amount:





| |  | about $1.2 billion
     represents senior secured lending assets and investments;
| | - | ---------------------------------------------------------------------------------




| |  | about $800 million
     represents CMBS receivables;
| | - | ----------------------------------------------------




| |  | about $400 million
     represents vacation ownership lending assets and investments
| | - | ------------------------------------------------------------------------------------




Real Estate Finance new business volume for the year totaled $1.4
   billion, of which approximately $400 million related to CMBS receivables.
   New business volume was down from 1998 due to an anticipated decline in CMBS
   volume. Excluding CMBS, new business volume for the year was approximately
   $1 billion, an increase of $744 million or 276% over 1998. This growth in
   non-CMBS volume resulted in an increase in Real Estate lending assets and
   investments of over $700 million in 1999. We are continuing to provide
   financing in the CMBS market and may sell or securitize existing and newly
   originated CMBS assets depending on market conditions.





Net writedowns to average lending assets improved to 0.1% during 1999
   versus 2.9% in 1998. Excluding a $40 million writedown recorded on CMBS
   assets in 1998, the ratio of net writedowns to average lending assets was
   0.3% for Real Estate Finance during 1998.





Total revenues of Real Estate Finance decreased during 1999 as
   compared to 1998 primarily due to lower securitization income and lower net
   investment gains.





Real Estate Finances credit philosophy emphasizes selecting
   properties that generate stable or increasing income cash flow streams, have
   strong asset quality and proven sponsorship with defined business plans. We
   underwrite the CMBS product according to rating agency guidelines and we
   make all CMBS loans on a senior secured basis. Vacation Ownerships
   credit philosophy considers the developers business objectives and
   capital needs, the competitive position of the resort development, mortgage
   servicing capabilities, receivable performance and the developers
   financial strength and timeshare experience. Our credit philosophy for
   junior secured financings considers the strength and track record of the
   property developer, the supply and demand dynamics of the particular market
   and the competitive strengths of the subject real estate.





These credit strategies have resulted in low levels of nonearning
   assets for the past three years. Our lending and investment philosophy
   emphasizes portfolio liquidity, relatively small individual transaction
   sizes and maintenance of a diverse portfolio in terms of geographic location
   and property type.





Real Estate Finances lending assets and investments were
   distributed as follows:





Property Types


|                                      |  | 1999 |   | 1998
|------------------------------------- |  | ---- | - | ----
|General purpose office
     buildings |  | 27   | % |     
|Retail
     properties                |  | 18   |   |     
|Apartments                            |  | 14   |   |     
|Vacation ownership
     units         |  | 14   |   |     
|Industrial
     properties            |  | 7    |   |     
|Hotels                                |  | 6    |   |     
|Manufactured
     housing             |  | 5    |   |     
|Self storage
     facilities          |  | 3    |   |     
|Senior housing                        |  | 2    |   |     
|Loan Portfolios                       |  | 1    |   |     
|Other                                 |  | 3    |   |     
|                                      |  |      |   |     
|                                      |  | 100  | % |     
|                                      |  |      |   |     

Geographic Areas


|                         |  | 1999 |   | 1998
|------------------------ |  | ---- | - | ----
|Southwest                |  | 17   | % |     
|California               |  | 17   |   |     
|Florida                  |  | 10   |   |     
|Southeast                |  | 8    |   |     
|Midwest                  |  | 7    |   |     
|Mid-Atlantic
     States |  | 6    |   |     
|West                     |  | 5    |   |     
|New England              |  | 5    |   |     
|New York                 |  | 4    |   |     
|Other                    |  | 21   |   |     
|                         |  |      |   |     
|                         |  | 100  | % |     
|                         |  |      |   |     
|                         |  |      |   |     
|                         |  |      |   |     

During 1999, we securitized approximately $400 million of CMBS
   receivables in the second quarter. We recognized $4 million of
   securitization income on this transaction. We did not retain any residual
   risk from this securitization as all of the commercial mortgage pass-through
   certificates were sold to third parties on a non-recourse basis.





In addition to securitizations, we participate 50% of most of our
   junior participation originations through an arrangement with institutional
   investors in which they participate, in the aggregate, in 50% of qualified
   transactions. Transactions originated outside of this
 arrangement may be syndicated as well based on size or concentration
   considerations. The use of syndications has enabled us to reduce our average
   individual retained position in this portfolio to approximately $2
   million.





At December 31, 1999, Real Estate Finance maintained contractual
   commitments to finance an additional $289 million to new and existing
   borrowers, generally contingent upon their maintaining specific credit
   standards. Since we expect many of these commitments to remain unused, the
   total commitment amounts do not necessarily represent future cash
   requirements. We do not have any significant commitments to provide
   additional financing related to nonearning assets.





| | Leasing Services
| | ----------------




Leasing Services is made up of three distinct business
   units:





| | (1) | Global Vendor Finance,
     which provides financing programs domestically and in important overseas
     markets for manufacturers and their channel partners;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------




| | (2) | Commercial Equipment
     Finance, which provides loans and lease financing to leading middle market
     companies and experienced operators of proven franchise concepts;
     and
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | (3) | Capital Finance, which
     provides financing and leasing for industry specific assets through direct
     investments, joint ventures and institutional partnerships.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------




Global Vendor Finance.We formed Global
   Vendor Finance in 1998 by combining our existing Vendor Finance unit with
   the Dealer Products Groups technology leasing business acquired on
   November 30, 1998. Primary locations for vendor leasing are the United
   States, United Kingdom and Canada with smaller operations in continental
   Europe, Mexico, Hong Kong and Singapore.





Global Vendor Finance provides customized sales financing programs
   that enable vendors and manufacturers in commercial, industrial, medical and
   information and technology markets to offer financing and leasing options to
   their customers. The primary products we offer are true leases, loans and
   conditional sales contracts. These financing programs may be offered on
   either a direct, private label or joint venture basis. The primary equipment
   types we finance are computer equipment, software, machine tool equipment,
   plastics equipment, graphic arts equipment and transportation equipment.
   Individual transaction sizes within these programs range from $1,000 to $10
   million and terms generally range from 24 months to eight years.





In 1999, Global Vendor Finance generated approximately $1.2 billion in
   new business volume, an increase of 53% over 1998 new business volume of
   nearly $800 million. This increase was primarily due to our 1998 acquisition
   of the Dealer Products Group.





Commercial Equipment Finance.Commercial
   Equipment Finance has broad, national access to the equipment finance
   marketplace through 13 domestic offices. We provide general equipment term
   loan and lease financings directly to a diverse group of middle market
   companies. They use the financings for:





| |  | expansions;
| | - | -----------




| |  | acquisitions;
| | - | -------------




| |  | turnkey land, building and
     equipment financing;
| | - | ----------------------------------------------------




| |  | remodeling;
| | - | -----------




| |  | refinancing;
| | - | ------------




| |  | replacement or
     modernization of equipment; and
| | - | ---------------------------------------------------




| |  | refinancing of existing
     equipment obligations.
| | - | ---------------------------------------------------




We believe that our emphasis on direct origination provides us with a
   competitive advantage of stronger customer relationships and enables us to
   generate repeat business.





In 1999, we launched the Franchise Finance unit, a specialty group
   within Commercial Equipment, to expand and focus our existing efforts to
   meet the financing needs of strong, experienced operators of proven
   franchise concepts. This unit reinforces our historical commitment to
   franchise lending.





The Special Purpose Property unit was also launched in 1999. This new
   specialty group combines our asset based lending expertise with our
   traditional equipment and real estate financing to provide one financing
   source for real property and equipment. The Special Purpose Property unit
   provides secured debt and synthetic lease products for end-user and
   owner-occupied properties to middle market companies in a wide variety of
   industries.





In addition to direct origination, we generate business through
   traditional broker and other intermediary channels. Through our broad market
   access, we also generate new business referrals for other business groups of
   the Company, particularly Corporate Finance and Small Business Finance.
   Individual transaction sizes range from $1 million to $40 million. A typical
   borrower/lessee is a U.S. business with annual revenues of at least $35
   million. Generally, the equipment serving as collateral for the financing is
   essential to the operations of the borrower and the amount financed is
   generally not a substantial part of the borrowers capital structure.
   Commercial Equipment Finance generated new business volume of nearly $800
   million in 1999, an increase of 26% over 1998.





Capital Finance.Capital Finance offers
   customized equipment financing solutions, including operating leases and
   other specialized financing alternatives. The group focuses its origination
   efforts in large ticket markets and sectors such as:





| |  | commercial
     aircraft;
| | - | -------------------------




| |  | entertainment;
| | - | --------------




| |  | media;
| | - | ------




| |  | selected telecommunication
     markets;
| | - | ----------------------------------------




| |  | selected transportation
     markets; and
| | - | -----------------------------------------




| |  | selected technology
     markets
| | - | --------------------------------




Our Aircraft Finance unit within Capital Finance is a niche competitor
   in the commercial aircraft and aircraft engine finance industries and
   provides financing through operating leases and senior and junior secured
   loans on both new and used equipment. Our clients are typically mid-tier
   foreign or domestic airlines. We have developed a reputation for
   responsiveness on single investor transactions, which generally involve one
   aircraft with lease terms of three to seven years. In addition, our
   reliability and industry knowledge have made us a frequently desired
   participant in larger financings by other aircraft lessors. With our
   industry and equipment expertise, we are able to effectively shift our
   product offering mix during various phases of the equipment cycle and to
   re-market off-lease equipment. Typical transaction sizes range from $3
   million to $50 million.





Similar to our Aircraft Finance unit, Capital Finance transactions
   provide financing through:





| |  | operating
     leases;
| | - | ----------------------




| |  | acquisition of seasoned
     leveraged leases;
| | - | ----------------------------------------------




| |  | residual participations;
     and
| | - | ---------------------------------




| |  | other strategic
     partnerships or investments.
| | - | -------------------------------------------------




Capital Finance generated new business volume of $311 million in 1999,
   35% of which related to Aircraft Finance. This level of new business volume
   represented a 35% increase over 1998.





The following table sets forth certain information regarding Leasing
   Services:





|                                                       |  | As of, or For the Year
     Ended,
   
   December 31,
|------------------------------------------------------ |  | ------------------------------------------------------
|
|
|New business
     volume                               |  | $2,298                                                
|Total lending assets and
     investments              |  | 3,428                                                 
|Revenues                                               |  | 341                                                   
|                                                      
|Revenues as a percentage
     of total revenues        |  | 20.8                                                  
|Ratio of net writedowns to
     average lending assets |  | 0.5                                                   
|Ratio of nonearning assets
     to lending assets      |  | 0.9                                                   




The ratio of net writedowns to average lending assets of 0.5% for 1999
   and 0.1% for 1998, and the low ratio of nonearning assets to lending assets
   of 1.0% or lower for each of the past three years, demonstrate the strong
   credit quality of the Leasing Services portfolio.





Global Vendor Finances approach to lending balances the strength
   of the borrower, the value of the underlying collateral and the extent of
   recourse provided by the vendor. Middle and large ticket leasing
   transactions are characterized by the high credit quality performance of the
   portfolio as evidenced by lower levels of nonearning assets and writedowns
   with equivalently lower yields. Small ticket leasing transactions have
   higher margins but also have correspondingly higher levels of writedowns and
   non-earning assets.





Commercial Equipment Finances approach to lending concentrates
   on the cash flow of the borrower, the importance and/or value of the
   equipment to the borrowers overall operations and the relative
   strength of the borrowers balance sheet and capital
   structure.





Capital Finances credit approach focuses on the strength of the
   underlying collateral and the creditworthiness of the underlying
   lessee.





In all areas, Leasing Services assesses residual value risk and
   effectively manages off-lease equipment exposures. Designated individuals in
   each equipment unit establish all equipment residuals used in pricing lease
   transactions. They continuously research secondary market values to
   establish current values, estimate future values and mark industry
   trends.





Leasing Services distributes a portion of its assets through
   securitizations and syndications. During 1999, Leasing Services securitized
   approximately $800 million in two securitizations resulting in net gains of
   $9 million. Through these capital markets capabilities, we are able to
   provide broader market coverage and better service to clients, while
   managing borrower and industry concentrations.





As of December 31, 1999, Leasing Services lending assets and
   investments totaled $3.4 billion, or 20% of Hellers total lending
   assets and investments.





The Leasing Services portfolio consisted of 31 industry
   classifications at December 31, 1999. The computer industry represented 22%
   of Leasing Services total lending assets while the automotive industry
   represented 15%. No other industry represented more than 10% of total
   lending assets for Leasing Services at December 31, 1999.





At December 31, 1999, Leasing Services maintained contractual
   commitments to finance an additional $557 million to new and existing
   borrowers, generally contingent upon their maintaining specific credit
   standards. Since we expect many of these commitments to remain unused, the
   total commitment amounts do not necessarily represent future cash
   requirements. We do not have any significant commitments to provide
   additional financing related to nonearning assets.





| | Small Business Finance
| | ----------------------




Small Business Finance provides long-term financing to small
   businesses primarily in the manufacturing, retail and service sectors
   for:





| |  | facility purchases,
     construction or refinancing;
| | - | -----------------------------------------------------




| |  | business or equipment
     acquisition;
| | - | ---------------------------------------




| |  | working capital;
     and
| | - | -------------------------




| |  | debt
     refinancing.
| | - | ----------------------




Our major product offerings are SBA 7(a) loans, which are guaranteed
   up to 80% by the SBA, and SBA 504 loans, which are senior to an accompanying
   SBA loan and have an average loan to collateral value of 50%. We also
   originate transactions without credit support from the SBA.





Small Business Finance is one of only fourteen non-banks that the SBA
   licenses to make SBA 7(a) loans. In 1999, we became the largest national
   originator of such loans in the United States in terms of volume. Our
   portfolio is 77% concentrated in California, Texas, Florida and Illinois,
   and is geographically diversified within these states. We have diversified
   our portfolio by industry type, with concentrations of 15% in transportation
   services and 11% in miscellaneous consumer services at December 31, 1999. No
   other industry represented more than 10% of our portfolio.





Small Business Finance loans are generally for amounts up to $4
   million, have an average size of approximately $500,000 and have a
   contractual maturity ranging from five to 25 years. Our $1.3 billion in
   lending assets and investments as of December 31, 1999, represented 7.8% of
   the Companys portfolio. At December 31, 1999, 79% of our portfolio was
   originated under SBA lending programs.





The following table gives certain information regarding Small Business
   Finance:





|                                                       |  | As of, or For the Year
     Ended,
|------------------------------------------------------ |  | ----------------------------------
|
|
|
|                                                      
|New business
     volume                               |  | $703                              
|Total lending assets and
     investments              |  | 1,312                             
|Revenues                                               |  | 120                               
|                                                      
|Revenues as a percentage
     of total revenues        |  | 7.3                               
|Ratio of net writedowns to
     average lending assets |  | 0.5                               
|Ratio of nonearning assets
     to lending assets      |  | 3.3                               




New business volume of Small Business Finance totaled over $700
   million and represented a 29% increase from the prior year.





Small Business Finance operates out of 32 offices in 16 states. Our
   portfolio is managed on a centralized basis. We focus our marketing efforts
   on developing relationships with third party intermediaries, such as real
   estate brokers, mortgage brokers and business brokers. We originate
   additional business through referrals from existing customers, franchisers,
   targeted direct marketing and cross-referrals from Hellers other
   business units.





We maintain SBA Preferred Lender Program (PLP) status that enables us
   to approve SBA 7(a) loans under SBA-delegated approval authority. Small
   Business Finance has maintained a position as one of the nations three
   largest originators of SBA 7(a) loans since 1995.





We have standardized our underwriting and procedural guidelines to
   ensure a consistent and efficient lending process. We base our credit
   decisions on the analysis of a prospective borrowers cash flow, the
   use of independent valuations for collateral and a review of management.
   Loans are generally secured by real estate and equipment, with additional
   collateral in the form of other business assets, personal residences and, in
   many instances, personal guarantees.





Our Small Business Finance portfolio consists of approximately 3,800
   individual loans, providing diversified risk. At December 31, 1999,
   nonearning assets represented 3.3% of this portfolio. Of our nonearning
   assets, approximately 76% were the guaranteed portions of SBA 7(a) loans
   which are held until a liquidation is complete and the SBA repurchases the
   loan. Net writedowns have remained at or below 0.5% of average lending
   assets for each of the past three years.





We have developed and demonstrated the ability to sell both the
   guaranteed and unguaranteed portions of SBA 7(a) loans in the secondary
   market. We sold $221 million in guaranteed SBA 7(a) loans in 1999 resulting
   in income of $17 million.





At December 31, 1999, Small Business Finance maintained contractual
   commitments to finance an additional $44 million to new and existing
   borrowers, generally contingent upon their maintaining specific credit
   standards. We do not have any significant commitments to provide additional
   financing related to nonearning assets.





| | Healthcare Finance
| | ------------------




Healthcare Finance was formed when we acquired HCFP in July 1999.
   Subsequent to the acquisition, we combined our existing healthcare finance
   activities in cash flow, asset based and real estate lending with those of
   HCFP and believe we became the leading financing provider to small and
   middle-market healthcare companies nationally.





Healthcare Finance offers asset-based, collateralized cash flow and
   secured real estate financing to healthcare providers, with a primary focus
   on clients operating in sub-markets of the healthcare industry, including
   long-term care, home healthcare, physician practices, pharmacies, mental
   health providers and durable medical equipment suppliers. We provide
   financing to our clients through i) revolving lines of credit secured by,
   and advances against, accounts receivable, and ii) term loans secured by
   real estate, accounts receivable or other assets. Our clients use our
   products to address their working capital needs and to finance healthcare
   facility acquisitions and expansions.





Healthcare Finance targets small and middle-market healthcare
   providers with financing needs in the $100,000 to $30 million range in
   healthcare sub-markets. The average asset based lending transaction size in
   1999 was about $4 million.





Healthcare Finance has developed low cost means of marketing its
   services on a nationwide basis to selected healthcare sub-markets.
   Healthcare Finance primarily markets its services by telemarketing to
   prospective clients, advertising in industry specific periodicals and
   participating in industry trade shows. To a lesser extent, Healthcare
   Finance markets its services by developing referral relationships with
   accountants, lawyers, venture capital firms, billing and collecting firms
   and investment banks.





The following table gives information about Healthcare
   Finance:





|                                                       |  | As of, or For the Year
     Ended,
   
   December 31,
|------------------------------------------------------ |  | ------------------------------------------------------
|
|
|New business
     volume                               |  | $362                                                  
|Total lending assets and
     investments              |  | 971                                                   
|Revenues                                               |  | 63                                                    
|                                                      
|Revenues as a percentage
     of total revenues        |  | 3.8                                                   
|Ratio of net writedowns to
     average lending assets |  |                                                      
|Ratio of nonearning assets
     to lending assets      |  | 0.7                                                   




|(1) | Includes existing
     healthcare activities of Real Estate Finance and Corporate
     Finance.
|--- | -----------------------------------------------------------------------------------------------




As of December 31, 1999, Healthcare Finance had total lending assets
   and investments of nearly $1 billion, or 5.8% of Hellers total lending
   assets and investments. Healthcare Finance new business volume for the year
   totaled $362 million, of which $145 million related to HCFP since the
   acquisition date.





Healthcare Finance provides financing based upon our analysis of the
   prospective clients financial condition and strategic position,
   including a review of all available financial statements and other financial
   information, legal documentation and operational matters. Our assessment
   also includes a detailed examination of a prospective clients accounts
   receivable, accounts payable, billing and collection systems and procedures,
   management information systems and real and personal property and other
   collateral.





As of December 31, 1999, Healthcare Finance had contractual
   commitments to finance an additional $44 million to new and existing
   borrowers, generally contingent on their maintaining specific credit
   standards. We do not have any significant commitments to provide additional
   financing related to nonearning assets.





International Factoring and Asset Based Finance Segment





International Group, the Heller subsidiary that manages the
   International Factoring and Asset Based Financing business, is active in the
   following product areas:





| |  | working capital
     finance;
| | - | -----------------------------




| |  | factoring and receivables
     management services;
| | - | ---------------------------------------------------




| |  | asset based
     financing;
| | - | ---------------------------




| |  | acquisition
     financing;
| | - | ---------------------------




| |  | leasing and vendor
     financing; and
| | - | --------------------------------------




| |  | trade
     financing.
| | - | ---------------------




International Group has a significant presence in factoring and
   asset based financing, primarily in Europe. We have had subsidiaries and
   joint ventures in many international markets for more than 30 years. Direct
   holdings of International Group currently consists of five consolidated
   subsidiaries and 10 joint ventures. These subsidiaries and joint ventures
   operate in 20 countries in Europe, Asia/Pacific and Latin
   America.





The largest of our consolidated subsidiaries is Factofrance, which is
   the leading factoring company in France and the second largest factor in the
   world. In 1999, Factofrance had factoring volume of $12 billion.





Factofrances traditional clients are small to mid-sized,
   high-growth companies that utilize factoring to finance their working
   capital needs. Factofrance offers a full range of both domestic and
   international factoring services, including financing, credit insurance and
   management and collection of accounts receivables.





Factofrance utilizes a credit scoring system and a rating system for
   making credit decisions. The scoring system involves many criteria including
   company size, industry, selected financial information and ratio analysis.
   In addition to the scoring system, a rating system is used for requests for
   credit lines above specified limits. The rating system is used to authorize
   credit limits for individual and global lines of credit. Credit approval
   decisions are made by analysts, credit managers or by committee according to
   delegated authorities.





Factofrance is re-insured by a third-party insurer for customer credit
   lines above specified limits. This credit insurance enables Factofrance to
   more effectively manage credit exposures. Insured risks require the approval
   of the insurance provider and are insured at either a 50% or 80% level,
   depending on the size of the risk.





To expand its client base, Factofrance has actively pursued a
   partnering strategy to focus on particular market niches as well as to
   provide access to the client bases of large banking partners. Two of these
   arrangements with French banking partners are unconsolidated joint ventures.
   Factofrance provides services to these joint ventures and bills the joint
   ventures for those services. On a combined basis, these unconsolidated joint
   ventures generated $6 billion in factoring volume in 1999, which is in
   addition to the consolidated factoring volume shown above.





In addition to its Paris headquarters, Factofrance has seven regional
   sales offices, which market its services and cover local networks of
   business referral sources from brokers or banks. In recent years, the direct
   marketing approach has gained in importance and is now the main source of
   business for Factofrance. The company engages in press and television
   advertisement to increase brand awareness and support direct marketing
   efforts.





Factofrances consolidated receivables were FRF 15.7 billion (or
   $2.4 billion) at the end of 1999. The companys receivables portfolio
   is well diversified both in terms of exposure to specific industries and
   individual customers, with no individual sector representing more than 10%
   of the total. In addition, the company has very effective control procedures
   in place to manage its risks, whether client or customer
   related.





The average maturity of Factofrances assets is about 70 days.
   Factofrance seeks to match this with short-term funding, essentially in the
   form of interbank borrowings and domestic commercial paper. In addition,
   Factofrance has access to Bank of France (central bank) funding based on
   certain eligible receivables. The company has approximately FRF 2.0 billion
   (or $307 million) in stand-by credit lines. In 1998 Factofrance set up a
   securitization program for approximately FRF 1.0 billion (or $188 million)
   in order to diversify its funding sources and enhance liquidity.





We believe that our International Group subsidiaries and joint
   ventures provide a solid base for consistent growth in international
   earnings. They also provide us with the opportunity to meet the
   international financing needs of Hellers domestic client base. At
   December 31, 1999, International Group had total lending assets and
   investments of over $3.0 billion, or 18.1% of Hellers total lending
   assets and investments. In 1999, we had total revenues (including Heller
   s share of net income from international joint ventures) of $265
   million, or 16.2% of Hellers total revenues.





The following table provides certain information regarding the
   International Factoring and Asset Based Financing segment:





|                                                                             |  | As of, or For the Year
   
   Ended, December 31,
|---------------------------------------------------------------------------- |  | -------------------------------------------------
|
|
|                                                                            
|Lending assets and
     investments of consolidated
   
       subsidiaries:
|France (1)                                                                   |  | $  2,410                                         
|Other Europe                                                                 |  | 22                                               
|Asia/Pacific                                                                 |  | 189                                              
|Latin America (2)                                                            |  | 204                                              
|                                                                             |  |                                                  
|                                                                             |  | 2,825                                            
|Investments in
     international joint ventures:                            |  |                                                  
|Europe                                                                       |  | 187                                              
|Asia/Pacific                                                                 |  | 17                                               
|Latin America (2)                                                            |  | 11                                               
|                                                                             |  |                                                  
|                                                                             |  | 215                                              
|                                                                             |  |                                                  
|Total lending assets and investments                                         |  | $  3,040                                         
|                                                                             |  |                                                  
|Factoring volume of
     consolidated subsidiaries:                          |  |                                                  
|France (1)                                                                   |  | $12,014                                          
|Asia/Pacific                                                                 |  | 623                                              
|Latin America (2)                                                            |  | 936                                              
|                                                                             |  |                                                  
|                                                                             |  | $13,573                                          
|                                                                             |  |                                                  
|Revenues of consolidated
     subsidiaries:                                  |  |                                                  
|France (1)                                                                   |  | $    182                                         
|Other Europe                                                                 |  | 5                                                
|Asia/Pacific                                                                 |  | 18                                               
|Latin America (2)                                                            |  | 26                                               
|                                                                             |  |                                                  
|                                                                             |  | 231                                              
|Income of international
     joint ventures:                                 |  |                                                  
|Europe                                                                       |  | 36                                               
|Asia/Pacific                                                                 |  | 1                                                
|Latin America (2)                                                            |  | (3                                               
|                                                                             |  |                                                  
|                                                                             |  | 34                                               
|                                                                             |  |                                                  
|Total international revenues                                                 |  | $    265                                         
|                                                                             |  |                                                  
|Total international
     revenues as a percentage
   
   of total revenues   |  | 16.2                                             
|Ratio of net writedowns to
     average lending assets                       |  | 0.1                                              
|Ratio of nonearning assets
     to lending assets                            |  | 1.2                                              







|(1) | Reflects the consolidation
     of Factofrance in April 1997 due to the acquisition of the interest of
     International Groups joint venture partner, which increased
     International Groups ownership of Factofrance from 48.8% to
     97.6%.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(2) | Reflects the consolidation
     of Heller Sud Servicios Financieros due to our obtaining economic control
     of this Argentina subsidiary.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------




The largest of our joint ventures is NMB-Heller Holding N.V., which
   operates in 8 countries, primarily Holland, the United Kingdom and Germany.
   NMB-Heller Holding N.V. accounted for 59% of our investments in
   international joint ventures at December 31, 1999.


Our investment in NMB-Heller Holding N.V. totaled $129 million and
   $131 million at December 31, 1999 and 1998, respectively. NMB-Heller Holding
   N.V. had total receivables of $2.9 billion and $2.8 billion at December 31,
   1999 and 1998, respectively, and revenues of $181 million and $180 million
   for the years then ended.





We continue to develop our international operations through mergers,
   joint ventures and acquisitions. We have broad, worldwide access to
   mid-sized and small businesses with operations in 20 countries outside the
   United States. Each of our subsidiaries and joint ventures operates
   independently, with its own well-developed methods of originating business.
   The majority of our international joint ventures are self-financed. We
   manage our investments through offices located in London, Singapore and
   Chicago. Each subsidiary and joint venture has its own well-developed credit
   philosophy, risk management policies and procedures and portfolio management
   processes. We monitor our subsidiaries and joint ventures through
   participation on their boards of directors, credit committees and other
   executive and administrative bodies.





See Note 26Subsequent Eventsfor information on the
   sale of our interest in our Belgium operating companies that occurred in
   February 2000.





Sales and Marketing





Our marketing efforts include reinforcing our national brand building
   marketing campaign, Straight Talk, Smart Deals,in the
   marketplace.





Heller originates transactions in the United States utilizing a
   dedicated sales force of over 300 employees throughout our 48 domestic
   office locations. We originate transactions internationally through a
   network of wholly-owned subsidiaries and joint venture commercial finance
   companies in 20 countries outside the United States. Our sales people have
   industry-specific experience that enables them to effectively structure
   commercial finance transactions to companies in the industries and markets
   we serve.





Our sales force originates business through a combination
   of:





| |  | relationships with a wide
     variety of private equity investors, business brokers, investment bankers,
     and various intermediaries and referral sources;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | relationships with
     manufacturers, dealers and distributors;
| | - | ----------------------------------------------------------------




| |  | direct calling on
     prospective borrowers;
| | - | ---------------------------------------------




| |  | relationships with
     financial institutions; and
| | - | ---------------------------------------------------




| |  | relationships with
     web-based customers.
| | - | --------------------------------------------




We have invested in expanding and broadening our market coverage in
   several of our businesses, particularly Small Business Finance, Leasing
   Services and Healthcare Finance. We expect these investments to enhance our
   ability to generate new transactions and revenue growth.





We design the structure of our sales force compensation to
   encourage:





| |  | profitable new business
     development;
| | - | -----------------------------------------




| |  | client
     retention;
| | - | ----------------------




| |  | credit
     quality;
| | - | --------------------




| |  | solid pricing margins;
     and
| | - | -------------------------------




| |  | cross-referral of business
     opportunities to other business groups.
| | - | -----------------------------------------------------------------------




Our CrossLink Program, which compensates sales force members
   and other employees for the generation of cross-referral business volume,
   has been enhanced and has built momentum for cross-referral activities.
   During 1999, CrossLink produced commitments of nearly $300
   million.





We also market our products and services through the use
   of:





| |  | general market
     advertising;
| | - | --------------------------------




| |  | trade
     advertising;
| | - | -----------------------




| |  | direct mail;
| | - | ------------




| |  | web sites;
| | - | ----------




| |  | public
     relations;
| | - | ----------------------




| |  | newsletters;
| | - | ------------




| |  | trade show attendance and
     sponsorship;
| | - | -------------------------------------------




| |  | presenting educational
     seminars; and
| | - | -----------------------------------------




| |  | a variety of other market
     and industry-specific events.
| | - | ------------------------------------------------------------




We maintain several proprietary databases for the purpose of
   generating targeted, customized direct marketing campaigns and for tracking
   relationship history with certain clients and prospects. We regularly
   conduct client satisfaction surveys and other market research studies
   designed to assess our competitive position and to identify unfulfilled
   needs of our clients and prospects.





We are developing and expanding our eCommercecapabilities in
   an effort to realize new business opportunities and processing efficiences,
   including:





| |  | new origination
     channels;
| | - | ------------------------------




| |  | new products and
     services;
| | - | -------------------------------




| |  | greater geographic
     penetration;
| | - | ------------------------------------




| |  | internet based alliances
     and partnerships;
| | - | -----------------------------------------------




| |  | increased automation of
     loan application and credit approval processes;
| | - | ----------------------------------------------------------------------------




| |  | self-service (customers
     and employees); and
| | - | ------------------------------------------------




| |  | rapid response to market
     demands and changes.
| | - | --------------------------------------------------




We have registered a number of domestic and foreign domain names that
   we are using, or may use in the future, in connection with our eCommerce
   strategy, the two most important of which are hellerfin.com and
   hellerfinancial.com.





Competition





Hellers markets are highly fragmented and extremely competitive.
   They are characterized by competitive factors that vary by product and
   geographic region. Our competitors include:





| |  | other commercial finance
     companies;
| | - | ----------------------------------------




| |  | national and regional
     banks and thrift institutions;
| | - | ---------------------------------------------------------




| |  | investment
     banks;
| | - | ----------------------




| |  | leasing
     companies;
| | - | -----------------------




| |  | investment companies;
     and
| | - | ------------------------------




| |  | manufacturers and
     vendors.
| | - | -------------------------------




Competition from both traditional competitors and new market entrants
   has intensified in recent years as the result of an improving economy,
   growing marketplace liquidity and an increasing recognition of the
   attractiveness of the commercial finance markets. Also, the growth of the
   securitization markets has reduced the difficulty of accessing capital for
   some market participants. This is further intensifying competition in
   certain market segments.





We compete primarily on the basis of pricing, terms, structure and
   service. Our competitors often seek to compete aggressively on the basis of
   these factors. We may lose market share to the extent we are unwilling to
   match our competitors pricing, terms or structure in order to maintain
   our spreads or to maintain our credit discipline. To the extent that we
   match competitors pricing, terms or structure, we may experience
   decreased spreads and/or increased risk of credit losses. Many of our
   competitors are large companies that have substantial capital, technological
   and marketing resources. Some of these competitors are larger than Heller
   and may have access to capital at a lower cost than we do. Further, the size
   and access to capital of certain of our competitors are being enhanced by
   the recent surge in consolidation activity in the commercial and investment
   banking industries. Also, our competitors include businesses that are not
   affiliated with bank holding companies and therefore are not subject to the
   same extensive federal regulations that govern bank holding companies and
   their subsidiaries. As a result, such non-banking competitors may engage in
   certain activities in which we are currently prohibited from
   engaging.





Regulation





| | Bank Holding Company
     Act
| | -----------------------------




Fuji Bank is a bank holding company within the meaning of the Bank
   Holding Company Act of 1956 and is registered as such with the Board of
   Governors of the Federal Reserve System. As a result, we are subject to the
   Bank Holding Company Act and are subject to examination by the Federal
   Reserve.





In general, the Bank Holding Company Act limits the activities in
   which we may engage to those the Federal Reserve has generally determined to
   be so closely related to banking . . . as to be a proper incident
   thereto. The Bank Holding Company Act generally requires the approval
   of the Federal Reserve before we may engage in such activities. To obtain
   the Federal Reserves approval, Fuji Bank must submit a notice that
   provides information both about the proposed activity or acquisition and
   about the financial condition and operations of Fuji Bank and Heller. The
   Bank Holding Company Act will continue to apply to the Company for as long
   as Fuji Bank holds 25% or more of any class of our voting stock or otherwise
   is deemed by the Federal Reserve to control our management or operations.
   Our current business activities either constitute permitted activities or
   have received the Federal Reserves express approval.





| | Japanese Banking
     Law
| | -------------------------




Fuji Bank, as a Japanese bank, is also required to comply with the
   Japanese Banking Law. During 1998, the Banking Law was amended. The Banking
   Law limits the type of
 subsidiaries in which a Japanese bank may invest to those that conduct
   eligible businesses. A subsidiary is defined as an entity in
   which there is ownership of more than 50% of the voting shares. Eligible
   businesses generally include banks, securities firms, insurance companies,
   administrative businesses and financial companies. Establishment of any
   subsidiary requires the prior approval of the Financial Supervisory Agency,
   an agency of the Prime Ministers Office. Non-eligible business
   investments are permitted if acquired as collateral, although disposition of
   such businesses is required within one year.





Heller intends to use its best efforts to cooperate with Fuji Bank in
   Fuji Banks compliance with the new statute, provided that such
   cooperation would not, in the judgment of Hellers management,
   materially and adversely affect Hellers business operations. We do not
   believe that our cooperation has had or will have a material adverse effect
   on our current business operations or on the achievement of our intended
   business and financial goals.





| | Small Business
     Act
| | -----------------------




SBA loans that we originate are governed by the Small Business Act and
   the Small Business Investment Act of 1958, as amended, and may be subject to
   the same regulations by certain states as are other commercial finance
   operations. The federal statutes and regulations specify the types of loans
   and loan amounts which are eligible for the SBAs guaranty as well as
   the servicing requirements imposed on the lender to maintain SBA
   guarantees.





| | Other
| | -----




Our operations are subject, in certain instances, to supervision and
   regulation by state and federal governmental authorities. They may also be
   subject to various laws and judicial and administrative decisions imposing
   various requirements and restrictions, which, among other
   things:





| |  | regulate credit granting
     activities;
| | - | -----------------------------------------




| |  | establish maximum interest
     rates, finance charges and other charges;
| | - | -------------------------------------------------------------------------




| |  | require disclosures to
     customers;
| | - | --------------------------------------




| |  | govern secured
     transactions; and
| | - | -------------------------------------




| |  | set collection,
     foreclosure, repossession and claims handling procedures and other trade
     practices.
| | - | -------------------------------------------------------------------------------------------------------------




Although most states do not regulate commercial finance, certain
   states impose limitations on interest rates and other charges and on certain
   collection practices and creditor remedies. They may also require licensing
   of lenders and financiers and adequate disclosure of certain contract terms.
   We are also required to comply with certain provisions of the Equal Credit
   Opportunity Act applicable to commercial loans. Additionally, we are subject
   to regulation in those countries in which we have operations and in most
   cases have been required to obtain central governmental approval before
   commencing business.





In the judgment of management, the above and other existing statutes
   and regulations have not had a material adverse effect on our business.
   However, it is not possible to forecast the nature of future domestic or
   foreign legislation, regulations, judicial decisions, orders or
   interpretations nor their impact upon our future business, financial
   condition, results of operations or prospects.





Employees





As of December 31, 1999, Heller had 2,695 employees. We are not
   subject to any collective bargaining agreements.





During 1999, Heller implemented its Employer of Choiceinitiative in an effort to gain recognition by its competitors, clients
   and employees as an exceptional employeran industry and market leader
   in attracting, developing and retaining employees.





Risk Management





Hellers business activities contain elements of risk. We
   consider the principal types of risk across the enterprise to
   be:





| |  | credit risk;
| | - | ------------




| |  | asset/liability risk
     (including market risk exposures to changes in interest rates and foreign
     exchange rates as well as liquidity risk); and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | operational
     risk.
| | - | ----------------------




We consider the proper management of risk, across the enterprise,
   essential to conducting our business and to maintaining profitability.
   Accordingly, we have designed our risk management systems and procedures to
   identify and analyze our risks. We have set appropriate policies and limits
   to continually monitor these risks and limits by means of administrative and
   information systems and other policies and programs.





| | Credit Risk Management
| | ----------------------




We manage credit risk through:





| |  | underwriting
     procedures;
| | - | -----------------------------




| |  | centralized approval of
     individual transactions; and
| | - | ---------------------------------------------------------




| |  | active portfolio and
     account management.
| | - | ---------------------------------------------




We have developed underwriting procedures for each business line that
   enable us to assess a prospective borrowers ability to perform in
   accordance with established loan terms. These procedures
   include:





| |  | analyzing business or
     property cash flows and collateral values;
| | - | ---------------------------------------------------------------------




| |  | performing financial
     sensitivity analyses; and
| | - | ---------------------------------------------------




| |  | assessing potential exit
     strategies.
| | - | -----------------------------------------




For transactions we originate with the intent of reducing our ultimate
   retained asset size, we assign a risk rating prior to approval of the
   underlying transaction that reflects our confidence level, prior to funding,
   in syndicating the proposed transaction. Each business unit has a Senior
   Credit Officer who reports directly to our Chief Credit Officer and who
   reviews and approves financing and restructuring transactions that exceed
   designated amounts. Larger transactions require approval of our Chief Credit
   Officer or his deputy or a centralized credit committee comprised of our
   Chairman, Chief Operating Officer, Chief Credit Officer and Chief Financial
   Officer. Our Chief Credit Officer and, in some cases, our Chairman, conducts
   a quarterly portfolio review of each business groups significant
   assets.





We manage our portfolio by monitoring transaction sizes as well as
   diversification according to:





| |  | industry;
| | - | ---------




| |  | geographic
     area;
| | - | ---------------------




| |  | property type;
     and
| | - | -----------------------




| |  | identity of
     borrower.
| | - | --------------------------




Through these practices, management identifies and limits exposure to
   unfavorable risks and seeks favorable financing opportunities. We use (1)
   loan grading systems to monitor the performance of loans by product category
   and (2) an overall risk classification system to monitor the risk
   characteristics of the total portfolio. These systems generally
   consider:





| |  | debt service
     coverage;
| | - | ---------------------------




| |  | the relationship of the
     loan to underlying business or collateral value;
| | - | -----------------------------------------------------------------------------




| |  | industry
     characteristics;
| | - | ------------------------------




| |  | principal and interest
     risk; and
| | - | -------------------------------------




| |  | credit enhancements such
     as guarantees, irrevocable letters of credit and recourse
     provisions.
| | - | --------------------------------------------------------------------------------------------------------




When an account experiences financial difficulties, professionals who
   specialize in managing workout situations are brought in to more closely
   monitor the account and formulate strategies to optimize and accelerate the
   resolution process. An independent loan review function performs reviews to
   validate the loan grading of assets and provides its findings to senior
   management and to our Boards Audit Committee. Our Internal Audit
   Department (IAD), which is independent of operations, performs
   reviews of credit management and operation processes. IAD also reports its
   findings to senior management and our Boards Audit
   Committee.





| | Asset/Liability Management
| | --------------------------




We actively measure and quantify (1) interest rate risk, (2) foreign
   exchange risk and (3) liquidity risk resulting from normal business
   operations and derivatives hedging activity. We use derivatives as an
   integral part of our asset/liability management program. We use these
   derivatives to:





| |  | diversify sources of
     funding;
| | - | ----------------------------------




| |  | alter interest rate
     exposure arising from mismatches between assets and liabilities;
     and
| | - | --------------------------------------------------------------------------------------------------




| |  | manage exposure to
     fluctuations in foreign exchange rates.
| | - | ---------------------------------------------------------------




We are not an interest rate swap dealer nor are we a trader in
   derivatives. We do not use derivative products for the purpose of generating
   earnings from changes in market conditions.





Before entering into a derivative transaction, we determine that a
   high correlation exists between the change in value of a hedged item and the
   value of the derivative. When we execute each transaction, we designate the
   derivative to specific assets, pools of assets or liabilities. After the
   inception of a hedge transaction, our asset/liability managers monitor the
   effectiveness of derivatives through an ongoing review of the amounts and
   maturities of
 assets, liabilities and swap positions. They report this information to our
   Financial Risk Management Committee (the FRMC), whose members include
   our Chairman, Chief Operating Officer, Chief Credit Officer, Chief Financial
   Officer and Treasurer. The FRMC determines the direction we will take with
   respect to our financial risk position and regularly reviews interest rate
   sensitivity, foreign exchange exposures, funding needs and liquidity. We
   regularly report these positions and the related FRMC activities to the
   Board of Directors and our Boards Executive Committee.





Interest Rate Risk Management.    We regularly
   measure and quantify our sensitivity to changes in interest rates in terms
   of our two primary risks of potential loss: (1) basis risk and (2) mismatch
   risk. Basis risk is the exposure created from the use of different interest
   rate indices to re-price assets versus liabilities, such as prime based
   assets funded with commercial paper liabilities. Mismatch risk is the
   exposure created from the re-pricing or maturity characteristics of on and
   off-balance sheet assets versus the re-pricing or maturity characteristics
   of on and off-balance sheet liabilities.





We use various sensitivity analysis models to measure our exposure to
   increases or decreases in interest rates on net income. We perform these
   analyses to ensure that our exposure to any significant adverse effect of
   change in interest rates is limited to that approved by the Board of
   Directors and the FRMC. The FRMC reviews the results of these models
   monthly.





Assuming our balance sheet and off-balance sheet positions were to
   remain constant and no actions were taken to alter the existing interest
   rate sensitivity at December 31, 1999 and 1998, a hypothetical immediate 100
   basis point parallel shift in yield curves would have affected net income by
   less than 0.4% and 1.0%, respectively, over a six month horizon.





Additionally, if our balance sheet and off-balance sheet positions
   were to remain constant and no actions were taken to alter the existing
   prime/commercial paper exposure existing at December 31, 1999 and 1998, a 30
   basis point compression in the existing basis would have altered net income
   by approximately 1.3% and 1.3% over a twelve month horizon.





We believe that the above interest rate sensitivity analyses comply
   with the SECs Quantitative Disclosure Rules About Market Risk.
   We revised our disclosure alternative for 1999 from the tabular format in
   1998 in an effort to streamline our disclosures and to present more
   practical information to our readers. We have provided interest rate
   sensitivity analyses for 1998 for comparative purposes.





Certain limitations are inherent in the above income simulation
   models. The models assume that changes in interest rates are reflected
   uniformly across all yield curves. The models do not adjust for potential
   changes in credit quality, size and balance sheet composition or other
   business developments over the period being measured which could affect net
   income. Although our models provide an indication of our sensitivity to
   interest rate changes at a particular point in time, we can give no
   assurances that actual results would not differ materially from the
   potential outcomes simulated.





Interest rate swaps are our primary tool for financial risk
   management. These instruments enable us to match more closely the interest
   rate and maturity characteristics of our assets and liabilities. As such, we
   use interest rate swaps to:





| |  | change the characteristics
     of fixed rate debt to that of variable rate debt;
| | - | ---------------------------------------------------------------------------------




| |  | alter the characteristics
     of specific fixed rate asset pools to more closely match the interest rate
     terms of the underlying financing; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------




| |  | modify the variable rate
     basis of a liability to more closely match the variable rate basis used
     for variable rate receivables.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------




At December 31, 1999, we had over $10 billion in notional amount of
   interest rate swap and basis swap agreements with commercial banks and
   investment banking firms.





We also utilize interest rate futures to hedge the interest rate risk
   of a portion of our receivables portfolio. At December 31, 1999 we held
   10-year interest rate futures contracts with an equivalent notional amount
   of $220 million.





Hellers underlying business activities remain unchanged from
   1998 and are not expected to substantially change in 2000. Interest rate
   risk remains a primary market risk exposure that we will continue to manage.
   We may utilize certain other types of instruments, in addition to interest
   rate swaps and futures, to hedge interest rate risk in 2000.





Foreign Exchange Risk Management.    We invest in
   and operate commercial finance companies throughout the world. Over the
   course of time, reported results from our operations and investments in
   foreign countries may fluctuate in response to exchange rate movements in
   the U.S. dollar. While our Western European operations and investments
   represent our largest areas of activity, reported results will be influenced
   to a lesser extent by the exchange rate movements in the currencies of
   certain countries in Asia and Latin America where our subsidiaries and
   investments are located.





In order to minimize the effect of fluctuations in foreign currency
   exchange rates on our financial results, we periodically enter into forward
   currency exchange contracts, cross currency swap agreements or enter into
   currency options or currency option combinations. These financial
   instruments serve as hedges of our foreign investment in international
   subsidiaries and joint ventures or effectively hedge the translation of the
   related foreign currency income. We held $1.4 billion in notional amount of
   forward currency exchange contracts and $470 million in notional amount of
   cross currency swap agreements at December 31, 1999. Included in the cross
   currency interest rate swap agreements were $306 million used to hedge debt
   instruments issued in foreign currencies at December 31, 1999. Through these
   contracts, we effectively sell the local currency and buy U.S. dollars. We
   also periodically enter into forward contracts to hedge receivables
   denominated in foreign currencies or purchase foreign currencies in the spot
   market to settle a foreign currency denominated liability.





Hellers exposure to foreign exchange risk has increased somewhat
   since 1997 due to the Dealer Products Group acquisition, since we now
   have additional operations in certain foreign countries. Foreign exchange
   risk remains a primary market risk exposure that we will continue to manage.
   We have not altered the way in which we hedge our foreign exchange risk nor
   do we anticipate any significant changes in 2000. Our implementation of
   Financial Accounting Standard No. 133, Accounting for Derivatives and
   Hedging Activities,may however, impact our use of certain foreign
   currency hedging instruments in 2000.





We use a Value-at-Risk (VAR)methodology to evaluate the impact
   of foreign currency exchange fluctuations on net income. VAR is a
   measurement of the potential company-wide loss in earnings from adverse
   market movements over a specified period of time with a selected likelihood
   of occurrence. Our model measures the aggregate sensitivity to all changes
   in foreign currency exchange rates to which we are exposed. The FRMC reviews
   the results of this model monthly.





We have employed a variance/co-variance approach to measure VAR.
   This approach seeks to quantify market volatility by using historical
   changes in foreign currency exchange rates to measure the probability of
   future changes in foreign exchange rates. Variance/covariance also uses
   correlation statistics to measure how different currencies move in relation
   to one another. Our VAR analysis calculates the potential after-tax earnings
   at risk associated with changes in foreign currency exchange rates, within a
   95% confidence level, over a twelve-month horizon. Based on our analysis
   using a 95% confidence level, it is expected that as of December 31, 1999
   and 1998, foreign exchange rate movements would reduce after-tax earnings by
   less than $1 million and $2 million, respectively, over a twelve-month
   horizon. The high and low VAR amounts during the year ended December 31,
   1999 ranged from $1.7 million to $45,000. The high and low VAR amounts
   during the year ended December 31, 1998 ranged from $2.1 million to
   $113,000.





We believe that the above VAR analyses comply with the SECs
   Quantitative Disclosure Rules About Market Risk. We revised our
   disclosure alternative for 1999 from the tabular format in 1998 in an effort
   to streamline our disclosures and to present more practical information to
   our readers. We have provided VAR analyses for 1998 for comparative
   purposes.





Liquidity Risk Management.We manage liquidity
   risk primarily by:





| | (1) | monitoring the relative
     maturities of assets and liabilities;
| | --- | ------------------------------------------------------------------




| | (2) | borrowing funds through
     the U.S. and international money and capital markets and bank credit
     markets; and
| | --- | -------------------------------------------------------------------------------------------------------------------




| | (3) | ensuring the availability
     of substantial sources of liquidity such as unused committed bank
     lines.
| | --- | ------------------------------------------------------------------------------------------------------------




We use cash to fund asset growth and to meet debt obligations and
   other commitments on a timely and cost-effective basis. Our primary sources
   of funds are:





| | (1) | commercial paper
     borrowings;
| | --- | ---------------------------------




| | (2) | issuances of medium-term
     notes and other term debt securities; and
| | --- | -----------------------------------------------------------------------




| | (3) | the syndication,
     securitization or sale of certain lending assets.
| | --- | -----------------------------------------------------------------------




At December 31, 1999, commercial paper and short-term borrowings were
   $5.2 billion and amounts due on term debt within one year were $2.8 billion.
   If we are unable to access such markets at acceptable terms, we could draw
   on our bank credit and asset sale facilities and use cash flow from
   operations and portfolio liquidations to satisfy our liquidity needs. At
   December 31, 1999, we had committed available liquidity support through our
   bank credit and asset sale facilities totaling $5.7 billion representing, on
   a consolidated basis, 110% of outstanding commercial paper and short-term
   borrowings. We believe that such credit lines should provide us with
   sufficient liquidity under foreseeable conditions. See also Item 7.
   Managements Discussion and Analysis of Financial Condition and Results
   of OperationsLiquidity and Capital Resources for further
   information concerning our liquidity.





| | Operational Risk Management
| | ---------------------------




Operational risk is the risk of potential losses due to business risk,
   event risk or organizational risk.





We have recently adopted an Enterprise Risk Management (ERM)
   approach to enhance our measurement, reporting and monitoring of all risks,
   including operational risk. ERM
 involves an organizational structure in which each business has an operational
   risk manager responsible for the identification, measurement, monitoring and
   reporting of credit, market and operational risk. These risks are then
   aggregated and monitored, on a company wide basis, by a separate unit led by
   the Operational Risk Officer who reports to the Audit Committee of our Board
   of Directors.





Portfolio Quality





The continued strong credit quality of our portfolio in 1999 reflected
   our credit strategies, underwriting, portfolio management and disciplined
   credit approval processes. As of December 31, 1999, nonearning assets were
   $228 million, or 1.5% of lending assets, versus $211 million, or 1.8% of
   lending assets, at the end of 1998. We remain favorable to our stated target
   range for nonearning assets of 24% of lending assets. In addition, our
   allowance for losses of receivables was in excess of 100% of nonearning
   impaired receivables as of December 31, 1999, 1998 and 1997. The following
   table presents information about the credit quality of our
   portfolio:





|                                                                                     |  | December
     31,
|------------------------------------------------------------------------------------ |  | -----------------
|
|
|Lending Assets and
     Investments:                                                 |  |                  
|Receivables                                                                          |  | $14,795          
|Repossessed assets                                                                   |  | 24               
|                                                                                     |  |                  
|Total lending assets                                                                 |  | 14,819           
|Equity and real estate investments                                                   |  | 737              
|Debt securities                                                                      |  | 549              
|Operating leases                                                                     |  | 508              
|Investments in international joint
     ventures                                     |  | 219              
|                                                                                     |  |                  
|Total lending assets and investments                                                 |  | $16,832          
|                                                                                     |  |                  
|Nonearning
     Assets:                                                              |  |                  
|Impaired receivables                                                                 |  | $    204         
|Repossessed assets                                                                   |  | 24               
|                                                                                     |  |                  
|Total nonearning assets                                                              |  | $    228         
|                                                                                     |  |                  
|Ratio of nonearning impaired receivables to
     receivables                         |  | 1.4              
|Ratio of total nonearning assets to total lending
     assets                        |  | 1.5              
|Allowances for
     Losses:                                                          |  |                  
|Allowance for losses of receivables                                                  |  | $    316         
|Ratio of allowance for losses of receivables to
     receivables                     |  | 2.1              
|Ratio of allowances for losses of receivables to
     net writedowns                 |  | 3.2              
|Ratio of allowance for losses of receivables to
     nonearning impaired receivables |  | 154.9            
|Delinquencies:                                                                       |  |                  
|Earning loans delinquent 60 days or
     more                                        |  | $    228         
|Ratio of earning loans delinquent 60 days or more
     to receivables                |  | 1.5              




|                                                       |  | For the Year Ended
   
   December 31,
|------------------------------------------------------ |  | --------------------------------------
|
|
|                                                      
|Net Writedowns of
     Lending Assets:                
|Net writedowns on receivables                          |  | $ 98                                  
|Net writedowns on repossessed assets                   |  |                                      
|                                                       |  |                                       
|Total net writedowns                                   |  | $  98                                 
|                                                       |  |                                       
|Ratio of net writedowns to average lending
     assets |  | 0.7                                   




Nonearning Assets.We classify
   receivables as nonearning when we have significant doubt about the ability
   of the debtor to meet current contractual terms. This may be evidenced by
   (1) loan delinquency, (2) reduction of cash flows, (3) deterioration in the
   loan to value relationship and (4) other relevant considerations. The table
   below shows nonearning assets by business line in 1999, 1998 and
   1997:





|                                                     |  | December
     31,
|---------------------------------------------------- |  | -----------------
|
|
|
|Domestic Commercial
     Finance                     |  |                  
|Corporate Finance                                    |  | $  29            
|Real Estate Finance                                  |  | 21               
|Leasing Services                                     |  | 25               
|Small Business Finance                               |  | 43               
|Healthcare Finance                                   |  | 7                
|Commercial Services                                  |  |                 
|Other                                                |  | 71               
|                                                     |  |                  
|Total Domestic Commercial
     Finance               |  | 196              
|International Factoring
     and Asset Based Finance |  | 32               
|                                                     |  |                  
|Nonearning assets.                                   |  | $228             
|                                                     |  |                  




Nonearning assets as of December 31, 1999 were 1.5% of total lending
   assets, an improvement from 1.8% as of the prior year and favorable to our
   targeted range of 2% to 4%. Other nonearning assets consist of transactions
   for business activities we are no longer pursuing.





Allowance for Losses.The
   allowance for losses of receivables is a general reserve available to absorb
   losses in the entire portfolio. We establish this allowance through direct
   charges to income. Losses are charged to the allowance when we deem all or a
   portion of a receivable uncollectible. We review the allowance periodically
   and we adjust it when appropriate given:





| |  | the size and loss
     experience of the overall portfolio;
| | - | -----------------------------------------------------------




| |  | the effect of current
     economic conditions; and
| | - | ---------------------------------------------------




| |  | the collectibility and
     workout potential of identified risk and nonearning accounts. For
     repossessed assets, if the fair value declines after the time of
     repossession, we record a writedown to reflect this reduction in
     value.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Our allowance for losses of receivables totaled $316 million, or 2.1%
   of receivables, at December 31, 1999 versus $271 million, or 2.3% of
   receivables, at December 31, 1998. The decrease as a percentage of
   receivables is consistent with the strong credit performance of our
   portfolio. The ratio of allowance for losses of receivables to nonearning
   impaired receivables exceeded 100% at December 31, 1999, 1998 and
   1997.





Delinquent Earning Accounts and Loan Modifications.Earning accounts 60 days or greater past due totaled
   $228 million, or 1.5% of receivables at December 31, 1999 compared to $184
   million or 1.6% at December 31, 1998. The level of delinquent earning
   accounts changes between periods based on the timing of payments and the
   effects of changes in general economic conditions on our borrowers. Troubled
   debt restructurings were $14 million at December 31, 1999 and at December
   31, 1998.





At December 31, 1999, there were no loans that were restructured and
   returned to earning status.





Writedowns.Net writedowns,
   shown below for the years ended December 31, 1999, 1998 and 1997, increased
   in 1999 from 1998 as lower net writedowns in Real Estate Finance were offset
   by significantly higher recoveries in the Other category during 1998. This
   category represents transactions for business activities we are no longer
   pursuing.





|                                                     |  | For the Year Ended
     December 31,
|---------------------------------------------------- |  | ------------------------------------
|
|
|
|Net Writedowns of Lending
     Assets:               |  |                                     
|Domestic Commercial Finance                          |  |                                     
|Corporate Finance                                    |  | $22                                 
|Real Estate Finance                                  |  | 2                                   
|Leasing Services                                     |  | 14                                  
|Small Business Finance                               |  | 6                                   
|Healthcare Finance                                   |  |                                    
|Commercial Services                                  |  | 16                                  
|Other                                                |  | 35                                  
|                                                     |  |                                     
|Total Domestic Commercial Finance                    |  | 95                                  
|International Factoring and Asset Based
     Finance |  | 3                                   
|                                                     |  |                                     
|Total net
     writedowns                            |  | $98                                 
|                                                     |  |                                     




Net writedowns for 1999 totaled $98 million or 0.7% of average lending
   assets, compared to $81 million or 0.7% for the same period in 1998. Gross
   writedowns totaled $116 million for 1999, compared to $145 million in the
   prior year, while gross recoveries totaled $18 million in 1999 compared to
   $64 million in 1998. The increase in Real Estate Finance net writedowns
   during 1998 was the result of the $40 million writedown on CMBS assets
   recorded in the fourth quarter of that year.





During 1999, we recorded net writedowns of $35 million on our Other
   portfolio, as compared with net recoveries of $2 million in 1998. This is
   the result of realizing higher levels of recoveries in 1998 on this
   portfolio which represents assets from activities we are no longer pursuing.
   The increase in Leasing Services net writedowns during 1999 is primarily due
   to the Dealer Products Group acquisition that occurred in November
   1998.





ITEM 2. PROPERTIES





We lease office space for our corporate headquarters at 500 West
   Monroe Street, Chicago, Illinois 60661. We lease other offices throughout
   the United States, Canada, Europe, Asia/Pacific and Latin America. For
   information concerning our lease obligations, see Note 11 to the
   Consolidated Financial Statements. We own an office building used by Leasing
   Services in the United Kingdom.





ITEM 3. LEGAL PROCEEDINGS





We are a party to a number of legal proceedings as plaintiff and
   defendant, all arising in the ordinary course of our business. We believe
   that the amounts, if any, which we may ultimately pay regarding these
   matters will not have a material adverse effect on our business, financial
   condition or results of operations. However, we have no assurance that an
   unfavorable decision in any such legal proceeding would not have a material
   adverse effect.





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





No matters were submitted to a vote of the security holders of Heller
   in the fourth quarter of 1999.





PART II





ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER
   MATTERS





Hellers Class A Common Stock has traded on the New York and
   Chicago Stock Exchanges, under the symbol HF,since our initial
   public offering in May 1998. The following tables summarize the high and low
   market prices as reported on the New York Stock Exchange Composite Tape for
   the periods indicated and the cash dividends declared during 1999 and
   1998:





|          |  | Sales Price Range
   
   of Common Stock
|--------- |  | ----------------------------------------
|
|
|Quarters: |  |                                         
|First     |  | $30.31                                  
|Second    |  | 31.19                                   
|Third     |  | 28.00                                   
|Fourth    |  | 25.63                                   




|                     |  | Dividends Declared
   
   on Common Stock
|-------------------- |  | -----------------------------------------
|
|
|Quarters:            |  |                                          
|First                |  | $  8                                     
|Second               |  | 8                                        
|Third                |  | 8                                        
|Fourth               |  | 10                                       
|                     |  |                                          
|Total dividends paid |  | $34                                      
|                     |  |                                          




In 1999, we declared and paid cash dividends of $34 million on our
   Common Stock. During the fourth quarter of 1999, we increased the quarterly
   dividend on each share of our Class A and Class B Common Stock to $0.10 per
   share from $0.09 per share, an increase of 11%.





In 1998, we declared and paid cash dividends of over $1 billion on our
   Common Stock. These dividends included $998 million paid on the Common Stock
   owned by FAHI, both before and after the IPO. This amount included a $450
   million dividend paid in February 1998 in the form of a subordinated note,
   which we subsequently repaid, and cash dividends in the first and second
   quarters of 1998 of $15 million and $533 million, respectively.





During the first quarter of 2000, we declared and paid dividends
   ratably on our Class A and Class B Common Stock of $0.10 per
   share.





We are prohibited from paying dividends on Common Stock
   unless:





| | (1) | we have paid all declared
     dividends on all of our outstanding shares of Preferred Stock, Series C
     and Series D; and
| | --- | -----------------------------------------------------------------------------------------------------------------------------




| | (2) | we have paid all full
     cumulative dividends on all outstanding shares of our Cumulative Perpetual
     Senior Preferred Stock, Series A.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------




All such preferred stock dividends have been paid to date.





As of February 10, 2000, there were approximately 833 holders of
   record of Hellers Class A Common Stock, one of which represents
   approximately 7,185 beneficial holders. FAHI is the sole record holder of
   Hellers Class B Common Stock. The closing price of the Class A Common
   Stock on February 10, 2000 was $20.44.





ITEM 6. SELECTED FINANCIAL DATA





The results of our operations and balance sheet data for each of the
   years in the three-year period ended December 31, 1999 and as of December
   31, 1999 and 1998, respectively, were derived from our audited Consolidated
   Financial Statements, and the notes thereto, which appear elsewhere in this
   Form 10-K. The results of operations and balance sheet data for each of the
   years in the two-year period ended December 31, 1996 and as of December 31,
   1997, 1996 and 1995, respectively, were derived from our audited
   consolidated financial statements, and the notes thereto, which are not
   presented herein. The data presented below should be read in conjunction
   with Item 7. Managements Discussion and Analysis of Financial
   Condition and Results of Operations and the Consolidated Financial
   Statements, and the notes thereto, appearing elsewhere in this Form
   10-K.





|                                                      |  | For the Year Ended
     December 31,
|----------------------------------------------------- |  | ------------------------------------
|
|
|Results of
     Operations:                           |  |                                     
|Interest income                                       |  | $  1,197                            
|Interest
     expense                                 |  | 685                                 
|                                                      |  |                                     
|Net interest income                                   |  | 512                                 
|Fees and other
     income                            |  | 286                                 
|Factoring
     commissions                            |  | 119                                 
|Income of international
     joint ventures           |  | 35                                  
|                                                      |  |                                     
|Operating revenues                                    |  | 952                                 
|Operating
     expenses                               |  | 456                                 
|Provision for
     losses                             |  | 136                                 
|Gain on sale of HCS
     assets                       |  | 79                                  
|Restructuring
     charge                             |  |                                    
|                                                      |  |                                     
|Income before income taxes and minority
     interest |  | 439                                 
|Income tax
     provision                             |  | 154                                 
|Minority
     interest                                |  | 1                                   
|                                                      |  |                                     
|Net income                                            |  | $    284                            
|                                                      |  |                                     
|Dividends on preferred stock                          |  | $     
      28                     
|                                                      |  |                                     
|Net income applicable to common stock                 |  | $    256                            
|                                                      |  |                                     
|
|
|
|Balance Sheet
     Data:                              |  |                                     
|Receivables                                           |  | $14,795                             
|Allowance for losses of
     receivables              |  | (316                                
|Equity and real estate
     investments               |  | 737                                 
|Debt securities                                       |  | 549                                 
|Operating
     leases                                 |  | 508                                 
|Investment in
     international joint ventures       |  | 219                                 
|Total assets                                          |  | 17,973                              
|                                                      |  |                                     
|Commercial paper and
     short-term borrowings       |  | 5,202                               
|Long-term debt                                        |  | 8,630                               
|                                                      |  |                                     
|Total debt                                            |  | $13,832                             
|                                                      |  |                                     
|Total liabilities                                     |  | $15,615                             
|Preferred stock                                       |  | 400                                 
|Common equity                                         |  | 1,947                               
|                                                      |  |                                     
|Total stockholders equity                            |  | $  2,347                            
|                                                      |  |                                     

|                                                                                                              |  | As of, or For the Year
     Ended, December 31,
|------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------
|
|
|Selected Data and
     Ratios:                                                                                |  |                                                
|Profitability                                                                                                 |  |                                                
|Net interest income as a percentage of
     AFE(5)                                                            |  | 3.8                                            
|Non-interest operating revenues as a percentage of
     AFE(5)                                                |  | 3.2                                            
|Operating revenues as a percentage of
     AFE(5)                                                             |  | 7.0                                            
|Return on average common stockholders
     equity(6)                                                         |  | 14.9                                           
|Return on average common stockholders
     equity, net of HCS gain (6)                                       |  | 12.1                                           
|Return on AFE(5)                                                                                              |  | 2.1                                            
|Ratio of earnings to combined fixed charges and
     preferred stock
   
              
      dividends(7)    |  | 1.53                                           
|Salaries and general operating expenses as a
     percentage of AFE(5)                                        |  | 3.3                                            
|Ratio of operating expenses to operating
     revenues                                                        |  | 47.9                                           
|Common dividend payout ratio(8)                                                                               |  | 13.3                                           
|Credit
     Quality                                                                                           |  |                                                
|Ratio of earning loans delinquent 60 days or more
     to receivables                                         |  | 1.5                                            
|Ratio of net writedowns to average lending
     assets                                                        |  | 0.7                                            
|Ratio of total nonearning assets to total lending
     assets                                                 |  | 1.5                                            
|Ratio of allowance for losses of receivables to
     receivables                                              |  | 2.1                                            
|Ratio of allowance for losses of receivables to
     net writedowns                                           |  | 3.2                                            
|Ratio of allowance for losses of receivables to
     nonearning impaired
   
              
      receivables |  | 154.9                                          
|Leverage                                                                                                      |  |                                                
|Ratio of debt (net of short-term investments) to
     total stockholders equity                              |  | 5.8                                            
|Ratio of commercial paper and short-term
     borrowings to total debt                                        |  | 37.6                                           
|Other                                                                                                         |  |                                                
|Total lending assets and investments(9)                                                                       |  | $16,832                                        
|Average lending assets                                                                                        |  | 13,235                                         
|Funds employed(5)                                                                                             |  | 15,839                                         
|Average funds employed(5)                                                                                     |  | 13,636                                         
|Total managed assets(10)                                                                                      |  | 17,202                                         
|Average managed assets(10)                                                                                    |  | 14,963                                         
|Number of employees                                                                                           |  | 2,695                                          
|Number of office locations                                                                                    |  | 70                                             







|(1) | The financial data
     presented for 1999 reflects our purchase of HCFP in July 1999. As a result
     of this purchase, we consolidated the acquired assets as of the date of
     acquisition. Goodwill related to the acquisition totaled approximately
     $235 million. The consolidation of HCFP resulted in an increase of
     approximately $535 million in total lending assets and investments and 134
     additional employees as of December 31, 1999. This acquisition had a
     favorable impact on our 1999 net income.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(2) | On December 1, 1999, we
     sold the net assets of our Commercial Services unit. The sale consisted of
     $911 million of factored accounts receivable and the assumption of $577
     million of liabilities due to factoring clients. We recognized an
     after-tax gain on the transaction of $48 million.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(3) | The financial data
     presented for 1999 and 1998 reflects our purchase of the domestic
     technology leasing assets of the Dealer Products Group and the stock of
     the Dealer Products Groups international subsidiaries in November
     1998. As a result of this purchase, we consolidated the acquired assets
     and international subsidiaries of the Dealer Products Group as of the date
     of acquisition. Goodwill related to this acquisition totaled $190 million.
     The consolidation of the Dealer Products Group assets and subsidiaries
     resulted in an increase of approximately $625 million in total assets and
     approximately 400 additional employees as of December 31, 1998 as compared
     to December 31, 1997. This acquisition had a minimal favorable impact on
     our 1998 net income, as our 1998 results include only one month of Dealer
     Products Group operations.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(4) | The financial data
     presented for 1999, 1998 and 1997 reflects our purchase (through our
     subsidiary, International Group) of our joint venture partners
     interest in Factofrance in April 1997 for $174 million. As a result of
     this purchase, Factofrance was reported on a consolidated basis with
     Heller as of the date of acquisition. The premium related to this purchase
     was allocated as follows: $78 million to goodwill and $18 million to a
     noncompetition agreement. Our consolidation of Factofrance resulted in
     increases of $2 billion, $94 million, $59 million and 570 in total assets,
     operating revenues, operating expenses and number of employees,
     respectively, during 1997 as compared to 1996.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(5) | Funds employed include
     lending assets and investments, less credit balances of our factoring
     clients. We believe that funds employed are indicative of the dollar
     amount which we have loaned to our borrowers. Average funds employed
     (AFE)reflect the average of lending assets and investments, less
     credit balances of our factoring clients.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(6) | Return on average common
     stockholders equity is computed as net income less preferred stock
     dividends paid divided by average total stockholders equity net of
     preferred stock.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(7) | The ratio of earnings to
     combined fixed charges and preferred stock dividends is calculated by
     dividing (i) income before income taxes, minority interest and fixed
     charges by (ii) fixed charges plus preferred stock dividends.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(8) | Common dividend payout
     ratio is computed as common dividends paid, divided by net income
     applicable to common stock. The 1998 common dividend payout ratio excludes
     the $983 million dividends paid on the Common Stock owned by
     FAHI.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(9) | Total lending assets and
     investments consist of receivables, repossessed assets, equity and real
     estate investments, operating leases, debt securities and investments in
     international joint ventures.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(10) | Total managed assets
     include funds employed, plus receivables previously securitized or sold
     that we currently manage.
|---- | --------------------------------------------------------------------------------------------------------------------------------




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





The following discussion and analysis should be read in conjunction
   with the Selected Financial Data and Consolidated Financial Statements,
   including the notes thereto, appearing elsewhere in this Form 10-K. The
   following discussion and analysis contains certain forward-looking
   statements as defined in the Securities Exchange Act of 1934, which are
   generally identified by the words anticipates, believes, estimates,
   expects, plans, intends and other similar expressions. These statements
   are subject to certain risks, uncertainties and contingencies, which could
   cause our actual results, performance or achievements to differ materially
   from those expressed in, or implied by, such statements. See Cautionary
   Note Regarding Forward-Looking Statementsbelow.





General





We are in the commercial finance business, providing primarily
   collateralized financing and leasing products and related services to
   mid-sized and small businesses in the United States and selected
   international markets. We classify the sources of our operating revenues in
   two broad categories:





| |  | net interest income;
     and
| | - | -----------------------------




| |  | non-interest
     income.
| | - | -------------------------




Net interest income represents the total interest income we earn,
   principally through our financing and leasing activities, less the total
   interest expense we pay on our interest bearing liabilities, which largely
   relate to the funding of these financing and leasing activities.





Non-interest income consists of:





| |  | factoring
     commissions;
| | - | ---------------------------




| |  | income from investments in
     international joint ventures; and
| | - | -----------------------------------------------------------------




| |  | fees and other
     income.
| | - | ---------------------------




Fees include:





| |  | loan servicing
     income;
| | - | ---------------------------




| |  | late fees;
| | - | ----------




| |  | structuring
     fees;
| | - | ----------------------




| |  | residual rental
     income;
| | - | ----------------------------




| |  | syndication fees;
     and
| | - | --------------------------




| |  | prepayment
     fees.
| | - | ---------------------




Other income includes:





| |  | real estate participation
     income;
| | - | --------------------------------------




| |  | our share of income from
     fund investments;
| | - | -----------------------------------------------




| |  | gains from sales,
     syndications and securitizations of lending assets and investments;
     and
| | - | ---------------------------------------------------------------------------------------------------




| |  | equipment residual
     gains.
| | - | ------------------------------




Our primary expenses, other than interest expense, are operating
   expenses, including employee compensation and general and administrative
   expenses and provisions for credit losses.





In July 1999, we acquired the assets of HCFP for approximately $475
   million. We paid 41% of the purchase price in the form of our Class A Common
   Stock and 59% in cash. We issued approximately 7.3 million shares of Class A
   Common Stock for the transaction, which reduced the ownership interest in
   Heller of our majority shareholder, Fuji Bank, from 57% to 52%. We also
   issued options to purchase approximately 1.1 million shares of our Class A
   Common Stock. The options were issued at prices ranging from $2 to $37 per
   share of our Class A Common Stock to replace stock options previously held
   by HCFP employees for HCFP common stock. HCFP was a rapidly growing
   commercial finance company exclusively focused on providing secured
   financing to small- and mid-sized health care providers throughout the
   United States. The HCFP business, combined with our existing healthcare
   operations, is operated as a business unit within our Domestic Commercial
   Finance segment and is known as Healthcare Finance.





In December 1999, we sold the assets of our Commercial Services unit,
   part of our Domestic Commercial Finance segment for approximately $454
   million in cash. The sale consisted of $911 million of factored accounts
   receivable and the assumption of $577 million of liabilities due to
   factoring clients. We recorded an after-tax gain on the sale of
   approximately $48 million, which included adjustments for transaction costs,
   obligations to employees, termination of third party contracts such as
   facility leases and vendor contracts, asset impairment charges, recourse
   provisions and certain other costs directly attributable to the
   sale.





Our results of operations may vary significantly from quarter to
   quarter based upon the timing of certain events, such as securitizations and
   net investment gains. See Note 24 to the Consolidated Financial
   Statements.





Year Ended December 31, 1999 Compared to Year Ended December 31,
   1998





Results of Operations





Overview.For the year ended
   December 31, 1999:





| |  | Net income totaled $284
     million compared with $193 million for the prior year, an increase of
     47%.
| | - | ------------------------------------------------------------------------------------------------------------




| |  | Net income applicable to
     common stock was $256 million compared with $172 million, an increase of
     49%.
| | - | ----------------------------------------------------------------------------------------------------------------




| |  | Net income for 1999
     includes a one-time after-tax gain of $48 million relating to the sale of
     the assets of our Commercial Services business unit. Excluding this gain,
     net income was $236 for the year, an increase of 22% over the prior year,
     marking our seventh consecutive year of record net income.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | This increase in net
     income reflects an increase of $169 million in operating revenues, due to
     growth in both net interest income and non-interest income.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | The increase in net
     interest income, as compared to the prior year, is due to both
     strengthening margins and growth in lending assets and investments. SeeOperating RevenuesNet Interest Income.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | The increase in
     non-interest income, as compared to the prior year, is due primarily to
     larger net investment gains and larger fee income and other. See
     Operating Revenues Non-Interest Income.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | New business lending
     volume totaled a record $8.1 billion, an increase of 12% over the prior
     year. This increase was the result of our significant investment in
     building leadership positions in our businesses and in expanding market
     coverage.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | Our factoring volume
     totaled $20.3 billion in 1999, an increase of 5% from the prior year.
     Factofrances factoring volume was up 12% over 1998.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------




Operating Revenues.The following
   table shows our operating revenues for the years ended December 31, 1999 and
   1998:





|                                       |  | For the Year Ended
     December 31,
|-------------------------------------- |  | ------------------------------------
|
|
|
|Net interest
     income               |  | $512                                
|Non-interest
     income:              |  |                                     
|Fees and other income                  |  | 286                                 
|Factoring commissions                  |  | 119                                 
|Income of international joint ventures |  | 35                                  
|                                       |  |                                     
|Total operating revenues               |  | $952                                
|                                       |  |                                     




Net Interest Income.The following table shows our net interest
   income for the years ended December 31, 1999 and 1998:





|                                                  |  | For the Year
   
   Ended
   
   December 31, |   | Increase
|------------------------------------------------- |  | --------------------------------------------- | - | --------
|
|
|Interest income                                   |  | $1,197                                        |   |         
|Interest
     expense                             |  | 685                                           |   |         
|                                                  |  |                                               |   |         
|Net interest income                               |  | $  512                                        |   |         
|                                                  |  |                                               |   |         
|Net interest income as a
   
   percentage of AFE |  | 3.8                                           | % |         




Net interest income totaled $512 million for the year ended December
   31, 1999, an increase of $89 million, or 21%, from the comparable prior year
   period. This increase was driven by strong growth in lending assets and
   investments combined with improved net interest margins.





Average funds employed totaled $13.6 billion for 1999, up 15% from
   $11.8 billion in 1998, primarily due to new business lending volume of $8.1
   billion during the year.





Net interest income as a percentage of AFE increased to 3.8% at
   December 31, 1999 from 3.6% at December 31, 1998. This increase reflects
   improved pricing in certain product groups, a lower cost of funding and a
   more favorable mix of higher yielding products during 1999 as compared to
   1998 such as those from HCFP and the Dealer Products Group
   acquisitions.





Interest rates we charge vary depending on:





| |  | risks and maturities of
     loans;
| | - | -----------------------------------




| |  | competition;
| | - | ------------




| |  | our current costs of
     borrowing;
| | - | ------------------------------------




| |  | state usury laws;
     and
| | - | --------------------------




| |  | other governmental
     regulations.
| | - | ------------------------------------




Our portfolio of receivables earns interest at both variable and fixed
   rates. The variable rates float in accordance with various agreed upon
   reference rates, including LIBOR, the Prime Rate and corporate based lending
   rates.





We use interest rate swaps as an important tool for financial risk
   management. They enable us to match more closely the interest rate and
   maturity characteristics of our assets and liabilities. As such, we use
   interest rate swaps to:





| |  | change the characteristics
     of fixed rate debt to that of variable rate liabilities;
| | - | ----------------------------------------------------------------------------------------




| |  | alter the characteristics
     of specific fixed rate asset pools to more closely match the interest
     terms of the underlying financing; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------




| |  | modify the variable rate
     basis of a liability to more closely match the variable rate basis used
     for variable rate receivables.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------




The following table shows a comparative analysis of the year-end
   principal outstanding and average interest rates we paid on our debt as of
   December 31, 1999 and 1998, before and after giving effect to interest rate
   swaps:





|                                            |  | For the Year Ended
     December 31,
|------------------------------------------- |  | ------------------------------------
|
|
|
|Commercial paper
     domestic and foreign |  | $  3,960                            
|Fixed rate debt                             |  | 4,817                               
|Variable rate
     debt                     |  | 3,819                               
|                                            |  |                                     
|Total                                       |  | $12,596                             
|                                            |  |                                     




Non-Interest Income.Our non-interest income is composed
   of:





| |  | factoring
     commissions;
| | - | ---------------------------




| |  | income of international
     joint ventures; and
| | - | ------------------------------------------------




| |  | The following table shows
     our non-interest income for the years ended December 31, 1999 and
     1998:
| | - | -----------------------------------------------------------------------------------------------------------




|                                                |  | For the Year
   
   Ended
   
   December 31, |   | Increase/(Decrease)
|----------------------------------------------- |  | --------------------------------------------- | - | -------------------
|
|
|Factoring
     commissions                      |  | $119                                          |   |                    
|Income of international
     joint ventures     |  | 35                                            |   |                    
|Fees and other
     income:                     |  |                                               |   |                    
|Fee income and other(1)                         |  | 117                                           |   |                    
|Investment and asset sale income(2)             |  | 169                                           |   |                    
|                                                |  |                                               |   |                    
|Total fees and other income                     |  | $286                                          |   |                    
|                                                |  |                                               |   |                    
|Total non-interest
     income                  |  | $440                                          |   |                    
|                                                |  |                                               |   |                    
|Non-interest income as a
     percentage of AFE |  | 3.2                                           | % |                    




|(1) | Fee income and other
     consists primarily of loan servicing income, late fees, prepayment fees,
     early termination fees, residual rental income and other miscellaneous
     fees.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(2) | Investment and asset sale
     income consists of gains on securitizations, syndications and loan sales,
     net investment income and gains, equipment residual gains and
     participation income.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Factoring commissions decreased $5 million, or 4%, in 1999 versus 1998
   due to lower volume of our domestic factoring business, partially due to the
   December 1999 sale of the assets of our Commercial Services unit, combined
   with lower factoring commission rates of Factofrance. Increased competition
   in the French factoring market and changes in product mix have resulted in
   lower factoring commission rates of Factofrance. Our total 1999 factoring
   volume increased 5% from the prior year. Factofrances factoring volume
   increased 12% over prior year.





Income of international joint ventures represents our share of the
   annual earnings or losses of joint ventures. The $5 million increase in
   income from international joint ventures in 1999 versus 1998 was due
   primarily to higher income from our European joint ventures partially offset
   by lower income from our Latin American joint ventures.





Fees and other income totaled $286 million for 1999, an increase of
   39% from the prior year due to increases in both fee income and other and
   investment and asset sale income. Fee income and other increased $22 million
   or 23% compared to 1998. This increase is due to higher fee income in
   Leasing Services related to the Dealer Products Group.





Investment and asset sale income increased $58 million, or 52% due to
   larger gains recognized on our portfolio of equity investments, higher
   income on limited partnership investments and higher gains on asset sales
   and equipment residual gains. Net investment gains are generated primarily
   from investment activity of Corporate Finance and junior participating
   lending activity of Real Estate Finance. The increase in asset sale income
   was primarily generated by sales of SBA guaranteed portions of 7(a) loans in
   Small Business Finance.





During 1999, we generated $13 million of securitization gains, a
   decrease of $4 million from the prior year. Securitization gains during 1999
   resulted from three securitization transactions. Leasing Services
   securitized approximately $800 million in two term securitizations during
   1999 resulting in a net gain of $9 million. Real Estate Finance securitized
   approximately $400 million in CMBS receivables resulting in $4 million of
   securitization income.





Operating Expenses.The following table shows our
   operating expenses for the years ended December 31, 1999 and
   1998:





|                                                                                                                                         |  | For the
   
   Year Ended
   
   December 31, |   | Increase
|---------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------- | - | --------
|
|
|Salaries and other
     compensation                                                                                                     |  | $237                                          |   |         
|General and administrative
     expenses                                                                                                 |  | 200                                           |   |         
|Goodwill and non-compete
     amortization                                                                                               |  | 19                                            |   |         
|                                                                                                                                         |  |                                               |   |         
|Total                                                                                                                                    |  | $456                                          |   |         
|                                                                                                                                         |  |                                               |   |         
|Operating expenses as a
     percentage of average managed assets                                                                        |  | 3.0                                           | % |         
|Ratio of operating
     expenses to operating revenues                                                                                   |  | 48                                            | % |         
|Ratio of operating
     expenses, excluding goodwill and non-compete
   
       amortization, as a percentage of operating
     revenues |  | 46                                            | % |         




Operating expenses, excluding the effect of acquisitions and
   divestitures, increased by $5 million, or 1%, in 1999, as compared to 1998.
   This modest growth is primarily related to increases in performance related
   compensation resulting from strong business performance in 1999, offset by
   decreases in salary expense resulting from our fourth quarter 1998
   restructuring effort. Operating expenses, excluding the effect of
   acquisitions and divestitures also increased as a result of increases in
   certain professional fees. Total operating expenses as a percentage of
   operating revenues improved to 48% in 1999 from 51% for the prior year and
   are in line with our 1999 goal. This decrease reflects improved leveraging
   of the Companys cost base.





Allowance for Losses.The
   following table shows the changes in our allowance for losses of
   receivables, including our provision for losses of receivables and
   repossessed assets, for the years ended December 31, 1999 and
   1998:


|                                          |  | For the
   
   Year Ended
   
   December 31, |   | Increase/(Decrease)
|----------------------------------------- |  | --------------------------------------------- | - | -------------------
|
|
|Balance at the beginning
     of the year |  | $271                                          |   |                    
|Provision for losses                      |  | 136                                           |   |                    
|Writedowns                                |  | (116                                          | ) |                    
|Recoveries                                |  | 18                                            |   |                    
|Dealer Products Group acquisition         |  |                                              |   |                    
|HCFP acquisition                          |  | 7                                             |   |                    
|Sale of HCS assets                        |  | (2                                            | ) |                    
|Transfers and other                       |  | 2                                             |   |                    
|                                          |  |                                               |   |                    
|Balance at the end of the
     year       |  | $316                                          |   |                    
|                                          |  |                                               |   |                    




The provision for losses was higher during 1999 than 1998 due to a
   significantly higher level of recoveries recorded in 1998 as compared to
   1999. Net writedowns totaled $98 million or 0.7% of average lending assets
   in 1999, compared to $81 million or 0.7% in 1998. Net writedown levels for
   both 1999 and 1998 are in line with our targeted level of 0.75% of average
   lending assets.





Gross writedowns totaled $116 million for 1999 versus $145 million
   for 1998, while recoveries totaled $18 million in 1999 versus $64 million
   for 1998. The higher level of recoveries in 1998 relates primarily to assets
   from business activities the Company is no longer pursuing.





As of December 31, 1999, the ratio of our allowance for losses of
   receivables to receivables was 2.1%, compared to 2.3% as of December 31,
   1998. The decrease in this ratio reflects the continued improvement of the
   credit quality of our portfolio. We will continue to systematically evaluate
   the appropriateness of the allowance for losses of receivables and adjust
   the allowance to reflect any necessary changes in the credit quality and
   inherent risks and losses of our portfolio.





Income Taxes.Excluding the
   effect of the HCS sale, our effective income tax rate was 34% for 1999 and
   32% for 1998, in each case below the combined Federal and State statutory
   rates due to:





| |  | the effect of earnings
     from international joint ventures;
| | - | --------------------------------------------------------------




| |  | the use of foreign tax
     credits; and
| | - | ----------------------------------------




| |  | certain favorable tax
     issue resolutions.
| | - | ---------------------------------------------




Lending Assets and Investments





Total lending assets and investments increased $3.4 billion, or 25%,
   during 1999 due to record new business originations of $8.1 billion offset
   by syndications, securitizations, loan sales and payoffs of $4.7 billion.
   The HCFP acquisition increased lending assets and investments by $535
   million during 1999. This increase was more than offset by the sale of $900
   million of HCS lending assets. During 1999, new business volume represented
   a 12% increase from 1998. This increase was largely due to strong new
   business volume in all of our domestic product groups.





The following tables present our lending assets and investments by
   business line and asset type as of December 31, 1999 and 1998:





|                                                         |  | December
     31,
|-------------------------------------------------------- |  | -----------------
|
|
|
|By Business
     Category:                              
|Domestic Commercial
     Finance                         |  |                  
|Corporate Finance                                        |  | $  4,937         
|Leasing Services                                         |  | 3,428            
|Real Estate Finance                                      |  | 2,626            
|Small Business Finance                                   |  | 1,312            
|Healthcare Finance                                       |  | 971              
|Commercial Services (1)                                  |  |                 
|Other                                                    |  | 518              
|                                                         |  |                  
|Total Domestic Commercial
     Finance                   |  | 13,792           
|International Factoring
     and Asset Based Finance (2) |  | 3,040            
|                                                         |  |                  
|Total lending assets and investments                     |  | $16,832          
|                                                         |  |                  
|By Asset Type:                                           |  |                  
|Receivables                                              |  | $14,795          
|Repossessed assets                                       |  | 24               
|                                                         |  |                  
|Total lending assets                                     |  | 14,819           
|Equity and real estate investments                       |  | 737              
|Debt securities                                          |  | 549              
|Operating leases                                         |  | 508              
|International joint ventures                             |  | 219              
|                                                         |  |                  
|Total lending assets and investments                     |  | $16,832          
|                                                         |  |                  
|Average lending assets                                   |  | $13,235          
|Total managed assets                                     |  | 17,202           
|Average managed assets                                   |  | 14,963           
|Funds employed                                           |  | 15,839           
|Average funds employed                                   |  | 13,636           







|(1) | Lending assets and
     investments of Commercial Services at December 31, 1998 were reduced by
     $475 million of factored accounts receivable sold to bank-supported
     conduits.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(2) | Includes $215 million in
     investments in international joint ventures, representing 1% of total
     lending assets and investments in 1999, and $231 million in investments in
     international joint ventures, representing 2% of total lending assets and
     investments, in 1998.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




As of December 31, 1999, our domestic commercial finance portfolio
   remained well diversified among our domestic product groups:





| |  | Corporate Finance
     increased its lending assets and investments to $4.9 billion, or 29% of
     total lending assets and investments, as a result of $3.1 billion in new
     business volume, which was partially offset by loan syndications and
     runoff in the portfolio of $2.3 billion. Of the total lending assets and
     investments, approximately $900 million represents asset-based
     financings.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | Leasing Services grew to
     $3.4 billion, or 20% of our total lending assets and investments, at
     December 31, 1999, primarily due to new business volume of $2.3 billion
     offset by payoffs, utilization and securitizations totaling approximately
     $1.6 billion in receivables.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | Real Estate Finance
     increased its lending assets and investments to $2.6 billion, or 16% of
     our total lending assets and investments as of December 31, 1999 versus
     14% at
   December 31, 1998 as new business volume of $1.4 billion was offset by
     payoffs, securitizations and syndications totaling nearly $840
     million.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | Small Business Finance
     increased its lending assets and investments by nearly $300 million due to
     record new business volume of over $700 million. This was partially offset
     by loan sales and payoffs of approximately $370 million.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | Healthcare Finance
     increased its lending assets and investments to approximately $1 billion,
     or 6% of total lending assets and investments as of December 31, 1999. Of
     this amount, about $535 million was as a result of the HCFP acquisition in
     July 1999. In addition, we combined approximately $350 million of lending
     assets and investments from our existing healthcare finance activities
     within Real Estate Finance and Corporate Finance.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Concentrations of lending assets of 5% or more at December 31, 1999
   and 1998, based on the standard industrial classifications of the borrowers,
   were as follows:





|                                                      |  | December
     31,
|----------------------------------------------------- |  | -----------------
|
|
|
|Automotive                                            |  | $1,325           
|Computers                                             |  | 938              
|Department and general
     merchandise retail stores |  | 877              
|Health services                                       |  | 864              
|Transportation                                        |  | 661              
|Food, grocery and
     miscellaneous retail           |  | 642              
|General industrial
     machines                      |  | 599              




With respect to the above table:





| |  | The automotive category is
     primarily comprised of auto parts distributors and wholesalers, resale and
     leasing services in the automotive and aircraft industries and maintenance
     services for automotive and aircraft parts.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | The computers category
     consists of software/hardware distributors and manufacturers, component
     manufacturers and end-users of this equipment.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | The department and general
     merchandise retail stores category is primarily comprised of factored
     accounts receivable, which represent short-term trade receivables from
     numerous customers.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | The health services
     category is primarily comprised of revolving and term facilities with
     small- and mid-sized health care providers. The increase in this category
     from 1998 is due to the acquisition of HCFP.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | A majority of the lending
     assets in the transportation category arise from chartered aircraft
     services and transportation services for freight, cargo and other various
     packages.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | The majority of lending
     assets in the food, grocery and miscellaneous retail category are
     revolving and term facilities with borrowers that are primarily in the
     business of manufacturing and retailing of food products.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | The general industrial
     machines classification is distributed among machinery used for many
     different industrial applications.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------




Year Ended December 31, 1998 Compared to Year Ended December 31,
   1997





Results of Operations





Overview.For the year ended December 31,
   1998:





| |  | Net income totaled $193
     million compared with $158 million for the prior year, an increase of 22%.
     This represented our sixth consecutive year of record net
     income.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | Net income applicable to
     common stock was $172 million for the year ended December 31, 1998. This
     represented an increase of 19% from $144 million for the prior year and
     reflects an increase of $29 million in operating revenues, due to growth
     in both net interest income and non-interest income, coupled with a
     decrease in the provision for losses of $87 million, or 53% from December
     31, 1997.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | Earnings were reduced by a
     one-time charge of $17 million, relating to our restructuring initiative,
     which was recorded in the fourth quarter.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | The increase in net
     interest income, as compared to the prior year, is due to growth in
     lending assets and investments.
| | - | ---------------------------------------------------------------------------------------------------------------------------------




| |  | The decrease in provision
     for losses is due to a significant increase in recoveries coupled with a
     decrease in writedowns. Our allowance for losses of receivables at
     year-end was in excess of 100% of nonearning impaired
     receivables.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | New business lending
     volume totaled a record $7.2 billion, an increase of 20% over the prior
     year. This increase was the result of our significant investment in
     building leadership positions in our businesses and in expanding market
     coverage.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | Our factoring volume
     totaled $19.4 billion in 1998, an increase of 21% from the prior year, due
     to significant growth of Factofrance.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------




Operating Revenues.The following table shows our
   operating revenues for the years ended December 31, 1998 and
   1997:





|                                       |  | For the Year Ended
     December 31,
|-------------------------------------- |  | ------------------------------------
|
|
|
|Net interest
     income               |  | $423                                
|Non-interest
     income:             
|Fees and other income                  |  | 206                                 
|Factoring commissions                  |  | 124                                 
|Income of international joint ventures |  | 30                                  
|                                       |  |                                     
|Total operating revenues               |  | $783                                
|                                       |  |                                     




Net Interest Income.The following table shows our net interest
   income for the years ended December 31, 1998 and 1997:





|                                                  |  | For the Year
   
   Ended
   
   December 31, |   | Increase
|------------------------------------------------- |  | --------------------------------------------- | - | --------
|
|
|Interest income                                   |  | $1,047                                        |   |         
|Interest
     expense                             |  | 624                                           |   |         
|                                                  |  |                                               |   |         
|Net interest income                               |  | $  423                                        |   |         
|                                                  |  |                                               |   |         
|Net interest income as a
   
   percentage of AFE |  | 3.6                                           | % |         




Net interest income totaled $423 million for the year ended December
   31, 1998, an increase of $15 million, or 4%, from the comparable prior year
   period. This increase was driven by strong growth in lending assets and
   investments offset by tightening net interest margins.





Average funds employed totaled $11.8 billion for 1998, up 17% from
   $10.1 billion in 1997 due to record new business lending volume of $7.2
   billion during the year.





Net interest income as a percentage of AFE decreased to 3.6% at
   December 31, 1998 from 4.0% at December 31, 1997. This decline reflects the
   competitive pricing pressures in certain product groups and the impact of
   the CMBS product, which carries a significantly lower net interest margin
   than other receivables. The lower yielding CMBS portfolio decreased our
   total net interest margin by approximately 0.30% for the twelve months ended
   December 31, 1998. Total net interest margin for 1998 was also reduced by
   0.05% as a result of interest expense recorded on the $450 million note
   related to the Fuji America Holdings dividend paid in February
   1998.





Interest rates we charge vary depending on:





| |  | risks and maturities of
     loans;
| | - | -----------------------------------




| |  | competition;
| | - | ------------




| |  | our current costs of
     borrowing;
| | - | ------------------------------------




| |  | state usury laws;
     and
| | - | --------------------------




| |  | other governmental
     regulations.
| | - | ------------------------------------




Our portfolio of receivables earns interest at both variable and fixed
   rates. The variable rates float in accordance with various agreed upon
   reference rates, including LIBOR, the Prime Rate and corporate based lending
   rates.





We use interest rate swaps as an important tool for financial risk
   management. They enable us to match more closely the interest rate and
   maturity characteristics of our assets and liabilities. As such, we use
   interest rate swaps to:





| |  | change the characteristics
     of fixed rate debt to that of variable rate liabilities;
| | - | ----------------------------------------------------------------------------------------




| |  | alter the characteristics
     of specific fixed rate asset pools to more closely match the interest
     terms of the underlying financing; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------




| |  | modify the variable rate
     basis of a liability to more closely match the variable rate basis used
     for variable rate receivables.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------




The following table shows a comparative analysis of the year-end
   principal outstanding and average interest rates we paid on our debt as of
   December 31, 1998 and 1997, before and after giving effect to interest rate
   swaps:





|                                            |  | For the Year Ended
     December 31,
|------------------------------------------- |  | ------------------------------------
|
|
|
|Commercial paper
     domestic and foreign |  | $2,692                              
|Fixed rate debt                             |  | 3,886                               
|Variable rate
     debt                     |  | 2,879                               
|                                            |  |                                     
|Total                                       |  | $9,457                              
|                                            |  |                                     




Non-Interest Income.The following table shows our
   non-interest income for the years ended December 31, 1998 and
   1997:





|                                                |  | For the
   
   Year Ended
   
   December 31, |   | Increase/(Decrease)
|----------------------------------------------- |  | --------------------------------------------- | - | -------------------
|
|
|Factoring
     commissions                      |  | $124                                          |   |                    
|Income of international
     joint ventures     |  | 30                                            |   |                    
|Fees and other
     income:                     |  |                                               |   |                    
|Fee income and other(1)                         |  | 95                                            |   |                    
|Investment and asset sale income (2)            |  | 111                                           |   |                    
|                                                |  |                                               |   |                    
|Total fees and other income                     |  | $206                                          |   |                    
|                                                |  |                                               |   |                    
|Total non-interest
     income                  |  | $360                                          |   |                    
|                                                |  |                                               |   |                    
|Non-interest income as a
     percentage of AFE |  | 3.0                                           | % |                    







|(1) | Fee income and other
     consists primarily of loan servicing income, late fees, prepayment fees,
     early termination fees, residual rental income and other miscellaneous
     fees.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|(2) | Investment and asset sale
     income consists of gains on securitizations, syndications and loan sales,
     net investment income and gains, equipment residual gains and
     participation income.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Our non-interest income is composed of:





| |  | factoring
     commissions;
| | - | ---------------------------




| |  | income of international
     joint ventures; and
| | - | ------------------------------------------------




| |  | fees and other
     income.
| | - | ---------------------------




Factoring commissions increased $20 million, or 19%, in 1998 versus
   1997 due to significant growth in international factoring volume and the
   consolidation of Factofrance for the full year of 1998 versus nine months in
   1997, offset by some compression in factoring commission rates. Our total
   1998 factoring volume, adjusted for the impact of the Factofrance
   consolidation for twelve months in 1998 versus nine months in 1997,
   increased 21% from the prior year, including a significant increase in
   factoring volume recorded by Factofrance of 34%.





Income of international joint ventures represents our share of the
   annual earnings or losses of joint ventures. The $6 million decrease in
   income from international joint ventures in 1998 versus 1997 was due
   primarily to the consolidation of Factofrance as described
   above.





Fees and other income totaled $206 million for 1998, unchanged from
   the prior year. An increase in fee income and other was offset by a decrease
   in investment and asset sale income during 1998 as compared to 1997. Fee
   income and other increased $7 million, or 8%, as we recognized increased
   prepayment income and fees on available lines of credit, as compared to the
   prior year. Investment and asset sale income decreased $7 million, or 6%, as
   increased income on lending asset sales of Real Estate Finance and Small
   Business Finance was offset by a decrease in net investment gains of Real
   Estate Finance and lower securitization income.





During 1998, we generated $17 million of securitization gains, a
   decrease of $9 million from the prior year. Securitization gains in 1998
   resulted from two CMBS securitizations totaling $2 billion, a $96 million
   securitization of the unguaranteed portion of SBA 7(a)
 loans and a $434 million sale of equipment receivables to a conduit. The lower
   level of securitization gains in 1998 is due to lower income realization on
   the CMBS securitizations. We did not retain any interest in the first CMBS
   transaction completed in the first quarter of 1998 totaling $1.1 billion. In
   the second CMBS securitization completed in the fourth quarter of 1998, we
   sold all of the unrated and B rated securities to third parties
   on a non-recourse basis. We retained an interest in the SBA securitization,
   as required by the SBA, and an interest in the equipment sales
   transaction.





Operating Expenses.The following table shows our
   operating expenses for the years ended December 31, 1998 and
   1997:





|                                                                                                                                  |  | For the
   
   Year Ended
   
   December 31, |   | Increase
|--------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------- | - | --------
|
|
|Salaries and other
     compensation                                                                                              |  | $227                                          |   |         
|General and administrative
     expenses                                                                                          |  | 164                                           |   |         
|Goodwill and non-compete
     amortization                                                                                        |  | 8                                             |   |         
|                                                                                                                                  |  |                                               |   |         
|Total                                                                                                                             |  | $399                                          |   |         
|                                                                                                                                  |  |                                               |   |         
|Operating expenses as a
     percentage of average managed assets                                                                 |  | 3.1                                           | % |         
|Ratio of operating
     expenses to operating revenues                                                                            |  | 51.0                                          | % |         
|Operating expenses,
     excluding goodwill and
   
       non-compete amortization, as a percentage
   
   of operating revenues |  | 50.0                                          | % |         




Operating expenses, excluding the impact of the Factofrance
   consolidation, increased by $21 million, or 6%, in 1998, as compared to
   1997. This increase is primarily due to investment in lower risk businesses,
   increased information technology expenses including amounts associated with
   year 2000 compliance efforts and investment in our national brand building
   marketing campaign (Straight Talk, Smart Deals). See
   Item 7. Managements Discussion and Analysis of Financial Condition
   and Results of OperationsYear 2000 Compliance.





Operating expenses as a percentage of average managed assets decreased
   to 3.1% as of December 31, 1998 from 3.3% at December 31, 1997, reflective
   of our focus on improving operating efficiency.





Allowance for Losses.The following table shows the
   changes in our allowance for losses of receivables, including our provision
   for losses of receivables and repossessed assets, for the years ended
   December 31, 1998 and 1997:





|                                          |  | For the
   
   Year Ended
   
   December 31, |   | Increase/(Decrease)
|----------------------------------------- |  | --------------------------------------------- | - | -------------------
|
|
|Balance at the beginning
     of the year |  | $261                                          |   |                    
|Provision for losses                      |  | 77                                            |   |                    
|Writedowns                                |  | (145                                          | ) |                    
|Recoveries                                |  | 64                                            |   |                    
|Factofrance consolidation                 |  |                                              |   |                    
|Dealer Products Group acquisition         |  | 18                                            |   |                    
|Transfers and other                       |  | (4                                            | ) |                    
|                                          |  |                                               |   |                    
|Balance at the end of the
     year       |  | $271                                          |   |                    
|                                          |  |                                               |   |                    




The provision for losses decreased to $77 million in 1998 from $164
   million in 1997. This decrease reflects the continued strong asset quality
   of our portfolio coupled with higher levels of recoveries and lower levels
   of writedowns. Net writedowns for 1998 totaled $81 million or 0.7% of
   average lending assets, compared to $146 million or 1.5% for the same period
   in 1997. Excluding a $40 million writedown of CMBS receivables, net
   writedowns were $41 million or 0.4% of average lending assets for the
   year.





Net writedowns for 1998 were within our stated writedown target of
   0.75% of average lending assets. Gross writedowns totaled $145 million for
   1998 versus $169 million for 1997, while recoveries totaled $64 million in
   1998 versus $23 million for 1997. The increase in recoveries for 1998
   related primarily to assets from activities we are no longer
   pursuing.





As of December 31, 1998, the ratio of our allowance for losses of
   receivables to receivables was 2.3%, compared to 2.4% as of December 31,
   1997. The decrease in this ratio reflected the continued improvement of the
   credit quality of our portfolio.





Income Taxes.Our effective income tax rate was 32% for
   1998 and 28% for 1997, in each case below the statutory rate due
   to:





| |  | the use of foreign tax
     credits;
| | - | ------------------------------------




| |  | the effect of earnings
     from international joint ventures; and
| | - | ------------------------------------------------------------------




| |  | certain favorable tax
     issue resolutions.
| | - | ---------------------------------------------




Lending Assets and Investments





Total lending assets and investments increased $1.5 billion, or 13%,
   during 1998 due to record new business originations of $7.2 billion and an
   approximate $625 million increase in assets from the Dealer Products Group
   acquisition, offset by $6.4 billion of paydowns, loan sales, syndications
   and securitizations. During 1998, new business volume represented a 20%
   increase over 1997, as we realized the benefit of the market positions held
   by Corporate Finance, Real Estate Finance and Small Business
   Finance.





The following table presents our lending assets and investments by
   business line and asset type as of December 31, 1998 and 1997:





|                                                        |  | December
     31,
|------------------------------------------------------- |  | -----------------
|
|
|
|By Business
     Category:                              |  |                  
|Domestic Commercial
     Finance                        |  |                  
|Corporate Finance                                       |  | $  3,722         
|Real Estate Finance                                     |  | 1,889            
|Leasing Services                                        |  | 2,840            
|Small Business Finance                                  |  | 1,013            
|Healthcare Finance                                      |  | 217              
|Commercial Services                                     |  | 401              
|Other                                                   |  | 687              
|                                                        |  |                  
|Total Domestic Commercial
     Finance                  |  | 10,769           
|International Factoring
     and Asset Based Finance(1) |  | 2,661            
|                                                        |  |                  
|Total lending assets and investments                    |  | $13,430          
|                                                        |  |                  
|By Asset
     Type:                                     |  |                  
|Receivables                                             |  | $11,854          
|Repossessed assets                                      |  | 3                
|                                                        |  |                  
|Total lending assets                                    |  | 11,857           
|Equity and real estate investments                      |  | 617              
|Debt securities                                         |  | 400              
|Operating leases                                        |  | 321              
|International joint ventures                            |  | 235              
|                                                        |  |                  
|Total lending assets and investments                    |  | $13,430          
|                                                        |  |                  
|Average lending assets                                  |  | $11,506          
|Total managed assets                                    |  | 13,664           
|Average managed assets                                  |  | 13,007           
|Funds employed                                          |  | 11,989           
|Average funds employed                                  |  | 11,814           







|(1) | Includes $231 million in
     investments in international joint ventures, representing 2% of total
     lending assets and investments in 1998, and $198 million in investments in
     international joint ventures, representing 2% of total lending assets and
     investments, in 1997.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




As of December 31, 1998, our domestic commercial finance portfolio
   remained well diversified between Corporate Finance, Leasing Services and
   Real Estate Finance:





| |  | Corporate Finance
     increased its lending assets and investments to $3.7 billion as a result
     of $2.7 billion in new business volume, which was partially offset by loan
     syndications and runoff in the portfolio.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | Leasing Services grew to
     $2.8 billion, or 21% of our total lending assets and investments, at
     December 31, 1998, primarily due to the Dealer Products Group acquisition
     of approximately $625 million in assets offset by the December 1998
     equipment sale of $434 million in receivables.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | Real Estate Finance
     decreased to 14% of our total lending assets and investments as of
     December 31, 1998 versus 20% at December 31, 1997 as new business volume
     of $2.2 billion was offset by payoffs and CMBS securitizations totaling $2
     billion.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Concentrations of lending assets of 5% or more at December 31, 1998
   and 1997, based on the standard industrial classifications of the borrowers,
   were as follows:


|                                                      |  | December
     31,
|----------------------------------------------------- |  | -----------------
|
|
|
|Department and general
     merchandise retail stores |  | $935             
|Computers                                             |  | 811              
|General industrial
     machines                      |  | 732              
|Automotive                                            |  | 667              
|Transportation                                        |  | 666              
|Food, grocery and
     miscellaneous retail           |  | 650              




With respect to the above table:





| |  | The department and general
     merchandise retail stores category is primarily comprised of factored
     accounts receivable, which represent short-term trade receivables from
     numerous customers.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | The computers category
     consists of software/hardware distributors and manufacturers, plastic
     component manufacturers and disk drive designers.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | The general industrial
     machines classification is distributed among machinery used for many
     different industrial applications.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------




| |  | The automotive category is
     primarily comprised of auto parts distributors and wholesalers, resale and
     leasing services in the automotive and aircraft industries and maintenance
     services for automotive and aircraft parts.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | A majority of the lending
     assets in the transportation category arise from chartered aircraft
     services and transportation services for freight, cargo and other various
     packages.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | The majority of lending
     assets in the food, grocery and miscellaneous retail category are
     revolving and term facilities with borrowers that are primarily in the
     business of manufacturing and retailing of food products.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Liquidity and Capital Resources





We manage liquidity to fund asset growth and meet debt obligations
   primarily by:





| |  | monitoring the relative
     maturities of assets and liabilities; and
| | - | ----------------------------------------------------------------------




| |  | borrowing funds through
     the U.S. and international money and capital markets and bank credit
     markets.
| | - | ---------------------------------------------------------------------------------------------------------------




Our primary sources of funds are:





| |  | commercial paper
     borrowings;
| | - | ---------------------------------




| |  | issuances of medium-term
     notes and other debt securities;
| | - | --------------------------------------------------------------




| |  | paydowns on lending
     assets; and
| | - | ------------------------------------




| |  | the securitizations,
     syndications and sales of lending assets.
| | - | -------------------------------------------------------------------




During 1999, our major funding requirements included:





| |  | $8.1 billion of
     longer-term loans, leases and investments funded;
| | - | ----------------------------------------------------------------------




| |  | a net increase in
     short-term loans and advances to factoring clients of $1.1
     billion;
| | - | -----------------------------------------------------------------------------------------------







| |  | the retirement of $2.9
     billion of senior notes;
| | - | ----------------------------------------------------




| |  | common and preferred
     dividends of over $62 million; and
| | - | ------------------------------------------------------------




| |  | the HCFP acquisition for
     approximately $475 million.
| | - | ---------------------------------------------------------




Our major sources of funding these requirements included:





| |  | cash flows from operations
     of $742 million;
| | - | ------------------------------------------------




| |  | loan repayments and
     investment and equipment on lease proceeds of $2.8 billion;
| | - | ------------------------------------------------------------------------------------




| |  | the syndication,
     securitization and sale of over $2.4 billion of loans;
| | - | ----------------------------------------------------------------------------




| |  | the issuance of $4.8
     billion of senior notes;
| | - | --------------------------------------------------




| |  | the increase in commercial
     paper and short-term debt of $1.5 billion;
| | - | --------------------------------------------------------------------------




| |  | the issuance of $192
     million of Class A Common Stock; and
| | - | --------------------------------------------------------------




| |  | proceeds of $454 million
     from the sale of the assets of HCS.
| | - | -----------------------------------------------------------------




Senior note issuances include $600 million relating to our first
   global bond offering that occurred in March 1999. This offering of notes has
   expanded our international investor base, thereby extending potential
   sources of liquidity.





While our portfolio demonstrated increasing liquidity in both its
   longer term loans and revolving loans, we continued to maintain a
   conservative funding posture, with commercial paper and short-term
   borrowings amounting to 38% of total debt at December 31, 1999 compared to
   35% at the end of 1998.





As of December 31, 1999:





| |  | Our committed bank credit
     and asset sale facilities totaled $5.7 billion and represented 110% of our
     outstanding commercial paper and short-term borrowings.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | Committed bank credit and
     asset sale facilities in the United States also were well in excess of
     100% of U.S. commercial paper borrowings at December 31, 1999.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------




The amount of committed bank credit facilities includes approximately
   $4.1 billion in available liquidity support under four agreements, the
   longest of which is a multi-year facility expiring in April 2002. Two of our
   three separate 364-day bank credit facilities expire in April 2000 (both of
   which we intend to renew) and the third expires in September
   2000.





We have $379 million of additional alternative liquidity, which is
   available by discounting eligible French receivables with the French Central
   Bank since Factofrance is a registered financial institution in
   France.





We also have included in our committed facilities a 364-day facility,
   expiring December 2000, which allows us to sell up to $400 million of our
   equipment receivables to two bank-sponsored conduits. These receivables are
   sold on a limited recourse basis. As of year-end, we had not sold any
   receivables under this facility.





The consolidated international subsidiaries are funded primarily
   through short-term money market and bank borrowings, which are supported by
   approximately $800 million (U.S. dollar equivalent) of committed foreign
   bank credit facilities.





Through our wholly-owned subsidiary, Factofrance, we have a factored
   accounts receivable sale facility. This facility allows us to sell an
   undivided interest of up to 1 billion
 French francs in a designated pool of our factored accounts receivable to one
   bank-sponsored conduit on a limited recourse basis. As of December 31, 1999,
   approximately
 
 1 billion French francs (or $165 million) of receivables were sold under this
   facility.





We have a shelf registration statement, filed with the SEC, permitting
   the offering of up to $5 billion in debt securities (including medium term
   notes), senior preferred stock and Class A Common Stock. As of December 31,
   1999, there was $89 million available under this shelf
   registration.





In August 1999, we filed with the SEC a shelf registration statement
   covering the sale of up to $10 billion in debt securities (including medium
   term notes), senior preferred stock and Class A Common Stock. As of December
   31, 1999, since no securities had been issued, we had $10 billion available
   under this shelf registration.





In October 1999, we established a Euro Medium-Term Note Program for
   the issuance of up to $2 billion in notes to be issued from time to
   time.





Also in October 1999, we increased the size of our Euro commercial
   paper program to $1 billion and established a $250 million Canadian
   commercial paper program.





In November 1999, we issued $600 million of 7.375% notes due November
   1, 2009 in a privately placed transaction under SEC Rule 144A and Regulation
   S. In February 2000, we filed a registration statement with the SEC in order
   to exchange these notes for substantially identical registered
   notes.





In addition to these various sources of liquidity, we have access to
   $500 million of additional liquidity support under the Keep Well Agreement
   between Heller and Fuji Bank. This agreement, which cannot be terminated by
   either party prior to December 31, 2002, also provides that Fuji Bank will
   maintain our net worth at an amount equal to $500 million. Fuji Bank has
   never been required to make any capital contribution or advance any funds to
   us under the Keep Well Agreement.





Our ratio of debt (net of short-term investments) to total stockholders
    equity remained conservative relative to commercial finance industry
   peers at 5.8 times and 5.2 times at December 31, 1999 and 1998,
   respectively. Leverage and the level of commercial paper and short-term
   borrowings continued to remain within ranges we have targeted to maintain a
   strong financial position.





Accounting Developments





In June 1998, the Financial Accounting Standards Board issued
   Statement of Financial Accounting Standards No. 133 (SFAS No. 133),
   Accounting for Derivative Instruments and Hedging Activities,as
   amended by Statement of Financial Accounting Standards No. 137, Deferral
   of the Effective Date of FASB Statement No. 133 (collectively referred
   to as SFAS No. 133). This Statement establishes accounting and
   reporting standards requiring all derivative instruments (including certain
   derivative instruments embedded in other contracts) to be recorded in the
   balance sheet as either an asset or liability measured at its fair value.
   Changes in the fair value of the derivative are to be recognized currently
   in earnings unless specific hedge accounting criteria are met. Special
   accounting for qualifying hedges allows gains and losses on derivatives to
   offset related results on the hedged items in the income statement and
   requires that a company must document, designate, and assess the
   effectiveness of transactions that receive hedge accounting. SFAS No. 133 is
   effective for fiscal years beginning after June 15, 2000. We are assessing
   the impact of this statement and will adopt it on January 1,
   2001.





Year 2000 Compliance





We experienced no significant system or other Year 2000 problems at
   the turn of the millennium or since then to the date of this report, nor has
   there been any material change in the total costs of remediation. We do not
   believe our spending patterns or cost relationships have been materially
   affected by Year 2000 remediation expenditures or postponement of other
   expenses for other information technology projects or for non-technology
   projects. We also saw no significant change in revenue patterns or borrower
   requests for funds in late 1999, and so we do not believe that any
   significant shifting of revenues or income occurred between late 1999 and
   early 2000. Finally, we have to date experienced no Year 2000 related
   difficulty in transacting with third party vendors and
   suppliers.





In summary, we adopted a phased approach to assessing and, where
   necessary, remediating or otherwise addressing, Year 2000 issues. Phases
   included:





| |  | awareness;
| | - | ----------




| |  | assessment;
| | - | -----------




| |  | remediation or
     implementation of contingency solutions; and
| | - | ----------------------------------------------------------------




| |  | validation.
| | - | -----------




We made certain investments in our software applications and systems
   to ensure that our systems would function properly through and beyond the
   year 2000. Including systems that service the Dealer Products Group and
   HCFP, we have:





| |  | four loan processing
     systems;
| | - | ----------------------------------




| |  | three lease processing
     systems;
| | - | ------------------------------------




| |  | a factoring system;
     and
| | - | ----------------------------




| |  | systems for general ledger
     processing, payroll, accounts payable, fixed assets, treasury and other
     smaller applications.
| | - | ----------------------------------------------------------------------------------------------------------------------------------




We also addressed the impact of the Year 2000 issue on our
   consolidated international subsidiaries and our international joint venture
   companies. As a result of the risk assessment completed with respect to
   these international companies in 1998, significant remediation activity and
   additional readiness validation were completed in 1999. During the first
   quarter of 1999, we engaged an independent consultant to conduct site visits
   and a limited scope review of overall Year 2000 preparedness activities at
   certain of our international companies.





In addition to information technology systems, we assessed and
   monitored potential Year 2000 impacts on our material vendors and borrowers,
   as well as Year 2000 issues relating to environmental factors such as
   facilities and general utilities. With respect to borrowers, a Year 2000
   risk assessment was incorporated into our underwriting and portfolio
   management activities in order to evaluate exposure due to any lack of
   compliance on the part of borrowers. Finally, we incorporated Year 2000
   contingency planning into our overall business resumption program in
   consideration of facilities and other environmental factors as well as with
   respect to mission-critical processes.





We incurred approximately $18 million to date of expenses related to
   the Year 2000 issue and estimate that we will incur insignificant additional
   expenses relating to the issue.We expensed remediation, compliance,
   maintenance and modification costs as incurred.





We continue to bear some risk related to the Year 2000 issue, although
   we believe such risk to be immaterial. We are not aware of any continuing
   contingencies, but we could be
 materially adversely affected if third parties with whom we have material
   relationships (e.g., vendors, including those providing outsourced
   technology services such as mainframe and application support, borrowers and
   power companies) did not or do not appropriately address their own Year 2000
   compliance issues.





Cautionary Note Regarding Forward-Looking Statements





This Form 10-K Annual Report and the information incorporated by
   reference in it includes or will include forward-looking statements,
   as defined in Section 27A of the Securities Act and Section 21E of the
   Exchange Act, that reflect our current expectations regarding our future
   results of operations, performance and achievements. We intend for these
   forward-looking statements to be covered by the safe harbor provisions of
   the Private Securities Litigation Reform Act of 1995. We have tried to
   identify these forward-looking statements by using words such asanticipates, believes, estimates, expects, plans, intends and other
   similar expressions. These forward-looking statements are based on
   information currently available to us and are subject to risks,
   uncertainties and contingencies which could cause our actual results,
   performance or achievements for 2000 and beyond to differ materially from
   those expressed in, or implied by these statements.





These risks, uncertainties and contingencies include, but are not
   limited to, the following:





| |  | the success or failure of
     our efforts to implement our business strategy;
| | - | ------------------------------------------------------------------------------




| |  | effects of economic
     conditions in the real estate markets, the capital markets or other
     markets or industries we serve and the performance of
     borrowers;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | changes in the volume and
     mix of interest earning assets, the level of interest rates earned on
     those assets, the volume of interest-bearing liabilities and the level of
     interest rates paid on those interest-bearing liabilities;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | currency exchange rate
     fluctuations, economic conditions and competition in international
     markets, and other international factors;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------




| |  | actions of our competitors
     and our ability to respond to those actions;
| | - | ----------------------------------------------------------------------------




| |  | the cost of our capital,
     which depends in part on our portfolio quality, ratings, prospects and
     outlook and general market conditions;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------




| |  | the adequacy of our
     allowance for losses of receivables;
| | - | -------------------------------------------------------------




| |  | our ability to attract and
     retain qualified and experienced management, sales and credit personnel;
     and
| | - | -----------------------------------------------------------------------------------------------------------------




| |  | changes in governmental
     regulations, tax rates and similar matters.
| | - | ------------------------------------------------------------------------




You should not place undue reliance on any forward-looking statements.
   Except as otherwise required by federal securities laws, we assume no
   obligation to publicly update or revise any forward-looking statements,
   whether as a result of new information, future events, changed circumstances
   or otherwise.





ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
   RISKS.





See Item 1. Risk Management.





ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA





HELLER FINANCIAL, INC. AND SUBSIDIARIES





MANAGEMENT REPORT ON RESPONSIBILITY FOR FINANCIAL
   REPORTING





The management of Heller Financial, Inc. and its subsidiaries (the
   Company) is responsible for the preparation, integrity and
   objectivity of the accompanying consolidated financial statements. The
   statements were prepared in accordance with generally accepted accounting
   principles reflecting, where applicable, managements best estimates
   and judgments. The other financial information in the December 31, 1999
   annual report filed on Form 10-K is consistent with that contained in the
   consolidated financial statements.





The Companys consolidated financial statements have been audited
   by Arthur Andersen LLP, independent public accountants. Arthur Andersen LLP
   is engaged to audit the consolidated financial statements and conducts such
   tests and related procedures as it deems necessary in conformity with
   generally accepted auditing standards. The opinion of the independent
   auditors, based upon their audits of the consolidated financial statements,
   is contained in this Form 10-K. Management has made available to Arthur
   Andersen LLP all the Companys financial records and related data, as
   well as the minutes of the stockholders and directors
   meetings.





Management is responsible for establishing and maintaining a system of
   internal accounting controls and procedures to provide reasonable assurance
   that assets are safeguarded and that transactions are authorized, recorded
   and reported properly. The internal accounting control system is augmented
   by a program of internal audits and appropriate reviews by management,
   written policies and guidelines and careful selection and training of
   qualified personnel. Management considers the internal auditors and
   Arthur Andersen LLPs recommendations concerning the Companys
   system of internal accounting controls and takes action in a cost-effective
   manner to appropriately respond to these recommendations. Management
   believes that the Companys internal accounting controls provide
   reasonable assurance that assets are safeguarded against material loss from
   unauthorized use or disposition and that the financial records are reliable
   for preparing financial statements and other data and for maintaining
   accountability of assets.





Management also recognizes its responsibility for fostering a strong
   ethical climate so that the Companys affairs are conducted according
   to high standards of personal and corporate conduct. This responsibility is
   characterized and reflected in the Companys code of ethical business
   practices, which is publicized throughout the Company. The code of ethical
   business practices addresses, among other things, the need for open
   communication within the Company, potential conflicts of interest,
   compliance with all domestic and foreign laws, including those relating to
   financial disclosure, and the confidentiality of proprietary
   information.





| | Richard J.
     Almeida
| | -----------------------

| | Chairman and Chief
     Executive Officer
| | -----------------------------------------




| | Lauralee E.
     Martin
| | -----------------------

| | Executive Vice
     President and Chief Financial Officer
| | ---------------------------------------------------------




| | Lawrence G.
     Hund
| | ---------------------

| | Executive Vice
     President, Controller and Chief Accounting Officer
| | ----------------------------------------------------------------------







HELLER FINANCIAL, INC. AND SUBSIDIARIES





REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS





To Heller Financial, Inc.:





We have audited the accompanying consolidated balance sheets of HELLER
   FINANCIAL, INC. (a Delaware corporation) AND SUBSIDIARIES as of December 31,
   1999 and 1998, and the related consolidated statements of income, changes in
   stockholders equity and cash flows for each of the three years in the
   period ended December 31, 1999. 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, the financial statements referred to above present
   fairly, in all material respects, the financial position of Heller
   Financial, Inc. and Subsidiaries as of December 31, 1999 and 1998, and the
   results of their operations and their cash flows for each of the three years
   in the period ended December 31, 1999, in conformity with generally accepted
   accounting principles.





| | ARTHUR
   ANDERSEN
   LLP
| | -------------------------




Chicago, Illinois


January 18, 2000


(except with respect to Note 26, as
   to


which the date is February 15,
   2000)





HELLER FINANCIAL, INC. AND SUBSIDIARIES





CONSOLIDATED BALANCE SHEETS





|                                                                                                                                                                                  |  | December
     31,
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------
|
|
|
|Cash and cash
     equivalents                                                                                                                                                    |  | $    516         
|Receivables (Note
     6)                                                                                                                                                         |  |                  
|Commercial loans                                                                                                                                                                  |  |                  
|Term loans                                                                                                                                                                        |  | 4,652            
|Revolving loans                                                                                                                                                                   |  | 2,055            
|Real estate loans                                                                                                                                                                 |  | 2,405            
|Factored accounts
     receivable                                                                                                                                                 |  | 2,708            
|Equipment loans and leases                                                                                                                                                        |  | 2,975            
|                                                                                                                                                                                  |  |                  
|Total receivables                                                                                                                                                                 |  | 14,795           
|Less: Allowance for losses of
     receivables (Note 6)                                                                                                                           |  | 316              
|                                                                                                                                                                                  |  |                  
|Net receivables                                                                                                                                                                   |  | 14,479           
|Equity and real estate
     investments (Note 7)                                                                                                                                  |  | 737              
|Debt securities (Note
     7)                                                                                                                                                     |  | 549              
|Operating leases (Note
     7)                                                                                                                                                    |  | 508              
|Investments in
     international joint ventures (Note 7)                                                                                                                         |  | 219              
|Goodwill (Note
     7)                                                                                                                                                            |  | 481              
|Other assets (Note
     7)                                                                                                                                                        |  | 484              
|                                                                                                                                                                                  |  |                  
|Total assets                                                                                                                                                                      |  | $17,973          
|                                                                                                                                                                                  |  |                  
|
|Senior debt (Note
     8)                                                                                                                                                         |  |                  
|Commercial paper and short-term
     borrowings                                                                                                                                   |  | $  5,202         
|Notes and debentures                                                                                                                                                              |  | 8,630            
|                                                                                                                                                                                  |  |                  
|Total debt                                                                                                                                                                        |  | 13,832           
|Credit balances of
     factoring clients                                                                                                                                         |  | 993              
|Other payables and
     accruals                                                                                                                                                  |  | 790              
|                                                                                                                                                                                  |  |                  
|Total liabilities                                                                                                                                                                 |  | 15,615           
|Minority
     interest                                                                                                                                                            |  | 11               
|Stockholders equity
     (Notes 12 and 13)                                                                                                                                       |  |                  
|Non-redeemable preferred stock (Note
     12)                                                                                                                                     |  | 400              
|Class A Common Stock ($.25 par;
     500,000,000 shares authorized; 46,320,888 shares
   
               
        issued and 45,953,214 shares outstanding) (Notes 2 and
     14) |  | 12               
|Class B Common Stock ($.25 par;
     300,000,000 shares authorized; 51,050,000 shares
   
               
        issued and outstanding) (Note 2)                                |  | 13               
|Additional paid in capital                                                                                                                                                        |  | 1,626            
|Retained earnings                                                                                                                                                                 |  | 332              
|Treasury stock (367,674) (Note
     14)                                                                                                                                           |  | (9               
|Accumulated other comprehensive
     income                                                                                                                                       |  | (27              
|                                                                                                                                                                                  |  |                  
|Total stockholders equity                                                                                                                                                        |  | 2,347            
|                                                                                                                                                                                  |  |                  
|Total liabilities and stockholders
     equity                                                                                                                                   |  | $17,973          
|                                                                                                                                                                                  |  |                  




The accompanying Notes to Consolidated Financial Statements
 
 are an integral part of these statements.





HELLER FINANCIAL, INC. AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF INCOME





|                                                                                 |  | For the Year Ended
   
   December 31,
|-------------------------------------------------------------------------------- |  | --------------------------------------
|
|
|Interest income                                                                  |  | $1,197                                
|Interest
     expense                                                            |  | 685                                   
|                                                                                 |  |                                       
|Net interest income                                                              |  | 512                                   
|Fees and other income
     (Note 15)                                             |  | 286                                   
|Factoring
     commissions                                                       |  | 119                                   
|Income of international
     joint ventures                                      |  | 35                                    
|                                                                                 |  |                                       
|Operating revenues                                                               |  | 952                                   
|Operating expenses (Note
     16)                                                |  | 456                                   
|Provision for losses (Note
     6)                                               |  | 136                                   
|Gain on sale of Commercial
     Services assets (Note 5)                         |  | 79                                    
|Restructuring charge (Note
     17)                                              |  |                                      
|                                                                                 |  |                                       
|Income before taxes and minority
     interest                                   |  | 439                                   
|Income tax provision (Note
     19)                                              |  | 154                                   
|Minority
     interest                                                           |  | 1                                     
|                                                                                 |  |                                       
|Net income                                                                       |  | $  284                                
|                                                                                 |  |                                       
|Dividends on preferred
     stock                                                |  | $    28                               
|                                                                                 |  |                                       
|Net income applicable to common
     stock                                       |  | $  256                                
|                                                                                 |  |                                       
|Basic net income applicable to common
     stock per share (Note 20)             |  | $  2.75                               
|                                                                                 |  |                                       
|Diluted net income applicable to
     common stock per share (Note 20)           |  | $  2.74                               
|                                                                                 |  |                                       
|Pro forma basic net income applicable
     to common stock per share (Note 20)   |  | $  2.75                               
|                                                                                 |  |                                       
|Pro forma diluted net income
     applicable to common stock per share (Note 20) |  | $  2.74                               
|                                                                                 |  |                                       




The accompanying Notes to Consolidated Financial Statements
 
 are an integral part of these statements.





HELLER FINANCIAL, INC. AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF CASH FLOWS





|                                                                                       |  | For the Year Ended
   
   December 31,
|-------------------------------------------------------------------------------------- |  | --------------------------------------
|
|
|OPERATING
     ACTIVITIES                                                              |  |                                       
|Net income                                                                             |  | $  284                                
|Adjustments to reconcile net income to net cash provided by
     operating activities: |  |                                       
|Provision for losses                                                                   |  | 136                                   
|Losses from equity investments                                                         |  | 21                                    
|Amortization and depreciation                                                          |  | 46                                    
|Provision for deferred tax asset
     (benefit)                                        |  | 40                                    
|Increase in accounts payable and accrued
     liabilities                              |  | 206                                   
|Undistributed income of international joint
     ventures                              |  | (21                                   
|Increase in interest payable                                                           |  | 25                                    
|Other                                                                                  |  | 5                                     
|                                                                                       |  |                                       
|Net cash provided by
     operating activities                                         |  | 742                                   
|INVESTING
     ACTIVITIES                                                              |  |                                       
|Increase in longer-term loans                                                          |  |                                       
|Due to HCFP acquisition                                                                |  | (535                                  
|Due to Dealer Products Group
     acquisition                                          |  |                                      
|Due to fundings                                                                        |  | (7,334                                
|Collections of principal                                                               |  | 2,476                                 
|Loan sales, securitizations and syndications                                           |  | 2,425                                 
|Net (increase) decrease in short-term loans and advances to
     factoring clients     |  |                                       
|Due to Sale of HCS assets                                                              |  | 334                                   
|Due to consolidation of Factofrance                                                    |  |                                      
|Other                                                                                  |  | (1,066                                
|Investment in operating leases                                                         |  |                                       
|Due to Dealer Products Group
     acquisition                                          |  |                                      
|Other                                                                                  |  | (278                                  
|Investment in equity interests and other investments                                   |  | (447                                  
|Goodwill and non-competition agreement from acquisitions                               |  | (238                                  
|Sales of investments and equipment on lease                                            |  | 337                                   
|Other                                                                                  |  | 48                                    
|                                                                                       |  |                                       
|Net cash used for
     investing activities                                            |  | (4,278                                
|FINANCING
     ACTIVITIES                                                              |  |                                       
|Senior note issues                                                                     |  | 4,805                                 
|Retirement of notes and debentures                                                     |  | (2,932                                
|Increase (decrease) in commercial paper and other short-term
     borrowings           |  |                                       
|Due to consolidation of Factofrance                                                    |  |                                      
|Other                                                                                  |  | 1,521                                 
|Net proceeds from preferred stock issuance                                             |  |                                      
|Net proceeds from common stock issuance                                                |  | 192                                   
|Repurchase of Class A Common Stock (Note 14)                                           |  | (2                                    
|Net (increase) decrease in advances to affiliates                                      |  | 6                                     
|Dividends paid on preferred and common stock                                           |  | (62                                   
|Other                                                                                  |  | (5                                    
|                                                                                       |  |                                       
|Net cash provided by
     financing activities                                         |  | 3,523                                 
|Increase (decrease) in
     cash and cash equivalents                                  |  | (13                                   
|Cash and cash equivalents
     at the beginning of the year                            |  | 529                                   
|                                                                                       |  |                                       
|Cash and cash equivalents
     at the end of the year                                  |  | $  516                                
|                                                                                       |  |                                       




The accompanying Notes to Consolidated Financial Statements
 
 are an integral part of these statements.





HELLER FINANCIAL, INC. AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS
   EQUITY





|                                                                                            |  | Non-Re-
   
   deemable
   
   Preferred
   
   Stock
   
   (Note 12) |  | Class A
   
   Common
   
   Stock
   
   (Note 2) |  | Class B
   
   Common
   
   Stock
   
   (Note 2) |  | Treasury
   
   Stock
   
   (Note
   
   14) |   | Addl
   
   Paid
   
   In
   
   Capital |        | Accum.
   
   Other
   
   Compre-
   
   hensive
   
   Income |  | Retained
   
   Earnings |   | Total |      | Compre-
   
   hensive
   
   Income
|------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------- |  | -------------------------------------------------- |  | -------------------------------------------------- |  | --------------------------------------------- | - | ------------------------------------------ | ------ | --------------------------------------------------------------- |  | ------------------------ | - | ----- | ---- | ------------------------------------
|
|BALANCE AT DECEMBER 31,
     1996                                                           |  | $125                                                                   |  |                                                   |  | $13                                                |  |                                              |   |                                            | $  675 |                                                                 |  | $  (1                    | ) |       | $655 |                                     
|Comprehensive
     Income:                                                                  |  |                                                                        |  |                                                    |  |                                                    |  |                                               |   |                                            |        |                                                                 |  |                          |   |       |      |                                     
|Net income                                                                                  |  |                                                                       |  |                                                   |  |                                                   |  |                                              |   |                                            |       |                                                                 |  |                         |   |       | 158  |                                     
|Other comprehensive income, net of tax:                                                     |  |                                                                        |  |                                                    |  |                                                    |  |                                               |   |                                            |        |                                                                 |  |                          |   |       |      |                                     
|Unrealized loss on securities, net of tax
   
               of $
     (2)                  |  |                                                                       |  |                                                   |  |                                                   |  |                                              |   |                                            |       |                                                                 |  |                         |   |       |     |                                     
|Foreign currency translation adjustments, net of
   
               tax
     of $ (17)      |  |                                                                       |  |                                                   |  |                                                   |  |                                              |   |                                            |       |                                                                 |  |                         |   |       |     |                                     
|                                                                                            |  |                                                                        |  |                                                    |  |                                                    |  |                                               |   |                                            |        |                                                                 |  |                          |   |       |      |                                     
|Other comprehensive income                                                                  |  |                                                                       |  |                                                   |  |                                                   |  |                                              |   |                                            |       |                                                                 |  | (11                      | ) |       |     |                                     
|                                                                                            |  |                                                                        |  |                                                    |  |                                                    |  |                                               |   |                                            |        |                                                                 |  |                          |   |       |      |                                     
|Comprehensive
     income                                                                   |  |                                                                       |  |                                                   |  |                                                   |  |                                              |   |                                            |       |                                                                 |  |                         |   |       |     |                                     
|                                                                                            |  |                                                                        |  |                                                    |  |                                                    |  |                                               |   |                                            |        |                                                                 |  |                          |   |       |      |                                     
|Issuance of Noncumulative
     Perpetual Senior
   
       Preferred Stock, Series B        |  | 150                                                                    |  |                                                   |  |                                                   |  |                                              |   |                                            | (3)    |                                                                 |  |                         |   |       |     |                                     
|Preferred stock dividends
     (Notes 12 and 13)                                            |  |                                                                       |  |                                                   |  |                                                   |  |                                              |   |                                            |       |                                                                 |  |                         |   |       | (14  | )                                   
|Common stock dividends
     (Note 13)                                                       |  |                                                                       |  |                                                   |  |                                                   |  |                                              |   |                                            |       |                                                                 |  |                         |   |       | (69  | )                                   
|                                                                                            |  |                                                                        |  |                                                    |  |                                                    |  |                                               |   |                                            |        |                                                                 |  |                          |   |       |      |                                     
|BALANCE AT DECEMBER 31,
     1997                                                           |  | $275                                                                   |  |                                                   |  | $13                                                |  |                                              |   |                                            | $  672 |                                                                 |  | $(12                     | ) |       | $730 |                                     
|Comprehensive
     Income:                                                                  |  |                                                                        |  |                                                    |  |                                                    |  |                                               |   |                                            |        |                                                                 |  |                          |   |       |      |                                     
|Net income                                                                                  |  |                                                                       |  |                                                   |  |                                                   |  |                                              |   |                                            |       |                                                                 |  |                         |   |       | 193  |                                     
|Other comprehensive income, net of tax:                                                     |  |                                                                        |  |                                                    |  |                                                    |  |                                               |   |                                            |        |                                                                 |  |                          |   |       |      |                                     
|Unrealized gain on securities, net of tax of
     $7                                        |  |                                                                       |  |                                                   |  |                                                   |  |                                              |   |                                            |       |                                                                 |  |                         |   |       |     |                                     
|Foreign currency translation adjustments, net of
   
               tax
     benefit of $17 |  |                                                                       |  |                                                   |  |                                                   |  |                                              |   |                                            |       |                                                                 |  |                         |   |       |     |                                     
|                                                                                            |  |                                                                        |  |                                                    |  |                                                    |  |                                               |   |                                            |        |                                                                 |  |                          |   |       |      |                                     
|Other comprehensive income                                                                  |  |                                                                       |  |                                                   |  |                                                   |  |                                              |   |                                            |       |                                                                 |  | 13                       |   |       |     |                                     
|                                                                                            |  |                                                                        |  |                                                    |  |                                                    |  |                                               |   |                                            |        |                                                                 |  |                          |   |       |      |                                     
|Comprehensive
     income                                                                   |  |                                                                       |  |                                                   |  |                                                   |  |                                              |   |                                            |       |                                                                 |  |                         |   |       |     |                                     
|                                                                                            |  |                                                                        |  |                                                    |  |                                                    |  |                                               |   |                                            |        |                                                                 |  |                          |   |       |      |                                     
|Issuance of Noncumulative
     Perpetual Senior
   
       Preferred Stock, Series D        |  | 125                                                                    |  |                                                   |  |                                                   |  |                                              |   |                                            | (3)    |                                                                 |  |                         |   |       |     |                                     
|Issuance of Class A Common
     Stock (Note 2)                                              |  |                                                                       |  | 10                                                 |  |                                                   |  |                                              |   |                                            | 981    |                                                                 |  |                         |   |       |     |                                     
|Repurchase of Class A
     Common Stock (Note 14)                                           |  |                                                                       |  |                                                   |  |                                                   |  | (8                                            | ) |                                            |       |                                                                 |  |                         |   |       |     |                                     
|Preferred stock dividends
     (Notes 12 and 13)                                            |  |                                                                       |  |                                                   |  |                                                   |  |                                              |   |                                            |       |                                                                 |  |                         |   |       | (21  | )                                   
|Common stock dividends
     (Notes 2 and 13)                                                |  |                                                                       |  |                                                   |  |                                                   |  |                                              |   |                                            | (215   | )                                                               |  |                         |   |       | (791 | )                                   
|                                                                                            |  |                                                                        |  |                                                    |  |                                                    |  |                                               |   |                                            |        |                                                                 |  |                          |   |       |      |                                     
|BALANCE AT DECEMBER 31,
     1998                                                           |  | $400                                                                   |  | $10                                                |  | $13                                                |  | $  (8                                         | ) |                                            | $1,435 |                                                                 |  | $  1                     |   |       | $111 |                                     
|Comprehensive
     Income:                                                                  |  |                                                                        |  |                                                    |  |                                                    |  |                                               |   |                                            |        |                                                                 |  |                          |   |       |      |                                     
|Net income                                                                                  |  |                                                                       |  |                                                   |  |                                                   |  |                                              |   |                                            |       |                                                                 |  |                         |   |       | 284  |                                     
|Other comprehensive income, net of tax:                                                     |  |                                                                        |  |                                                    |  |                                                    |  |                                               |   |                                            |        |                                                                 |  |                          |   |       |      |                                     
|Unrealized loss on securities, net of tax benefit
   
               of
     $8             |  |                                                                       |  |                                                   |  |                                                   |  |                                              |   |                                            |       |                                                                 |  |                         |   |       |     |                                     
|Foreign currency translation adjustments, net of
   
               tax
     of $ (56)      |  |                                                                       |  |                                                   |  |                                                   |  |                                              |   |                                            |       |                                                                 |  |                         |   |       |     |                                     
|                                                                                            |  |                                                                        |  |                                                    |  |                                                    |  |                                               |   |                                            |        |                                                                 |  |                          |   |       |      |                                     
|Other comprehensive income                                                                  |  |                                                                       |  |                                                   |  |                                                   |  |                                              |   |                                            |       |                                                                 |  | (28                      | ) |       |     |                                     
|                                                                                            |  |                                                                        |  |                                                    |  |                                                    |  |                                               |   |                                            |        |                                                                 |  |                          |   |       |      |                                     
|Comprehensive
     income                                                                   |  |                                                                       |  |                                                   |  |                                                   |  |                                              |   |                                            |       |                                                                 |  |                         |   |       |     |                                     
|                                                                                            |  |                                                                        |  |                                                    |  |                                                    |  |                                               |   |                                            |        |                                                                 |  |                          |   |       |      |                                     
|Issuance of Class A Common
     Stock (Note 2)                                              |  |                                                                       |  | 2                                                  |  |                                                   |  |                                              |   |                                            | 190    |                                                                 |  |                         |   |       |     |                                     
|Repurchase of Class A
     Common Stock (Note 14)                                           |  |                                                                       |  |                                                   |  |                                                   |  | (1                                            | ) |                                            |       |                                                                 |  |                         |   |       | (1   | )                                   
|Vesting of Restricted
     Shares                                                           |  |                                                                       |  |                                                   |  |                                                   |  |                                              |   |                                            | 1      |                                                                 |  |                         |   |       |     |                                     
|Preferred stock dividends
     (Notes 12 and 13)                                            |  |                                                                       |  |                                                   |  |                                                   |  |                                              |   |                                            |       |                                                                 |  |                         |   |       | (28  | )                                   
|Common stock dividends
     (Notes 2 and 13)                                                |  |                                                                       |  |                                                   |  |                                                   |  |                                              |   |                                            |       |                                                                 |  |                         |   |       | (34  | )                                   
|                                                                                            |  |                                                                        |  |                                                    |  |                                                    |  |                                               |   |                                            |        |                                                                 |  |                          |   |       |      |                                     
|BALANCE AT DECEMBER 31,
     1999                                                           |  | $400                                                                   |  | $12                                                |  | $13                                                |  | $  (9                                         | ) |                                            | $1,626 |                                                                 |  | $(27                     | ) |       | $332 |                                     
|                                                                                            |  |                                                                        |  |                                                    |  |                                                    |  |                                               |   |                                            |        |                                                                 |  |                          |   |       |      |                                     




The accumulated other comprehensive income balance included $7
   million, $22 million and $8 million of unrealized gains on securities
   available for sale at December 31, 1999, 1998 and 1997, respectively.
   Accumulated other comprehensive income also included deferred foreign
   currency translation adjustments, net of tax, of $(34) million, $(21)
   million and $(20) million at December 31, 1999, 1998 and 1997,
   respectively.





The accompanying Notes to Consolidated Financial Statements
 
 are an integral part of these statements.





HELLER FINANCIAL, INC. AND SUBSIDIARIES





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





1. Summary of Significant Accounting Policies





Description of the Reporting Entity
   





Heller Financial, Inc. (including its consolidated subsidiaries,
   Helleror the Company,which may be referred to as we, usor our) furnishes commercial finance services to businesses in
   the United States and invests in and operates commercial finance companies
   throughout the world. We provide our products and services to mid-sized and
   small businesses principally through two business segments, (1) Domestic
   Commercial Finance and (2) International Factoring and Asset Based Finance.
   The Domestic Commercial Finance segment is comprised of five business units:
   (i) Heller Corporate Finance (Corporate Finance),(ii) Heller Real
   Estate Financial Services (Real Estate Finance),(iii) Heller Leasing
   Services (Leasing Services),(iv) Heller Small Business Finance
   (Small Business Finance),and (v) Heller Healthcare Finance
   (Healthcare Finance).Our International Factoring and Asset Based
   segment, managed by our wholly-owned subsidiary, Heller International Group,
   Inc. (International Group),provides international factoring and
   asset based financing to medium size and small companies.





Prior to 1998, all of our common stock was owned by Heller
   International Corporation (HIC),a wholly-owned subsidiary of The
   Fuji Bank, Limited (Fuji Bank),of Tokyo, Japan. In addition, Fuji
   Bank directly owned 21% of the outstanding shares of International Group. We
   owned the remaining 79% of the outstanding shares of International
   Group.





Effective January 1998, in order to combine its United States non-bank
   operations under one holding company, Fuji Bank formed Fuji America
   Holdings, Inc. (FAHI),and transferred ownership of the Company from
   HIC to FAHI.





In May 1998, we issued 38,525,000 shares of Class A Common Stock in an
   initial public offering (the Offering).During 1998, we also issued
   509,019 shares of restricted Class A Common Stock to management. After the
   Offering and the issuance of shares to management, there were 90,080,912
   shares of common stock issued, resulting in FAHI owning 79% of the voting
   interest and 57% of the economic interest of Hellers issued common
   stock. See Note 2Initial Public Offeringfor more details.
   In May 1998, we also purchased the 21% interest held by Fuji Bank in
   International Group and we now own 100% of International Group.





In July 1999, we issued 7.3 million shares of Class A Common Stock in
   conjunction with the HealthCare Financial Partners acquisition. See Note 4
   HealthCare Financial Acquisitionfor more details. Our
   issuance of common stock related to this transaction reduced FAHIs
   ownership interest in Heller from 57% to 52%.





Basis of Presentation
   





The accompanying consolidated financial statements include the
   accounts of the Company and our majority-owned subsidiaries. All significant
   inter-company accounts and transactions have been eliminated in
   consolidation. We account for investments in affiliated companies owned 50%
   or less using the equity method. We have included certain temporary
   interests in investments and carry those temporary investments at
   cost.





Use of Estimates





Preparing financial statements in conformity with generally accepted
   accounting principles requires us to make estimates and assumptions. These
   estimates and assumptions may affect the reported amounts of assets and
   liabilities and the disclosure of contingent assets and liabilities at the
   financial statement date and the reported amounts of revenues and expenses
   during the reporting period. Actual results could differ from those
   estimates.





Cash and Cash Equivalents
   





Cash and cash equivalents consist of cash deposits maintained in banks
   and short-term debt securities with original maturities of less than 60
   days.





Receivables





We present receivables net of unearned income, which generally
   includes deferred loan origination and commitment fees and direct loan
   origination costs. We also include in unearned income other amounts
   attributed to the fair value of equity interests and other investments
   received in connection with certain financings. We amortize the unearned
   income to interest income using the effective interest method over the life
   of the related loan, lease or commitment period.





We originate certain loans, which may be syndicated or portions sold
   to participants, to manage borrower, industry or product concentrations. We
   present these receivables net of unearned income. In the event we sell a
   portion of a loan we had originated, any deferred fees or discounts relating
   to the portion sold are recognized in interest income. For loan sales that
   qualify as participations, we recognize income when the participation is
   complete.





We review income recognition on an account by account basis. We
   evaluate collateral regularly, primarily by assessing the related current
   and future cash flow streams to estimate the value of the equipment, or by
   assessing the value of the property underlying the receivable. We classify
   loans as nonearning and we suspend all interest and unearned income
   amortization when there is significant doubt as to the ability of the debtor
   to meet current contractual terms. Numerous factors including loan covenant
   defaults, deteriorating loan-to-value relationships, delinquencies greater
   than 90 days, the sale of major income generating assets or other major
   operational or organizational changes may lead to income suspension. We may
   restore a nonearning account to earning status if all delinquent principal
   and interest have been paid under the original contractual terms or the
   account has been restructured and has demonstrated both the capacity to
   service the amended terms of the debt and has adequate loan to value
   coverage.





Allowance for Losses





We maintain an allowance for losses of receivables based upon our
   estimate of probable losses inherent in our receivables portfolio at
   year-end. The allowance for losses of receivables is established through
   direct charges to income. We charge losses to the allowance when we deem all
   or a portion of a receivable to be impaired and uncollectible as determined
   by account management procedures. These procedures include assessing how the
   borrower is affected by economic and market conditions, evaluating operating
   performance and reviewing loan-to-value relationships. We measure impaired
   receivables based on the present value of expected future cash flows
   discounted at the receivables effective interest rate, at the
   observable market price of the receivable or at the fair value of the
   collateral if the receivable is collateral dependent. When the recorded
   balance of an impaired receivable
 exceeds the relevant measure of value, we record impairment through an
   increase in the provision for losses.





We evaluate the allowance for losses on a quarterly basis. We review
   nonearning assets and loans with certain loan grading characteristics to
   determine if there is a potential risk of loss under varying performance
   scenarios. We aggregate the potential loss estimates for these individual
   loans and add them to a general allowance requirement, which reflects our
   estimates of inherent losses within our lending portfolio. We base these
   estimates on general economic factors, related industry performance,
   historical losses and other judgmental factors. We then compare this total
   allowance requirement to the existing allowance for losses and we make
   adjustments, if necessary.





Securitized Receivables
   





We have securitized and sold to investors certain commercial mortgage,
   equipment and small business loans and leases. In the securitization
   process, originated loans are sold to trusts. The trusts then issue
   asset-backed securities to investors. In accordance with Statement of
   Financial Accounting Standards No. 125, Accounting for Transfers and
   Servicing of Financial Assets and Extinguishment of Liabilities, as
   amended by Statement of Financial Accounting Standards No. 127, Deferral
   of the Effective Date of Certain Provisions of FASB Statement No. 125,
   collectively referred to as SFAS 125, after a transfer of financial
   assets, an entity:





| |  | recognizes the financial
     and servicing assets it controls and the liabilities it has
     incurred;
| | - | --------------------------------------------------------------------------------------------------------




| |  | derecognizes financial
     assets when control has been surrendered; and
| | - | -------------------------------------------------------------------------




| |  | derecognizes liabilities
     when extinguished.
| | - | ------------------------------------------------




SFAS 125 provides standards for distinguishing transfers of financial
   assets that are sales from transfers that are secured borrowings.
   Securitizations of finance receivables are accounted for as sales when legal
   and effective control over the related receivables is surrendered. Servicing
   assets or liabilities are recognized when the servicing rights are retained
   by the seller and when servicing fees vary from market rates.





In accordance with SFAS 125, when we sell the loans in a
   securitization, we recognize a gain for the difference between the net
   proceeds received and the allocated carrying value of the receivables sold,
   based on relative fair values. If we do not retain any interest in the
   transaction and sell all of the securities to third party investors on a
   nonrecourse basis, our gain equals the net proceeds on the transaction less
   the carrying value of the securities sold. We classify retained securities
   as debt securities available for sale. These interests are recorded at their
   estimated fair market value based on estimated future cash flows discounted
   at a market rate of interest and adjusted for any recourse obligations.
   Assumptions used in estimating future cash flows are based on a combination
   of our historical experience, current and forecasted trends and external
   data. Retained securities are periodically reviewed for impairment. We
   record any gain recognized in fees and other income. In general, we do not
   establish servicing assets or liabilities because, in securitization
   transactions to date, we have earned servicing fees that are considered
   consistent with market rates.





Investments in Joint Ventures
   





Our investments in unconsolidated joint ventures represent investments
   in companies with operations in 15 foreign countries. We use the equity
   method of accounting for these investments. Under this method, we recognize
   our share of the earnings or losses of the joint
 venture in the period in which they are earned. We record these amounts as
   income of international joint ventures in our consolidated statements of
   income. Dividends received from joint ventures reduce the carrying amount of
   the investment.





Investments





Equity Interests and InvestmentsWe carry at cost
   investments in warrants, certain common and preferred stocks and certain
   equity investments, which are not subject to the provisions of Statement of
   Financial Accounting Standards No. 115, Accounting for Certain
   Investments in Debt and Equity Securities.We periodically review the
   valuation of all of these investments and we write down the investment
   balance to reflect declines in value determined to be other than temporary.
   We record any gains or losses recognized upon sale or write-down of these
   investments as a component of fees and other income. We account for certain
   other equity investments in limited partnership under the equity method of
   accounting in accordance with Accounting Principles Board Opinion No. 18,
   The Equity Method of Accounting for Investments in Common Stock,and
   record income on these investments based on financial information received
   from fund managers.





Equipment on LeaseWe recordaircraft and equipment
   under operating lease at cost and depreciate them over their estimated
   useful lives using the straight line method for financial reporting purposes
   and accelerated methods for tax purposes. We report rental revenue over the
   lease term as it is earned according to the provisions of the
   lease.





Available for Sale and Held to Maturity SecuritiesWe
   carry at fair value our available for sale securities using the specific
   identification method. We record any unrealized gains or losses in
   stockholders equity, net of related taxes. We record our held to
   maturity securities at amortized cost. We may write down to fair value
   available for sale and held to maturity securities to reflect declines in
   value determined to be other than temporary. We include the amount of any
   writedown in fees and other income.





Real Estate InvestmentsWe provide financing through
   certain real estate loan arrangements that are recorded as acquisition,
   development and construction investment transactions. We only recognize
   income when we have received cash in excess of the investments
   carrying amount.





Repossessed AssetsAssets that we have legally acquired in
   satisfaction of receivables are carried at fair value less selling costs and
   are included in other assets. After repossession, we expense operating costs
   and apply cash receipts to reduce the asset balance.





GoodwillWe record as goodwill the excess of an entity
   s acquisition cost over the fair value of the acquired entitys
   net assets and any identifiable intangibles. We amortize goodwill on a
   straight-line basis over the acquisitions expected beneficial period
   not to exceed 25 years.





Income Taxes





From January 1998 through the date of the Offering, Heller was
   included in FAHIs consolidated United States federal income tax
   return. Subsequent to the Offering and in 1999, we filed our own United
   States federal income tax return. We record future tax benefits as soon as
   we believe the benefits will be realized.





International Group filed a separate United States federal income tax
   return through April 1998. After that date, International Group is included
   in Hellers consolidated United States federal income tax
   return.





Derivative Financial Instruments
   





We use derivatives as an integral part of asset/liability management
   to reduce the overall level of financial risk arising from normal business
   operations. These derivatives are used to:





| |  | diversify sources of
     funding;
| | - | ----------------------------------




| |  | alter interest rate
     exposure arising from mismatches between assets and liabilities;
     and
| | - | --------------------------------------------------------------------------------------------------




| |  | manage exposure to
     fluctuations in foreign exchange rates.
| | - | ---------------------------------------------------------------




We do not trade in derivative securities, nor do we use speculative
   derivative products to generate earnings from changes in market
   conditions.





Before entering into a derivative transaction, we determine that a
   high correlation exists between the change in value of the hedged item and
   the value of the derivative. At the inception of each transaction,
   derivatives are designated or matched to specific assets, pools of assets or
   liabilities. After inception of a hedge, asset/liability managers monitor
   its effectiveness through an ongoing review of the amounts and maturities of
   assets, liabilities and derivative positions. This information is reported
   to our Financial Risk Management Committee (FRMC) whose members
   include our Chairman, Chief Financial Officer and Treasurer. The FRMC
   determines the direction the Company will take with respect to our financial
   risk position and regularly reviews interest rate sensitivity, foreign
   exchange exposure, funding needs and liquidity. Our financial risk position
   and the related activities of the FRMC are reported regularly to the
   Executive Committee of the Board of Directors and to the Board of
   Directors.





We enter into interest rate swap agreements to modify the interest
   characteristics of our outstanding assets and liabilities to limit exposure
   to changes in interest rates. Our interest rate swap agreements are
   designated as hedges of their underlying assets and liabilities. We
   generally hold our interest rate swap agreements to maturity. Any
   differential paid or received, as interest rates change, is accrued and
   recognized as an adjustment in interest expense or interest income over the
   agreements life. Any amount payable to or receivable from
   counter-parties is recorded in other liabilities or other assets. Gains or
   losses on terminated interest rate swaps that hedged underlying assets or
   obligations are amortized to interest income or interest expense over the
   remaining life of the underlying asset or obligation. If the underlying
   asset or obligation is sold, we recognize the gain or loss related to
   closing the swap currently in income.





We also periodically enter into forward currency exchange contracts.
   These financial instruments serve as hedges of our foreign investment in
   international subsidiaries and joint ventures. They also serve to
   effectively hedge the translation of the related foreign currency income.
   Through these contracts, we primarily sell the local currency and buy U.S.
   dollars. Gains or losses on terminated forward currency exchange contracts,
   which were hedges of net investments in a foreign subsidiary or joint
   venture, continue to be deferred and are recognized when the international
   investment is sold or substantially liquidated. Gains or losses resulting
   from translation of foreign currency financial statements and the related
   effects of the hedges of net investments in joint ventures and subsidiaries
   outside the United States, are accumulated in stockholders equity, net
   of related taxes, until the international investment is sold or
   substantially liquidated. The change in fair value of contracts, which serve
   to effectively hedge the translation of foreign currency income, is included
   in the determination of net income.





Stock Based Compensation
   





We account for stock option and stock awards in accordance with
   Accounting Principles Board Opinion No. 25, Accounting for Stock Issued
   to Employees (APB 25). In accordance with APB 25, no compensation
   expense is recognized for stock options or awards issued under our stock
   incentive plan as the exercise price of the stock options equaled the market
   value on the grant dates.





The restricted stock we issued during 1999 and 1998 was recorded as
   deferred compensation at the issue price or the fair market value on grant
   date and is amortized to compensation expense on a straight-line basis over
   the applicable vesting periods.





Reclassifications





We have reclassified certain prior year amounts to conform to the
   current years presentation.





2. Initial Public Offering





In May 1998, we issued 38,525,000 shares of Class A Common Stock in an
   initial public offering (the Offering). We received net proceeds of
   $986 million. Of that amount, we repaid our indebtedness of a $450 million
   subordinated note to FAHI. The note was issued February 24, 1998 for a
   previously declared dividend to FAHI. We also used $533 million to pay a
   cash dividend to FAHI. Our 51,050,000 outstanding Class B Common Shares are
   held by FAHI. In addition, we issued 509,019 shares of restricted Class A
   Common Stock to management during 1998.





The holders of our Class A Common Stock are entitled to one vote per
   share. The holders of our Class B Common Stock are entitled to three votes
   per share (except that the outstanding shares of Class B Common Stock may
   never represent more than 79% of the combined voting power of all
   outstanding shares of the Companys voting stock).





After the Offering and the issuance of shares to management, we had
   90,080,912 shares of common stock issued resulting in FAHI owning 79% of the
   voting interest and 57% of the economic interest of our issued common stock.
   Prior to May 1998, FAHI owned 100% of our issued and outstanding common
   stock. FAHIs ownership is now 52%.





In anticipation of an initial public offering, we amended our Restated
   Certificate of Incorporation increasing the number of authorized shares of
   Common Stock. We have the authority to issue up to 852 million shares of
   stock including:





| |  | 2 million shares
     designated as Preferred Stock with no par value;
| | - | ----------------------------------------------------------------------




| |  | 50 million shares
     designated as Senior Preferred Stock with a par value of $0.01 per
     share; and
| | - | ---------------------------------------------------------------------------------------------------------




| |  | 800 million shares
     designated Common Stock with a par value of $0.25 per
     share.
| | - | -----------------------------------------------------------------------------------------




Our Certificate of Incorporation, as amended, now authorizes two
   classes of Common Stock, Class A Common Stock and Class B Common Stock. We
   have retroactively reflected the authorization of the two classes of Common
   Stock in our consolidated financial statements.





3. Acquisition of the Dealer Products Group





On November 30, 1998, we acquired, through our subsidiaries, the U.S.
   assets of the Dealer Products Group of Dana Commercial Credit Corporation
   and the stock of the Dealer Products Groups international subsidiaries
   (collectively, Dealer Products Group) for $775 million. The purchase
   price includes the assumption and repayment of approximately $260 million of
   the international subsidiaries debt. The U.S. and international
   subsidiaries of the Dealer Products Group provide customized leasing and
   financing to commercial enterprises primarily for the acquisition of
   computer and telecommunications equipment. The Dealer Products Group is a
   recognized leader in the leasing industry and has operations in the United
   States, Canada, United Kingdom, Germany, Switzerland and France.





We accounted for the acquisition using the purchase method of
   accounting in accordance with Accounting Principles Board Opinion No. 16,
   Business Combinations. Goodwill from the acquisition totaled $190
   million and is being amortized over 25 years.





The following table presents unaudited pro forma combined income
   statements of Heller and the Dealer Products Group for the years ended
   December 31, 1999 and 1998. The pro forma combined income statements are
   presented as if the acquisition had been effective January 1, 1998. The
   combined historical results of operations of Heller and the Dealer Products
   Group for 1999 and 1998 have been adjusted to reflect the amortization of
   goodwill and the costs of financing for the transaction. We have presented
   the following table for informational purposes only. It does not necessarily
   indicate our future operating results or the operating results that would
   have occurred had the acquisition been effective in the periods
   presented.





|                                                      |  | For the Year
      Ended
   
   December 31,
|----------------------------------------------------- |  | --------------------------------------------
|
|
|Interest income                                       |  | $1,197                                      
|Interest
     expense                                 |  | 685                                         
|                                                      |  |                                             
|Net interest income                                   |  | 512                                         
|Fees and other
     income                            |  | 286                                         
|Factoring
     commissions                            |  | 119                                         
|Income of international
     joint ventures           |  | 35                                          
|                                                      |  |                                             
|Operating revenues                                    |  | 952                                         
|Operating
     expenses                               |  | 456                                         
|Provision for
     losses                             |  | 136                                         
|Gain on sale of Commercial
     Services assets       |  | 79                                          
|Restructuring
     charge                             |  |                                            
|                                                      |  |                                             
|Income before income taxes and
     minority interest |  | 439                                         
|Income tax
     provision                             |  | 154                                         
|Minority
     interest                                |  | 1                                           
|                                                      |  |                                             
|Net income                                            |  | $  284                                      
|                                                      |  |                                             




4. HealthCare Financial Partners, Inc. Acquisition





On July 28, 1999 we acquired HealthCare Financial Partners, Inc.
   (HCFP) for approximately $475 million. We paid 41% of the purchase
   price in the form of our Class A Common Stock and 59% in cash. We issued
   approximately 7.3 million Class A Common Shares for the transaction, which
   reduced FAHIs ownership interest in Heller from 57% to
 52%. In addition, we issued options to purchase 1.1 million shares of our
   Class A Common Stock at prices ranging from $2 to $37 per share to replace
   stock options previously held by HCFP employees for HCFP common stock. HCFP
   is a rapidly growing commercial finance company exclusively focused on
   providing secured financing to small- and mid-sized health care providers
   throughout the United States.





We accounted for the acquisition using the purchase method of
   accounting in accordance with Accounting Principles Board Opinion No. 16,
   Business Combinations. Goodwill from the transaction totaled
   approximately $235 million and will be amortized over 25 years. Our 1999
   consolidated statement of income includes HCFPs operating results
   since the acquisition date.





The following table presents the unaudited pro forma combined income
   statements of the Company and HCFP for the year ended December 31, 1999 and
   1998. The pro forma combined income statements are presented as if the
   acquisition had been effective January 1, 1998. The combined historical
   operating results of the Company and HCFP for 1999 and 1998 have been
   adjusted to reflect goodwill amortization and financing costs for the
   transaction. We have presented the following table for informational
   purposes only. It does not necessarily indicate our future operating results
   or the operating results that would have occurred had the acquisition been
   effective in the periods presented.





|                                                      |  | For the
   
   Year Ended
   
   December 31,
|----------------------------------------------------- |  | ---------------------------------------------
|
|
|Interest income                                       |  | $1,239                                       
|Interest
     expense                                 |  | 694                                          
|                                                      |  |                                              
|Net interest income                                   |  | 545                                          
|Fees and other
     income                            |  | 289                                          
|Factoring
     commissions                            |  | 119                                          
|Income of international
     joint ventures           |  | 35                                           
|                                                      |  |                                              
|Operating revenues                                    |  | 988                                          
|Operating
     expenses                               |  | 477                                          
|Provision for
     losses                             |  | 142                                          
|Gain on sale of Commercial
     Services assets       |  | 79                                           
|Restructuring
     charge                             |  |                                             
|                                                      |  |                                              
|Income before income taxes and
     minority interest |  | 448                                          
|Income tax
     provision                             |  | 157                                          
|Minority
     interest                                |  | 1                                            
|                                                      |  |                                              
|Net income                                            |  | $  290                                       
|                                                      |  |                                              




5.Commercial Services Sale





On December 1, 1999, we sold the assets of our Commercial Services
   unit, part of our Domestic Commercial Finance segment for approximately $454
   million in cash. The sale consisted of $911 million of factored accounts
   receivable and the assumption of $577 million of liabilities due to
   factoring clients.





The premium on the transaction to Heller was reduced by $41 million of
   costs incurred to exit the domestic factoring business. Of this amount, $21
   million was related to severance benefits and other related compensation
   costs incurred for termination of approximately 19%
 of our domestic employees. In addition, we incurred expenses for transaction
   costs, termination of third party contracts such as facility leases and
   vendor contracts, asset impairment charges, recourse provisions and certain
   other costs directly attributable to the sale. The transaction resulted in a
   pre-tax gain of $79 million and an after tax gain of $48
   million.





Upon completion of the sale, we terminated our domestic factored
   accounts receivable sale facility.





Of the total costs incurred in this transaction, $21 million is
   recorded as a liability of Heller as of December 31, 1999, including $15
   million for severance benefits and other related compensation costs. Most of
   these costs will be paid out by June 2000.





6. Lending Assets





Lending assets includes receivables and repossessed
   assets.





At December 31, 1999 we had domestic commercial finance receivables of
   $12 billion and international factoring and asset based finance receivables
   of $2.8 billion. The international receivables included factored accounts
   receivable of $2.4 billion relating to Factofrance and $400 million from our
   other foreign consolidated subsidiaries. Total receivables at December 31,
   1998 consist of $9.5 billion of domestic receivables and $2.4 billion of
   foreign receivables.





Diversification of Credit Risk
   





Concentrations of lending assets of 5% or more at December 31, 1999
   and 1998, based on the standard industrial classification of the borrower,
   are as follows:





|                                                      |  | December
     31,
|----------------------------------------------------- |  | -----------------
|
|
|
|Automotive                                            |  | $1,325           
|Computers                                             |  | 938              
|Department and general
     merchandise retail stores |  | 877              
|Health services                                       |  | 864              
|Transportation                                        |  | 661              
|Food, grocery and
     miscellaneous retail           |  | 642              
|General industrial
     machines                      |  | 599              




The automotive category is primarily comprised of:





| |  | auto parts distributors
     and wholesalers;
| | - | ---------------------------------------------




| |  | resale and leasing
     services in the automotive and aircraft industries; and
| | - | -------------------------------------------------------------------------------




| |  | maintenance services for
     automotive and aircraft parts.
| | - | ------------------------------------------------------------




The computers category consists of the following
   classifications:





| |  | software/hardware
     distributors and manufacturers;
| | - | ------------------------------------------------------




| |  | plastic component
     manufacturers; and
| | - | -----------------------------------------




| |  | disk drive
     designers.
| | - | --------------------------




The department and general merchandise retail stores category is
   primarily comprised of factored accounts receivable which represent
   short-term trade receivables from numerous
 customers. The total of this category decreased in 1999 due to the sale of the
   assets of our Commercial Services unit.





The health services category is primarily comprised of revolving and
   term facilities with small- and mid-sized health care providers. The
   increase in this category from 1998 is due to the acquisition of
   HCFP.





The lending assets in the transportation category primarily arise from
   chartered aircraft services and transportation services of freight, cargo,
   and various packages.





The majority of lending assets in the food, grocery and miscellaneous
   retail category are revolving and term facilities with borrowers primarily
   in the business of manufacturing and retailing of food products.





The general industrial machines classification is distributed among
   machinery used for many different industrial applications.





Contractual Maturity of Loan Receivables
   





The following table presents the contractual maturities of our
   receivables at December 31, 1999. This information should not be regarded as
   a forecast of cash flows (in millions):





|                                  |  | 2000   |  | 2001   |  | 2002   |  | 2003   |  | 2004   |  | After
   
   2004 |  | Total   
|--------------------------------- |  | ------ |  | ------ |  | ------ |  | ------ |  | ------ |  | ----------------- |  | --------
|Commercial
     loans             |  | $  933 |  | $  743 |  | $  949 |  | $  739 |  | $  775 |  | $2,568            |  | $  6,707
|Real estate
     loans            |  | 289    |  | 340    |  | 563    |  | 121    |  | 123    |  | 969               |  | 2,405   
|Factored accounts
     receivable |  | 2,708  |  |       |  |       |  |       |  |       |  |                  |  | 2,708   
|Equipment loans and
     leases   |  | 552    |  | 532    |  | 438    |  | 352    |  | 339    |  | 762               |  | 2,975   
|                                  |  |        |  |        |  |        |  |        |  |        |  |                   |  |         
|Total                             |  | $4,482 |  | $1,615 |  | $1,950 |  | $1,212 |  | $1,237 |  | $4,299            |  | $14,795 
|                                  |  |        |  |        |  |        |  |        |  |        |  |                   |  |         




Commercial loans consist principally of senior loans secured by
   receivables, inventory or property plant and equipment. Real estate loans
   are principally collateralized by first mortgages on commercial and
   residential real estate. Factored accounts receivable are purchased from
   clients and we provide credit and collection services in return for a
   commission. Equipment loans and leases are secured by the underlying
   equipment and we may have at least partial recourse to the equipment vendor.
   Of the loans maturing after 2000, $3.7 billion have fixed interest rates and
   $6.6 billion have floating interest rates.





Impaired Receivables, Repossessed Assets,
   and Troubled Debt Restructurings





We do not recognize interest and fee income on impaired receivables or
   repossessed assets, both of which are classified as nonearning, as set forth
   in the following table:





|                                                              |  | December
     31,
|------------------------------------------------------------- |  | -----------------
|
|
|Impaired
     receivables                                     |  | $204             
|Repossessed
     assets                                       |  | 24               
|                                                              |  |                  
|Total nonearning assets                                       |  | $228             
|                                                              |  |                  
|Ratio of total nonearning
     assets to total lending assets |  | 1.5              




Nonearning assets included $32 million and $26 million in 1999 and
   1998, respectively, for our International Factoring and Asset Based Finance
   Segment.





The average investment in nonearning impaired receivables was $214
   million, $160 million and $236 million for the years ended December 31,
   1999, 1998 and 1997, respectively.





We had $14 million of loans that are considered troubled debt
   restructurings at December 31, 1999 and December 31, 1998.





The following table indicates the effect on income if interest on
   nonearning impaired receivables and troubled debt restructurings outstanding
   at year-end had been recognized at original contractual rates during the
   year:





|                                                                |  | For the Year
   
   Ended |  | For the Year
   
   Ended
|--------------------------------------------------------------- |  | ------------------------- |  | -------------------------
|
|
|
|
|Interest income which
     would have been
   
        recorded |  | $12                       |  | $15                      
|Interest income
     recorded                                   |  | 2                         |  | 4                        
|                                                                |  |                           |  |                          
|Effect on interest
     income                                  |  | $10                       |  | $11                      
|                                                                |  |                           |  |                          




Loan Modifications





At December 31, 1999, there were no loans that were restructured and
   returned to earning status.





Allowance for Losses





The changes in the allowance for losses of receivables and repossessed
   assets were as follows:





|                                          |  | For the Year Ended
   
   December 31,
|----------------------------------------- |  | --------------------------------------
|
|
|Balance at the beginning
     of the year |  | $271                                  
|Provision for losses                      |  | 136                                   
|Writedowns                                |  | (116                                  
|Recoveries                                |  | 18                                    
|Factofrance consolidation                 |  |                                      
|Dealer Products Group
     acquisition    |  |                                      
|HCFP acquisition                          |  | 7                                     
|Sale of HCS assets                        |  | (2                                    
|Transfers and other                       |  | 2                                     
|                                          |  |                                       
|Balance at the end of the
     year       |  | $316                                  
|                                          |  |                                       




Impaired receivables with identified reserve requirements were $177
   million and $136 million at December 31, 1999 and 1998,
   respectively.





|                                                                                                       |  | December
     31,
|------------------------------------------------------------------------------------------------------ |  | -----------------
|
|
|Identified reserve
     requirements for impaired receivables                                          |  | $  44            
|Additional allowance for
     losses of receivables                                                    |  | 272              
|                                                                                                       |  |                  
|Total allowance for losses of receivables                                                              |  | $316             
|                                                                                                       |  |                  
|Ratio of total allowance
     for losses of receivables to nonearning
   
        impaired receivables |  | 155              




7. Investments and Other Assets





Equity and Real Estate Investments
   





The following table sets forth a summary of the major components of
   our equity and real estate investments (in millions):





|                                              |  | December
     31,
|--------------------------------------------- |  | -----------------
|
|Real estate
     investments                  |  | $235             
|Equity interests and
     investments         |  | 418              
|Available for sale equity
     securities     |  | 84               
|                                              |  |                  
|Total equity and real estate
     investments |  | $737             
|                                              |  |                  




Real estate investments are acquisition, development and construction
   investment transactions. At December 31, 1999, we held investments in 173
   projects with balances ranging up to approximately $9 million.





Equity interests and investments principally include common stock,
   preferred stock, warrants and investments in limited
   partnerships.





The available for sale equity securities are principally comprised of
   shares of common stock. Net unrealized holding gains on these securities
   were $30 million and $52 million at December 31, 1999 and 1998,
   respectively, and are recorded in stockholders equity on a net of tax
   basis.





Debt Securities





The Companys debt securities are all available for sale debt
   securities and include purchased investments in debt securities and $107
   million of securities retained in connection with our various
   securitizations. Of the securities retained in connection with our
   securitizations, $95 million are rated BB or higher and no
   losses have been realized on any of the retained securities to date. Net
   unrealized holding losses on total available for sale debt securities were
   $23 million and $17 million at December 31, 1999 and 1998, respectively.
   These amounts are recorded in stockholders equity on a net of tax
   basis.





Operating Leases





Equipment on lease is primarily comprised of aircraft and related
   equipment. Noncancellable future minimum rental receipts under the leases
   are $38 million, $29 million,
 $21 million, $16 million and $8 million for 2000 through 2004. All aircraft
   and related equipment was under lease as of December 31, 1999.





Investments in International Joint Ventures
   





The following table sets forth a summary of the financial results of
   our international joint ventures on a combined basis:





|                       |  | December
     31,
|---------------------- |  | -----------------
|
|
|Total
     receivables |  | $ 4,609          
|Factoring
     volume  |  | 25,243           
|Net income             |  | 50               




The following table shows our investment in international joint
   ventures by geographic region:





|              |  | December
     31,
|------------- |  | -----------------
|
|
|Europe        |  | $187             
|Latin America |  | 11               
|Asia/Pacific  |  | 17               
|North America |  | 4                
|              |  |                  
|Total         |  | $219             
|              |  |                  




We own interests of 40% to 50% in these joint ventures. Our largest
   investment in international joint ventures is NMB-Heller Holding N.V. which
   accounts for 59% of our total investments in international joint ventures at
   December 31, 1999. NMB-Heller Holding N.V. operates finance companies
   primarily located in the Netherlands, Germany and the United Kingdom. Our
   investment in NMB-Heller Holding N.V. totaled $129 million and $131 million
   at December 31, 1999 and 1998, respectively. NMB-Heller Holding N.V. had
   total receivables of $2.9 billion and $2.8 billion as of December 31, 1999
   and 1998 and revenues of $181 million and $180 million for the years then
   ended.





Goodwill





The following table presents goodwill balances, net of amortization,
   relating to our acquisitions:





|                           |  | December
     31,
|-------------------------- |  | -----------------
|
|
|HCFP                       |  | $231             
|Dealer Products
     Group |  | 181              
|Factofrance                |  | 62               
|Other                      |  | 7                
|                           |  |                  
|Total goodwill             |  | $481             
|                           |  |                  




Amortization for the years ended December 31, 1999 and 1998 totaled
   $15 million and $4 million, respectively.





Other Assets





The following table sets forth a summary of the major components of
   other assets:





|                                                                                                                                  |  | December
     31,
|--------------------------------------------------------------------------------------------------------------------------------- |  | -----------------
|
|
|Other Assets:                                                                                                                    
|Deferred income tax benefits, net of
     allowance of $5 at December 31, 1999 and 1998,
   
               
        respectively |  | $194             
|Prepaid expenses and other
     assets                                                                                            |  | 203              
|Furniture, fixtures and
     equipment                                                                                            |  | 55               
|Non-compete agreement                                                                                                             |  | 8                
|Repossessed assets                                                                                                                |  | 24               
|Net advances to affiliates                                                                                                        |  |                 
|                                                                                                                                  |  |                  
|Total other assets                                                                                                                |  | $484             
|                                                                                                                                  |  |                  




Our noncash investing activities include $21 million and $4 million of
   receivables which were classified as repossessed assets during the periods
   ended December 31, 1999 and 1998, respectively. See Note 19 for additional
   information on deferred income tax benefits.





8. Senior Debt





Commercial paper and short-term borrowingsWe use
   commercial paper to finance our domestic operations. Our consolidated
   international subsidiaries use short-term borrowings and commercial paper to
   finance international operations. Total commercial paper borrowings
   represent 29% of total debt at December 31, 1999. Combined commercial paper
   and short-term borrowings represent 38% of total debt at December 31,
   1999.





The following table summarizes our commercial paper and short-term
   borrowings as of December 31, 1999 and 1998:





|                                                           |  | December
     31,
|---------------------------------------------------------- |  | -----------------
|
|
|Domestic commercial
     paper                             |  | $3,563           
|Factofrance commercial
     paper                          |  | 397              
|Factofrance short-term
     borrowings                     |  | 989              
|Other consolidated
     subsidiaries short-term borrowings |  | 253              
|                                                           |  |                  
|Commercial paper and short-term
     borrowings            |  | $5,202           
|                                                           |  |                  




The table below sets forth information concerning our domestic
   commercial paper borrowings. The average interest rates and average
   borrowings are computed based on the average daily balances during the year.
   We issue commercial paper with maturities ranging up to 270
   days.





|                                                                                                     |  | 1999   |   | 1998 |        | 1997
|---------------------------------------------------------------------------------------------------- |  | ------ | - | ---- | ------ | ----
|
|Commercial Paper
     domestic:                                                                    
|Average interest rate                                                                                |  |        |   |      |        |     
|During the year                                                                                      |  | 5.32   | % |      | 5.71   | %   
|During the year, including the effect of
   
               
                 
      commitment fees |  | 5.47   |   |      | 5.83   |     
|At year-end, including the effect of commitment
   
               
                 
      fees     |  | 6.13   |   |      | 5.59   |     
|Average borrowings                                                                                   |  | $3,346 |   |      | $2,619 |     
|Maximum month-end borrowings                                                                         |  | 4,194  |   |      | 2,974  |     
|End of period borrowings                                                                             |  | 3,563  |   |      | 2,450  |     




Factofrance commercial paper issued at December 31, 1999 had an
   average interest rate of 3.36% and its short-term borrowings at December 31,
   1999 had an average interest rate of 3.41%. Factofrance uses primarily
   short-term debt and commercial paper to fund its assets which are short-term
   in nature.





Available credit and asset sale facilitiesAt December 31,
   1999, we have total committed credit and asset sale facilities of $5.7
   billion, of which $5.4 billion was available for use at December 31,
   1999.





The amount of committed facilities includes approximately $4.1 billion
   in available liquidity support under four bank credit facilities. The
   longest facility is a multi-year agreement for $1.6 billion that expires in
   April 2002. Two of our three separate 364-day bank credit facilities expire
   in April 2000 and the third in September 2000. Each of these facilities
   includes a term loan option that expires one year after the option exercise
   date. The terms of the bank credit facilities require us to maintain
   stockholders equity of $1 billion. Under the terms of the debt
   covenants of the agreements, we could have borrowed an additional $8.6
   billion of debt at December 31, 1999.





Also included in committed facilities is $379 million of additional
   alternative liquidity, which is available by discounting eligible French
   receivables with the French Central Bank since Factofrance is a registered
   financial institution in France. At December 31, 1999, $280 million was
   available for use under this facility.





We also have included in our committed facilities a 364-day facility,
   expiring December 2000, which allows us to sell up to $400 million of our
   equipment receivables to two bank-sponsored conduits, on a limited recourse
   basis. As of December 31, 1999, we have not sold any receivables under this
   facility.





In addition to the above facilities, we have committed foreign bank
   credit facilities in excess of $800 million (U.S. dollar equivalent) for our
   international subsidiaries. As of December 31, 1999, there was $661 million
   available under these facilities.





Our wholly-owned subsidiary, Factofrance, has a factored accounts
   receivable sale facility. This facility allows Factofrance to sell an
   undivided interest of up to 1 billion French francs in a designated pool of
   its factored accounts receivable to one bank-sponsored conduit on a limited
   recourse basis. As of December 31, 1999, approximately 1 billion French
   francs (or $165 million) of receivables were sold under this
   facility.





We have a shelf registration statement, filed with the SEC, permitting
   the offering of up to $5 billion in debt securities (including medium term
   notes), senior preferred stock and Class A Common Stock. As of December 31,
   1999, there was $89 million available under this shelf
   registration.





In August 1999, we filed with the SEC a shelf registration statement
   covering the sale of up to $10 billion in debt securities (including medium
   term notes), senior preferred stock and Class A Common Stock. As of December
   31, 1999, there was $10 billion available under this shelf
   registration.





In
   October 1999, we established a Euro Medium-Term Note Program for the
   issuance of up to $2 billion in notes to be issued from time to time. Also
   in October 1999, we increased the size of our Euro commercial paper program
   to $1 billion and established a $250 million Canadian commercial paper
   program.





In
   November 1999, we issued $600 million of 7.375% notes due November 1, 2009
   in a privately placed transaction under SEC Rule 144A and Regulation S. See
   footnote 26Subsequent Eventsfor information on our
   February 2000 filing of a registration statement with the SEC to exchange
   these notes.





Notes and debenturesThe scheduled maturities of debt
   outstanding at December 31, 1999, other than commercial paper and short-term
   borrowings, and gross of the net unamortized discount of $6 million, are as
   follows:





|                                                |  | Scheduled Maturities at
     December 31,
|----------------------------------------------- |  | -----------------------------------------
|
|
|Various fixed rate notes
     and debentures    |  | $1,336                                   
|Fixed weighted average rate                     |  | 5.46                                     
|Various floating rate
     notes and debentures |  | $1,477                                   
|Floating weighted average rate                  |  | 6.18                                     
|Total notes and
     debentures                 |  | $2,813                                   




Our
   various fixed and floating rate notes and debentures are denominated in U.S.
   dollars, Japanese yen and French francs. In order to fix the exchange rate
   of Japanese yen to U.S. dollars on the yen denominated debt, we have entered
   into cross currency interest rate swap agreements. In order to convert
   certain fixed rate debt to floating rate debt and vice-versa, we have
   entered into interest rate swap agreements. The following table provides the
   year-end weighted average interest rate of the U.S. dollar and Japanese yen
   denominated debt, gross of the net unamortized discount of $6 million before
   and after the effect of the swap agreements. We have $17 million of French
   franc denominated fixed rate debt and $87 million of French franc
   denominated variable rate debt which support French franc denominated
   assets.





|                     |  | Weighted Average
     Interest Rate
|-------------------- |  | -----------------------------------
|
|
|1999:               
|United States dollar |  | $4,494                             
|Japanese yen         |  | 306                                
|Total                |  | $4,800                             
|1998:               
|United States dollar |  | $3,554                             
|Japanese yen         |  | 306                                
|Total                |  | $3,860                             




The
   contractual interest rates for the U.S. dollar denominated fixed rate debt
   range between 5.48% and 7.38% at December 31, 1999. The contractual rates on
   the U.S. dollar denominated floating rate debt are based primarily on
   indices such as the Federal Funds rate plus 0.25%, the one-month London
   Inter-Bank Offered Rate (LIBOR) plus 0.11%, three-month LIBOR
   plus 0.10% to 0.90%, six-month LIBOR plus 0.25% or the Prime rate less 2.55%
   to 2.60%.





9. Financial Instruments with Off-Balance Sheet
   Risk





We are
   party to several types of agreements involving financial instruments with
   off-balance sheet risk. These instruments are used to meet the financing
   needs of borrowers and to manage our own exposure to interest rate and
   currency exchange rate fluctuations. These instruments principally include
   interest rate swap agreements, forward currency exchange contracts, options,
   futures contracts, interest rate cap agreements, loan commitments, letters
   of credit and guarantees.





Derivative financial instruments used for
   risk management purposes





We use derivatives as an integral part of asset/liability management
   to reduce our overall level of financial risk. These derivatives,
   particularly interest rate swap agreements, are used to:





| |  | diversify sources of
     funding;
| | - | ----------------------------------




| |  | alter interest rate
     exposure arising from mismatches between assets and liabilities;
     and
| | - | --------------------------------------------------------------------------------------------------




| |  | manage exposure to
     fluctuations in foreign exchange rates.
| | - | ---------------------------------------------------------------




Our derivative instruments are entirely related to accomplishing
   these risk management objectives, which arise from normal business
   operations. We are not an interest rate swap dealer nor are we a trader in
   derivative securities. We have not used speculative derivative products to
   generate earnings from changes in market conditions.





Before entering into a derivative agreement, we determine that an
   inverse correlation exists between the value of the hedged item and the
   value of the derivative. At the inception of each agreement, derivatives are
   designated or matched to specific assets, pools of assets or liabilities.
   After inception of a hedge, asset/liability managers monitor its
   effectiveness through an ongoing review of the amounts and maturities of
   assets, liabilities and swap positions. This information is reported to our
   Financial Risk Management Committee (FRMC) whose members include our
   Chairman, Chief Financial Officer and Treasurer. The FRMC determines the
   direction the Company will take with respect to its asset/liability
   position. Our asset/liability position and the related activities of the
   FRMC are reported regularly to the Executive Committee of the Board of
   Directors and to the Board of Directors.





The following table summarizes the notional amounts of our interest
   rate swap agreements, foreign exchange contracts and interest rate cap
   agreements as of December 31, 1999 and 1998. The credit risk associated with
   these instruments is limited to





| |  | amounts earned but not
     collected and
| | - | -----------------------------------------




| |  | any additional amounts we
     may incur to replace the instrument under current market
     conditions.
| | - | --------------------------------------------------------------------------------------------------------




These amounts will increase or decrease during the life of the
   instruments as interest rates and foreign exchange rates fluctuate. The
   amounts are substantially less than the notional amounts of these
   agreements. We manage this risk by establishing minimum credit ratings for
   each counter-party. We also limit the exposure to individual counter-parties
   based upon the total notional amount and the current replacement cost of
   existing agreements. We have not experienced nonperformance by any
   counter-party related to our derivative financial instruments.





|                                                  |  | Contract or
   
   Notional Amount
|------------------------------------------------- |  | ----------------------------------
|
|
|Interest rate swap
     agreements                |  | $7,662                            
|Cross currency interest
     rate swap agreements |  | 470                               
|Basis swap
     agreements                        |  | 2,376                             
|Forward currency exchange
     contracts          |  | 1,421                             
|Purchased
     options                            |  | 29                                
|Interest rate cap
     agreements                 |  | 24                                
|Interest rate futures
     contracts              |  | 220                               




We utilize interest rate swaps primarily to convert fixed rate
   financings to variable rate debt. We may also utilize cross currency
   interest rate swaps when the issuance of debt denominated in a foreign
   currency is deemed more cost effective. This type of swap converts foreign
   currency denominated debt to U.S. dollar denominated debt and U.S. based
   indices. We also use swap agreements to alter the characteristics of
   specific asset pools to more closely match the interest terms of the
   underlying financing. These agreements enhance the correlation of the
   interest rate and currency characteristics of our assets and liabilities and
   mitigate our exposure to interest rate volatility. Basis swap agreements
   involve the exchange of two different floating rate interest payment
   obligations. We use these types of agreements to manage the risk between
   different floating rate indices.





Forwards are contracts for the delivery of an item in which the buyer
   agrees to take delivery of an instrument or currency at a specified price
   and future date. We will periodically enter into forward currency exchange
   contracts or purchase options. These instruments serve as hedges of our
   investment in international subsidiaries and joint ventures or effectively
   hedge the translation of the related foreign currency income. We also
   periodically enter into forward contracts to hedge receivables denominated
   in foreign currencies or may purchase foreign currencies in the spot market
   to settle a foreign currency denominated liability.





Commitments, letters of credit and guaranteesWe generally
   enter into various commitments, letters of credit and guarantees in response
   to our customers financing needs. Since we expect many of these agreements
   to expire unused, the total commitment amount does not necessarily represent
   future cash requirements. The credit risk involved in issuing these
   instruments is similar to extending loans to borrowers. Our credit quality
   and collateral policies for controlling this risk are similar to those
   involved in our normal lending transactions. Our contractual amount of
   commitments, letters of credit and guarantees are shown below:





|                                                |  | Contract
     Amount
|----------------------------------------------- |  | --------------------
|
|
|Loan
     commitments                           |  | $2,587              
|Letters of credit and
     financial guarantees |  | 582                 
|Factoring credit
     guarantees                |  |                    
|Investment
     commitments                     |  | 147                 




Commitments to fund new and existing borrowers generally have fixed
   expiration dates and termination clauses and typically require payment of a
   fee. We issue letters of credit and financial guarantees as conditional
   commitments to guarantee the performance of a borrower or an affiliate to a
   third party. For factoring credit guarantees, we receive a fee for
   guaranteeing the collectibility of certain factoring clients accounts
   receivable. Under this arrangement, clients generally retain the
   responsibility for collection and bookkeeping. Losses related to these
   services historically have not been significant. Due to the sale of HCS, we
   had no factoring credit guarantees outstanding at December 31,
   1999.





10. Legal Proceedings





We are party to a number of legal proceedings as plaintiff and
   defendant, all arising in the ordinary course of its business. Although our
   ultimate amount of liability, if any, is not ascertainable, we believe that
   the amounts, if any, which may ultimately be funded or paid will not have a
   material adverse effect on our financial condition or results of
   operations.





11. Rental Commitments





Our minimum rental commitments under non-cancelable operating leases
   and other service agreements at December 31, 1999 are as follows (in
   millions):





|2000       |  | $  23
|---------- |  | -----
|2001       |  | 21   
|2002       |  | 21   
|2003       |  | 19   
|2004       |  | 17   
|Thereafter |  | 31   
|           |  |      
|           |  | $132 
|           |  |      




Total rent expense, net of rental income from subleases, was $37
   million, $34 million and $30 million for the years ended December 31, 1999,
   1998 and 1997, respectively.





12. Preferred Stock





The following table summarizes our non-redeemable preferred
   stock:





|                                                              |  | As of
   
   December 31,
|------------------------------------------------------------- |  | -------------------------
|
|
|Cumulative Perpetual
     Senior Preferred Stock, Series A    |  | $125                     
|Noncumulative Perpetual
     Senior Preferred Stock, Series C |  | 150                      
|Noncumulative Perpetual
     Senior Preferred Stock, Series D |  | 125                      
|                                                              |  |                          
|Total Preferred Stock                                         |  | $400                     
|                                                              |  |                          




Cumulative Perpetual Senior Preferred Stock, Series A ($.01 Par
   Value; stated value, $25; 8.125%; 5,000,000 shares authorized and
   outstanding)Our Cumulative Perpetual Senior Preferred Stock,
   Series A (Series A Preferred Stock) is not redeemable prior to
   September 22, 2000. On or after this date, we can redeem, in whole or in
   part, the Series A Preferred Stock at a redemption price of $25 per share,
   plus accrued and unpaid dividends. This stock has an annual dividend rate of
   8.125%. Dividends are cumulative and payable quarterly. The Series A
   Preferred Stock ranks senior with respect to the payment of dividends and
   liquidation to our other preferred stock.





Noncumulative Perpetual Senior Preferred Stock, Series C ($.01 Par
   Value; stated value, $100; 6.687%; 1,500,000 shares authorized and
   outstanding)Our Series C Preferred Stock is not redeemable prior
   to August 15, 2007. On or after this date, we can redeem, in whole or in
   part, the Series C Preferred Stock at a redemption price of $100 per share,
   plus any accrued and unpaid dividends. The Series C Preferred Stock has an
   annual dividend rate of 6.687%.





Noncumulative Perpetual Senior Preferred Stock, Series D ($.01 Par
   Value; stated value, $100; 6.95%; 1,250,000 shares authorized and
   outstanding)In December 1998, we publicly issued 1,250,000 shares
   of 6.95% Noncumulative Perpetual Senior Preferred Stock, Series D (Series
   D Preferred Stock). This stock was issued at $100 per share and we
   received proceeds of $125 million less underwriting costs of two percent.
   The Series D Preferred Stock is not redeemable prior to February 15, 2009.
   On or after this date, we can redeem, in whole or in part, the Series D
   Preferred Stock at a redemption price of $100 per share, plus any accrued
   and unpaid dividends.





Redeemable Preferred StockWe have authorized the
   issuance of 100,000 shares of a series of preferred stock designated NW
   Preferred Stock, Class B (No Par Value) (NW Preferred Stock). This
   stock was authorized pursuant to the Keep Well Agreement between us and Fuji
   Bank. The agreement is dated April 23, 1983 and was subsequently amended
   (the Keep Well Agreement). The amendments include, among other
   things, Fuji Banks agreement to purchase NW Preferred Stock in an
   amount required to maintain our stockholders equity at $500 million.
   As of December 31, 1999, our stockholders equity was $2.3 billion. If
   and when issued, we will pay quarterly dividends on the NW Preferred Stock
   at a rate per annum equal to 1% over the three-month LIBOR. Subject to
   certain conditions, the holder can redeem the NW Preferred Stock within a
   specified time period after a calendar quarter end. The redemption amount
   must not exceed the amount of our stockholders equity over $500
   million. The redemption price will equal the price paid for the stock plus
   accumulated dividends. No purchases of NW Preferred Stock have been made by
   Fuji Bank under the Keep Well Agreement.





13. Dividend Restrictions and Payments





Under the provisions of the Delaware General Corporation Law, we may
   legally pay dividends only out of our surplus or our net profits for either
   the current or preceding fiscal year, or both. In addition, we are
   prohibited from paying dividends on Common Stock unless all current and full
   cumulative dividends on the Series A Preferred Stock and the current
   dividends on the Series C and Series D Preferred Stock have been paid. Also,
   we are prohibited from paying dividends on any other preferred stock that
   ranks, with respect to the payment of dividends, equal or junior to the
   Series A, Series C and Series D Preferred Stock, unless all current and full
   cumulative dividends on these preferred stocks have been paid.





We declared and paid dividends on the Series A Preferred Stock of $10
   million and $11 million in 1999 and 1998, respectively. We declared and paid
   dividends on the Series C Preferred Stock of $10 million and $10 million in
   1999 and 1998, respectively. We also declared and paid dividends on the
   Series D Preferred Stock of $8 million in 1999.





We paid Common Stock dividends in 1999 of $34 million ratably to our
   Class A and Class B shareholders. During the fourth quarter of 1999, we
   increased the quarterly dividend on each share of our Class A and Class B
   Common Stock to $0.10 per share from $0.09 per share. In 1998, we paid
   Common Stock dividends of over $1 billion. These dividends included $450
   million paid in the form of a subordinated note dated February 24, 1998 and
   $533 million paid in May 1998 subsequent to our Offering.





14. Treasury Stock





We have an executive deferred compensation plan (the Plan) into
   which certain employees can elect to defer a portion of their annual
   compensation on a pre-tax basis. The amount deferred remains an asset of
   Heller and is invested in several mutual funds and in our Class A Common
   Stock. Investments in our Class A Common Stock under this Plan are reported
   as treasury stock and are included in the calculation of basic and diluted
   earnings per share. At December 31, 1999, we held 189,859 shares of treasury
   stock through the Plan. See Note 18 for additional information relating to
   the Plan.





In addition, we held 177,815 shares of our Class A Common Stock for
   use in meeting the requirements of our current stock incentive compensation
   plans.





On October 18, 1999, we announced the authorization to repurchase up
   to 2 million shares of our Class A Common Stock to provide stock for
   issuance under our stock
 
 option and restricted stock plans, as well as for other corporate purposes.
   See footnote
 
 23Subsequent Eventsfor information on our 2000 repurchases
   under this program.





15. Fees and Other Income





The following table summarizes our fees and other income for the years
   ended December 31, 1999, 1998 and 1997:





|                                      |  | Year Ended
   
   December 31,
|------------------------------------- |  | ------------------------------
|
|
|Fee income and
     other             |  | $117                          
|Investment and asset sale
     income |  | 169                           
|                                      |  |                               
|Total                                 |  | $286                          
|                                      |  |                               




Fee income and other includes servicing income, late fees, prepayment
   fees, early termination fees, residual rental income and other miscellaneous
   fees.





Investment and asset sale income consists of gains on securitizations,
   syndications and loan sales, net investment income and gains, equipment
   residual gains and participation income.





Investment and asset sale income includes realized gains from
   investment securities of $130 million, $92 million and $119 million during
   the years ended December 31, 1999, 1998 and 1997, respectively and realized
   losses and writedowns totaling $21 million, $33 million and $50 million for
   1999, 1998 and 1997, respectively.





Securitization gains included in investment and asset sale income
   totaled $13 million, $17 million and $26 million for the years ended
   December 31, 1999, 1998 and 1997, respectively.





16. Operating Expenses





The following table sets forth a summary of the major components of
   operating expenses:





|                                                    |  | Year Ended
   
   December 31,
|--------------------------------------------------- |  | ------------------------------
|
|
|Salaries and other
     compensation                |  | $237                          
|Legal and professional
     fees                    |  | 45                            
|Space costs                                         |  | 37                            
|Equipment costs                                     |  | 25                            
|Business acquisition
     costs                     |  | 23                            
|Travel and entertainment
     costs                 |  | 19                            
|Goodwill and noncompete
     agreement amortization |  | 19                            
|Other                                               |  | 51                            
|                                                    |  |                               
|Total                                               |  | $456                          
|                                                    |  |                               




Of the increase in operating expenses in 1999, $12 million related to
   the HCFP consolidation which occurred in July 1999 and $48 million related
   to the consolidation of the
 Dealer Products Group for the full year 1999 versus $3 million for one month
   of Dealer Products Group operations in 1998. These increases from our
   acquisition activities were partially offset by a lower level of operating
   expenses relating to our Commercial Services unit of which we divested in
   November 1999.





Of the increase in operating expenses in 1998, $21 million related to
   the consolidation of Factofrance for the full year 1998 versus nine months
   in 1997.





17. Restructuring Charge





In 1998, we incurred a one time restructuring charge of $17 million.
   This amount includes $8 million in severance benefits for termination of
   approximately 15% of the Companys domestic employees. Also included
   was $6 million related to office lease terminations and related leasehold
   improvement writedowns. Restructuring charge liabilities were fully paid out
   during 1999 and 1998.





18. Employee Benefits





We have various incentive compensation plans and a savings and
   profit-sharing plan which provide for annual contributions for eligible
   employees based on our achievement of certain financial objectives and
   employee achievement of certain objectives.





Pension and Post Retirement PlansWe have a
   noncontributory defined benefit pension plan (Retirement Plan)
   covering substantially all of our domestic employees and a supplemental
   retirement plan (SERP) in which certain employees participate. Our
   policy is to fund, at a minimum, pension contributions as required by the
   Employee Retirement Income Security Act of 1974. Benefits under the
   Retirement Plan and SERP are based on an employees years of service
   and average earnings for the five highest consecutive years of compensation
   occurring during the last ten years before retirement.





We also provide health care benefits for eligible retired employees
   and their eligible dependents through the Post-retirement Health Care Plan
   (Health Care Plan).





The following table summarizes the change in the benefit obligations
   for the Retirement Plan and Health Care Plan at the end of the respective
   year and identifies the assumptions used to determine the benefit
   obligation:





|                                                                                                                       |  | Retirement Plan
   
   Year Ended
   
   December 31, |   | Post-Retirement
   
   Health Care Plan
   
   Year Ended
   
   December 31,
|---------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------- | - | -----------------------------------------------------------------------------
|
|
|Change in benefit
     obligation                                                                                      |  |                                                       |   |                                                                              
|Benefit obligation at January
     1                                                                                   |  | $52                                                   |   |                                                                              
|Service
     Cost                                                                                                      |  | 4                                                     |   |                                                                              
|Interest
     Cost                                                                                                     |  | 4                                                     |   |                                                                              
|Acquisitions/Divestitures                                                                                              |  | (1                                                    | ) |                                                                              
|Actuarial (gain) loss                                                                                                  |  | (7                                                    | ) |                                                                              
|Benefits
     paid                                                                                                     |  | (2                                                    | ) |                                                                              
|                                                                                                                       |  |                                                       |   |                                                                              
|Benefit obligation at December
     31                                                                                 |  | $50                                                   |   |                                                                              
|                                                                                                                       |  |                                                       |   |                                                                              
|Change in plan
     assets                                                                                             |  |                                                       |   |                                                                              
|Fair value of plan assets at January
     1                                                                            |  | $50                                                   |   |                                                                              
|Actual
     return on plan assets                                                                                      |  | 8                                                     |   |                                                                              
|Benefits
     paid                                                                                                     |  | (2                                                    | ) |                                                                              
|                                                                                                                       |  |                                                       |   |                                                                              
|Fair value of plan assets at December
     31                                                                          |  | $56                                                   |   |                                                                              
|                                                                                                                       |  |                                                       |   |                                                                              
|Reconciliation of
     funded status                                                                                   |  |                                                       |   |                                                                              
|Funded status                                                                                                          |  | $  7                                                  |   |                                                                              
|Unrecognized prior service
     cost                                                                                   |  | (1                                                    | ) |                                                                              
|Unrecognized actuarial (gain)
     loss                                                                                |  | (15                                                   | ) |                                                                              
|Unrecognized transition (asset)
     obligation                                                                        |  |                                                      |   |                                                                              
|                                                                                                                       |  |                                                       |   |                                                                              
|Net
     amount recognized in the statement of financial
   
               
             position at December
     31 |  | $  (9                                                 | ) |                                                                              
|                                                                                                                       |  |                                                       |   |                                                                              
|Weighted-average
     assumptions as of December 31:                                                                   |  |                                                       |   |                                                                              
|Discount rate                                                                                                          |  | 7.50                                                  | % |                                                                              
|Expected return on assets                                                                                              |  | 9.00                                                  |   |                                                                              
|Rate of salary increases                                                                                               |  | 5.00                                                  |   |                                                                              




Components of net pension cost for the Retirement Plan and the Health
   Care Plan for the following periods are:





|                                              |  | Retirement Plan
   
   Year Ended
   
   December 31, |   | Post-Retirement
   
   Healthcare Plan
   
   Year Ended
   
   December 31,
|--------------------------------------------- |  | ----------------------------------------------------- | - | ----------------------------------------------------------------------------
|
|
|Service cost                                  |  | $    4                                                |   |                                                                             
|Interest cost                                 |  | 4                                                     |   |                                                                             
|Expected return on plan
     assets           |  | (5                                                    | ) |                                                                             
|Prior service cost and
     transition amount |  |                                                      |   |                                                                             
|                                              |  |                                                       |   |                                                                             
|Net periodic benefit cost                     |  | $    3                                                |   |                                                                             
|                                              |  |                                                       |   |                                                                             




The SERP has an unfunded benefit obligation of $3 million at December
   31, 1999 and 1998, and $4 million at December 31, 1997. The SERP has an
   unrecognized prior service cost of $2 million at December 31, 1999, 1998 and
   1997. The unrecognized actuarial gain
 was $4 million, $4 million and $2 million for the years ended December 31,
   1999, 1998 and 1997, respectively. The ending accrued benefit cost
   recognized was $5 million, $5 million and $4 million at December 31, 1999,
   1998 and 1997, respectively. The net periodic pension cost for the SERP was
   approximately $1 million for the years ended December 31, 1999, 1998 and
   1997. The weighted average assumptions as of December 31, 1999, 1998 and
   1997 for the SERP were equal to the discount rate and rate of salary
   increases applied for the defined benefit plan.





In conjunction with the Dealer Products Group acquisition,
   approximately 215 domestic employees of the Dealer Products Group became
   eligible to participate in the Retirement Plan and the SERP as of December
   1, 1998 and are subject to the Retirement Plan provisions regarding service
   from that date. The eligible employees were granted vested service under the
   Retirement Plan since their date of hire with the Dealer Products Group. The
   additional employees did not have a significant impact on our pension
   expense for 1998 or 1999.





In conjunction with the HCFP acquisition, approximately 123 employees
   became eligible to participate in the Retirement Plan and the SERP as of
   August 1, 1999. These employees are subject to the Retirement Plan
   provisions regarding service from that date. The eligible employees were
   granted vested service under the Retirement Plan since their date of hire
   with HCFP. The additional employees did not have a significant impact on our
   pension expense for 1999. We do not anticipate a significant impact on
   pension expense for 2000 related to the new employees.





In conjunction with the sale of assets of our HCS unit that occurred
   in December 1999, certain employees were no longer eligible to participate
   in the Retirement Plan or SERP. The reduction of plan participants had no
   impact on 1999 pension expense and will decrease 2000 pension expense by
   approximately $1 million.





We adjust the discount and salary rates, as well as the expected rates
   of return on assets, for the Retirement Plan and the SERP to reflect market
   conditions at the measurement date. Changes in these assumptions will impact
   the amount of pension expense in future years. The change in the discount
   rate at December 31, 1999, combined with amortization of our actuarial gain,
   will reduce pension expense by approximately $1 million in 2000. The change
   in the discount rate and salary rate at December 31, 1998 did not have a
   material impact on 1999 pension expense. We decreased the salary rate
   assumption to 5% at December 31, 1998, based upon our expectation that a
   greater portion of future salary increases will be provided in the form of
   incentive compensation, which is not currently covered under Hellers
   retirement plans.





We also adjust the discount, salary, and health care cost trend rates
   for the Health Care Plan to reflect market conditions at the measurement
   date. Changes in these assumptions will impact the amount of the benefit
   expense in future years. The discount rate used at December 31, 1999 was
   unchanged from the rate used at December 31, 1998. The change in the
   discount rate at December 31, 1998 had an insignificant impact on 1999
   expense.





The accumulated post retirement benefit obligation, under the terms of
   the Health Care Plan, as amended, was calculated using relevant actuarial
   assumptions and health care cost trend rates projected at annual rates
   ranging from 7.5% in 1999 trending down to 5.0% in 2005 and thereafter. The
   effect of a 1.0% annual increase in those assumed cost trend rates would
   increase the accumulated post retirement benefit obligation by $1 million,
   while annual service and interest cost components in the aggregate would not
   be materially affected. The effect of a 1.0% annual decrease in these
   assumed cost trend rates would
 decrease the accumulated post retirement benefit obligation by $1 million,
   while annual service and interest cost components in the aggregate would not
   be materially affected.





Executive Deferred Compensation PlanOur Executive
   Deferred Compensation Plan (the Plan) is a nonqualified deferred
   compensation plan in which certain employees may elect to defer a portion of
   their annual compensation on a pre-tax basis. The amount deferred remains an
   asset of Heller and may be invested, at the participants discretion,
   into certain mutual funds and our Class A Common Stock. Payment of amounts
   deferred is made in a lump sum or in annual installments over a five, ten or
   fifteen year period as determined by the participant.





Investments in our Class A Common Stock under this plan are reported
   as treasury stock. At December 31, 1999, we held 189,859 shares of treasury
   stock through the Plan. Plan assets, other than treasury stock, totaled $39
   million and $24 million at December 31, 1999 and 1998.





We earned $5 million, $4 million and $5 million on plan assets during
   1999, 1998 and 1997, respectively. Earnings on plan assets, other than
   treasury stock, are included as part of fees and other income. Compensation
   expense of these same amounts was also recorded in each of these
   years.





Long Term Incentive PlansWe have long-term incentive
   plans in which participants receive performance units that are granted at
   the beginning of a three-year performance period. The value of a performance
   unit is based on our three-year average return on equity target. The total
   expense related to the long-term incentive plans was less than $1 million in
   1999, $4 million in 1998 and $3 million in 1997. These plans will terminate
   in 2000 after the payout for the 1997 to 1999 performance
   period.





1998 Stock Incentive PlanWe adopted a stock-based
   incentive plan, The Heller Financial, Inc. 1998 Stock Incentive Plan
   (Stock Incentive Plan), covering non-employee directors and employees
   (collectively, Participants).





The Stock Incentive Plan provides for the grant of incentive and
   non-qualified stock options, restricted stock, stock appreciation rights,
   performance shares and performance units(Awards). The terms
   of the Awards are set forth in award agreements (Award Agreements).
   The Compensation Committee of the Heller Board of Directors, in its sole
   discretion, determines which employees receive Awards as well as the type,
   size and terms and conditions applicable to any Award. The Compensation
   Committee also has the authority to interpret, construe and implement the
   provisions of the Stock Incentive Plan. Awards to non-employee directors
   will be made by members of our Board of Directors who are not otherwise
   entitled to participate in the Stock Incentive Plan, or will be based on a
   formula developed by the Board of Directors or the Compensation
   Committee.





Under the Stock Incentive Plan, 2,864,757 shares of Class A Common
   Stock are available for Awards as of December 31, 1999. During 1999, we
   awarded shares of restricted stock and non-qualified options to purchase
   shares of Class A Common Stock as discussed below:





Restricted StockIn conjunction with our Offering, we
   issued 509,019 shares of restricted Class A Common Stock during 1998 and, as
   part of compensation awards, granted an additional 197,604 shares during
   1999. As of December 31, 1999, there were 657,611 restricted shares
   outstanding.





All restricted shares granted during 1998 and 1999 were issued at
   the fair market value on the date of grant. Shares issued in conjunction
   with our Offering vest on January 1, 2001, if we achieve certain net income
   growth targets as specified in the Restricted Stock Award Agreements. If we
   do not achieve these growth targets by January 1, 2001, these restricted
   stock awards will vest on January 1, 2004. Shares awarded during 1999 have
   various vesting periods, none of which exceed a three-year
   period.





The holder of restricted stock generally has the rights of a Heller
   stockholder, including the right to vote and to receive cash dividends prior
   to the end of the vesting period. Compensation expense related to these
   shares totaled $5 million and $5 million during 1999 and 1998,
   respectively.





Stock Options Each option represents the right to
   purchase one share of our Class A Common Stock. No compensation expense was
   recorded, as the exercise price of each option granted equals the market
   price of our Class A Common Stock on the grant date. The options expire ten
   years from the grant date.





Of the options granted in 1999, as presented in the table below,
   approximately 1.1 million related to the HCFP acquisition and were 100%
   vested on the grant date. The options were issued at prices ranging from $2
   to $37 per share to replace stock options previously held by HCFP employees
   for HCFP common stock. The remaining options granted in 1999 will vest
   ratably over a four year period from the date of grant. The options granted
   in 1998 vest on January 1, 2001.





A summary of the status and activity of stock options under the Stock
   Incentive Plan as of December 31, 1999 and 1998, and changes during the
   years ending on those dates is presented below:





|                                                                                |  | 1999      |   | 1998
|------------------------------------------------------------------------------- |  | --------- | - | ----
|
|Outstanding at beginning
     of year                                           |  | 1,291,952 |   |     
|Granted                                                                         |  | 2,293,824 |   |     
|Exercised                                                                       |  | (136,863  | ) |     
|Forfeited                                                                       |  | (298,118  | ) |     
|Expired                                                                         |  |          |   |     
|                                                                                |  |           |   |     
|Outstanding at end of
     year                                                 |  | 3,150,795 |   |     
|                                                                                |  |           |   |     
|Weighted-average fair
     value of options
   
        granted during the year |  | $13.45    |   |     




The following table summarized information about fixed stock options
   outstanding at December 31, 1999:





|              |  | Options
     Outstanding |  | Options
     Exercisable
|------------- |  | ------------------------ |  | ------------------------
|
|$2 to $11     |  | 155,325                  |  | 9.6 years               
|21 to
     27 |  | 1,821,318                |  | 9.5 years               
|28 to
     37 |  | 1,174,152                |  | 9.4 years               
|              |  |                          |  |                         
|$2 to $37     |  | 3,150,795                |  |                         
|              |  |                          |  |                         




Accounting for Stock-Based Compensation PlansWe account
   for the stock options in accordance with Accounting Principles Board Opinion
   No. 25, Accounting for Stock Issued to Employees(APB No. 25).
   Under APB No. 25, we do not recognize compensation expense on the issuance
   of our stock options as the option terms are fixed and the exercise price
   equals the market price of the underlying stock on the grant date. If we
   were to implement Statement of Financial Accounting Standard No. 123,
   Accounting for Stock Based Compensation, our net income applicable to
   common stock for 1999 and 1998 would have been $243 million and $170
   million, respectively. Our pro-forma diluted earnings per share would have
   been $2.61 and $1.89 for 1999 and 1998, respectively. The weighted average
   fair value of each option granted during 1999 and 1998 was $13.45 and $9.29,
   respectively. The annual cost of the stock options was determined using a
   Black-Scholes option-pricing model that assumed the following:





| |  | a ten-year option life for
     1999 and 1998;
| | - | ----------------------------------------------




| |  | a risk-free interest rate
     of 4.76% for 1999 and 5.67% for 1998;
| | - | --------------------------------------------------------------------




| |  | a dividend yield of 1.26%
     for 1999 and 1.60% for 1998; and
| | - | ---------------------------------------------------------------




| |  | volatility of 36.51% for
     1999 and 19.44% for 1998 based on industry peers
     volatility.
| | - | ------------------------------------------------------------------------------------------------




Employee Stock Purchase PlanWe adopted an Employee Stock
   Purchase Plan (the ESPP) which offers employees the opportunity to
   purchase Class A Common Stock at a discount through payroll deductions. The
   ESPP meets the requirements of Section 423 of the Internal Revenue Code. All
   regular full-time and part-time employees are eligible to participate in the
   ESPP after six months of employment. Employees desiring to purchase stock
   through ESPP may elect to reduce their pay by up to 10% in any payroll
   period. These payroll deductions accumulate during a three-month purchase
   period. At the end of each purchase period, the payroll deductions are
   used to purchase Class A Common Stock at a price equal to 85% of the fair
   market value of the Class A Common Stock on the last day of the respective
   purchase period. We purchase shares of Class A Common Stock in the open
   market to satisfy purchases under the ESPP. During 1999 and 1998, we
   incurred expenses related to the ESPP of $408,000 and $142,000.





19. Income Taxes





The provision for income taxes is summarized in the following
   table:





|                                                       |  | 1999  |   | 1998 |       | 1997
|------------------------------------------------------ |  | ----- | - | ---- | ----- | ----
|
|Current:                                               |  |       |   |      |       |     
|Federal                                                |  | $  89 |   |      | $  35 |     
|Utilization of investment and foreign
     tax credits |  | (8    | ) |      | (4    | )   
|                                                       |  |       |   |      |       |     
|Net federal                                            |  | 81    |   |      | 31    |     
|State                                                  |  | 11    |   |      | 5     |     
|Foreign                                                |  | 22    |   |      | 24    |     
|                                                       |  |       |   |      |       |     
|Total current                                          |  | 114   |   |      | 60    |     
|                                                       |  |       |   |      |       |     
|Deferred:                                              |  |       |   |      |       |     
|Federal                                                |  | 37    |   |      | 32    |     
|State                                                  |  | 3     |   |      | 1     |     
|                                                       |  |       |   |      |       |     
|Total deferred                                         |  | 40    |   |      | 33    |     
|                                                       |  |       |   |      |       |     
|                                                       |  | $154  |   |      | $ 93  |     
|                                                       |  |       |   |      |       |     




Of the total current income tax provision recorded in 1999, $31
   million relates to the gain on sale of the Commercial Services
   assets.





We filed a consolidated United States federal income tax return with
   FAHI through the date of the Offering in May 1998 (and with HIC in 1997).
   Since then, we file our own United States federal income tax return.
   International Group filed a separate United States federal income tax return
   through the date of the Offering. Subsequent to that date, International
   Group is included in our consolidated United States federal income tax
   return.





We record future tax benefits for deductible temporary differences if
   we believe that we will realize these benefits. In the period we filed a
   consolidated income tax return with FAHI or HIC, we recorded income tax
   expense as if we were a separate taxpayer. Included in income tax expense
   are amounts relating to International Group.





We made United States federal income tax payments of $67 million in
   1999 and $20 million since the Offering through December 1998. United States
   federal income taxes paid by International Group amounted to $3 million in
   1997.





Under the terms of the tax allocation agreements between Heller and
   FAHI through April 1998, we calculated our current and deferred income taxes
   based on our taxable income or loss, utilizing separate company net
   operating losses, tax credits, capital losses and deferred tax assets or
   liabilities. In accordance with the provisions of the tax allocation
   agreements, net payments of $6 million were made to FAHI through April 1998
   and payments of $73 million were made to HIC in 1997,
   respectively.





The reconciliation between the statutory federal income tax provision
   and the actual effective tax provision for each of the three years ended
   December 31 is as follows:





|                                                                                                      |  | 1999 |   | 1998 |       | 1997
|----------------------------------------------------------------------------------------------------- |  | ---- | - | ---- | ----- | ----
|
|Tax provision at statutory
     rate                                                                  |  | $154 |   |      | $101  |     
|State and foreign income
     taxes, net of federal income tax effects                                |  | 32   |   |      | 31    |     
|Income of foreign
     subsidiaries and joint ventures and foreign tax
   
        credit utilization |  | (29  | ) |      | (37   | )   
|Resolution of tax
     issues                                                                         |  |     |   |      | (3    | )   
|Other, net                                                                                            |  | (3   | ) |      | 1     |     
|                                                                                                      |  |      |   |      |       |     
|                                                                                                      |  | $154 |   |      | $  93 |     
|                                                                                                      |  |      |   |      |       |     




The significant components of the deferred tax assets and deferred
   tax liabilities at December 31, 1999 and 1998 are shown below:





|                                                              |  | December
     31,
|------------------------------------------------------------- |  | -----------------
|
|
|Deferred Tax
     Assets:                                     |  |                  
|Allowance for loan losses                                     |  | $128             
|Foreign tax credits                                           |  | 5                
|Lease portfolio
     acquisitions                             |  | 36               
|Net operating losses                                          |  | 54               
|Equity interests and other
     investments                   |  | 20               
|Terminated swap income                                        |  |                 
|Accrued expenses                                              |  | 36               
|                                                              |  |                  
|Gross deferred tax
     assets                                |  | 279              
|Valuation
     allowance                                      |  | (5               
|                                                              |  |                  
|Gross deferred tax assets,
     net of valuation allowance    |  | 274              
|Deferred Tax
     Liabilities:                                |  |                  
|Repossessed properties                                        |  | $    (8          
|Fixed assets and deferred income from
     lease financing    |  | (67              
|Unrealized appreciation of securities
     available for sale |  | (5               
|                                                              |  |                  
|Gross deferred tax
     liabilities                           |  | (80              
|                                                              |  |                  
|Net deferred tax
     asset                                   |  | $194             
|                                                              |  |                  




We have not made a provision for United States or additional foreign
   taxes on $188 million of undistributed earnings of subsidiaries outside the
   United States since we intend to reinvest those earnings. These earnings
   would become taxable upon the sale or liquidation of these international
   operations or upon the remittance of dividends. Given the availability of
   foreign tax credits and various tax planning strategies, we believe any tax
   liability which may ultimately be paid on these earnings would be
   substantially less than that computed at the statutory federal income tax
   rate. Upon remittance, certain foreign countries impose withholding taxes
   that are then available, subject to certain limitations, for use as credits
   against our United States tax liability. The amount of withholding tax that
   would be payable upon remittance of the entire amount of undistributed
   earnings is approximately $16 million.





We had unused foreign tax credit carryforwards of $5 million at
   December 31, 1999 and 1998. Due to substantial restrictions on the
   utilization of foreign tax credits imposed by the Tax Reform Act of 1986, we
   may not be able to utilize a significant portion of foreign tax credit
   carryforwards prior to expiration. Accordingly, we have recognized a
   valuation allowance for the amount of foreign tax credits recorded at
   December 31, 1999 and 1998.





We have recorded a net deferred tax asset of $194 million as of
   December 31, 1999. Although realization is not assured, we believe it is
   more likely than not that the deferred tax assets will be realized. The
   amount of the deferred tax assets considered realizable, however, could be
   reduced if estimates of future taxable income are reduced.





20. Basic and Diluted Net Income Per Share and Pro Forma Net
   Income Per Share





The following table shows the calculation of net income applicable to
   common stock per share on a basic and diluted basis for the periods
   indicated:





|                                                                                      |  | Quarter Ended December
     31, |  | Twelve Months Ended
     December 31,
|------------------------------------------------------------------------------------- |  | ------------------------------- |  | -------------------------------------
|
|
|
|Net Income applicable to
     common stock
   
        (in millions)                  |  | $  103                          |  | $    41                              
|                                                                                      |  |                                 |  |                                      
|Average equivalent shares
     of common
   
        stock outstanding (in thousands) |  | 97,325                          |  | 90,081                               
|Stock options                                                                         |  |                                |  |                                     
|                                                                                      |  |                                 |  |                                      
|Total average equivalent
     shares                                                  |  | 97,325                          |  | 90,081                               
|                                                                                      |  |                                 |  |                                      
|Net income per
     share                                                             |  | $  1.06                         |  | $  0.46                              
|                                                                                      |  |                                 |  |                                      




The table below presents the pro forma net income applicable to common
   stock per share on a basic and diluted basis. Pro forma information adjusts
   for the impact of our Offering of Class A Common Stock that occurred in May
   1998 and assumes that shares issued in conjunction with the Offering have
   been outstanding since the beginning of 1998. We compute pro forma basic net
   income applicable to common stock per share based on net income applicable
   to common stock divided by the average number of shares outstanding during
   the period. We compute pro forma diluted net income applicable to common
   stock per share based on net income applicable to common stock divided by
   the average number of shares outstanding during the period plus the dilutive
   effect of stock options.





|                                                                     |  | Quarter Ended December
     31, |  | Twelve Months Ended
     December 31,
|-------------------------------------------------------------------- |  | ------------------------------- |  | -------------------------------------
|
|
|
|Net income applicable to
     common stock
   
        (in millions) |  | $  103                          |  | $    41                              
|                                                                     |  |                                 |  |                                      
|Pro forma shares (in
     thousands):                                |  |                                 |  |                                      
|Shares of common stock
   
               
        outstanding       |  | 97,325                          |  | 90,081                               
|Stock options                                                        |  |                                |  |                                     
|                                                                     |  |                                 |  |                                      
|Total pro forma shares                                               |  | 97,325                          |  | 90,081                               
|                                                                     |  |                                 |  |                                      
|Pro forma net income per
     share                                  |  | $  1.06                         |  | $  0.46                              
|                                                                     |  |                                 |  |                                      




The table below presents the pro forma net income applicable to
   common stock per share on a basic and diluted basis excluding the after-tax
   gain from the sale of the Commercial Services assets:





|                                                                        |  | Quarter Ended December
     31, |  | Twelve Months Ended
     December 31,
|----------------------------------------------------------------------- |  | ------------------------------- |  | -------------------------------------
|
|
|
|Net income applicable to
     common
   
        stock, net of HCS gain |  | $    55                         |  | $    41                              
|                                                                        |  |                                 |  |                                      
|Pro forma shares (in
     thousands):                                   |  |                                 |  |                                      
|Shares of common stock                                                  |  |                                 |  |                                      
|Outstanding                                                             |  | 97,325                          |  | 90,081                               
|Stock options                                                           |  |                                |  |                                     
|                                                                        |  |                                 |  |                                      
|Total pro forma shares                                                  |  | 97,325                          |  | 90,081                               
|                                                                        |  |                                 |  |                                      
|Pro forma net income per
     share, net
   
        of HCS gain        |  | $  0.56                         |  | $  0.46                              
|                                                                        |  |                                 |  |                                      




21. Related Parties





We have several financial, administrative or other service
   arrangements with Fuji Bank, FAHI or related affiliates. We believe that the
   terms of these arrangements were similar to those we would have obtained in
   like agreements with unaffiliated entities in arms-length
   transactions.





Keep Well Agreement with Fuji Bank.The Keep Well Agreement
   provides that if Heller should lack sufficient cash or credit facilities to
   meet our commercial paper obligations, Fuji Bank will lend us up to $500
   million. That loan would be payable on demand. We could only use the
   proceeds from the loan to meet our commercial paper obligations.





The Keep Well Agreement further provides that Fuji Bank will maintain
   our stockholders equity at $500 million. Accordingly, if at the close
   of any month our stockholders equity is less than $500 million Fuji
   Bank will purchase, or cause one of its subsidiaries to purchase, shares of
   our NW Preferred Stock in an amount necessary to increase our stockholders
    equity to $500 million.





We paid commitment fees to Fuji Bank under the Keep Well Agreement of
   less than $1 million in 1999, 1998 and 1997. Interest on any loans will be
   charged at the prime rate of Morgan Guaranty Trust Company of New York plus
   .25% per annum. No loans or purchases of NW Preferred Stock have been made
   by Fuji Bank under this agreement.





Neither Fuji Bank nor us can terminate the Keep Well Agreement prior
   to December 31, 2002. After December 31, 2002, the Keep Well Agreement can
   only be terminated if we have received written certifications from Moody
   s Investor Service, Inc. and Standard and Poors Corporation
   that, upon termination, our Series A Preferred Stock will be rated no lower
   than a3 and A, respectively and our Series C
   Preferred Stock will be rated no lower than baa1 and BBB
   , respectively. Similarly, after December 31, 2002, the agreement may
   only be terminated if our senior debt ratings were unchanged as a result of
   the termination of the Agreement. After December 31, 2007, the agreement may
   be terminated by either party with 30 business days written
   notice.





We amended the Keep Well Agreement in connection with the Offering to
   allow us or Fuji Bank or any of its affiliates to sell or dispose of Common
   Stock to any person or entity
 on the condition that Fuji Bank (directly or indirectly through one or more
   subsidiaries) continues to hold greater than 50% of the combined voting
   power of the outstanding Common Stock.





Purchase of Interest in International Group from Fuji Bank.In
   connection with the Offering, we purchased Fuji Banks interest in
   International Group for total cash consideration of approximately $83
   million. The cost included $54 million for the International Group common
   stock owned by Fuji Bank, valued at book value, and $29 million for the
   International Group preferred stock owned by Fuji Bank, valued at a modest
   premium over book value.





Services Provided by Fuji Bank and HIC for Heller.Certain
   employees of Fuji Bank performed managerial, administrative and other
   related functions for Heller during 1999, 1998 and 1997. Certain employees
   of HIC also performed managerial, administrative, and other related
   functions for us during 1997. In conjunction with the ownership transfer of
   Heller from HIC to FAHI in January 1998, the majority of HICs
   employees were transferred to Heller. We compensated Fuji Bank for the use
   of such individuals services at a rate that reflects current costs.
   The amount paid to Fuji Bank for these services was approximately $1 million
   in 1999 and 1998. The amounts paid to Fuji Bank and HIC for these services
   were $2 million and $77 million, respectively, in 1997. Additionally,
   certain subsidiaries of Fuji Bank act as registrar and paying agent for
   certain debt issuances by Heller. These services are provided at market
   rates.





Services Provided by Heller for Fuji Bank and Affiliates.We
   perform services for our affiliates, including FAHI, and charge them for the
   cost of the work performed. The amount received from FAHI was less than $1
   million in 1999 and 1998. Additionally, we guaranteed payment under a
   deferred compensation arrangement between FAHI and certain of its employees
   who were providing services to Heller. We may also guarantee the obligations
   of our clients or the clients of certain joint ventures, under letters of
   credit issued by financial institutions, some of which are Hellers
   affiliates.





Intercompany Receivables, Payables, Transactions and Financial
   Instruments.At December 31, 1999 and 1998, other payables and other
   receivables, respectively, included net amounts due to and due from
   affiliates of $3 million. These amounts mainly include interest bearing
   demand notes representing amounts due to or from Heller arising from an
   interest rate swap agreement with FAHI, advances, administrative fees and
   costs charged to other subsidiaries of FAHI and amounts payable to FAHI for
   services provided. The notes bear interest at rates that approximate the
   average rates our commercial paper obligations or short-term bank borrowing
   rates outstanding during the period. During 1999 and 1998, we paid interest
   of $160,000 and $1.7 million, respectively, to FAHI related to these
   notes.





Fuji Banks trust department may purchase our commercial paper
   for its clients. We paid interest expense related to these borrowings of
   $272,000 in 1998.





Fuji Bank and one of its subsidiaries provided uncommitted lines of
   credit to our consolidated international subsidiaries totaling $25 million
   and $27 million at December 31, 1999 and 1998, respectively. Borrowings
   under these facilities totaled $2 million at December 31, 1998. In addition,
   Fuji Bank provides committed and uncommitted lines of credit to certain
   international joint ventures.





During 1999, we had an accounts receivable sale facility which allowed
   us to sell an undivided interest of up to $503 million in a designated pool
   of our factored accounts receivable to five bank-sponsored conduits. The
   underlying liquidity support for the conduits
 was provided by unaffiliated entities. One of the conduits had an operating
   agreement with Fuji Bank. We paid fees of $247,000 and interest expense of
   $2 million to Fuji Bank during 1999 for services provided under this
   agreement. This agreement was terminated when we sold the assets of our
   Commercial Services business unit during the fourth quarter of
   1999.





During 1999, Global Vendor Finance purchased a leasing portfolio from
   FUJI Leasing (Deutschland) GMBH for approximately $4 million.





22. Fair Value Disclosures





Statement of Financial Accounting Standards No. 107, Disclosures
   about Fair Value of Financial Instruments, requires disclosure of fair
   value information for certain financial instruments, for which it is
   practicable to estimate that value. Since there is no well-established
   market for many of our assets and financial instruments, fair values are
   estimated using present value, property yield, historical rate of return and
   other valuation techniques. These techniques are significantly affected by
   the assumptions used, including the discount rate and estimates of future
   cash flows. These assumptions are inherently judgmental and changes in such
   assumptions could significantly affect fair value calculations. The derived
   fair value estimates may not be substantiated by comparison to independent
   markets and may not be realized in immediate liquidation of the
   instrument.





Our carrying values and estimated fair values of our financial
   instruments at December 31, 1999 and 1998, are as follows:





|                                         |  | December
     31,
|---------------------------------------- |  | -----------------
|
|
|
|Total
     receivables                   |  | $14,795          
|Total
     investments                   |  | 1,794            
|Debt                                     |  | 13,832           
|Swap
     agreements:                    |  |                  
|Asset                                    |  |                 
|Liability                                |  |                 
|Forward currency exchange
     contracts |  | 6                
|Interest rate futures
     contracts     |  | 32               




We used the following methods and assumptions to estimate the fair
   value disclosures for financial instruments. Carrying values approximate
   fair values for all financial instruments which are not specifically
   addressed.





For variable rate receivables that re-price frequently and are
   performing at acceptable levels, fair values were assumed to equal carrying
   values. All other receivables were pooled by loan type and risk rating. We
   estimated the fair value for these receivables by employing discounted cash
   flow analyses using interest rates equal to the London Inter-Bank Offered
   Rate or the Prime rate offered as of December 31, 1999 and 1998 plus an
   adjustment for normal spread, credit quality and the remaining terms of the
   loans.





Carrying and fair values of the securities available for sale are
   based predominantly on quoted market prices. We use our business valuation
   model to determine the estimated value of our equity and other investments
   as of their anticipated exercise date. The business valuation model analyzes
   the cash flows of the related company and considers values for similar
   equity investments. The determined value is then discounted back to December
   31, 1999 and 1998 using an appropriate rate of return for equity
   investments.





We estimated the fair value of our notes and debentures using
   discounted cash flow analyses. These analyses are based on current
   incremental borrowing rates for arrangements with similar terms and
   remaining maturities as quoted by independent financial institutions as of
   December 31, 1999 and 1998. Fair values were assumed to equal carrying
   values for commercial paper and other short-term borrowings.





The estimated fair value of interest rate swap agreements represents
   the mark to market loss and mark to market gain outstanding as of December
   31, 1999 and 1998, respectively, as based upon quoted market prices obtained
   from independent financial institutions. Forward and futures contracts are
   carried at fair value. The fair values of loan commitments, letters of
   credit and guarantees are negligible.





23. Operating Segments





We adopted Statement of Financial Accounting Standards No. 131,
   Disclosures about Segments of an Enterprise and Related Information,
   in 1998. This statement requires us to report segment information based upon
   the way we organize segments within the Company for making operating
   decisions and assessing performance.





Our two reportable segments, Domestic Commercial Finance and
   International Factoring and Asset Based Finance, are identified based upon
   our strategic business units whose long-term financial performance is
   affected by similar economic conditions. Each segment is managed separately
   by its own President.





Domestic Commercial FinanceThis segment consists of five
   business units:





| | (i) | Heller Corporate Finance
     (Corporate Finance):providing collateralized cash flow and asset
     based lending;
| | --- | ------------------------------------------------------------------------------------------------------------------




| | (ii) | Heller Real Estate
     Financial Services (Real Estate Finance):providing secured real
     estate financing;
| | ---- | --------------------------------------------------------------------------------------------------------------




| | (iii) | Heller Leasing Services
     (Leasing Services):providing debt and lease financing of small and
     large ticket equipment and commercial aircraft;
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------




| | (iv) | Heller Small Business
     Finance (Small Business Finance):providing financing to small
     businesses, primarily under U.S. Small Business Administration (SBA)loan programs; and
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | (v) | Heller Healthcare Finance
     (Healthcare Finance):providing financing for the healthcare
     industry.
| | --- | ---------------------------------------------------------------------------------------------------------




Prior to December 31, 1999, we also had Heller Commercial Services
   (Commercial Services) which provided factoring and receivables
   management services. This business unit was sold during the fourth quarter
   of 1999. See Note 5Commercial Services Salefor more
   details.





Domestic Commercial Finance also includes receivables for domestic
   business activities that we are no longer pursuing.





International Factoring and Asset Based FinanceThis
   segment, managed by International Group, provides various types of financing
   through five majority owned subsidiaries and 10 joint ventures. These
   subsidiaries and joint ventures operate in 20 countries in Europe,
   Asia/Pacific and Latin America. The types of financing provided
   include:





| |  | factoring and receivables
     management services;
| | - | ---------------------------------------------------




| |  | asset based
     financing;
| | - | ---------------------------




| |  | acquisition
     financing;
| | - | ---------------------------




| |  | leasing and vendor finance
     and/or trade finance programs.
| | - | --------------------------------------------------------------




We evaluate the performance of our operating segments based on net
   income. Inter-segment sales and transfers are not significant. The
   reportable segments accounting policies are consistent with ours, as
   described in Note 1, Summary of Significant Accounting
   Policies.





Summarized financial information concerning our reportable segments is
   shown in the following table.





|                                             |  | Domestic
   
   Commercial
   
   Finance |  | International
   
   Factoring
   
   and
   
   Asset BasedFinance |  | ConsolidatedCompany
|-------------------------------------------- |  | ----------------------------------------- |  | ------------------------------------------------------------------- |  | -------------------
|
|Total assets:                               
|1999                                         |  | $14,510                                   |  | $3,463                                                              |  | $17,973            
|1998                                         |  | 11,278                                    |  | 3,088                                                               |  | 14,366             
|1997                                         |  | 10,278                                    |  | 2,583                                                               |  | 12,861             
|Revenues:                                   
|1999                                         |  | 1,372                                     |  | 265                                                                 |  | 1,637              
|1998                                         |  | 1,163                                     |  | 244                                                                 |  | 1,407              
|1997                                         |  | 1,083                                     |  | 187                                                                 |  | 1,270              
|Income of international
     joint ventures:
|1999                                         |  | 1                                         |  | 34                                                                  |  | 35                 
|1998                                         |  |                                          |  | 30                                                                  |  | 30                 
|1997                                         |  |                                          |  | 36                                                                  |  | 36                 
|Net interest
     income:                   
|1999                                         |  | 474                                       |  | 38                                                                  |  | 512                
|1998                                         |  | 381                                       |  | 42                                                                  |  | 423                
|1997                                         |  | 382                                       |  | 26                                                                  |  | 408                
|Net Income:                                 
|1999                                         |  | 236                                       |  | 48                                                                  |  | 284                
|1998                                         |  | 163                                       |  | 30                                                                  |  | 193                
|1997                                         |  | 145                                       |  | 13                                                                  |  | 158                




Net income of Domestic Commercial Finance for 1999 includes a one-time
   after-tax gain of $48 million relating to the sale of assets of our
   Commercial Services unit. See Note 5Commercial Services Sale
   for more details.





Net income of Domestic Commercial Finance for 1998 was reduced by a
   one-time charge of $17 million ($12 million net of tax) relating to our
   restructuring initiative. International Factoring and Asset Based Finance
   net income was reduced by minority interest of $1 million, $4 million and $9
   million in 1999, 1998 and 1997, respectively.





We have allocated expenses of our corporate support functions to
   Domestic Commercial Finance and International Factoring and Asset Based
   Finance based on estimates of services provided to these segments.
   Unallocated expenses have been included with the Domestic Commercial Finance
   segment.





The following table presents certain financial information by
   geographic region for the years ended December 31, 1999, 1998 and 1997. We
   have attributed revenues to the specific region of transaction
   origination.





|                       |  | United
   
   States |  | For the Year Ended
     December 31, |  | Latin
   
   America |  | Consolidated
|---------------------- |  | -------------------- |  | ------------------------------------ |  | -------------------- |  | ------------
|
|
|Long-lived
     assets |  |                      |  |                                      |  |                      |  |             
|1999                   |  | $  953               |  | $                                   |  | $  87                |  | $186        
|1998                   |  | 502                  |  |                                     |  | 102                  |  | 237         
|1997                   |  | 225                  |  |                                     |  | 94                   |  | 146         
|Total revenues         |  |                      |  |                                      |  |                      |  |             
|1999                   |  | $1,332               |  | $    6                               |  | $187                 |  | $  70       
|1998                   |  | 1,159                |  |                                     |  | 188                  |  | 31          
|1997                   |  | 1,083                |  |                                     |  | 127                  |  | 26          




24. Summary of Quarterly Financial Information
   (Unaudited)





The following financial information for the calendar quarters of 1999,
   1998 and 1997, is unaudited. In the opinion of management, all adjustments
   necessary to present fairly the results of operations for such periods have
   been included.





|                          |  | Quarter
     Ended
|------------------------- |  | ------------------
|
|
|Net interest
     income  |  |                   
|1999                      |  | $113              
|1998                      |  | 99                
|1997                      |  | 92                
|Operating
     revenues   |  |                   
|1999                      |  | $223              
|1998                      |  | 186               
|1997                      |  | 141               
|Provision for
     losses |  |                   
|1999                      |  | $  29             
|1998                      |  | 15                
|1997                      |  | 22                
|Net income                |  |                   
|1999                      |  | $  57             
|1998                      |  | 48                
|1997                      |  | 39                




Net income for the fourth quarter of 1999 includes a one-time
   after-tax gain of $48 million relating to the sale of assets of our
   Commercial Services unit. See Note 5Commercial Services Sale
   for more details.





25. Accounting Developments





In June 1998, the Financial Accounting Standards Board issued
   Statement of Financial Accounting Standards No. 133 (SFAS No. 133),
   Accounting for Derivative Instruments and Hedging Activities,as
   amended by Statement of Financial Accounting Standards No. 137, Deferral
   of the Effective Date of FASB Statement No. 133 (collectively referred
   to as SFAS No. 133). This Statement establishes accounting and
   reporting standards requiring all derivative instruments (including certain
   derivative instruments embedded in other contracts)
 to be recorded in the balance sheet as either an asset or liability measured
   at its fair value. Changes in the fair value of the derivative are to be
   recognized currently in earnings unless specific hedge accounting criteria
   are met. Special accounting for qualifying hedges allows gains and losses on
   derivatives to offset related results on the hedged items in the income
   statement and requires that a company must document, designate, and assess
   the effectiveness of transactions that receive hedge accounting. SFAS No.
   133 is effective for fiscal years beginning after June 15, 2000. We are
   assessing the impact of this statement and will adopt it on January 1,
   2001.





26. Subsequent Events





In January 2000, we granted to various employees approximately 1.1
   million options to purchase shares of Hellers Class A Common Stock. No
   compensation expense was recorded in conjunction with the awards as the
   exercise price equaled the market value of the stock on the date of grant.
   The options vest equally over each of the next 4 years.





In February 2000, we granted approximately 109,000 shares of
   restricted Class A Common Stock to employees of Heller. Compensation expense
   will be recorded ratably over the vesting periods which range from two to
   five years.





In January 2000, we sold our interest in our Belgium operating
   companies, Kefam N.V., Belgo-Factors and International
   Automatiserings-Centrum, N.V. Our investment in these entities totaled
   nearly $12 million at the time of sale.The gain resulting from this
   transaction will be recorded in the first quarter of 2000.





On February 15, 2000, we paid dividends of $0.10 per share on our
   Class A and Class B Common Stock.





In February 2000, we securitized approximately $375 million in CMBS
   assets that were receivables of Heller at December 31, 1999.





As of February 2000, we have repurchased 1 million shares of our Class
   A Common Stock to provide stock for issuance under our stock option and
   restricted stock plans, as well as for other corporate purposes.





In February 2000, we filed a registration statement with the SEC in
   order to exchange $600 million of 7.375% notes due November 1, 2009 with
   substantially identical notes previously issued in a privately placed
   transaction under SEC Rule 144 A and Regulation S.





All of the above items were completed by February 15,
   2000.





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





None.





PART III





ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE
   REGISTRANT





The information required by this item pertaining to executive officers
   of the Company is set forth below. The information required by this item
   pertaining to directors of the Company and to compliance with Section 16(a)
   of the Securities Exchange Act of 1934 is incorporated by reference to the
   Companys Proxy Statement for the 2000 Annual Meeting of Stockholders.
   Directors of Heller may also be directors of certain of its wholly-owned
   subsidiaries.





Executive Officers





Richard J. Almeida


| | Mr. Almeida, age 57,
     has served as Chairman of the Board and Chief Executive Officer of Heller
     and Heller International Group, Inc. (International Group), a
     wholly-owned subsidiary through which Heller conducts its international
     business, since November 1995, and as a Director of Heller since November
     1987. He has been Director of Fuji America Holdings, Inc. (FAHI), a
     subsidiary of The Fuji Bank, Limited, and the majority stockholder of
     Heller, since January 1998. He previously held the positions of Executive
     Vice President and Chief Financial Officer from November 1987 to November
     1995. Mr. Almeida also serves as a Director of The Fuji Bank and Trust
     Company, a subsidiary of Fuji Bank. Prior to joining Heller in 1987, Mr.
     Almeida held a number of operating positions, both in corporate banking
     and investment banking, for Citicorp.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Nina B. Eidell


| | Ms. Eidell, age 47,
     has served as Executive Vice President and Chief Human Resources Officer
     of Heller since March 1998. From February 1995 to February 1998, she
     served as Director, Human Resources of the American Bar Association. Ms.
     Eidell previously spent eight years with Citicorp, where she held a
     variety of human resources management roles. She has also held human
     resources leadership positions with Sara Lee Corporation and R.R.
     Donnelley & Sons Company.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Michael J. Litwin


| | Mr. Litwin, age 52,
     has served as Executive Vice President and Chief Credit Officer of Heller
     since January 1997, and in 1999 became Chief Risk Officer of Heller. He
     previously served as a Director of Heller from April 1990 to July 1998,
     and Senior Group President of Heller from October 1990 to January 1997.
     Mr. Litwin has served in various other positions since joining Heller in
     1971, including Assistant General Counsel.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Dennis P. Lockhart


| | Mr. Lockhart, age 53,
     has been a Director of Heller and President of International Group since
     January 1988. In his current position, Mr. Lockhart has principal
     responsibility for our international operations. Mr. Lockhart also serves
     as a Director of Tri Valley Corporation. Prior to joining Heller in 1988,
     Mr. Lockhart was employed by Citicorp for 16 years, holding a number of
     positions in corporate/institutional banking domestically and abroad,
     including assignments in Lebanon, Saudi Arabia, Greece, Iran, New York and
     Atlanta, with regional
   experience encompassing Europe, the Middle East, Africa and Latin
     America.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Lauralee E. Martin


| | Ms. Martin, age 49,
     has served as Executive Vice President and Chief Financial Officer of
     Heller since May 1996. She was a Director of Heller from May 1991 to July
     1998, and Senior Group President of Heller from October 1990 to May 1996.
     Ms. Martin has been a Director of Gables Residential Trust since January
     1994. Prior to joining Heller in 1986, Ms. Martin held a variety of senior
     management positions with General Electric Credit Corporation.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Debra H. Snider


| | Ms. Snider, age 45,
     has served as Chief Administrative Officer of Heller since February 1997,
     General Counsel since October 1995, Executive Vice President and Secretary
     since April 1995, and Secretary of FAHI since January 1998. She previously
     served as Acting General Counsel of Heller from April 1995 to October
     1995. Prior to joining Heller, Ms. Snider was a Partner at the law firm of
     Katten Muchin & Zavis from February 1991 to March 1995, and First Vice
     President and Associate General Counsel at the Balcor Company.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Frederick E. Wolfert


| | Mr. Wolfert, age 45,
     has served as a Director of Heller since July 1998 and as President and
     Chief Operating Officer since January 1998. In this capacity, he has
     principal responsibility for all of our domestic businesses. Prior to
     joining Heller, Mr. Wolfert was Chairman of Key Global Finance Ltd. from
     April 1996 to December 1997, Chairman, President and Chief Executive
     Officer of KeyCorp Leasing, Ltd. from June 1993 to December 1997,
     Chairman, President and Chief Executive Officer of KeyBank USA N.A. from
     June 1993 to December 1996, President and Chief Operating Officer of
     KeyCorp Leasing, Ltd. from December 1991 to June 1993, and Executive Vice
     President of KeyBank USA N.A. from December 1991 to June 1993. Prior to
     1991, Mr. Wolfert held various management positions with U.S. Leasing
     Corporation.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




ITEM 11.    EXECUTIVE COMPENSATION





| | The information required
     by this Item is incorporated by reference to the Companys Proxy
     Statement for the 2000 Annual Meeting of Stockholders.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------




ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
   OWNERS AND MANAGEMENT





| | The information required
     by this Item is incorporated by reference to the Companys Proxy
     Statement for the 2000 Annual Meeting of Stockholders.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------




ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED
   TRANSACTIONS





| | The information required
     by this Item is incorporated by reference to the Companys Proxy
     Statement for the 2000 Annual Meeting of Stockholders.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------




PART IV





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





(a) Documents Filed as Part of This Report:





| | 1. | Financial Statements (All
     Financial Statements listed below are those of the Company and its
     consolidated subsidiaries):
| | -- | ----------------------------------------------------------------------------------------------------------------------------------




| | Report of Independent
     Public AccountantsArthur Andersen LLP
| | -----------------------------------------------------------------




| | Consolidated Balance Sheets
     December 31, 1999 and 1998
| | ------------------------------------------------------------




| | Consolidated Statements of
     Income for the Years Ended December 31, 1999, 1998 and 1997
| | -------------------------------------------------------------------------------------------




| | Consolidated Statements of
     Cash Flows for the Years Ended December 31, 1999, 1998 and
     1997
| | ----------------------------------------------------------------------------------------------------




| | Consolidated Statements of
     Changes in Stockholders Equity for the Years Ended December 31,
     1999, 1998 and 1997
| | -------------------------------------------------------------------------------------------------------------------------




| | Notes to Consolidated
     Financial Statements
| | -----------------------------------------------




| | 2. | Financial Statement
     Schedules:
| | -- | -----------------------------------




| | Schedules are omitted
     because they are not applicable or because the required information
     appears in the financial statements or the notes thereto.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------




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




| | Any shareholder who would
     like a copy of the following Exhibits may obtain one upon request from the
     Company at a charge that reflects the reproduction cost of such Exhibits.
     Requests should be made to the Corporate Secretary, Heller Financial,
     Inc., 500 W. Monroe St., Chicago, IL 60661.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | 
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 
|(3)(a) |  | Amended and Restated
     Certificate of Incorporation of the Company, as amended and
   
   restated on April 30, 1998, is incorporated by reference to Exhibit 3.1 to
     the Companys
   
   Quarterly Report on Form 10-Q for the period ended March 31, 1998 (File No.
     1-6157).                                                                                                                                                        |  | 
|(3)(b) |  | Amended and Restated
     By-laws of the Company, adopted on April 27, 1998, are
   
   incorporated by reference to Exhibit 3.2 to the Companys Quarterly
     Report on Form 10-
   
   Q for the period ended March 31, 1998 (File No. 1-6157).                                                                                                                                                                                                |  | 
|(4)(a) |  | Certificate of
     Designation, Preferences and Rights of Cumulative Perpetual Senior
   
   Preferred Stock, Series A, as filed with the Delaware Secretary of State on
     September 16,
   
   1992, is incorporated by reference to Exhibit 4(a) to the Companys
     Annual Report on
   
   Form 10-K for the Fiscal Year ended December 31, 1992 (File No.
     1-6157).                                                                 |  | 
|(4)(b) |  | Certificate of
     Designation, Preferences and Rights of the Companys Fixed Rate
   
   Noncumulative Perpetual Senior Preferred Stock, Series C (Liquidation
     Preference
   
   $100.00 Per Share) filed with the Secretary of State of Delaware on November
     5, 1997, is
   
   incorporated by reference to Exhibit 4.4 to the Companys Registration
     Statement on
   
   Form S-4 dated October 24, 1997 (File No. 333-38627). |  | 

|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | 
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 
|(4)(c) |  | Certificate of Designation,
    Preferences and Rights of the Companys Fixed Rate
  
  Noncumulative Perpetual Senior Preferred Stock, Series D (Liquidation
    Preference
  
  $100.00 Per Share), filed with the Secretary of State of Delaware on December
    3, 1998 is
  
  incorporated by reference to Exhibit (4)(c) to the Companys Annual
    Report on Form 10-
  
  K for the Fiscal Year ended December 31, 1998, as amended on Form 10-K/A
    (File No.
  
  1-6157). |  | 
|(4)(d) |  | Heller Financial, Inc.
    Standard Multiple-Series Indenture Provisions dated February 5,
  
  1987 are incorporated by reference to Exhibit (4)(a) to the Companys
    Registration
  
  Statement on Form S-3 dated February 5, 1987 (File No. 33-11757).                                                                                                                                                                                                                            |  | 
|(4)(e) |  | Form of Indenture dated as
    of February 5, 1987 between the Company and Chemical
  
  Bank, Trustee, with respect to Senior Securities is incorporated by reference
    to Exhibit
  
  (4)(c) to the Companys Registration Statement on Form S-3 dated
    February 5, 1987 (File
  
  No. 33-11757).                                                                                                                                                                               |  | 
|(4)(f) |  | First Supplemental
    Indenture dated as of December 1, 1989 to the Indenture dated as of
  
  February 5, 1987 between the Company and Chemical Bank, as Trustee, is
    incorporated
  
  by reference to Exhibit (4)(e) to the Companys Annual Report on Form
    10-K for the
  
  Fiscal Year ended December 31, 1994 (File No. 1-6157).                                                                                                                                          |  | 
|(4)(g) |  | Indenture dated as of
    September 1, 1995 between the Company and State Street Bank and
  
  Trust Company, as successor to Shawmut Bank Connecticut, National
    Association, as
  
  Trustee, with respect to Senior Securities is incorporated by reference to
    Exhibit 4.3 to the
  
  Companys Registration Statement on Form S-3 dated October 23, 1997
    (File No. 333-
  
  38545).                                                                                     |  | 
|
|(4)(h) |  | First Supplemental
    Indenture dated as of October 13, 1995, to the Indenture dated as of
  
  September 1, 1995, between the Company and State Street Bank and Trust
    Company, as
  
  successor to Shawmut Bank Connecticut, National Association, as Trustee, with
    respect to
  
  Senior Securities is incorporated by reference to an exhibit to the Company
    s Current
  
  Report on Form 8-K, filed October 18, 1995 (File No. 1-6157).                             |  | 
|(4)(i) |  | Second Supplemental
    Indenture dated November 17, 1997 to the Indenture dated
  
  September 1, 1995 between the Company and State Street Bank and Trust
    Company, as
  
  Trustee, with respect to Senior Securities is incorporated by reference to
    Exhibit 4(a) to
  
  the Companys Current Report on Form 8-K filed December 4, 1997 (File
    No. 1-6157).                                                                                                              |  | 
|(4)(j) |  | Third Supplemental
    Indenture dated as of August 16, 1999 to the Indenture dated
  
  September 1, 1995 between the Company and State Street Bank and Trust
    Company, as
  
  Trustee, with respect to Senior Securities is incorporated by reference to
    Exhibit 4 to the
  
  Companys Quarterly Report on Form 10-Q for the period ended September
    30, 1999
  
  (File No. 1-6157).                                                                                     |  | 
|(4)(k) |  | Indenture dated as of
    September 1, 1995 between the Company and State Street Bank and
  
  Trust Company, as successor to Shawmut Bank Connecticut, National
    Association, as
  
  Trustee, with respect to Subordinated Securities is incorporated by reference
    to Exhibit
  
  4.5 to the Companys Registration Statement on Form S-3 dated October
    23, 1997 (File
  
  No. 333-38545).                                                                                |  | 
|(4)(l) |  | First Supplemental
    Indenture dated as of October 13, 1995, to the Indenture dated as of
  
  September 1, 1995, between the Company and State Street Bank and Trust
    Company, as
  
  successor to Shawmut Bank Connecticut, National Association, as Trustee, with
    respect to
  
  Subordinated Securities is incorporated by reference to an exhibit to the
    Companys
  
  Current Report on Form 8-K, filed October 18, 1995 (File No.
    1-6157).                    |  | 




|(4)(m)   |  | Indenture dated as of
    September 1, 1995 between the Company and State Street Bank and
  
  Trust Company, as successor to Shawmut Bank Connecticut, National
    Association, as
  
  Trustee, with respect to Junior Subordinated Securities is incorporated by
    reference to
  
  Exhibit 4.7 to the Companys Registration Statement on Form S-3 dated
    October 23, 1997
  
  (File No. 333-38545).                                                         |  | 
|-------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | 
|(4)(n)   |  | First Supplemental
    Indenture dated October 13, 1995 to the Indenture dated as of
  
  September 1, 1995 between the Company and State Street Bank and Trust
    Company, as
  
  successor to Shawmut Bank Connecticut, National Association, as Trustee, with
    respect to
  
  Junior Subordinated Securities is incorporated by reference to Exhibit
    4(d)(i) to the
  
  Companys Current Report on Form 8-K filed October 18, 1995 (File No.
    1-6157). |  | 
|(4)(o)   |  | Form of Medium-Term Note,
    Series J (Fixed Rate) due from 9 months to 30 years from
  
  date of issue is incorporated by reference to Exhibit 4(a) to the Company
    s Current
  
  Report on Form 8-K filed October 6, 1999 (File No. 1-6157).                                                                                                                                                                                                                    |  | 
|(4)(p)   |  | Form of Medium-Term Note,
    Series J (Fixed Rate/Currency Indexed) due from 9 months
  
  to 30 years from date of issue is incorporated by reference to Exhibit 4(b)
    to the
  
  Companys Current Report on Form 8-K filed October 6, 1999 (File No.
    1-6157).                                                                                                                                                                                                |  | 
|(4)(q)   |  | Form of Medium-Term Note,
    Series J (Floating Rate) due from 9 months to 30 years
  
  from date of issue filed as Exhibit 4(c) to the Companys Current Report
    on Form 8-K
  
  filed October 6, 1999 (File No. 1-6157).                                                                                                                                                                                                                                         |  | 
|(4)(r)   |  | Form of Medium-Term Note,
    Series J (Floating Rate/Currency Indexed) due from 9
  
  months to 30 years from date of issue is incorporated by reference to Exhibit
    4(d) to the
  
  Companys Current Report on Form 8-K filed October 6, 1999 (File No.
    1-6157).                                                                                                                                                                                             |  | 
|
|(10)(a)  |  | Amended and Restated Keep
    Well Agreement between The Fuji Bank, Limited (Fuji
  
  Bank)and the Company, as amended, is incorporated by reference to
    Exhibit 4.13 to the
  
  Companys Registration Statement on Form S-3 dated July 8, 1998 (File
    No. 333-58723).                                                                                                                                                                                          |  | 
|(10)(b)  |  | Registration Rights
    Agreement dated May 6, 1998 between the Company and Fuji Bank
  
  is incorporated by reference to Exhibit (10)(b) to the Companys Annual
    Report on Form
  
  10-K for the Year Ended December 31, 1998, as amended on Form 10-K/A (File
    No. 1-
  
  6157).                                                                                                                                                                             |  | 
|(10)(c)  |  | Services Agreement dated
    January 1, 1985 between the Company and Fuji Bank is
  
  incorporated by reference to Exhibit (10)(e) to the Companys Annual
    Report on Form
  
  10-K for the Fiscal Year ended December 31, 1992 (File No. 1-6157).                                                                                                                                                                                                                  |  | 
|(10)(d)  |  | Management Services
    Agreement dated as of January 2, 1998 between Fuji America
  
  Holdings, Inc. (FAHI)and the Company is incorporated by reference to
    Exhibit 10(d) to
  
  the Companys Annual Report on Form 10-K for the Fiscal Year ended
    December 31,
  
  1997, as amended on Form 10-K/A (File No. 1-6157).                                                                                                                                       |  | 
|(10)(e)  |  | Agreement for the
    Allocation of Federal Income Tax Liability and Benefits among FAHI
  
  and the Company, effective as of January 2, 1998, incorporated by reference
    to the
  
  Companys Annual Report on Form 10-K for the Fiscal Year ended December
    31, 1998,
  
  as amended on Form 10-K/A (File No. 1-6157).                                                                                                                                        |  | 
|(10)(f) |  | 1997-1999 Long Term
    Incentive Plan, effective January 1, 1997, is incorporated by
  
  reference to Exhibit 10(i) to the Companys Annual Report on Form 10-K
    for the Fiscal
  
  Year ended December 31, 1997, as amended on Form 10-K/A (File No. 1-6157).                                                                                                                                                                                                     |  | 




|(10)(g) |  | Supplemental Executive
    Retirement Benefit Plan, amended and restated effective January
  
  1, 1996, is incorporated by reference to Exhibit (10)(e) to the Company
    s Annual Report
  
  on Form 10-K for the Fiscal Year ended December 31, 1996 (File No.
    1-6157).              |  | 
|-------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 
|(10)(h)  |  | First Amendment to the
    Companys Supplemental Executive Retirement Plan, effective as
  
  of January 1, 1999, is incorporated by reference to the Companys
    Quarterly Report on
  
  Form 10-Q for the period ended September 30, 1999 (File No.
    1-6157).                         |  | 
|(10)(i) |  | 1998 Heller Financial, Inc.
    Stock Incentive Plan is incorporated by reference to Exhibit
  
  10.1 to the Companys Registration Statement on Form S-2 initially filed
    on February 26,
  
  1998, as amended (File No. 333-46915).                                                     |  | 
|(10)(j) |  | Amended and Restated
    Executive Deferred Compensation Plan, effective as of January 1,
  
  1998, is incorporated by reference to Exhibit 10 to the Companys
    Quarterly Report on
  
  Form 10-Q for the period ended September 30, 1998 (File No.
    1-6157).                         |  | 
|(10)(k) |  | First Amendment to Amended
    and Restated Executive Deferred Compensation Plan dated
  
  March 2, 1999 is incorporated by reference to the Companys Annual
    Report on Form
  
  10-K for the Fiscal Year ended December 31, 1998, as amended on Form 10-K/A
    (File
  
  No. 1-6157). |  | 
|(10)(l)* |  | Second Amendment to Amended
    and Restated Executive Deferred Compensation Plan
  
  dated November 16, 1999.                                                                                                                                                                                |  | 
|(10)(m)* |  | Employment Letter
    Agreement, dated as of December 31, 1999, between the Company
  
  and Richard J. Almeida.                                                                                                                                                                               |  | 
|(10)(n)* |  | Employment Letter
    Agreement, dated as of December 31, 1999, between the Company
  
  and Frederick E. Wolfert.                                                                                                                                                                             |  | 
|
|(10)(o) |  | Form of Change in Control
    Agreement is incorporated by reference to Exhibit 10.32 to
  
  the Companys Registration Statement on Form S-2 initially filed on
    February 26, 1998,
  
  as amended (File No. 333-46915).                                                                 |  | 
|(12)*    |  | Computation of Ratio of
    Earnings to Combined Fixed Charges and Preferred Stock
  
  Dividends                                                                                                                                                                                              |  | 
|(21)*    |  | Subsidiaries of the
    Registrant                                                                                                                                                                                                                                                             |  | 
|(23)*    |  | Consent of Independent
    Public Accountants                                                                                                                                                                                                                                                  |  | 
|(27)*    |  | Financial Data
    Schedule                                                                                                                                                                                                                                                                    |  | 







|* | Filed herewith.
|- | ---------------




| | Management contract or
    compensatory plan or arrangement required to be filed as an exhibit to this
    Form 10-K.
|- | ---------------------------------------------------------------------------------------------------------------------




Instruments defining the rights of holders of certain issues of
  long-term debt of the Company have not been filed as exhibits to this Report
  because the authorized principal amount of any one of such issues does not
  exceed 10% of the total assets of the Company. The Company hereby agrees to
  furnish to the Securities and Exchange Commission, upon request, a copy of
  each instrument that defines the rights of holders of the Companys
  long-term debt.





(b) Current Reports on Form 8-K:





|Date of Report   |  | Item |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|---------------- |  | ---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|October 5, 1999  |  | 5, 7 |  | A report filing a press
    release announcing that the Company agreed to sell
  
  its domestic factoring business, known as Commercial Services, to The CIT
  
  Group.                                                                                                                                                                                                                                                                                                                                                                    
|                
|October 6, 1999  |  | 5, 7 |  | A report announcing that
    the Company commenced an offering on
  
  Registration Statement on Form S-3 No. 333-84725 of up to
  
  $10,000,000,000 of Medium Term Notes, Series J, due from 9 months to
  
  30 years from the date of issue.                                                                                                                                                                                                                                                                                             
|                
|October 18, 1999 |  | 5, 7 |  | A report filing press
    releases announcing (i) the increase of the quarterly
  
  dividend on the Companys Class A and Class B common stock to $.10 per
  
  share from $.09 per share, (ii) the declaration of dividends on three of the
  
  Companys preferred stocks and (iii) the authorization to repurchase up
    to
  
  two million shares of the Companys Class A Common Stock to provide
  
  stock for issuance under the Companys stock option and restricted stock
  
  plans, as well as for other corporate purposes.
|                
|October 20, 1999 |  | 5, 7 |  | A report filing a press
    release announcing earnings for the quarter ending
  
  September 30, 1999.                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                
|January 20, 2000 |  | 5,7  |  | A report filing a press
    release announcing (i) earnings for the year ending
  
  December 31, 1999, (ii) selection by the Board of Directors of May 4, 2000
  
  as the date for the Annual Meeting of Stockholders, and (iii) selection by
  
  the Board of Directors of March 10, 2000 as the record date for voting at
  
  the Annual Meeting of Stockholders.                                                                                                                                                                      
|                
|January 20, 2000 |  | 5,7  |  | A report filing a press
    release announcing the declaration of dividends on
  
  the Companys common and preferred stocks.                                                                                                                                                                                                                                                                                                                                                                                                               




SIGNATURES





Pursuant to the requirements of Section 13 or 15(d) of the
  Securities Exchange Act of 1934, the registrant has duly caused this Form
  10-K to be signed on its behalf by the undersigned, thereunto duly authorized
  on this 22nd day of February, 2000.





| | HELLER
  FINANCIAL
  , INC
  .
| | ------------------------------




| | /S
  /    RICHARD
  J. ALMEIDA
| | ------------------------------

| | By:
| | ---

| | Richard J.
    Almeida
| | ----------------------

| | Chairman and Chief
    Executive Officer
| | ----------------------------------------




Pursuant to the requirements of the Securities Exchange Act of 1934,
  this Form 10-K has been signed by the following persons on behalf of the
  registrant in their capacities and on the date indicated.





|Signature                                                         |  | Title                                                                       |  | Date             
|----------------------------------------------------------------- |  | --------------------------------------------------------------------------- |  | -----------------
|/S
  /    RICHARD
  J. ALMEIDA
         
  Richard J. Almeida     |  | Chairman and Chief
  
  Executive Officer                                   |  | February 22, 2000
|                                                                 
|/S
  /    LAWRENCE
  G. HUND
         
  Lawrence G. Hund         |  | Executive Vice President,
  
  Controller and Chief
  
  Accounting Officer |  | February 18, 2000
|                                                                 
|/S
  /    LAURALEE
  E. MARTIN
         
  Lauralee E. Martin     |  | Executive Vice President and
  
  Chief Financial Officer                   |  | February 22, 2000
|                                                                 
|/S
  /    FREDERICK
  E. WOLFERT
         
  Frederick E. Wolfert |  | Director, President and Chief
  
  Operating Officer                        |  | February 22, 2000
|                                                                 
|/S
  /    MICHAEL
  A. CONWAY
         
  Michael A. Conway       |  | Director                                                                    |  | February 22, 2000
|                                                                 
|/S
  /    SOICHI
  HIRABAYASHI
         
  Soichi Hirabayashi     |  | Director                                                                    |  | February 23, 2000
|                                                                 
|/S
  /    TAKAAKI
  KATO
         
  Takaaki Kato                 |  | Director                                                                    |  | February 22, 2000
|                                                                 
|/S
  /    MARK
  KESSEL
         
  Mark Kessel                   |  | Director                                                                    |  | February 22, 2000
|                                                                 
|/S
  /    TETSUO
  KUMON
         
  Tetsuo Kumon                 |  | Director                                                                    |  | February 22, 2000
|                                                                 
|/S
  /    DENNIS
  P. LOCKHART
         
  Dennis P. Lockhart     |  | Director and Executive Vice
  
  President                                  |  | February 22, 2000
|                                                                 
|/S
  /    TAKASHI
  MAKIMOTO
         
  Takashi Makimoto         |  | Director                                                                    |  | February 23, 2000
|                                                                 




|Signature                                                 |  | Title    |  | Date             
|--------------------------------------------------------- |  | -------- |  | -----------------
|/S
  /    FRANK
  S. PTAK
         
  Frank S. Ptak       |  | Director |  | February 22, 2000
|                                                         
|/S
  /    MASAHIRO
  SAWADA
         
  Masahiro Sawada   |  | Director |  | February 22, 2000
|                                                         
|/S
  /    KENICHIRO
  TANAKA
         
  Kenichiro Tanaka |  | Director |  | February 22, 2000




HFI 1999 XX 10-K