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

                                  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, 2000

                                       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) 536-1390

                                   ----------

          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  Exhangeable
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
($23.10 per share), which occurred on February 28, 2001, was $3,059,674,418. 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 28, 2001, 262,212,301 shares of
CIT's Common Stock  including  Exchangeable  Shares,  par value $0.01 per share,
were outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE

      List hereunder the following  documents if  incorporated  by Reference and
the Part of the Form 10-K (e.g.,  Part I, Part II, etc.) into which the document
is  incorporated:  (1) Any annual report to security  holders;  (2) Any proxy or
information  statement;  and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the  Securities Act of 1933.  The listed  documents  should be clearly
described for identification  purposes (e.g.,  annual report to security holders
for fiscal year ended December 24, 1980).

                                      None

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

<PAGE>

                                TABLE OF CONTENTS
--------------------------------------------------------------------------------

Form 10-K
 Item No.                         Name of Item                              Page
---------                         ------------                              ----

                                     Part I

Item 1.  Business ........................................................    1
           Overview ......................................................    1
           First Quarter 2001 Business Unit Transfers ....................    8
           Common Stock ..................................................    8
           Securitization Program ........................................    8
           Industry Concentration ........................................    9
           Competition ...................................................    9
           Regulation ....................................................    9
Item 2.  Properties ......................................................    10
Item 3.  Legal Proceedings ...............................................    10
Item 4.  Submission of Matters to a Vote of Security Holders .............    10

                                     Part II

Item 5.  Market for Registrant's Common Equity and Related
           Stockholder Matters ...........................................    11
Item 6.  Selected Financial Data .........................................    12
Item 7.  Management's Discussion and Analysis of Financial
and        Condition and Results of Operations ...........................    14
Item 7A. Quantitative and Qualitative Disclosure about Market Risk .......    14
Item 8.  Financial Statements and Supplementary Data .....................    30
Item 9.  Changes in and Disagreements with Accountants on
           Accounting and Financial Disclosure ...........................    61

                                    Part III

Item 10. Directors and Executive Officers of the Registrant ..............    62
Item 11. Executive Compensation ..........................................    62
Item 12. Security Ownership of Certain Beneficial Owners
           and Management ................................................    62
Item 13. Certain Relationships and Related Transactions ..................    62

                                     Part IV

Item 14. Exhibits, Financial Statement Schedule and
           Reports on Form 8-K ...........................................    63


                                       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 risk management,
      o     our credit risk management,
      o     our asset/liability risk management,
      o     our capital, leverage and credit ratings,
      o     our operational and legal risks, and
      o     how we may be affected by 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 market interest rates,
      o     funding opportunities and borrowing costs,
      o     changes in funding markets,  including  commercial  paper, term debt
            and the asset-backed securitization markets,
      o     uncertainties  associated with risk  management,  including  credit,
            prepayment, asset/liability, interest rate and currency risks,
      o     adequacy of reserves for credit losses,
      o     risks  associated  with  the  value  and  recoverability  of  leased
            equipment and lease residual values,
      o     changes in  regulations  governing  our business and  operations  or
            permissible activities, and
      o     changes in competitive factors.


                                       ii

<PAGE>

                                     PART I

Item 1. Business

OVERVIEW

      The  CIT  Group,   Inc.,   ("we,"  "our,"  "us,"  or  "CIT"),  a  Delaware
corporation,  is a leading  global source of financing  and leasing  capital for
companies  in more  than  30  industries,  including  many  of  today's  leading
industries and emerging  businesses,  offering  vendor,  equipment,  commercial,
factoring, consumer, and structured financing capabilities. We had $54.9 billion
of managed assets and $6.0 billion of stockholders' equity at December 31, 2000.
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.  CIT became a
public  company in  November  1997 in an initial  public  offering  ("IPO").  At
December 31, 2000, The Dai-Ichi Kangyo Bank, Limited ("DKB") owned approximately
27% of the outstanding stock (including the exchangeable  shares).  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  were significantly  expanded in November 1999, when we acquired
Newcourt Credit Group Inc. ("Newcourt").

      On March 13, 2001,  Tyco  International  Ltd.  (NYSE:  TYC), a diversified
manufacturing  and service  company,  and CIT  announced a definitive  agreement
whereby  Tyco will acquire  CIT. As part of this  transaction,  Tyco has entered
into a purchase  agreement with DKB for their  approximate  27% interest,  or 71
million  shares,  at a price of $35.02,  in cash,  per CIT share.  The remaining
shareholders  will  receive  0.6907  Tyco  shares  for  each  share  of CIT in a
tax-free,  stock-for-stock exchange. The transaction, which is expected to close
during  the  third  quarter  of 2001,  is  valued  at  $35.02  per  share to CIT
shareholders,  or  approximately  $9.2  billion,  based on Tyco's March 12, 2001
closing stock price.

      The financial  data in this section  reflects the five  business  segments
that comprise CIT, as follows:

      Commercial Segments:

      o     Equipment Financing and Leasing

      o     Vendor Technology Finance

      o     Commercial Finance

      o     Structured Finance

      Consumer Segment:

      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 in the following pages.


                                       1
<PAGE>

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: manufacturing, retailing, transportation,
aerospace,  construction  and various  service related  industries.  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,  debtor-in-possession  and
turnaround financing, and acquisition and expansion financing.

      The  following  table  sets  forth the  managed  assets of our  commercial
operations  at December 31 for each of the years in the  five-year  period ended
December 31, 2000. At December 31, 2000,  our  commercial  segments  represented
88.1% and 86.8% of  consolidated  financing and leasing assets and total managed
assets,  respectively.  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>
Commercial Segments                                                       December 31,
-------------------------------------------   -------------------------------------------------------------------
Dollars in Millions                              2000           1999          1998          1997           1996
                                              ---------      ---------     ---------     ---------      ---------
<S>                                           <C>            <C>           <C>           <C>            <C>
Equipment Financing and Leasing ...........   $20,078.0      $17,016.7     $13,367.0     $11,709.7      $11,321.6
Vendor Technology Finance .................     8,121.0        9,597.7            --            --             --
Commercial Finance ........................     7,693.7        7,002.1       4,996.2       4,250.8        3,838.1
Structured Finance ........................     2,691.9        2,071.2          81.9            --             --
                                              ---------      ---------     ---------     ---------      ---------
  Total financing and leasing assets ......    38,584.6       35,687.7      18,445.1      15,960.5       15,159.7
Finance receivables previously
  securitized and still managed
  by us ...................................     9,075.9        8,471.5            --            --             --
                                              ---------      ---------     ---------     ---------      ---------
Total managed assets ......................   $47,660.5      $44,159.2     $18,445.1     $15,960.5      $15,159.7
                                              =========      =========     =========     =========      =========
</TABLE>

      The table above reflects  various asset transfers among our business units
in connection with our integration and  profitability  improvement  initiatives.
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  certain  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
select finance  receivables and equipment  under  operating  leases for risk and
other balance sheet management purposes, or to improve profitability.

Equipment Financing and Leasing Segment

      Our Equipment  Financing and Leasing  operations  had total  financing and
leasing  assets of $20.1  billion at December  31, 2000,  representing  45.9% of
total financing and leasing assets. On a managed basis,  Equipment Financing and
Leasing totaled $26.5 billion or 48.2% of total managed  assets.  We conduct our
Equipment Financing and Leasing operations through two strategic business units:

      o     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   in   manufacturing,    construction,
            transportation, food services/stores and other industries.

      o     Capital  Finance offers secured  equipment  financing and leasing by
            directly marketing customized  transactions,  particularly operating
            leases of commercial aircraft and rail equipment.

      Equipment Financing and Capital Finance personnel have extensive expertise
in  managing  equipment  over its full  life  cycle,  including  purchasing  new
equipment,  maintaining and repairing equipment,  estimating residual values and
re-marketing  via re-leasing or selling  equipment.  Equipment  Financing's  and
Capital Finance's  equipment and industry  expertise enables them to effectively
manage  residual  value  risk.  For  example,   Capital  Finance  can  repossess
commercial aircraft,  if necessary,  obtain any required maintenance and repairs
for such


                                       2
<PAGE>

aircraft,  and recertify such aircraft with appropriate  authorities.  We manage
the  equipment,  residual  value,  and the risk of equipment  remaining idle for
extended periods of time and where appropriate,  we locate alternative equipment
users or  purchasers.  For each year in the period 1996 through 2000,  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 the managed assets of our Equipment Financing and
Leasing  segment at  December 31 for each of the years in the  five-year  period
ended December 31, 2000.

<TABLE>
<CAPTION>
Equipment Financing and Leasing                                           December 31,
-------------------------------------------   -------------------------------------------------------------------
Dollars in Millions                             2000          1999           1998          1997           1996
                                              ---------      ---------     ---------     ---------      ---------
<S>                                           <C>            <C>           <C>           <C>            <C>
Finance receivables .......................   $14,202.7      $12,999.6     $10,592.9     $ 9,804.1      $ 9,919.5
Operating lease equipment, net ............     5,875.3        4,017.1       2,774.1       1,905.6        1,402.1
                                              ---------      ---------     ---------     ---------      ---------
  Total financing and leasing assets ......    20,078.0       17,016.7      13,367.0      11,709.7       11,321.6
Finance receivables previously
  securitized and still managed
  by us ...................................     6,387.2        2,189.4            --            --             --
                                              ---------      ---------     ---------     ---------      ---------
Total managed assets ......................   $26,465.2      $19,206.1     $13,367.0     $11,709.7      $11,321.6
                                              =========      =========     =========     =========      =========
</TABLE>

      During 2000,  certain  transfers were completed to better align  marketing
and risk management efforts, to further improve operating  efficiencies,  and to
implement a more uniform North American  strategy.  These transfers are detailed
in Item 7.  Management's  Discussion  and  Analysis of Financial  Condition  and
Results of Operations,  under "Financing and Leasing Assets",  and were in large
part the reason for the  increase  in managed  assets,  in 2000,  for  Equipment
Financing and Leasing.

Equipment Financing

      Equipment  Financing is the largest of our strategic  business  units with
total  financing  and  leasing  assets of $14.4  billion at December  31,  2000,
representing 33.0% of our total financing and leasing assets. On a managed asset
basis,  Equipment  Financing  represents $20.8 billion or 37.9% of total managed
assets.  Equipment  Financing  offers  secured  equipment  financing and leasing
products,   including  loans,   leases,   wholesale  and  retail  financing  for
distributors  and  manufacturers,  loans  guaranteed by the U.S.  Small Business
Administration,  operating leases,  sale and leaseback  arrangements,  portfolio
acquisitions,   municipal  leases,   revolving  lines  of  credit  and  in-house
syndication capabilities.

      Equipment  Financing is a diversified,  middle market,  secured  equipment
lender  that  has a  global  presence,  with  strong  North  American  marketing
coverage. At December 31, 2000, 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.

      The following  table sets forth the managed assets of Equipment  Financing
at December 31 for each of the years in the five-year  period ended December 31,
2000.

<TABLE>
<CAPTION>
Equipment Financing                                                       December 31,
-------------------------------------------   -------------------------------------------------------------------
Dollars in Millions                             2000          1999           1998          1997           1996
                                              ---------      ---------     ---------     ---------      ---------
<S>                                           <C>            <C>            <C>           <C>            <C>
Finance receivables .......................   $12,153.7      $10,899.3      $8,497.6      $7,403.4       $5,616.8
Operating lease equipment, net ............     2,280.7        1,066.2         765.1         623.8          426.6
                                              ---------      ---------      --------      --------       --------
  Total financing and leasing assets ......    14,434.4       11,965.5       9,262.7       8,027.2        6,043.4
Finance receivables previously
  securitized and still managed
  by us ...................................     6,387.2        2,189.4            --            --             --
                                              ---------      ---------      --------      --------       --------
Total managed assets ......................   $20,821.6      $14,154.9      $9,262.7      $8,027.2       $6,043.4
                                              =========      =========      ========      ========       ========
</TABLE>


                                       3
<PAGE>

Capital Finance

      Capital  Finance  had  financing  and  leasing  assets of $5.6  billion at
December 31, 2000,  which  represented  12.9% of our total financing and leasing
assets and 10.3% of managed  assets.  Capital  Finance  specializes in providing
customized  leasing and secured  financing  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.  New business is generated  through  direct calling
efforts  supplemented with transactions  introduced by intermediaries  and other
referral sources.

      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,  with the fleet approaching 300 aircraft,  most
of which are 10 years old or less.  Capital Finance has developed  strong direct
relationships  with most major  airlines  and all major  aircraft  and  aircraft
engine  manufacturers.  This provides  Capital  Finance with access to technical
information,  which enhances  customer  service,  and provides  opportunities to
finance new business. During 2000 and 1999, we entered into agreements with both
Airbus Industrie and the Boeing Company to purchase a total of 88 aircraft, with
options to acquire additional units. Deliveries of these new aircraft, which are
scheduled to take place over a five-year  period,  started in the fourth quarter
of 2000.  All aircraft  scheduled for delivery  through 2001 have been placed on
lease, with other customers already in place for 2002 and 2003 deliveries.

      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 shippers 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.  Railcars total in
excess of 45,000, with approximately 78% less than 6 years old. In addition, the
rail portfolio also includes over 400 locomotives.

      The following table sets forth the financing and leasing assets of Capital
Finance  at  December  31 for each of the years in the  five-year  period  ended
December 31, 2000.

<TABLE>
<CAPTION>
Capital Finance                                                            December 31,
-------------------------------------------    ------------------------------------------------------------------
Dollars in Millions                              2000           1999          1998          1997           1996
                                               --------       --------      --------      --------       --------
<S>                                            <C>            <C>           <C>           <C>            <C>
Finance receivables .......................    $2,049.0       $2,100.3      $2,095.3      $2,400.7       $4,302.7
Operating lease equipment, net ............     3,594.6        2,950.9       2,009.0       1,281.8          975.5
                                               --------       --------      --------      --------       --------
  Total financing and leasing
    assets ................................    $5,643.6       $5,051.2      $4,104.3      $3,682.5       $5,278.2
                                               ========       ========      ========      ========       ========
</TABLE>

Vendor Technology Finance Segment

      Vendor   Technology   Finance  was   realigned   following   our  Newcourt
acquisition.  The  financing  and leasing  assets of Vendor  Technology  Finance
("VTF")  totaled $8.1 billion and  comprised  18.5% of our total  financing  and
leasing assets at December 31, 2000. On a managed asset basis, VTF totaled $10.8
billion or 19.7% of total managed assets.  VTF customers range from small-market
businesses  and  consumers to  larger-sized  companies.  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. This international platform provides a global presence to attract
and retain large, sales oriented  corporate vendor partners through  traditional
vendor finance programs, joint ventures and profit sharing arrangements.

      VTF builds alliances with  industry-leading  equipment vendors,  including
manufacturers, dealers and distributors, to deliver customized asset-based sales
and  financing  solutions in a wide array of vendor  programs.  These  alliances
allow our vendor  partners to better utilize core  competencies,  reduce capital
needs and drive  incremental  sales volume.  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


                                       4
<PAGE>

management   services,   efficient  loan   processing,   and  real-time   credit
adjudication.  By working in partnership with select vendors,  VTF is integrated
with the vendor's  business  planning  process and product  offering  systems to
improve execution and reduce cycle times. VTF has significant vendor programs in
information technology and telecommunications.

      These vendor  alliances are  characterized  by the use of joint  ventures,
profit sharing and other transaction structures.  In the case of joint ventures,
VTF and the vendor combine financing  activities through a distinct legal entity
that is jointly owned.  Generally,  these  arrangements  are accounted for on an
equity basis, with profits and losses distributed according to the joint venture
agreement.  Additionally, VTF generally purchases finance receivables originated
by the joint venture  entities.  VTF also  utilizes  "virtual  joint  ventures",
whereby the assets are  originated  on VTF's  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.

      The  following  table sets forth the managed  assets of Vendor  Technology
Finance at December 31, 2000 and 1999.

Vendor Technology Finance                                      December 31,
----------------------------------------------------     -----------------------
Dollars in Millions                                         2000          1999
                                                         ---------     ---------
Finance receivables ................................     $ 6,864.5     $ 7,488.9
Operating lease equipment, net .....................       1,256.5       2,108.8
                                                         ---------     ---------
  Total financing and leasing assets ...............       8,121.0       9,597.7
Finance receivables previously securitized
  and still managed by us ..........................       2,688.7       6,282.1
                                                         ---------     ---------
Total managed assets ...............................     $10,809.7     $15,879.8
                                                         =========     =========

      During 2000,  certain  transfers were completed to better align  marketing
and risk management efforts, to further improve operating  efficiencies,  and to
implement a more uniform North American  strategy.  These transfers are detailed
in Item 7.  Management's  Discussion  and  Analysis of Financial  Condition  and
Results of Operations, under "Financing and Leasing Assets".

Commercial Finance Segment

      At December 31, 2000,  the financing and leasing  assets of our Commercial
Finance segment totaled $7.7 billion,  representing 17.6% of total financing and
leasing assets and 14.0% of managed  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     Commercial  Services provides secured financing as well as factoring
            and  receivable/collection   management  products  to  companies  in
            apparel, textile, furniture, home furnishings, and other industries.

      o     Business  Credit  provides  secured  financing  to a full  range  of
            borrowers from small to larger-sized companies.

      The  following  table  sets  forth the  financing  and  leasing  assets of
Commercial  Finance at December 31 for each of the years in the five-year period
ended December 31, 2000.

<TABLE>
<CAPTION>
Commercial Finance                                                    December 31,
-------------------------------------------    ------------------------------------------------------------------
Dollars in Millions                              2000           1999          1998          1997           1996
                                               --------       --------      --------      --------       --------
<S>                                            <C>            <C>           <C>           <C>            <C>
Commercial Services .......................    $4,277.9       $4,165.1      $2,481.8      $2,113.1       $1,804.7
Business Credit ...........................     3,415.8        2,837.0       2,514.4       2,137.7        2,033.4
                                               --------       --------      --------      --------       --------
  Total financing and leasing assets ......    $7,693.7       $7,002.1      $4,996.2      $4,250.8       $3,838.1
                                               ========       ========      ========      ========       ========
</TABLE>

      In  1999,  Commercial  Services  completed  the  acquisitions  of  certain
domestic assets,  which added in excess of $1.5 billion in financing and leasing
assets.


                                       5
<PAGE>

Commercial Services

      Commercial Services had total financing and leasing assets of $4.3 billion
at December 31, 2000, which  represented 9.8% of our total financing and leasing
assets and 7.8% of managed  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
receivables  or  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 and improving  management  information.  Further,
with the TotalSourceSM product,  clients can outsource  bookkeeping,  collection
and other  receivable  processing  activities.  These services are attractive to
industries outside the typical factoring markets, providing growth opportunities
for Commercial Services.

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

Business Credit

      Financing and leasing  assets of Business  Credit  totaled $3.4 billion at
December 31, 2000 and represented 7.8% of our total financing and leasing assets
and 6.2% of managed  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.  Business Credit recently formed a joint venture
with a leading  Canadian bank to originate  flow  business,  which is outside of
that bank's standard product offerings.

Structured Finance Segment

      Structured  Finance  had  financing  and leasing  assets of $2.7  billion,
comprising  6.1% of our total  financing and leasing  assets and 4.9% of managed
assets at December 31, 2000. Structured Finance operates internationally through
operations in the United States, Canada, and Europe. Structured Finance provides
specialized investment


                                       6
<PAGE>

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.  Similar to
Vendor Technology  Finance,  Structured Finance was realigned following the 1999
acquisition of Newcourt.

      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.

      During 2000,  certain  transfers were completed to better align  marketing
and risk management efforts, to further improve operating  efficiencies,  and to
implement a more uniform North American  strategy.  These transfers are detailed
in Item 7.  Management's  Discussion  and  Analysis of Financial  Condition  and
Results of Operations,  under "Financing and Leasing Assets". Equity Investments
and its subsidiary  Venture Capital  (together "Equity  Investments")  were also
moved to Structured Finance.  Structured Finance and Equity Investments continue
to originate and purchase private equity and equity-related securities,  arrange
transaction  financing and participate in merger and  acquisition  transactions.
Equity  Investments has  investments in emerging growth  enterprises in selected
industries, including the information technology,  communications,  life science
and consumer products industries.

      The  following  table  sets  forth the  financing  and  leasing  assets of
Structured Finance at December 31, 2000 and 1999.

Structured Finance                                            December 31,
----------------------------------------------------     -----------------------
Dollars in Millions                                        2000           1999
                                                         --------       --------
Finance receivables ................................     $2,347.3       $1,933.9
Operating lease equipment, net .....................         58.8             --
Other -- Equity Investments ........................        285.8          137.3
                                                         --------       --------
  Total financing and leasing assets ...............     $2,691.9       $2,071.2
                                                         ========       ========

Consumer Segment

      Our Consumer segment  financing and leasing assets totaled $5.2 billion at
December 31, 2000,  representing  11.9% of total  financing and leasing  assets.
Total Consumer managed assets were $7.2 billion, representing 13.2% of our total
managed assets.

      Our consumer  business is focused  primarily on home equity lending and on
retail  sales  financing  secured  by  recreational  vehicles  and  manufactured
housing.  As a  part  of an  ongoing  strategy  to  maximize  the  value  of our
origination  network and to improve  overall  profitability,  the Consumer  unit
sells  individual  loans and  portfolios  of loans to banks,  thrifts  and other
originators of consumer  loans.  The unit also provides  contract  servicing for
securitization  trusts  and other  third  parties  through a  centralized  Asset
Service Center.

      The following table sets forth the managed assets of our Consumer  segment
at December 31 for each of the years in the five-year  period ended December 31,
2000.

<TABLE>
<CAPTION>
Consumer                                                                   December 31,
-------------------------------------------    ------------------------------------------------------------------
Dollars in Millions                              2000           1999          1998          1997           1996
                                               --------       --------      --------      --------       --------
<S>                                            <C>            <C>           <C>           <C>            <C>
Financing and leasing assets:
  Home equity .............................    $2,451.7       $2,215.4      $2,244.4      $1,992.3       $2,005.5
  Manufactured housing ....................     1,802.1        1,666.9       1,417.5       1,125.7          790.2
  Recreational vehicles ...................       648.0          361.2         744.0         501.9          510.1
  Liquidating portfolio* ..................       298.2          462.8         848.4         313.1           49.5
                                               --------       --------      --------      --------       --------
Total financing and leasing assets ........     5,200.0        4,706.3       5,254.3       3,933.0        3,355.3
Finance receivables previously
  securitized and still managed
  by us ...................................     2,040.4        2,567.8       2,516.9       2,385.6        1,437.4
                                               --------       --------      --------      --------       --------
Total managed assets ......................    $7,240.4       $7,274.1      $7,771.2      $6,318.6       $4,792.7
                                               ========       ========      ========      ========       ========
</TABLE>

----------
*     Balances include recreational boat and wholesale loan product lines exited
      in 1999. Prior year balances have been conformed.


                                       7
<PAGE>

      Our home equity products include both fixed and  variable-rate  closed-end
loans and variable-rate  lines of credit. We primarily  originate,  purchase and
service  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 and  correspondents  with a
high proportion of home equity  applications  processed  electronically over the
internet via BrokerEdgeSM  using our proprietary  systems.  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.  Our underwriting  standards  reflect a commitment to
credit quality,  as almost 80% of the portfolio are in a first lien position and
the weighted average loan to value ratio at origination is approximately 75%.

      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  segment,  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  segment for a fee on a
"contract" basis. These third-party  portfolios totaled $1.4 billion at December
31, 2000.

FIRST QUARTER 2001 BUSINESS UNIT TRANSFERS

      Certain small-ticket commercial businesses were transferred from Equipment
Financing  to Consumer.  Accordingly,  effective  January 1, 2001,  the Consumer
segment was renamed Specialty Finance.

COMMON STOCK

      At December 31, 2000, CIT had 261,897,768 issued and outstanding shares of
common stock, including 11,637,709 exchangeable shares of CIT Exchangeco Inc. At
December 31, 2000, DKB, our largest shareholder,  owned approximately 27% of our
outstanding 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 each of 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 gain or loss  recognition  on the  acquisition  for income tax
purposes. 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.

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 an array of programs to access  both the public and private  asset  backed
securitization  markets.  Current  products  utilized in these programs  include
commercial  receivables  and leases and consumer  loans secured by  recreational
vehicles and residential  real estate.  During 2000, we securitized $4.1 billion
of financing and leasing assets and the outstanding securitized asset balance at
December 31, 2000 was $11.1  billion or 20.2% of our total managed  assets.  The
1999   Newcourt   acquisition   provided  us  with   commercial   securitization
capabilities.

      Under a typical asset backed  securitization,  we sell a "pool" of secured
loans  or  leases  to  a   special-purpose   entity,   typically  a  trust.  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


                                       8
<PAGE>

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  special-purpose  entity,  cash reserve accounts on deposit in the
special-purpose entity or interest only receivables) and recognize a gain.

      In estimating residual cash flows and the value of the retained interests,
we make a variety  of  financial  assumptions,  including  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 review them quarterly for 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, 2000 of $840.4 million, including
interests  in  commercial  securitized  assets of $684.5  million  and  consumer
securitized  assets of $155.9 million.  Retained interests are subject to credit
and prepayment risk. Our interests relating to commercial securitized assets are
generally subject to lower prepayment risk because of their  contractual  terms.
These assets are subject to the same credit  granting and  monitoring  processes
which are  described  in the Item 7.  Management's  Discussion  and  Analysis of
Financial  Condition and Results of  Operations  and Item 7A.  Quantitative  and
Qualitative  Disclosures  about  Market  Risk in the  "Credit  Risk  Management"
section.

INDUSTRY CONCENTRATION

      See the  "Industry  Composition"  section of  "Concentrations"  in Item 7.
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations and Item 7A.  Quantitative and Qualitative  Disclosures  about Market
Risk.

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 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;  though,  in the
second half of 2000, the economy  slowed,  marketplace  liquidity  tightened and
borrowing   costs   increased.   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.

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.  Since DKB owns  approximately  27% of CIT's
outstanding  common stock,  we are subject to certain  provisions of the Act and
examination by the Federal Reserve System (the "Federal  Reserve").  In general,
the Act limits the activities in which a bank holding


                                       9
<PAGE>

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  determined to be "so closely
related to banking or managing or controlling  banks as to be a proper  incident
thereto" as of November  11, 1999.  Our current  principal  business  activities
constitute  permissible  activities for a non-bank  subsidiary of a bank holding
company.

      Our  operations are subject,  in certain  instances,  to  supervision  and
regulation by state,  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.  In addition
to the foregoing,  CIT Online Bank, a Utah  industrial loan  corporation  wholly
owned by CIT, is subject to regulation and  examination  by the Federal  Deposit
Insurance Corporation and the Utah Department of Financial Institutions.

      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.

      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,  their  staffs or any 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 DKB obtains the required
prior  approval,  gives such prior  notice or makes  such  filings.  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,  DKB
determines  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.

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 and 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 did not submit any  matters to a vote of  security  holders  during the
fourth quarter of 2000.


                                       10
<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>
                                                       2000                     1999                      1998
                                                -------------------      -------------------       -------------------
Common Stock Prices                               High       Low           High       Low            High       Low
-------------------                             --------   --------      --------   --------       --------   --------
<S>                                             <C>        <C>           <C>        <C>            <C>        <C> <C>
First Quarter ...............................   $22 3/16   $13 5/8       $33 7/16   $27 5/8        $33        $29 7/16
Second Quarter ..............................   $19 3/16   $14 7/8       $33 13/16  $27 9/16       $37 1/2    $31 1/4
Third Quarter ...............................   $20 9/16   $15 7/8       $29 5/8    $20 1/16       $36 1/4    $25 3/8
Fourth Quarter ..............................   $20 1/4    $13 5/16      $25 3/8    $17 13/16      $31 13/16  $19 1/8
</TABLE>

      Our Common Stock is listed on the New York Stock  Exchange and the Toronto
Stock Exchange.

      Below are the dividends per share paid during the past three years.

      Dividends Paid                            2000        1999          1998
      --------------                           -------     -------       -------
      First Quarter .........................   $0.10       $0.10         $   *
      Second Quarter ........................    0.10        0.10          0.10
      Third Quarter .........................    0.10        0.10          0.10
      Fourth Quarter ........................    0.10        0.10          0.10
                                                -----       -----         -----
      Year ..................................   $0.40       $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 February 15, 2001,
there were  19,984  stockholders  of CIT,  including  both  record  holders  and
individual participants holding through a registered clearing agency.


                                       11
<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 7A.  Quantitative and
Qualitative  Disclosures about Market Risk and Item 8. Financial  Statements and
Supplementary Data.

<TABLE>
<CAPTION>
                                                                      Years Ended December 31,
                                               -------------------------------------------------------------------
Dollars in Millions, except per share data       2000          1999(2)         1998           1997           1996
                                               --------       --------       --------       --------        ------
<S>                                            <C>            <C>            <C>            <C>             <C>
Results of Operations
Net finance income .........................   $2,750.7       $1,272.5       $  974.3       $  887.5        $797.9
Net finance margin .........................    1,469.4          917.4          804.8          740.7         676.2
Operating revenue ..........................    2,381.4        1,268.2        1,060.2        1,046.5(1)      920.3
Salaries and general operating
   expenses ................................    1,035.2          516.0          407.7          420.0         385.3
Provision for credit losses ................      255.2          110.3           99.4          113.7         111.4
Goodwill amortization ......................       86.3           25.7           10.1            8.4           7.8
Net income .................................      611.6          389.4          338.8          310.1         260.1
Net income per diluted share ...............       2.33           2.22           2.08           1.95          1.64
</TABLE>

<TABLE>
<CAPTION>
                                                                         At December 31,
                                               -------------------------------------------------------------------
Dollars in Millions                              2000         1999(2)         1998           1997           1996
                                               ---------     ---------      ---------      ---------     ---------
<S>                                            <C>           <C>            <C>            <C>           <C>
Balance Sheet Data
Finance receivables:
  Commercial ...............................   $29,304.0     $27,119.2      $15,589.1      $14,054.9     $13,757.6
  Consumer .................................     4,193.5       3,887.9        4,266.9        3,664.8       3,239.0
                                               ---------     ---------      ---------      ---------     ---------
Total finance receivables ..................    33,497.5      31,007.1       19,856.0       17,719.7      16,996.6
Reserve for credit losses ..................       468.5         446.9          263.7          235.6         220.8
Operating lease equipment, net .............     7,190.6       6,125.9        2,774.1        1,905.6       1,402.1
Goodwill ...................................     1,964.6       1,850.5          216.5          134.6         129.5
Total assets ...............................    48,689.8      45,081.1       24,303.1       20,464.1      18,932.5
Commercial paper ...........................     9,063.5       8,974.0        6,144.1        5,559.6       5,827.0
Variable-rate senior notes .................    11,130.5       7,147.2        4,275.0        2,861.5       3,717.5
Fixed-rate senior notes ....................    17,571.1      19,052.3        8,032.3        6,593.8       4,761.2
Subordinated fixed-rate notes ..............       200.0         200.0          200.0          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          250.0            --
Stockholders' equity .......................     6,007.2       5,554.4        2,701.6        2,432.9       2,075.4
</TABLE>

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

(2)   Includes  results of  operations  of Newcourt  Credit Group Inc.  from the
      November 15, 1999 acquisition date.


                                       12
<PAGE>

<TABLE>
<CAPTION>
                                                                     At or for the Years Ended December 31,
                                                     -------------------------------------------------------------------
                                                       2000           1999           1998           1997         1996
                                                     ---------      ---------      ---------      ---------    ---------
<S>                                                  <C>            <C>            <C>            <C>          <C>
Selected Data and Ratios

Profitability
Net finance income as a percentage
   of average earning
   assets ("AEA")(1) .............................        6.76%          4.97%          4.75%          4.87%        4.82%
Net finance margin as
   a percentage of AEA ...........................        3.61%          3.59%          3.93%          4.06%        4.09%
Return on average
   tangible stockholders' equity(2) ..............        16.0%          14.2%          14.0%          14.6%        14.0%
Return on average
   stockholders' equity ..........................        10.7%          12.0%          13.2%          14.0%(5)     13.0%
Return on AEA ....................................        1.50%          1.52%          1.65%          1.70%(5)     1.57%
Ratio of earnings to fixed charges ...............        1.39x          1.45x          1.49x          1.51x        1.49x
Salaries and general
   operating expenses (excluding
   goodwill amortization)
   as a percentage of average
   managed assets ("AMA")(3) .....................        2.01%          1.75%          1.78%          2.11%(5)     2.18%
Efficiency ratio (excluding
   goodwill amortization)(4) .....................        43.8%          41.3%          39.2%          40.8%(5)     41.9%

Credit Quality
60+ days contractual delinquency
   as a percentage of finance
   receivables ...................................        2.98%          2.71%          1.75%          1.67%        1.72%
Net credit losses as a percentage
   of average finance receivables ................        0.71%          0.42%          0.42%          0.59%        0.62%
Reserve for credit losses as a percentage
   of finance receivables ........................        1.40%          1.44%          1.33%          1.33%        1.30%

Leverage
Total debt (net of overnight deposits)
   to tangible stockholders' equity(2)(6) ........        8.78x          8.75x          6.82x          5.99x        7.49x
Tangible stockholders' equity(2) to
   managed assets ................................         7.8%           7.7%          10.4%          11.4%         9.7%

Other
Total managed assets(7)
   (dollars in millions) .........................   $54,900.9      $51,433.3      $26,216.3      $22,344.9    $20,005.4
Employees ........................................       7,355          8,255          3,230          3,025        2,950
</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)   Tangible stockholders' equity excludes goodwill.

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

(4)   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.

(5)   Excluding  the 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%.

(6)   Total debt excludes and  stockholders'  equity includes  Company-obligated
      mandatorily  redeemable  preferred  securities of subsidiary trust holding
      solely debentures of the Company.

(7)   "Managed  assets" include (i) financing and leasing  assets,  (ii) certain
      investments and (iii)  off-balance  sheet finance  receivables  previously
      securitized and still managed by us.


                                       13
<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,  2000,  our net income  totaled a record
$611.6  million,  increasing  from $389.4  million in 1999 and $338.8 million in
1998. The 2000 earnings  represented the thirteenth  consecutive increase in our
annual earnings,  and the tenth consecutive year of record earnings.  During the
year,  we sought to  improve  CIT's  profitability  by  improving  lower  return
businesses  or  by  identifying   lower   performing   portfolios  for  sale  or
liquidation, and by strengthening our pricing discipline. Additionally, the 2000
results  reflect growth from 1999  acquisition  activities,  solid fee and other
income  generation,   as  well  as  considerable   expense  savings  related  to
operational  integrations.  The  improvements  in 1999 over 1998  resulted  from
stronger revenues from a higher level of financing and leasing assets.

      Earnings per diluted share  increased  from the preceding  year by 5.0% in
2000 and 6.7% in 1999.  Earnings per share improved  considerably  less than the
corresponding  increases in net income due to 104.0 million shares issued in the
acquisition  of  Newcourt  in November  1999.  Excluding  the impact of goodwill
amortization,  earnings per diluted share  increased  from the preceding year by
12.4% in 2000 and by 10.4% in 1999.  Return on  average  tangible  stockholders'
equity improved to 16.0% in 2000 and 14.2% in 1999 from 14.0% in 1998.

      Information pertaining to 1999 reflects the results of acquired operations
from  each  acquisition  date  through  year  end.  Segment  data  reflects  the
realignment of Vendor Technology  Finance and Structured  Finance from the prior
year Newcourt segment, as reported in the 1999 10-K. In addition, during 2000 we
continued to realign  businesses and shift assets  between  business  units,  as
$2,702.2 million of financing and leasing assets and $2,902.2 million of managed
assets were transferred from Vendor Technology  Finance to Equipment  Financing,
and a $313.0 million telecommunications  portfolio was transferred to Structured
Finance from  Equipment  Financing.  These  transfers  were done to better align
marketing  and  risk   management   efforts,   to  further   improve   operating
efficiencies, and to implement a more uniform North American strategy.

      The following table summarizes our net income and related data.

<TABLE>
<CAPTION>
                                                                                 Years Ended December 31,
                                                                            ---------------------------------
                                                                             2000         1999          1998
                                                                            ------       ------        ------
<S>                                                                         <C>          <C>           <C>
Net income (dollars in millions) ........................................   $611.6       $389.4        $338.8
Earnings per diluted share (EPS) ........................................   $ 2.33       $ 2.22        $ 2.08
Earnings per diluted share excluding goodwill amortization ..............   $ 2.62       $ 2.33        $ 2.11
Return on average stockholders' equity (ROE) ............................     10.7%        12.0%         13.2%
Return on average stockholders' equity excluding
  goodwill amortization .................................................     12.0%        12.6%         13.6%
Return on average tangible stockholders' equity (ROTE) ..................     16.0%        14.2%         14.0%
Return on average earning assets (ROA) ..................................     1.50%        1.52%         1.65%
Return on average earning assets excluding
  goodwill amortization .................................................     1.69%        1.60%         1.70%
</TABLE>

      Managed assets  totaled $54.9 billion at December 31, 2000,  $51.4 billion
at December 31, 1999,  and $26.2 billion at December 31, 1998,  while  financing
and leasing  portfolio  assets  totaled $43.8  billion,  $40.4 billion and $23.7
billion at December 31, 2000, 1999 and 1998, respectively.  The increase in both
managed and portfolio assets over 1999 reflects increased volume of originations
across all business segments, which was dampened by continued pricing discipline
and by the sale of over $1 billion of non-strategic  assets during the year. For
the year 2000, financing and leasing assets grew 8.1% in the commercial segments
and 10.5% in the Consumer segment,  with a 6.1% increase in finance  receivables
and a 17.4%  increase in operating  leases.  In the  commercial  segments,  2000
growth,  excluding the effect of the asset transfers, was particularly strong in
Structured Finance and Vendor Technology Finance,  while our Consumer growth was
driven by gains in the recreational vehicle and home equity portfolios. The 1999
increase  of  96.2%  in  managed   assets  over  1998  reflects   primarily  the
acquisitions  made in 1999. The remainder of the 1999 increase  reflects  strong
new business volume,  offset by a drop in Consumer assets due to our decision to
discontinue and liquidate our recreational boat and wholesale  inventory finance
portfolios. See "Financing and Leasing Assets" for additional information.


                                       14
<PAGE>

Net Finance Margin

      A comparison of the components of 2000,  1999, and 1998 net finance margin
is set forth below.

                                                Years Ended December 31,
                                         -------------------------------------
Dollars in Millions                        2000          1999          1998
                                         ---------     ---------     ---------
Finance income .......................   $ 5,248.4     $ 2,565.9     $ 2,015.1
Interest expense .....................     2,497.7       1,293.4       1,040.8
                                         ---------     ---------     ---------
Net finance income ...................     2,750.7       1,272.5         974.3
Depreciation on operating
  lease equipment ....................     1,281.3         355.1         169.5
                                         ---------     ---------     ---------
Net finance margin ...................   $ 1,469.4     $   917.4     $   804.8
                                         =========     =========     =========
Average earning assets ("AEA") .......   $40,682.5     $25,583.0     $20,495.8
Net finance margin as a % of AEA .....        3.61%         3.59%         3.93%

      Net finance margin  increased 60.2% to $1,469.4 million in 2000 from 1999,
and 14.0% in 1999 from 1998. The increase in 2000 primarily  reflects  growth in
our loans, leases and operating leases due to acquisitions. The increase in 1999
from 1998 was due to acquisitions and strong internal business generation.  As a
percentage  of AEA, net finance  margin was 3.61% in 2000 versus 3.59% and 3.93%
in 1999 and  1998,  respectively.  Net  finance  margin as a  percentage  of AEA
increased  from the  prior  year in 2000,  as wider  margins  in our  businesses
acquired  in 1999  more  than  offset  the  impact  of the  continued  growth in
operating  leases.  The operating  leasing  business,  which generally has lower
initial net finance margins than finance  receivables,  also generates equipment
gains, renewal fees and tax depreciation benefits.

      Finance income totaled $5,248.4 million in 2000,  $2,565.9 million in 1999
and $2,015.1 million in 1998. As a percentage of AEA, finance income  (excluding
interest income related to short-term  interest-bearing  deposits) was 12.69% in
2000,  9.88% in 1999 and 9.69% in 1998.  The  increase in yield in 2000 and 1999
primarily  reflected  changes in product mix due to acquisitions and the sale or
liquidation of non-strategic, lower yielding assets.

      Interest  expense totaled  $2,497.7  million in 2000,  $1,293.4 million in
1999 and $1,040.8  million in 1998.  As a percentage  of AEA,  interest  expense
(excluding  interest  related  to  short-term   interest-bearing   deposits  and
dividends related to preferred  capital  securities) was 5.92% in 2000, 4.91% in
1999 and 4.94% in 1998,  reflecting  the impact of prevailing  interest rates at
the time of the  Newcourt  acquisition,  the rising  interest  rate  environment
throughout most of 2000 and wider borrowing  spreads over U.S. Treasury rates in
2000.  We  seek  to  mitigate  interest  rate  risk by  matching  the  repricing
characteristics  of our  assets  with our  liabilities,  which  is in part  done
through portfolio  management and the use of derivative  financial  instruments,
principally interest rate swaps. For further discussion, see "Risk Management."

      The operating lease  equipment  portfolio was $7.2 billion at December 31,
2000 versus $6.1  billion and $2.8 billion at December 31, 1999 and December 31,
1998,  respectively.  As a result,  depreciation  on operating  lease  equipment
increased to $1,281.3 million in 2000,  versus $355.1 million and $169.5 million
in 1999 and 1998,  respectively.  As a percentage of average  operating  leases,
depreciation was 19.50%, 9.51%, and 7.66% in 2000, 1999 and 1998,  respectively.
The  increase in 2000 over 1999  reflects  the full year impact of the  acquired
assets,  which include  smaller  ticket and shorter term leases.  This more than
offsets  the impact of an  increase  in airline  and rail  assets,  with  longer
depreciable  lives,  from 1998 to 2000 in the  Equipment  Financing  and Leasing
segment.

Other Revenue

      We  continue  to  emphasize  growth  and   diversification  of  our  other
"non-spread"  revenues to improve  overall  profitability  of CIT. Other revenue
improved to $912.0  million  during 2000,  from $350.8  million  during 1999 and
$255.4 million during 1998, primarily due to the 1999 acquisition  activity,  as
set forth in the following table.

                                                      Years Ended December 31,
                                                     --------------------------
Dollars in Millions                                   2000      1999      1998
                                                     ------    ------    ------
Fees and other income .........................      $480.9    $161.0    $ 90.7
Factoring commissions .........................       154.7     118.7      95.7
Gains on sales of leasing equipment ...........       113.2      56.4      45.2
Gains on securitizations ......................       109.5      14.7      12.5
Gains on venture capital investments ..........        53.7        --      11.3
                                                     ------    ------    ------
   Total ......................................      $912.0    $350.8    $255.4
                                                     ======    ======    ======


                                       15
<PAGE>

      Included in fees and other income are miscellaneous fees, syndication fees
and gains from receivable  sales.  Receivable  sales increased  primarily in our
Consumer  business,  reflecting its receivable  origination  and whole loan sale
strategy to maximize the value of our origination  network.  Miscellaneous  fees
increased across all commercial segments during 2000;  however,  the increase is
primarily due to the 1999  acquisitions.  Fees from syndication  activity in the
acquired  Structured  Finance segment also had a significant  impact on the year
over year  increase.  Factoring  commissions  were up due to the 1999  factoring
acquisitions.  Gains on sales of  leasing  equipment  and  securitizations  each
increased due to higher  volumes in 2000. We also  benefited from the maturation
of certain venture capital investments and a strong IPO market in the early part
of the year. The 1999 increase in other revenue from 1998 reflects  primarily an
increase in factoring commissions, due in part to the two acquisitions completed
during the year,  syndication fees from the Structured Finance segment and gains
recognized on sales of receivables.

Salaries and General Operating Expenses

      Salaries and general  operating  expenses were  $1,035.2  million in 2000,
$516.0  million  in  1999,  and  $407.7  million  in  1998.   Expenses  were  up
significantly  in 2000 due to the  prior  year  acquisitions,  with the  largest
portion of this increase in employee costs and facilities expenses.  Integration
cost  savings  exceeded  our  original  forecast of $150  million in annual cost
savings from  pre-acquisition  levels.  These cost savings were the result of an
integration  plan established in connection with the acquisition that identified
certain real estate locations for elimination,  as well as involuntary  employee
terminations.

      Our personnel  decreased to approximately  7,355 at December 31, 2000 from
8,255 at December 31, 1999 due to integration reductions. This compared to 3,230
at December 31, 1998, reflecting the 1999 acquisitions.

      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 computer
equipment and software, including post-implementation evaluations.

      The  efficiency  ratio and the ratio of  salaries  and  general  operating
expenses  to  AMA  are  two   measurements   that  management  uses  to  monitor
productivity.  AMA is  comprised of average  earning  assets plus the average of
finance receivables previously securitized and still managed by us. These ratios
exclude goodwill amortization and are set forth in the following table.

                                                      Years Ended December 31,
                                                     --------------------------
                                                      2000      1999      1998
                                                     ------    ------    ------
Efficiency ratio .................................    43.8%     41.3%     39.2%
Salaries and general operating expenses as
  a percentage of AMA ............................    2.01%     1.75%     1.78%

      The lower  efficiency  (higher  ratio) in 2000 and 1999 from 1998 reflects
the impact of the Newcourt  acquisition,  as that company's efficiency ratio was
historically  significantly  higher than  CIT's.  Integration  cost  savings and
efficiency enhancements improved the efficiency ratio for the year 2000 to 43.8%
from the 48.3%  level for the 1999  fourth  quarter,  when the  acquisition  was
completed.

Goodwill Amortization

      Goodwill  amortization  was $86.3 million in 2000 versus $25.7 million and
$10.1 million in 1999 and 1998, respectively, reflecting the full year impact of
the 1999  acquisitions,  all of which  were  accounted  for under  the  purchase
method.

Provision and Reserve for Credit Losses/Credit Quality

      The  provision  for  credit  losses was $255.2  million  for 2000,  $110.3
million  for 1999,  and $99.4  million  for 1998.  Net  charge-offs  were $235.6
million for 2000,  $95.0 million for 1999,  and $78.8 million for 1998.  Our net
charge-off experience, in amount and as a percentage of finance receivables,  is
provided in the following table.


                                       16
<PAGE>

<TABLE>
<CAPTION>
                                                     Years Ended December 31,
                                       -----------------------------------------------------
Dollars in Millions                         2000               1999               1998
                                       ---------------    ---------------    ---------------
<S>                                    <C>        <C>     <C>        <C>     <C>        <C>
Equipment Financing and Leasing...     $102.9     0.71%   $ 16.7     0.16%   $ 18.2     0.18%
Vendor Technology Finance ........       31.7     0.54        --       --        --       --
Commercial Finance ...............       46.2     0.60      29.0     0.47      14.8     0.31
Structured Finance ...............        0.4     0.03        --       --        --       --
                                       ------     ----    ------     ----    ------     ----
  Total Commercial Segments ......      181.2     0.62      45.7     0.25      33.0     0.22
Consumer .........................       54.4     1.32      49.3     1.19      45.8     1.18
                                       ------     ----    ------     ----    ------     ----
  Total ..........................     $235.6     0.71%   $ 95.0     0.42%   $ 78.8     0.42%
                                       ======     ====    ======     ====    ======     ====
</TABLE>

      The  increase  in  Equipment  Financing  and  Leasing  net  credit  losses
primarily  reflects  the impact of  acquired  assets.  The  increase  in 2000 in
Commercial  Finance net credit  losses  primarily  reflects one food  wholesaler
account  charged-off in 2000. The 1999 increase over 1998 in Commercial  Finance
was due to high recoveries in 1998.

      Our  consolidated  reserve for credit losses  increased to $468.5  million
(1.40% of finance  receivables) at December 31, 2000 from $446.9 million (1.44%)
at December 31, 1999 and $263.7  million  (1.33%) at December  31,  1998,  as we
recorded provisions of $19.6 million,  $15.3 million and $20.6 million in excess
of net charge-offs during 2000, 1999 and 1998, respectively. The increase in the
2000 and 1999 ratio of reserve to  receivables  from 1998  reflects the acquired
assets,  which carried a higher reserve  percentage than CIT's historical ratio,
and is commensurate with this  historically  higher past due loan and charge-off
profile.  The  decrease in the ratio of reserve to finance  receivables  in 2000
from 1999,  reflects  product mix changes as well as the  implementation  of CIT
credit standards in the acquired portfolios.

      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 credit  losses  inherent in the
portfolios.   We  review  finance  receivables  periodically  to  determine  the
probability  of loss, and take  charge-offs  after  considering  such factors as
delinquencies,  the  financial  condition of obligors,  the value of  underlying
collateral,  as well as third party credit  enhancements  such as guarantees and
recourse from  manufacturers.  Charge-offs are recorded on consumer  receivables
and certain small ticket commercial finance receivables beginning at 180 days of
contractual  delinquency  based upon historical loss severity.  The consolidated
reserve for credit  losses is  intended  to provide  for losses  inherent in the
portfolio, which requires the application of estimates and significant judgement
as to the ultimate outcome of collection  efforts and realization of collateral,
among other things.  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.

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, 2000, 1999 and 1998.

<TABLE>
<CAPTION>
                                                          At December 31,
                                       -----------------------------------------------------
Dollars in Millions                         2000               1999               1998
                                       ---------------    ---------------    ---------------
<S>                                    <C>        <C>     <C>        <C>     <C>        <C>
Finance receivables, past due
 60 days or more:
  Equipment Financing and Leasing...   $399.8     2.88%   $209.6     1.93%   $149.9     1.41%
  Vendor Technology Finance ........    184.9     3.07     314.9     4.16        --       --
  Commercial Finance ...............    107.9     1.40      64.0     0.91      32.1     0.64
  Structured Finance ...............     96.2     5.59      61.5     4.12        --       --
                                       ------     ----    ------     ----    ------     ----
    Total Commercial Segments ......    788.8     2.69     650.0     2.42     182.0     1.17
  Consumer .........................    211.1     5.03     189.1(1)  4.62(1)  166.0     3.89
                                       ------     ----    ------     ----    ------     ----
    Total ..........................   $999.9     2.98%   $839.1     2.71%   $348.0     1.75%
                                       ======     ====    ======     ====    ======     ====

Non-performing assets:
  Equipment Financing and Leasing...   $351.0     2.53%   $139.9     1.29%   $135.2     1.27%
  Vendor Technology Finance ........     93.9     1.56     247.9     3.27        --       --
  Commercial Finance ...............     65.3     0.85      27.6     0.39      14.5     0.29
  Structured Finance ...............    118.6     6.90      61.5     4.12        --       --
                                       ------     ----    ------     ----    ------     ----
    Total Commercial Segments ......    628.8     2.15     476.9     1.77     149.7     0.96
  Consumer .........................    199.3     4.75     158.5(1)  3.87(1)  129.0     3.02
                                       ------     ----    ------     ----    ------     ----
    Total ..........................   $828.1     2.47%   $635.4     2.05%   $278.7     1.40%
                                       ======     ====    ======     ====    ======     ====
</TABLE>

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


                                       17
<PAGE>

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

      The 2000 increase from 1999 in our Equipment Financing and Leasing segment
delinquency  and  non-performing  asset  ratios  was in  large  part  due to the
acquired assets,  which  historically  carried a higher level of delinquency and
non-performing assets, as well as an increase in trucking industry delinquencies
and non-performing  assets.  The increase in Structured Finance  delinquency and
non-performing  assets from  December 31, 1999 was  primarily due to one account
which was  classified as  non-performing  during the fourth  quarter of 2000. In
1999,   Equipment   Financing  and  Leasing  past  due  loans   increased,   but
non-performing  assets remained relatively stable at 1.29%. The increase in 1999
Equipment  Financing  and  Leasing  past dues  also  included  three  commercial
aircraft that became past due in the fourth quarter. The increases in Commercial
Finance  in 2000 past due and  non-performing  balances  was due to the over 20%
growth in the Business Credit unit and economic softening in various markets.

      The increases,  in both 2000 and 1999 Consumer past due and non-performing
accounts are due to softening in the manufactured housing market.

Income Taxes

      The  provision  for  federal,  foreign  and state and local  income  taxes
totaled $373.9 million in 2000, compared with $207.6 million in 1999, and $185.0
million in 1998. The effective income tax rate for 2000 was 37.9%, compared with
34.8% in 1999,  and  35.3% in 1998,  primarily  as a result  of an  increase  in
non-deductible  goodwill  amortization  and foreign taxes,  partially  offset by
lower state and local taxes.

Results by Business Segment

      In Equipment Financing and Leasing,  net income increased 24.3% from 1999,
as the dollar  amounts of increased  margin and  non-spread  revenues  more than
offset  higher  charge-offs  and  operating  expenses.  As a percentage  of AEA,
Equipment  Financing  and Leasing net income  dropped from 1999, as the relative
revenue and spread  improvements  fell short of credit  provisions and operating
expense  increases.  The  increased  net income in 2000 over 1999 for  Equipment
Financing  and  Leasing,  as well  as the  return  on AEA  trends,  reflect  the
transfers of acquired assets.  Commercial Finance net income improved 14.4% from
1999,  and  reflected  increased  factoring  commissions,  largely from the 1999
acquisitions.  Consumer  segment  earnings  grew by  22.2%  and  benefited  from
improved  efficiency and gains on receivable sales. Whole loan sales are part of
our ongoing Consumer  business strategy to maximize the value of our origination
network.  The  increased  corporate  expense in 2000 over 1999  included  higher
goodwill amortization and higher corporate interest expense.

      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  two 1999  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, and higher corporate interest expense.

      The table below  summarizes  selected  financial  information  by business
segment,  based  upon a fixed  leverage  ratio  across  business  units  and the
allocation of a majority of corporate expenses.

<TABLE>
<CAPTION>
                                                                      For the Years Ended December 31,
                                                    -----------------------------------------------------------------
                                                             Net Income                         Return on AEA
                                                    ----------------------------         ----------------------------
Dollars in Millions                                  2000       1999       1998           2000       1999       1998
                                                    ------     ------     ------         ------     ------     ------
<S>                                                 <C>        <C>        <C>             <C>        <C>        <C>
Equipment Financing and Leasing ................    $287.8     $231.5     $193.9          1.42%      1.65%      1.59%
Vendor Technology Finance ......................     148.9        7.5         --          1.91         --(1)      --(1)
Commercial Finance .............................     161.8      141.4      119.1          3.03       3.35       3.36
Structured Finance .............................      89.6         --         --          4.04         --(1)      --
                                                    ------     ------     ------          ----       ----       ----
  Total Commercial Segments ....................     688.1      380.4      313.0          1.93       1.85       1.98
Consumer .......................................      73.3       60.0       44.3          1.45       1.18       0.99
                                                    ------     ------     ------          ----       ----       ----
  Total Segments ...............................     761.4      440.4      357.3          1.87       1.72       1.74
Corporate ......................................    (149.8)     (51.0)     (18.5)           --(1)      --(1)      --(1)
                                                    ------     ------     ------          ----       ----       ----
   Total .......................................    $611.6     $389.4     $338.8          1.50%      1.52%      1.65%
                                                    ======     ======     ======          ====       ====       ====
</TABLE>

--------------------------------------------------------------------------------
(1)   These percentages are not meaningful.


                                       18
<PAGE>

Financing and Leasing Assets

      Our managed assets grew $3.5 billion (6.7%), to $54.9 billion in 2000, and
grew  $25.2  billion  (96.2%)  to  $51.4  billion  in  1999,  due  primarily  to
acquisitions.  Financing and leasing assets that we own grew $3.4 billion (8.4%)
to $43.8  billion in 2000,  and grew $16.7  billion  (70.4%) to $40.4 billion in
1999.  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  integration of Newcourt,  we transferred  various
assets among our business units to better align core  competencies,  gain scale,
raise efficiency and improve profitability. During 2000, we transferred $1,713.3
million of finance receivables,  $988.9 million of operating leases and $2,902.2
million of  securitized  assets  from  Vendor  Technology  Finance to  Equipment
Financing.  Also, a  telecommunications  portfolio  totaling  $313.0 million was
transferred to Structured Finance from Equipment Financing.  These transfers are
in addition to 1999 movements when finance  receivables of $2,149.4  million and
operating leases of $208.4 million were transferred to Equipment  Financing from
Vendor  Technology  Finance and $229.4 million of finance  receivables  and $4.4
million of operating leases were transferred to Vendor  Technology  Finance from
Equipment   Financing.   Additionally,   in  1999,  $231.3  million  of  finance
receivables were transferred to Capital Finance from Structured Finance.

      Excluding the impact of asset transfers in 2000, Vendor Technology Finance
and  Structured  Finance  portfolio  assets  grew at a rate of 12.8% and  14.9%,
respectively,  during the year, while Commercial  Finance was up 9.9%.  Consumer
managed  assets  were  flat  year 2000 over  1999;  however,  on an owned  basis
(excluding  the  liquidating  portfolio),  assets  were up 15.5% as no  consumer
asset-backed securitizations were completed in 2000.

      Business volume,  excluding factoring,  was $25.3 billion in 2000, up from
$13.2 billion in 1999, as volume was strong across all  commercial  segments and
in the Consumer home equity portfolio.


                                       19
<PAGE>

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

<TABLE>
<CAPTION>
                                                                         At December 31,                           % Change
                                                           -----------------------------------------       -------------------------
Dollars in Millions                                          2000            1999            1998          '00 vs. '99   '99 vs. '98
                                                           ---------       ---------       ---------       -----------   -----------
<S>                                                        <C>             <C>             <C>                <C>           <C>
Equipment Financing:
  Finance receivables .............................        $12,153.7       $10,899.3       $ 8,497.6           11.5%         28.3%
  Operating lease equipment, net ..................          2,280.7         1,066.2           765.1          113.9          39.4
                                                           ---------       ---------       ---------          -----         -----
    Total .........................................         14,434.4        11,965.5         9,262.7           20.6          29.2
                                                           ---------       ---------       ---------          -----         -----
Capital Finance:
  Finance receivables .............................          1,863.1         1,838.0         1,655.4            1.4          11.0
  Operating lease equipment, net ..................          3,594.6         2,931.8         1,982.0           22.6          47.9
  Liquidating portfolio(1) ........................            185.9           281.4           466.9          (33.9)        (39.7)
                                                           ---------       ---------       ---------          -----         -----
    Total .........................................          5,643.6         5,051.2         4,104.3           11.7          23.1
                                                           ---------       ---------       ---------          -----         -----
    Total Equipment Financing
      and Leasing Segment .........................         20,078.0        17,016.7        13,367.0           18.0          27.3
                                                           ---------       ---------       ---------          -----         -----
Vendor Technology Finance:
  Finance receivables .............................          6,864.5         7,488.9              --           (8.3)           --(3)
  Operating lease equipment, net ..................          1,256.5         2,108.8              --          (40.4)           --(3)
                                                           ---------       ---------       ---------          -----         -----
    Total Vendor Technology
      Finance Segment .............................          8,121.0         9,597.7              --          (15.4)           --(3)
                                                           ---------       ---------       ---------          -----         -----
Commercial Services ...............................          4,277.9         4,165.1         2,481.8            2.7          67.8
Business Credit ...................................          3,415.8         2,837.0         2,514.4           20.4          12.8
                                                           ---------       ---------       ---------          -----         -----
    Total Commercial
      Finance Segment .............................          7,693.7         7,002.1         4,996.2            9.9          40.1
                                                           ---------       ---------       ---------          -----         -----
Structured Finance:
  Finance receivables .............................          2,347.3         1,933.9              --           21.4            --(3)
  Operating lease equipment, net ..................             58.8              --              --             --            --
  Other - Equity Investments ......................            285.8           137.3            81.9          108.2          67.6
                                                           ---------       ---------       ---------          -----         -----
    Total Structured Finance
      Segment .....................................          2,691.9         2,071.2            81.9           30.0            --(3)
                                                           ---------       ---------       ---------          -----         -----
    Total Commercial Segments .....................         38,584.6        35,687.7        18,445.1            8.1          93.5
                                                           ---------       ---------       ---------          -----         -----
Consumer:
  Home equity .....................................          2,451.7         2,215.4         2,244.4           10.7          (1.3)
  Manufactured housing ............................          1,802.1         1,666.9         1,417.5            8.1          17.6
  Recreational vehicles ...........................            648.0           361.2           744.0           79.4         (51.5)
  Liquidating portfolio(2) ........................            298.2           462.8           848.4          (35.6)        (45.5)
                                                           ---------       ---------       ---------          -----         -----
    Total Consumer Segment ........................          5,200.0         4,706.3         5,254.3           10.5         (10.4)
                                                           ---------       ---------       ---------          -----         -----
    TOTAL FINANCING AND
      LEASING PORTFOLIO
      ASSETS ......................................         43,784.6        40,394.0        23,699.4            8.4          70.4
                                                           ---------       ---------       ---------          -----         -----
Finance receivables previously
    securitized:
  Commercial ......................................          9,075.9         8,471.5              --            7.1            --(3)
  Consumer ........................................          1,582.7         1,987.0         2,025.0          (20.3)         (1.9)
  Consumer liquidating portfolio(2) ...............            457.7           580.8           491.9          (21.2)         18.1
                                                           ---------       ---------       ---------          -----         -----
    Total .........................................         11,116.3        11,039.3         2,516.9            0.7         338.6
                                                           ---------       ---------       ---------          -----         -----
    TOTAL MANAGED ASSETS ..........................        $54,900.9       $51,433.3       $26,216.3            6.7%         96.2%
                                                           =========       =========       =========          =====         =====
</TABLE>

--------------------------------------------------------------------------------
(1)   Consists  primarily of ocean going maritime and project  finance.  Capital
      Finance discontinued marketing to these sectors in 1997.

(2)   Consists of recreational  boat and wholesale loan product lines,  which we
      exited in 1999.

(3)   These percentages are not meaningful.


                                       20
<PAGE>

Concentrations

Financing and Leasing Assets Composition

      Our ten largest  financing  and leasing  asset  accounts in the  aggregate
represented  3.9% of our total financing and leasing assets at December 31, 2000
(with the largest  account  representing  less than 1%) and 3.7% at December 31,
1999. 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.

<TABLE>
<CAPTION>
                                                            At December 31,
                                         ----------------------------------------------------
                                                  2000                          1999
                                         ---------------------         ----------------------
Dollars in Millions                        Amount      Percent           Amount       Percent
                                         ---------     -------         ---------      -------
<S>                                      <C>            <C>            <C>             <C>
United States:
   Northeast .........................   $ 9,099.3      20.8%          $ 8,257.2       20.5%
   West ..............................     8,336.9      19.0             7,594.0       18.8
   Midwest ...........................     7,723.1      17.6             7,042.7       17.4
   Southeast .........................     6,228.6      14.2             5,380.5       13.3
   Southwest .........................     4,940.3      11.4             4,426.1       11.0
                                         ---------     -----           ---------      -----
Total United States ..................    36,328.2      83.0            32,700.5       81.0
                                         ---------     -----           ---------      -----
Foreign:
   Canada ............................     2,357.4       5.4             2,797.5        6.9
   All other .........................     5,099.0      11.6             4,896.0       12.1
                                         ---------     -----           ---------      -----
Total ................................   $43,784.6     100.0%          $40,394.0      100.0%
                                         =========     =====           =========      =====
</TABLE>

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

      Our  financing  and  leasing  asset  portfolio  in the  United  States  is
diversified  by state.  At December 31, 2000,  with the  exception of California
(10.4% of financing and leasing assets),  Texas (7.9%),  and New York (6.9%), no
state  represented  more than 4.6% of  financing  and leasing  assets.  Our 1998
managed and owned asset geographic composition did not significantly differ from
our 1999 managed and owned asset geographic composition.

      Financing and leasing assets to foreign  obligors  totaled $7.5 billion at
December 31, 2000.  After  Canada,  $2.4 billion  (5.4% of financing and leasing
assets), the largest foreign exposures were to England, $1.2 billion (2.8%), and
Australia,   $399.6  million  (0.9%).   Our  remaining   foreign   exposure  was
geographically dispersed, with no other individual country exposure greater than
0.8% of financing and leasing assets.

      At December 31, 1999,  financing  and leasing  assets to foreign  obligors
totaled $7.7 billion.  After Canada, $2.8 billion (6.9% of financing and leasing
assets), the largest foreign exposures were to England, $1.6 billion (4.0%), and
Australia,   $397.6  million  (1.0%).   Our  remaining   foreign   exposure  was
geographically dispersed, with no other individual country exposure greater than
0.8% of financing and leasing assets.


                                       21
<PAGE>

      Industry Composition

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

<TABLE>
<CAPTION>
                                                            At December 31,
                                         ----------------------------------------------------
                                                  2000                          1999
                                         ---------------------         ----------------------
Dollars in Millions                        Amount      Percent           Amount       Percent
                                         ---------     -------         ---------      -------
<S>                                      <C>            <C>            <C>             <C>
Manufacturing(1)
  (no industry greater than 2.6%) ...    $ 8,787.2       20.1%         $ 8,566.5        21.2%
Retail(2) ...........................      4,211.3        9.6            4,032.0        10.0
Commercial airlines .................      3,557.2        8.1            3,091.2         7.7
Transportation(3) ...................      3,431.0        7.8            3,348.2         8.3
Construction equipment ..............      2,697.8        6.2            2,697.0         6.7
Home mortgage .......................      2,451.7        5.6            2,215.4         5.5
Service industries ..................      1,987.1        4.5            1,768.1         4.4
Manufactured housing ................      1,802.1        4.1            1,666.9         4.1
Communications ......................      1,496.7        3.4            1,372.6         3.4
Wholesaling .........................      1,445.0        3.3            1,303.6         3.2
Other (no industry greater
  than 2.6%) ........................     11,917.5       27.3           10,332.5        25.5
                                         ---------      -----          ---------       -----
  Total .............................    $43,784.6      100.0%         $40,394.0       100.0%
                                         =========      =====          =========       =====
</TABLE>

--------------------------------------------------------------------------------
(1)   Includes  manufacturers of textiles and apparel,  industrial machinery and
      equipment, electrical and electronic equipment, and other industries.

(2)   Includes retailers of apparel (3.8%) and general merchandise (2.6%).

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

     Our  telecommunications  portfolio is included in  "Communications"  in the
industry  composition  table above. This portfolio is included in our Structured
Finance  segment and totals  approximately  $690  million at December  31, 2000,
comprising  approximately  1.6% of total financing and leasing assets,  of which
10.0% are on non-accrual  status. This portfolio consists of 60 accounts with an
average  balance of $11.4  million.  The 10 largest  accounts  in the  portfolio
aggregate $277 million with the largest single account under $50.0 million.  Our
telecommunications transactions are collateralized by the assets of the customer
(equipment,  receivable,  cash, etc.) and are also secured by a pledge of all of
the stock of the non-public companies.

      Our 1998  managed  and owned  asset  industry  composition  did not differ
significantly from our 1999 managed and owned asset industry composition.

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.

      We review and monitor  credit  exposures,  both owned and  managed,  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 finance receivables across the entire organization. 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 and the Chief  Financial  Officer.
Periodically,  the  Committee  meets with  senior  executives  of our  strategic
business units and corporate  credit risk management  group to review  portfolio
status and performance,


                                       22
<PAGE>

as well as the status of  individual  financing  and leasing  assets,  owned and
managed,  greater  than  $500,000 to obligors  with  higher  risk  profiles.  In
addition,  this  committee  periodically  meets  with  the  Chairman  and  Chief
Executive  Officer of CIT to review overall credit risk,  including  geographic,
industry and customer concentrations.

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,  we formed a corporate credit risk
management group, which reports to the Chief Risk Officer, 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  large  transactions,   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,  our Executive Credit  Committee,  which
includes the Chairman and Chief Executive Officer, the Chief Risk Officer, three
members  of the  corporate  credit  risk  management  group and two group  Chief
Executive  Officers,  approves  credits  that are  beyond the  authority  of the
business units.  The credit risk  management  group also includes an independent
credit audit function.

      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
segment  and  the  Consumer   segment,   we  utilize  automated  credit  scoring
capabilities.  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.  The  design  and
monitoring  of  these  automated  statistical  models  is led by our  Management
Science Group, staffed by specialists with considerable experience and expertise
in this discipline.

      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.

Equipment/Residual Risk Management

      We have developed systems, processes and expertise to manage the equipment
and  residual  risk  in our  Commercial  segments.  Our  process  consists  of a
four-pronged  approach: 1) residual setting and valuation at deal inception,  2)
approvals and authorizations,  3) systematic residual reviews, and 4) monitoring
of residual  realizations.  Over time, we have  developed  experienced  internal
equipment management specialists, as well as


                                       23
<PAGE>

external consultant  networks,  who understand equipment values. We believe this
to be one  of  our  core  competencies.  These  specialists  set  values  in our
larger-ticket transactional business, and develop standard residual matrices for
our lower-ticket,  higher-volume  transaction business.  Transactions outside of
these standard  residual  matrices,  or transactions over certain dollar limits,
must be  approved  by  various  combinations  of  business  unit  management  or
Corporate  risk  management.  Reviews  for  impairment  are  performed  at least
annually.  Residual realizations,  by business unit and product, are reviewed as
part of our ongoing financial and asset quality review, both within the business
units and by Corporate management.

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.

      As mentioned  previously,  senior business unit and credit risk management
are actively involved in the ongoing, disciplined asset quality review process.

Consumer and Small-ticket Leasing

      We have developed proprietary automated credit scoring models by 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 "Provision and Reserve 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 what
we believe  are  conservative  management  practices  and  policies  designed to
effectively  mitigate such risks.  The objectives of our market risk  management
efforts are to preserve  company value by hedging changes in future expected net
cash flows and to decrease 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.

      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.


                                       24
<PAGE>

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 rotating basis.

      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.,  basis 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 economic terms through duration  measures and value
at risk analysis,  and we measure its periodic effect on earnings using maturity
gap analysis.

      A  matched  asset/liability  position  is  generally  achieved  through  a
combination of on and off-balance sheet financial instruments, including issuing
commercial paper, medium term notes,  long-term debt, interest rate and currency
swaps,   foreign  exchange   contracts,   and  through  asset   syndication  and
securitization. We do not speculate on interest rates or foreign exchange rates,
but  rather  seek to  mitigate  the  possible  impact of such rate  fluctuations
encountered  in the normal  course of  business.  This process is ongoing due to
prepayments, refinancings and 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) to manage  liquidity  and reduce  interest  rate risk at a
lower overall funding cost than could be achieved by solely issuing debt.

      Interest  rate swaps with  notional  principal  amounts of $9.9 billion at
December  31, 2000 and $8.8  billion at December  31,  1999 were  designated  as
hedges  against  outstanding  debt  and were  principally  used to  convert  the
interest rate on variable-rate  debt to a fixed-rate,  establishing a fixed-rate
term debt  borrowing  cost for 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>
                                                                             Years Ended December 31,
                                                       --------------------------------------------------------------------
                                                                                   Before Swaps
                                                       --------------------------------------------------------------------
Dollars in Millions                                           2000                     1999                     1998
                                                       ------------------       ------------------       ------------------
<S>                                                    <C>           <C>        <C>           <C>        <C>           <C>
Commercial paper and variable-rate
  senior notes .................................       $19,848.6     6.53%      $11,896.2     5.26%      $ 9,672.6     5.53%
Fixed-rate senior and subordinated
  notes ........................................        17,689.7     6.72        10,115.1     6.47         7,476.5     6.31
                                                       ---------     ----       ---------     ----       ---------     ----
Composite ......................................       $37,538.3     6.62%      $22,011.3     5.71%      $17,149.1     5.87%
                                                       =========     ====       =========     ====       =========     ====
</TABLE>

<TABLE>
<CAPTION>
                                                                             Years Ended December 31,
                                                       --------------------------------------------------------------------
                                                                                    After Swaps
                                                       --------------------------------------------------------------------
                                                              2000                     1999                     1998
                                                       ------------------       ------------------       ------------------
<S>                                                    <C>           <C>        <C>           <C>        <C>           <C>
Commercial paper and variable-rate
  senior notes .................................       $14,762.1     6.74%      $ 8,977.7     5.32%      $ 7,069.9     5.47%
Fixed-rate senior and subordinated
  notes ........................................        22,776.2     6.67        13,033.6     6.25        10,079.2     6.39
                                                       ---------     ----       ---------     ----       ---------     ----
Composite ......................................       $37,538.3     6.70%      $22,011.3     5.87%      $17,149.1     6.01%
                                                       =========     ====       =========     ====       =========     ====
</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  over the life of the  borrowings  had we
chosen to manage  interest rate risk without the use of such swaps.  Derivatives
are discussed further in Note 9 -- "Derivative Financial Instruments" of Item 8.
-- "Financial Statements and Supplementary Data."


                                       25
<PAGE>

      Our foreign operations  include Canada,  Latin America,  Europe,  Asia and
Australia and 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, 2000, $2.9
billion in  notional  principal  amount of foreign  exchange  forwards  and $1.2
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  derivative  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, 2000, $0.8 billion in notional  principal of foreign exchange  forwards were
designated as hedges of net investments in foreign operations.

      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 or leases 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, 2000, an immediate hypothetical 100 basis point
parallel change in the yield curve on January 1, 2001 would affect net income by
an  estimated  $25  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 enter into  interest rate and currency
swaps and foreign exchange forward  contracts as part of our overall market risk
management  practices.  We assess and manage the  external  and  internal  risks
associated  with these  derivative  instruments  in accordance  with the overall
operating goals established by our Capital  Committee.  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
actions taken in contravention of CIT policy.

      The primary external risk of derivative instruments is counterparty credit
exposure,  which is defined  as the  ability of a  counterparty  to perform  its
financial obligations under a derivative contract. We control the credit risk of
our derivative agreements through counterparty credit approvals, pre-established
exposure limits and monitoring procedures.

      The Capital Committee approves each counterparty and establishes  exposure
limits based on credit analysis and market value. All derivative  agreements are
with  major  money  center  financial  institutions  rated  investment  grade by
nationally  recognized rating agencies,  with the majority of our counterparties
rated "AA" or better. Credit exposures are measured based on the market value of
outstanding  derivative  instruments.   Both  current  exposures  and  potential
exposures,  based on two standard deviations in market rates, are calculated for
each  derivative  contract,  summarized  by  counterparty,  and  reported to the
Capital Committee.

      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  source of funds.  We actively  manage and  mitigate
liquidity risk by maintaining


                                       26
<PAGE>

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).   Included  as  part  of  our
securitization  programs are committed asset-backed commercial paper programs in
the U.S. and Canada. We also maintain  committed bank lines of credit to provide
back-stop support of commercial paper borrowings and local bank lines to support
our international operations. Additional sources of liquidity are loan and lease
payments from customers, whole loan asset sales and loan syndications.

      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 maximum  percentage  of  outstanding  commercial  paper to
total debt and minimum percentage of committed bank line coverage to outstanding
commercial paper.

Liquidity

      We maintain  committed  bank lines of credit  aggregating  $8.5 billion to
provide  back-stop  support of commercial  paper  borrowings  and  approximately
$198.0 million of local bank lines to support our international operations.  Our
primary  bank  line  agreements  include a minimum  equity  requirement  of $3.8
billion.   Included  as  part  of  our  securitization  programs  are  committed
asset-backed  commercial  paper  programs  in the U.S.  and  Canada  aggregating
approximately  $4.8 billion.  At December 31, 2000,  $4.6 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 at competitive interest rates,
we maintain strong investment grade ratings as outlined below.

                                                         Short Term    Long Term
                                                         ----------    ---------

      Moody's ........................................       P-1           A1
      Standard & Poor's ..............................       A-1           A+
      Fitch ..........................................       F1            A+
      Dominion Bond Rating Service ...................    R-1 (mid)     A (high)

      As part of our  continuing  program of  accessing  the public and  private
asset-backed  securitization  markets as an additional liquidity source, general
equipment finance  receivables of $4.1 billion were securitized  during 2000. We
securitized  recreational  vehicle and general equipment finance  receivables of
$1.5 billion in 1999. The increase in securitization  activity in 2000 from 1999
was  primarily  due to the  impact  of a  full  year  of  activity  from  Vendor
Technology Finance and Equipment  Financing  operations,  which have established
securitization  vehicles and relationships with  institutional  investors in the
U.S. and Canada to ensure broad market access.

      At December 31, 2000,  we had $2.5 billion of  registered,  but  unissued,
securities  available  under  shelf  registration  statements  relating  to  our
asset-backed securitization programs.

Capitalization

      Leverage reduction and disciplined  capital allocation are high priorities
for us, and the ongoing evaluation of risk adjusted returns and growth prospects
of business units across the organization will continue.  Businesses that do not
fit  strategically,  or portfolios that do not meet  profitability  requirements
will be  improved,  liquidated  or sold.  Currently,  we have  approximately  $5
billion in assets,  which are under review or are being  considered  for sale or
liquidation.  Progress was made toward increasing tangible capitalization during
the second half of 2000. As a result,  the tangible equity to managed assets and
total debt to tangible  equity ratios improved to 7.82% and 8.78x from 7.47% and
9.27x at June 30, 2000, respectively.


                                       27
<PAGE>

      The following table presents information regarding our capital structure.

                                                          At December 31,
                                                      -----------------------
Dollars in Millions                                      2000          1999
                                                      ----------    ---------
Commercial paper .................................    $ 9,063.5     $ 8,974.0
Term debt ........................................     28,901.6      26,399.5
Company-obligated mandatorily
  redeemable preferred securities of
  subsidiary trust holding solely
  debentures of the Company
  ("Preferred Capital Securities") ...............        250.0         250.0
Stockholders' equity .............................      6,007.2       5,554.4
                                                      ---------     ---------
Total capitalization .............................     44,222.3      41,177.9
Goodwill .........................................      1,964.6       1,850.5
                                                      ---------     ---------
Total tangible capitalization ....................    $42,257.7     $39,327.4
                                                      =========     =========
Tangible stockholders' equity and
  Preferred Capital Securities to
  managed assets .................................         7.82%         7.69%
Total debt (excluding overnight
  deposits) to tangible stockholders'
  equity and Preferred Capital
  Securities .....................................         8.78x         8.75x
Total debt (excluding overnight
  deposits) to stockholders' equity
  and Preferred Capital Securities ...............         6.02x         5.96x

      The  Company-obligated  mandatorily  redeemable  preferred  securities are
7.70%  Preferred  Capital  Securities  issued in 1997 by CIT Capital  Trust I, a
wholly-owned subsidiary. CIT Capital Trust I invested the proceeds of that issue
in Junior  Subordinated  Debentures  of CIT having  identical  rates and payment
dates.

      At December 31, 2000, CIT had 261,897,768 issued and outstanding shares of
common stock, including 11,637,709 exchangeable shares of CIT Exchangeco Inc. At
December  31, 2000,  The Dai-Ichi  Kangyo  Bank,  Limited  ("DKB"),  our largest
shareholder, owned approximately 27% of our outstanding stock.

Recent Accounting Pronouncements

      During 1999, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial  Accounting  Standards ("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 No.  133,  which is now  effective  for all
fiscal quarters of all fiscal years  beginning after June 15, 2000.  During June
2000,  the  FASB  issued  SFAS  No.  138,  "Accounting  for  Certain  Derivative
Instruments and Certain Hedging  Activities,  an amendment of FASB Statement No.
133."

      We adopted  SFAS 133 and 138 as of January 1, 2001.  The  adoption did not
have a material  effect on either the  statement  of  financial  position or the
results of operations.

      During  September  2000,  the FASB issued SFAS No.  140,  "Accounting  for
Transfers   and   Servicing  of   Financial   Assets  and   Extinguishments   of
Liabilities--a replacement of FASB Statement No. 125." SFAS No. 140 is effective
for  transfers  and  servicing  of  financial  assets  and   extinguishments  of
liabilities occurring after March 31, 2001, and is effective for recognition and
reclassification of collateral and for disclosures for fiscal years ending after
December 15, 2000. We have adopted the  disclosures for this statement and we do
not expect the adoption of this  standard to affect the  accounting  for, or the
structure of, our securitization transactions.


                                       28
<PAGE>

Subsequent Event

      On March 13, 2001,  Tyco  International  Ltd.  (NYSE:  TYC), a diversified
manufacturing  and service  company,  and CIT  announced a definitive  agreement
whereby  Tyco will acquire  CIT. As part of this  transaction,  Tyco has entered
into a purchase  agreement with DKB for their  approximate  27% interest,  or 71
million  shares,  at a price of $35.02,  in cash,  per CIT share.  The remaining
shareholders  will  receive  0.6907  Tyco  shares  for  each  share  of CIT in a
tax-free,  stock-for-stock exchange. The transaction, which is expected to close
during  the  third  quarter  of 2001,  is  valued  at  $35.02  per  share to CIT
shareholders,  or  approximately  $9.2  billion,  based on Tyco's March 12, 2001
closing stock price.

      In  connection  with the  transaction,  CIT's  credit  ratings  have  been
reviewed by the rating  agencies as follows:  Standard & Poor's has  re-affirmed
the  short  and  long-term  ratings,  Fitch has  taken no  action,  Moody's  has
re-affirmed  the  short-term  rating and has placed the  long-term  rating under
review, and Dominion Bond Rating Service has placed both the short and long-term
ratings under review.


                                       29
<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, 2000 and 1999, 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, 2000.
These  consolidated   financial  statements  are  the  responsibility  of  CIT'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 auditing  standards  generally
accepted in the United States of America.  Those standards  require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management  as well as  evaluating  the overall
financial  statement  presentation.   We  believe  that  our  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, 2000 and 1999, and the results of
their  operations and cash flows for each of the years in the three-year  period
ended  December 31, 2000 in  conformity  with  accounting  principles  generally
accepted in the United States of America.

                                                         KPMG LLP

Short Hills, New Jersey
January 25, 2001, except
as to Note 25, which
is as of March 13, 2001


                                       30
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                                                             December 31,
                                                       -----------------------
Dollars in Millions                                      2000          1999
                                                       ---------     ---------
                                     Assets
Financing and leasing assets:
   Loans and leases:
     Commercial ..................................     $29,304.0     $27,119.2
     Consumer ....................................       4,193.5       3,887.9
                                                       ---------     ---------
       Finance receivables .......................      33,497.5      31,007.1
  Reserve for credit losses ......................        (468.5)       (446.9)
                                                       ---------     ---------
     Net finance receivables .....................      33,029.0      30,560.2
  Operating lease equipment, net .................       7,190.6       6,125.9
  Finance receivables held for sale ..............       2,698.4       3,123.7
Cash and cash equivalents ........................         812.1       1,073.4
Goodwill .........................................       1,964.6       1,850.5
Other assets .....................................       2,995.1       2,347.4
                                                       ---------     ---------
     Total assets ................................     $48,689.8     $45,081.1
                                                       =========     =========

                      Liabilities and Stockholders' Equity
Debt:
  Commercial paper ...............................     $ 9,063.5     $ 8,974.0
  Variable-rate senior notes .....................      11,130.5       7,147.2
  Fixed-rate senior notes ........................      17,571.1      19,052.3
  Subordinated fixed-rate notes ..................         200.0         200.0
                                                       ---------     ---------
     Total debt ..................................      37,965.1      35,373.5
Credit balances of factoring clients .............       2,179.9       2,200.6
Accrued liabilities and payables .................       1,640.8       1,191.8
Deferred federal income taxes ....................         646.8         510.8
                                                       ---------     ---------
     Total liabilities ...........................      42,432.6      39,276.7
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           2.7
  Paid-in capital ................................       3,527.2       3,521.8
  Retained earnings ..............................       2,603.3       2,097.6
  Accumulated other comprehensive
     income ......................................          11.7           2.8
  Treasury stock, at cost ........................        (137.7)        (70.5)
                                                       ---------     ---------
     Total stockholders' equity ..................       6,007.2       5,554.4
                                                       ---------     ---------
     Total liabilities and
       stockholders' equity ......................     $48,689.8     $45,081.1
                                                       =========     =========

See accompanying notes to consolidated financial statements.


                                       31
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                               Years Ended December 31,
                                                                          ----------------------------------
Dollars in Millions (except per share amounts)                              2000         1999         1998
                                                                          --------     --------     --------
<S>                                                                       <C>          <C>          <C>
Finance income ...................................................        $5,248.4     $2,565.9     $2,015.1
Interest expense .................................................         2,497.7      1,293.4      1,040.8
                                                                          --------     --------     --------
   Net finance income ............................................         2,750.7      1,272.5        974.3
Depreciation on operating lease equipment ........................         1,281.3        355.1        169.5
                                                                          --------     --------     --------
   Net finance margin ............................................         1,469.4        917.4        804.8
Other revenue ....................................................           912.0        350.8        255.4
                                                                          --------     --------     --------
   Operating revenue .............................................         2,381.4      1,268.2      1,060.2
                                                                          --------     --------     --------
Salaries and general operating expenses ..........................         1,035.2        516.0        407.7
Provision for credit losses ......................................           255.2        110.3         99.4
Goodwill amortization ............................................            86.3         25.7         10.1
Minority interest in subsidiary trust holding solely
   debentures of the Company .....................................            19.2         19.2         19.2
                                                                          --------     --------     --------
   Operating expenses ............................................         1,395.9        671.2        536.4
                                                                          --------     --------     --------
   Income before provision for income taxes ......................           985.5        597.0        523.8
Provision for income taxes .......................................           373.9        207.6        185.0
                                                                          --------     --------     --------
   Net income ....................................................        $  611.6     $  389.4     $  338.8
                                                                          ========     ========     ========
Net income per basic share .......................................        $   2.34     $   2.24     $   2.09
Net income per diluted share .....................................        $   2.33     $   2.22     $   2.08
</TABLE>

See accompanying notes to consolidated financial statements.


                                       32
<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'
Dollars in Millions                                    Stock     Stock    Capital     Stock   Earnings      Income        Equity
                                                      --------  --------  --------  --------  --------  -------------  -------------
<S>                                                   <C>       <C>       <C>       <C>       <C>            <C>           <C>
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
Net income .........................................                                             611.6                        611.6
Foreign currency translation
  adjustments ......................................                                                            4.3             4.3
Unrealized gain on equity and
   securitization investments, net .................                                                            4.6             4.6
                                                                                                                           --------
Total comprehensive income .........................                                                                          620.5
                                                                                                                           --------
Cash dividends .....................................                                            (105.9)                      (105.9)
Repurchase of common stock .........................                                   (67.2)                                 (67.2)
Restricted common stock grants .....................                           5.4                                              5.4
                                                      --------  --------  --------  --------  --------       ------        --------
Balance, December 31, 2000 .........................  $    2.7  $     --  $3,527.2  $ (137.7) $2,603.3       $ 11.7        $6,007.2
                                                      ========  ========  ========  ========  ========       ======        ========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       33
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                        Years Ended December 31,
                                                                             ---------------------------------------------
Dollars in Millions                                                              2000             1999            1998
                                                                             -----------      -----------      -----------
<S>                                                                          <C>              <C>              <C>
Cash flows from operations
Net income ...........................................................       $     611.6      $     389.4      $     338.8
Adjustments to reconcile net income to net cash flows
  from operations:
    Provision for credit losses ......................................             255.2            110.3             99.4
    Depreciation and amortization ....................................           1,408.7            402.8            195.9
    Provision for deferred federal income taxes ......................             211.5            163.5            100.2
    Gains on equipment, receivable and investment sales ..............            (371.8)          (109.3)           (75.1)
    Increase in accrued liabilities and payables .....................             449.0            221.2             34.2
    Increase in other assets .........................................            (690.9)          (125.6)           (89.2)
    Other ............................................................              31.9             33.9             11.0
                                                                             -----------      -----------      -----------
      Net cash flows provided by operations ..........................           1,905.2          1,086.2            615.2
                                                                             -----------      -----------      -----------
Cash flows from investing activities
Loans extended .......................................................         (49,275.8)       (39,657.9)       (35,818.9)
Collections on loans .................................................          41,847.5         34,315.7         32,463.4
Proceeds from asset and receivable sales .............................           7,055.4          3,733.2          1,381.3
Purchases of assets to be leased .....................................          (2,457.6)        (1,633.2)        (1,101.7)
Purchases of finance receivable portfolios ...........................          (1,465.6)          (492.1)          (600.0)
Net increase in short-term factoring receivables .....................            (175.4)          (242.9)          (255.4)
Acquisitions, net of cash acquired ...................................                --           (538.0)              --
Other ................................................................             (79.4)           (36.0)           (19.5)
                                                                             -----------      -----------      -----------
  Net cash flows used for investing activities .......................          (4,550.9)        (4,551.2)        (3,950.8)
                                                                             -----------      -----------      -----------
Cash flows from financing activities
Proceeds from the issuance of variable and fixed-rate notes ..........          12,645.3          7,700.0          6,863.5
Repayments of variable and fixed-rate notes ..........................         (10,143.2)        (5,538.3)        (4,111.5)
Net increase in commercial paper .....................................              89.5          2,571.2            584.5
Net repayments of non-recourse leveraged lease debt ..................             (31.2)          (156.8)             6.6
Cash dividends paid ..................................................            (105.9)           (64.6)           (48.9)
Purchase of treasury stock ...........................................             (67.2)           (45.1)           (25.4)
                                                                             -----------      -----------      -----------
  Net cash flows provided by financing activities ....................           2,387.3          4,466.4          3,268.8
                                                                             -----------      -----------      -----------
Effect of exchange rate changes on cash ..............................              (2.9)            (1.6)              --
                                                                             -----------      -----------      -----------
Net (decrease) increase in cash and cash equivalents .................            (261.3)           999.8            (66.8)
Cash and cash equivalents, beginning of year .........................           1,073.4             73.6            140.4
                                                                             -----------      -----------      -----------
Cash and cash equivalents, end of year ...............................       $     812.1      $   1,073.4      $      73.6
                                                                             ===========      ===========      ===========
Supplemental cash disclosures
Interest paid ........................................................       $   2,449.7      $   1,268.9      $   1,021.3
Federal, foreign and state and local income taxes paid ...............       $      28.4      $      66.4      $      81.4
Supplemental non-cash disclosure
Stock issued for acquisition .........................................       $        --      $   2,563.7      $        --
</TABLE>

See accompanying notes to consolidated financial statements.


                                       34
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1--The Company

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

      On November 15, 1999, CIT 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,  CIT'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.  At December  31, 2000,  The
Dai-Ichi Kangyo Bank, Limited ("DKB") owned approximately 27% of the outstanding
stock (including the exchangeable shares).

      In November 1998, CIT's majority stockholder,  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.

Note 2--Summary of Significant Accounting Policies

Basis of Presentation

      The consolidated  financial  statements and accompanying notes include the
accounts of CIT 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  statements  of income
reflect  results of the acquired  operations for the full year 2000, as compared
to a partial year for each acquisition for 1999.

Financing and Leasing Assets

      CIT 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.

      At the time of  designation  for sale,  securitization  or  syndication by
management,  assets are classified as finance  receivables  held for sale. These
assets  are  carried  at the lower of  aggregate  cost or market  value.

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 CIT 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  credit  related
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


                                       35
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

but uncollected income at the date an account is placed on non-accrual status is
reversed and charged  against income.  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.

      Other  revenue  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 CIT 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  impairment,
other than temporary, 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. Changes in economic conditions or other events affecting
specific  obligors or industries may necessitate  additions or deductions to the
consolidated  reserve for credit losses.  It is  management's  judgment that the
consolidated  reserve for credit losses is adequate to provide for credit losses
inherent in the portfolio.

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.  Charge-offs  are recorded on
consumer and certain small ticket commercial  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  individual  review by CIT's  Asset  Quality
Review Committee ("AQR").  The AQR is comprised of members of senior management,
which  reviews  overall  owned and  managed  portfolio  performance  across  the
organization, as well as individual accounts 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
estimated  fair value and the recorded  investment  in the loan is recognized by
recording a provision for credit losses.


                                       36
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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 from date of acquisition,  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 CIT are projected to be
less than the carrying amount of goodwill, an impairment write-down equal to the
difference  between the discounted cash flows and the recorded goodwill would be
recorded as a charge to operations.

Securitizations

      CIT's  retained  interests  in  securitized  assets are  included in other
assets.  Pools of assets are originated and sold to independent  trusts which in
turn,  issue  securities to investors backed by the asset pools. CIT retains the
servicing  rights and  participates  in certain  cash flows from the pools.  The
present  value of expected  net cash flows that  exceeds the  estimated  cost of
servicing  is recorded at the time of sale as "retained  interest".  CIT, in its
estimation of residual cash flows and retained  interests,  inherently employs a
variety of financial assumptions,  including loan pool credit losses, prepayment
speeds and discount rates.  These assumptions are empirically  supported by both
CIT's historical  experience,  market trends and anticipated  trends relative to
the  particular  products  securitized.  Subsequent to the recording of retained
interests,  CIT reviews such assets for impairment on a quarterly  basis.  These
reviews  are  performed  on a  disaggregated  basis.  Fair  values  of  retained
interests  are  calculated  utilizing  current and  anticipated  credit  losses,
prepayment  speeds and discount  rates and are then  compared to CIT'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 CIT's venture capital investment  companies are included directly in
operations.  Unrealized gains and losses,  representing  the difference  between
carrying value and estimated  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.


                                       37
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Derivative Financial Instruments

      CIT primarily uses interest rate and currency  swaps for worldwide  market
risk  management.  These  transactions  are entered  into as hedges  against the
effects of future interest rate and currency fluctuations and, accordingly,  are
not  carried  at fair  value.  CIT  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 position.
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 position.

      CIT uses derivative instruments to hedge the interest rate associated with
the anticipated securitization, syndication, or whole loan 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
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 may be liquidated  with any gain or loss
recognized  in  operations  at  such  time,  and the  related  assets  would  be
reclassified to finance receivables.

      CIT  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.

Stock-Based Compensation

      Stock  option  plans  are  accounted  for in  accordance  with  Accounting
Principles  Board Opinion 25,  "Accounting for Stock Issued to Employees"  ("APB
25".) In accordance with APB 25, no compensation expense is recognized for stock
options issued. Pro forma  disclosures,  as if CIT applied the "Fair Value Based
Method"  for stock  options  granted to  employees,  have been  provided in Note
16--"Postretirement  and Other Benefit Plans."  Compensation  expense associated
with restricted stock awards is recognized over the associated vesting periods.

Foreign Currency Translation

      CIT has  operations  in Canada,  Europe 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 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  of a change in tax rates is recognized in income at the
time of enactment of such change in tax rates.


                                       38
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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 original term is generally less than 90 days.

Other Comprehensive Income

      Other comprehensive  income includes unrealized gains and losses on equity
investments,  securitization retained interests and foreign currency translation
adjustments  pertaining to both the net investment in foreign operations and the
related derivatives designated as hedges of such investments.

Use of Estimates

      The  preparation  of financial  statements in conformity  with  accounting
principles   generally  accepted  in  the  United  States  of  America  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, CIT acquired Newcourt,  a publicly traded,  non-bank
financial  services  enterprise that  originated,  invested in and  securitized,
syndicated  and  sold  asset-based  loans  and  leases.  Newcourt's  origination
activities  focused on the  commercial  and  corporate  finance  segments of the
asset-based  financing  market.  Newcourt,  which was  headquartered in Toronto,
Canada,  operated  extensively  in the United States and Canada,  with strategic
locations in Europe, Latin America, and the Pacific Rim.

      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  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  $1,583.2  million,  which
includes an increase of $200.1 million during 2000 following a refinement to the
original purchase price allocations as summarized, on an after tax basis, in the
table below.

Dollars in Millions                                                       Amount
                                                                          ------
Retained interests in securitization transactions ......................  $117.6
Pre-acquisition contingencies ..........................................    32.2
Business restructuring, including adjustments to reflect dispositions ..    26.4
Other ..................................................................    23.9
                                                                          ------
   Total increase ......................................................  $200.1
                                                                          ======

      This goodwill is being amortized on a straight-line basis over twenty-five
years from the date of acquisition.

      In connection with the acquisition,  CIT 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   employees  for  involuntary
termination.


                                       39
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      The following table summarizes  activity in the  restructuring  liability.
The remaining accrual balances represent expenditures expected during 2001.

<TABLE>
<CAPTION>
                                                                  Severance
                                                                  and Other      Leasehold      Transaction
                                                                 Termination    Termination      and Other
Dollars in Millions                                                 Costs          Costs           Costs           Total
                                                                 -----------    -----------     -----------        ------
<S>                                                                <C>             <C>             <C>             <C>
Balance at November 15, 1999 .................................     $102.1          $ 24.5          $ 72.6          $199.2
  Cash payments ..............................................      (48.1)             --           (38.0)          (86.1)
  Transaction fees paid in CIT stock .........................         --              --           (14.3)          (14.3)
  Non-cash reductions ........................................         --              --            (2.5)           (2.5)
                                                                   ------          ------          ------          ------
Balance at December 31, 1999 .................................       54.0            24.5            17.8            96.3
  Cash payments ..............................................      (60.7)          (10.2)           (8.1)          (79.0)
  Additions ..................................................        6.7              --              --             6.7
  Non-cash reductions ........................................         --            (2.4)           (6.2)           (8.6)
                                                                   ------          ------          ------          ------
Balance at December 31, 2000 .................................     $   --          $ 11.9          $  3.5          $ 15.4
                                                                   ======          ======          ======          ======
</TABLE>

      On April 1, 1999,  CIT  purchased  certain  factoring  assets of  Congress
Financial Corporation ("Congress") from First Union Corporation, and on December
1, 1999, CIT purchased the domestic  factoring business of Heller Financial Inc.
("Heller").  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 these purchases was $270.6  million.  This goodwill is being amortized
on a straight-line basis over twenty years from the dates of acquisition.

      The actual 2000 results and the unaudited pro forma condensed consolidated
statement  of  income  for the year  ended  December  31,  1999,  which has been
prepared  assuming that the 1999  acquisitions  had occurred at the beginning of
that year, follow.

                                                       Years Ended December 31,
                                                     --------------------------
Dollars in Millions, except per share amounts          2000      1999 Pro Forma
                                                     --------    --------------

Operating revenue ..........................         $2,381.4       $2,201.1
Net income .................................         $  611.6       $  448.1
Basic earnings per share ...................         $   2.34       $   1.69
Diluted earnings per share .................         $   2.33       $   1.68

      The pro forma results have been prepared for  comparative  purposes  only.
The pro forma  results  for the year ended  December  31,  1999 are based on the
historical   operating   results  of  the  acquired   companies   prior  to  the
acquisitions. The 1999 pro forma results include certain adjustments,  primarily
to recognize accretion and amortization based on the allocated purchase price of
assets and liabilities.  Further, the 1999 pro forma results do not include cost
savings,  reduced  securitization  activity and other initiatives  introduced by
CIT.  Accordingly,  management  does not believe that the 1999 pro forma results
are  indicative  of  the  actual  results  that  would  have  occurred  had  the
acquisition  closed at the beginning of 1999, nor are they  indicative of future
results.

Note 4--Finance Receivables

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

                                                            December 31,
                                                      -------------------------
Dollars in Millions                                      2000           1999
                                                      ----------     ----------
Loans:
  Commercial .......................................  $18,727.0       $16,997.9
  Consumer .........................................    4,193.4         3,887.9
Lease receivables ..................................   10,577.1        10,121.3
                                                      ---------       ---------
  Finance receivables ..............................  $33,497.5       $31,007.1
                                                      =========       =========


                                       40
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      Included in lease  receivables at December 31, 2000 and 1999 are leveraged
lease  receivables of $1.1 billion and $931.9 million,  respectively.  Leveraged
lease  receivables  exclude the portion  funded by  nonrecourse  debt payable to
third party lenders of $2.1 billion at both December 31, 2000 and 1999.

      Commercial and consumer loans are presented net of unearned income of $1.5
billion at both December 31, 2000 and 1999. Lease  receivables are presented net
of unearned  income of $2.6  billion and $2.2  billion at December  31, 2000 and
1999, respectively.

      At December 31, 2000 and 1999, finance  receivables  exclude $11.1 billion
and $11.0 billion,  respectively,  of finance receivables previously securitized
and still managed by CIT.

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

<TABLE>
<CAPTION>
                                                               At December 31,
                                              ---------------------------------------------------
                                                       2000                         1999
                                              ---------------------        ----------------------
Dollars in Millions                             Amount      Percent          Amount       Percent
                                              ----------    -------        ----------     -------
<S>                                            <C>          <C>             <C>           <C>
Due within one year ........................   $14,185.7     42.3%          $11,761.2      37.9%
Due within one to two years ................     5,450.6     16.3             5,375.1      17.3
Due within two to four years ...............     5,774.6     17.2             5,789.3      18.7
Due after four years .......................     8,086.6     24.2             8,081.5      26.1
                                               ---------    -----           ---------     -----
  Total ....................................   $33,497.5    100.0%          $31,007.1     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 and Item 7A.  Quantitative  and  Qualitative
Disclosures about Market Risk.

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

                                                           At December 31,
                                                         ------------------
Dollars in Millions                                       2000        1999
                                                         ------      ------
Non-accrual finance receivables ..................       $704.2      $510.3
Assets received in satisfaction of loans .........        123.9       125.1
                                                         ------      ------
  Total non-performing assets ....................       $828.1      $635.4
                                                         ======      ======
Percent to finance receivables ...................         2.47%       2.05%
                                                         ======      ======

      At December 31, 2000 and 1999, the recorded  investment in impaired loans,
which are generally  collateral  dependent,  totaled  $326.6  million and $241.5
million,  respectively,  with a corresponding specific reserve for credit losses
allocation of $59.9 million and $24.9 million, respectively. The average monthly
recorded investment in the impaired loans was $256.6 million, $116.9 million and
$73.2  million  for  the  years  ended   December  31,  2000,   1999  and  1998,
respectively.  There was no finance income  recorded on these loans during 2000,
1999 or 1998 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 $38.1 million,  $26.9 million,  and $16.1 million in 2000,
1999, and 1998, respectively.


                                       41
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 5--Reserve for Credit Losses

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

<TABLE>
<CAPTION>
                                                                                At December 31,
                                                                        -------------------------------
Dollars in Millions                                                      2000        1999         1998
                                                                        ------     -------      -------
<S>                                                                     <C>        <C>          <C>
Balance, January 1 .........................................            $446.9     $ 263.7      $ 235.6
                                                                        ------     -------      -------
Provision for credit losses ................................             255.2       110.3         99.4
Reserves relating to acquisitions/dispositions .............               2.0       167.9          7.5
                                                                        ------     -------      -------
  Additions to the reserve for credit losses ...............             257.2       278.2        106.9
                                                                        ------     -------      -------
Finance receivables charged-off ............................            (255.8)     (111.1)      (103.7)
Recoveries on finance receivables
 previously charged-off ....................................              20.2        16.1         24.9
                                                                        ------     -------      -------
  Net credit losses ........................................            (235.6)      (95.0)       (78.8)
                                                                        ------     -------      -------
Balance, December 31 .......................................            $468.5     $ 446.9      $ 263.7
                                                                        ------     -------      -------
Reserve for credit losses as a percentage
 of finance receivables ....................................              1.40%       1.44%        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 $1,080.9 million at December
31, 2000 and $719.4 million at December 31, 1999.

                                                  At December 31,
                                             ------------------------
Dollars in Millions                            2000            1999
                                             --------        --------
Commercial aircraft .......................  $1,885.5        $1,528.4
Railroad equipment ........................   1,697.1         1,398.1
Information technology ....................   1,155.4           925.1
Telecommunications ........................     560.4           468.7
Transportation ............................     385.2           428.4
Business aircraft .........................     364.0           334.3
Manufacturing .............................     305.6           258.6
Other .....................................     837.4           784.3
                                             --------        --------
  Total ...................................  $7,190.6        $6,125.9
                                             ========        ========

      Included in the  preceding  table is equipment  not  currently  subject to
lease  agreements of $351.0  million and $235.9 million at December 31, 2000 and
1999, respectively.

      Rental income on operating  leases,  which is included in finance  income,
totaled  $1.7 billion in 2000,  $617.8  million in 1999,  and $314.1  million in
1998.   The  following   table   presents   future   minimum  lease  rentals  on
non-cancelable  operating  leases as of December  31, 2000.  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                                            Amount
                                                             -----------
2001 ..............................................           $1,522.6
2002 ..............................................              992.1
2003 ..............................................              535.4
2004 ..............................................              280.3
2005 ..............................................              169.3
Thereafter ........................................              298.4
                                                              --------
    Total .........................................           $3,798.1
                                                              ========


                                       42
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 7--Investments in Debt and Equity Securities

      At  December  31,  2000 and 1999,  CIT's  investments  in debt and  equity
securities  designated as available for sale totaled  $849.7  million and $892.0
million, respectively.

      Included in CIT's  investments in debt and equity  securities are retained
interests  in  commercial  securitized  assets of $684.5  million  and  consumer
securitized  assets  of $155.9  million  at  December  31,  2000 and  commercial
securitized  assets of $676.8 million and consumer  securitized assets of $194.8
million at December 31, 1999. 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 quarterly for valuation impairment.

      The securitization  programs cover a wide range of products and collateral
types with significantly different prepayment and credit risk characteristics.

      The prepayment speed, in the tables below, is based on CPR which expresses
payments as a function  of the  declining  amount of loans at a compound  annual
rate.  Expected credit losses are based upon annual loss rates. The key economic
assumptions   used  in  measuring   the  retained   interests  at  the  date  of
securitization  for  transactions  completed during 2000 by product type were as
follows.

<TABLE>
<CAPTION>
                                                                                    Consumer
                                                                       ----------------------------------
                                                                       Manufactured
                                                       Commercial       Housing &           Recreational
                                                        Equipment       Home Equity        Vehicle & Boat
                                                     ---------------   ------------        --------------
<S>                                                  <C>                    <C>                 <C>
Prepayment speed ..................................  4.50% - 9.81%          --                  --
Expected credit losses ............................  0.52% - 1.28%          --                  --
Weighted average discount rate ....................  8.50% - 9.86%          --                  --
Weighted average life (in years) ..................   0.69 - 2.69           --                  --
</TABLE>

      Ranges of key economic  assumptions  used in calculating the fair value of
the  retained  interests in  securitized  assets by product type at December 31,
2000 were as follows.

<TABLE>
<CAPTION>
                                                                                        Consumer
                                                                           ----------------------------------
                                                                           Manufactured
                                                       Commercial           Housing &           Recreational
                                                        Equipment           Home Equity        Vehicle & Boat
                                                     ---------------        ------------       --------------
<S>                                                  <C>                  <C>                  <C>
Prepayment speed ..................................  4.50% -  9.08%       16.84% - 30.00%      20.56% - 30.00%
Expected credit losses ............................  0.55% -  4.03%        0.15% -  0.90%       0.00% -  0.94%
Weighted average discount rate ....................  8.74% - 10.35%        8.00% - 12.00%       8.00% -  8.50%
Weighted average life (in years) ..................  0.52  -  1.97         2.37  -  3.95        0.79  -  2.88
</TABLE>

      The  impact  of 10  percent  and 20  percent  adverse  changes  to the key
economic  assumptions on the fair value of retained interests as of December 31,
2000 is shown in the following tables.

<TABLE>
<CAPTION>
                                                                                    Consumer
                                                                       ----------------------------------
                                                                       Manufactured
                                                       Commercial       Housing &           Recreational
Dollars in Millions                                     Equipment       Home Equity        Vehicle & Boat
                                                     ---------------   ------------        --------------
<S>                                                     <C>                 <C>                 <C>
Prepayment speed:
  10 percent adverse change .........................   $ (0.8)           $(1.8)                $(5.0)
  20 percent adverse change .........................     (1.4)            (3.6)                 (9.2)
Expected credit losses:
  10 percent adverse change .........................    (20.6)            (0.4)                 (3.4)
  20 percent adverse change .........................    (41.3)            (0.8)                 (6.7)
Weighted average discount rate:
  10 percent adverse change .........................     (8.7)            (0.9)                 (2.0)
  20 percent adverse change .........................    (17.2)            (1.7)                 (4.0)
</TABLE>

      These  sensitivities  are  hypothetical  and should be used with  caution.
Changes in fair value based on a 10 percent  variation in assumptions  generally
cannot be extrapolated  because the relationship of the change in assumptions to
the change in fair value may not be linear. Also, in this table, the effect of a
variation in a particular


                                       43
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

assumption  on the fair value of the retained  interests is  calculated  without
changing any other assumption.  In reality,  changes in one factor may result in
changes in another (for example,  increases in market  interest rates may result
in lower  prepayments  and  increased  credit  losses),  which might  magnify or
counteract the sensitivities.

      The following tables summarize static pool credit losses,  which represent
the sum of actual and projected  future credit  losses,  divided by the original
pool of the  respective  assets.  Amounts  shown  for each  year are a  weighted
average for the securitizations during the period.



                                                          Commercial Equipment
                                                         Securitizations During
                                                         ----------------------
                                                           2000          1999
                                                          ------        -------

Actual and projected losses at:
  December 31, 2000 ..................................     1.83%         3.92%
  December 31, 1999 ..................................       --          4.59%

                                                          Recreational Vehicle
                                                                and Boat
                                                         Securitizations During
                                                         ----------------------
                                                           2000          1999
                                                          ------        -------
Actual and projected losses at:
  December 31, 2000 ..................................       --          2.32%
  December 31, 1999 ..................................       --          2.25%

      The table that follows  summarizes  certain cash flows  received  from and
paid to securitization trusts for the year ended December 31, 2000.

                                                                  Year Ended
Dollars in Millions                                            December 31, 2000
                                                               -----------------
Proceeds from new securitizations ...........................      $4,310.9
Other cash flows received on retained interests .............         327.7
Servicing fees received .....................................          65.2
Purchases of delinquent or foreclosed assets ................         (11.0)
Purchases of ineligible contracts ...........................         (44.2)
Reimbursable servicing advances, net ........................         (44.7)
Purchases of contracts through clean up calls ...............        (259.0)
                                                                   --------
  Total, net ................................................      $4,344.9
                                                                   ========

      Charge-offs for the year ended December 31, 2000 and receivables  past due
60 days or more at  December  31,  2000 are set forth  below,  for both  finance
receivables and managed receivables. In addition to finance receivables, managed
receivables include finance receivables previously securitized and still managed
by us, but exclude operating leases and equity investments.

<TABLE>
<CAPTION>
                                                 Charge-offs for the Year Ended December 31, 2000
                                                --------------------------------------------------
                                                  Finance Receivables         Managed Receivables
                                                ----------------------       ---------------------
Dollars in Millions                             Amount         Percent       Amount        Percent
                                                ------         -------       ------        -------
<S>                                             <C>             <C>           <C>            <C>
Commercial .................................    $181.2          0.62%         $346.2         0.88%
Consumer ...................................      54.4          1.32            85.7         1.15
                                                ------          ----          ------         ----
  Total ....................................    $235.6          0.71%         $431.9         0.93%
                                                ======          ====          ======         ====

<CAPTION>
                                                  Past Due 60 Days or More at December 31, 2000
                                                --------------------------------------------------
                                                  Finance Receivables         Managed Receivables
                                                ----------------------       ---------------------
Dollars in Millions                             Amount         Percent       Amount        Percent
                                                ------         -------       ------        -------
<S>                                             <C>             <C>         <C>              <C>
Commercial .................................    $788.8          2.69%       $1,279.6         3.18%
Consumer ...................................     211.1          5.03           279.4         3.86
                                                ------          ----        --------         ----
  Total ....................................    $999.9          2.98%       $1,559.0         3.29%
                                                ======          ====        ========         ====
</TABLE>


                                       44
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 8--Debt

      The following table presents data on commercial paper borrowings.

<TABLE>
<CAPTION>
                                                                            At December 31,
                                                                --------------------------------------
Dollars in Millions                                               2000            1999          1998
                                                                --------        --------      --------
<S>                                                             <C>             <C>           <C>
Borrowings outstanding .....................................    $9,063.5        $8,974.0      $6,144.1
Weighted average interest rate .............................        6.57%           5.71%         5.35%
Weighted average maturity ..................................     37 days         27 days       38 days

<CAPTION>
                                                                   For the Years Ended December 31,
                                                                --------------------------------------
Dollars in Millions                                               2000            1999          1998
                                                                --------        --------      --------
<S>                                                             <C>             <C>           <C>
Daily average borrowings ..................................     $10,565.1       $6,694.5      $6,572.1
Maximum amount outstanding ................................     $12,868.2       $9,295.0      $7,655.9
Weighted average interest rate ............................          6.23%          5.17%         5.51%
</TABLE>

      The following  tables present the contractual  maturities of total debt at
December 31, 2000 and 1999.

<TABLE>
<CAPTION>
                                                                           At December 31, 2000
                                                               ---------------------------------------------          Total
                                                               Commercial      Variable-rate                      at December 31,
Dollars in Millions                                              Paper          Senior Notes         Total             1999
                                                               ----------      -------------       ---------      ---------------
<S>                                                             <C>              <C>               <C>               <C>
Due in 2000 (rates ranging from
 4.00% to 7.57%) ....................................           $     --         $      --         $      --         $14,056.2
Due in 2001 (rates ranging from
 5.90% to 6.97%) ....................................            9,063.5           6,755.5          15,819.0           1,225.0
Due in 2002 (rates ranging from
 6.58% to 8.52%) ....................................                 --           4,355.0           4,355.0             820.0
Due in 2003 (rates ranging from
 5.81% to 6.04%) ....................................                 --              20.0              20.0              20.0
                                                                --------         ---------         ---------         ---------
 Total ..............................................           $9,063.5         $11,130.5         $20,194.0         $16,121.2
                                                                ========         =========         =========         =========
</TABLE>

      The consolidated  weighted average interest rates on variable senior notes
at December 31, 2000 and 1999 were 6.76% and 6.03%, respectively.

<TABLE>
<CAPTION>
                                                                          At December 31, 2000
                                                               -------------------------------------------
                                                                      Fixed-rate Notes                                Total
                                                               -----------------------------                     at December 31,
                                                                  Senior        Subordinated        Total             1999
                                                               -----------      ------------      ---------      ---------------
<S>                                                            <C>                 <C>            <C>               <C>
Due in 2000 (rates ranging from
 5.00% to 9.34%) ......................................        $        --         $   --         $      --         $ 4,827.2
Due in 2001 (rates ranging from
 5.50% to 9.25%) ......................................            4,464.8          200.0           4,664.8           4,678.7
Due in 2002 (rates ranging from
 5.50% to 8.26%) ......................................            3,028.4             --           3,028.4           2,885.0
Due in 2003 (rates ranging from
 4.90% to 8.26%) ......................................            3,851.5             --           3,851.5           1,268.8
Due in 2004 (rates ranging from
 4.41% to 8.26%) ......................................            1,752.3             --           1,752.3           1,766.4
Due in 2005 (rates ranging from
 5.91% to 8.26%) ......................................            2,890.6             --           2,890.6           3,670.9
Due after 2005 (rates ranging from
 3.25% to 8.25%) ......................................            1,566.0             --           1,566.0                --
                                                               -----------         ------         ---------         ---------
Face amount of maturities .............................           17,553.6          200.0          17,753.6          19,097.0
Purchase accounting adjustment and
 issue discount .......................................               17.5             --              17.5             155.3
                                                               -----------         ------         ---------         ---------
 Total ................................................        $  17,571.1         $200.0         $17,771.1         $19,252.3
                                                               ===========         ======         =========         =========
</TABLE>


                                       45
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      Fixed-rate  senior and subordinated  debt outstanding at December 31, 2000
mature at various dates through 2028,  with interest rates ranging from 3.25% to
9.25%. The consolidated weighted average interest rates on fixed-rate senior and
subordinated  debt  at  December  31,  2000  and  1999  were  6.83%  and  6.61%,
respectively.  The purchase accounting adjustment and issue discount was reduced
during 2000 primarily by the cash settlement of a derivative contract.

      The following table represents information on unsecured committed lines of
credit  with 47  banks  that  can be  drawn  upon to  support  commercial  paper
borrowings at December 31, 2000.

Maturity                                                           Amount
--------                                                          --------
Dollars in Millions
March 2001 ...............................................        $4,053.9
April 2003 ...............................................           765.0
March 2005 ...............................................         3,720.0
                                                                  --------
      Total credit lines .................................        $8,538.9
                                                                  ========

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

      Certain foreign  operations  utilize local financial  institutions to fund
operations.  At December  31,  2000,  local  credit  facilities  totaled  $198.0
million, of which $104.6 million was available.

Note 9--Derivative Financial Instruments

      As part of managing the exposure to changes in market interest rates, CIT,
as an end-user,  enters into various  interest  rate swap  transactions,  all of
which  are  transacted  in  over-the-counter   markets,   with  other  financial
institutions  acting as principal  counterparties.  CIT 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 a hedge objective against:  commercial
paper,  a  specifically  underwritten  debt issue or a specific  pool of assets.
CIT'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  associated  with
anticipated  securitization,  syndication  or whole loan sale of  financing  and
leasing assets.  The notional  amounts,  rates,  indices and maturities of CIT's
off-balance sheet derivatives are required to closely match the related terms of
CIT's hedged assets and liabilities.

      CIT 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.  CIT 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.

<TABLE>
<CAPTION>
                                 Notional Amount
Interest Rate Swaps                in Millions                      Comments
----------------------------     ---------------   --------------------------------------------------
<S>                                  <C>           <C>
Floating to fixed-rate swaps         $8,916.6      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          1,002.8      Effectively  converts  the  interest  rate  on  an
                                                   equivalent   amount  of  fixed-rate   notes  to  a
                                                   variable-rate.

                                     --------
Total interest rate swaps            $9,919.4
                                     ========
</TABLE>

                                       46
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      CIT's hedging activity increased interest expense by $25.9 million,  $35.8
million  and  $23.4  million  in 2000,  1999 and  1998,  respectively,  over the
interest  expense that would have been incurred with the existing debt structure
but without  CIT's  hedging  activity.  However,  this  calculation  of interest
expense  does not take into  account  any actions CIT 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.

      CIT is  party  to  cross-currency  interest  rate  swaps  with a  notional
principal amount of $1.2 billion. The swaps hedge foreign currency risk and have
maturities ranging from 2001 to 2019 that correspond with the terms of the debt.
CIT also entered into foreign currency  exchange and bond forward contracts with
notional  amounts  of  $2.9  billion  and  $26.9  million,  respectively,   with
maturities  ranging from 2001 to 2004,  to hedge  foreign  currency and interest
rate risk.

      CIT is exposed to credit risk to the extent that the 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  $151.6 million at December 31, 2000,
reduced by the effects of master  netting  agreements as presented in Note 20 --
"Fair  Values  of  Financial  Instruments."  CIT  manages  this  credit  risk by
requiring all derivative  transactions  be conducted with  counterparties  rated
investment grade by nationally recognized rating agencies,  with the majority of
the  counterparties  rated "AA" or higher, and by setting limits on the exposure
with any individual counterparty.  Accordingly, CIT's actual counterparty credit
risk at December 31, 2000 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, 2000.

<TABLE>
<CAPTION>
                                         Floating to Fixed-rate                    Fixed to Floating-rate
                                    ----------------------------------        --------------------------------
                                                   Weighted Average                          Weighted Average
                                                   -------------------                       -----------------
Years Ending                        Notional       Receive       Pay           Notional      Receive      Pay
December 31,                         Amount         Rate         Rate           Amount        Rate        Rate
---------------------------------   --------       -------     -------        ---------      -------     -----
Notional Amount in Millions
<S>                                 <C>             <C>         <C>           <C>            <C>         <C>
2001 ............................   $1,980.3        6.73%       6.52%         $ 162.0        5.95%       6.80%
2002 ............................    1,336.4        6.64        6.47             61.0        6.18        6.88
2003 ............................    2,902.2        6.63        6.96            311.0        7.15        8.48
2004 ............................    1,009.4        6.72        7.18             11.0        7.85        7.42
2005 ............................      131.9        6.65        6.44            257.8        6.92        7.99
2006-Thereafter .................      986.2        6.71        6.94            200.0        5.92        6.76
                                    --------        ----        ----         --------        ----        ----
  Total .........................   $8,346.4        6.68%       6.79%        $1,002.8        6.60%       7.63%
                                    ========        ====        ====         ========        ====        ====
</TABLE>

      In addition, at December 31, 2000, CIT 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
amount of $394.8 million that converted floating-rate debt to fixed-rate debt at
weighted  average  receive and pay rates of 5.88% and 6.20%,  respectively.  The
Australian dollar  derivatives  convert U.S. dollar equivalent $163.9 million in
floating-rate  debt to fixed-rate debt at weighted average receive and pay rates
of 6.29%  and  6.37%,  respectively.  The  contractual  maturities  for both the
Canadian and Australian derivatives are predominately between 2001 and 2004. All
other foreign currency  derivatives had an outstanding  notional balance of U.S.
dollar  equivalent  $11.5  million,   which  converted   floating-rate  debt  to
fixed-rate  debt,  maturing  through 2002, at weighted  average  receive and pay
rates of 5.14% and 3.56%, respectively.

      All rates were those in effect at December  31, 2000.  Variable-rates  are
based on the contractually  determined rate or other market rate indices and may
change significantly, affecting future cash flows.


                                       47
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      The following  table  presents the notional  principal  amounts of foreign
exchange forwards,  cross currency swaps and bond forwards at December 31, 2000.
The bond forwards are utilized to hedge certain assets held for syndication.

<TABLE>
<CAPTION>
                                                                                          Cross-Currency         Bond
                                                 Foreign Exchange Forwards                     Swaps           Forwards
                                   -----------------------------------------------------  --------------   ---------------
                                                        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
---------------------------------  ---------------   ------------------  ---------------  ---------------  ---------------
Notional Amounts in Millions
<S>                                    <C>                <C>               <C>              <C>                <C>
2001 ............................      $1,223.0           $573.4            $1,796.4         $ 183.4            $26.9
2002 ............................         498.4            221.6               720.0            11.7               --
2003 ............................         293.1             35.7               328.8           131.7               --
2004 ............................           7.5               --                 7.5           125.5               --
2005 ............................            --               --                  --           695.8               --
2006-Thereafter .................            --               --                  --            88.9               --
                                       --------           ------            --------        --------            -----
  Total .........................      $2,022.0           $830.7            $2,852.7        $1,237.0            $26.9
                                       ========           ======            ========        ========            =====
</TABLE>

      During 1999, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial  Accounting  Standards ("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 No.  133,  which is now  effective  for all
fiscal quarters of all fiscal years  beginning after June 15, 2000.  During June
2000,  the  FASB  issued  SFAS  No.  138,  "Accounting  for  Certain  Derivative
Instruments and Certain Hedging  Activities,  an amendment of FASB Statement No.
133."

      We adopted  SFAS 133 and 138 as of January 1, 2001.  The  adoption did not
have a material  effect on either the  statement  of  financial  position or the
results of operations.

Note 10--Preferred Capital Securities

      In  February  1997,  CIT Capital  Trust I (the  "Trust"),  a  wholly-owned
subsidiary  of CIT,  issued  in a  private  offering  $250.0  million  of  7.70%
Preferred Capital Securities (the "Capital Securities"), which were subsequently
registered with the Securities and Exchange  Commission  pursuant to an exchange
offer.  The  Trust  subsequently   invested  the  offering  proceeds  in  Junior
Subordinated  Debentures (the  "Debentures")  of CIT, having identical rates and
payment  dates.  The  Debentures  of CIT 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 CIT 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 CIT to the extent that the
Trust has funds available for distribution. CIT records distributions payable on
the Capital Securities as an operating expense in the Consolidated Statements of
Income.

Note 11--Stockholders' Equity

      Under  the  most   restrictive   provisions  of  agreements   relating  to
outstanding  debt, CIT may not, without the consent of the holders of such debt,
permit  stockholders' equity to be less than $200 million. Our primary bank line
agreements include a minimum equity requirement of $3.8 billion.

      During  1998,  CIT's Board of Directors  authorized  the purchase of up to
2,000,000  shares of common  stock to  provide  for,  among  other  things,  its
employee  compensation  programs.  On March 14,  2000,  the  Board of  Directors
renewed  and  extended  the 1998 stock  repurchase  program by  authorizing  the
purchase of up to 3,000,000  additional shares of its common stock.  Previously,
on July 22, 1999,  the Board of Directors  renewed and extended the same program
by authorizing the purchase of up to 2,000,000  additional shares. All 5,000,000
shares were repurchased under these extensions.


                                       48
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      CIT has common stock, par value $.01 per share, with 1,210,000,000  shares
authorized as of December 31, 2000. The following table  summarizes  activity in
the  outstanding  common  stock  and  exchangeable  shares  for 2000  and  1999,
respectively.

<TABLE>
<CAPTION>
                                                                          Common Stock
                                                       ---------------------------------------------------
                                                                               Less                                 Exchangeable
                                                          Issued             Treasury          Outstanding             Shares
                                                       -----------           ---------         -----------          ------------
<S>                                                    <C>                    <C>              <C>
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 issued, net ...................           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
Restricted shares issued, net ...................        1,412,025                  --           1,412,025                   --
Shares purchased, net ...........................               --          (3,946,834)         (3,946,834)                  --
Conversion of Exchangeco shares
 to common shares ...............................       13,254,601                  --          13,254,601          (13,254,601)
                                                       -----------           ---------         -----------           ----------
Balance at December 31, 2000 ....................      256,952,578          (6,692,519)        250,260,059           11,637,709
                                                       ===========           =========         ===========           ==========
</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 Newcourt
acquisition.  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 CIT may redeem  these  shares on a  one-for-one
basis on or before November 1, 2004.

Note 12--Other Revenue

      The following table sets forth the components of other revenue.

                                                   Years Ended December 31,
                                                  --------------------------
Dollars in Millions                                2000      1999      1998
                                                  ------    ------    ------

Fees and other income ......................      $480.9    $161.0    $ 90.7
Factoring commissions ......................       154.7     118.7      95.7
Gains on sales of leasing equipment ........       113.2      56.4      45.2
Gains on securitizations ...................       109.5      14.7      12.5
Gains on venture capital investments .......        53.7      --        11.3
                                                  ------    ------    ------
  Total ....................................      $912.0    $350.8    $255.4
                                                  ======    ======    ======

Note 13--Salaries and General Operating Expenses

      The  following  table sets forth the  components  of salaries  and general
operating expenses (excluding goodwill amortization).

                                                  Years Ended December 31,
                                                ----------------------------
Dollars in Millions                               2000       1999      1998
                                                --------    ------    ------

Salaries and employee benefits ...........      $  600.7    $309.4    $245.4
Other operating expenses .................         434.5     206.6     162.3
                                                --------    ------    ------
  Total ..................................      $1,035.2    $516.0    $407.7
                                                ========    ======    ======


                                       49
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 14--Income Taxes

      The effective tax rate of CIT varied from the statutory federal corporate
income tax rate as follows.

                                                     Years Ended December 31,
                                                     ------------------------
Percentage of Pretax Income                          2000      1999      1998
                                                     ----      ----      ----
Federal income tax rate ...........................  35.0%     35.0%     35.0%
Increase (decrease) due to:
  Goodwill amortization ...........................   2.1       0.2       0.1
  Foreign income taxes ............................   2.0        --        --
  State and local income taxes,
      net of federal income tax benefit ...........   1.6       2.7       3.0
  Other ...........................................  (2.8)     (3.1)     (2.8)
                                                     ----      ----      ----
Effective tax rate ................................  37.9%     34.8%     35.3%
                                                     ====      ====      ====

      The provision for income taxes is comprised of the following.

                                                     Years Ended December 31,
                                                  ------------------------------
Dollars in Millions                                2000        1999        1998
                                                  ------      ------      ------
Current federal income tax provision .......      $ 24.6      $ 16.7      $ 60.4
Deferred federal income tax provision ......       211.5       163.5       100.2
                                                  ------      ------      ------
  Total federal income taxes ...............       236.1       180.2       160.6
Foreign income taxes .......................       113.2         3.0          --
State and local income taxes ...............        24.6        24.4        24.4
                                                  ------      ------      ------
  Total provision for income taxes .........      $373.9      $207.6      $185.0
                                                  ======      ======      ======

      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,
                                                       -------------------------
Dollars in Millions                                      2000             1999
                                                       --------        ---------
Assets:

   Amortization of intangibles .................       $ (300.8)       $ (282.1)
   Net operating loss carryforwards ............         (216.0)         (153.8)
   Alternative minimum tax .....................          (85.7)          (50.7)
   Provision for credit losses .................          (73.4)          (90.1)
   Loan origination fees .......................          (29.7)          (22.6)
   Other .......................................          (96.3)          (81.1)
                                                       --------        --------
      Total deferred tax assets ................         (801.9)         (680.4)
                                                       --------        --------
Liabilities:

   Leasing transactions ........................        1,006.6           932.7
   Market discount income ......................          388.9           226.6
   Other .......................................           51.6            29.7
                                                       --------        --------
      Total deferred tax liabilities ...........        1,447.1         1,189.0
                                                       --------        --------
Net deferred tax liability .....................       $  645.2        $  508.6
                                                       ========        ========

      Included in deferred  federal  income  taxes on the  Consolidated  Balance
Sheets are  unamortized  investment tax credits of $1.6 million and $2.2 million
at December 31, 2000 and 1999, respectively. Included in the accrued liabilities
and  payables  caption in the  Consolidated  Balance  Sheets are state and local
deferred tax  liabilities  of $112.6  million and $66.8  million at December 31,
2000 and 1999, respectively, arising from the temporary differences shown in the
above tables.

      At  December  31,  2000  CIT has  $538.6  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


                                       50
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

permanent differences.  Non-capital losses pertaining to the Canadian operations
of $208.2  million  will  expire at various  dates  through  the year 2007.  Net
operating losses pertaining to the U.S. operations of $330.4 million will expire
at various  dates  through  the year 2020.  CIT had an  alternative  minimum tax
credit  carryforward  for income tax  purposes of $85.7  million at December 31,
2000.

      During 2000,  the net deferred tax  liability was reduced by $95.6 million
for  the tax  effect  of  purchase  price  allocation  refinements  recorded  in
goodwill.

Note 15--Earnings Per Share ("EPS")

      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 CIT at the  average  market  price  for  the  period.  Options  that  have an
anti-dilutive   effect  are  not  included  in  the   denominator  and  averaged
approximately 14.9 million shares for the year ended December 31, 2000.

      The reconciliation of the numerator and denominator of basic EPS with that
of diluted EPS is presented  for the years ended  December 31, 2000 and 1999 and
1998.

<TABLE>
<CAPTION>
                                                     Income            Shares         Per-Share
Dollars in Millions, except per share amounts      (Numerator)     (Denominator)        Amount
                                                   -----------     -------------        ------
<S>                                                  <C>            <C>                 <C>
For the Year Ended December 31, 2000
Basic EPS:
   Income available to common shareholders .....     $611.6         261,141,544         $2.34
Effect of dilutive securities:
   Restricted shares ...........................         --           1,386,353         (0.01)
   Stock options ...............................         --             169,082            --
                                                     ------         -----------         -----
Diluted EPS ....................................     $611.6         262,696,979         $2.33
                                                     ======         ===========         =====
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
                                                     ======         ===========         =====
</TABLE>

Note 16--Postretirement and Other Benefit Plans

Retirement and Postretirement Medical and Life Insurance Benefit Plans

      Certain employees of CIT 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.  CIT funds the Plan to the  extent it  qualifies  for an income  tax
deduction. Such funding is charged to salaries and employee benefits expense.


                                       51
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      CIT 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.

      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
                                                  ---------------------------------      -------------------------------
Dollars in Millions                                2000         1999         1998         2000        1999        1998
                                                  -------      -------      -------      -------     -------     -------
<S>                                               <C>          <C>          <C>          <C>         <C>         <C>
Change in Benefit Obligations
Benefit obligation at beginning of year ......    $ 107.9      $ 118.1      $ 100.4      $  36.7     $  37.2     $  35.0
Service cost .................................        7.0          7.2          6.3          2.0         1.8         1.5
Interest cost ................................        8.5          7.6          6.9          3.0         2.3         2.3
Plan participants' contributions .............         --           --           --          0.2          --          --
Plan amendments ..............................        2.6          1.3           --         (7.8)         --          --
Actuarial loss/(gain) ........................        4.6        (23.8)         7.0          5.1        (2.8)        1.2
Benefits paid ................................       (2.9)        (2.5)        (2.5)        (2.9)       (1.8)       (2.8)
                                                  -------      -------      -------      -------     -------     -------
Benefit obligation at end of year ............    $ 127.7      $ 107.9      $ 118.1      $  36.3     $  36.7     $  37.2
                                                  =======      =======      =======      =======     =======     =======
Change in Plan Assets
Fair value of plan assets at beginning of year    $ 140.7      $ 132.8      $ 128.5      $    --     $    --     $    --
Actual return on plan assets .................       (0.4)        10.4          6.8           --          --          --
Plan participants' contributions .............         --           --           --          0.2          --          --
Benefits paid ................................       (2.9)        (2.5)        (2.5)        (2.9)       (1.8)       (2.8)
Employer contributions .......................         --           --           --          2.7         1.8         2.8
                                                  -------      -------      -------      -------     -------     -------
Fair value of plan assets at end of year .....    $ 137.4      $ 140.7      $ 132.8      $    --     $    --     $    --
                                                  =======      =======      =======      =======     =======     =======
Reconciliation of Funded Status at End of Year
Funded status ................................    $   9.7      $  32.8      $  14.7      $ (36.3)    $ (36.7)    $ (37.2)
Unrecognized prior service cost ..............        2.4         (0.1)        (1.5)          --          --          --
Unrecognized net gain ........................       (6.0)       (25.8)        (4.7)        (3.0)       (8.4)       (6.2)
Unrecognized net transition obligation .......         --           --           --         11.8        21.2        22.9
                                                  -------      -------      -------      -------     -------     -------
Prepaid/(accrued) benefit cost ...............    $   6.1      $   6.9      $   8.5      $ (27.5)    $ (23.9)    $ (20.5)
                                                  =======      =======      =======      =======     =======     =======
Weighted-average Assumptions
Discount rate ................................       7.50%        7.75%        6.50%        7.50%       7.75%       6.50%
Rate of compensation increase ................       4.50%        4.75%        4.25%        4.50%       4.75%       4.25%
Expected return on plan assets ...............      10.00%       10.00%       10.00%          --          --          --

Components of Net Periodic Benefit Cost
Service cost .................................    $   7.0      $   7.2      $   6.3      $   2.0     $   1.8     $   1.5
Interest cost ................................        8.5          7.6          6.9          3.0         2.3         2.3
Expected return on plan assets ...............      (14.0)       (13.2)       (12.8)          --          --          --
Amortization of prior service cost ...........        0.1           --         (0.2)          --          --          --
Amortization of transition obligation ........         --           --           --          1.6         1.6         1.6
Amortization of gains ........................       (0.8)          --         (0.5)        (0.4)       (0.5)       (0.8)
                                                  -------      -------      -------      -------     -------     -------
Total net periodic expense/(benefit) .........    $   0.8      $   1.6      $  (0.3)     $   6.2     $   5.2     $   4.6
                                                  =======      =======      =======      =======     =======     =======
</TABLE>

      For 2000,  the assumed health care cost trend rates decline to an ultimate
level  of  5.25%  in 2006  for all  retirees;  for  1999,  5.50% in 2005 for all
retirees; and for 1998, 4.50% in 2005 for employees prior to reaching age 65.


                                       52
<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
                                                         -----------------------
Dollars in Millions                                         2000         1999
                                                           ------       ------
Effect of One-percentage Point Increase on:
Year end benefit obligation .........................      $ 1.4        $ 2.8
Total of service and interest cost components .......      $ 0.5        $ 0.4

Effect of One-percentage Point Decrease on:
Year end benefit obligation .........................      $(1.3)       $(2.6)
Total of service and interest cost components .......      $(0.4)       $(0.4)

Savings Incentive Plan

      Certain  employees  of CIT  participate  in The CIT Group  Holdings,  Inc.
Savings Incentive Plan. This plan qualifies under section 401(k) of the Internal
Revenue  Code.  CIT's  expense  is based on  specific  percentages  of  employee
contributions and plan administrative costs and aggregated $13.2 million,  $10.4
million and $9.6 million for 2000, 1999 and 1998, respectively.

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 depend 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.  For the  years  ended
December 31, 2000, 1999 and 1998,  expenses for the Bonus Plan amounted to $40.0
million, $24.3 million and $18.6 million,  respectively.  Relating to their 1999
bonus,  certain  senior  executive  officers were permitted to defer up to fifty
percent  (50%) (in the form of CIT stock  units).  The  deferred  portion of the
bonus  was  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. No deferral was offered for 2000.

Long-Term Equity Compensation Plan

      CIT sponsors a Long-Term  Equity  Compensation  Plan (the "ECP").  The ECP
allows CIT 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 2000, 1999 and 1998 vest one-third on the first,
second and third anniversary of the date of grant.


                                       53
<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>
                                                      2000                                    1999
                                           --------------------------------      --------------------------------
                                                               Weighted                              Weighted
                                                            Average Option                        Average Option
                                             Shares         Price Per Share        Shares         Price Per Share
                                           ----------       ---------------      ----------       ---------------
<S>                                        <C>                  <C>               <C>                 <C>
Outstanding at beginning of year .....     16,551,643           $26.89            4,766,109           $27.39
Granted ..............................      7,096,081           $14.22            7,556,714           $23.38
Exercised ............................       (117,530)          $12.40              (27,698)          $27.00
Forfeited ............................     (2,487,154)          $26.99             (397,099)          $26.10
Converted Newcourt options
  outstanding at year end 1999 .......           --               --              4,653,617           $32.02
                                           ----------           ------           ----------           ------
Outstanding at end of year ...........     21,043,040           $22.72           16,551,643           $26.89
                                           ==========           ======           ==========           ======
Options exercisable at year end ......      7,801,955           $26.79            3,060,247           $26.13
                                           ==========           ======           ==========           ======
Weighted average fair value of options
  granted (1999 excludes converted
  Newcourt options) during the year ..                          $ 4.50                                $ 6.87
                                                                ======                                ======
</TABLE>

      On November 18, 1999,  5,985,714 options were granted to certain employees
as part of a broad-based incentive program. The CIT options that were granted to
replace  Newcourt  options become vested and  exercisable in accordance with the
original grants.

      The 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>
                            Expected              Average           Expected             Risk Free
     Option Issuance    Option Life Range     Dividend Yield    Volatility Range    Interest Rate Range
    -----------------   -----------------     --------------   -----------------   --------------------
<S>                         <C>                    <C>           <C>                   <C>
    2000 ............       3-5 years              2.82%         36.23% - 43.51%       5.70% - 6.77%
    1999 ............       3-5 years              1.75%         28.93% - 34.82%       4.61% - 5.92%
</TABLE>

      The following table summarizes information about stock options outstanding
and options exercisable at December 31, 2000.

<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>            <C>
$12.40 - $19.63 ...     7,144,308        9.7 years          $14.21             52,228         $12.86
$21.08 - $32.44 ...    12,847,904        7.9 years          $25.20          7,446,463         $25.99
$33.06 - $68.22 ...     1,050,828        7.3 years          $50.19            303,264         $49.04
                       ----------                                           ---------
 Total ............    21,043,040                                           7,801,955
                       ==========                                           =========
</TABLE>

Employee Stock Purchase Plan

      In 1998, CIT adopted an Employee  Stock Purchase Plan (the "ESPP").  Under
the ESPP,  CIT 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 CIT's stock at 85%
of fair market  value.  During 2000,  1999 and 1998,  CIT sold  207,177  shares,
132,084 shares and 21,214 shares, respectively, to participating employees under
the ESPP.

Restricted Stock

      In January 2000, CIT issued 114,037  restricted  shares in connection with
the Bonus Plan. In addition, in January and November 2000, CIT issued 10,350 and
933 shares  respectively  in  connection  with awards to outside  members of the
Board of Directors.  All shares were issued at fair market value.  The per share
value of the January


                                       54
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

2000 Bonus Plan  grant was  $19.625.  The per share  values of the  January  and
November 2000 Directors' grants were $19.625 and $16.75 respectively. Restricted
shares issued in connection with the Bonus Plan vest on the third anniversary of
the grant (January  2003).  Restricted  shares awarded to the outside members of
the  Board of  Directors  all vest  one-third  on the  first,  second  and third
anniversary of the grant date.

      On January 1, 2000, CIT issued 1,284,080  restricted  shares in connection
with the  Performance  Accelerated  Restricted  Share  program.  The shares were
issued at a fair market value of $20.75.  Restricted shares under this grant can
vest on an  accelerated  basis in either three or four years (January 1, 2003 or
2004)  based on  earnings  per  share  performance  of CIT.  If  conditions  for
accelerated  vesting are not met in either year, the remaining  awards will vest
on the fifth anniversary of grant (January 1, 2005).

      In January 1999, CIT issued 68,225  restricted  shares in connection  with
the Bonus Plan.  Such shares were issued at fair market value,  which was $32.44
per share. The 1999 shares granted vest one-third on the first, second and third
anniversary of the date of grant.

      The holder of restricted  stock  generally has the rights of a stockholder
of CIT,  including the right to vote and to receive cash  dividends.  Restricted
stock of 1,446,032  shares and 945,606  shares was  outstanding  at December 31,
2000  and  1999.  For  the  years  ended  December  31,  2000,  1999  and  1998,
compensation  expense  recognized in connection with restricted  stock was $13.2
million, $4.9 million and $5.2 million, respectively.

Accounting for Stock-Based Compensation Plans

      CIT has elected to apply Accounting Principles Board Opinion 25 ("APB 25")
rather than the optional  provisions of SFAS No. 123 "Accounting for Stock-Based
Compensation" ("SFAS 123") in accounting for its stock-based compensation plans.
Under APB 25, CIT 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, CIT has  determined  the pro forma  information as if CIT had accounted for
stock  options  granted  under  the  fair  value  method  of SFAS  123.  Had the
compensation cost of CIT's stock-based  compensation plans been determined based
on the  operational  provisions  of SFAS 123,  CIT's net income for 2000 and net
income per diluted share would have been $591.8  million and $2.25,  compared to
$611.6 million and $2.33,  as reported.  For 1999, net income 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.

Note 17--Lease Commitments

      CIT  has  entered  into  noncancellable  long-term  lease  agreements  for
premises and  equipment.  The following  table presents  future minimum  rentals
under such noncancellable leases at December 31, 2000.

Years Ended December 31,                                           Amount
------------------------                                          --------
Dollars in Millions
      2001 ...............................................         $ 60.1
      2002 ...............................................           53.5
      2003 ...............................................           47.8
      2004 ...............................................           41.6
      2005 ...............................................           36.4
      Thereafter .........................................           32.1
                                                                   ------
         Total ...........................................         $271.5
                                                                   ======

      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  $54.8  million  due in the  future  under  noncancellable
subleases.


                                       55
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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

                                                Years Ended December 31,
                                        ---------------------------------------
Dollars in Millions ............         2000            1999             1998
                                        -------         -------         -------
Premises .......................         $47.7           $24.8           $17.1
Equipment ......................          11.1             7.1             6.5
Less sublease income ...........          (5.7)           (1.3)           (1.3)
                                         -----           -----           -----
  Total ........................         $53.1           $30.6           $22.3
                                         =====           =====           =====

Note 18--Legal Proceedings

      In the ordinary  course of business,  there are various legal  proceedings
pending against CIT. 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 CIT.

Note 19--Credit-Related and Other Commitments

      In the normal course of meeting the financing needs of its customers,  CIT
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,   CIT   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 CIT 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
Dollars in Millions                                 One Year         One Year         2000            1999
                                                    --------         --------     ------------     -----------
<S>                                                 <C>                <C>           <C>             <C>
Unused commitments to extend credit:
  Financing and leasing assets ...................  $2,728.1           $371.4        $3,099.5        $3,128.1
Letters of credit and acceptances:
  Standby letters of credit ......................     171.9              2.0           173.9           168.5
  Other letters of credit ........................     467.8             32.5           500.3           373.9
  Acceptances ....................................       6.7               --             6.7            12.7
Guarantees .......................................     645.3               --           645.3           351.2
</TABLE>

      During  2000 and  1999,  we  entered  into  agreements  with  both  Airbus
Industrie  and the Boeing  Company to  purchase  a total of 88  aircraft  (at an
estimated cost of approximately $5 billion),  with options to acquire additional
units,  and  with the  flexibility  to delay  or  terminate  certain  positions.
Deliveries  of these new aircraft  are  scheduled to take place over a five-year
period, which started in the fourth quarter of 2000. Outstanding  commitments to
purchase  aircraft,  rail and other equipment from manufacturers to be placed on
operating lease during 2001 totaled $694.0 million, of which $492.1 million have
agreements  in  place  to  lease  to  third  parties.   Similar  commitments  to
manufacturers  for year 2000  purchases  totaled  $224.5 million at December 31,
1999.

Note 20--Fair Values of Financial Instruments

      SFAS No.  107  "Disclosures  About Fair  Value of  Financial  Instruments"
requires disclosure of the estimated fair value of CIT'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  instrument,  assuming adequate
market liquidity.  Since no established  trading market exists for a significant
portion  of CIT's  financial  instruments,  fair  value  estimates  are based on
judgments   regarding   future


                                       56
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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 CIT'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
19--"Credit-Related   and  Other   Commitments",   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 CIT's  financial  instruments  at December 31, 2000 and 1999 are
set forth below.

<TABLE>
<CAPTION>
                                                             2000                             1999
                                                   ---------------------------     --------------------------
                                                    Carrying        Estimated       Carrying        Estimated
                                                      Value        Fair Value         Value        Fair Value
                                                      Asset           Asset           Asset           Asset
Dollars in Millions                                (Liability)     (Liability)     (Liability)     (Liability)
                                                   -----------     -----------     -----------     -----------
<S>                                                <C>              <C>             <C>             <C>
Finance receivables -- loans(a) ................   $22,599.8        $22,878.4       $20,638.1       $20,726.4
Finance receivables held for sale ..............     2,698.4          2,698.4         3,123.7         3,123.7
Other assets(b) ................................     1,809.0          1,827.1         1,728.8         1,746.2
Commercial paper(c) ............................    (9,063.5)        (9,063.5)       (8,974.0)       (8,974.0)
Fixed-rate senior notes and subordinated
   fixed-rate notes(d) .........................   (18,145.7)       (17,969.4)      (19,405.6)      (19,082.7)
Variable-rate senior notes(d) ..................   (11,221.8)       (11,127.2)       (7,209.4)       (7,146.7)
Credit balances of factoring clients and
   other liabilities(d) (e) ....................    (3,480.3)        (3,480.3)       (3,228.3)       (3,228.3)
Company-obligated mandatorily redeemable
   preferred securities of subsidiary trust
   holding solely debentures of the
   Company(f) ..................................      (250.0)          (240.8)         (250.0)         (232.8)
Derivative Financial Instruments:(g)
   Interest rate swaps, net ....................       (15.5)          (229.2)         (125.4)         (134.0)
   Cross-currency swaps, net ...................        (4.0)            (2.1)          (16.5)           13.8
   Foreign exchange forwards, net ..............        84.7             60.3            25.4            19.1
   Bond forwards, net ..........................          --             (2.2)           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 8.14% to 10.01% for 2000 and 8.32% to 10.37%
      for 1999. 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 quality,  fair value approximates
      carrying  value.  The net carrying value of lease finance  receivables not
      subject to fair value  disclosure  totaled $10.4 billion in 2000 and $10.0
      billion in 1999.


                                       57
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(b)   Other assets subject to fair value  disclosure  include  accrued  interest
      receivable,   retained   interests  in   securitizations   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 $1,202.2 million in 2000 and $618.6 million in 1999. Excluded from
      other assets is ($16.1) million net premium on foreign exchange  forwards,
      which is included in this table under derivative financial instruments.

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

(d)   The carrying value of fixed-rate senior notes and subordinated  fixed-rate
      notes includes  $288.6  million and $256.6 million of accrued  interest at
      December 31, 2000 and 1999,  respectively.  The variable-rate senior notes
      include $91.2  million and $62.2  million of accrued  interest at December
      31, 2000 and 1999, respectively. These amounts are excluded from the other
      liabilities  balances in this table.  The carrying value of the fixed-rate
      senior  notes  includes the net  liability  carrying  value of  derivative
      financial  instruments  (as  presented  in this  table  and  explained  in
      footnote "g") of $86.0 million and $103.3 million at December 31, 2000 and
      1999,  respectively.  These  derivative  financial  instrument  values are
      included  in the  fixed-rate  senior  notes  on the  Consolidated  Balance
      Sheets. Fixed-rate notes were valued using a present value discounted cash
      flow analysis with a discount rate approximating  current market rates for
      issuances  by CIT of  similar  term debt at the end of the year.  Discount
      rates used in the present value calculation  ranged from 6.10% to 8.31% in
      2000 and 5.65% to 7.83% in 1999.

(e)   The  estimated  fair  value  of  credit  balances  of  factoring   clients
      approximates  carrying value due to their short  settlement  terms.  Other
      liabilities include 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 $607.5
      million in 2000 and $356.1 million in 1999.

(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)   CIT enters into  derivative  financial  instruments  for hedging  purposes
      only.  The  2000  and  1999  carrying  values  for  interest  rate  swaps,
      cross-currency  swaps  and bond  forwards  represent  purchase  accounting
      adjustments  associated with the instruments acquired from Newcourt and do
      not necessarily  correlate  directly with the presented fair values as CIT
      has  other  instruments  that are  carried  only  off-balance  sheet.  The
      carrying value balances will amortize as the instruments  acquired mature.
      The carrying value for foreign exchange forwards is based on the change in
      spot rate from the initial  contract  date to the year end. The  estimated
      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
      9--"Derivative  Financial  Instruments"  for  notional  principal  amounts
      associated with the instruments.

Note 21--Certain Relationships and Related Transactions

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

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

      At December 31, 2000 and December  31,  1999,  CIT's credit line  coverage
totaled $8.5 billion and $8.4 billion, respectively, of committed facilities. At
December 31, 2000, DKB was committed under a five-year,  $3.7 billion  revolving
credit facility and a 364-day, $3.7 billion revolving credit facility for $173.5
million per facility.  In addition,  DKB was committed  under a separate  $333.9
million  credit  facility for $17.4  million.  At December  31, 1999,  DKB was a
committed bank under a five-year,  $3.7 billion  revolving credit facility and a
364-day,  $1.7 billion  revolving  credit  facility for $210.0 million and $93.0
million,  respectively.  Additional information regarding these credit lines can
be found in Note 8--"Debt."

      CIT 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 $200.0 million and $220.0 million
at December  31, 2000 and 1999,  respectively.  The  notional  principal  amount
outstanding  on foreign  currency  swaps with DKB totaled $168.6 million at year
end 2000 and 1999.  CIT has entered into  leveraged  leasing  arrangements  with
third party loan  participants,  including  affiliates  of DKB.  Amounts owed to
affiliates of DKB are $373.1  million at December 31, 2000 and $398.3 million at
December 31, 1999.

      At  December  31,  2000 and  1999,  CIT has  entered  into  credit-related
commitments with DKB in the form of letters of credit totaling $19.5 million and
$16.5 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.

      CIT 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
securitization  trusts. These securitization  trusts were formed for the purpose
of securitizing  certain  recreational  vehicle and recreational  marine finance
receivables.  At December 31, 2000 and 1999, the principal amount outstanding on
the  cash  collateral  loans  with  DKB was  $8.9  million  and  $15.7  million,
respectively.


                                       58
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


Note 22--Business Segment Information

Management's Policy in Identifying Reportable Segments

      CIT'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 five reportable segments:  Equipment Financing and Leasing, Vendor
Technology  Finance,   Commercial  Finance,  Structured  Finance  and  Consumer.
Equipment  Financing  and  Leasing,  Vendor  Technology  Finance and  Structured
Finance  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.  For 1999, CIT's internal financial  information combined Vendor
Technology  Finance  and  Structured  Finance in the Vendor  Technology  Finance
segment,  due to the short  period from the  acquisition  date to the end of the
year  and the  business  restructuring  which  took  place as of year  end.  The
Commercial Finance segment offers secured lending and receivables  collection as
well as other financial 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.  CIT'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
Note  2--"Summary of  Significant  Accounting  Policies."  Since CIT generates a
majority of its revenue from interest,  fees, and asset gains, management relies
primarily on operating  revenues to assess the  performance of the segment.  CIT
also 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
totals  and the  consolidated  managed  assets  total at or for the years  ended
December  31,  2000,  1999 and  1998.  Goodwill  amortization  is  allocated  to
Corporate and Other for purposes of the table.

<TABLE>
<CAPTION>
                                 Equipment     Vendor
                                 Financing   Technology   Commercial  Structured              Total      Corporate     Consolidated
Dollars in Millions            and Leasing    Finance      Finance    Finance(1)  Consumer   Segments    and Other(1)      Total
                               -----------    -------      -------    ----------  --------   --------    ------------  ------------
<S>                            <C>          <C>          <C>         <C>         <C>         <C>        <C>              <C>
December 31, 2000
Operating revenue ...........  $   969.4    $   540.0    $   499.1   $   175.3   $   256.0   $ 2,439.8  $   (58.4)       $ 2,381.4
Income taxes ................      147.3         96.5        109.2        49.9        43.4       446.3      (72.4)           373.9
Net income ..................      287.8        148.9        161.8        89.6        73.3       761.4     (149.8)           611.6
Total managed assets ........   26,465.2     10,809.7      7,693.7     2,691.9     7,240.4    54,900.9       --           54,900.9

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     15,879.8      7,002.1     2,071.2     7,274.1    51,433.3       --           51,433.3

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
</TABLE>

--------------------------------------------------------------------------------
(1)   For 1998, Equity Investments is included in Corporate and Other. This unit
      is part of Structured Finance in 2000 and 1999.


                                       59
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

      Finance  income  and other  revenues  derived  from  United  States  based
financing  and  leasing  assets  were  $5,215.6  million,  $2,641.0  million and
$2,129.9  million  for the  years  ending  December  31,  2000,  1999 and  1998,
respectively.  Finance  income and other  revenues  derived from  foreign  based
financing  and leasing  assets were $944.8  million,  $275.7  million and $140.6
million for the years ending December 31, 2000, 1999 and 1998, respectively.

Note 23--Summarized Financial Information of Subsidiaries

      The following table presents summarized consolidated financial information
for CIT  Holdings  LLC and  its  wholly  owned  subsidiary,  Capita  Corporation
(formerly AT&T Capital).  CIT has guaranteed on a full and  unconditional  basis
the existing  registered debt securities and certain other indebtedness of these
subsidiaries.  Therefore,  CIT has not presented related financial statements or
other information for these subsidiaries on a stand-alone basis.

      The  following  summarized  consolidated  financial  information  reflects
results as of and for the year ended  December 31, 2000 and also the transfer of
various subsidiaries among other CIT entities.

                                                Year Ended December 31, 2000
                                              --------------------------------
                                                                     Capita
Dollars in Millions                           CIT Holdings LLC     Corporation
                                              ----------------     -----------
Operating revenue ...........................      $ 710.7           $ 442.5
Operating expenses ..........................        451.5             308.2
                                                  --------           -------
Income before provision for income taxes ....      $ 259.2           $ 134.3
Net income ..................................      $ 176.0           $  98.1


                                                     At December 31, 2000
                                              --------------------------------
                                                                     Capita
                                              CIT Holdings LLC     Corporation
                                              ----------------     -----------
Assets
Cash and cash equivalents ...................     $   48.6          $  129.3
Financing and leasing assets ................      6,781.5           5,294.7
Receivables from affiliates and other assets         914.4             145.9
                                                  --------          --------
Total assets ................................     $7,744.5          $5,569.9
                                                  ========          ========
Liabilities and Shareholders' Equity
Liabilities:
  Debt ......................................     $4,323.3          $3,879.6
  Other .....................................        477.0             326.2
                                                  --------          --------
Total liabilities ...........................      4,800.3           4,205.8
Total shareholders' equity ..................      2,944.2           1,364.1
                                                  --------          --------
Total liabilities and shareholders' equity ..     $7,744.5          $5,569.9
                                                  ========          ========


                                       60
<PAGE>

                      THE CIT GROUP, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 24--Selected Quarterly Financial Data (Unaudited)

<TABLE>
<CAPTION>
                                                                                2000
                                                        -----------------------------------------------------
                                                         First     Second       Third      Fourth
Dollars in Millions, except per share amounts           Quarter    Quarter     Quarter     Quarter     Year
                                                        -------    -------     -------     -------   --------
<S>                                                     <C>         <C>        <C>         <C>       <C>
Net finance margin ...................................  $349.1      $359.2     $370.5      $390.6    $1,469.4
Other revenue ........................................   238.2       232.3      224.2       217.3       912.0
Salaries and general operating expenses ..............   268.2       257.5      250.2       259.3     1,035.2
Provision for credit losses ..........................    61.6        64.0       65.8        63.8       255.2
Goodwill amortization ................................    20.5        20.6       22.7        22.5        86.3
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 ...........................    88.3        93.2       95.0        97.4       373.9
Net income ...........................................  $143.9      $151.4     $156.2      $160.1      $611.6
Net income per diluted share .........................  $ 0.55      $ 0.58     $ 0.60      $ 0.61      $ 2.33

<CAPTION>
                                                                                1999
                                                        -----------------------------------------------------
                                                         First     Second       Third      Fourth
Dollars in Millions, except per share amounts           Quarter    Quarter     Quarter     Quarter     Year
                                                        -------    -------     -------     -------   --------
<S>                                                     <C>         <C>        <C>         <C>         <C>
Net finance margin ...................................  $212.1      $214.4     $218.2      $272.7      $917.4
Other revenue ........................................    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>

Note 25--Subsequent Event

      On March 13, 2001,  Tyco  International  Ltd.  (NYSE:  TYC), a diversified
manufacturing  and service  company,  and CIT  announced a definitive  agreement
whereby  Tyco will acquire  CIT. As part of this  transaction,  Tyco has entered
into a purchase  agreement with DKB for their  approximate  27% interest,  or 71
million  shares,  at a price of $35.02,  in cash,  per CIT share.  The remaining
shareholders  will  receive  0.6907  Tyco  shares  for  each  share  of CIT in a
tax-free,  stock-for-stock exchange. The transaction, which is expected to close
during  the  third  quarter  of 2001,  is  valued  at  $35.02  per  share to CIT
shareholders,  or  approximately  $9.2  billion,  based on Tyco's March 12, 2001
closing stock price.

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

      None.


                                       61
<PAGE>

                                    PART III

Item 10. Directors and Executive Officers of the Registrant.

      CIT will file this by amendment no later than April 30, 2001.

Item 11. Executive Compensation.

      CIT will file this by amendment no later than April 30, 2001.

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

      CIT will file this by amendment no later than April 30, 2001.

Item 13. Certain Relationships and Related Transactions.

      CIT will file this by amendment no later than April 30, 2001.


                                       62
<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 30 - 61.

      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, 1999.

            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
                    November 1, 1999.

            10.4    Employment Agreement of Joseph M. Leone, dated September 13,
                    2000,  comparable  to the  agreements  for Thomas L. Abbate,
                    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,
                    amended and restated as of July 26, 2000.

            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).

            10.11   The CIT Group,  Inc.  Transition  Option  Plan,  amended and
                    restated as of July 26, 2000.

            10.12   Agreement  and Plan of Merger,  dated March 12, 2001, by and
                    between Tyco  Acquisition  Corp. XIX (NV) and The CIT Group,
                    Inc., including Guarantee of Tyco International Ltd.

            12      Computation of Ratios of Earnings to Fixed Charges.

            21      Subsidiaries of the Registrant.

            23      Consent of KPMG LLP.

            24      Powers of Attorney.


                                       63
<PAGE>

     (b) A Current Report on Form 8-K, dated October 26, 2000 was filed with the
Securities and Exchange Commission  reporting CIT's announcement of its earnings
results for the  quarter  ended  September  30,  2000 and the  declaration  of a
dividend for the quarter ended September 30, 2000.

     A Current  Report on Form 8-K,  dated  November 2, 2000, was filed with the
Securities and Exchange Commission containing Form T-1, Statement of Eligibility
of Trustee for Allfirst Bank with respect to a Registration  Statement  filed on
Form S-3 by The CIT Group, Inc. and The CIT Group Securitization Corporation II,
as coregistrants, for CIT RV Trust 2000-A.

     A Current  Report on Form 8-K,  dated  November 7, 2000, was filed with the
Securities and Exchange  Commission  containing the Term Sheet dated November 7,
2000 relating to CIT RV Trust 2000-A.

     A Current  Report on Form 8-K,  dated  December 1, 2000, was filed with the
Securities and Exchange  Commission  regarding CIT's Investor Day Conference and
earnings guidance for 2001.


                                       64
<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 and General Counsel

March 26, 2001

     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.
Chairman, President, Chief Executive Officer and Director
             (principal executive officer)


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


                     JOHN S. CHEN*
 ....................................................
                     John S. Chen
                       Director


                     ANTHEA DISNEY*
 ....................................................
                     Anthea Disney
                       Director


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


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


                    PAUL G. MORTON*
 ...................................................
                    Paul G. Morton
                       Director


                   TAKATSUGU MURAI*
 ...................................................
                    Takatsugu Murai
                       Director


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


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


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


                     KEIJI TORII*
 ....................................................
                      Keiji Torii
                       Director


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

                                       65
<PAGE>


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

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


                  /S/ JOSEPH M. LEONE                             March 26, 2001
 ....................................................
                    Joseph M. Leone
             Executive Vice President and
                Chief Financial Officer
            (principal accounting officer)


*BY:             /S/ ERNEST D. STEIN                              March 26, 2001
     ...............................................
                    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.


                                       66