================================================================================
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C. 20549-1004

                                   ----------
                                    Form 10-K
                                   ----------
(Mark One)

      [X]   ANNUAL  REPORT  PURSUANT  TO SECTION  13 OR 15(d) 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
                  For the transition period from              to

                                   ----------

                          Commission file number 1-1861
                               THE CIT GROUP, INC.
             (Exact name of registrant as specified in its charter)

                Delaware                                   13-2994534
      (State or other jurisdiction                      (I.R.S. Employer
    of incorporation or organization)                  Identification No.)

1211 Avenue of the Americas, New York, New York                10036
   (Address of principal executive offices)                 (Zip Code)

       Registrant's telephone number, including area code: (212) 536-1950

                                   ----------

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

                                                    Name of each exchange on
          Title of each class                            which registered
           ----------------                          ------------------------
 Common Stock, par value $0.01 per share .........  New York Stock Exchange
                                                     Toronto Stock Exchange
    5 7/8% Notes due October 15, 2008 ............  New York Stock Exchange

                                   ----------

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

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

      The  aggregate  market  value of the voting stock  including  Exchangeable
Shares held by  non-affiliates  of the registrant,  based on the most recent New
York Stock  Exchange  Composite  Transaction  closing  price of the Common Stock
($14.06 per share), which occurred on February 29, 2000, was $2,281,167,773. For
purposes of this computation, all officers,  directors, and 5% beneficial owners
of the registrant are deemed to be affiliates.  Such determination should not be
deemed an admission that such officers, directors, and beneficial owners are, in
fact, affiliates of the registrant.  At February 29, 2000, 263,827,792 shares of
the Company's Common Stock including  Exchangeable  Shares,  par value $0.01 per
share, were outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE*

           Document                                   Where Incorporated
           --------                                   ------------------
   Proxy Statement for 2000                   Part III (Items 10, 11, 12 and 13)
 Annual Meeting of Stockholders

----------
*     As stated  under  various  Items of this Report,  only  certain  specified
      portions of such document are incorporated by reference herein.
================================================================================


<PAGE>

<TABLE>
                               TABLE OF CONTENTS
-----------------------------------------------------------------------------------------------------------
<CAPTION>
Form 10-K
 Item No.                           Name of Item                                                       Page
 --------                           ------------                                                       ----
                                     Part I

<S>       <C>                                                                                            <C>
Item 1.    Business ..................................................................................    1
              Overview ...............................................................................    1
              Securitization Program .................................................................    9
              Industry Concentration .................................................................   10
              Competition ............................................................................   10
              Regulation .............................................................................   11
Item 2.    Properties ................................................................................   12
Item 3.    Legal Proceedings .........................................................................   12
Item 4.    Submission of Matters to a Vote of Security Holders .......................................   12

                                     Part II

Item 5.    Market for Registrant's Common Equity and Related Stockholder Matters .....................   13
Item 6.    Selected Financial Data ...................................................................   14
Item 7.    Management's Discussion and Analysis of Financial Condition and Results of
and          Operations ..............................................................................   16
Item 7A.   Quantitative and Qualitative Disclosure about Market Risk .................................   16
Item 8.    Financial Statements and Supplementary Data ...............................................   31
Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial
             Disclosure ..............................................................................   63

                                    Part III

Item 10.   Directors and Executive Officers of the Registrant ........................................   64
Item 11.   Executive Compensation ....................................................................   64
Item 12.   Security Ownership of Certain Beneficial Owners and Management ............................   64
Item 13.   Certain Relationships and Related Transactions ............................................   64

                                     Part IV

Item 14.   Exhibits, Financial Statement Schedule and Reports on Form 8-K ............................   65
</TABLE>


                                       i
<PAGE>

                           Forward-Looking Statements

      Certain statements contained in this filing are forward-looking statements
concerning  our  operations,   economic  performance  and  financial  condition.
Forward-looking statements are included, for example, in the discussions about:

      o     our liquidity,
      o     our credit risk management,
      o     our asset/liability risk management,
      o     our operational and legal risks,
      o     Year 2000 issues and
      o     how we may be affected by certain legal proceedings.

      These statements  involve risks and uncertainties that may be difficult to
predict. Also,  forward-looking statements are based upon management's estimates
of fair  values and of future  costs,  using  currently  available  information.
Therefore,  actual results may differ materially from those expressed or implied
in those statements.  Factors that could cause such differences include, but are
not limited to:

      o     risks of economic slowdown or downturn,
      o     industry cycles and trends,
      o     risks inherent in changes in prevailing market interest rates,
      o     funding opportunities and borrowing costs,
      o     changes in funding markets (including the asset-based
            securitization market),
      o     uncertainties associated with risk management, including credit risk
            management, asset/liability management, interest rate risk
            management and currency risk management,
      o     adequacy of reserves for credit losses,
      o     risks associated with the value and recoverability of leased
            equipment,
      o     difficulties in combining the management, operations or cultures of
            CIT and Newcourt,
      o     cost savings that are not realized or are not realizable within the
            time anticipated and
      o     changes in regulations governing the combined companies' business
            and operations, competitive factors, permissible activities.


                                       ii
<PAGE>

                                     PART I

Item 1. Business

OVERVIEW

      THE  CIT  Group,   Inc.,   ("we,"  "our,"  "us,"  or  "CIT"),  a  Delaware
corporation,  is a leading  diversified  commercial  finance  company with $50.4
billion of managed assets and $5.6 billion of  stockholders'  equity at December
31,  1999.  Our  principal  executive  offices are located at 1211 Avenue of the
Americas,  New York, New York 10036 and our telephone  number is (212) 536-1390.
We commenced  operations in 1908 and have developed a broad array of "franchise"
businesses that focus on specific industries, asset types and markets, which are
balanced by client, industry and geographic diversification.

      Our size, scope and  diversification  was expanded  significantly  when we
acquired Newcourt Credit Group Inc. ("Newcourt") on November 15, 1999. As of the
transaction date,  Newcourt had over $20.0 billion of managed assets.  Newcourt,
headquartered in Toronto,  Canada, is a non-bank financial services  enterprise,
which  originates,  invests  in  and  sells  asset-based  financing.  Newcourt's
origination activities focus on the commercial and corporate finance segments of
the  asset-based  financing  market  through a global  network  of offices in 26
countries.  This  transaction  combines  the  financial  strength  of  CIT  with
Newcourt's broad technology-based leasing business and international platform.

      In conjunction with the Newcourt  acquisition,  we issued common stock and
exchangeable  equivalents  with a value of $2.6  billion.  The  acquisition  was
accounted  for using the  purchase  method,  whereby the excess of the  purchase
price over the estimated fair value of net assets acquired has been allocated to
goodwill in the  Consolidated  Balance  Sheets.  This goodwill  amounted to $1.4
billion,  and  is  being  amortized  over  25  years.  In  connection  with  the
acquisition,   we  also  established  an  integration   plan,  which  identified
activities  that would not continue and the associated  exit costs.  Pursuant to
this plan, restructuring charges of $235.7 million were included in the purchase
accounting  adjustments.  The  restructuring  plan  anticipates  reducing annual
operating  expenses by more than $150 million from the mid-1999 combined expense
level  by the end of the  year  2000.  See  Item  8.  Financial  Statements  and
Supplementary  Data, Note 3 -"Acquisitions"  for more information  regarding the
Newcourt acquisition.

      During 1999 we also acquired  Heller  Financial  Corporation's  ("Heller")
domestic  factoring  business  and  factoring  assets  from  Congress  Financial
Corporation  ("Congress").  These  businesses added in excess of $1.5 billion in
finance assets and enhance our  Commercial  Services  business  unit's scale and
market share in the factoring  industry.  These acquisitions were also accounted
for using the purchase method.

      Prior to the acquisition of Newcourt,  CIT had three business  segments --
Equipment Financing and Leasing, Commercial Finance and Consumer.  Following the
completion  of the  acquisition,  a fourth  segment  was  created to reflect the
combined results of Newcourt.  This  presentation was necessitated by the timing
of  the  acquisition  and  was  consistent  with  our  internal  fourth  quarter
management reporting.  Accordingly,  the financial data in this section reflects
the four business segments as follows:

      o     Equipment Financing and Leasing

      o     Newcourt

      o     Commercial Finance

      o     Consumer

      Certain segments conduct their operations through strategic business units
that market  their  products  and  services to satisfy  the  financing  needs of
specific customers, industries, vendors/manufacturers, and markets. Our business
segments are described in greater detail.

Commercial Segments

      Our  commercial  operations  are  diverse  and  provide  a wide  range  of
financing and leasing  products to small,  midsize and larger companies across a
wide variety of industries, including aerospace, retailing,


                                       1
<PAGE>

construction,   rail,  trucking,  machine  tool,  business  aircraft,   apparel,
textiles, electronics and technology,  chemicals,  manufacturing,  and financial
institutions.  The  secured  lending,  leasing  and  factoring  products  of our
commercial  operations  include  direct  loans  and  leases,  operating  leases,
leveraged and single investor leases, secured revolving lines of credit and term
loans,  credit protection,  accounts  receivable  collection,  import and export
financing and  factoring,  debtor-in-possession  and turnaround  financing,  and
acquisition and expansion financing.

      The following  table sets forth the  financing  and leasing  assets of our
commercial  operations  at  December  31 for each of the years in the  five-year
period ended December 31, 1999. In total,  our commercial  segments  represented
88.0% and 85.3% of  consolidated  financing and leasing assets and total managed
assets, respectively.  The Newcourt segment was acquired in 1999. In addition to
on-balance  sheet  finance  receivables,   operating  lease  equipment,  finance
receivables  held for sale,  and certain  investments,  managed  assets  include
finance receivables previously securitized and still managed by us.

<TABLE>
<CAPTION>
                                                                      December 31,
                                          --------------------------------------------------------------------
                                            1999           1998           1997          1996           1995
                                            ----           ----           ----          ----           ----
                                                                   Dollars in Millions
<S>                                       <C>            <C>           <C>           <C>            <C>
Equipment Financing and Leasing ......... $17,016.7      $13,367.0     $11,709.7     $11,321.6      $10,591.6
Newcourt ................................  11,531.6             --            --            --             --
Commercial Finance ......................   7,002.1        4,996.2       4,250.8       3,838.1        3,973.0
                                          ---------      ---------     ---------     ---------      ---------
  Total financing and leasing assets ....  35,550.4       18,363.2      15,960.5      15,159.7       14,564.6
Finance receivables previously
  securitized and currently managed
  by us .................................   7,471.5             --            --            --             --
                                          ---------      ---------     ---------     ---------      ---------
Total managed assets .................... $43,021.9      $18,363.2     $15,960.5     $15,159.7      $14,564.6
                                          =========      =========     =========     =========      =========
 </TABLE>

      Commercial  transactions are generated through direct calling efforts with
borrowers, lessees, equipment end-users, vendors, manufacturers and distributors
and  through  referral  sources  and  other  intermediaries.  In  addition,  our
strategic business units jointly structure  transactions and refer or cross-sell
transactions  to other CIT units to best meet our customers'  overall  financing
needs. Our marketing  efforts are supplemented by the  Multi-National  Marketing
Group,  which  promotes  our  products  to  the  U.S.  subsidiaries  of  foreign
corporations  in need of  asset-based  financing,  developing  business  through
referrals  from DKB and through  direct  calling  efforts.  We also buy and sell
participations  in and  syndications  of  finance  receivables  and/or  lines of
credit.  In addition,  from time to time in the normal  course of  business,  we
purchase  finance  receivables in bulk to supplement our  originations  and sell
selected  finance  receivables  and equipment  under  operating  leases for risk
management  and/or  other  balance  sheet  management  purposes.   Historically,
Newcourt had  securitized  pools of various  financing and leasing  assets which
comprise  the entire $7.5  billion  balance in the table  above at December  31,
1999.

Equipment Financing and Leasing Segment

      Our Equipment  Financing and Leasing  operations  had total  financing and
leasing  assets of $17.0  billion at December  31, 1999,  representing  42.1% of
total  financing  and leasing  assets.  We conduct our  Equipment  Financing and
Leasing operations through two strategic business units:

      o     The CIT Group/Equipment  Financing ("Equipment  Financing"),  offers
            secured  equipment  financing  and  leasing and focuses on the broad
            distribution    of    its    products     through     manufacturers,
            dealers/distributors,  intermediaries  and  direct  calling  efforts
            primarily  with the  construction,  transportation  and machine tool
            industries.

      o     The CIT  Group/Capital  Finance  ("Capital  Finance") offers secured
            equipment  financing and leasing and focuses on the direct marketing
            of customized transactions,  particularly operating leases, relating
            primarily to commercial aircraft and rail equipment.


                                       2
<PAGE>

      Equipment Financing and Capital Finance personnel have extensive expertise
in managing  equipment  over its full life  cycle,  including  purchases  of new
equipment,  maintenance and repairs,  residual value  estimation and remarketing
via releasing or sale. Equipment Financing's and Capital Finance's equipment and
industry expertise enables them to evaluate effectively residual value risk. For
example, Capital Finance can repossess commercial aircraft, if necessary, obtain
any required  maintenance  and repairs for such  aircraft,  and  recertify  such
aircraft  with  appropriate  authorities.  They manage the  equipment,  residual
value,  and/or the risk of equipment remaining idle for extended periods of time
or in amounts that could materially impact profitability by locating alternative
equipment  users  and/or  purchasers.  For each year in the period 1995  through
1999, Equipment Financing and Capital Finance have realized in excess of 100% of
the aggregate booked residual values in connection with their equipment sales.

      The  following  table  sets  forth  certain  information   concerning  the
financing and leasing assets of our Equipment  Financing and Leasing  segment at
December 31 for each of the years in the  five-year  period  ended  December 31,
1999.

<TABLE>
<CAPTION>
                                                                      December 31,
                                          --------------------------------------------------------------------
                                            1999           1998           1997          1996           1995
                                            ----           ----           ----          ----           ----
                                                                   Dollars in Millions
<S>                                       <C>            <C>           <C>           <C>            <C>
Finance receivables                       $12,999.6      $10,592.9     $ 9,804.1     $ 9,919.5      $ 9,478.6
Operating lease equipment, net ..........   4,017.1        2,774.1       1,905.6       1,402.1        1,113.0
                                          ---------      ---------     ---------     ---------      ---------
  Total financing and leasing assets ....  17,016.7       13,367.0      11,709.7      11,321.6       10,591.6
Finance receivables previously
  securitized and currently
  managed by us .........................   2,189.4             --            --            --             --
                                          ---------      ---------     ---------     ---------      ---------
Total managed assets .................... $19,206.1      $13,367.0     $11,709.7     $11,321.6      $10,591.6
                                          =========      =========     =========     =========      =========
</TABLE>

      As part of our  integration  plan of the former  Newcourt  businesses,  on
December  31,  1999,  financing  and  leasing  assets of $2,357.8  million  were
transferred  to Equipment  Financing from Vendor  Technology  Finance and $233.8
million were transferred to Vendor Technology Finance from Equipment  Financing.
Additionally, $231.3 million of financing and leasing assets were transferred to
Capital Finance from Structured Finance on December 31, 1999. Similarly, finance
receivables  previously  securitized  by Newcourt  of  $2,189.4  million are now
managed  by  Equipment  Financing.  On  January  1,  1997,  $1,519.2  million of
financing and leasing assets and related marketing and servicing operations were
transferred  from Capital  Finance to Equipment  Financing.  The  financing  and
leasing  assets,  operations and  securitized  assets that were  transferred are
considered more  complementary  to the specified  business units.  The transfers
were  undertaken to increase reach and scale in specific  markets and to further
leverage existing systems and infrastructure.

Equipment Financing

      On an  owned  asset  basis,  Equipment  Financing  is the  largest  of our
strategic  business  units  with total  financing  and  leasing  assets of $12.0
billion at December  31, 1999,  representing  29.6% of our total  financing  and
leasing assets. On a managed asset basis,  Equipment Financing  represents $14.2
billion or 28.1% of total managed  assets.  Equipment  Financing  offers secured
equipment  financing  and leasing  products,  including  direct  secured  loans,
leases,  revolving  lines  of  credit,  operating  leases,  sale  and  leaseback
arrangements,  vendor financing,  specialized wholesale and retail financing for
distributors and manufacturers,  and loans guaranteed by the U.S. Small Business
Administration.

      Equipment Financing is a leading nationwide  asset-based equipment lender.
At December 31, 1999, its portfolio included  significant  financing and leasing
assets to  customers  in a number of different  industries,  with  manufacturing
being the largest as a percentage of financing and leasing  assets,  followed by
construction and transportation.

      Products are  originated  through  direct calling on customers and through
relationships with manufacturers,  dealers/distributors  and intermediaries that
have leading or significant marketing positions in their respective  industries.
This provides Equipment  Financing with efficient access to equipment  end-users
in many industries across a variety of equipment types.


                                       3
<PAGE>

      The  following  table  sets  forth  certain  information   concerning  the
financing and leasing  assets of Equipment  Financing at December 31 for each of
the years in the five-year period ended December 31, 1999.

<TABLE>
<CAPTION>
                                                                      December 31,
                                          --------------------------------------------------------------------
                                            1999           1998           1997          1996           1995
                                            ----           ----           ----          ----           ----
                                                                   Dollars in Millions
<S>                                       <C>             <C>           <C>           <C>            <C>
Finance receivables ....................  $10,899.3       $8,497.6      $7,403.4      $5,616.8       $4,929.9
Operating lease equipment, net .........    1,066.2          765.1         623.8         426.6          363.0
                                          ---------       --------      --------      --------       --------
  Total financing and leasing assets ...   11,965.5        9,262.7       8,027.2       6,043.4        5,292.9
Finance receivables previously
  securitized and currently managed
  by us ................................    2,189.4             --            --            --             --
                                          ---------       --------      --------      --------       --------
Total managed assets ...................  $14,154.9       $9,262.7      $8,027.2      $6,043.4       $5,292.9
                                          =========       ========      ========      ========       ========
</TABLE>

Capital Finance

      Capital  Finance  had  financing  and  leasing  assets of $5.1  billion at
December 31, 1999,  which  represented  12.5% of our total financing and leasing
assets. Capital Finance specializes in customized leasing and secured financing,
relating primarily to end-users of commercial  aircraft and railcars,  including
operating leases,  single investor leases,  equity portions of leveraged leases,
sale and leaseback arrangements,  as well as loans secured by equipment. Typical
Capital Finance customers are middle-market to larger-sized companies.

      Capital Finance has provided financing to commercial  airlines for over 30
years. The Capital Finance aerospace portfolio includes most of the leading U.S.
and  foreign   commercial   airlines.   Capital  Finance  has  developed  strong
relationships  with most major  airlines  and all major  aircraft  and  aircraft
engine  manufacturers.  This provides  Capital  Finance with access to technical
information,  which supports  customer  service,  and provides  opportunities to
finance new business.  During 1999, we entered into  agreements with both Airbus
Industries  and the Boeing  Company to  purchase  a total of 40  aircraft,  with
options  to acquire  additional  units.  Deliveries  of these new  aircraft  are
scheduled to take place over a five year period  starting in the fourth  quarter
of 2000.

      Capital  Finance  has  over 25  years  experience  in  financing  the rail
industry,  contributing  to its  knowledge  of asset  values,  industry  trends,
product  structuring  and customer  needs.  Capital Finance has a dedicated rail
equipment   group,   maintains   relationships   with  several  leading  railcar
manufacturers,  and has a significant direct calling effort on all railroads and
rail shipping in the United States.  The Capital Finance rail portfolio includes
all of the U.S.  and  Canadian  Class I railroads  and  numerous  shippers.  The
operating lease fleet includes  primarily covered hopper cars used to ship grain
and agricultural  products,  plastic pellets and cement;  gondola cars for coal,
steel coil and mill service;  open hopper cars for coal and  aggregates;  center
beam flat cars for lumber; and boxcars for paper and auto parts. Capital Finance
also has a fleet of locomotives on lease to U.S. railroads.

      New business is generated by Capital Finance through:

      o     direct calling efforts with equipment end-users and borrowers,
            including major airlines, railroads and shippers,

      o     relationships with aerospace, railcar and other manufacturers and

      o     intermediaries and other referral sources.


                                       4
<PAGE>

      The  following  table  sets  forth  certain  information   concerning  the
financing and leasing  assets of Capital  Finance at December 31 for each of the
years in the five-year period ended December 31, 1999.

<TABLE>
<CAPTION>
                                                                      December 31,
                                          ---------------------------------------------------------------------
                                            1999           1998           1997          1996           1995
                                            ----           ----           ----          ----           ----
                                                                  Dollars in Millions
<S>                                        <C>            <C>           <C>           <C>            <C>
Finance receivables .....................  $2,100.3       $2,095.3      $2,400.7      $4,302.7       $4,548.7
Operating lease equipment, net ..........   2,950.9        2,009.0       1,281.8         975.5          750.0
                                           --------       --------      --------      --------       --------
  Total financing and leasing assets ....  $5,051.2       $4,104.3      $3,682.5      $5,278.2       $5,298.7
                                           ========       ========      ========      ========       ========
</TABLE>

Newcourt Segment

      At December 31, 1999,  the  financing  and leasing  assets of our Newcourt
segment totaled $11.5 billion, representing 28.5% of total financing and leasing
assets.  Newcourt's origination activities focus on the commercial and corporate
finance  segments of the asset-based  financing market through a global network.
We conduct our Newcourt operations through two strategic business units.

      o     Vendor Technology Finance (formerly Newcourt Financial)

      o     Structured Finance (formerly Newcourt Capital)

      The  following  table  sets  forth  certain  information   concerning  the
financing and leasing assets of the Newcourt segment at December 31, 1999.

                                                            December 31, 1999
                                                            ----------------
                                                           Dollars in Millions

        Finance receivables ...............................     $ 9,422.8
        Operating lease equipment, net ....................       2,108.8
                                                                ---------
          Total financing and leasing assets ..............      11,531.6
        Finance receivables previously securitized
          and currently managed by us .....................       5,282.1
                                                                ---------
        Total managed assets ..............................     $16,813.7
                                                                =========

Vendor Technology Finance

      Financing and leasing assets of Vendor Technology  Finance ("VTF") totaled
$9.6 billion at December 31, 1999,  and comprised  23.8% of our total  financing
and leasing assets. On a managed asset basis, VTF totaled $14.9 billion or 29.5%
of total managed assets.  VTF is a newly acquired  strategic  business unit. VTF
operates globally through operations in the United States, Canada, Europe, Latin
America, Asia, and Australia,  and serves many industries including a wide range
of manufacturers. Additionally, VTF customers range from small-market businesses
and consumers to large-sized companies.

      VTF builds alliances with  industry-leading  equipment vendors,  including
manufacturers, dealers and distributors, to deliver customized asset-based sales
and  financing  solutions in more than 300 vendor  programs.  VTF offers  credit
financing  to the  manufacturer's  customers  for the  purchase  or lease of the
manufacturer's   products,   while  also  offering   enhanced   sales  tools  to
manufacturers  and vendors,  such as asset management  services,  efficient loan
processing,  and real-time credit  adjudication.  By working in partnership with
its vendors,  VTF is integrated with the vendor's  business planning process and
product  offering  systems.  VTF has significant  vendor programs in information
technology and telecommunications.

      These  vendor  alliances  are  also  characterized  by the  use  of  joint
ventures,  profit sharing and other transaction structures. In the case of joint
ventures,  through  a  contractual  arrangement,  VTF  and  the  vendor  combine
activities into one business model in a distinct legal entity. Generally,  these
arrangements  are  accounted  for on an equity  basis,  with  profits and losses
distributed according to the joint venture agreement. VTF also utilizes "virtual
joint ventures",  whereby the assets are funded on balance sheet,  while profits
and losses are shared with the vendor.  These types of strategic alliances are a
key  source  of  business  for  VTF.  New  business  is also  generated  through
intermediaries  and other referral  sources,  as well as through direct end-user
relationships.


                                       5
<PAGE>

      The  following  table  sets  forth  certain  information   concerning  the
financing and leasing assets of Vendor Technology Finance at December 31, 1999.

                                                          December 31, 1999
                                                         ------------------
                                                         Dollars in Millions
     Finance receivables ................................    $ 7,488.9
     Operating lease equipment, net .....................      2,108.8
                                                             ---------
       Total financing and leasing assets ...............      9,597.7
     Finance receivables previously securitized
       and currently managed by us ......................      5,282.1
                                                             ---------
     Total managed assets ...............................    $14,879.8
                                                             =========

Structured Finance

      At December 31, 1999  Structured  Finance had financing and leasing assets
of $1.9  billion,  comprising  4.8% of our  consolidated  financing  and leasing
assets.

      Structured Finance provides specialized investment banking services to the
international  corporate finance and institutional  finance markets by providing
asset-based  financing for large ticket asset acquisitions and project financing
and related advisory  services to equipment  manufacturers,  corporate  clients,
regional  airlines,  governments  and public  sector  agencies.  Communications,
transportation,  and the power and  utilities  sectors are among the  industries
that Structured Finance serves.

      Structured  Finance also serves as an  origination  conduit to its lending
partners  by  seeking  out and  creating  investment  opportunities.  Structured
Finance has established relationships with insurance companies and institutional
investors and can arrange financing  opportunities that meet asset class, yield,
duration and credit quality  requirements.  Accordingly,  Structured Finance has
considerable  syndication and fee generation  capacity.  Structured Finance also
holds equity positions in connection with its advisory activities.

Commercial Finance Segment

      At December 31, 1999,  the financing and leasing  assets of our Commercial
Finance segment totaled $7.0 billion,  representing 17.3% of total financing and
leasing  assets.  We conduct  our  Commercial  Finance  operations  through  two
strategic  business  units,  both of which  focus  on  accounts  receivable  and
inventories as the primary source of security for their lending transactions.

      o     The CIT Group/Commercial  Services  ("Commercial  Services"),  which
            provides    secured    financing   as   well   as   factoring    and
            receivable/collection  management  products to companies in apparel,
            textile, furniture, home furnishings, and other industries.

      o     The CIT Group/Business  Credit ("Business  Credit"),  which provides
            secured  financing  to a full  range  of  borrowers  from  small  to
            larger-sized companies.

      The  following  table  sets  forth  certain  information   concerning  the
financing and leasing  assets of  Commercial  Finance at December 31 for each of
the years in the five-year period ended December 31, 1999.

<TABLE>
<CAPTION>
                                                                      December 31,
                                         ----------------------------------------------------------------------
                                            1999           1998           1997          1996           1995
                                            ----           ----           ----          ----           ----
                                                                   Dollars in Millions
<S>                                        <C>            <C>           <C>           <C>            <C>
Commercial Services ....................   $4,165.1       $2,481.8      $2,113.1      $1,804.7       $1,743.3
Business Credit ........................    2,837.0        2,514.4       2,137.7       2,033.4        2,229.7
                                           --------       --------      --------      --------       --------
  Total financing and leasing assets ...   $7,002.1       $4,996.2      $4,250.8      $3,838.1       $3,973.0
                                           ========       ========      ========      ========       ========
</TABLE>

      In 1999,  CIT combined the management and operations of two business units
with similar  products and processes,  Business Credit and Credit Finance,  into
one business unit called Business Credit to improve efficiency and reduce costs.
Prior year balances reflect the current year presentation.  In 1999,  Commercial


                                       6
<PAGE>

      Services completed the acquisitions of certain domestic assets from Heller
and  Congress.  In total,  these  purchases  added in excess of $1.5  billion in
financing and leasing assets.

Commercial Services

      Commercial Services had total financing and leasing assets of $4.2 billion
at December 31, 1999, which represented 10.3% of our total financing and leasing
assets.  Commercial  Services offers a full range of domestic and  international
customized  credit  protection,  lending and  outsourcing  services that include
working capital and term loans,  factoring,  receivable management  outsourcing,
bulk purchases of accounts receivable, import and export financing and letter of
credit programs.

      Financing  is  provided  to  clients  through  the  purchase  of  accounts
receivable  owed to  clients  by  their  customers,  as well as by  guaranteeing
amounts due under letters of credit issued to the clients' suppliers,  which are
collateralized by accounts receivable and other assets. The purchase of accounts
receivable is  traditionally  known as "factoring" and results in the payment by
the client of a factoring fee which is commensurate  with the underlying  degree
of credit risk and recourse, and which is generally a percentage of the factored
sales volume.  When Commercial  Services "factors" (i.e.,  purchases) a customer
invoice from a client,  it records the customer  receivable as an asset and also
establishes  a liability  for the funds due to the client  ("credit  balances of
factoring  clients").  Commercial Services also may advance funds to its clients
prior to collection of receivables, typically in an amount up to 80% of eligible
accounts receivable (as defined for that transaction), charging interest on such
advances (in addition to any factoring  fees) and satisfying  such advances from
receivables collections.

      Clients  use  Commercial  Services'  products  and  services  for  various
purposes,  including  improving  cash flow,  mitigating  or reducing the risk of
charge-offs,  increasing sales,  improving management information and converting
the high fixed cost of operating a credit and collection department into a lower
and variable expense based on sales volume.

      Commercial  Services  generates  business  regionally  from a  variety  of
sources,  including  direct calling efforts and referrals from existing  clients
and other sources. Additionally, acquisitions play a large role in the growth of
Commercial Services.

Business Credit

      Financing and leasing  assets of Business  Credit  totaled $2.8 billion at
December  31,  1999 and  represented  7.0% of our total  financing  and  leasing
assets.  Business  Credit  offers  revolving  and term loans secured by accounts
receivable,  inventories  and  fixed  assets  to  smaller  through  larger-sized
companies.  Clients  use  such  loans  primarily  for  working  capital  growth,
expansion, acquisitions,  refinancings and debtor-in-possession,  reorganization
and  restructurings,  and  turnaround  financings.  Business  Credit  sells  and
purchases participation interests in such loans to and from other lenders.

      Through  its  variable  interest  rate  senior  revolving  and  term  loan
products,  Business  Credit  meets its  customers'  financing  needs for working
capital,  growth,  acquisition and other financing  situations otherwise not met
through  bank  or  other  unsecured  financing  alternatives.   Business  Credit
typically  structures  financings on a fully secured basis, though, from time to
time,  it may look to a customer's  cash flow to support a portion of the credit
facility.  Revolving  and term loans are made on a variable  interest rate basis
based on published indexes such as LIBOR or a prime rate of interest.

      Business is originated through direct calling efforts and intermediary and
referral sources, as well as through sales and regional offices. Business Credit
has focused on increasing  the  proportion  of direct  business  origination  to
improve  its  ability  to  capture or retain  refinancing  opportunities  and to
enhance finance income.  Business Credit has developed  long-term  relationships
with  selected  finance  companies,  banks  and  other  lenders  and  with  many
diversified referral sources.

Consumer Segment

      At December 31, 1999,  our Consumer  segment  financing and leasing assets
totaled $4.7 billion,  representing 11.7% of total financing and leasing assets.
Total  Consumer   managed  assets  were  $7.3  billion  at  December  31,  1999,
representing 14.4% of our total managed assets.


                                       7
<PAGE>

      Our consumer  business is focused  primarily on home equity lending and on
retail  sales  financing  secured  by  recreational  vehicles  and  manufactured
housing. During 1999, two changes were initiated in order to improve margins and
efficiencies.  First, we decided to concentrate our efforts on core products. In
doing so, we de-emphasized  recreational boat and wholesale  financing.  Second,
prior to 1999,  home equity  lending  was  performed  by The CIT  Group/Consumer
Finance  ("Consumer  Finance")  business unit while sales financing for consumer
products  sold through  dealers was performed by The CIT  Group/Sales  Financing
("Sales  Financing")  business unit. During 1999, we combined these two business
units  under  one  management  team to  improve  efficiencies.  Our  streamlined
consumer unit will  continue to provide  contract  servicing for  securitization
trusts and other third  parties  through a  centralized  Asset  Service  Center.
Additionally,  in the  ordinary  course  of  business,  the  consumer  unit will
purchase loans and portfolios of loans from banks, thrifts and other originators
of consumer loans.

      The following table sets forth certain information  regarding our Consumer
segment  at  December  31 for each of the years in the  five-year  period  ended
December 31, 1999.

<TABLE>
<CAPTION>
                                                                      December 31,
                                         ---------------------------------------------------------------------
                                            1999           1998           1997          1996           1995
                                            ----           ----           ----          ----           ----
                                                                   Dollars in Millions
<S>                                        <C>            <C>           <C>           <C>            <C>
Financing and leasing assets
  Home equity ..........................   $2,215.4       $2,244.4      $1,992.3      $2,005.5       $1,039.0
  Manufactured housing .................    1,666.9        1,417.5       1,125.7         790.2          561.5
  Recreational vehicles ................      361.2          744.0         501.9         510.1          698.5
  Liquidating portfolio* ...............      462.8          848.4         313.1          49.5          156.9
                                           --------       --------      --------      --------       --------
Total financing and leasing assets .....    4,706.3        5,254.3       3,933.0       3,355.3        2,455.9
Finance receivables previously
  securitized and currently
  managed by us ........................    2,567.8        2,516.9       2,385.6       1,437.4          916.5
                                           --------       --------      --------      --------       --------
Total managed assets ...................   $7,274.1       $7,771.2      $6,318.6      $4,792.7       $3,372.4
                                           ========       ========      ========      ========       ========
</TABLE>

----------
*     In 1999 we  decided  to exit  the  recreational  boat and  wholesale  loan
      product  lines.  Prior year balances  have been  conformed to current year
      presentation.

      Our home equity  products  include both fixed and variable rate closed-end
loans and variable rate lines of credit.  We primarily  originate,  purchase and
sell  loans  secured  by  first  or  second  liens on  detached,  single  family
residential properties. Customers borrow for the purpose of consolidating debts,
refinancing an existing mortgage,  funding home  improvements,  paying education
expenses  and, to a lesser  extent,  purchasing  a home,  among  other  reasons.
Consumer  primarily  originates  loans through  brokers,  as well as on a direct
marketing  basis and  through  correspondents.  We believe  that the  network of
offices,   located  in  most  major  U.S.  markets,  enables  us  to  provide  a
competitive,  extensive product offering  complemented by high levels of service
delivery.  Through  experienced lending  professionals and automation,  Consumer
provides  rapid   turnaround   time  from   application   to  loan  funding,   a
characteristic considered to be critical by its broker relationships.

      Consumer also provides nationwide retail financing for the purchase of new
and used  recreational  vehicles  and  manufactured  housing.  These  loans  are
predominantly  originated through  recreational vehicle and manufactured housing
dealer, manufacturer and broker relationships.

Servicing

      The Asset Service Center centrally services and collects substantially all
of our Consumer  receivables,  including  loans  originated  or purchased by our
Consumer  Group,  as well as loans  originated  or  purchased  and  subsequently
securitized with servicing retained. The servicing portfolio also includes loans
owned by third  parties that are  serviced by our Consumer  Group for a fee on a
"contract"  basis.  At December  31,  1999,  the  Consumer  servicing  portfolio
included $1.0 billion of finance receivables serviced for third parties.


                                       8
<PAGE>

Equity Investments

      The CIT Group/Equity  Investments and its subsidiary The CIT Group/Venture
Capital (together "Equity Investments")  originate and participate in merger and
acquisition transactions,  purchase private equity and equity-related securities
and  arrange  transaction  financing.  Equity  Investments  has  investments  in
emerging growth opportunities in selected industries,  including the information
technology,  communications,  life  science and  consumer  products  industries.
Equity  Investments made its first investment in 1991 and had total  investments
of $137.3 million at December 31, 1999.

Common Stock

      On November 15, 1999, we issued  76,428,304 shares of CIT common stock and
27,577,082  exchangeable  shares  of  CIT  Exchangeco  Inc.  (exchangeable  on a
one-for-one  basis  for  shares  of CIT  common  stock)  under  the terms of the
Newcourt acquisition. This issuance reflected an exchange ratio of .70 shares of
our common  stock for the  148,536,081  outstanding  common  shares of Newcourt.
Canadian  resident  holders of  Newcourt  common  shares  could elect to receive
exchangeable  shares  issued by CIT  Exchangeco  in lieu of CIT common  stock in
order to defer recognizing any gain or loss on the acquisition for income taxes.
Prior to the acquisition,  we amended our Certificate of Incorporation to rename
and combine our Class A Common Stock and Class B Common  Stock as Common  Stock,
which  is now  the  only  class  of  common  stock  outstanding.  Following  the
transaction, the former CIT shareholders owned approximately 61% of the combined
company,  and the former Newcourt  shareholders  owned  approximately 39% of the
combined  company.  At December 31,  1999,  The  Dai-Ichi  Kangyo Bank,  Limited
("DKB"), our largest  shareholder,  owned approximately 26.8% of our outstanding
stock.

      In November 1998, DKB sold 55,000,000  shares of Class A Common Stock in a
secondary  public offering (the "Secondary  Offering") for which it received all
the proceeds.  Prior to the sale,  DKB converted all of its Class B Common Stock
into an identical  number of shares of Class A Common  Stock.  DKB held 94.4% of
the  combined  voting  power and 77.2% of the  economic  interest  of all of our
outstanding common stock prior to the sale.

      In November 1997, we issued  36,225,000  shares of Class A Common Stock in
an initial public  offering (the "IPO").  Prior to the IPO, DKB owned 80% of our
issued and outstanding stock and The Chase Manhattan Corporation ("Chase") owned
the remaining 20% common stock interest. DKB had an option expiring December 15,
2000 to purchase the remaining 20% common stock interest from Chase. In November
1997, we purchased  DKB's option at its fair market value,  exercised the option
to  purchase  the  stock  held by Chase  and  recapitalized  by  converting  the
outstanding common stock to 157,500,000  shares of Class B Common Stock.  Twenty
percent of the Class B Common Stock shares (which had five votes per share) were
converted to Class A Common Stock shares  (which had one vote per share) and, in
addition to an underwriter's  overallotment  option, were issued in the IPO. The
issuance of Class A Common  Stock  pursuant to the  underwriter's  overallotment
resulted in an increase to stockholders' equity of $117.7 million.

SECURITIZATION PROGRAM

      We fund  most of our  assets on  balance  sheet  using  our  access to the
commercial paper,  medium-term note and capital markets. In an effort to broaden
funding  sources and to provide an additional  source of  liquidity,  we have in
place a program to opportunistically  access the public and private asset backed
securitization  markets.  Current  products  utilized  in this  program  include
commercial  receivables  secured by equipment (a  capability  acquired  with the
Newcourt  acquisition)  and consumer loans secured by recreational  vehicles and
residential  real estate.  During 1999, we securitized $1.5 billion of financing
and leasing assets and the remaining pool balance at December 31, 1999 was $10.0
billion or 19.9% of our total managed  assets.  In addition to  conventional  on
balance sheet funding,  Newcourt  historically used securitizations to finance a
significant  portion of asset growth.  Newcourt has  established  securitization
vehicles and relationships with institutional  investors in the U.S., Canada and
the U.K. to provide broad market  access.  It is our intention to continue these
commercial securitization capabilities, though at lower percentage levels of our
overall funding than Newcourt did prior to the acquisition.


                                       9
<PAGE>

      Under a typical asset backed  securitization,  we sell a "pool" of secured
loans or leases to a special  purpose entity.  The special  purpose  entity,  in
turn, issues  certificates  and/or notes that are collateralized by the pool and
entitle the holders thereof to participate in certain pool cash flows. We retain
the servicing of the securitized  contracts,  for which we earn a servicing fee.
We also  participate in certain  "residual" cash flows (cash flows after payment
of principal and interest to certificate and/or note holders, servicing fees and
other credit related disbursements).  At the date of securitization, we estimate
the  "residual"  cash flows to be received over the life of the  securitization,
record the  present  value of these cash  flows as a  retained  interest  in the
securitization  (retained  interests can include bonds issued by the trust, cash
reserve  accounts  on deposit in the trust or  interest  only  receivables)  and
recognize a gain.  The retained  interests are then amortized  through  earnings
over the estimated life of the related loan pool.

      In estimating residual cash flows and the value of the retained interests,
we make a variety of financial  assumptions,  including loan pool credit losses,
prepayment  speeds  and  discount  rates.   These  assumptions  are  empirically
supported by both our historical  experience and anticipated  trends relative to
the  particular  products  securitized.  Subsequent  to  recording  the retained
interests,  we  regularly  review such assets for  valuation  impairment.  These
reviews  are  performed  on a  disaggregated  basis.  Fair  values  of  retained
interests  are   calculated   utilizing   current  pool   demographics,   actual
note/certificate outstandings, current and anticipated credit losses, prepayment
speeds and discount  rates.  These  revised fair values are then compared to our
carrying  values.  Our retained  interests had a carrying  value at December 31,
1999 of $1.1 billion,  including  interests in commercial  securitized assets of
$914.5  million and  consumer  securitized  assets of $194.8  million.  Retained
interests are subject to credit and prepayment risk. These assets are subject to
the same credit granting and monitoring processes which are described in Item 7.
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations,   "Credit  Risk  Management"  section.  Our  interests  relating  to
commercial  securitized  assets are generally  subject to lower  prepayment risk
because of their contractual terms.

INDUSTRY CONCENTRATION

      See the "Industry  Composition" and "Commercial Airline Industry" sections
of "Concentrations" in Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.

COMPETITION

      Our markets are highly  competitive and are  characterized  by competitive
factors that vary based upon product and geographic region.  Competitors include
captive  and  independent   finance  companies,   commercial  banks  and  thrift
institutions,  industrial banks,  leasing companies,  manufacturers and vendors.
Substantial  financial services networks have been formed by insurance companies
and bank holding  companies  that  compete with us. On a local level,  community
banks  and  smaller   independent   finance  and/or  mortgage  companies  are  a
competitive  force.  Some competitors have substantial  local market  positions.
Many of our  competitors  are large  companies  that have  substantial  capital,
technological and marketing resources. Some of these competitors are larger than
us and may have access to capital at a lower cost than us. Also, our competitors
include  businesses  that  are  not  related  to  bank  holding  companies  and,
accordingly,  may engage in activities, for example, short-term equipment rental
and  servicing,  which  currently  are  prohibited to us.  Competition  has been
enhanced in recent years by a strong economy and growing marketplace  liquidity.
The markets for most of our  products  are  characterized  by a large  number of
competitors.  However, with respect to some of our products, competition is more
concentrated.

      We compete  primarily on the basis of pricing,  terms and structure.  From
time to time, our competitors seek to compete aggressively on the basis of these
factors and we may lose  market  share to the extent we are  unwilling  to match
competitor pricing and terms in order to maintain interest margins and/or credit
standards.

      Other primary  competitive  factors include industry experience and client
service and relationships.  In addition, demand for our products with respect to
certain industries, such as the commercial airline industry, will be affected by
demand for such industry's services and products and by industry regulations.


                                       10
<PAGE>

REGULATION

      DKB is a bank  holding  company  within the  meaning  of the Bank  Holding
Company Act of 1956 (the  "Act"),  and is  registered  as such with the Board of
Governors  of the  Federal  Reserve.  As a result,  we are  subject  to  certain
provisions  of the Act and are subject to  examination  by the  Federal  Reserve
System (the "Federal  Reserve").  In general,  the Act limits the  activities in
which a bank holding company and its subsidiaries may engage to those of banking
or managing or controlling banks or performing  services for their  subsidiaries
and to continuing  activities which the Federal Reserve has determined to be "so
closely  related to banking or managing or  controlling  banks as to be a proper
incident  thereto."  Our  current  principal  business   activities   constitute
permissible activities for a non-bank subsidiary of a bank holding company.

      In  addition  to being  subject to the Act,  DKB is  subject  to  Japanese
banking laws,  regulations,  guidelines  and orders that affect our  permissible
activities.  We have entered into an agreement  with DKB in order to  facilitate
DKB's  compliance with  applicable U.S. and Japanese  banking laws, and with the
regulations,  interpretations,  policies,  guidelines,  requests, directives and
orders of the  applicable  regulatory  authorities  or their staffs thereof or a
court  (collectively,  the "Banking  Laws").  That  agreement  prohibits us from
engaging in any new activity or entering  into any  transaction  for which prior
approval,  notice or filing is required under Banking Laws,  unless the required
prior approval is obtained, prior notice is given or made by DKB and accepted or
such filings are made. We are also prohibited from engaging in any activity that
would cause DKB, CIT or any affiliate of DKB or CIT to violate any Banking Laws.
If,  at any  time,  it is  determined  by DKB  that  any  of our  activities  is
prohibited by any Banking Law, we are required to take all  reasonable  steps to
cease such activities. Under the terms of that agreement, DKB is responsible for
making all determinations as to compliance with applicable Banking Laws.

      Two of our subsidiaries are investment  companies  organized under Article
XII of the New York  Banking  Law.  The  activities  of these  subsidiaries  are
restricted  by  state  banking  laws  and  these  subsidiaries  are  subject  to
examination  by state banking  examiners.  Also, any person or entity seeking to
purchase  "control" of the Company would be required to apply for and obtain the
prior  approval  of the  Superintendent  of  Banks  of the  State  of New  York.
"Control"  is  presumed  to exist if a  person  or  entity  would,  directly  or
indirectly,  own, control or hold (with power to vote) 10% or more of our voting
stock.

      Our  operations are subject,  in certain  instances,  to  supervision  and
regulation by state and federal and various foreign governmental authorities and
may be  subject  to  various  laws and  judicial  and  administrative  decisions
imposing various  requirements and restrictions,  which, among other things, (i)
regulate   credit  granting   activities,   including   establishing   licensing
requirements,  if any,  in  applicable  jurisdictions,  (ii)  establish  maximum
interest  rates,  finance charges and other charges,  (iii) regulate  customers'
insurance coverages,  (iv) require disclosures to customers,  (v) govern secured
transactions, (vi) set collection, foreclosure, repossession and claims handling
procedures  and other trade  practices,  (vii)  prohibit  discrimination  in the
extension of credit and administration of loans, and (viii) regulate the use and
reporting of information related to a borrower's credit experience.

      Depending on the provisions of the applicable law and  regulations and the
specific facts and  circumstances  involved,  violations of these laws may limit
our ability to collect all or part of the principal of or interest on applicable
loans,  may  entitle the  borrower  to rescind  the loan and any  mortgage or to
obtain a refund of amounts previously paid and, in addition, could subject us to
damages and administrative sanctions.

      The  above  regulation  and  supervision  could  limit our  discretion  in
operating  our  businesses.  For  example,  state laws often  establish  maximum
allowable   finance   charges  for  certain   consumer  and  commercial   loans.
Noncompliance  with  applicable  statutes  or  regulations  could  result in the
suspension or revocation of any license or registration at issue, as well as the
imposition of civil fines and criminal penalties. No assurance can be given that
applicable  laws or  regulations  will not be amended or construed  differently,
that new laws and  regulations  will not be  adopted or that  interest  rates we
charge will not rise to maximum  levels  permitted  by law, the effect of any of
which could be to adversely affect our business or results of operations.  Under
certain  circumstances,  the Federal  Reserve has the  authority to issue orders
which  could  restrict  our  ability to engage in new  activities  or to acquire
additional  businesses  or to acquire  assets  outside  of the normal  course of
business.


                                       11
<PAGE>

Item 2. Properties

      The  operations of CIT and its  subsidiaries  are  generally  conducted in
leased office space located in numerous  cities and towns  throughout the world.
Such  leased  office  space is suitable  and  adequate  for our needs.  With the
exception of various  locations in the United States and Canada,  which are part
of our  restructuring  plan  and  are  discussed  in  Note  3 of  the  Financial
Statements,   we  utilize,  or  plan  to  utilize  in  the  foreseeable  future,
substantially all of our leased office space.

Item 3. Legal Proceedings

      We are a defendant in various  lawsuits  arising in the ordinary course of
our business.  We  aggressively  manage our litigation and evaluate  appropriate
responses  to our  lawsuits  in light  of a number  of  factors,  including  the
potential impact of the actions on the conduct of our operations. In the opinion
of  management,  none of the  pending  matters  is  expected  to have a material
adverse  effect on our financial  condition or results of  operations.  However,
there  can be no  assurance  that  an  adverse  decision  in one or more of such
lawsuits will not have a material adverse effect.

Item 4. Submission of Matters to a Vote of Security Holders

      We held a Special  Meeting  of  Stockholders  on October  26,  1999 at our
offices in Livingston,  New Jersey. A total of 161,209,826  shares were eligible
to  vote  at the  meeting.  The  stockholders  approved  each  of the  following
proposals:

<TABLE>
<CAPTION>
              Proposal                                For           Withheld/Against     Exception/Abstain
              --------                                ---           ----------------     -----------------
<S>                                                <C>                  <C>                   <C>
Issue additional shares of common stock
  to acquire Newcourt Credit Group Inc. .......... 141,420,487          1,934,463             24,308

Amend the Amended and Restated
  Certificate of  Incorporation to combine
  Class A Common Stock and Class B
  Common Stock into one class of
  Common Stock ................................... 143,248,878            102,642             27,738

Approval of The CIT Group, Inc.
  Long-Term Equity Compensation Plan ............. 134,893,586          8,419,320             66,352

Approval of The CIT Group, Inc.
  Transition Option Plan ......................... 139,349,976          3,966,644             62,638

Approval of the Amendment to The CIT
  Group, Inc. Employee Stock Purchase Plan ....... 142,961,387            351,508             66,363
</TABLE>


                                       12
<PAGE>

                                     PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

      The following  table sets forth the high and low last reported sale prices
for the Common Stock for the periods indicated.

<TABLE>
<CAPTION>
                                                       1999                     1998                      1997
                                               ---------------------     ------------------       --------------------
Common Stock Prices                              High        Low           High       Low           High         Low
-------------------                            ---------   ---------     ---------  --------      ---------    -------
<S>                                            <C>         <C>           <C>       <C>            <C>         <C>
First Quarter ................................ $33 7/16    $27 5/8       $33        $29 7/16            --         --
Second Quarter ............................... $33 13/16   $27 9/16      $37 1/2    $31 1/4             --         --
Third Quarter ................................ $29 5/8     $20 1/16      $36 1/4    $25 3/8             --         --
Fourth Quarter ............................... $25 3/8     $17 13/16     $31 13/16  $19 1/8        $32 5/8    $29 3/4
</TABLE>

      Our Common  Stock was priced at $27.00 per share in our IPO and was listed
on the New York Stock Exchange on November 13, 1997.

      Below are the dividends paid during the past two years:

                                                      1999           1998
                                                   ----------     ----------
      Dividends Paid                               (per share)    (per share)
      -------------                                ----------     ----------
      First Quarter ..............................   $0.10          $   *
      Second Quarter .............................    0.10           0.10
      Third Quarter ..............................    0.10           0.10
      Fourth Quarter .............................    0.10           0.10
                                                     -----          -----
        Year .....................................   $0.40          $0.30
                                                     =====          =====

----------
*     No dividends were paid to holders of the Common Stock.

      The declaration and payment of dividends by us is evaluated  quarterly and
is subject to the  discretion  of the Board of  Directors.  As of March 2, 2000,
there were  31,378  stockholders  of CIT,  including  both  record  holders  and
individual participants holding through a registered clearing agency.


                                       13
<PAGE>

Item 6. Selected Financial Data

      The following tables set forth selected consolidated financial information
regarding our results of operations and balance sheet.  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  Item  8.  Financial
Statements and Supplementary Data.

<TABLE>
<CAPTION>
                                                                Years Ended December 31,
                                           -------------------------------------------------------------------
                                             1999           1998            1997           1996          1995
                                             ----           ----            ----           ----          ----
                                                        Dollars in Millions, except per share data
<S>                                        <C>            <C>            <C>              <C>           <C>
Results of Operations
Net finance income .....................   $1,272.5       $  974.3       $  887.5         $797.9        $697.7
Net finance margin .....................      917.4          804.8          740.7          676.2         618.0
Operating revenue ......................    1,268.2        1,060.2        1,046.5(1)       920.3         802.7
Salaries and general operating
   expenses ............................      516.0          407.7          420.0          385.3         338.3
Provision for credit losses ............      110.3           99.4          113.7          111.4          91.9
Goodwill amortization ..................       25.7           10.1            8.4            7.8           7.4
Net income .............................      389.4          338.8          310.1          260.1         225.3
Net income per diluted share ...........       2.22           2.08           1.95           1.64          1.43
</TABLE>

<TABLE>
<CAPTION>
                                                                     At December 31,
                                           -------------------------------------------------------------------
                                            1999           1998            1997           1996          1995
                                            ----           ----            ----           ----          ----
                                                                    Dollars in Millions
<S>                                       <C>            <C>            <C>            <C>           <C>
Balance Sheet Data
Finance receivables:
  Commercial ...........................  $27,119.2      $15,589.1      $14,054.9      $13,757.6     $13,451.5
  Consumer .............................    3,887.9        4,266.9        3,664.8        3,239.0       2,344.0
                                          ---------      ---------      ---------      ---------     ---------
Total finance receivables ..............  $31,007.1      $19,856.0      $17,719.7      $16,996.6     $15,795.5
Reserve for credit losses ..............      446.9          263.7          235.6          220.8         206.0
Operating lease equipment, net .........    6,125.9        2,774.1        1,905.6        1,402.1       1,113.0
Goodwill ...............................    1,850.5          216.5          134.6          129.5         137.3
Total assets ...........................   45,081.1       24,303.1       20,464.1       18,932.5      17,420.3
Commercial paper .......................    8,974.0        6,144.1        5,559.6        5,827.0       6,105.6
Variable rate senior notes .............    7,147.2        4,275.0        2,861.5        3,717.5       3,827.5
Fixed rate senior notes ................   19,052.3        8,032.3        6,593.8        4,761.2       3,337.0
Subordinated fixed rate notes ..........      200.0          200.0          300.0          300.0         300.0
Company-obligated mandatorily
   redeemable preferred securities of
   subsidiary trust holding solely
   debentures of the Company ...........      250.0          250.0          250.0             --            --
Stockholders' equity ...................    5,554.4        2,701.6        2,432.9        2,075.4       1,914.2
--------------------------------------------------------------------------------------------------------------
</TABLE>

(1)   Includes a 1997 gain of $58.0  million  on the sale of an equity  interest
      acquired in connection with a loan workout.


                                       14
<PAGE>

<TABLE>
<CAPTION>
                                                            At or for the Years Ended December 31,
                                                ----------------------------------------------------------------
                                                 1999            1998          1997           1996         1995
                                                 ----            ----          ----           ----         ----
<S>                                          <C>           <C>            <C>            <C>          <C>
Selected Data and Ratios

Profitability
Net finance income as a percentage
   of average earning
   assets ("AEA")(1) ...................         4.97%          4.75%          4.87%          4.82%        4.54%
Net finance margin as
   a percentage of AEA .................         3.59%          3.93%          4.06%          4.09%        4.02%
Return on average
   stockholders' equity ................         12.0%          13.2%          14.0%(4)       13.0%        12.1%
Return on AEA (1) ......................         1.52%          1.65%          1.70%(4)       1.57%        1.46%
Ratio of earnings to fixed charges .....         1.45x          1.49x          1.51x          1.49x        1.44x
Salaries and general
   operating expenses (excludes
   goodwill amortization)
   as a percentage of average
   managed assets ("AMA")(2) ...........         1.75%          1.78%          2.11%(4)       2.18%        2.12%
Efficiency ratio (excluding
   goodwill amortization)(3) ...........         41.3%          39.2%          40.8%(4)       41.9%        42.1%

Credit Quality
60+ days contractual delinquency
   as a percentage of finance
   receivables .........................         2.71%          1.75%          1.67%          1.72%        1.67%
Net credit losses as a percentage
   of average finance receivables ......         0.42%          0.42%          0.59%          0.62%        0.50%
Reserve for credit losses as a percentage
   of finance receivables ..............         1.44%          1.33%          1.33%          1.30%        1.30%

Leverage
Total debt (net of overnight deposits)
   to stockholders' equity and
   Company-obligated  mandatorily
   redeemable preferred securities
   of subsidiary trust holding solely
   debentures of the Company ...........         5.96x          6.32x          5.71x          7.04x         7.09x
Tangible stockholders' equity(5)
   to managed assets ...................          7.8%          10.4%          11.4%           9.7%          9.9%

Other
Total managed assets
   (dollars in millions)(6) ............    $50,433.3      $26,216.3      $22,344.9      $20,005.4     $17,978.6
Employees ..............................        8,255          3,230          3,025          2,950         2,750
</TABLE>

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

(1)   "AEA" means the average of finance receivables, operating lease equipment,
      finance  receivables  held for sale and certain  investments,  less credit
      balances of factoring clients.

(2)   "AMA" means average earning assets plus the average of finance receivables
      previously securitized and currently managed by us.

(3)   Efficiency  ratio  reflects  the ratio of salaries  and general  operating
      expenses  to the  sum of  operating  revenue  less  minority  interest  in
      subsidiary trust holding solely debentures of the Company.

(4)   Excluding  a gain of  $58.0  million  on the  sale of an  equity  interest
      acquired in a loan workout and certain nonrecurring expenses, for the year
      ended  December 31, 1997, (i) the return on average  stockholders'  equity
      would have been 13.1%, (ii) the return on AEA would have been 1.58%, (iii)
      the  efficiency  ratio would have been 41.1% and (iv) salaries and general
      operating expenses as a percentage of AMA would have been 2.01%.

(5)   Tangible  stockholders'  equity  excludes  goodwill and  Company-obligated
      mandatorily  redeemable  preferred  securities of subsidiary trust holding
      solely debentures of the Company.

(6)   "Managed  assets"  include  (i)  financing  and  leasing  assets  and (ii)
      off-balance sheet finance receivables previously securitized and currently
      managed by us.


                                       15
<PAGE>

Item 7. Management's  Discussion and Analysis of Financial Condition and Results
of Operations
and
Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Overview

      For the year  ended  December  31,  1999,  our net income  totaled  $389.4
million,  increasing from $338.8 million in 1998 and $310.1 million in 1997. The
1999 earnings  represented the twelfth consecutive  increase in annual earnings,
and the ninth  consecutive  year of record  earnings.  The 1999 results  reflect
continued growth in the commercial and equipment finance  portfolios,  solid fee
generation, improved consumer business profitability and continued strong credit
quality.  Current year net income also includes earnings of $7.5 million for the
former Newcourt  operations from the November 15, 1999  acquisition date through
December 31, 1999.  The  improvements  in 1998 over 1997  resulted from stronger
revenues from a higher level of financing and leasing assets,  lower  commercial
credit losses and improvements in operating efficiency.

      The following table summarizes our net income and related data,  excluding
the 1997 special items.

                                                    Years Ended December 31,
                                                   --------------------------
                                                   1999       1998       1997
                                                   ----       ----       ----

Net income (dollars in millions) ..............   $389.4     $338.8    $287.5
Earnings per diluted share (EPS) ..............   $ 2.22     $ 2.08    $ 1.81
Return on average stockholders' equity (ROE) ..     12.0%      13.2%     13.1%
Return on average earning assets (ROA) ........     1.52%      1.65%     1.58%

      The 1997 earnings  included a one-time  $58.0  million  pretax gain on the
sale of an  equity  interest  acquired  in a loan  workout  partially  offset by
certain  non-recurring  expenses  principally related to our 1997 fourth quarter
IPO.  Including these special items, net income was $310.1 million,  with EPS of
$1.95, ROE of 14.0% and ROA of 1.70%.

      Managed assets  totaled $50.4 billion in 1999,  $26.2 billion in 1998, and
$22.3 billion in 1997.  The 1999 increase of 92.4% over 1998 reflects  primarily
the acquisition of over $20 billion in Newcourt managed assets in late 1999. The
remainder of the increase  reflects strong new business volume and two strategic
factoring  purchases  in the  Commercial  Finance  segment,  offset by a drop in
consumer  assets due to our decision to  discontinue  certain  product lines and
liquidate our recreational boat and wholesale inventory finance portfolios.  The
1998  increase  of 17.3%  over 1997 was  principally  due to  record  internally
generated new business,  with strong  performance  across all 1998 CIT segments.
See "Financing and Leasing Assets" for additional information.

Net Finance Income and Margin

      We earn finance income on the loans and leases we provide to our borrowers
and equipment  users.  The interest expense is the cost to us of borrowing funds
used to make loans and purchase  equipment to lease to customers.  The excess of
finance income over interest  expense is "net finance  income."  During 1999 our
net finance  income as a percentage  of AEA  increased  significantly,  due to a
higher level of operating leases in 1999. Considering this growing proportion of
operating leases in the portfolio,  we believe that a more meaningful measure of
profitability is finance income after  depreciation on operating lease equipment
or "net finance margin."


                                       16
<PAGE>

      A comparison of the  components of 1999,  1998 and 1997 net finance income
and net finance margin is set forth below.

<TABLE>
<CAPTION>
                                                    Years Ended December 31,
                                            -----------------------------------------
                                              1999             1998            1997
                                              ----             ----            ----
                                                       Dollars in Millions
<S>                                         <C>             <C>             <C>
Finance income ..........................   $ 2,565.9       $ 2,015.1       $ 1,824.7
Interest expense ........................     1,293.4         1,040.8           937.2
                                            ---------       ---------       ---------
Net finance income ......................     1,272.5           974.3           887.5
Depreciation on operating lease equipment       355.1           169.5           146.8
                                            ---------       ---------       ---------
Net finance margin ......................   $   917.4       $   804.8       $   740.7
                                            =========       =========       =========
Average Earning Assets ("AEA") ..........   $25,583.0       $20,495.8       $18,224.5
Net finance income as a % of AEA ........        4.97%           4.75%           4.87%
Net finance margin as a % of AEA ........        3.59%           3.93%           4.06%
</TABLE>

      Net finance  margin  increased  14.0% in 1999 from 1998,  and 8.6% in 1998
from 1997.  The  increases  primarily  reflect  growth in our loans,  leases and
operating  leases.  As a percentage of AEA, net finance  margin was 3.59% versus
3.93% and 4.06% in 1998 and 1997,  respectively.  This downward three year trend
primarily  reflects the growing  operating  leasing business which generally has
lower net finance  margins than finance  receivables,  but which also  generates
equipment gains, renewal fees and tax depreciation benefits.

      Finance income totaled $2,565.9 million in 1999,  $2,015.1 million in 1998
and $1,824.7 million in 1997. As a percentage of AEA (excluding  interest income
related to short-term  interest-bearing  deposits),  finance income was 9.88% in
1999,  9.69% in 1998 and 9.92% in 1997.  The increase in yield in 1999 reflected
primarily  changes  in  product  mix,  while  the  decline  in yield in 1998 was
principally  due to the 1998  decline  in market  interest  rates and the highly
competitive marketplace.

      Interest  expense totaled  $1,293.4  million in 1999,  $1,040.8 million in
1998 and $937.2  million  in 1997.  As a  percentage  of AEA,  interest  expense
(excluding  interest  relating  to  short-term   interest-bearing  deposits  and
dividends related to preferred  capital  securities) was 4.91% in 1999, 4.94% in
1998  and  5.05% in 1997,  reflecting  lower  market  interest  rates.  Although
interest  expense  as a  percentage  of AEA for the full year 1999 was below the
prior year,  interest rates escalated during the latter part of 1999. See Note 7
-- "Debt" for further information  regarding interest rates during and as of the
years  ended 1999,  1998 and 1997.  We seek to  mitigate  interest  rate risk by
matching the repricing characteristics of our assets with our liabilities, which
is in part done through the use of derivative financial instruments, principally
interest rate swaps. For further discussion, see "Market Risk Management."

      The operating  equipment  lease portfolio was $6.1 billion at December 31,
1999 versus $2.8  billion and $1.9 billion at December 31, 1998 and December 31,
1997, respectively.  As a result,  depreciation on operating lease equipment was
$355.1  million in 1999,  versus $169.5  million and $146.8  million in 1998 and
1997,  respectively.  As a percentage of average operating leases,  depreciation
was 9.51%, 7.66%, and 10.04% in 1999, 1998 and 1997, respectively.  The increase
in 1999 over 1998 reflects the impact of the former  Newcourt  portfolio,  which
includes  smaller ticket and shorter term assets than the existing CIT business.
This mitigates the impact of an increasing proportion of airline and rail assets
with longer  depreciable lives from 1997 to 1999 in the Equipment  Financing and
Leasing  segment.  See "Financing and Leasing Assets" for further  discussion on
growth of our operating lease portfolio.


                                       17
<PAGE>

Fees and Other Income

      Fees and other income  improved to $350.8 million during 1999, from $255.4
million during 1998 and $247.8 million during 1997 as set forth in the following
table.

                                                      Years Ended December 31,
                                                     -------------------------
                                                     1999      1998      1997
                                                     ----      ----      ----
                                                         Dollars in Millions
Factoring commissions ............................. $118.7   $ 95.7    $ 95.2
Fees and other income .............................  161.0     90.7      73.8
Gains on sales of leasing equipment ...............   56.4     45.2      30.1
Gains on securitizations ..........................   14.7     12.5      32.0
Gains on sales of venture capital investments .....     --     11.3      16.7
                                                     -----     ----    ------
                                                    $350.8   $255.4    $247.8
                                                    ======   ======    ======

      The 1999 increase reflects primarily an increase in factoring commissions,
due in part to the two  acquisitions  completed during the year, and syndication
fees (in fees and  other  income)  from the  Newcourt  acquisition.  The  former
Newcourt operations contributed $49.3 million in total fees and other income for
the period from the acquisition date through December 31, 1999. Included in fees
and other income are gains  recognized by increased sales of receivables  ($38.2
million in 1999 and $6.1 million in 1998). Total fees and other income increased
in 1998 from 1997  primarily due to higher fees from  servicing  and  commercial
businesses and improved gains on the sale of equipment coming off lease,  offset
by lower gains on  securitizations.  We expect this trend of increasing fees and
other income to continue in the future given the higher  proportion of fee-based
business within the former Newcourt and factoring businesses.

1997 Gain On Sale of Equity Interest Acquired in Loan Workout

      We  originated a loan in the 1980's to a  telecommunications  company that
subsequently went into default.  Pursuant to a workout  agreement,  the stock of
that company was  transferred  to us and a co-lender.  In 1991,  we received all
amounts due and retained an equity interest in such telecommunications  company,
which we sold in the second quarter of 1997 at a pretax gain of $58.0 million.

Salaries and General Operating Expenses

      Salaries  and general  operating  expenses  were  $516.0  million in 1999,
$407.7 million in 1998, and $420.0 million in 1997.  During 1999, core operating
expense growth was modest due to consumer business productivity improvements and
increased use of electronic  data exchange in our factoring  business.  However,
expenses increased in 1999 due to the Newcourt and factoring  acquisitions.  The
largest portion of this increase was in employee costs and facilities  expenses.
The 1997  expenses  included  a $10.0  million  pretax  charge  relating  to the
termination  of a long-term  incentive plan in connection  with the IPO,  higher
performance based incentive  accruals,  and a provision for vacant leased space.
Without these items,  1997 salaries and general  operating  expenses  would have
been $400.0 million.

      Our personnel  increased to approximately  8,255 at December 31, 1999 from
3,230 at December 31, 1998 and 3,025 at December 31, 1997,  primarily reflecting
the late 1999 Newcourt acquisition.

      We manage expenditures using a comprehensive  budgetary process.  Expenses
are monitored  closely by business unit management and are reviewed monthly with
our senior management.  To ensure overall project cost control,  an approval and
review procedure is in place for major capital  expenditures,  such as purchases
of computer equipment, including post-implementation evaluations.

      Management  monitors  productivity via the analysis of an efficiency ratio
and the  ratio  of  salaries  and  general  operating  expenses  to AMA.  AMA is
comprised  of average  earning  assets plus the  average of finance  receivables
previously  securitized  and currently  managed by us. These  ratios,  excluding
goodwill  amortization  and the 1997  non-recurring  pretax  gain  and  expenses
previously described, are set forth in the following table.

<TABLE>
<CAPTION>
                                                           Years Ended December 31,
                                                          -------------------------
                                                          1999      1998      1997
                                                          ----      ----      ----
<S>                                                      <C>       <C>       <C>
Efficiency ratio .................................       41.3%     39.2%     41.1%
Salaries and general operating expenses as a
  percentage of AMA ..............................       1.75%     1.78%     2.01%
</TABLE>


                                       18
<PAGE>

      The 1999  efficiency  ratio  includes  the  results of  Newcourt  from the
November 15, 1999 acquisition date through year-end. Newcourt's efficiency ratio
has historically been significantly  higher than CIT's. The deterioration in the
efficiency  ratio  in  1999  from  1998  reflects  the  impact  of the  Newcourt
acquisition,  as integration  cost savings are not expected to be fully realized
until the latter part of year 2000 and beyond. As the former Newcourt operations
results are only  included for the period from November 15, 1999 to December 31,
1999,  the expense  ratio will likely  increase in the near term before  expense
savings and efficiency enhancements take effect.

      In connection  with the  acquisition,  we established an integration  plan
which identified  activities that would not continue and the associated costs of
exiting those activities.  The plan identified areas for adjusting the amount of
real estate required including the closing of the Newcourt corporate location in
New Jersey,  reducing corporate office space in Toronto,  Canada and eliminating
various other operating  locations  throughout the United States and Canada. The
plan also  outlined that  approximately  850  employees  would be  involuntarily
terminated.   Further,   additional   restructuring   activities,   which   were
contemplated in our overall integration plan, may occur in the year 2000.

Goodwill Amortization

      Goodwill  amortization  was $25.7 million in 1999 versus $10.1 million and
$8.4  million in 1998 and 1997,  respectively.  This trend  reflects the partial
year impact of the 1999 acquisitions of Newcourt,  Heller and Congress,  each of
which were accounted for under the purchase method.

Reserve and Provision for Credit Losses/Credit Quality

      Our  consolidated  reserve for credit losses  increased to $446.9  million
(1.44% of finance receivables) at December 31, 1999, from $263.7 million (1.33%)
at December 31, 1998 and $235.6  million  (1.33%) at December 31, 1997. The 1999
increases in amount and percentage  primarily reflect the Newcourt  acquisition.
The acquired  Newcourt  portfolio had a higher  reserve  percentage  than CIT's,
commensurate with its higher past due loan and charge-off  profile.  The reserve
increases in 1998 and 1997 reflect  growth in finance  receivables in each year.
The ratio of the consolidated  reserve for credit losses to non-accrual  finance
receivables was 87.6% at year end 1999.

      Our  consolidated  reserve for credit losses is periodically  reviewed for
adequacy considering  economic conditions,  collateral values and credit quality
indicators,  including  charge-off  experience  and levels of past due loans and
non-performing assets. It is management's judgment that the consolidated reserve
for credit losses is adequate to provide for potential credit losses.  We review
finance receivables  periodically to determine the probability of loss, and take
charge-offs after considering such factors as the obligor's  financial condition
and the value of underlying collateral and guarantees. Automatic charge-offs are
recorded on consumer finance  receivables at intervals  beginning at 180 days of
contractual  delinquency,  based upon historical loss severity. The consolidated
reserve for credit  losses is intended  to provide for future  events,  which by
their nature are uncertain.  Therefore,  changes in economic conditions or other
events affecting  specific  obligors or industries may necessitate  additions or
deductions to the consolidated reserve for credit losses.

      The provision for credit losses was $110.3 million for 1999, $99.4 million
for 1998, and $113.7 million for 1997.  Net  charge-offs  were $95.0 million for
1999,  $78.8 million for 1998,  and $101.0  million for 1997. Our net charge-off
experience is provided in the following table.

                                                    Years Ended December 31,
                                                    ------------------------
                                                     1999     1998    1997
                                                     ----     ----    ----
Net credit  losses as a  percentage  of average
  finance  receivables  excluding
  finance receivables held for sale:
Equipment Financing and Leasing ...............      0.16%   0.18%   0.50%
Commercial Finance ............................      0.47%   0.31%   0.41%
Consumer ......................................      1.19%   1.18%   1.09%
                                                     ----    ----    ----
  Total .......................................      0.42%   0.42%   0.59%
                                                     ====    ====    ====


                                       19
<PAGE>

      Charge-offs  of the acquired  Newcourt  portfolio  have been  historically
higher as a percentage of average finance  receivables  than CIT's experience as
shown  above.  Accordingly,  charge-offs  as a  percentage  of  average  finance
receivables will increase in the short term.

      The decrease in our Equipment  Financing and Leasing  segment's net credit
losses  reflects  continued  improvement  in credit quality in our portfolio and
sustained  strength  of the  United  States  economy.  The three  year  trend in
Commercial Finance net credit losses reflects unusually high recoveries in 1998.
As a percentage  of average  managed  finance  receivables,  consumer net credit
losses were 1.03% for 1999, 0.92% for 1998, and 0.91% for 1997.

Past Due and Non-performing Assets

      The following table sets forth certain information concerning our past due
and non-performing  assets (and the related percentages of finance  receivables)
at December 31, 1999, 1998 and 1997. The amounts and ratios below do not reflect
various  portfolio  transfers between the former Newcourt business units and the
Equipment Financing and Leasing segment.

<TABLE>
<CAPTION>
                                                                            At December 31,
                                                     -------------------------------------------------------------
                                                            1999                  1998                  1997
                                                     -----------------      ----------------      ----------------
                                                                          Dollars in Millions
<S>                                                   <C>        <C>        <C>        <C>        <C>         <C>
Finance receivables, past due 60 days or more:
  Equipment Financing and Leasing ..............      $209.6     1.93%      $149.9     1.41%      $127.3      1.30%
  Newcourt .....................................       376.4     4.15%          --       --           --        --
  Commercial Finance ...........................        64.0     0.91%        32.1     0.64%        41.6      0.98%
  Consumer .....................................       189.1(1)  4.62%(1)    166.0     3.89%       127.7      3.48%
                                                      ------     -----      ------     ----       ------      ----
    Total ......................................      $839.1     2.71%      $348.0     1.75%      $296.6      1.67%
                                                      ======     ====       ======     ====       ======      ====

Non-performing assets:
  Equipment Financing and Leasing ..............      $139.9     1.29%      $135.2     1.27%      $ 81.6      0.83%
  Newcourt .....................................       309.4     3.41%          --       --          --         --
  Commercial Finance ...........................        27.6     0.39%        14.5     0.29%        23.9      0.56%
  Consumer .....................................       158.5(1)  3.87%(1)    129.0     3.02%       101.9      2.78%
                                                      ------     -----      ------     ----       ------      ----
    Total ......................................      $635.4     2.05%      $278.7     1.40%      $207.4      1.17%
                                                      ======     ====       ======     ====       ======      ====
-------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)   For these calculations,  certain finance receivables held for sale and the
      associated past due and non-performing balances are included.

      Non-performing  assets  reflect both finance  receivables  on  non-accrual
status and assets received in satisfaction of loans.

      The increase in our overall delinquency and non-performing asset ratio was
in a large part due to the  acquired  Newcourt  portfolios  which carry a higher
level of delinquency and non-performing assets. In 1999, Equipment Financing and
Leasing  past  due  loans  increased,  however  non-performing  assets  remained
relatively stable at 1.29%. The increase in 1999 Equipment Financing and Leasing
past dues included three commercial  aircraft that became past due in the fourth
quarter.  We  believe  the  carrying  values  are  adequately  supported  by the
underlying aircraft collateral.

      The 1999  increase in Consumer  delinquencies  and  non-performing  assets
reflects increases in the manufactured  housing portfolio,  whereas the increase
in Consumer  delinquencies and non-performing assets from 1997 to 1998 primarily
relates to the seasoning of home equity receivables and the growth and expansion
of the  wholesale  inventory  financing  product  line.  During 1998,  Equipment
Financing  and Leasing  non-performing  assets  increased to a more normal level
from the particularly low 1997 year-end balance.

Income Taxes

      The  provision  for  federal,  state and local and  foreign  income  taxes
totaled $207.6 million in 1999, compared with $185.0 million in 1998, and $178.0
million  in 1997.  The  effective  income tax rate for 1999  declined  to 34.8%,
compared with 35.3% in 1998,  and 36.5% in 1997,  primarily as a result of lower
state and local taxes.


                                       20
<PAGE>

Results by Business Segment

      Net income for 1999  improved  $50.6 million or 14.9% from 1998, as all of
our original business segments improved from 1998. Both the Equipment  Financing
and Leasing and Commercial  Finance  segments  improved  approximately  19% from
1998, due to the  continuation  of strong asset growth.  The Commercial  Finance
segment  results  also  reflected  the Heller  and  Congress  acquisitions.  The
Consumer segment earnings grew by 35% and benefited from improved efficiency and
gains on receivable  sales.  The increased  corporate  expense in 1999 over 1998
included higher goodwill amortization, higher corporate interest expense and the
absence of venture capital investment gains.

      The 1998 net income  improved  $28.7  million,  or 9.3% from 1997,  as the
18.7% earnings  improvement in the Equipment  Financing and Leasing  segment was
mitigated by the more modest earnings  growth of 5.6% in the Commercial  Finance
segment and a $5.3  million  reduction  in net income from the prior year in the
Consumer segment  reflecting higher net credit losses.  See Note 22 -- "Business
Segment Information" for summarized segment financial data.

Financing and Leasing Assets

      Our managed assets grew $24.2 billion (92.4%),  of which $21.4 billion was
acquired in the Newcourt acquisition, to $50.4 billion in 1999, and $3.9 billion
(17.3%) to $26.2  billion  in 1998.  Financing  and  leasing  assets  grew $16.7
billion (70.4%) to $40.4 billion in 1999, and grew $3.7 billion (18.7%) to $23.7
billion in 1998.  Managed assets include  finance  receivables,  operating lease
equipment,  finance receivables held for sale, certain investments,  and finance
receivables  previously  securitized and still managed by us. In connection with
the Newcourt  acquisition and business  integration,  certain  receivables  were
transferred at December 31, 1999 between  Vendor  Technology  Finance  (formerly
Newcourt  Financial)  and  Equipment  Financing,  and  from  Structured  Finance
(formerly Newcourt Capital) to Capital Finance.


                                       21
<PAGE>

      The  managed  assets  of  our  business  segments  and  the  corresponding
strategic  business  units are presented in the following  table,  including the
transfers between business units.

<TABLE>
<CAPTION>
                                                    At December 31,                     % Change
                                         ---------------------------------      -------------------------
                                            1999        1998        1997        '99 vs. '98    '98 vs.'97
                                            ----        ----        ----        -----------    ----------
                                                Dollars in Millions
<S>                                      <C>         <C>         <C>               <C>            <C>
Equipment Financing:
  Finance receivables (1) ..........     $10,899.3   $ 8,497.6   $ 7,403.4         28.3%          14.8%
  Operating lease equipment, net (2)       1,066.2       765.1       623.8         39.4%          22.7%
                                         ---------   ---------   ---------         ----           ----
    Total ..........................      11,965.5     9,262.7     8,027.2         29.2%          15.4%
                                         ---------   ---------   ---------         ----           ----
Capital Finance:
  Finance receivables (1) ..........       1,838.0     1,655.4     1,755.5         11.0%          (5.7)%
  Operating lease equipment, net ...       2,931.8     1,982.0     1,251.8         47.9%          58.3%
  Liquidating portfolio (3) (4) ....         281.4       466.9       675.2        (39.7)%        (30.9)%
                                         ---------   ---------   ---------         ----           ----
    Total ..........................       5,051.2     4,104.3     3,682.5         23.1%          11.5%
                                         ---------   ---------   ---------         ----           ----
  Total Equipment Financing
    and Leasing Segment ............      17,016.7    13,367.0    11,709.7         27.3%          14.2%
                                         ---------   ---------   ---------         ----           ----
Vendor Technology Finance:
  Finance receivables (1) ..........       7,488.9          --          --           --             --
  Operating lease equipment, net (2)       2,108.8          --          --           --             --
                                         ---------   ---------   ---------         ----           ----
    Total ..........................       9,597.7          --          --           --             --
                                         ---------   ---------   ---------         ----           ----
Structured Finance
  Finance receivables (1) ..........       1,933.9          --          --           --             --
                                         ---------   ---------   ---------         ----           ----
  Total Newcourt Segment ...........      11,531.6          --          --           --             --
                                         ---------   ---------   ---------         ----           ----
Commercial Services ................       4,165.1     2,481.8     2,113.1         67.8%          17.4%
Business Credit ....................       2,837.0     2,514.4     2,137.7         12.8%          17.6%
                                         ---------   ---------   ---------         ----           ----
  Total Commercial
     Finance Segment ...............       7,002.1     4,996.2     4,250.8         40.1%          17.5%
                                         ---------   ---------   ---------         ----           ----
  Total Commercial Segments ........      35,550.4    18,363.2    15,960.5         93.6%          15.1%
                                         ---------   ---------   ---------         ----           ----
Home equity ........................       2,215.4     2,244.4     1,992.3         (1.3)%         12.7%
Manufactured housing ...............       1,666.9     1,417.5     1,125.7         17.6%          25.9%
Recreational vehicles ..............         361.2       744.0       501.9        (51.5)%         48.2%
Liquidating portfolio (5) ..........         462.8       848.4       313.1        (45.5)%        171.0%
                                         ---------   ---------   ---------         ----           ----
  Total Consumer Segment ..........       4,706.3     5,254.3     3,933.0        (10.4)%         33.6%
                                         ---------   ---------   ---------         ----           ----
  Other - Equity Investments .......         137.3        81.9        65.8         67.6%          24.5%
                                         ---------   ---------   ---------         ----           ----
  Total Financing and Leasing
     Portfolio Assets ..............      40,394.0    23,699.4    19,959.3         70.4%          18.7%
                                         ---------   ---------   ---------         ----           ----
Finance receivables previously
   securitized:
  Commercial .......................       7,471.5          --          --           --             --
  Consumer .........................       2,567.8     2,516.9     2,385.6          2.0%           5.5%
                                         ---------   ---------   ---------         ----           ----
  Total ............................      10,039.3     2,516.9     2,385.6        298.9%           5.5%
                                         ---------   ---------   ---------         ----           ----
  Total Managed Assets .............     $50,433.3   $26,216.3   $22,344.9         92.4%          17.3%
                                         =========   =========   =========         ====           ====
-------------------------------------------------------------------------------------------------------
</TABLE>

(1)   At  December  31,  1999,  finance  receivables  of $2,149.4  million  were
      transferred  to Equipment  Financing  from Vendor  Technology  Finance and
      $229.4  million  were  transferred  to  Vendor  Technology   Finance  from
      Equipment Financing.  Additionally,  $231.3 million of finance receivables
      were transferred to Capital Finance from Structured Finance.

(2)   At December 31, 1999, net operating  lease equipment of $208.4 million was
      transferred to Equipment Financing from Vendor Technology Finance and $4.4
      million  was  transferred  to Vendor  Technology  Finance  from  Equipment
      Financing.

(3)   Consists  primarily  of ocean  going  maritime  and  project  finance.  We
      discontinued marketing to these sectors in 1997.

(4)   Operating lease equipment,  net, of $19.1 million, $27.0 million and $30.0
      million are included in the  liquidating  portfolio  for 1999,  1998,  and
      1997, respectively.

(5)   In 1999,  we  decided to exit the  recreational  boat and  wholesale  loan
      product  lines.  Prior year balances  have been  conformed to current year
      presentation.


                                       22
<PAGE>

      Based on strong new business volume plus the Newcourt  acquisition,  which
added $21.4 billion in managed  assets,  and the Heller and Congress  purchases,
the Commercial  segments'  managed assets grew by $24.7 billion in 1999 to $43.0
billion in 1999.  Including the Heller and Congress  purchases,  the  Commercial
Finance  segment  grew  40.1%  from  1998 to  1999.  Excluding  the  liquidating
portfolio and the transfers between business units, the Equipment  Financing and
Leasing segment grew 11.4% in 1999.  Total  commercial  segments grew 15.1% from
1997 to 1998. Growth in finance  receivables was principally due to increases in
transportation,  construction and the purchase of a  telecommunications  leasing
portfolio.

      Consumer  managed  assets  decreased  to $7.3  billion  in 1999  from $7.8
billion  in 1998.  This  decrease  reflects  the  whole  loan  sales of  certain
receivables  and our decision to exit two product lines,  recreational  boat and
wholesale  financing,  to  concentrate  on our remaining  core consumer  product
lines. The Consumer segment managed assets grew 23.0% in 1998, reflecting strong
home equity originations and strong growth in new business volume,  particularly
in recreational vehicle financing.

Concentrations

Financing and Leasing Assets Composition

      Our ten largest  financing  and leasing  asset  accounts in the  aggregate
represented 3.7% of our total financing and leasing assets at December 31, 1999,
and 4.5% at December 31, 1998.  All ten accounts  were  commercial  accounts and
were secured by equipment, accounts receivable and/or inventory.

Geographic Composition

      The following  table presents our financing and leasing assets by customer
location.

                                                At December 31,
                                   -----------------------------------------
                                          1999                  1998
                                   ------------------     ------------------
                                   Amount     Percent     Amount     Percent
                                   ------     -------     ------     -------
                                              Dollars in Millions

United States
  Northeast ..................   $ 8,145.1      20.2%   $ 5,143.9      21.7%
  West .......................     7,517.2      18.6      5,583.2      23.6
  Midwest ....................     6,966.8      17.2      4,895.3      20.7
  Southeast ..................     5,318.5      13.2      3,492.3      14.7
  Southwest ..................     4,387.0      10.9      2,993.3      12.6
                                 ---------      ----    ---------      ----
  Total United States ........    32,334.6      80.1     22,108.0      93.3
                                 ---------      ----    ---------      ----
Foreign
  Canada .....................     3,163.4       7.8        100.5       0.4
  All other ..................     4,896.0      12.1      1,490.9       6.3
                                 ---------      ----    ---------      ----
  Total ......................   $40,394.0     100.0%   $23,699.4     100.0%
                                 =========     =====    =========     =====

      Our managed asset geographic  diversity does not differ significantly from
our owned asset geographic diversity.

      Our  financing  and  leasing  asset  portfolio  in the  United  States  is
diversified  by state.  At December 31, 1999,  with the  exception of California
(10.1%),  Texas (7.7%), and New York (6.9%), no state represented more than 4.8%
of financing  and leasing  assets.  Our 1997 managed and owned asset  geographic
composition did not  significantly  differ from our 1998 managed and owned asset
geographic composition.

      Financing and leasing assets to foreign  obligors  totaled $8.1 billion at
December 31, 1999.  After Canada,  $3.2 billion  (7.83% of financing and leasing
assets),  the largest foreign  exposures were to England,  $1.6 billion (4.00%),
and  Australia,  $397.6  million  (0.98%).  Our remaining  foreign  exposure was
geographically dispersed, with no other individual country exposure greater than
0.77% of financing and leasing assets.

      At December 31, 1998,  financing  and leasing  assets to foreign  obligors
totaled  $1.6  billion.  The  largest  exposures  at  December  31, 1998 were to
obligors in Belgium, $142.4 million (0.60% of financing and leasing assets), and
France,   $136.4   million   (0.58%).   Our  remaining   foreign   exposure  was
geographically dispersed, with no other individual country exposure greater than
0.44%.


                                       23
<PAGE>

Industry Composition

      The following  table  presents our  financing and leasing  assets by major
industry class.

                                                      At December 31,
                                        ----------------------------------------
                                                1999                  1998
                                        ------------------    ------------------
                                        Amount     Percent    Amount     Percent
                                        ------     -------    ------     -------
                                                   Dollars in Millions

Manufacturing(1)
   (none greater than 4.2%) .......... $ 8,566.5    21.2%   $ 5,117.0    21.6%
Retail (2) ...........................   5,194.1    12.9      1,882.1     7.9
Transportation (3) ...................   3,348.2     8.3      1,777.6     7.5
Commercial airlines (4) ..............   3,091.2     7.7      2,325.4     9.8
Construction equipment ...............   2,697.0     6.7      1,947.4     8.2
Home mortgage ........................   2,215.4     5.5      2,244.4     9.5
Manufactured housing .................   1,666.9     4.1      1,417.5     6.0
Wholesaling ..........................   1,303.6     3.2        976.5     4.1
Financial institutions ...............   1,205.3     3.0        316.5     1.4
Other (none greater than 3.0%) .......  11,105.8    27.4      5,695.0    24.0
                                       ---------   -----     --------   -----
Total ................................ $40,394.0   100.0%   $23,699.4   100.0%
                                       =========   =====     ========   =====
--------------------------------------------------------------------------------
(1)   Includes manufacturers of steel and metal products,  textiles and apparel,
      printing and paper products, and other industries.

(2)   Includes  retailers  of apparel  (4.0%) and trade and  building  materials
      (3.5%), both increasing from 1998 due to 1999 acquisitions.

(3)   Includes rail, bus, and over-the-road  trucking  industries,  and business
      aircraft.

(4)   See  "Commercial  Airline  Industry"  for a discussion  of the  commercial
      airline portfolio.

      Our 1997  managed  and owned  asset  industry  composition  did not differ
significantly from our 1998 managed and owned asset industry composition.

Commercial Airline Industry

      Commercial airline financing and leasing assets totaled $3.1 billion (7.7%
of our total financing and leasing assets) and 264 aircraft at December 31, 1999
compared with $2.3 billion (9.8%) and 206 aircraft in 1998.  The  acquisition of
Newcourt increased our portfolio by approximately  $0.4 billion,  represented by
71  aircraft.  Our  portfolio  is secured by  commercial  aircraft  and  related
equipment.  From 1992 through  mid-1997,  we limited the growth of our aerospace
portfolio  due  to  weakness  in  the  commercial  airline  industry,   industry
overcapacity  and  declining  equipment  values.  In 1997,  we decided to resume
growing  the  aerospace  portfolio,  but will  continue  to monitor  this growth
relative to our total  financing and leasing  assets.  We continue to reduce our
Stage II exposure so that 97.6% of our  portfolio at December 31, 1999  consists
of Stage III aircraft  versus  96.6% at December  31, 1998.  All of our Stage II
aircraft are currently deployed outside the continental United States.

      We  continue to shift our  commercial  aircraft  product mix from  secured
financings  to operating  lease  equipment,  relying on our strong  industry and
equipment  management  and  remarketing  expertise  to  compete  effectively  in
commercial aircraft operating lease  transactions.  Operating lease transactions
accounted for 49.4% of the total  commercial  airline  portfolio  outstanding at
December 31, 1999,  47.1% at December 31, 1998,  and 39.6% at December 31, 1997.
During 1999,  we entered into  agreements  with both Airbus  Industries  and the
Boeing  Company to purchase a total of 40 aircraft,  for a total  commitment  of
approximately $2.0 billion, with options to acquire additional units. Deliveries
of these new  aircraft  are  scheduled  to take  place  over a five year  period
starting in the fourth quarter of 2000.

Risk Management

      Our business  activities contain various elements of risk. We consider the
principal  types of risk to be credit risk  (including  credit,  collateral  and
equipment risk) and market risk (including  interest rate,  foreign currency and
liquidity risk).

      We consider the  management of risk essential to conducting our commercial
and consumer businesses and to maintaining profitability.  Accordingly, our risk
management systems and procedures are designed to identify and analyze risks, to
set appropriate  policies and limits and to continually  monitor these risks and
limits by means of reliable  administrative  and  information  systems and other
policies and programs.


                                       24
<PAGE>

Credit Risk Management

      We have developed systems  specifically  designed to manage credit risk in
our Commercial and Consumer business segments. We evaluate financing and leasing
assets for credit and  collateral  risk during the credit  granting  process and
periodically after the advancement of funds.

      In response to our growing businesses,  a corporate credit risk management
group, which reports to the Chief Risk Officer, was formed in the fourth quarter
of 1999 to oversee and manage credit risk throughout CIT. This group's structure
includes senior credit  executive  alignment with each of the business units, as
well as a senior  executive  with  corporate-wide  asset  recovery  and work-out
responsibilities.   This  group   reviews   non-traditional   transactions   and
transactions which are outside of established target market definitions and risk
acceptance  criteria  or which  exceed  the  strategic  business  units'  credit
authority.  In addition,  an executive credit committee ("ECC"),  which includes
the Chairman and Chief  Executive  Officer,  the Chief Risk  Officer,  and three
members of the corporate credit risk management group, approves credits that are
beyond the authority of the business  units.  The credit risk  management  group
also includes an independent credit audit function, which previously was part of
our internal audit group.

      Each of our  strategic  business  units has  developed  and  implemented a
formal credit  management  process in accordance with formal uniform  guidelines
established by the credit risk management group. These guidelines set forth risk
acceptance criteria for:

o     Acceptable maximum credit line;

o     Selected target markets and products;

o     Creditworthiness  of  borrowers,   including  credit  history,   financial
      condition, adequacy of cash flow and quality of management; and

o     The type and value of  underlying  collateral  and  guarantees  (including
      recourse from dealers and manufacturers.)

      We also employ a risk adjusted  pricing process where the perceived credit
risk is a factor in  determining  the interest  rate and/or fees charged for our
financing and leasing products. As economic and market conditions change, credit
risk management  practices are reviewed and modified,  if necessary,  to seek to
minimize the risk of credit loss.

      For small ticket  business  originated  in our Vendor  Technology  Finance
business unit and the Consumer  segment,  we utilize  automated  credit  scoring
capabilities.  The Vendor Technology Finance  capability,  which was acquired in
the  Newcourt  purchase,  dates  back to the late  1980s.  In these  proprietary
models,  we utilize  statistical  techniques in analyzing  customer  attributes,
including  industry and corporate data, trade payment history,  and other credit
bureau  information.  Model scores are measured  against actual  delinquency and
loss experience. Modifications are made to the models based upon this monitoring
effort as appropriate.

      Compliance  with  established  corporate  policies and  procedures and the
credit management  processes at each strategic business unit are reviewed by the
credit audit group.  The credit audit group examines  adherence with established
credit  policies and procedures and tests for  inappropriate  credit  practices,
including  whether potential problem accounts are being detected and reported on
a timely basis.  The credit audit group reports to the Chief Risk Officer and to
the Audit Committee.

      Commercial. We have developed systems specifically designed to effectively
manage  credit risk in our  Commercial  segments.  The  process  starts with the
initial  evaluation  of credit  risk and  underlying  collateral  at the time of
origination  and continues over the life of the finance  receivable or operating
lease,  including  collecting  past  due  balances  and  liquidating  underlying
collateral.

      Credit  personnel of the  applicable  strategic  business unit review each
potential  borrower's financial  condition,  results of operations,  management,
industry,  customer base,  operations,  collateral and other data, such as third
party credit  reports,  to  thoroughly  evaluate the  customer's  borrowing  and
repayment  ability.  Borrowers are graded according to credit quality based upon
our uniform credit grading  system,  which grades both the borrower's  financial
condition  and the  underlying  collateral.  Credit  facilities  are  subject to
approval within our overall credit approval and underwriting  guidelines and are
issued commensurate with the credit evaluation performed on each borrower.


                                       25
<PAGE>

      We review and monitor credit exposures on an ongoing basis to identify, as
early  as  possible,   those  customers  that  may  be  experiencing   declining
creditworthiness  or  financial   difficulty,   and  periodically  evaluate  our
Commercial  segments' finance  receivables based upon credit criteria  developed
under our uniform credit grading system. We monitor  concentrations by borrower,
industry,  geographic region and equipment type and management adjusts limits as
conditions warrant to seek to minimize the risk of credit loss.

      Our Asset  Quality  Review  committee  is  comprised  of members of senior
management,   including   the   Chief   Risk   Officer,   the   Executive   Vice
President-Credit  Administration and the Chief Financial Officer.  Periodically,
this committee will meet with the Chairman and Chief Executive Officer of CIT to
review,  among  other  topics,  levels  of  geographic,  industry  and  customer
concentrations.  In  addition,  the  Committee  periodically  meets with  senior
executives of our strategic  business units and corporate credit risk management
group to review the status of financing and leasing assets greater than $500,000
to obligors with higher risk profiles.

      Consumer. For consumer loans, our management has developed and implemented
proprietary automated credit scoring models for each loan type that include both
customer demographics and credit bureau characteristics. The profiles emphasize,
among other things, occupancy status, length of residence, length of employment,
debt to income ratio (ratio of total  installment  debt and housing  expenses to
gross monthly income),  bank account  references,  credit bureau information and
combined  loan to  value  ratio.  The  models  are used to  assess  a  potential
borrower's  credit  standing  and  repayment  ability  considering  the value or
adequacy of property offered as collateral. Our credit criteria include reliance
on credit  scores,  including  those  based upon both our  proprietary  internal
credit scoring model and external credit bureau scoring, combined with judgment.
The credit scoring  models are regularly  reviewed for  effectiveness  utilizing
statistical  tools. We regularly evaluate the consumer loan portfolio using past
due,  vintage  curve and other  statistical  tools to analyze  trends and credit
performance by loan type, including analysis of specific credit  characteristics
and other selected subsets of the portfolios.  Adjustments to credit  scorecards
and lending programs are made when deemed appropriate.  Individual  underwriters
are assigned  credit  authority  based upon their  experience,  performance  and
understanding  of the  underwriting  policies  and  procedures  of our  consumer
operations  and  a  credit  approval   hierarchy   exists  to  ensure  that  all
applications  are  reviewed  by an  underwriter  with the  appropriate  level of
authority.

      See "Reserve and Provision for Credit Losses/Credit Quality".

Market Risk Management

      Market  risk  is the  risk of loss  arising  from  changes  in  values  of
financial  instruments  including  interest rate risk,  foreign  exchange  risk,
derivative  credit risk and liquidity  risk. We engage in  transactions,  in the
normal  course of  business,  that  expose us to  market  risks and we  maintain
management practices and policies designed to effectively mitigate such risks.

      Our Capital Committee sets policies, oversees and guides the interest rate
and currency risk management process,  including establishment and monitoring of
risk metrics,  and ensures the  implementation  of those  policies.  Other risks
monitored by the Capital Committee include  derivative credit risk and liquidity
risk.  The  Capital  Committee  is  comprised  of members  of senior  management
including the Chairman and Chief Executive Officer, the Chief Financial Officer,
the Treasurer,  and the  Controller.  Business unit executives also serve on the
Capital Committee on a rotational basis.

      We seek to preserve  company value by hedging  changes in future  expected
net cash flows and/or by decreasing the cost of capital. Strategies for managing
market  risks  associated  with changes in interest  rates and foreign  exchange
rates are an integral  part of the process,  since those  strategies  affect our
future expected cash flows as well as our cost of capital.

      Interest Rate and Foreign Exchange Risk Management.  We offer a variety of
financing  products to our customers  including fixed and floating rate loans of
various  maturities  and  currency  denominations,  and  a  variety  of  leases,
including  operating  leases.  Changes  in  market  interest  rates,  or in  the
relationships  between short-term and long-term market interest rates, or in the
relationships  between different  interest rate indices (i.e.,  basic risk), can
affect the interest rates charged on  interest-earning  assets  differently than
the interest rates paid on interest-bearing liabilities,  which can result in an
increase  in  interest  expense  relative  to finance  income.  We  measure  our
asset/liability  position in both economic  terms and by its periodic  effect on
earnings using maturity gap analysis and duration analysis.


                                       26
<PAGE>

      A matched position is generally  achieved through a combination of on- and
off-balance  sheet financial  instruments,  including the issuance of commercial
paper and medium and long-term debt,  interest rate and currency swaps,  foreign
exchange  contracts,  syndication  and  securitization.  We do not  speculate on
interest  rates and foreign  exchange  rates,  but rather  seek to mitigate  the
possible  impact of such rate  fluctuations  encountered in the normal course of
business.  This is an ongoing process due to prepayments,  refinancings,  actual
payments varying from contractual terms, as well as other portfolio dynamics.

      We  periodically  enter into  structured  financings  (involving  both the
issuance of debt and an interest rate swap with corresponding notional principal
amount and maturity)  that not only improve  liquidity and reduce  interest rate
risk,  but result in a lower  overall  funding  cost than could be  achieved  by
solely issuing debt.

      Interest  rate swaps with  notional  principal  amounts of $8.8 billion at
December  31, 1999 and $4.3  billion at December  31,  1998 were  designated  as
hedges  against  outstanding  debt  and were  principally  used to  convert  the
interest  rate on  variable  rate debt to a fixed  rate that sets our fixed rate
term debt  borrowing  cost over the life of the swap.  These  hedges  reduce our
exposure  to rising  interest  rates,  but also reduce the  benefits  from lower
interest rates.

      A comparative  analysis of the weighted average principal  outstanding and
interest  rates paid on our debt  before and after the effect of  interest  rate
swaps is shown in the following table.

<TABLE>
<CAPTION>
                                                            At December 31,
                                        ----------------------------------------------------------
                                                               Before Swaps
                                        ----------------------------------------------------------
                                              1999                 1998                1997
                                        ------------------  ------------------  ------------------
                                                           Dollars in Millions
<S>                                     <C>          <C>    <C>          <C>    <C>          <C>
Commercial paper and variable rate
   senior notes ..................      $11,896.2    5.26%  $ 9,672.6    5.53%  $ 9,574.2    5.61%
Fixed rate senior and subordinated
   notes .........................       10,115.1    6.47%    7,476.5    6.31%    5,497.6    6.52%
                                        ---------    ----   ---------   ----    ---------    ----
Composite ........................      $22,011.3    5.71%  $17,149.1    5.87%  $15,071.8    5.94%
                                        =========    ====   =========   ====    =========    ====
</TABLE>

<TABLE>
<CAPTION>
                                                             At December 31,
                                        ----------------------------------------------------------
                                                               After Swaps
                                        ----------------------------------------------------------
                                              1999                 1998                1997
                                        ------------------  ------------------  ------------------
                                                           Dollars in Millions
<S>                                     <C>          <C>    <C>          <C>    <C>          <C>
Commercial paper and variable rate
   senior notes ..................      $ 8,977.7    5.32%  $ 7,069.9    5.47%  $ 6,443.2    5.54%
Fixed rate senior and subordinated
   notes .........................       13,033.6    6.25%   10,079.2    6.39%    8,628.6    6.52%
                                        ---------    ----   ---------    ----   ---------    ----
Composite ........................      $22,011.3    5.87%  $17,149.1    6.01%  $15,071.8    6.10%
                                        =========    ====   =========    ====   =========    ====
</TABLE>

      The weighted  average  composite  interest rate after swaps in each of the
years  presented  increased  from  the  composite  interest  rate  before  swaps
primarily  because a larger  proportion  of our  debt,  after  giving  effect to
interest rate swaps, was subject to a fixed interest rate. However, the weighted
average  interest  rates  before swaps do not  necessarily  reflect the interest
expense that would have been incurred had we chosen to manage interest rate risk
without  the use of such  swaps.  Derivatives  are  discussed  further in Note 8
"Derivative   Financial   Instruments"  of  Item  8.  Financial  Statements  and
Supplementary Data.

      The  acquisition  of  Newcourt  has  expanded  our global  presence,  with
operations in North America,  South  America,  Europe,  Asia and Australia.  Our
foreign  operations are funded  through both local currency  borrowings and U.S.
dollar  borrowings  which are  converted  to local  currency  through the use of
foreign  exchange  forward  contracts or  cross-currency  swaps. At December 31,
1999, $2.9 billion in notional principal amount of foreign exchange forwards and
$1.5  billion  in  notional  principal  amount  of  cross-currency   swaps  were
designated as currency-related debt hedges.

      We also  utilize  foreign  exchange  forward  contracts  to hedge  our net
investments  in  foreign  operations.   Translation  gains  and  losses  of  the
underlying  foreign net investment,  as well as offsetting hedge gains or losses
on designated hedges, are reflected in other comprehensive  income as a separate
component of equity in the Consolidated Balance Sheets. As of December 31, 1999,
$0.9 billion in notional  principal of foreign exchange forwards were designated
as hedges of net investments in foreign operations.


                                       27
<PAGE>

      We regularly  monitor and simulate through computer modeling our degree of
interest  rate  sensitivity  by  measuring  the  repricing   characteristics  of
interest-sensitive assets, liabilities,  and off-balance sheet derivatives.  The
Capital  Committee  reviews the results of this modeling  monthly.  The interest
rate  sensitivity  modeling  techniques  employed by us include the  creation of
prospective  twelve month  "baseline"  and "rate  shocked"  net interest  income
simulations.  At the date that interest rate sensitivity is modeled,  "baseline"
net   interest   income   is   derived   considering   the   current   level  of
interest-sensitive  assets  and  related  run-off  (including  both  contractual
repayment  and  historical   prepayment   experience),   the  current  level  of
interest-sensitive  liabilities and related  maturities and the current level of
off-balance sheet derivatives.  The "baseline" simulation assumes that, over the
next  successive  twelve  months,  market  interest  rates  (as of the  date  of
simulation)  are held  constant  and that no new  loans are  extended.  Once the
"baseline" net interest income is calculated,  market interest rates, which were
previously  held  constant,  are raised  100 basis  points  instantaneously  and
parallel across the entire yield curve, and a "rate shocked"  simulation is run.
Interest rate sensitivity is then measured as the difference  between calculated
"baseline" and "rate shocked" net interest income.

      Utilizing our computer modeling, if no new fixed rate loans or leases were
extended and no actions to alter the existing  interest  rate  sensitivity  were
taken subsequent to December 31, 1999, an immediate hypothetical 100 basis point
parallel rise in the yield curve on January 1, 2000 would increase net income by
an  estimated  $1.4  million  after-tax  over the next twelve  months.  Although
management  believes  that this measure  provides a  meaningful  estimate of our
interest  rate  sensitivity,  it does not account for  potential  changes in the
credit quality, size, composition and prepayment  characteristics of the balance
sheet and other business developments that could affect net income. Accordingly,
no assurance can be given that actual results would not differ  materially  from
the potential outcome simulated by our computer modeling.  Further,  it does not
necessarily  represent  management's current view of future market interest rate
movements.

      Derivative Risk Management. We manage our derivative positions so that the
exposure to interest rate, credit or foreign exchange risk is in accordance with
the overall  operating  goals  established by our Capital  Committee.  A list of
diversified,   creditworthy   counterparties   used  for  derivative   financial
instruments,  each of whom has specific credit exposure limits,  which are based
on market value, is maintained. The Capital Committee approves each counterparty
and its  related  market  value and  credit  exposure  limit  annually,  or more
frequently  if  any  changes  are   recommended.   Credit   exposures  for  each
counterparty are measured based upon market value of the outstanding  derivative
instruments.  Market  values  are  calculated  periodically  for  each  type  of
contract, summarized by counterparty and reported to the Capital Committee.

      We assess and manage the risks  associated  with  derivative  instruments,
which can be categorized as 1) external and 2) internal risks.  External risk is
defined as those risks  outside of our direct  control,  including  counterparty
credit risk, liquidity risk, systemic risk and legal risk. Internal risk relates
to those  operational  risks  within the  management  oversight  structure,  and
includes action taken in contravention of CIT policy.

      The primary external risk of derivative instruments is counterparty credit
exposure,  which is the market value of the derivative  contract and the ability
of the counterparty to perform its payment  obligation  under the agreement.  We
control the credit risk of our derivative  agreements  through credit approvals,
exposure limits, and monitoring  procedures.  All derivative agreements are with
major money center financial  institutions  rated investment grade by nationally
recognized rating agencies with the majority of our  counterparties  being rated
"AA" or better.

      We  maintain a variety of controls to address  potential  internal  risks,
with such controls  intended to  effectively  guard against  policy  violations.
Among the internal controls are approved authorization limits and segregation of
duties.

      Liquidity Risk Management.  Liquidity risk refers to the risk of CIT being
unable to meet potential cash outflows  promptly and cost  effectively.  Factors
that could  cause such a risk to arise  might be a  disruption  of a  securities
market or other


                                       28
<PAGE>

source of funds. We actively  manage and mitigate  liquidity risk by maintaining
diversified sources of funding. The primary funding sources are commercial paper
(U.S.,  Canada and Australia),  medium-term notes (U.S.,  Canada and Europe) and
asset-backed securities (U.S. and Canada). We also maintain committed bank lines
of credit  aggregating $8.4 billion to provide  back-stop  support of commercial
paper borrowings and  approximately  $392 million of local bank lines to support
our international operations. Additional sources of liquidity are loan and lease
payments from customers and wholeloan asset sales and syndications.  At December
31, 1999, $21.2 billion of registered,  but unissued,  debt securities  remained
available  under  shelf  registration  statements,  including  $2.0  billion  of
European Medium-Term Notes.

      To ensure  uninterrupted  access to capital, we maintain strong investment
grade ratings as outlined below:

                                                       Short Term      Long Term
                                                       ----------      ---------
         Moody's ..................................        P-1            A1
         Standard & Poor's ........................        A-1            A+
         Duff & Phelps ............................       D-1+            AA-
         Dominion Bond Rating Service .............     R-1 (mid)       A (mid)

      As part of our  continuing  program of  accessing  the public and  private
asset-backed   securitization   markets  as  an  additional   liquidity  source,
recreational  vehicle and general equipment finance  receivables of $1.5 billion
were securitized during 1999. We securitized  recreational  vehicle, home equity
and  recreational  boat  finance  receivables  of $866.0  million  in 1998.  The
increase  in  securitization  activity  from 1998 to 1999 was  primarily  due to
additional activity from the former Newcourt operations,  which have established
securitization  vehicles and relationships with  institutional  investors in the
U.S. and Canada to insure broad market  access.  It is our intention to continue
this  commercial  securitization  activity,  though  at a lower  level  of total
funding than done by Newcourt prior to the acquisition.

      At December 31, 1999,  we had $4.3 billion of  registered,  but  unissued,
securities  available  under  shelf  registration  statements  relating  to  our
asset-backed securitization program.

      We also  target and  monitor  certain  liquidity  metrics to ensure both a
balanced liability profile and adequate alternate liquidity availability.  Among
the  target  ratios  are  commercial  paper as a  percentage  of total  debt and
committed bank line coverage of outstanding commercial paper.

Capitalization

      The following table presents information regarding our capital structure.

<TABLE>
<CAPTION>
                                                                                   At December 31,
                                                                             -----------------------------
                                                                                1999               1998
                                                                             ---------           ---------
                                                                                 Dollars in Millions
<S>                                                                          <C>                 <C>
Commercial paper .........................................................   $ 8,974.0           $ 6,144.1
Term debt ................................................................    26,399.5            12,507.3
Company-obligated mandatorily redeemable preferred securities
  of subsidiary trust holding solely debentures of the Company ...........       250.0               250.0
Stockholders' equity .....................................................     5,554.4             2,701.6
                                                                             ---------           ---------
Total capitalization .....................................................   $41,177.9           $21,603.0
                                                                             =========           =========
Total debt (excluding overnight deposits) to stockholders' equity and
  Company-obligated mandatorily redeemable preferred securities of
  subsidiary trust holding solely debentures of the Company ..............       5.96x               6.32x
Total debt (excluding overnight deposits) to tangible stockholders'
  equity and Company-obligated mandatorily redeemable
  preferred securities of subsidiary trust holding solely
  debentures of the Company ..............................................       8.75x               6.82x
Tangible stockholders' equity and Company-obligated
  mandatorily redeemable preferred securities of subsidiary trust
   holding solely debentures of the Company to managed assets ............        7.8%               10.4%
</TABLE>


                                       29
<PAGE>

      The  Company-obligated  mandatorily  redeemable  preferred  securities are
7.70%  Preferred  Capital  Securities  of CIT  Capital  Trust I, a  wholly-owned
subsidiary  of ours.  CIT Capital Trust I invested the proceeds of that issue in
Junior Subordinated Debentures of CIT having identical rates and payment dates.

      On November 15, 1999, we issued  76,428,304 shares of CIT common stock and
27,577,082  exchangeable  shares  of  CIT  Exchangeco  Inc.  (exchangeable  on a
one-for-one  basis  for  shares  of CIT  common  stock)  under  the terms of the
Newcourt acquisition. This issuance reflected an exchange ratio of .70 shares of
our common  stock for the  148,536,081  outstanding  common  shares of Newcourt.
Canadian  resident  holders of Newcourt common shares were permitted to elect to
receive exchangeable shares issued by CIT Exchangeco in lieu of CIT common stock
in order to defer recognizing any taxable gain or loss on the acquisition. Prior
to the  acquisition,  we amended our Certificate of  Incorporation to rename and
combine our Class A Common Stock and Class B Common Stock as Common Stock, which
is now the only class of common stock  outstanding.  Following the  transaction,
the former CIT shareholders owned approximately 61% of the combined company, and
the  former  Newcourt  shareholders  owned  approximately  39% of  the  combined
company. At December 31, 1999, DKB, our largest shareholder, owned approximately
26.8% of our outstanding common stock (including the exchangeable  shares).  CIT
also  acquired  two  factoring  operations  during  1999 for cash.  All of these
acquisitions  were accounted for using the purchase  method of  accounting.  See
Note 3 -- "Acquisitions" for further discussion of 1999 acquisitions.

Recent Accounting Pronouncements

      During 1999, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 137, "Accounting for Derivative Instruments and Hedging Activities--Deferral
of the Effective  Date of FASB Statement No. 133, an amendment of FASB Statement
No.  133".  SFAS  137  delayed  the  implementation  of SFAS  133,  which is now
effective for all fiscal  quarters of all fiscal years  beginning after June 15,
2000.  Due to the  additional  derivative  instruments  acquired in the Newcourt
purchase, we have not yet finalized the evaluation of the impact of SFAS 133.

Year 2000 Compliance

      We successfully completed our Year 2000 transition and to date we have not
experienced any Year 2000  operational  problems in our  Information  Technology
(IT) systems and our non-IT systems.  We have not received  indications from any
material third party or material  borrower that they have  experienced  any Year
2000 problems.  Although we do not anticipate that Year 2000 problems will arise
in our  operations,  we may continue to be exposed to Year 2000 risks from third
parties.

      The total cost,  excluding  expenses  incurred  by  Newcourt  prior to the
acquisition,  of our Year 2000  project was  approximately  $6.7  million.  This
amount  included  the costs of  additional  hardware,  software  and  technology
consultants,  as well as the  cost of our  systems  professionals  dedicated  to
achieving Year 2000 compliance for IT systems.


                                       30
<PAGE>

Item 8. Financial Statements and Supplementary Data.

                          INDEPENDENT AUDITORS' REPORT

The Stockholders and Board of Directors of

The CIT Group, Inc.:

      We have audited the  accompanying  consolidated  balance sheets of The CIT
Group,  Inc. 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 years in the  three-year  period ended  December 31, 1999.
These consolidated  financial statements are the responsibility of the Company's
management.  Our  responsibility is to express an opinion on these  consolidated
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 consolidated  financial  statements referred to above
present  fairly,  in all material  respects,  the financial  position of The CIT
Group,  Inc. and  subsidiaries at December 31, 1999 and 1998, and the results of
their  operations and cash flows for each of the years in the three-year  period
ended  December  31,  1999 in  conformity  with  generally  accepted  accounting
principles.

                                                                        KPMG LLP

Short Hills, New Jersey
February 2, 2000

                                       31
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                              December 31,
                                                                       -----------------------
                                                                        1999              1998
                                                                       -----             -----
                                                                          Dollars in Millions
                                     Assets
<S>                                                                    <C>            <C>
Financing and leasing assets
Loans and leases
    Commercial .................................................       $27,119.2       $15,589.1
    Consumer ...................................................         3,887.9         4,266.9
                                                                       ---------       ---------
      Finance receivables ......................................        31,007.1        19,856.0
Reserve for credit losses ......................................          (446.9)         (263.7)
                                                                       ---------       ---------
    Net finance receivables ....................................        30,560.2        19,592.3
Operating lease equipment, net .................................         6,125.9         2,774.1
Finance receivables held for sale ..............................         3,123.7           987.4
Cash and cash equivalents ......................................         1,073.4            73.6
Goodwill .......................................................         1,850.5           216.5
Other assets ...................................................         2,347.4           659.2
                                                                       ---------       ---------
      Total assets .............................................       $45,081.1       $24,303.1
                                                                       =========       =========

                      Liabilities and Stockholders' Equity

Debt
Commercial paper ...............................................       $ 8,974.0       $ 6,144.1
Variable rate senior notes .....................................         7,147.2         4,275.0
Fixed rate senior notes ........................................        19,052.3         8,032.3
Subordinated fixed rate notes ..................................           200.0           200.0
                                                                       ---------       ---------
      Total debt .............................................          35,373.5        18,651.4
Credit balances of factoring clients ...........................         2,200.6         1,302.1
Accrued liabilities and payables ...............................         1,191.8           694.3
Deferred federal income taxes ..................................           510.8           703.7
                                                                       ---------       ---------
      Total liabilities ......................................          39,276.7        21,351.5
Company-obligated mandatorily redeemable preferred securities of
    subsidiary trust holding solely debentures of the Company ..           250.0           250.0
Stockholders' equity
Common stock ...................................................             2.7             1.7
Paid-in capital ................................................         3,521.8           952.5
Retained earnings ..............................................         2,097.6         1,772.8
Accumulated other comprehensive income .........................             2.8              --
Treasury stock at cost .........................................           (70.5)          (25.4)
                                                                       ---------       ---------
      Total stockholders' equity .............................           5,554.4         2,701.6
                                                                       ---------       ---------
      Total liabilities and stockholders' equity .............         $45,081.1       $24,303.1
                                                                       =========       =========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       32
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                               Years Ended December 31,
                                                                       --------------------------------------
                                                                          1999           1998          1997
                                                                        --------       --------     --------
                                                                                   Dollars in Millions
                                                                               (except per share amounts)

<S>                                                                     <C>            <C>          <C>
Finance income ....................................................     $2,565.9       $2,015.1     $1,824.7
Interest expense ..................................................      1,293.4        1,040.8        937.2
                                                                        --------       --------     --------
    Net finance income ............................................      1,272.5          974.3        887.5
Depreciation on operating lease equipment .........................        355.1          169.5        146.8
                                                                        --------       --------     --------
    Net finance margin ............................................        917.4          804.8        740.7
Fees and other income .............................................        350.8          255.4        247.8
Gain on sale of equity interest acquired in loan workout ..........           --             --         58.0
                                                                        --------       --------     --------
    Operating revenue .............................................      1,268.2        1,060.2      1,046.5
                                                                        --------       --------     --------
Salaries and general operating expenses ...........................        516.0          407.7        420.0
Provision for credit losses .......................................        110.3           99.4        113.7
Goodwill amortization .............................................         25.7           10.1          8.4
Minority interest in subsidiary trust holding solely
    debentures of the Company .....................................         19.2           19.2         16.3
                                                                        --------       --------     --------
    Operating expenses ............................................        671.2          536.4        558.4
                                                                        --------       --------     --------
    Income before provision for income taxes ......................        597.0          523.8        488.1
Provision for income taxes ........................................        207.6          185.0        178.0
                                                                        --------       --------     --------
    Net income ....................................................     $  389.4       $  338.8     $  310.1
                                                                        ========       ========     ========
Net income per basic share ........................................     $   2.24       $   2.09     $   1.96
Net income per diluted share ......................................     $   2.22       $   2.08     $   1.95
</TABLE>

See accompanying notes to consolidated financial statements.


                                       33
<PAGE>


                      THE CIT GROUP, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                              Accumulated
                                                  Class B                                        Other          Total
                                       Common     Common     Paid-in  Treasury   Retained    Comprehensive  Stockholders'
                                        Stock      Stock     Capital    Stock    Earnings       Income         Equity
                                      --------    -------    -------   -------   --------    -------------  ------------
                                                                     Dollars in Millions

<S>                                    <C>           <C>    <C>           <C>     <C>              <C>         <C>
Balance, December 31, 1996 .........   $250.0       $ --   $  573.3    $   --     $1,252.1       $  --         $2,075.4
Net income .........................                                                 310.1                        310.1
Cash dividends .....................                                                 (79.3)                       (79.3)
Recapitalization to Class B
  common stock shares ..............   (250.0)       1.6      248.4                                                  --
Twenty percent of Class B
  common shares bought
  pursuant to option agreement .....                (0.3)              (808.0)                                   (808.3)
Conversion of Class B treasury
  stock shares to common stock
  shares and issuance of
  common stock to the public .......      0.3                           808.0                                     808.3
Issuance of underwriter's
  overallotment of common
  stock shares, net ................      0.1                 117.6                                               117.7
Restricted common stock
  grants ...........................                            9.0                                                 9.0
                                       ------       ----   --------    ------     --------       -----         --------
Balance, December 31, 1997 .........      0.4        1.3      948.3        --      1,482.9          --          2,432.9
Net income .........................                                                 338.8                        338.8
Cash dividends .....................                                                 (48.9)                       (48.9)
Conversion of Class B common
  stock to common stock ............      1.3       (1.3)                                                            --
Repurchase of common stock .........                                    (25.4)                                    (25.4)
Costs relating to common
  stock offering ...................                           (1.0)                                               (1.0)
Restricted common stock grants .....                            5.2                                                 5.2
                                       ------       ----   --------    ------     --------       -----         --------
Balance, December 31, 1998 .........      1.7         --      952.5     (25.4)     1,772.8          --          2,701.6
Net income .........................                                                  389.4                        389.4
Foreign currency translation
  adjustments .....................                                                                0.3              0.3
Unrealized gain on equity and
  securitization investments,
  net .............................                                                                2.5              2.5
                                                                                                               --------
Total comprehensive income ........                                                                               392.2
                                                                                                               --------
Cash dividends .....................                                                 (64.6)                       (64.6)
Repurchase of common stock .........                                    (45.1)                                    (45.1)
Issuance of common stock and
  exchangeable shares in
  connection with the
  Newcourt acquisition .............      1.0               2,562.7                                             2,563.7
Restricted common stock grants .....                            6.6                                                 6.6
                                       ------       ----     ------    ------     --------       -----         --------
Balance, December 31, 1999 .........   $  2.7       $ --   $3,521.8    $(70.5)    $2,097.6       $ 2.8         $5,554.4
                                       ======       ====   ========    ======     ========       =====         ========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       34
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                               Years Ended December 31,
                                                                      -----------------------------------------
                                                                          1999          1998           1997
                                                                         -----          -----          -----
                                                                                  Dollars in Millions
<S>                                                                      <C>            <C>            <C>
Cash flows from operations
Net income ........................................................    $   389.4      $   338.8      $   310.1
Adjustments to reconcile net income to net cash flows
  from operations:
    Provision for credit losses ...................................        110.3           99.4          113.7
    Depreciation and amortization .................................        402.8          195.9          168.6
    Provision for deferred federal income taxes ...................        163.5          100.2           80.3
    Gains on asset and receivable sales ...........................       (109.3)         (75.1)        (137.7)
    Increase in accrued liabilities and payables ..................        221.2           34.2           66.1
    Increase in other assets ......................................       (125.6)         (89.2)         (54.0)
    Other .........................................................         33.9           11.0            8.0
                                                                       ---------      ---------      ---------
      Net cash flows provided by operations .......................      1,086.2          615.2          555.1
                                                                       ---------      ---------      ---------

Cash flows from investing activities
Loans extended ....................................................    (39,657.9)     (35,818.9)     (33,332.9)
Collections on loans ..............................................     34,315.7       32,463.4       31,419.7
Proceeds from asset and receivable sales ..........................      3,733.2        1,381.3        1,747.5
Purchases of assets to be leased ..................................     (1,633.2)      (1,101.7)        (802.8)
Acquisitions, net of cash acquired ................................       (538.0)            --             --
Purchases of finance receivables portfolios .......................       (492.1)        (600.0)        (176.6)
Net increase in short-term factoring receivables ..................       (242.9)        (255.4)        (238.8)
Other .............................................................        (36.0)         (19.5)         (12.9)
                                                                       ---------      ---------      ---------
  Net cash flows used for investing activities ....................     (4,551.2)      (3,950.8)      (1,396.8)
                                                                       ---------      ---------      ---------

Cash flows from financing activities
Proceeds from the issuance of variable and fixed rate notes .......      7,700.0        6,863.5        4,532.7
Repayments of variable and fixed rate notes .......................     (5,538.3)      (4,111.5)      (3,556.1)
Net increase (decrease) in commercial paper .......................      2,571.2          584.5         (267.4)
Repayments of nonrecourse leveraged lease debt ....................       (160.4)        (148.7)        (162.3)
Proceeds from nonrecourse leveraged lease debt ....................          3.6          155.3           43.7
Cash dividends paid ...............................................        (64.6)         (48.9)         (79.3)
Purchase of treasury stock ........................................        (45.1)         (25.4)            --
Proceeds from issuance of common stock, net .......................           --             --          926.0
Purchase of Class B common stock pursuant to
  option agreement ................................................           --             --         (808.3)
Proceeds from the issuance of Company-obligated mandatorily
  redeemable preferred securities of subsidiary trust holding
  solely debentures of the Company ................................           --             --          250.0
                                                                       ---------      ---------      ---------
  Net cash flows provided by financing activities .................      4,466.4        3,268.8          879.0
                                                                       ---------      ---------      ---------
Effect of exchange rate changes on cash ...........................         (1.6)            --             --
                                                                       ---------      ---------      ---------
Net increase (decrease) in cash and cash equivalents ..............        999.8          (66.8)          37.3
Cash and cash equivalents, beginning of year ......................         73.6          140.4          103.1
                                                                       ---------      ---------      ---------
Cash and cash equivalents, end of year ............................    $ 1,073.4      $    73.6      $   140.4
                                                                       =========      =========      =========
Supplemental cash disclosures
Interest paid .....................................................    $ 1,268.9      $ 1,021.3      $   917.5
Federal and state and local income taxes paid .....................    $    66.4      $    81.4      $   102.1

Supplemental non-cash disclosures
Stock issued for acquisition ......................................    $ 2,563.7      $      --      $      --

</TABLE>

See accompanying notes to consolidated financial statements.


                                       35
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1--The Company

      The CIT Group,  Inc.  (the  "Company") is a  diversified  finance  company
engaging in vendor, equipment, commercial, consumer and structured financing and
leasing  activities.  The Company operates  extensively in the United States and
Canada,  with  strategic  locations in Europe,  Latin and South Americas and the
Pacific Rim.

      On November 15, 1999, the Company issued  76,428,304  shares of CIT common
stock and 27,577,082 exchangeable shares of CIT Exchangeco Inc. (exchangeable on
a  one-for-one  basis for  shares of CIT  common  stock)  under the terms of the
acquisition of Newcourt Credit Group Inc.  ("Newcourt").  In addition,  prior to
the  acquisition,  the Company's  Certificate  of  Incorporation  was amended to
rename and combine the Class A Common  Stock and Class B Common  Stock as Common
Stock,  which is now the only class of common stock  outstanding.  Following the
transaction, the former CIT shareholders owned approximately 61% of the combined
company,  and the former Newcourt  shareholders  owned  approximately 39% of the
combined  company.  At December 31, 1999, DKB owned  approximately  26.8% of the
outstanding stock (including the exchangeable shares). The Company also acquired
two factoring  operations  during 1999 for cash. All of these  acquisitions were
accounted   for   using   the   purchase   method   of   accounting.   See  Note
3--"Acquisitions" for further discussion of 1999 acquisitions.

      In November 1998,  CIT's majority  stockholder,  The Dai-Ichi Kangyo Bank,
Limited  ("DKB") sold  55,000,000  shares of Class A Common Stock in a secondary
public  offering  (the  "Secondary  Offering")  for which DKB  received  all the
proceeds.  Prior to the sale, DKB converted all of its Class B Common Stock into
an identical number of shares of Class A Common Stock.  DKB owned  approximately
94.4% of the combined voting power and 77.2% of the economic  interest of all of
the Company's  outstanding common stock prior to the sale. At December 31, 1998,
DKB owned  approximately  43.8% of the voting power and economic interest of the
Company's outstanding common stock.

      In November 1997, the Company issued  36,225,000  shares of Class A Common
Stock in an initial public offering (the "IPO"). Prior to the IPO, DKB owned 80%
of  the  Company's  issued  and  outstanding  stock,  and  The  Chase  Manhattan
Corporation  ("Chase")  owned the  remaining  20% of the issued and  outstanding
stock.  DKB had an option  expiring  December 15, 2000 to purchase the remaining
20% common stock interest from Chase.  In November  1997, the Company  purchased
DKB's  option at its fair market  value,  exercised  the option to purchase  the
stock held by Chase and  recapitalized the Company by converting the outstanding
common stock to  157,500,000  shares of Class B Common Stock.  Twenty percent of
the Class B Common Stock shares (which had five votes per share) were  converted
to Class A Common Stock  shares  (which had one vote per share) and, in addition
to an underwriter's  overallotment  option, were issued in the IPO. The issuance
of Class A Common Stock pursuant to the underwriter's  overallotment resulted in
an increase to the Company's stockholders' equity of $117.7 million.

Note 2--Summary of Significant Accounting Policies

Basis of Presentation

      The consolidated  financial  statements and accompanying notes include the
accounts of the  Company  and its  subsidiaries.  All  significant  intercompany
transactions  have been eliminated.  Prior period amounts have been reclassified
to conform to the current presentation. The 1999 acquisitions were accounted for
using  the  purchase  method  of  accounting.   The   acquisitions   affect  the
comparability  of the  consolidated  financial  statements  as the  consolidated
statement  of income  reflects  results  for the  acquired  operations  from the
acquisition dates through December 31, 1999.

Financing and Leasing Assets

      The  Company  provides  funding for a variety of  financing  arrangements,
including  term  loans,  lease  financing  and  operating  leases.  The  amounts
outstanding on loans and leases are referred to as finance receivables and, when
combined  with finance  receivables  held for sale,  net book value of operating
lease  equipment,  and  certain  investments,  represent  financing  and leasing
assets.


                                       36
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Income Recognition

      Finance  income  includes  interest on loans,  the  accretion of income on
direct financing leases, and rents on operating leases.  Related origination and
other nonrefundable fees and direct origination costs are deferred and amortized
as  an  adjustment  of  finance  income  over  the   contractual   life  of  the
transactions.  Income on  finance  receivables  other than  leveraged  leases is
recognized on an accrual  basis  commencing  in the month of  origination  using
methods that generally  approximate the interest method.  Leveraged lease income
is recognized  on a basis  calculated  to achieve a constant  after-tax  rate of
return  for  periods  in which the  Company  has a  positive  investment  in the
transaction, net of related deferred tax liabilities. Rental income on operating
leases is recognized on an accrual basis.

      The  accrual  of  finance  income on  commercial  finance  receivables  is
generally  suspended and an account is placed on non-accrual status when payment
of principal or interest is  contractually  delinquent  for 90 days or more,  or
earlier when, in the opinion of management, full collection of all principal and
interest  due is  doubtful.  Given the nature of  revolving  credit  facilities,
including  those  combined  with term loan  facilities  (advances  and  interest
accruals  increase  revolving loan balances and payments  reduce  revolving loan
balances),  the placement of revolving credit  facilities on non-accrual  status
includes the review of other qualitative and quantitative factors, and generally
does not result in the reversal of significant  amounts of accrued interest.  To
the extent the  estimated  fair value of  collateral  does not satisfy  both the
principal and accrued income outstanding,  accrued but uncollected income at the
date an account is placed on non-accrual  status is reversed and charged against
income,  though such amounts are generally not  significant.  Subsequent  income
received is applied to the outstanding  principal balance until such time as the
account is collected,  charged-off or returned to accrual status. The accrual of
finance  income on consumer loans is suspended,  and all previously  accrued but
uncollected  income is reversed,  when payment of principal  and/or  interest on
consumer finance receivables is contractually delinquent for 90 days or more.

      Fees and other income includes: (1) factoring commissions, (2) commitment,
facility,  letters of credit and  syndication  fees,  (3) servicing fees and (4)
gains  and  losses  from  the  sales  of  leasing  equipment,   venture  capital
investments,  and the sales and  securitizations of finance  receivables.

Lease Financing

      Direct financing leases are recorded at the aggregate future minimum lease
payments plus estimated residual values less unearned finance income.  Operating
lease  equipment  is  carried  at  cost  less  accumulated  depreciation  and is
depreciated to estimated residual value using the straight-line  method over the
lease term or  projected  economic  life of the  asset.  Equipment  acquired  in
satisfaction of loans and subsequently  placed on operating lease is recorded at
the lower of  carrying  value or  estimated  fair  value  when  acquired.  Lease
receivables  include leveraged leases,  for which a major portion of the funding
is provided  by third party  lenders on a  nonrecourse  basis,  with the Company
providing the balance and acquiring title to the property.  Leveraged leases are
recorded at the aggregate  value of future minimum lease payments plus estimated
residual value,  less nonrecourse  third party debt and unearned finance income.
Management  performs  periodic reviews of the estimated  residual  values,  with
other than temporary impairment, if any, being recognized in the current period.

Reserve for Credit Losses on Finance Receivables

      The  consolidated  reserve for credit losses is periodically  reviewed for
adequacy considering  economic conditions,  collateral values and credit quality
indicators,  including  charge-off  experience  and levels of past due loans and
non-performing assets. It is management's judgment that the consolidated reserve
for credit  losses is adequate  to provide  for  potential  credit  losses.  The
Company reviews finance receivables periodically to determine the probability of
loss,  and takes  charge-offs  after  considering  such factors as the obligor's
financial condition and the value of underlying  collateral and guarantees.  The
consolidated reserve for credit losses is intended to provide for future events,
which by their nature are uncertain.  Therefore,  changes in economic conditions
or other  events  affecting  specific  obligors or  industries  may  necessitate
additions or deductions to the consolidated reserve for credit losses.


                                       37
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Charge-off of Finance Receivables

      Finance receivables are reviewed periodically to determine the probability
of loss.  Charge-offs are taken after considering such factors as the borrower's
financial  condition  and the  value of  underlying  collateral  and  guarantees
(including recourse to dealers and manufacturers). Such charge-offs are deducted
from the carrying value of the related finance  receivables.  To the extent that
an  unrecovered  balance  remains due, a final  charge-off  is taken at the time
collection  efforts  are no longer  deemed  useful.  Automatic  charge-offs  are
recorded on consumer  finance  receivables  beginning at 180 days of contractual
delinquency based upon historical loss severity.

Impaired Loans

      Impaired  loans are measured  based upon 1) the present  value of expected
future cash flows  discounted at the loan's  effective  interest rate; or 2) the
fair value of the  collateral,  if the loan is  collateral  dependent.  Impaired
loans include any loan  transaction on  non-accrual  status or any troubled debt
restructuring,  subject to periodic review by the Company's Asset Quality Review
Committee ("AQR").  The AQR is comprised of members of senior management,  which
reviews  finance  receivables  of $500,000 or more meeting  certain  credit risk
grading  parameters.  Excluded  from impaired  loans are: 1) certain  individual
small  dollar  commercial  non-accrual  loans  (under  $500,000)  for  which the
collateral value supports the outstanding  balance, 2) consumer loans, which are
subject to automatic charge-off procedures, and 3) short-term factoring customer
receivables,  generally  having terms of no more than 30 days.  In general,  the
impaired loans are collateral dependent. Any shortfall between the value and the
recorded  investment  in the loan is  recognized  by  recording a provision  for
credit losses.

Long-Lived Assets

      A review for  impairment of  long-lived  assets,  such as operating  lease
equipment,  is performed  whenever events or changes in  circumstances  indicate
that  the  carrying  amount  of  long-lived   assets  may  not  be  recoverable.
Recoverability  of assets to be held and used is measured by a comparison of the
carrying amount of an asset to future net cash flows expected to be generated by
the asset.  If such assets are  considered to be impaired,  the impairment to be
recognized is measured by the amount by which the carrying  amount of the assets
exceeds the fair value of the assets.  Assets to be disposed of are  reported at
the lower of the carrying amount or fair value less costs to sell.

Goodwill

      Goodwill  represents  the excess of the purchase  price over the estimated
fair value of  identifiable  assets  acquired,  less the estimated fair value of
liabilities assumed from business combinations and is amortized over periods not
exceeding 25 years on a straight line basis. Goodwill is reviewed for impairment
whenever  events indicate the carrying  amounts may not be  recoverable.  If the
estimated  future cash flows of the Company  are  projected  to be less than the
carrying  amount of goodwill,  an impairment  write-down  would be recorded as a
charge to operations.

Securitizations

      Included  in  Other  Assets  are  the  Company's   retained   interest  on
securitized   assets.  At  the  time  management   decides  to  proceed  with  a
securitization  of  loans,  such  loans  are  considered   available  for  sale,
classified  as  finance  receivables  held for sale and  carried at the lower of
aggregate  cost or market value with losses  recognized if  applicable.  Certain
loans are  originated  and sold to  independent  trusts  which,  in turn,  issue
asset-backed  securities to investors.  The Company retains the servicing rights
and  participates  in certain  cash flows from the loans.  The present  value of
expected  net cash flows  which  exceeds  the  estimated  cost of  servicing  is
recorded at the time of sale as "interest-only receivables". The Company, in its
estimation  of residual  cash flows and  interest-only  receivables,  inherently
employs a variety of financial  assumptions,  including loan pool credit losses,
prepayment  speeds  and  discount  rates.   These  assumptions  are  empirically
supported  by both  the  Company's  historical  experience,  market  trends  and
anticipated trends relative to the particular products  securitized.  Subsequent
to the recording of interest-only  receivables,  the Company


                                       38
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

regularly  reviews  such  assets for  valuation  impairment.  These  reviews are
performed on a disaggregated basis. Fair values of interest-only receivables are
calculated  utilizing current and anticipated  credit losses,  prepayment speeds
and  discount  rates and are then  compared to the  Company's  carrying  values.
Unrealized gains and losses,  representing the difference between carrying value
and current fair market value, are recorded as other  comprehensive  income in a
separate  component  of equity.  Declines in value  considered  to be other than
temporary are recognized directly in operations.

Other Assets

      Assets  received  in  satisfaction  of loans are  carried  at the lower of
carrying value or estimated fair value less selling costs,  with  write-downs at
the time of receipt recognized by recording a charge-off. Subsequent write-downs
of such assets,  which may be required due to a decline in estimated fair market
value after receipt, are reflected in general operating expenses.

      Realized and  unrealized  gains (losses) on marketable  equity  securities
included in the  Company's  venture  capital  investment  companies are included
directly in operations. Unrealized gains and losses, representing the difference
between  carrying  value and current  fair  market  value for all other debt and
marketable equity securities,  are recorded as other  comprehensive  income in a
separate component of equity.

      Investments  in joint  ventures are accounted for using the equity method,
whereby  the  investment  balance  is  carried  at  cost  and  adjusted  for the
proportionate share of undistributed earnings or losses.

      Fixed  assets  such  as  computer  equipment,   furniture,  and  leasehold
improvements are stated at cost less accumulated  depreciation and amortization.
Depreciation and amortization are computed  principally  using the straight-line
method over the estimated useful lives of the related assets.

Derivative Financial Instruments

      The Company  primarily uses interest rate swaps,  as part of its worldwide
interest rate risk  management.  These  transactions  are entered into as hedges
against  the  effects  of  future  interest  and  currency   fluctuations   and,
accordingly,  are not  carried at fair value.  The  Company  does not enter into
derivative financial instruments for trading or speculative purposes.

      The net interest  differential,  including  premiums paid or received,  if
any, on interest rate swaps,  is recognized on an accrual basis as an adjustment
to finance income or as interest  expense to correspond with the hedged asset or
liability  position,  respectively.  In the event  that early  termination  of a
derivative instrument occurs, the net proceeds paid or received are deferred and
amortized  over the  shorter  of the  remaining  original  contract  life of the
interest rate swap or the maturity of the hedged asset or liability position.

      The  Company  uses  derivative  instruments  to hedge  the  interest  rate
associated with the anticipated  securitization,  syndication, or wholeloan sale
of financing and leasing assets. Such derivative  transactions are designated as
hedges  against  a  sale  that  is  probable  and  for  which  the   significant
characteristics  and terms  have  been  identified,  but for  which  there is no
legally  binding  obligation.  The loans to be sold are considered held for sale
and are  included  in  finance  receivables  held for  sale in the  accompanying
balance  sheets.  The net interest  differential  on the derivative  instrument,
including  premium paid or received,  if any, is  recognized as an adjustment to
the  basis of the  corresponding  assets  at the time of sale.  In the event the
anticipated  sale does not occur, the related hedge position would be liquidated
with any gain or loss  recognized in  operations  at such time,  and the related
assets would be reclassified to finance receivables.

      The Company also uses foreign exchange forward  contracts to hedge the net
investments in foreign  operations.  These  instruments are designated as hedges
and resulting gains and losses are reflected in accumulated other  comprehensive
income as a separate component of equity.


                                       39
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Stock-Based Compensation

      Stock  option  plans  are  accounted  for in  accordance  with  Accounting
Principles  Board Option 25,  "Accounting  for Stock Issued to Employees"  ("APB
25"). In accordance with APB 25, no compensation expense is recognized for stock
options issued. Proforma disclosures,  as if the Company applied the "Fair Value
Based  Method" for stock issued to  employees,  have been provided in Note 15 to
the financial statements.  Compensation expense associated with restricted stock
awards is recognized over the associated vesting periods.

Foreign Currency Translation

      The Company has operations  located in Canada and other countries  outside
the United States.  The functional  currency for these foreign operations is the
local currency. The assets and liabilities of these operations are translated at
the rate of exchange in effect at the  balance  sheet date.  Revenue and expense
items are translated at the average  exchange rate  prevailing  during the year.
The resulting translation adjustments, as well as offsetting gains and losses on
hedges of net  investments in foreign  operations,  are reflected in accumulated
other comprehensive income as a separate component of stockholders' equity.

Income Taxes

      Deferred  tax assets and  liabilities  are  recognized  for the future tax
consequences   attributable  to  temporary  differences  between  the  financial
statement  carrying  amounts  of  existing  assets  and  liabilities  and  their
respective tax bases.  Deferred tax assets and liabilities are determined  using
enacted  tax  rates  expected  to apply in the  year in  which  those  temporary
differences are expected to be recovered or settled.  The effect on deferred tax
assets and  liabilities  is  recognized  in income at the time of enactment of a
change in tax rates.

Consolidated Statements of Cash Flows

      Cash and cash  equivalents  includes cash and  interest-bearing  deposits,
which  generally  represent  overnight  money market  investments of excess cash
borrowed in the commercial  paper market and maintained for liquidity  purposes.
Cash inflows and outflows from  commercial  paper  borrowings and most factoring
receivables  are presented on a net basis in the  Statements  of Cash Flows,  as
their term is generally less than 90 days.

Comprehensive Income

      Components of  comprehensive  income prior to the year ending December 31,
1999 were not material.

Use of Estimates

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

Note 3--Acquisitions

      On November 15, 1999, the Company concluded its acquisition of Newcourt, a
publicly-traded  non-bank  financial  services  enterprise,   which  originated,
invested in and securitized,  syndicated and sold asset-based  loans and leases.
Newcourt's  origination activities focus on the commercial and corporate finance
segments of the asset-based financing market.  Newcourt, which was headquartered
in Toronto,  Canada,  operates  extensively in the United States and Canada, and
has strategic locations in Europe, Latin and South America, and the Pacific Rim.
The Consolidated Statements of Income reflects Newcourt results from the date of
the acquisition through December 31, 1999.


                                       40
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      In connection with the acquisition,  76,428,304 shares of CIT common stock
and 27,577,082  exchangeable  shares of CIT Exchangeco Inc.  (exchangeable  on a
one-for-one basis for shares of CIT common stock),  were issued for all Newcourt
common stock  outstanding.  The value of CIT common  stock issued in  connection
with the acquisition  (including  exchangeable  shares),  was $2,563.7  million,
based upon 148,536,081  outstanding shares of Newcourt at a price of $17.26. The
price per share was determined by multiplying  the average  closing price of CIT
common  stock for the  two-day  period  both  before  and after the  acquisition
announcement on August 5, 1999 by the exchange ratio of .70.

      The  acquisition  of Newcourt  has been  accounted  for using the purchase
method.  The difference  between the purchase price and the estimated fair value
of net assets  acquired  has been  allocated  to  goodwill  in the  Consolidated
Balance Sheets.  The goodwill  created by the Newcourt  acquisition was $1,383.1
million.  This  goodwill  is  being  amortized  on a  straight-line  basis  over
twenty-five years.

      The  purchase   accounting   adjustments   include  estimated  fair  value
adjustments  relating to certain  receivable  portfolios that are held for sale.
Goodwill may be further  adjusted  upon the sale of these  portfolios to reflect
the  allocation  of  goodwill  to the cost  basis of the assets  sold.  Further,
additional  restructuring  activities,  which were contemplated in the Company's
overall integration plan, may occur in the year 2000. Any associated incremental
exit costs will also be reflected as goodwill  adjustments in 2000 to the extent
applicable.

      In connection with the acquisition, the Company established an integration
plan,  which  identified  activities  that would not continue and the associated
costs of exiting those  activities.  The plan identified areas for adjusting the
amount of real estate required,  including the closing of the Newcourt corporate
location in New Jersey,  the  reduction  of  corporate  office space in Toronto,
Canada, and the elimination of various other operating locations  throughout the
United States and Canada.  The plan also  identified the number of employees who
would be  involuntarily  terminated,  and established the severance  levels that
employees  would  receive upon  termination.  The existence of this plan and the
severance   levels  were   communicated  to  employees   during  December  1999.
Approximately 850 employees,  whose functions were eliminated,  were impacted by
this plan. Of this total, 1% were senior corporate executive officers,  21% were
in corporate  staff  groups,  and the  remaining  78% were in various  operating
locations.  As of December 31, 1999,  approximately  230 employees were paid and
terminated  under  the plan,  including  former  senior  executive  officers  of
Newcourt.  The facilities closings and employee  terminations are expected to be
completed by the third quarter of 2000.

      Pursuant to this integration plan,  restructuring charges were included in
the purchase accounting adjustments as summarized in the table below.

                                                              December 31, 1999
                                                              -----------------
                                                             Dollars in Millions
Other Assets:
 Leasehold abandonment ..........................................   $ 21.8
 Other ..........................................................     14.7
                                                                    ------
                                                                      36.5
                                                                    ------
Accrued Liabilities and Payables:
 Severance and other termination payments .......................    102.1
 Combined CIT and Newcourt transaction costs for legal, investment
    banking and accounting ......................................     57.9
 Leasehold termination costs ....................................     24.5
 Other ..........................................................     14.7
                                                                    ------
                                                                     199.2
                                                                    ------
Total Restructuring Charge ......................................   $235.7
                                                                    ======


                                       41
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      The following table summarizes the activity in the restructuring liability
(dollars in millions).

Restructuring liability at November 15, 1999 ............                $199.2
Cash payments:
  Transaction costs .....................................     (38.0)
  Employee termination benefits .........................     (48.1)      (86.1)
                                                              -----
Other adjustments:
  Settlement of transaction fees in CIT common stock ....     (14.3)
  Other .................................................     ( 2.5)      (16.8)
                                                              -----      ------
Restructuring liability at December 31, 1999 ............                $ 96.3
                                                                         ======

      On April 1, 1999,  the  Company  purchased  factoring  assets of  Congress
Financial Corporation ("Congress") from First Union Corporation, and on December
1, 1999,  the  Company  purchased  the  domestic  factoring  business  of Heller
Financial Inc.  ("Heller").  Both of these  acquisitions were cash purchases and
were  accounted  for  using  the  purchase   method  of  accounting,   with  the
Consolidated   Statements  of  Income  reflecting  results  from  the  dates  of
acquisition through December 31, 1999. In total, these two acquisitions added in
excess of $1.5 billion in financing and leasing  assets.  The combined  goodwill
created at the  acquisition  dates for Congress  and Heller was $270.6  million.
This goodwill is being amortized on a straight-line basis over twenty years.

      The unaudited pro forma  condensed  consolidated  statements of income for
the years  ended  December  31,  1999,  and  December  31,  1998  follow.  These
statements have been prepared assuming that the Newcourt,  Congress,  and Heller
acquisitions had occurred at the beginning of each respective period.

                                                           For the years ended
                                                               December 31,
                                                        ------------------------
                                                          Dollars in Millions,
                                                        except per share amounts
                                                             1999        1998
                                                             ----        ----
Operating revenue .................................       $ 3,256.9   $ 3,221.1
Net income ........................................       $   448.1   $   551.7
Basic earnings per share ..........................       $    1.69   $    2.11
Diluted earning per share .........................       $    1.68   $    2.09

      The pro forma results have been prepared for  comparative  purposes  only,
and are based on the  historical  operating  results of the  acquired  companies
prior to the  acquisitions.  The proforma  results include certain  adjustments,
primarily  to  recognize  accretion  and  amortization  based  on the  allocated
purchase price of assets and liabilities.  Further, these results do not include
cost savings,  reduced securitization  activity and other initiatives introduced
by  the  Company   that   management   believes   will  be   reflected   in  the
post-acquisition  results.  Accordingly,  management does not believe that these
pro forma results are  indicative of the actual results that would have occurred
had the  acquisition  closed at the beginning of each period,  nor indicative of
future results.


                                       42
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 4--Finance Receivables

      The following table presents the breakdown of finance receivables by loans
and lease receivables:

                                                               December 31,
                                                         -----------------------
                                                         1999             1998
                                                         ----             ----
                                                          Dollars in Millions
Loans:
  Commercial ......................................   $16,997.9        $11,415.5
  Consumer ........................................     3,887.9          4,266.9
Lease receivables .................................    10,121.3          4,173.6
                                                      ---------        ---------
  Finance receivables .............................   $31,007.1        $19,856.0
                                                      =========        =========

      Included in lease  receivables at December 31, 1999 and 1998 are leveraged
lease receivables of $931.9 million and $792.2 million, respectively.  Leveraged
lease  receivables  exclude the portion  funded by  nonrecourse  debt payable to
third party  lenders of $2.1  billion and $1.9  billion at December 31, 1999 and
1998, respectively.

      Commercial  and consumer  loans are  presented  net of unearned  income of
$899.8 million and $557.0  million at December 31, 1999 and 1998,  respectively.
Lease  receivables are presented net of unearned income of $1.8 billion and $1.1
billion at December 31, 1999 and 1998, respectively.

      At December 31, 1999 and 1998, finance  receivables  exclude $10.0 billion
and $2.5 billion,  respectively,  of finance receivables  previously securitized
and currently managed by the Company.

      The  following  table sets  forth the  contractual  maturities  of finance
receivables.

<TABLE>
<CAPTION>
                                                                   At December 31,
                                                   ---------------------------------------------------
                                                           1999                          1998
                                                   --------------------         ----------------------
                                                   Amount       Percent         Amount         Percent
                                                   ------       -------         ------         -------
                                                                   Dollars in Millions
<S>                                             <C>               <C>         <C>               <C>
Due within one year .......................      $11,761.2        37.9%       $ 7,948.8         40.0%
Due within one to two years ...............        5,375.1        17.3          3,146.0         15.9
Due within two to four years ..............        5,789.3        18.7          3,458.3         17.4
Due after four years ......................        8,081.5        26.1          5,302.9         26.7
                                                 ---------       -----        ---------        -----
  Total ...................................      $31,007.1       100.0%       $19,856.0        100.0%
                                                 =========       =====        =========        =====
</TABLE>

      Information   about   concentrations  of  credit  risk  is  set  forth  in
"Concentrations"  in Item 7.  Management's  Discussion and Analysis of Financial
Condition and Results of Operations.

      The  following   table  sets  forth  the   information   regarding   total
non-performing assets.

                                                               December 31,
                                                         -----------------------
                                                          1999            1998
                                                          ----            ----
                                                           Dollars in Millions
Non-accrual finance receivables .......................  $510.3          $211.4
Assets received in satisfaction of loans ..............   125.1            67.3
                                                         ------          ------
  Total non-performing assets .........................  $635.4          $278.7
                                                         ======          ======
Percent to finance receivables ........................   2.05%            1.40%
                                                         ======          ======


                                       43
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      At December 31, 1999 and 1998, the recorded  investment in impaired loans,
which are  generally  collateral  dependent,  totaled  $241.5  million and $74.1
million,  respectively,  with a related  specific  reserve  allocation  of $24.9
million and $0.0 million,  respectively. The average monthly recorded investment
in the impaired  loans was $116.9  million,  $73.2 million and $71.6 million for
the years ended  December 31, 1999,  1998 and 1997,  respectively.  There was no
finance  income  recorded on these loans during  1999,  1998 or 1997 after being
classified  as  impaired.  The  amount of  finance  income  that would have been
recorded  under  contractual  terms for year-end  impaired loans would have been
$26.9  million,  $16.1  million,  and $19.9  million  in 1999,  1998,  and 1997,
respectively.

Note 5--Reserve for Credit Losses

      The following table presents changes in the reserve for credit losses.

<TABLE>
<CAPTION>
                                                                     At December 31,
                                                           ----------------------------------
                                                            1999           1998         1997
                                                            ----           ----         ----
                                                                   Dollars in Millions
<S>                                                        <C>            <C>          <C>
Balance, January 1 ...................................     $263.7         $235.6       $220.8
                                                           ------         ------       ------
Provision for credit losses ..........................      110.3           99.4        113.7
Reserves relating to acquisitions ....................      167.9            7.5          2.1
                                                           ------         ------       ------
  Additions to the reserve for credit losses .........      278.2          106.9        115.8
                                                           ------         ------       ------
Finance receivables charged-off ......................     (111.1)        (103.7)      (123.5)
Recoveries on finance receivables
  previously charged-off .............................       16.1           24.9         22.5
                                                           ------         ------       ------
  Net credit losses ..................................      (95.0)         (78.8)      (101.0)
                                                           ------         ------       ------
Balance, December 31 .................................     $446.9         $263.7       $235.6
                                                           ======         ======       ======
Reserve for credit losses as a percentage
  of finance receivables .............................       1.44%          1.33%        1.33%
                                                           ======         ======       ======
</TABLE>

Note 6--Operating Lease Equipment

      The following  table provides an analysis of operating  lease equipment by
equipment  type, net of accumulated  depreciation  of $719.4 million in 1999 and
$457.2 million in 1998.

                                                            At December 31,
                                                      --------------------------
                                                         1999             1998
                                                         ----             ----
                                                           Dollars in Millions
Commercial aircraft ............................      $1,528.4         $1,094.7
Railroad equipment .............................       1,398.1            806.0
Information technology .........................         925.1             12.0
Telecommunications .............................         468.7               --
Transportation .................................         428.4            187.0
Business aircraft ..............................         334.3            318.7
Manufacturing ..................................         258.6            122.0
Machinery and equipment ........................         228.9             25.2
Construction ...................................         140.9             95.7
Other ..........................................         414.5            112.8
                                                      --------         --------
   Total .......................................      $6,125.9         $2,774.1
                                                      ========         ========


                                       44
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      Included in the  preceding  table is equipment  not  currently  subject to
lease  agreements  of $235.9  million and $27.2 million at December 31, 1999 and
1998, respectively.

      Rental income on operating  leases,  which is included in finance  income,
totaled  $617.8  million in 1999,  $314.1 million in 1998, and $231.8 million in
1997.   The  following   table   presents   future   minimum  lease  rentals  on
non-cancelable  operating  leases as of December  31, 1999.  Excluded  from this
table are variable  rentals  calculated on the level of asset usage,  re-leasing
rentals, and expected sales proceeds from remarketing  operating lease equipment
at lease  expiration,  all of which are important  components of operating lease
profitability.

                                                      Years Ended December 31,
                                                   -----------------------------
                                                         Dollars in Millions
2000 ..........................................               $1,294.7
2001 ..........................................                  866.7
2002 ..........................................                  502.9
2003 ..........................................                  258.3
2004 ..........................................                  138.2
Thereafter ....................................                  269.0
                                                              --------
  Total .......................................               $3,329.8
                                                              ========

Note 7--Debt

      The following table presents data on commercial paper borrowings.

<TABLE>
<CAPTION>
                                                                At December 31,
                                                  ------------------------------------------
                                                      1999          1998           1997
                                                  ------------  ------------    ------------
                                                             Dollars in Millions
<S>                                                <C>           <C>            <C>
Borrowings outstanding .......................     $ 8,974.0     $ 6,144.1      $ 5,559.6
Weighted average interest rate ...............          5.71%         5.35%          5.86%
Weighted average maturity ....................       27 days       38 days        43 days
</TABLE>

<TABLE>
<CAPTION>
                                                        For the Years Ended December 31,
                                                  -----------------------------------------
                                                      1999          1998           1997
                                                  ------------  ------------    ------------
                                                             Dollars in Millions
<S>                                                <C>           <C>            <C>
Daily average borrowings ....................      $ 6,694.5     $ 6,572.1      $ 6,320.7
Maximum amount outstanding ..................      $ 9,295.0     $ 7,655.9      $ 7,039.4
Weighted average interest rate ..............           5.17%         5.51%          5.56%
</TABLE>


                                       45
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      The following  tables present the contractual  maturities of total debt at
December 31, 1999 and 1998.

<TABLE>
<CAPTION>
                                                                                         At December 31,
                                                                                       -------------------
                                                       Commercial   Variable Rate      Total         Total
                                                          Paper     Senior Notes       1999          1998
                                                       ----------   -------------      -----         -----
                                                                          Dollars in Millions
<S>                                                     <C>           <C>           <C>           <C>
Due in 1999 (rates ranging from
  4.40% to 5.47%) ...................................   $     --      $     --      $      --     $ 9,849.1
Due in 2000 (rates ranging from
  4.00% to 7.57%) ...................................    8,974.0       5,082.2       14,056.2         550.0
Due in 2001 (rates ranging from
  6.14% to 6.35%) ...................................         --       1,225.0        1,225.0            --
Due in 2002 (rates ranging from
  6.47% to 7.93%) ...................................         --         820.0          820.0            --
Due in 2003 (rates ranging from
  5.81% to 6.04%) ...................................         --          20.0           20.0          20.0
                                                        --------      --------      ---------     ---------
 Total ..............................................   $8,974.0      $7,147.2      $16,121.2     $10,419.1
                                                        ========      ========      =========     =========
</TABLE>


<TABLE>
<CAPTION>
                                                                                         At December 31,
                                                                                       -------------------
                                                             Fixed Rate Notes          Total         Total
                                                         Senior      Subordinated      1999          1998
                                                         ------      ------------      -----         -----
<S>                                                    <C>              <C>         <C>            <C>
Due in 1999 (rates ranging from
 5.38% to 6.63%) ....................................   $     --        $   --       $     --      $1,881.0
Due in 2000 (rates ranging from
 5.00% to 9.34%) ....................................    4,827.2            --        4,827.2       2,222.0
Due in 2001 (rates ranging from
 5.50% to 9.25%) ....................................    4,478.7         200.0        4,678.7       1,675.0
Due in 2002 (rates ranging from
 5.80% to 8.26%) ....................................    2,885.0            --        2,885.0       1,050.0
Due in 2003 (rates ranging from
 4.90% to 8.26%) ....................................    1,268.8            --        1,268.8         755.0
Due in 2004 (rates ranging from
 4.41% to 8.26%) ....................................    1,766.4            --        1,766.4          80.2
Due after 2004 (rates ranging from
 3.35% to 8.26%) ....................................    3,670.9            --        3,670.9         578.4
                                                       ---------        ------      ---------      --------
Face amount of maturities ...........................   18,897.0         200.0       19,097.0       8,241.6
Purchase accounting adjustment and issue discount ...      155.3            --          155.3          (9.3)
                                                       ---------        ------      ---------      --------
 Total ..............................................  $19,052.3        $200.0      $19,252.3      $8,232.3
                                                       =========        ======      =========      ========
</TABLE>

      Variable rate senior notes  outstanding at December 31, 1999 with interest
rates  ranging from 5.13% to 7.93% mature at various  dates  through  2003.  The
consolidated  weighted  average  interest  rates  on  variable  senior  notes at
December 31, 1999 and 1998 were 6.03% and 4.93%, respectively. Fixed rate senior
and subordinated  debt outstanding at December 31, 1999 matures at various dates
through 2028 at interest  rates  ranging from 3.35% to 9.34%.  The  consolidated
weighted average  interest rates on fixed rate senior and  subordinated  debt at
December 31, 1999 and 1998 were 6.61% and 6.11%, respectively.

      The following table represents information on unsecured revolving lines of
credit with 70 banks that support  commercial  paper  borrowings at December 31,
1999.

Maturity                                                     Dollars in Millions
--------                                                     -------------------
April 2000 ..............................................          $3,962.9
April 2002 ..............................................           3,720.0
April 2003 ..............................................             765.0
                                                                   --------
      Total credit lines ................................          $8,447.9
                                                                   ========


                                       46
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      The credit  line  agreements  contain  clauses  that allow the  Company to
extend the termination dates upon written consent from the participating banks.

      Certain foreign  operations  utilize local financial  institutions to fund
operations.  At December  31,  1999,  local  credit  facilities  totaled  $391.5
million, of which $130.3 million was available.

Note 8--Derivative Financial Instruments

      As part of managing the exposure to changes in market interest rates,  the
Company,  as an end-user,  enters into various interest rate swap  transactions,
all of which are  transacted  in  over-the-counter  (OTC)  markets,  with  other
financial  institutions  acting as  principal  counterparties.  The Company uses
off-balance sheet derivatives for hedging purposes only, and does not enter into
derivative financial  instruments for trading or speculative purposes. To ensure
both appropriate use as a hedge and hedge accounting treatment,  all derivatives
entered into are designated,  according to hedge objective,  against  commercial
paper, a specifically  underwritten debt issue or a specific pool of assets. The
Company's  primary  hedge  objectives  include the  conversion  of variable rate
liabilities to fixed rates, the conversion of fixed rate liabilities to variable
rates,  the fixing of spreads on variable  rate  liabilities  to various  market
indices  and the  elimination  of  interest  rate  risk on  finance  receivables
classified as held for sale prior to securitization or syndication. The notional
amounts,  rates,  indices and  maturities  of the  Company's  off-balance  sheet
derivatives  are required to closely  match the related  terms of the  Company's
hedged assets and liabilities.

      The Company utilizes foreign exchange forward  contracts or cross-currency
swaps to convert U.S.  dollar  borrowings into local currency to the extent that
local borrowings are not cost effective or available.  The Company also utilizes
foreign  exchange  forward  contracts  to hedge its net  investment  in  foreign
operations.

      The following  table presents the notional  principal  amounts of interest
rate swaps by class and the corresponding hedged liability position.

                              Notional Amount
Interest Rate Swaps             in Millions                Comments
-------------------           ---------------              --------
Floating to fixed rate swaps     $5,873.3       Effectively     converts     the
                                                interest  rate on an  equivalent
                                                amount of  commercial  paper and
                                                variable  rate  notes to a fixed
                                                rate.

Fixed to floating rate swaps      2,906.1       Effectively     converts     the
                                                interest  rate on an  equivalent
                                                amount of fixed  rate notes to a
                                                variable rate.
                                 --------
Total interest rate swaps        $8,779.4
                                 ========

      The  Company's  hedging  activity  increased  interest  expense  by  $35.8
million,  $23.4 million and $24.2 million in 1999, 1998 and 1997,  respectively,
over the interest  expense that would have been incurred with its debt structure
but without  the  Company's  hedging  activity.  However,  this  calculation  of
interest  expense does not take into account any actions the Company  would have
taken to reduce interest rate risk in the absence of hedging  activity,  such as
issuing more fixed rate debt that would also tend to increase interest expense.

      The Company is party to cross-currency interest rate swaps with a notional
principal amount of $1.5 billion. The swaps have maturities ranging from 2000 to
2019 that  correspond  with the  terms of the debt.  The  Company  entered  into
foreign  currency  exchange and bond forward  contracts with notional amounts of
$3.8  billion and $0.3  billion,  respectively,  to hedge  foreign  currency and
interest rate risk.

      The Company is exposed to credit risk to the extent a  counterparty  fails
to perform under the terms of a derivative instrument.  This risk is measured as
the market value of interest  rate swaps,  bond  forwards,  or foreign  exchange
forwards with a positive fair value,  which totaled  $191.0  million at December
31, 1999,  reduced by the effects of master  netting  agreements as presented in
Note 19--"Fair Values of Financial


                                       47
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Instruments."   However,   due  to  the  investment   grade  credit  ratings  of
counterparties and limits on the exposure with any individual counterparty,  the
Company's actual counterparty credit risk is not considered significant.

      The following  table  presents the notional  principal  amounts,  weighted
average  interest  rates  expected to be received or paid and the  maturities of
U.S.  dollar  interest  rate  swaps at  December  31,  1999.  The data  reflects
contractual  amounts,  maturities and rates,  and does not include the impact of
purchase accounting adjustments.

<TABLE>
<CAPTION>
                                            Floating to                            Fixed to
                                            Fixed Rate                           Floating Rate
                               ---------------------------------     ---------------------------------
                                                      Notional Amounts in Millions
Years Ending                    Notional      Receive       Pay        Notional      Receive      Pay
December 31,                     Amount        Rate         Rate        Amount        Rate        Rate
------------                   --------      -------       ----       --------      -------      ----
<S>                            <C>            <C>          <C>       <C>             <C>         <C>
2000 ....................      $1,328.3       6.34%        6.44%     $  413.5        7.15%       7.75%
2001 ....................       2,349.9       6.40%        6.34%        637.1        6.52%       6.58%
2002 ....................         421.4       6.41%        6.44%        198.0        6.88%       6.76%
2003 ....................         617.9       6.12%        6.02%        311.0        7.15%       7.99%
2004 ....................         112.9       6.51%        5.82%         11.0        7.84%       6.32%
2005-Thereafter .........         541.0       6.18%        6.82%      1,107.8        7.45%       7.69%
                               --------       ----         ----      --------        ----        ----
                               $5,371.4                              $2,678.4
                               ========                              ========
Weighted average rate ...                     6.33%        6.37%                     7.11%       7.40%
                                              ====         ====                      ====        ====
</TABLE>

      In addition,  at December 31, 1999, the Company had  outstanding  interest
rate swaps denominated in Canadian dollars and Australian dollars.  The Canadian
dollar  derivatives  included  instruments with U.S. dollar equivalent  notional
principal of $230.0 million that converted floating-rate debt to fixed-rate debt
at weighted average receive and pay rates of 5.07% and 5.77%, respectively,  and
instruments  with notional  principal of U.S. dollar  equivalent  $227.7 million
that converted fixed-rate debt to floating-rate debt at weighted average receive
and  pay  rates  of  7.11%  and  5.53%,  respectively.   The  Australian  dollar
derivatives  convert U.S. dollar equivalent $163.4 million in floating-rate debt
to fixed-rate debt at weighted average receive and pay rates of 5.62% and 5.85%,
respectively.  The  contractual  maturities for both the Canadian and Australian
derivatives, are predominately between 2000 and 2004. All other foreign currency
derivatives had an outstanding notional balance of U.S. dollar equivalent $108.4
million  maturing  through  2002, at weighted  average  receive and pay rates of
6.24% and 5.53%, respectively.

      All rates were those in effect at December  31, 1999.  Variable  rates are
based on the contractually  determined rate or other market rate indices and may
change significantly, affecting future cash flows.

      The following  table  presents the notional  principal  amounts of foreign
exchange  forwards,  cross currency swaps and bond forward at December 31, 1999.
The bond forwards are utilized to hedge certain assets held for syndication.

<TABLE>
<CAPTION>
                                              Foreign Exchange                  Cross-Currency        Bond
                                                   Forwards                           Swaps          Forwards
                              ------------------------------------------------- --------------      ---------
                                                        Notional Amounts in Millions
                                                Hedges of Net
                                               Investments in
Years ended                  Hedges of Debt  Foreign Operations      Total
December 31,                 Notional Amount   Notional Amount  Notional Amount Notional Amount Notional Amount
------------                 --------------  -----------------  --------------- --------------- ---------------
<S>                              <C>                <C>             <C>             <C>               <C>
2000 ...................         $1,919.6           $646.0          $2,565.6        $  240.8          $307.4
2001 ...................            633.2            258.3             891.5           184.1              --
2002 ...................            314.5             26.7             341.2            24.1              --
2003 ...................             34.7               --              34.7           122.8              --
2004 ...................              3.4               --               3.4           134.6              --
2005-Thereafter ........               --               --                --           835.8              --
                                 --------           ------          --------        --------          ------
                                 $2,905.4           $931.0          $3,836.4        $1,542.2          $307.4
                                 ========           ======          ========        ========          ======
</TABLE>


                                       48
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 9--Preferred Capital Securities

      In  February  1997,  CIT Capital  Trust I (the  "Trust"),  a  wholly-owned
subsidiary of the Company,  issued  $250.0  million of 7.70%  Preferred  Capital
Securities  (the  "Capital  Securities")  in  a  private  offering.   The  Trust
subsequently  invested the offering proceeds in Junior  Subordinated  Debentures
(the "Debentures") of the Company, having identical rates and payment dates. The
Debentures of the Company represent the sole assets of the Trust. Holders of the
Capital Securities are entitled to receive cumulative distributions at an annual
rate of 7.70% through either the  redemption  date or maturity of the Debentures
(February 15,  2027).  Both the Capital  Securities  issued by the Trust and the
Debentures of the Company owned by the Trust are  redeemable in whole or in part
on or after  February  15, 2007 or at any time in whole upon changes in specific
tax legislation,  bank regulatory guidelines or securities law. Distributions by
the Trust are  guaranteed  by the Company to the extent that the Trust has funds
available for  distribution.  The Company records  distributions  payable on the
Capital  Securities as an operating  expense in the  Consolidated  Statements of
Income.

Note 10--Stockholders' Equity

      Under  the  most   restrictive   provisions  of  agreements   relating  to
outstanding  debt,  the Company  may not,  without the consent of the holders of
such debt, permit stockholders' equity to be less than $200.0 million.

      On July 22, 1999,  the Company's  Board of Directors  renewed and extended
the 1998 stock repurchase program by authorizing the purchase of up to 2,000,000
additional shares of its common stock to provide shares for, among other things,
its employee  compensation  programs.  Stock  repurchases are authorized to take
place over a twelve month period ending  August 2000,  and may be made from time
to time in the open market or in privately negotiated transactions.

      In 1999,  the Class A Common  Stock,  par value $.01 per share was renamed
Common Stock, par value $.01 per share with  1,210,000,000  shares authorized as
of December 31, 1999. The following table summarizes activity in the outstanding
common stock and exchangeable shares for 1999 and 1998 respectively.

<TABLE>
<CAPTION>
                                                        Common Stock
                                          ---------------------------------------
                                                         Less                       Exchangeable
                                          Issued       Treasury       Outstanding      Shares
                                          ------       --------       -----------   ------------
<S>                                     <C>            <C>            <C>             <C>
Balance at December 31, 1997 ........    37,173,527            --      37,173,527             --
Shares issued:
 Conversion of Class B Common Stock     126,000,000            --     126,000,000             --
Restricted shares -- net change .....       (28,648)           --         (28,648)            --
Shares purchased -- net .............            --      (967,930)       (967,930)            --
                                        -----------    ----------     -----------     ----------
Balance at December 31, 1998 ........   163,144,879      (967,930)    162,176,949             --
Shares issued:
 Newcourt acquisition                    76,428,304            --      76,428,304     27,577,082
Restricted shares -- net change .....        27,997            --          27,997             --
Shares purchased -- net .............            --    (1,777,755)     (1,777,755)            --
Conversion of Exchangeco shares
 to common shares ...................     2,684,772            --       2,684,772     (2,684,772)
                                        -----------    ----------     -----------     ----------
Balance at December 31, 1999 ........   242,285,952    (2,745,685)    239,540,267     24,892,310
                                        ===========    ==========     ===========     ==========
</TABLE>


      On November 15, 1999,  27,577,082  exchangeable  shares of CIT  Exchangeco
Inc.,  par  value  of $.01  per  share,  were  issued  in  connection  with  the
acquisition of Newcourt. The holders of Exchangeco shares have dividend,  voting
and other rights  equivalent to those of CIT common stock holders.  These shares
may be exchanged at any time at the option of the holder on a one-for-one  basis
for CIT common stock,  and in any event must be exchanged no later than November
2004.


                                       49
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 11--Fees and Other Income

      The following table sets forth the components of fees and other income.

<TABLE>
<CAPTION>
                                                           Years Ended December 31,
                                                        ------------------------------
                                                        1999         1998         1997
                                                        ----         ----         ----
                                                              Dollars in Millions
<S>                                                    <C>         <C>          <C>
Factoring commissions ..............................   $118.7      $ 95.7       $ 95.2
Fees and other income ..............................    161.0        90.7         73.8
Gains on sales of leasing equipment ................     56.4        45.2         30.1
Gains on securitizations ...........................     14.7        12.5         32.0
Gains on sales of venture capital investments ......       --        11.3         16.7
                                                       ------      ------       ------
Total ..............................................   $350.8      $255.4       $247.8
                                                       ======      ======       ======
</TABLE>

Note 12--Salaries and General Operating Expenses

      The  following  table sets forth the  components  of salaries  and general
operating expenses.

<TABLE>
<CAPTION>
                                                           Years Ended December 31,
                                                        ------------------------------
                                                        1999         1998         1997
                                                        ----         ----         ----
                                                              Dollars in Millions
<S>                                                    <C>         <C>          <C>
Salaries and employee benefits ...................     $309.4      $245.4       $253.5
General operating expenses .......................      206.6       162.3        166.5
                                                       ------      ------       ------
  Total ..........................................     $516.0      $407.7       $420.0
                                                       ======      ======       ======
</TABLE>

Note 13--Income Taxes

      The  effective tax rate of the Company  varied from the statutory  federal
corporate income tax rate as follows:

<TABLE>
<CAPTION>
                                                                          Years Ended December 31,
                                                                        ---------------------------
                                                                        1999       1998       1997
                                                                        ----       ----       ----
                                                                       Percentage of Pretax Income
<S>                                                                     <C>        <C>        <C>
Federal income tax rate .............................................   35.0%      35.0%      35.0%
Increase (decrease) due to:
  State and local income taxes, net of federal income tax benefit ...    2.7        3.0        3.7
  Other .............................................................   (2.9)      (2.7)      (2.2)
                                                                        ----       ----       ----
Effective tax rate ..................................................   34.8%      35.3%      36.5%
                                                                        ====       ====       ====
</TABLE>

      The provision for income taxes is comprised of the following:

<TABLE>
<CAPTION>
                                                           Years Ended December 31,
                                                        ------------------------------
                                                        1999         1998         1997
                                                        ----         ----         ----
                                                              Dollars in Millions
<S>                                                    <C>         <C>          <C>
Current federal income tax provision .............     $ 16.7      $ 60.4       $ 70.0
Deferred federal income tax provision ............      163.5       100.2         80.3
                                                       ------      ------       ------
  Total federal income taxes .....................      180.2       160.6        150.3
State and local income taxes .....................       24.4        24.4         27.7
Foreign income taxes .............................        3.0          --           --
                                                       ------      ------       ------
  Total provision for income taxes ...............     $207.6      $185.0       $178.0
                                                       ======      ======       ======
</TABLE>

                                       50
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      The tax effects of  temporary  differences  that give rise to  significant
portions of the deferred  federal and foreign income tax assets and  liabilities
are presented below.

                                                               At December 31,
                                                          ----------------------
                                                             1999         1998
                                                             ----         ----
                                                            Dollars in Millions
ASSETS
   Amortization of intangibles .........................  $ (282.1)     $    --
   Net operating loss carryforwards ....................    (153.8)          --
   Provision for credit losses ..........................    (90.1)       (88.9)
   Alternative minimum tax .............................     (50.7)          --
   Loan origination fees ...............................     (22.6)       (11.3)
   Other ...............................................     (81.1)       (24.3)
                                                          --------      -------
      Total deferred tax assets ........................    (680.4)      (124.5)
                                                          --------      -------
LIABILITIES
   Leasing transactions ................................     932.7        778.3
   Market discount income ..............................     226.6         33.7
   Other ...............................................      29.7         13.1
                                                          --------      -------
      Total deferred tax liabilities ...................   1,189.0        825.1
                                                          --------      -------
Net deferred tax liability .............................  $  508.6      $ 700.6
                                                          ========      =======

      Also,  included  in  deferred  federal  income  taxes on the  Consolidated
Balance Sheets are  unamortized  investment tax credits of $2.2 million and $3.1
million at  December  31, 1999 and 1998,  respectively.  Included in the accrued
liabilities and payables  caption in the  Consolidated  Balance Sheets are state
and local  deferred  tax  liabilities  of $66.8  million  and $124.7  million at
December 31, 1999 and 1998, respectively, arising from the temporary differences
shown in the above tables.

      The Company has $591.5  million of  non-capital  losses  available for tax
purposes to offset future  taxable  income arising from the reversal of deferred
income tax  liabilities.  These  non-capital tax losses arise  principally  from
temporary differences relating to depreciation and restructuring charges as well
as certain other permanent  differences.  Non-capital  losses  pertaining to the
Canadian  operations of $295.3  million will expire at various dates by the year
2005. Net operating losses  pertaining to the U.S.  operations of $296.2 million
will expire at various dates by the year 2019.

      The Company had an alternative  minimum tax credit carryforward for income
tax purposes of $51.2 million at December 31, 1999.

Note 14--Earnings Per Share

      Basic EPS is  computed  by  dividing  net  income by the  weighted-average
number of common shares  outstanding for the period. The diluted EPS computation
includes the potential impact of dilutive securities including stock options and
restricted stock grants.  The dilutive effect of stock options is computed using
the treasury stock method,  which assumes the repurchase of common shares by the
Company  at the  average  market  price  for the  period.  Options  that have an
anti-dilutive   effect  are  not  included  in  the   denominator  and  averaged
approximately 2.4 million shares at the year ended December 31, 1999.


                                       51
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      The reconciliation of the numerator and denominator of basic EPS with that
of diluted EPS is presented  for the years ended  December 31, 1999 and 1998 and
1997.

<TABLE>
<CAPTION>
                                                        Income          Shares        Per-Share
                                                      (Numerator)    (Denominator)     Amount
                                                      -----------    -------------    ---------
                                                   Dollars in Millions, except per share amounts
<S>                                                      <C>          <C>               <C>
For the Year Ended December 31, 1999
Basic EPS:
  Income available to common shareholders .........      $389.4       174,013,063       $ 2.24
Effect of Dilutive Securities:
  Restricted shares ...............................          --         1,001,269        (0.02)
  Stock options ...................................          --           146,753           --
                                                         ------       -----------       ------
Diluted EPS .......................................      $389.4       175,161,085       $ 2.22
                                                         ======       ===========       ======
For the Year Ended December 31, 1998
Basic EPS:
  Income available to common shareholders .........      $338.8       161,987,897       $ 2.09
Effect of Dilutive Securities:
  Restricted shares ...............................          --           936,250        (0.01)
  Stock options ...................................          --           264,592           --
                                                         ------       -----------       ------
Diluted EPS .......................................      $338.8       163,188,739       $ 2.08
                                                         ======       ===========       ======
For the Year Ended December 31, 1997
Basic EPS: ........................................
  Income available to common shareholders .........      $310.1       158,134,315       $ 1.96
Effect of Dilutive Securities:
  Restricted shares ...............................          --           948,527        (0.01)
  Stock options ...................................          --            71,440           --
                                                         ------       -----------       ------
Diluted EPS .......................................      $310.1       159,154,282       $ 1.95
                                                         ======       ===========       ======
</TABLE>

Note 15 -- Postretirement and Other Benefit Plans

Retirement and Postretirement Medical and Life Insurance Benefit Plans

      Certain  employees of the Company who have  completed  one year of service
and are 21 years of age or older  participate  in The CIT Group  Holdings,  Inc.
Retirement Plan (the "Plan").  The retirement  benefits under the Plan are based
on the employee's age, years of benefit service,  and a percentage of qualifying
compensation  during  the final  years of  employment.  Plan  assets  consist of
marketable securities,  including common stock and government and corporate debt
securities.  The Company funds the Plan to the extent it qualifies for an income
tax  deduction.  Such  funding is  charged to  salaries  and  employee  benefits
expense.

      The Company also provides certain health care and life insurance  benefits
to eligible retired employees.  Salaried participants  generally become eligible
for retiree  health care benefits after reaching age 55 with 10 years of benefit
service and 11 years of medical plan participation. Generally, the medical plans
pay a stated percentage of most medical expenses reduced by a deductible as well
as by payments made by government  programs and other group coverage.  The plans
are funded on a pay as you go basis.


                                       52
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      The following tables set forth the change in obligations, plan assets, and
funded status of the plans as well as the net periodic benefit cost.

<TABLE>
<CAPTION>
                                                            At or for the Years Ended December 31,
                                                     --------------------------------------------------------
                                                       Retirement Benefits          Postretirement Benefits
                                                     ------------------------       -------------------------
                                                     1999      1998      1997       1999      1998      1997
                                                     ----      ----      ----       ----      ----      ----
                                                                         Dollars in Millions
<S>                                                <C>       <C>       <C>        <C>        <C>       <C>
Change in Benefit Obligations
Benefit obligation at beginning of year ........   $ 118.1   $ 100.4   $  84.0    $ 37.2     $ 35.0    $ 34.9
Service cost ...................................       7.2       6.3       5.2       1.8        1.5       1.3
Interest cost ..................................       7.6       6.9       6.2       2.3        2.3       2.3
Plan amendments ................................       1.3        --        --        --         --        --
Actuarial (gain)/loss ..........................     (23.8)      7.0       7.8      (2.8)       1.2      (1.3)
Benefits paid ..................................      (2.5)     (2.5)     (2.8)     (1.8)      (2.8)     (2.2)
                                                   -------   -------   -------    ------     ------    ------
Benefit obligation at end of year .............    $ 107.9   $ 118.1   $ 100.4    $ 36.7     $ 37.2    $ 35.0
                                                   =======   =======   =======    ======     ======    ======
Change in Plan Assets
Fair value of plan assets at beginning
  of year .....................................    $ 132.8   $ 128.5              $   --     $   --
Actual return on plan assets ..................       10.4       6.8                  --         --
Benefits paid .................................       (2.5)     (2.5)               (1.8)      (2.8)
Employer contributions ........................         --        --                 1.8        2.8
                                                   -------   -------              ------     ------
Fair value of plan assets at end of year ......    $ 140.7   $ 132.8              $   --     $   --
                                                   =======   =======              ======     ======
Reconciliation of Funded Status at End of Year
Funded status .................................    $  32.8   $  14.7              $(36.7)    $(37.2)
Unrecognized prior service cost ...............       (0.1)     (1.5)                 --         --
Unrecognized net (gain)/loss ..................      (25.8)     (4.7)               (8.4)      (6.2)
Unrecognized net transition obligation ........         --        --                21.2       22.9
                                                   -------   -------              ------     ------
Prepaid/(accrued) benefit cost ................    $   6.9   $   8.5              $(23.9)    $(20.5)
                                                   =======   =======              ======     ======
Weighted-average Assumptions
Discount rate .................................       7.75%     6.50%     7.00%     7.75%      6.50%     7.00%
Rate of compensation increase .................       4.75%     4.25%     4.50%     4.75%      4.25%     4.50%
Expected return on plan assets ................      10.00%    10.00%    10.00%       --         --        --

Components of Net Periodic Benefit Cost
Service cost ..................................    $   7.2   $   6.3   $   5.2    $  1.8     $  1.5    $  1.3
Interest cost .................................        7.6       6.9       6.2       2.3        2.3       2.3
Expected return on plan assets ................      (13.2)    (12.8)    (10.8)       --         --        --
Amortization of prior service cost ............         --      (0.2)     (0.2)       --         --        --
Amortization of transition obligation .........         --        --        --       1.6        1.6       1.7
Amortization of gains .........................         --      (0.5)     (0.4)     (0.5)      (0.8)     (0.8)
                                                   -------   -------   -------    ------     ------    ------
Total net periodic expense/(benefit) ..........    $   1.6   $  (0.3)  $    --    $  5.2     $  4.6    $  4.5
                                                   =======   =======   =======    ======     ======    ======
</TABLE>

      For 1999,  the assumed health care cost trend rates decline to an ultimate
level  of  5.50%  in 2005  for all  retirees;  for  1998,  4.50% in 2005 for all
retirees; and for 1997, 4.50% in 2004 for employees prior to reaching age 65.


                                       53
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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

                                                         Postretirement Benefits
                                                         -----------------------
                                                           For the Years Ended
                                                         -----------------------
                                                           1999         1998
                                                           ----         ----
                                                           Dollars in Millions
Effect of One-Percentage Point Increase on:
Year-end benefit obligation............................      $ 2.8     $ 2.6
Total of service and interest cost components..........        0.4       0.4

Effect of One-Percentage Point Decrease on:
Year-end benefit obligation............................      $(2.6)    $(2.4)
Total of service and interest cost components..........       (0.4)     (0.3)

Savings Incentive Plan

      Certain  employees of the Company  participate in The CIT Group  Holdings,
Inc.  Savings  Incentive  Plan.  This plan qualifies under section 401(k) of the
Internal Revenue Code. The Company's expense is based on specific percentages of
employee  contributions  and plan  administrative  costs  and  aggregated  $10.4
million,  $9.6 million and $9.0 million for 1999,  1998 and 1997,  respectively.
During 1999, former Newcourt employees  participated in the Newcourt Savings and
Investment Plan, which also qualifies under section 401(k).

Corporate Annual Bonus Plan

      The CIT Group Bonus Plan ("Bonus  Plan") is an annual bonus plan  covering
certain executive officers and other employees.  The amount of awards depends on
a variety of factors, including corporate performance and individual performance
during the calendar year for which awards are made and is subject to approval by
the Compensation  Committee of the Board of Directors.  Certain senior executive
officers  were  permitted to defer up to fifty percent (50%) of their 1999 bonus
(in the form of CIT stock units). The deferred portion of the bonus is converted
into  restricted  shares at a 25%  premium,  based on the  closing  price of CIT
shares on the date of approval.  Such  restricted  shares vest over a three year
period.   The  premium  element  is  subject  to  forfeiture  if  the  executive
voluntarily terminates employment with CIT prior to three years from the date of
the award.  For the years ended December 31, 1999,  1998 and 1997,  expenses for
the Bonus Plan  amounted to $24.3  million,  $18.6  million  and $18.5  million,
respectively.

Long-Term Equity Compensation Plan

      The Company sponsors a Long-Term Equity Compensation Plan (the "ECP"). The
ECP allows the Company to issue to employees up to  28,900,000  shares of common
stock through grants of annual  incentive  awards,  incentive and  non-qualified
stock options, stock appreciation rights,  restricted stock,  performance shares
and  performance  units.  Common  stock  issued  under  the  ECP  may be  either
authorized but unissued shares,  treasury shares or any combination thereof. All
options  granted  have 10 year  terms.  Options  granted in 1997 vest at various
anniversary dates through 2002.  Options granted in 1998 and 1999 vest one-third
on the first  anniversary  of the date of grant (1999 and 2000),  an  additional
one-third on the second anniversary of the date of grant (2000 and 2001), and in
full on the third anniversary of the date of grant (2001 and 2002).


                                       54
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      Data for the stock option plans is summarized as follows:

<TABLE>
<CAPTION>
                                                             1999                          1998
                                                   -------------------------     -------------------------
                                                             Average Option                Average Option
                                                   Shares    Price Per Share     Shares    Price Per Share
                                                   ------    ---------------     ------    ---------------
<S>                                              <C>              <C>           <C>             <C>
Outstanding at beginning of year ...............  4,766,109       $27.39        4,038,298       $27.00
Granted ........................................  7,556,714       $23.38          892,120       $29.08
Exercised ......................................    (27,698)      $27.00             (921)      $27.00
Forfeited ......................................   (397,099)      $26.10         (163,388)      $27.01
Converted Newcourt options
  outstanding at year end ......................  4,653,617       $32.02               --           --
                                                 ----------       ------        ---------       ------
Outstanding at end of year ..................... 16,551,643       $26.89        4,766,109       $27.39
                                                 ==========       ======        =========       ======
Options exercisable at year end ................  3,060,247       $26.13          903,438       $27.00
                                                 ==========       ======        =========       ======
Weighted average fair value of options
  granted (excludes converted Newcourt
  options) during the year .....................      $6.87                         $9.41
                                                      =====                         =====
</TABLE>

      On November 18, 1999, 5,985,714 options were granted to certain employees,
including former Newcourt employees, as part of a broad-based program. According
to the terms of the purchase agreement,  outstanding  Newcourt options as of the
acquisition  date were  converted  to CIT options by  multiplying  the number of
Newcourt  options by the .70 exchange ratio.  The converted  option price is the
original Newcourt option price divided by the exchange ratio, and converted into
U.S. dollars from Canadian dollars.  The converted CIT options become vested and
exercisable in accordance with the original grants.

      Fair value of options  granted was  determined  at the date of grant using
the Black-Scholes option pricing model which assumed the following:

<TABLE>
<CAPTION>
 Option                          Expected            Average        Expected           Risk Free
Issuance                     Option Life Range  Dividend Yield  Volatility Range  Interest Rate Range
--------                     -----------------  --------------  ----------------  -------------------
<S>                              <C>                 <C>          <C>                 <C>
  1999 ....................      3-5 years           1.75%        28.93%-34.82%       4.61%-5.92%
  1998 ....................      3-5 years           1.37%        29.39%-40.93%       4.54%-5.63%
</TABLE>

      The following table summarizes information about stock options outstanding
and options exercisable at December 31, 1999:

<TABLE>
<CAPTION>
                                Options Outstanding                      Options Exercisable
                    ----------------------------------------------   ----------------------------
   Range of                          Remaining         Weighted                       Weighted
   Exercise           Number        Contractual         Average        Number          Average
     Price          Outstanding        Life         Exercise Price   Exercisable   Exercise Price
   --------         -----------     -----------     --------------   -----------   --------------
<S>                  <C>             <C>                <C>             <C>             <C>
$12.40 - $21.44      6,829,610       9.8 years          $21.13          209,097         $12.57
$25.78 - $30.75      8,421,595       8.2 years          $27.86        2,818,958         $26.81
$32.44 - $68.22      1,300,438       8.4 years          $50.86           32,192         $54.65
                    ----------                                        ---------
                    16,551,643                                        3,060,247
                    ==========                                        =========
</TABLE>

Employee Stock Purchase Plan

      In 1998, the Company adopted an Employee Stock Purchase Plan (the "ESPP").
Under the ESPP,  the Company is  authorized  to issue up to 1,000,000  shares of
common stock to eligible employees.  Under the terms of the ESPP,  employees can
choose to have between 1% and 10% of their base salary  withheld to purchase the
Company's  stock at 85% of the fair  market  value.  During  1999 and 1998,  the
Company sold 132,084 and 21,214 shares, respectively, to participating employees
under the ESPP.


                                       55
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Restricted Stock and CIT Career Incentive Plan

      In January 1999, the Company issued 68,225 restricted shares in connection
with the Bonus Plan and in November 1997, the Company issued 948,527  restricted
shares in connection with the termination of the CIT Career Incentive Plan. Such
shares were issued at fair market value,  which was $32.44 per share in 1999 and
$27.00  per  share  in  1997.  The  1999  shares  vest  one-third  on the  first
anniversary  of the grant  (2000)  and an  additional  one-third  on the  second
anniversary of the date of grant (2001) and in full on the third  anniversary of
the  date of the  grant  (2002)  whereas  the  1997  shares  vest  on the  third
anniversary of the date of grant.  The holder of restricted  stock generally has
the rights of a stockholder  of the Company,  including the right to vote and to
receive  cash  dividends.   Restricted   shares  of  945,606  and  919,879  were
outstanding  at December  31, 1999 and 1998.  For the years ended  December  31,
1999,  1998  and  1997,  compensation  expense  recognized  in  connection  with
restricted stock was $4.9 million, $5.2 million and $9.0 million, respectively.

      In  conjunction  with the  IPO,  the  Company  terminated  the CIT  Career
Incentive  Plan as of November 13, 1997 and  extinguished  all phantom shares of
stock, by making a cash payment and granting  restricted  shares of common stock
and stock options.  Phantom  shares granted under the CIT Career  Incentive Plan
entitled the  participant to receive,  at the end of the three year  performance
period, a specified amount of cash. Following the end of the performance period,
one-third of the phantom shares vested  immediately and one-third  vested at the
end of each of the next two years. At the employee's  option, all or part of the
cash  component  of the  termination  could  either  be  paid in 1998 in cash or
deferred  in up to five annual  installments.  For the year ended  December  31,
1997,  amounts charged to expense for the CIT Career  Incentive Plan amounted to
$20.1 million.  All charges  relating to the termination of the Career Incentive
Plan were included in 1997 expense.

Accounting for Stock-Based Compensation Plans

      The Company has elected to apply  Accounting  Principles  Board Opinion 25
("APB 25")  rather  than the  optional  provisions  of  Statement  of  Financial
Accounting  Standards No. 123 "Accounting for Stock-Based  Compensation"  ("SFAS
123") in accounting for its stock-based  compensation  plans.  Under APB 25, the
Company  does not  recognize  compensation  expense on the issuance of its stock
options  because the option  terms are fixed and the  exercise  price equals the
market price of the underlying stock on the grant date. As required by SFAS 123,
the  Company  has  determined  the pro forma  information  as if the Company had
accounted for stock options granted under the fair value method of SFAS 123. Had
the  compensation  cost of the  Company's  stock-based  compensation  plans been
determined  based on the  operational  provisions of SFAS 123, the Company's net
income for 1999 and net income per diluted share would have been $355.6  million
and $2.03,  compared to $389.4  million and $2.22,  as reported.  For 1998,  net
income and net income per  diluted  share  would have been  $333.4  million  and
$2.04,  compared to $338.8 million and $2.08, as reported.  For 1997, net income
and net income  per  diluted  share  would have been  $288.7  million  and $1.81
compared to $310.1 and $1.95 as reported.

Note 16--Lease Commitments

      The Company has entered into noncancellable long-term lease agreements for
premises and  equipment.  The following  table presents  future minimum  rentals
under such noncancellable  leases that have initial or remaining terms in excess
of one year at December 31, 1999.

Years Ended December 31,                                   Dollars in Millions
------------------------                                   -------------------
2000 ...............................................              $ 54.4
2001 ...............................................                43.9
2002 ...............................................                39.4
2003 ...............................................                40.6
2004 ...............................................                24.2
Thereafter .........................................                60.2
                                                                  ------
   Total ...........................................              $262.7
                                                                  ======


                                       56
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      In addition to fixed lease rentals,  leases  generally  require payment of
maintenance  expenses  and real  estate  taxes,  both of which  are  subject  to
escalation  provisions.  Minimum  payments  have not  been  reduced  by  minimum
sublease  rentals  of  $65.7  million  due in the  future  under  noncancellable
subleases.

      Rental expense,  net of sublease income on premises and equipment,  was as
follows.

                                                     Years Ended December 31,
                                                 -------------------------------
                                                 1999          1998        1997
                                                 ----          ----        ----
                                                       Dollars in Millions
Premises ..................................     $24.8         $17.1       $19.6
Equipment .................................       7.1           6.5         6.0
Less sublease income ......................      (1.3)         (1.3)       (1.2)
                                                -----         -----       -----
  Total ...................................     $30.6         $22.3       $24.4
                                                =====         =====       =====

Note 17--Legal Proceedings

      In the ordinary  course of business,  there are various legal  proceedings
pending against the Company. Management believes that the aggregate liabilities,
if any, arising from such actions will not have a material adverse effect on the
consolidated  financial  position,  results of  operations  or  liquidity of the
Company.

Note 18--Credit-Related and Other Commitments

      In the normal course of meeting the financing needs of its customers,  the
Company  enters  into  various  credit-related   commitments.   These  financial
instruments  generate fees and involve,  to varying degrees,  elements of credit
risk in excess of the amounts recognized in the Consolidated  Balance Sheets. To
minimize  potential credit risk, the Company generally  requires  collateral and
other  credit-related  terms  and  conditions  from  the  customer.  At the time
credit-related  commitments are granted,  management  believes the fair value of
the underlying collateral and guarantees approximates or exceeds the contractual
amount of the  commitment.  In the event a customer  defaults on the  underlying
transaction,  the maximum  potential loss to the Company will be the contractual
amount outstanding less the value of all underlying collateral and guarantees.

      The   accompanying   table   summarizes   the   contractual   amounts   of
credit-related commitments.

<TABLE>
<CAPTION>
                                                                      At December 31,
                                                ------------------------------------------------------
                                                    Due to Expire
                                                ---------------------
                                                                               Total          Total
                                                 Within        After       Outstanding     Outstanding
                                                One Year     One Year         1999            1998
                                                --------     --------      -----------     -----------
                                                                   Dollars in Millions
<S>                                             <C>           <C>           <C>             <C>
Unused commitments to extend credit
  Financing and leasing assets .............    $2,396.1      $732.0        $3,128.1        $1,876.9
Letters of credit and acceptances
Standby letters of credit ..................       157.3        11.2           168.5           156.4
Other letters of credit ....................       371.7         2.2           373.9           200.1
Acceptances ................................        12.7          --            12.7            12.2
Guarantees .................................       350.3         0.9           351.2           238.8
</TABLE>

      During 1999, we entered into agreements with both Airbus Industrie and the
Boeing  Company to purchase a total of 40 aircraft  (at a cost of  approximately
$2.0 billion), with options to acquire additional units. Deliveries of these new
aircraft  are  scheduled  to take place over a five year period  starting in the
fourth quarter of 2000. Additional  commitments to purchase equipment from other
manufacturers  to be placed on operating lease totaled $224.5 million and $449.9
million at December 31, 1999 and 1998, respectively.

Note 19--Fair Values of Financial Instruments

      Statement of Financial  Accounting  Standards No. 107  "Disclosures  About
Fair Value of Financial  Instruments"  ("SFAS 107")  requires  disclosure of the
estimated fair value of the Company's financial  instruments,  excluding leasing
transactions accounted for under SFAS 13. The fair value estimates are made at a
discrete  point in time based on relevant  market  information  and  information
about the financial
                                       57
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

instrument. Since no established trading market exists for a significant portion
of the  Company's  financial  instruments,  fair  value  estimates  are based on
judgments   regarding   future  expected  loss   experience,   current  economic
conditions,  risk  characteristics of various financial  instruments,  and other
factors. These estimates are subjective in nature,  involving  uncertainties and
matters of  significant  judgment  and,  therefore,  cannot be  determined  with
precision. Changes in assumptions or estimation methods may significantly affect
the estimated fair values. Because of these limitations,  management provides no
assurance that the estimated fair values presented would necessarily be realized
upon disposition or sale.

      Actual fair values in the  marketplace  are affected by other  significant
factors,  such as supply and demand,  investment  trends and the  motivations of
buyers  and  sellers,  which  are  not  considered  in the  methodology  used to
determine the estimated fair values presented. In addition, fair value estimates
are based on existing on-and  off-balance  sheet financial  instruments  without
attempting to estimate the value of future business  transactions  and the value
of assets and liabilities  that are part of the Company's  overall value but are
not considered  financial  instruments.  Significant assets and liabilities that
are not considered financial  instruments include customer base, operating lease
equipment, premises and equipment, assets received in satisfaction of loans, and
deferred tax balances. In addition, tax effects relating to the unrealized gains
and losses  (differences in estimated fair values and carrying  values) have not
been  considered in these  estimates  and can have a significant  effect on fair
value estimates.  The carrying amounts for cash and cash equivalents approximate
fair value  because they have short  maturities  and do not present  significant
credit risks. Credit-related commitments, as disclosed in Note 18, are primarily
short term floating rate contracts  whose terms and conditions are  individually
negotiated,  taking into  account the  creditworthiness  of the customer and the
nature,  accessibility and quality of the collateral and guarantees.  Therefore,
the fair value of credit-related  commitments,  if exercised,  would approximate
their contractual amounts.

      Estimated fair values,  recorded  carrying values and various  assumptions
used in valuing the  Company's  financial  instruments  at December 31, 1999 and
1998 are set forth below.

<TABLE>
<CAPTION>
                                                             1999                             1998
                                                   --------------------------      ---------------------------
                                                    Carrying        Estimated       Carrying        Estimated
                                                      Value        Fair Value         Value        Fair Value
                                                      Asset           Asset           Asset           Asset
                                                   (Liability)     (Liability)     (Liability)     (Liability)
                                                   -----------     -----------     -----------     -----------
                                                                       Dollars in Millions
<S>                                                <C>              <C>             <C>             <C>
Finance receivables - loans(a) ..................  $20,638.1        $20,726.4       $15,474.0       $15,772.2
Finance receivables held for sale ...............    3,123.7          3,123.7           987.4           987.4
Other assets(b) .................................    1,728.8          1,746.2           469.3           480.9
Commercial paper(c) .............................   (8,974.0)        (8,974.0)       (6,144.1)       (6,144.1)
Fixed rate senior notes and subordinated
   fixed rate notes(d) ..........................  (19,149.0)       (19,082.7)       (8,232.3)       (8,365.5)
Variable rate notes(d) ..........................   (7,147.2)        (7,146.7)       (4,275.0)       (4,272.3)
Credit balances of factoring clients and
   other liabilities(e) .........................   (3,547.1)        (3,547.1)       (1,833.6)       (1,833.6)
Company-obligated mandatorily
   redeemable preferred securities of
   subsidiary trust holding solely
   debentures of the Company(f) .................     (250.0)          (232.8)         (250.0)         (263.4)
Derivative Financial Instruments(g)
  Interest rate swap assets .....................       32.9             62.5              --            11.6
  Interest rate swap liabilities ................     (158.3)          (196.5)             --           (79.0)
  Cross currency assets .........................       14.8             53.2              --            25.6
  Cross currency liabilities ....................      (31.3)           (39.4)             --            (2.7)
  Foreign exchange assets .......................       37.3             61.8              --              --
  Foreign exchange liabilities ..................      (11.9)           (42.7)             --              --
  Bond forward assets ...........................       13.2             13.5              --              --
---------------------------------------------------------------------------------------------------------------
</TABLE>

(a)   The fair value of performing  fixed-rate  loans was estimated based upon a
      present value  discounted  cash flow  analysis,  using interest rates that
      were being  offered at the end of the year for loans with similar terms to
      borrowers of similar  credit  quality.  Discount rates used in the present
      value  calculation  range from 8.32% to 10.37% for 1999 and 7.59% to 8.67%
      for 1998. The maturities used represent the average contractual maturities
      adjusted for prepayments.  For floating rate loans that reprice frequently
      and have no significant change in credit


                                       58
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      quality, fair value approximates carrying value. The net carrying value of
      lease finance  receivables  not subject to fair value  disclosure  totaled
      $10.0 billion in 1999 and $4.1 billion in 1998.

(b)   Other assets subject to fair value  disclosure  include  accrued  interest
      receivable  and  investment  securities.  The  carrying  amount of accrued
      interest  receivable   approximates  fair  value.   Investment  securities
      actively traded in a secondary  market were valued using quoted  available
      market prices.  Investments not actively traded in a secondary market were
      valued based upon recent  selling price or present value  discounted  cash
      flow  analysis.  The  carrying  value of other  assets not subject to fair
      value  disclosure  totaled  $618.6  million in 1999 and $406.4  million in
      1998.

(c)   The estimated fair value of commercial paper  approximates  carrying value
      due to the  relatively  short  maturities.

(d)   The  carrying  value of the  fixed  rate  senior  notes  excludes  the net
      liability  carrying  value  of  $103.3  million  of  derivative  financial
      instruments. Fixed rate notes were valued using a present value discounted
      cash flow analysis with a discount rate approximating current market rates
      for  issuances by the Company of similar term debt at the end of the year.
      Discount rates used in the present value calculation  ranged from 5.65% to
      7.83% in 1999 and 4.83% to 6.04% in 1998.  The  estimated  fair  value for
      variable rate notes  differs from carrying  value as a result of a foreign
      denominated issuance.

(e)   The  estimated  fair  value  of  credit  balances  of  factoring   clients
      approximates  carrying value due to their short  settlement  terms.  Other
      liabilities  includes  accrued  liabilities  and deferred  federal  income
      taxes.  Accrued liabilities and payables with no stated maturities have an
      estimated fair value that approximates  carrying value. The carrying value
      of other  liabilities not subject to fair value disclosure  totaled $356.1
      million in 1999 and $866.5 million in 1998.

(f)   Company-obligated  mandatorily  redeemable preferred capital securities of
      subsidiary  trust  holding  solely  debentures  of the Company were valued
      using a present value  discounted  cash flow analysis with a discount rate
      approximating  current market rates of similar issuances at the end of the
      year.

(g)   The  Company  enters into  derivative  financial  instruments  for hedging
      purposes  only. The 1999 carrying  values  represent  purchase  accounting
      adjustments  associated with the instruments acquired from Newcourt and do
      not necessarily  correlate  directly with the presented fair values as the
      Company has other instruments that are carried only off-balance sheet. The
      carrying value balances will amortize as the instruments  acquired mature.
      The estimate fair values are obtained from dealer quotes and represent the
      net amount  receivable or payable to terminate the agreement,  taking into
      account current market interest rates and  counter-party  credit risk. See
      Note 8 - "Derivative Financial Instruments" for notional principal amounts
      associated with the instruments.

Note 20--Investments in Debt and Equity Securities

      At  December  31, 1999 and 1998,  the  Company's  investments  in debt and
equity securities  designated as available for sale totaled $1,129.7 million and
$238.6 million, respectively.

      Included in the Company's  investments  in debt and equity  securities are
retained  interests  in  commercial  securitized  assets of $914.5  million  and
consumer  securitized assets of $194.8 million at December 31, 1999 and consumer
securitized  assets of $222.8 million at December 31, 1998.  Retained  interests
include interest-only strips, retained subordinated securities, and cash reserve
accounts  related  to  securitizations.  The  carrying  value  of  the  retained
interests  in  securitized   assets  is  reviewed   periodically  for  valuation
impairment.

      Ranges of key economic  assumptions  used in calculating the fair value of
the retained  interests in securitized assets by type of product at December 31,
1999 were as follows:

<TABLE>
<CAPTION>
                                                                          Consumer
                                                          -------------------------------------
                                             Commercial   Manufactured Housing    Recreational
                                              Equipment       & Home Equity      Vehicle & Boat
                                             ----------   --------------------   --------------
<S>                                          <C>               <C>                 <C>
Prepayment speed(1) ....................      6.0%-11.7%       15.6%-30.2%         21.5%-26.2%
Expected credit losses .................     0.30%-1.70%       0.25%-1.38%         0.60%-1.52%
Weighted average discount rate .........      5.3%-11.6%        8.8%-12.1%          8.7%- 9.6%
-----------------------------------------------------------------------------------------------
</TABLE>

(1)   Based upon CPR. CPR expresses  prepayments  as a function of the declining
      amount of loans at a compound annual rate.

Note 21--Certain Relationships and Related Transactions

      The  Company  has in the past and may in the  future  enter  into  certain
transactions  with  affiliates  of the  Company.  It is  anticipated  that  such
transactions will be entered into at a fair market value for the transaction.

      The Company's  interest-bearing  deposits  generally  represent  overnight
money  market  investments  of excess  cash that are  maintained  for  liquidity
purposes. From time to time, the Company may maintain such deposits with DKB.

      At December 31, 1999 and December 31,  1998,  the  Company's  total credit
line coverage totaled $8.4 billion and $5.0 billion,  respectively, of committed
facilities.  At  December  31,  1999,  DKB was  committed  under a $1.7  billion
revolving  credit  facility and a $3.7 billion  revolving  credit  facility with
commitments of


                                       59
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

$93.0 million and $210.0 million,  respectively. At December 31, 1998, DKB was a
committed bank under a $1.2 billion revolving credit facility and a $3.7 billion
revolving  credit facility with commitments of $67.5 million and $210.0 million,
respectively.  Additional  information regarding these credit lines can be found
in Note 7 -- "Debt."

      The  Company  has  entered  into  interest  rate swap and  cross  currency
interest rate swap  agreements with financial  institutions  acting as principal
counterparties,  including  affiliates  of DKB.  The notional  principal  amount
outstanding on interest rate swap  agreements with DKB totaled $220.0 million at
both December 31, 1999 and 1998. The notional  principal  amount  outstanding on
foreign  currency  swaps with DKB totaled  $168.6  million at year-end  1999 and
1998. The Company has entered into  leveraged  leasing  arrangements  with third
party loan participants, including affiliates of DKB. Amounts owed to affiliates
of DKB are $398.3 million in 1999 and $431.0 million in 1998.

      At December 31, 1999 and 1998, the Company had entered into credit-related
commitments with DKB in the form of letters of credit totaling $13.4 million and
$12.2 million, respectively,  equal to the amount of the single lump sum premium
necessary to provide group life insurance  coverage to certain  eligible retired
employees and an amount to fund certain overseas finance receivables.

      The Company has entered  into cash  collateral  loan  agreements  with DKB
pursuant  to which DKB made four loans to  separate  cash  collateral  trusts in
order to provide  additional  security for payments on the  certificates  of the
related  contract  trusts.  These contract trusts were formed for the purpose of
securitizing  certain  recreational  vehicle  and  recreational  marine  finance
receivables.  During  1998,  the  Company  replaced  DKB's  position in two cash
collateral loan agreements with a total payment made to DKB of $5.9 million.  At
December  31,  1999 and  1998,  the  principal  amount  outstanding  on the cash
collateral loans with DKB was $15.7 million and $34.3 million, respectively.

Note 22--Business Segment Information

Management's Policy in Identifying Reportable Segments

      The  Company's  reportable  segments are  comprised of strategic  business
units  aggregated  into segments based upon the  commonality of their  products,
customers,  distribution  methods,  operations and servicing,  and the nature of
their regulatory environment.

Types of Products and Services

      CIT  has  four  reportable  segments,  Equipment  Financing  and  Leasing,
Newcourt, Commercial Finance, and Consumer. Equipment Financing and Leasing, and
the former Newcourt  operations  offer secured  lending and leasing  products to
midsize and larger companies across a variety of industries including aerospace,
construction,  rail, machine tool, business aircraft, technology,  manufacturing
and transportation.  Prospectively, the Company expects to report the operations
of Newcourt by its Vendor  Technology  Finance and Structured  Finance segments.
However, for 1999 the Company's internal financial  information was prepared for
the Newcourt segment only due to the short period and the business restructuring
which took place as of year-end.  The Commercial  Finance segment offers secured
lending and  receivables  collection / management  products to small and midsize
companies.  These  include  secured  revolving  lines of credit and term  loans,
credit protection,  accounts receivable collection,  import and export financing
and  factoring,  debtor-in-possession  and turnaround  financing.  The Company's
Consumer segment offers retail  installment  sale products to consumers  focused
primarily  on home equity and retail  sales  financing  secured by  recreational
vehicles and manufactured housing.

Segment Profit and Assets

      The accounting policies of the segments are the same as those described in
the Summary of Significant  Accounting  Policies.  Since the Company generates a
majority of its revenue from interest,  fees, and asset gains, management relies
primarily on net revenues to assess the performance of the segment.  The Company


                                       60
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

evaluates  segment  performance  based on profit after income taxes,  as well as
asset growth, credit risk management and other factors.

      The  following  table  presents  reportable  segment  information  and the
reconciliation of segment balances to the consolidated financial statement total
and the consolidated managed asset total at or as of December 31, 1999, 1998 and
1997.

<TABLE>
<CAPTION>
                                  Equipment
                                  Financing             Commercial  Consumer    Total    Corporate  Consolidated
                                 and Leasing  Newcourt    Finance    Finance   Segments   and Other     Total
                                 -----------  --------  ----------  --------   --------  ----------  -----------
                                                                   Dollars in Millions
<S>                                 <C>        <C>        <C>        <C>      <C>         <C>       <C>
December 31, 1999
-----------------
Operating revenue .............   $   504.6  $   104.1   $  429.3   $  243.1  $ 1,281.1    $(12.9)   $ 1,268.2
Income taxes ..................       108.2        5.5      100.6       37.5      251.8     (44.2)       207.6
Net income ....................       231.5        7.5      141.4       60.0      440.4     (51.0)       389.4
Total managed assets ..........    19,206.1   16,813.7    7,002.1    7,274.1   50,296.0     137.3     50,433.3

December 31, 1998
-----------------
Operating revenue .............       447.3         --      348.7      222.4    1,018.4      41.8      1,060.2
Income taxes ..................        93.3         --       84.7       27.2      205.2     (20.2)       185.0
Net income ....................       193.9         --      119.1       44.3      357.3     (18.5)       338.8
Total managed assets ..........    13,367.0         --    4,996.2    7,771.2   26,134.4      81.9     26,216.3

December 31, 1997
-----------------
Operating revenue .............       414.8         --      343.5      210.9      969.2      77.3      1,046.5
Income taxes ..................        82.9         --       83.4       31.6      197.9     (19.9)       178.0
Net income ....................       163.4         --      112.7       49.6      325.7     (15.6)       310.1
Total managed assets ..........    11,709.7         --    4,250.8    6,318.6   22,279.1      65.8     22,344.9
</TABLE>

      Revenues  derived from United States based  financing  and leasing  assets
were  $2,641.0  million,  $2,129.9  million and  $2,001.6  million for the years
ending December 31, 1999,  1998 and 1997,  respectively.  Revenues  derived from
foreign based financing and leasing assets were $275.7  million,  $140.6 million
and $128.9  million  for the years  ending  December  31,  1999,  1998 and 1997,
respectively.

Note 23--Summarized Financial Information of Subsidiaries

      The following table shows summarized  consolidated  financial  information
for  Newcourt  Credit  Group  Inc.  and for AT&T  Capital.  AT&T  Capital  was a
subsidiary of Newcourt  Credit Group Inc. at December 31, 1999.  The Company has
guaranteed  on a full and  unconditional  basis  the  existing  registered  debt
securities and certain other indebtedness of these subsidiaries. The Company has
not  disclosed  related  financial  statements  or other  information  for these
subsidiaries on a stand-alone basis because  management does not believe that it
is material to debt holders due to the guarantee.


                                       61
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      The  following  summarized  consolidated  financial  information  reflects
results from the November 15, 1999 acquisition date through December 31, 1999.

<TABLE>
<CAPTION>
                                                                    Period Ended December 31, 1999
                                                          Newcourt Credit Group Inc.     AT&T Capital
                                                          --------------------------     ------------
                                                                          Dollars in Millions
<S>                                                                  <C>                      <C>
Operating revenue .......................................            $ 219.4                  $ 30.2
Operating expenses ......................................              206.4                    31.2
Operating income (loss) before taxes ....................               13.0                    (1.0)
Net income (loss) .......................................                7.5                    (0.7)

                                                                         At December 31, 1999
                                                          -------------------------------------------
ASSETS
Cash and cash equivalents ...............................            $ 423.7                 $ 179.0
Financing and leasing portfolio assets ..................           14,122.9                 5,250.1
Receivables from affiliates and other assets ............            2,543.5                 5,992.2
                                                                   ---------               ---------
Total assets ............................................          $17,090.1               $11,421.3
                                                                   =========               =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Debt ....................................................          $11,822.6               $10,050.6
Other ...................................................            2,327.4                   472.3
                                                                   ---------               ---------
Total liabilities .......................................           14,150.0                10,522.9
Total shareholders' equity ..............................            2,940.1                   898.4
                                                                   ---------               ---------
Total liabilities and shareholders' equity ..............          $17,090.1               $11,421.3
                                                                   =========               =========
</TABLE>

Note 24--Selected Quarterly Financial Data (Unaudited)

<TABLE>
<CAPTION>
                                                                                1999
                                                        -----------------------------------------------------
                                                         First     Second       Third      Fourth
                                                        Quarter    Quarter     Quarter     Quarter      Year
                                                        -------    -------     -------     -------      -----
                                                            Dollars in Millions, except per share amounts
<S>                                                     <C>         <C>        <C>         <C>         <C>
Net finance margin ...................................  $212.1      $214.4     $218.2      $272.7      $917.4
Fees and other income ................................    64.7        74.8       81.9       129.4       350.8
Salaries and general operating expenses ..............   105.8       108.0      110.2       192.0       516.0
Provision for credit losses ..........................    21.9        23.8       32.2        32.4       110.3
Goodwill amortization ................................     3.2         5.0        4.9        12.6        25.7
Minority interest in subsidiary trust holding
  solely debentures of the Company ...................     4.8         4.8        4.8         4.8        19.2
Provision for income taxes ...........................    49.2        51.3       51.1        56.0       207.6
Net income ...........................................  $ 91.9      $ 96.3     $ 96.9      $104.3      $389.4
Net income per diluted share .........................  $ 0.57      $ 0.59     $ 0.60      $ 0.49      $ 2.22
</TABLE>


                                       62
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


<TABLE>
<CAPTION>
                                                                                1998
                                                        ----------------------------------------------------
                                                         First     Second       Third      Fourth
                                                        Quarter    Quarter     Quarter     Quarter      Year
                                                        -------    -------     -------     -------      ----
                                                             Dollars in Millions, except per share amounts
<S>                                                     <C>         <C>        <C>         <C>         <C>
Net finance margin ...................................  $189.7      $200.0     $204.1      $211.0      $804.8
Fees and other income ................................    66.4        60.7       69.0        59.3       255.4
Salaries and general operating expenses ..............    99.4       101.7      103.0       103.6       407.7
Provision for credit losses ..........................    22.5        21.9       30.6        24.4        99.4
Goodwill amortization ................................     2.3         2.3        2.3         3.2        10.1
Minority interest in subsidiary trust holding
  solely debentures of the Company ...................     4.8         4.8        4.8         4.8        19.2
Provision for income taxes ...........................    45.4        46.3       46.3        47.0       185.0
Net income ...........................................  $ 81.7      $ 83.7     $ 86.1      $ 87.3      $338.8
Net income per diluted share .........................  $ 0.50      $ 0.51     $ 0.53      $ 0.54      $ 2.08
</TABLE>

Item  9.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure.

      None.


                                       63
<PAGE>

                                    PART III

Item 10. Directors and Executive Officers of the Registrant.

      The  information  called for by Item 10 is  incorporated by reference from
the  information  under the caption  "Election of  Directors"  and  "Election of
Directors --  Executive  Officers"  in our Proxy  Statement  for our 2000 annual
meeting of stockholders.

Item 11. Executive Compensation.

      The  information  called for by Item 11 is  incorporated by reference from
the  information  under the caption  "Compensation  of Directors  and  Executive
Officers" in our Proxy Statement for our 2000 annual meeting of stockholders.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

      The  information  called for by Item 12 is  incorporated by reference from
the  information  under  the  caption  "Principal  Shareholders"  in  our  Proxy
Statement for our 2000 annual meeting of stockholders.

Item 13. Certain Relationships and Related Transactions.

      The  information  called for by Item 13 is  incorporated by reference from
the  information   under  the  caption   "Certain   Relationships   and  Related
Transactions"   in  our  Proxy   Statement  for  our  2000  annual   meeting  of
stockholders.


                                       64
<PAGE>

                                     PART IV

Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K.

      (a) The following  documents are filed with the  Securities and Exchange
          Commission as part of this report:

          1. The financial statements of The CIT Group, Inc. and Subsidiaries as
             set forth on pages 31 - 63.

          2. All  schedules  are  omitted  because  they are not  applicable  or
             because  the  required  information  appears  in  the  consolidated
             financial statements or the notes thereto.

          3. The  following is an index of the Exhibits  required by Item 601 of
             Regulation S-K filed with the Securities and Exchange Commission as
             part of this report:

             3.1   Amended and Restated  Certificate of Incorporation of The CIT
                   Group,   Inc.,  dated  November  12,  1997  (incorporated  by
                   reference  to Exhibit 3.1 to Form 8-A filed by CIT on October
                   29, 1997).

             3.2   By-Laws of The CIT  Group,  Inc.,  dated  November  12,  1997
                   (incorporated  by  reference to Exhibit 3.2 to Form 8-A filed
                   by CIT on October 29, 1997).

             4.1   Form of certificate of Class A Common Stock  (incorporated by
                   reference  to Exhibit 4.1 to Form 8-A filed by CIT on October
                   29, 1998).

             4.2   Upon the request of the Securities  and Exchange  Commission,
                   the Company will furnish a copy of all  instruments  defining
                   the rights of holders of long-term debt of CIT.

             10.1  Regulatory  Compliance  Agreement,  dated  November  18, 1997
                   (incorporated by reference to Exhibit 10.4 to Amendment No. 2
                   to Form S-2 filed by CIT on November 12, 1997).

             10.2  Registration  Rights  Agreement,   dated  November  18,  1997
                   (incorporated by reference to Exhibit 10.5 to Amendment No. 2
                   to Form S-2 filed by CIT on November 12, 1997).

             10.3  Employment Agreement of Albert R. Gamper, Jr., dated April 1,
                   1997,  comparable to the  agreement  for Joseph A.  Pollicino
                   (incorporated by reference to Exhibit 10.6 to Amendment No. 2
                   to Form S-2 filed by the Company on November 12, 1997).

             10.4  Employment  Agreement of Joseph M. Leone,  dated  November 2,
                   1998, comparable to the agreements for William M. O'Grady and
                   Ernest D. Stein.

             10.5  The CIT  Group  Bonus  Plan  (incorporated  by  reference  to
                   Exhibit 10 (d) to Form 10-K filed by CIT  for the fiscal year
                   ended December 31, 1992).

             10.6  The  CIT  Group  Holdings,  Inc.  Supplemental  Savings  Plan
                   (incorporated  by  reference  to  Exhibit  10(f) to Form 10-K
                   filed by CIT for the fiscal year ended December 31, 1992).

             10.7  The CIT Group  Holdings,  Inc.  Supplemental  Retirement Plan
                   (incorporated  by  reference  to  Exhibit  10(g) to Form 10-K
                   filed by CIT for the fiscal year ended December 31, 1992).

             10.8  The CIT Group Holdings,  Inc.  Executive  Retirement Plan and
                   New Executive  Retirement  Plan, each effective as of January
                   1,  1995  (incorporated  by  reference  to  Exhibit  10.12 to
                   Amendment No. 2  to  Form S-2  filed  by CIT on  November 12,
                   1997).

             10.9  The CIT Group, Inc.  Long-Term Equity  Compensation  Plan, as
                   amended and restated as of October 26, 1999 (incorporated  by
                   reference  to  Annex P to  the Joint  Management  Information
                   Circular and Proxy Statement filed by CIT and Newcourt Credit
                   Group Inc. on September 21, 1999).

             10.10 The CIT Group,  Inc. Employee Stock Purchase Plan, as amended
                   and restated January 28, 1999 and  amended September 17, 1999
                   (incorporated   by  reference   to   Annex  R  to   the Joint
                   Management  Information Circular and Proxy Statement filed by
                   CIT and Newcourt Credit Group Inc. on September 21, 1999).


                                       65
<PAGE>

             10.11 The CIT  Group,  Inc.  Transition  Option  Plan,  dated as of
                   November 15, 1999 (incorporated  by reference  to  Annex Q to
                   the Joint Management Information Circular and Proxy Statement
                   filed by CIT and Newcourt Credit Group Inc. on September 21,
                   1999).

             12    Computation  of Ratios of Earnings to Fixed Charges.

             21    Subsidiaries of the Registrant.

             23    Consent of KPMG LLP.

             24    Powers of Attorney

             27    Financial Data Schedule (filed electronically)

      (b) A Current  Report on Form 8-K,  dated October 4, 1999,  was filed with
the  Securities  and  Exchange  Commission  regarding  the  announcement  of  an
agreement between Heller Financial, Inc. and The CIT Group/Commercial  Services,
Inc.,  pursuant  to which CIT would  purchase  the assets of  Heller's  domestic
factoring business.

      A Current  Report on Form 8-K,  dated  October 25, 1999 was filed with the
Securities and Exchange  Commission  reporting CIT's announcement of results for
the quarter ended September 30, 1999.

      A Current  Report on Form 8-K,  dated October 26, 1999, was filed with the
Securities and Exchange  Commission  regarding the approval by stockholders at a
Special Meeting of  Stockholders  of the pending  acquisition of Newcourt Credit
Group Inc. and the declaration of a dividend for the quarter ended September 30,
1999.

      A Current  Report on Form 8-K, dated November 15, 1999, was filed with the
Securities  and  Exchange  Commission   reporting  CIT's  announcements  of  the
completion  of the  acquisition  of  Newcourt  Credit  Group  Inc.  and of CIT's
guarantee  of  all  public   indebtedness   of  Newcourt  and  of  AT&T  Capital
Corporation.

      A Current  Report on Form 8-K, dated November 23, 1999, was filed with the
Securities and Exchange  Commission  reporting  CIT's  announcement of a consent
solicitation relating to certain of its public debt.


                                       66
<PAGE>

                                   SIGNATURES

      Pursuant  to the  requirements  of Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                 THE CIT GROUP, INC.

                                 By:            /s/ ERNEST D. STEIN
                                    -------------------------------------------
                                                  Ernest D. Stein
                                     Executive Vice President, General Counsel
                                                   and Secretary

March 28, 2000

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

               Signature and Title                                    Date
                ----------------                                      ----
             ALBERT R. GAMPER, JR.*
-------------------------------------------------
              Albert R. Gamper, Jr.
 President, Chief Executive Officer and Director
          (principal executive officer)


                 DANIEL P. AMOS*
-------------------------------------------------
                 Daniel P. Amos
                    Director

                  ANTHEA DISNEY*
-------------------------------------------------
                  Anthea Disney
                    Director

                WILLIAM A. FARLINGER*
-------------------------------------------------
                William A. Farlinger
                    Director

                    GUY HANDS*
-------------------------------------------------
                    Guy Hands
                    Director

                  THOMAS H. KEAN*
-------------------------------------------------
                  Thomas H. Kean
                    Director

                   PAUL MORTON*
-------------------------------------------------
                   Paul Morton
                    Director

                 TAKATSUGU MURAI*
-------------------------------------------------
                 Takatsugu Murai
                    Director

                WILLIAM M. O'GRADY*
-------------------------------------------------
                William M. O'Grady
                    Director

              JOSEPH A. POLLICINO*
-------------------------------------------------
               Joseph A. Pollicino
                    Director

                  PAUL N. ROTH*
-------------------------------------------------
                  Paul N. Roth
                    Director

                 PETER J. TOBIN*
-------------------------------------------------
                 Peter J. Tobin
                    Director


                                       67
<PAGE>

               Signature and Title                                    Date
                ----------------                                      ----

                   KEIJI TORII*
-------------------------------------------------
                   Keiji Torii
                    Director

              THEODORE V. WELLS, JR.*
-------------------------------------------------
              Theodore V. Wells, Jr.
                    Director

                 ALAN F. WHITE*
-------------------------------------------------
                  Alan F. White
                    Director

               /s/ JOSEPH M. LEONE                                March 28, 2000
-------------------------------------------------
                 Joseph M. Leone
             Executive Vice President and
                Chief Financial Officer
            (principal accounting officer)

       *BY:   /s/ ERNEST D. STEIN                                 March 28, 2000
-------------------------------------------------
              Ernest D. Stein
             Attorney-In-Fact

      Original powers of attorney  authorizing Albert R. Gamper,  Jr., Ernest D.
Stein,  and  James  P.  Shanahan  and  each of them  to  sign on  behalf  of the
above-mentioned  directors  are  held  by  the  Corporation  and  available  for
examination by the Securities and Exchange Commission pursuant to Item 302(b) of
Regulation S-T.


                                       68