THE FOLLOWING IS FOR  INFORMATIONAL  PURPOSES  ONLY.  THESE  STATEMENTS  ARE NOT
INCORPORATED  BY REFERENCE IN THIS OR ANY OTHER FILING WITH THE  SECURITIES  AND
EXCHANGE  COMMISSION.  THESE  STATEMENTS  SHOULD BE READ IN CONJUNCTION WITH THE
COMDISCO,  INC.  CONSOLIDATED  FINANCIAL  STATEMENTS  AND  THIS  INFORMATION  IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.

     INDEPENDENT AUDITORS' REPORT

     The Stockholders and Board of Directors
     Comdisco, Inc.:

     We have audited the accompanying  balance sheets of Comdisco Ventures group
     (a division of Comdisco,  Inc., "the company") as of September 30, 2000 and
     1999,  and the related  statements of earnings and division net worth,  and
     cash flows for each of the years in the three-year  period ended  September
     30,  2000.  These  financial  statements  are  the  responsibility  of  the
     company's management.  Our responsibility is to express an opinion on these
     financial statements based on our audits.

     We conducted our audits in accordance  with  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.

     As described in note 1 to the financial statements, Comdisco Ventures group
     is a division of Comdisco,  Inc.; accordingly,  the financial statements of
     Comdisco  Ventures  group  should be read in  conjunction  with the audited
     consolidated financial statements of Comdisco, Inc.

     In our opinion,  the financial statements referred to above present fairly,
     in all material respects, the financial position of Comdisco Ventures group
     as of September 30, 2000 and 1999,  and the results of its  operations  and
     its  cash  flows  for  each of the  years in the  three-year  period  ended
     September  30, 2000 in  conformity  with  accounting  principles  generally
     accepted in the United States of America.

     /s/  KPMG LLP

     Chicago, Illinois
     November 7, 2000

<PAGE>
COMDISCO VENTURES GROUP
Balance Sheets
September 30, 2000 and 1999
(in millions)
<TABLE>
<CAPTION>

                                                                     2000        1999
                                                                   ------      ------
<S>                                                               <C>          <C>
ASSETS
     Cash and cash equivalents ..............................      $   25      $    -
     Equity securities ......................................         832         197
     Receivables, net .......................................         723         380
     Leased assets:
         Direct financing and sales-type ....................           3           5
         Operating (net of accumulated depreciation
           and amortization) ................................         552         283
                                                                   ------      ------
                  Net leased assets .........................         555         288
     Other assets ...........................................           6           7
                                                                   ------      ------
                                                                   $2,141      $  872
                                                                   ======      ======

LIABILITIES AND DIVISION NET WORTH
     Inter-group payable ....................................      $1,142      $  559
     Deferred income taxes ..................................         260          72
     Other liabilities ......................................          85          41
                                                                   ------      ------
                                                                    1,487         672

     Accumulated other comprehensive income .................         392          86
     Accumulated net earnings ...............................         262         114
                                                                   ------      ------
                  Total division net worth                            654         200
                                                                   ------      ------
                                                                   $2,141      $  872
                                                                   ======      ======


See accompanying notes to financial statements.
</TABLE>


<PAGE>
COMDISCO VENTURES GROUP
Statements of Earnings and Division Net Worth
Years ended September 30, 2000, 1999 and 1998
(in millions)
<TABLE>
<CAPTION>

                                                          2000     1999     1998
                                                          ----     ----     ----
<S>                                                      <C>      <C>      <C>
Revenue:
    Leasing:
      Operating .....................................     $195     $117     $ 83
      Direct financing ..............................        -        1        1
      Sales-type ....................................        2        -        1
                                                          ----     ----     ----
            Total leasing ...........................      197      118       85

    Sales ...........................................       11        6        7
    Interest income on notes ........................       56       23        7
    Warrant sale proceeds and capital gains .........      406       81       15
    Other ...........................................        3        1        -
                                                          ----     ----     ----
            Total revenue ...........................      673      229      114
                                                          ----     ----     ----
Costs and expenses:
    Leasing:
      Operating .....................................      150       88       60
      Sales-type ....................................        1        -        -
                                                          ----     ----     ----
            Total leasing ...........................      151       88       60

    Sales ...........................................        9        5        4
    Commission expense ..............................       78       10        2
    Other selling, general, and administrative ......       16        8        3
    Interest ........................................       61       24       11
    Bad debt expense ................................      112       23        5
                                                          ----     ----     ----
            Total costs and expenses ................      427      158       85
                                                          ----     ----     ----

Earnings before income taxes ........................      246       71       29
Income taxes ........................................       98       28       12
                                                          ----     ----     ----
Net earnings ........................................     $148     $ 43     $ 17
                                                          ====     ====     ====

Division net worth at beginning of year .............     $200     $ 71     $ 54

Comprehensive income:
    Net earnings ....................................      148       43       17
    Other comprehensive income -
      unrealized gains, net of tax ..................      306       86        -
                                                          ----     ----     ----
            Total comprehensive income ..............      454      129       17
                                                          ----     ----     ----
Division net worth at end of year ...................     $654     $200     $ 71
                                                          ====     ====     ====


See accompanying notes to financial statements.
</TABLE>


<PAGE>
COMDISCO VENTURES GROUP
Statements of Cash Flows
Years ended September 30, 2000, 1999 and 1998
(in millions)
<TABLE>
<CAPTION>

                                                            2000       1999       1998
                                                         -------    -------    -------
<S>                                                     <C>          <C>       <C>
Cash flows from operating activities:
    Operating lease and other leasing receipts .......   $   194    $   118    $    92
    Leasing costs, primarily rentals paid ............         -          -         (1)
    Sales ............................................        10          7          6
    Cost of sales ....................................         -          -         (1)
    Warrant proceeds .................................       398         55         15
    Promissory note receipts .........................       267         69         33
    Other revenue ....................................         3         12          7
    Selling, general, and administrative expenses ....       (46)        (8)        (7)
                                                         -------    -------    -------
             Net cash provided by operating activities       826        253        144
                                                         -------    -------    -------

Cash flows from investing activities:
    Equipment purchased for leasing ..................      (438)      (206)      (114)
    Purchase of property and equipment ...............        (2)         -          -
    Equity investments ...............................      (145)       (40)        (8)
    Issuance of promissory notes .....................      (621)      (334)       (57)
    Other ............................................         -          -          2
                                                         -------    -------    -------
             Net cash used in investing activities ...    (1,206)      (580)      (177)
                                                         -------    -------    -------

Cash flows from financing activities:
    Net change in inter-group loans ..................       405        327         33
                                                         -------    -------    -------
             Net cash provided by financing activities       405        327         33
                                                         -------    -------    -------

             Net increase in cash and cash equivalents        25          -          -
Cash and cash equivalents at beginning of year .......         -          -          -
                                                         -------    -------    -------
Cash and cash equivalents at end of year .............   $    25    $     -    $     -
                                                         =======    =======    =======

</TABLE>


<PAGE>
COMDISCO VENTURES GROUP
Statements of Cash Flows, Continued
Years ended September 30, 2000, 1999 and 1998
(in millions)
<TABLE>
<CAPTION>

                                                                      2000    1999   1998
                                                                      ----    ----   ----
<S>                                                                  <C>     <C>    <C>
Reconciliation of net earnings to net cash
    provided by operating activities:
Net earnings ...............................................          $148    $ 43   $ 17
Adjustments to reconcile net earnings to
    net cash provided by operating activities:
      Leasing costs, primarily depreciation and amortization           150      87     59
      Leasing revenue ......................................             -       2      6
      Principal portion of notes receivable ................           211      47     26
      Cost of sales ........................................             8       4      3
      Selling, general, and administrative expenses ........           160      34      4
      Income taxes .........................................            98      28     12
      Interest .............................................            61      24     11
      Other - net ..........................................           (10)    (16)     6
                                                                      ----    ----   ----

             Net cash provided by operating activities .....          $826    $253   $144
                                                                      ====    ====   ====


See accompanying notes to financial statements.
</TABLE>


<PAGE>
COMDISCO VENTURES GROUP
Notes to Financial Statements
September 30, 2000, 1999 and 1998
(in millions)



(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     NATURE OF OPERATIONS

     Formed in 1987 as a division of Comdisco,  Inc.,  Comdisco  Ventures  group
     (the "company")  provides  venture  leases,  venture debt and direct equity
     financing to venture  capital-backed  companies.  Venture leases are leases
     with warrants that  compensate the company for providing  equipment  leases
     with terms having lower periodic cash costs than leases  without  warrants.
     Similarly,   venture  debt  is  a  high-risk   loan  with   warrants  or  a
     conversion-to-equity   feature  with  more  flexible  terms,  having  lower
     periodic  costs  and  security  conditions,   than  more  traditional  debt
     financing. The company's principal market is North America.

     The company's cash activity is reflected  through the  inter-group  payable
     account.  Interest expense on the inter-group payable account,  included in
     the  accompanying  financial  statements,  amounted  to  $61  million,  $24
     million,  and $11 million in the years ended September 30, 2000,  1999, and
     1998, respectively.

     The company is allocated  certain shared  services and support  activity of
     Comdisco, Inc., consisting of, among other things, financial and accounting
     services,  information  system  services,  certain  selling  and  marketing
     activities,  executive  management,  human  resources,  corporate  finance,
     legal, and corporate planning activities.  Such allocated expenses amounted
     to $4 million, $3 million,  and $1 million in the years ended September 30,
     2000, 1999, and 1998, respectively. The company was allocated such expenses
     based on use and other criteria which management believes is reasonable.

     USE OF ESTIMATES

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

     INCOME TAXES

     The company is included in the  consolidated  Federal and state  income tax
     returns of Comdisco,  Inc.  Income tax expense has been  computed as if the
     company filed its own income tax returns.  Related  current tax liabilities
     are settled through the inter-group payable account.

     The  company  uses the asset and  liability  method to  account  for income
     taxes.  Deferred tax assets and  liabilities  are recognized for the future
     tax  consequences   attributable  to  differences   between  the  financial
     statement  carrying  amounts of existing  assets and  liabilities and their
     respective tax basis. The measurement of deferred tax assets is reduced, if
     necessary,  by a valuation  allowance  for any tax benefits of which future
     realization is uncertain.


<PAGE>

     LEASE ACCOUNTING

     See notes 4, 5 and 6 of notes to financial  statements for a description of
     lease accounting policies, lease revenue recognition, and related costs.

     CASH AND CASH EQUIVALENTS:  Cash equivalents are comprised of highly liquid
     debt instruments with original maturities of 90 days  or  less.   The  cash
     balance  at  September 30, 2000  is   cash  that  has  been committed to be
     invested but had not yet been remitted to the investee.

     OTHER ASSETS

     Other assets  consists  primarily of inventory of equipment  and  property,
     plant and equipment.  Inventory of equipment is stated at the lower of cost
     or market by categories of similar equipment. Property, plant and equipment
     is carried at cost and is depreciated using the  straight-line  method over
     the estimated useful lives of the related assets ranging from three to five
     years.

     INVESTMENTS IN EQUITY SECURITIES

     The  company  determines  the  appropriate   classification  of  marketable
     securities at the time of purchase and reevaluates such designation at each
     balance sheet date.  Marketable securities classified as available-for-sale
     are carried at fair value,  based on quoted market prices, net of estimated
     commission  expenses,  with  unrealized  gains  and  losses  excluded  from
     earnings and reported in accumulated  other  comprehensive  income.  Equity
     investments  for which  there is no  readily  determinable  fair  value are
     carried at cost, less any appropriate valuation allowance.

     WARRANTS

     The company's  investments  in warrants  (received in  connection  with its
     lease or other financings) are initially  recorded at zero cost and carried
     in the financial statements as follows:

          o   Warrants   that   meet  the   criteria   for   classification   as
          available-for-sale  are carried at fair value  based on quoted  market
          prices with  unrealized  gains and losses  excluded  from earnings and
          reported in accumulated other comprehensive income.

          o  Warrants  that do not  meet  the  criteria  for  classification  as
          available-for-sale are carried at zero value.

     The proceeds  received from the sale or liquidation  are recorded as income
     on the trade date.

     RECLASSIFICATIONS

     Certain  reclassifications  have been  made in the 1998 and 1999  financial
     statements to conform to the 2000 presentation.

<PAGE>


(2)  EQUITY SECURITIES

     The company  provides  financing to privately-held companies in networking,
     optical  networking,  software,  communications,  Internet-based  and other
     industries   through  the  purchase  of  equity   securities.   For  equity
     investments,  which are non-quoted investments,  the company's policy is to
     regularly review the assumptions  underlying the operating  performance and
     cash  flow  forecasts  in  assessing  the  carrying  values.   The  company
     identifies and records  impairment  losses on equity securities when events
     and circumstances indicate that such assets might be impaired.  During 2000
     and 1999,  certain of these  investments in privately held companies became
     available-for-sale   securities  when  issuers   completed  initial  public
     offerings.

     Equity securities at September 30, 2000 were as follows (in millions):

<TABLE>
<CAPTION>

                                                      Gross          Gross
                                                   unrealized     unrealized       Market
                                          Cost        gains         losses         value
                                         -----    ------------   ------------     -------
     <S>                                 <C>         <C>            <C>           <C>
     Available-for-sale
       securities .....................   $ 31        $652           $  -          $683
     Preferred stock
       and other equity................    149           -              -           149
                                          ----        ----           ----          ----
                                          $180        $652           $  -          $832
                                          ====        ====           ====          ====


     Equity securities at September 30, 1999 were as follows (in millions):

                                                      Gross          Gross
                                                   unrealized     unrealized       Market
                                          Cost        gains         losses         value
                                         -----    ------------   ------------     -------

     Available-for-sale
       securities .....................   $  7        $143           $  -          $150
     Preferred stock
       and other equity................     47           -              -            47
                                          ----        ----           ----          ----
                                          $ 54        $143           $  -          $197
                                          ====        ====           ====          ====

</TABLE>

     Realized  gains or losses  are  recorded  on the trade  date based upon the
     difference  between the  proceeds and the cost basis  determined  using the
     specific    identification    method.   Changes   in   the   valuation   of
     available-for-sale  securities  are  included as changes in the  unrealized
     holding gains in accumulated other comprehensive income. Net realized gains
     from the sales of equity  investments were $202 million,  $6 million and $1
     million in fiscal 2000, 1999, and 1998, respectively.  Gross realized gains
     from the sales of equity securities were $206 million,  $8 million,  and $2
     million in fiscal 2000, 1999, and 1998, respectively.

<PAGE>

     The company  records the proceeds  received from the sale or liquidation of
     warrants  received in  conjunction  with its lease or other  financings  as
     income on the trade date.  These  proceeds were $204 million,  $75 million,
     and $14 million in fiscal 2000, 1999, and 1998, respectively.

(3)  RECEIVABLES

     Receivables include the following at September 30 (in millions):

                                      2000     1999
                                     -----    -----

     Notes .......................   $ 708    $ 356
     Accounts ....................      12        7
     Unsettled equity transactions      67       26
     Other .......................      31        8
                                     -----    -----
     Total receivables ...........     818      397
     Allowance for credit losses .     (95)     (17)
                                     -----    -----
     Total .......................   $ 723    $ 380
                                     =====    =====

     The  company  provides  loans  to  privately  held  venture  capital-backed
     companies in  networking,  optical  networking,  software,  communications,
     Internet-based  and other  industries.  The  company's  loans are generally
     structured as equipment loans or subordinated loans.

     The amount of each loan varies,  but generally does not exceed $10 million.
     The loans bear fixed  interest rates  currently  ranging from 8% to 13% per
     annum. In addition,  loan  processing  fees typically  ranging from .75% to
     1.5% of the principal amount of the loan commitment may be paid at closing.
     As part of the transaction,  the company  receives  warrants to purchase an
     equity interest in its customer,  or a conversion option, in each case at a
     stated exercise price based on the price paid by venture capitalists. Loans
     provide current income from interest and fees.

     Contractual  maturities of total notes receivables as of September 30, 2000
     were as follows:  2001 - $296  million;  2002 - $320  million;  2003 - $170
     million;  2004 - $4 million.  Actual cash flows will vary from  contractual
     maturities due to prepayments and charge-offs.

     The  allowance  for credit  losses  includes  management's  estimate of the
     amounts expected to be lost on specific accounts and for losses on other as
     of yet unidentified accounts included in receivables at September 30, 2000,
     including  estimated  losses  on future  noncancelable  lease  rentals.  In
     estimating  the  reserve  component  for  unidentified  losses  within  the
     receivables   and  lease   portfolio,   management   relies  on  historical
     experience,  adjusted for any known trends,  including  industry trends, in
     the portfolio.

     Changes in the  allowance for credit  losses  (combined  notes and accounts
     receivables)  for  the  years  ended  September  30,  were as  follows  (in
     millions):

                                         2000     1999     1998
                                        -----    -----    -----

     Balance at beginning of year...     $ 17     $  6     $  5
     Provision for credit losses....      112       23        5
     Net credit losses .............      (34)     (12)      (4)
                                         ----     ----     ----
     Balance at end of year ........     $ 95     $ 17     $  6
                                         ====     ====     ====

<PAGE>

(4)  LEASE ACCOUNTING POLICIES

     FASB  Statement of Financial  Accounting  Standards  No. 13 requires that a
     lessor account for each lease by either the direct  financing,  sales-type,
     or operating method.

     LEASED ASSETS

     o Direct  financing and  sales-type  leased  assets  consist of the present
     value of the future  minimum  lease  payments plus the present value of the
     residual (collectively referred to as the net investment).  Residual is the
     estimated  fair  market  value  at lease  termination.  In  estimating  the
     equipment's  fair  value  at  lease  termination,  the  company  relies  on
     historical  experience  by  equipment  type  and  manufacturer  and,  where
     available, valuations by independent appraisers, adjusted for known trends.
     The company's  estimates are reviewed  continuously to ensure  realization;
     however,  the amounts the company will ultimately realize could differ from
     the estimated amounts.

     o Operating  leased assets consist of the equipment  cost,  less the amount
     depreciated to date.

     REVENUE, COSTS, AND EXPENSES

     o Direct  financing  leases - Revenue  consists of  interest  earned on the
     present  value of the lease  payments and  residual.  Revenue is recognized
     periodically over the lease term as a constant percentage return on the net
     investment.  There are no costs and  expenses  related to direct  financing
     leases since leasing revenue is recorded on a net basis.

     o Sales-type  leases - Revenue  consists of the present  value of the total
     contractual  lease payments which is recognized at lease  inception.  Costs
     and expenses  consist of the equipment's net book value at lease inception,
     less the  present  value of the  residual.  Interest  earned on the present
     value of the lease payments and residual,  which is recognized periodically
     over the lease term as a constant  percentage return on the net investment,
     is included in direct financing lease revenue in the statement of earnings.

     o Operating leases - Revenue consists of the contractual lease payments and
     is  recognized  on a  straight-line  basis over the lease  term.  Costs and
     expenses are  principally  depreciation  of the equipment.  Depreciation is
     recognized  on a  straight-line  basis over the lease term to the company's
     estimate of the equipment's  fair market value at lease  termination,  also
     commonly  referred to as "residual"  value.  In estimating the  equipment's
     fair  value  at  lease  termination,   the  company  relies  on  historical
     experience  by  equipment  type  and  manufacturer  and,  where  available,
     valuations  by  independent  appraisers,  adjusted  for known  trends.  The
     company's  estimates  are  reviewed  continuously  to  ensure  realization;
     however,  the amounts the company will ultimately realize could differ from
     the amounts  assumed in  determining  depreciation  on the equipment in the
     operating lease portfolio at September 30, 2000.

     o Initial direct costs related to operating and direct financing leases are
     capitalized and amortized over the lease term.

<PAGE>

(5)  LEASED ASSETS

     The  components of the net  investment in direct  financing and  sales-type
     leases as of September 30 are as follows (in millions):

                                                      2000   1999
                                                      ----   ----

     Minimum lease payments receivable ..........      $ 3    $ 6
     Estimated residual values ..................        -      -
     Less: unearned revenue .....................        -     (1)
                                                       ---    ---
     Net investment in direct financing and
        sales-type leases .......................      $ 3    $ 5
                                                       ===    ===

     Unearned revenue is recorded as leasing revenue over the lease terms.

     Operating   leased  assets   include  the  following   as  of  September 30
     (in millions):

                                                      2000     1999
                                                      ----     ----

     Operating leased assets ....................    $ 778    $ 433
     Less: accumulated depreciation and
         amortization ...........................     (226)    (150)
                                                      ----     ----
     Net operating leased assets ................    $ 552    $ 283
                                                      ====     ====



(6)  LEASE PORTFOLIO INFORMATION

     The size of the  company's  lease  portfolio can be measured by the cost of
     leased  assets  at the date of  lease  inception.  Cost at lease  inception
     represents  either the  equipment's  original cost or its net book value at
     termination of a prior lease.  The following table  summarizes,  by year of
     lease commencement and by year of projected lease termination,  the cost at
     lease  inception for all leased  assets  recorded at September 30, 2000 (in
     millions):

<TABLE>
<CAPTION>


                                        Cost at     Projected year of lease termination
          Year lease                     lease     ------------------------------------
          commenced                    inception       2001    2002    2003    2004
        ------------------             ---------       ----    ----    ----    ----
        <S>                           <C>             <C>     <C>     <C>     <C>
        1996 and prior                 $ 17            $ 17    $  -    $  -    $  -
        1997                             46              44       1       1       -
        1998                             87              37      50       -       -
        1999                            210              10     104      91       5
        2000                            438               -      20     280     138
                                       ----            ----    ----    ----    ----
                                       $798            $108    $175    $372    $143
                                       ====            ====    ====    ====    ====

</TABLE>

<PAGE>

     The  following  table  summarizes  the  estimated  net book  value at lease
     termination for all leased assets recorded at September 30, 2000. The table
     is presented by year of lease  commencement  and by year of projected lease
     termination (in millions):

<TABLE>
<CAPTION>

                                       Net book
                                       value at    Projected year of lease termination
          Year lease                    lease      ------------------------------------
          commenced                   termination      2001    2002    2003    2004
        ------------------            -----------      ----    ----    ----    ----
        <S>                           <C>             <C>     <C>     <C>     <C>
        1996 and prior                 $  -            $  -    $  -    $  -    $  -
        1997                              4               4       -       -       -
        1998                             10               4       6       -       -
        1999                             20               1      10       9       -
        2000                             22               -       1      15       6
                                       ----            ----    ----    ----    ----
                                       $ 56            $  9    $ 17    $ 24    $  6
                                       ====            ====    ====    ====    ====

</TABLE>



(7)  FUTURE CONTRACTUAL CASH FLOWS

     Presented  below is a summary  of future  contractual  noncancelable  lease
     rentals  on  owned   equipment   and   maturities   of  notes   receivables
     (collectively, "cash in-flows").

     The summary  presents  expected cash  in-flows due in  accordance  with the
     contractual terms in existence as of September 30, 2000 (in millions).
<TABLE>
<CAPTION>

                                                    2001     2002     2003     2004    Total
                                                  ------   ------   ------   ------   ------
     <S>                                        <C>       <C>      <C>      <C>      <C>
     Expected future cash in-flows:
         Direct financing and sales-type leases  $     3   $    -   $    -   $    -   $    3
         Operating leases .....................      264      228      120       15      627
         Notes receivable .....................      296      320      170        4      790
                                                  ------   ------   ------   ------   ------
                                                  $  563   $  548   $  290   $   19   $1,420
                                                  ======   ======   ======   ======   ======
</TABLE>



(8)  INCOME TAXES

     The company  files its U.S.  income tax return as part of the  consolidated
     return with its parent.  In accordance  with a tax sharing  agreement,  the
     company records its income tax liabilities on a separate return basis.

<PAGE>


     The components of the income tax provision  (benefit) charged (credited) to
     operations were as follows (in millions):


                                     2000     1999    1998
                                    -----    -----   -----
     Current:
         U.S. Federal ...........   $  92    $  14   $  10
         U.S. state and local ...      21        3       2
                                    -----    -----   -----
                                      113       17      12

     Deferred:
         U.S. Federal ...........     (12)       9       -
         U.S. state and local ...      (3)       2       -
                                    -----    -----   -----
                                      (15)      11       -
                                    -----    -----   -----
              Total tax provision   $  98    $  28   $  12
                                    =====    =====   =====

     The reasons for the difference between the U.S. Federal income tax rate and
     the effective income tax rate for earnings were as follows:

                                                       2000      1999      1998
                                                     ------    ------    ------

     U.S. Federal income tax rate ................    35.0%     35.0%     35.0%
     Increase resulting from - State income taxes,
        net of U.S. Federal tax benefit ..........     4.9       4.9       4.9
                                                     ------    ------    ------

                                                      39.9%     39.9%     39.9%
                                                     ======    ======    ======

     Deferred tax assets and  liabilities at September 30, 2000 and 1999 were as
     follows (in millions):

                                                   2000     1999
                                                  -----    -----
     Deferred tax assets (liabilities):
         Investments ..........................   $   4    $   4
         Accounts receivable ..................      38        2
         Lease accounting .....................     (37)     (18)
         Deferred income ......................      (5)      (3)
         Accumulated other comprehensive income    (260)     (57)
                                                  -----    -----
            Gross deferred tax liabilities ....    (260)     (72)
     Less: valuation allowance ................       -        -
                                                  -----    -----
            Net deferred tax liabilities ......   $(260)   $ (72)
                                                  =====    =====

<PAGE>


(9)  COMPREHENSIVE INCOME

     Components  of other  comprehensive  income  consists of the  following (in
     millions):
                                                2000     1999     1998
                                               -----    -----    -----

     Unrealized gains on securities:
       Unrealized holding gains arising
        during the period ..................   $ 915    $ 224    $  15
       Reclassification adjustment for gains
        included in earnings before income
        taxes ..............................    (406)     (81)     (15)
                                               -----    -----    -----
     Net unrealized gains, before
        income taxes .......................     509      143        -
     Income taxes ..........................    (203)     (57)       -
                                               -----    -----    -----
     Net unrealized gains ..................     306       86        -
                                               -----    -----    -----
     Other comprehensive income ............     306       86        -
     Net earnings ..........................     148       43       17
                                               -----    -----    -----
     Total comprehensive income ............   $ 454    $ 129    $  17
                                               =====    =====    =====

     Accumulated  other   comprehensive   income  presented  below  and  in  the
     accompanying balance sheets consists of the accumulated net unrealized gain
     on available-for-sale securities (in millions):

                                   Accumulated
                                     other
                                  comprehensive
                                     income
                                  ------------


     Balance at September 30, 1997..   $  -
     Pretax amount .................      -
     Income taxes ..................      -
                                       ----

     Balance at September 30, 1998..      -
     Pretax amount..................    143
     Income taxes ..................    (57)
                                       ----

     Balance at September 30, 1999..     86
     Pretax amount..................    509
     Income taxes ..................   (203)
                                       ----
     Balance at September 30, 2000..   $392
                                       ====


<PAGE>


(10) FAIR VALUE OF FINANCIAL INSTRUMENTS

     The estimated  fair value of the  company's  financial  instruments  are as
     follows (in millions):
<TABLE>
<CAPTION>

                                                                      2000               1999
                                                                ---------------    ----------------
                                                                Carrying   Fair    Carrying   Fair
                                                                 Amount    Value    Amount    Value
                                                                -------   -----    --------  ------
<S>                                                               <C>    <C>       <C>        <C>
     Assets:
         Cash and cash equivalents .............................   $ 25   $ 25     $  -      $  -
         Equity securities .....................................    832    832      197       197
         Notes receivable including
          noncurrent portion ...................................    708    708      356       356

</TABLE>


     Fair values were determined as follows:

     o The carrying amounts of cash and cash equivalents approximates fair value
     because of the short-term maturity of these instruments.

     o   Equity   instruments   are   based  on   quoted   market   prices   for
     available-for-sale  securities,  and, for  non-quoted  equity  instruments,
     based on the lower of  management's  estimates  of fair value or cost.  The
     company's investment in warrants of public companies were valued at the bid
     quotation.

     o Notes receivable are estimated by discounting future cash flows using the
     current  rates at which  similar  loans  would  be made to  borrowers  with
     similar business profiles.