SIX-YEAR SUMMARY
COMDISCO, INC. AND SUBSIDIARIES
(IN MILLIONS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>



                                                                                        YEARS ENDED SEPTEMBER 30,
                                                               -------------------------------------------------------------------
                                                                  1999        1998        1997        1996        1995        1994
                                                               -------     -------     -------     -------     -------     -------
<S>                                                            <C>         <C>         <C>         <C>         <C>         <C>
CONSOLIDATED SUMMARY OF EARNINGS
Revenue
     Leasing .............................................     $ 2,655     $ 2,435     $ 2,116     $ 1,797     $ 1,573     $ 1,538
     Sales ...............................................         406         329         269         262         358         271
     Mainframe portfolio sale ............................         485          --          --          --          --          --
     Technology services .................................         522         433         354         318         267         242
     Other ...............................................          91          46          80          54          42          47
                                                               -------     -------     -------     -------     -------     -------
          Total revenue ..................................       4,159       3,243       2,819       2,431       2,240       2,098
                                                               -------     -------     -------     -------     -------     -------
Costs and expenses
     Leasing .............................................       1,969       1,791       1,534       1,246       1,023       1,004
     Sales ...............................................         361         275         210         218         304         225
     Mainframe portfolio sale ............................         485          --          --          --          --          --
     Technology services .................................         440         362         296         277         238         224
     Selling, general and administrative .................         306         249         244         244         233         213
     Litigation settlement ...............................          --          --          --          --          --          70
     Litigation charge ...................................          --          --          --          --          --          10
     Interest ............................................         337         326         299         262         274         263
     Prism Communication Services ........................          36          --          --          --          --          --
     Other ...............................................         150          --          25          --          --          --
                                                               -------     -------     -------     -------     -------     -------
          Total costs and expenses .......................       4,084       3,003       2,608       2,247       2,072       2,009
                                                               -------     -------     -------     -------     -------     -------

Earnings before income taxes .............................          75         240         211         184         168          89
Income taxes .............................................          27          87          80          70          64          36
                                                               -------     -------     -------     -------     -------     -------
Net earnings before preferred dividends ..................          48         153         131         114         104          53
Preferred dividends ......................................          --          (2)         (8)         (8)         (8)         (9)
                                                               -------     -------     -------     -------     -------     -------
         Net earnings to common stockholders .............     $    48     $   151     $   123     $   106     $    96     $    44
                                                               =======     =======     =======     =======     =======     =======
COMMON SHARE DATA
Earnings per common share-basic ..........................     $   .32     $   .99     $   .83     $   .70     $   .60     $   .26
Earnings per common share-diluted ........................         .30         .93         .78         .67         .57         .26
Common stockholders' equity (per common share outstanding)        6.94        6.44        5.24        4.77        4.37        3.89
Cash dividends paid on common stock ......................         .10         .10         .10         .09         .08         .07
Average common shares (in thousands)-diluted .............     161,787     162,770     157,590     159,684     165,502     173,274

FINANCIAL POSITION
Total assets .............................................     $ 7,807     $ 7,063     $ 6,350     $ 5,591     $ 5,039     $ 4,807
Notes payable ............................................         820       1,121       1,024       1,127         661         593
Total long-term debt .....................................       4,236       3,318       2,918       2,145       1,796       1,364
Discounted lease rentals .................................         515         596         742         781       1,124       1,548
Stockholders' equity .....................................       1,060         979         865         799         776         741

OTHER DATA
Total rents of new leases ................................     $ 3,100     $ 3,400     $  3,200    $ 2,800     $ 2,300     $ 1,800
Future contractual cash flows ............................       6,731       6,089        5,440      4,903       4,380       4,185

</TABLE>

                                  -24 and 25-


<PAGE>

MANAGEMENT'S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD LOOKING STATEMENTS

Certain  statements herein constitute  "forward-looking  statements"  within the
meaning of Section  27A of the  Securities  Act of 1933 and  Section  21E of the
Securities   Exchange   Act  of  1934,   and  the  company   intends  that  such
forward-looking statements be subject to the safe harbors created thereby. These
forward-looking  statements  are  subject  to  many  uncertainties  and  factors
relating to the company's  operations and business  environment  which may cause
the actual  results of the company to be  materially  different  from any future
results  expressed or implied by such  forward-looking  statements.  Examples of
such uncertainties include, but are not limited to, those risk factors set forth
generally  throughout  this  Management's  Discussion  and Analysis of Financial
Condition and Results of Operations  and  specifically  under "Risk Factors that
May Affect Future Results" and in the "Note on  Forward-Looking  Information" on
page 57 of this annual report to stockholders.


SUMMARY
Fiscal 1999 net earnings to common stockholders (hereinafter referred to as "net
earnings") were $48 million, or $.30 per common share-diluted,  compared to $151
million, or $.93 per common share-diluted,  and $123 million, or $.78 per common
share-diluted,  in  fiscal  1998 and 1997,  respectively.  The  decrease  in net
earnings  in fiscal  1999  compared  to fiscal  1998 was due to $150  million of
pre-tax  charges  (the  "Charge")  related  to  the  divestiture  of  low-margin
businesses  and  the  realignment  of  the  company's  service  businesses  (see
"Business"  for  a  discussion  of  this  pre-tax  charge)  and  due  to  losses
attributable  to Prism  Communication  Services  ("Prism"),  which  reduced  net
earnings by $36 million, or $.14 per diluted common share.  Excluding the Charge
and Prism, net earnings for the year ended September 30, 1999 were $167 million,
or $1.03 per diluted common share.  Excluding the Charge and Prism, the increase
in net earnings in the year ended  September 30, 1999 compared to fiscal 1998 is
primarily  due  to  remarketing   activities  and  earnings  contributions  from
Ventures.  The increase in net earnings in fiscal 1998 and 1997  compared to the
prior year is due to increases in earnings  contributions  from  remarketing and
technology services.

      Earnings  per common  share  (basic and  diluted)  in fiscal 1999 and 1998
benefited from the company's  stock  repurchase  program,  which has reduced the
average common shares  outstanding.  However,  average common shares outstanding
increased during fiscal 1998 as compared to fiscal 1997 primarily as a result of
the  company's  shared  investment  program (the "SIP") (see Note 12 of Notes to
Consolidated Financial  Statements).  Shares issued under the SIP in fiscal 1998
exceeded the number of shares repurchased in fiscal 1998.


BUSINESS
The company's  businesses are designed to bring solutions that reduce technology
cost  and risk to the  customer  and in  supporting  the  customer's  technology
infrastructure. These businesses are: 1) Leasing, which includes the leasing and
remarketing of distributed  systems (PCs,  servers,  workstations  and routers),
communications equipment,  equipment leasing and technology lifecycle management
services for the semiconductor manufacturing,  pharmaceutical and communications
industries; 2) Technology services, which includes business continuity services,
desktop management services (marketed under the company's IT CAP Solutions brand
name),  managed  network  services and software tools to support these areas; 3)
Ventures, which provides venture debt and venture leasing to emerging technology
companies;  and 4) Prism,  which provides high speed,  leading edge connectivity
and other communications services.

      On March 24,  1999,  the  company  announced  a major  shift in  corporate
strategy,  including  focusing on  high-margin  service  businesses and shedding
low-margin  businesses,  including its mainframe  leasing  portfolio and medical
refurbishing business.

                                      -26-
<PAGE>
      The company  finalized the  acquisition  of Prism during the quarter ended
March 31, 1999.

      The industry in which the company operates is evolving,  and the company's
business is becoming  more service  oriented,  with the  business  driven by the
company's service capabilities.  Accordingly, Comdisco has realigned to focus on
technology  services,  Ventures,  Prism,  and on global  leasing  businesses  in
historically  high-margin  areas such as electronics,  communications,  medical,
laboratory and scientific equipment.

      In conjunction  with its  repositioning,  the company  recorded a one-time
pre-tax charge of $150 million,  $96 million after tax, or  approximately  $0.59
diluted per share,  in the quarter ended March 31, 1999.  The  components of the
Charge  include $100 million  associated  with the  company's  plans to exit the
mainframe   residual  leasing   business,   $20  million  to  exit  the  medical
refurbishing  business  and $30 million  associated  with a  realignment  of the
service  businesses.  In the fiscal  quarter  ended June 30,  1999,  the company
completed  the sale of its mainframe  computer  leasing  portfolio  (hereinafter
referred to as the "Sale) and the sale of the medical refurbishing business. The
company also completed the sale of the majority of the vendor lease portfolio in
September 1999.

      Leasing  volume  decreased  in fiscal  1999 as  compared  to fiscal  1998,
primarily as a result of the company's  decision to exit the  mainframe  leasing
business and its focus on technology services. Cost of equipment placed on lease
was $2.9 billion in fiscal 1999,  compared to cost of equipment  placed on lease
of $3.3 billion and $3.1 billion in fiscal 1998 and 1997, respectively.

      In addition to  originating  new equipment  lease  financing,  the company
remarkets used equipment  from its lease  portfolio.  Remarketing is the sale or
re-lease  of  equipment  either at  original  lease  termination  or during  the
original  lease.  These  transactions  may be with  existing  lessees  or,  when
equipment is returned, with new customers.  Remarketing activities are comprised
of  earnings  from  follow-on  leases  and  gross  profit  on  equipment  sales.
Remarketing  activity,   an  important  contributor  to  earnings,   was  strong
throughout  both fiscal 1999 and 1998 and was at record  levels in fiscal  1999.
The company believes that remarketing  activity will continue to be an important
contributor to quarterly  earnings in the near and long term because of the size
of the company's  lease  portfolio at September 30, 1999, and as a result of the
residual leasing business for communication,  electronics,  medical,  laboratory
and scientific equipment.  See "Risk Factors That May Affect Future Results" for
a discussion of the factors that may affect remarketing activities.

      The company's technology services attained record revenues in fiscal 1999,
however,  higher costs,  primarily  associated  with higher  personnel costs and
continued investment in new service development,  negatively impacted margins on
the  company's   technology   services  business.   Costs  associated  with  the
development and implementation of the company's network services  infrastructure
had a negative impact on the network services earnings contribution.  Technology
services had pre-tax  earnings of $82  million,  excluding  the pre-tax  charge,
compared  to pre-tax  earnings of $71 million and $58 million in fiscal 1998 and
1997,  respectively.  The  company's  network  services  as well as its  desktop
management  services  had strong  growth  during  fiscal  1999 and should have a
positive impact on the company's  pre-tax  earnings in fiscal 2000.  Included in
the Charge is $30  million  associated  with the  realignment  of the  company's
service  businesses,  including  costs  associated  with the  relocation  of its
network  management center and consolidation and  reconfiguration of some of its
continuity  services  facilities  worldwide.  See "Risk  Factors That May Affect
Future  Results"  for a  discussion  of the  factors  that may  affect  earnings
contributions from services.

FINANCIAL CONDITION
The company's  operating  activities  during the year ended  September 30, 1999,
including  capital  expenditures  for equipment  facilities  expansion and other
capital  expenditures,  were  funded  primarily  by cash  flow  from  operations
(primarily lease receipts), including the realization of residual values through
remarketing  activities,  and  external  financing.  See  Note  7  of  Notes  to
Consolidated   Financial   Statements   for   information   on   the   company's
interest-bearing  liabilities,  including  average daily  borrowings,  effective
interest rates and maturities.

      During the last five years,  equipment  purchased for leasing  totaled $13
billion.  Expenditures for equipment in fiscal 1999 totaled  approximately  $2.8
billion.  The  company  continues  to invest  additional  capital to upgrade its
service capabilities and enhance future continuity services revenues.  In fiscal
1999,  capital  expenditures were $151 million,  compared to $87 million and $61
million in fiscal 1998 and 1997, respectively.  This includes additions in large
systems, mid-range systems, network products and expansion of its work areas, as

                                      -27-
<PAGE>
well as  continued  investment  in Advance  Recovery  Services  ("ARS").  ARS is
designed  to reduce the risk of data loss as well as  recovery  time  across all
market-leading  platforms. The company is also investing in additional personnel
to expand its other technology  services  offerings and to ensure the quality of
its services offerings.

      During fiscal 1999,  the company  invested  approximately  $136 million in
Prism,  including $91 million in the development and expansion of this business.
The  company  currently  estimates  that  Prism  capital  expenditures  will  be
approximately  $400  million  in fiscal  2000 and $250  million  in fiscal  2001
including  capital  expenditures  for the  expansion of Prism's  network,  costs
associated with the buildup phase in each  metropolitan  area (the  procurement,
design and  construction of central office cages,  end-user DSL line cards,  and
expenditures  for other  elements of network  design),  and the  improvement  of
Prism's network management, billing and other back office systems.

      The company  believes that its  estimated  cash flow from  operations  and
current financial resources will be sufficient to fund anticipated future growth
and  operating  requirements.  In addition,  the company  expects to continue to
utilize a variety of  financial  instruments  to fund its  short- and  long-term
needs.


CASH PROVIDED BY OPERATING ACTIVITIES: Net cash provided by operating activities
was $3.3 billion,  $2.9 billion and $2.5 billion in fiscal 1999,  1998 and 1997,
respectively.  During  the last  five  years,  net cash  provided  by  operating
activities totaled $12.8 billion.

      As of September 30, 1999, the company  estimates  that future  contractual
cash flows  from  leasing,  services  and  ventures  could  generate  gross cash
receipts of approximately  $6.7 billion,  including $3.1 billion in fiscal 2000.
The company's  liquidity has typically been augmented by the realization of cash
from the  future  remarketing  of  leased  equipment.  Assuming  realization  of
independent  forecasts of equipment  values at lease  termination and management
estimates,  the estimated gross cash receipts to be provided from remarketing in
future years totals $1.6 billion.

CREDIT LINES:  At September 30, 1999,  the company had $1.6 billion of available
domestic and international borrowing capacity under various lines of credit from
commercial banks and commercial paper facilities,  of which  approximately  $801
million was  unused.  The company had  committed  credit  lines of $1.3  billion
established with twenty-nine banks at September 30, 1999.

SENIOR NOTES:  The company  issued $370 million of  medium-term  notes in fiscal
1999 pursuant to a registration  statement  filed in June 1997. The company also
issued an additional  $370 million of medium-term  notes in fiscal 1999 pursuant
to a registration  statement  filed in June 1997. In October,  1998, the company
filed a  registration  statement  on Form S-3 with the  Securities  and Exchange
Commission (the "SEC") for a shelf offering of up to $1.5 billion of senior debt
securities  with  terms to be set at the time of each sale (the  "1998  Shelf").
Pursuant to the 1998 Shelf,  the  company,  in fiscal 1999 issued the  following
senior notes:
     o $350  million of 6.000%  Notes Due January  30, 2002
     o $350  million of 5.950%  Notes Due April 30, 2002
     o $300 million of 7.250%   Notes Due  September 1, 2002
     o $318 million of medium-term notes

     At September  30, 1999, an aggregate of $182 million of  medium-term  notes
remained  available  for  issuance  under  the 1998  Shelf.  Subject  to  market
conditions,  the company  plans to continue to be active in issuing  senior debt
during  fiscal 2000,  primarily to supportthe  anticipated  growth of the leased
assets,  services,   Ventures,  Prism,  and,  where  appropriate,  to  refinance
maturities of  interest-bearing  liabilities.  On September 24, 1999 the company
filed a registration  statement on Form S-3 with the SEC for a shelf offering of
up to $1.5 billion of senior debt  securities  on terms to be set at the time of
each sale (the "1999 Shelf").  No senior debt has been sold pursuant to the 1999
Shelf. In September 1999, the company established a 500 million Euro Medium Term
Note  Program  under  which the company  would issue Euro medium term notes.  An
application  has  been  made to list  notes  issued  under  the  program  on the
Luxembourg  Stock  Exchange and the company may apply for listing on other stock
exchanges.

                                      -28-
<PAGE>
SECURED DEBT:  Proceeds from the discounting of lease rentals were $341 million,
$279  million  and $430  million in fiscal  1999,  1998 and 1997,  respectively.
Secured  debt  is  currently  utilized  as a tool  to  manage  credit  risk  and
concentration  risk.  However,  the  company  believes  that in a changing  rate
environment,  secured debt may offer  attractive  financing  rates during fiscal
2000. The company's credit committee establishes  concentration levels by credit
rating and customer.

MATURITIES:  At  September  30,  1999,  the  company  had  debt of $2.5  billion
scheduled to mature in fiscal 2000,  including $820 million of commercial  paper
and short-term bank borrowings.  At September 30, 1999, the company had expected
future  contractual  cash  flows  from  existing  lease,  services  and  venture
contracts  of $3.1  billion  in  fiscal  2000.  See  Notes 6 and 7 of  Notes  to
Consolidated  Financial Statements for information on contractual cash flows and
interest-bearing liabilities, respectively.

RATIOS: The ratio of debt to total stockholders' equity (the "Ratio") was 5.3:1,
5.1:1 and 5.4:1 at  September  30,  1999,  1998 and 1997,  respectively.  During
fiscal 1998, the company redeemed its outstanding preferred stock, which reduced
stockholders'  equity by $89 million.  The 1998 Ratio was positively impacted by
the SIP,  under  which 106 senior  managers of the  company  purchased  over six
million shares of the company's common stock for approximately $109 million.


REVENUE
Total revenue of approximately  $4.2 billion and $3.2 billion in fiscal 1999 and
1998  represented  increases  of 28% and 15%  respectively,  over the prior year
periods.  The increase in fiscal 1999  compared to fiscal 1998 was primarily due
to the Sale,  which increased sales revenue by $485 million,  and higher revenue
from  technology  services.  Total leasing  revenue of $2.7 billion for the year
ended  September  30, 1999  represented  an increase of 9% compared to the prior
year.  Sales-type  revenue increased 44% in fiscal 1999 compared to fiscal 1998,
reflecting  the  company's  emphasis  on,  and the  importance  of,  remarketing
activities. Technology services revenue increased 21% in fiscal 1999 compared to
fiscal 1998. See "Technology  Services" for a discussion of technology  services
revenue and margins and "Sales" for a discussion of sales revenue and margins.

LEASING:  Operating  lease revenue minus operating lease costs was $375 million,
or 19.3% of operating  lease revenue (the "Operating  Lease  Margin"),  and $369
million,  or 19.5%  of  operating  lease  revenue,  in  fiscal  1999  and  1998,
respectively.   The  company  expects  the  Operating  Lease  Margin  to  be  at
approximately  current levels  throughout  fiscal 2000,  depending on the mix of
equipment  leased and product  announcements  by  manufacturers.  The relatively
modest  increase in operating lease revenue minus operating lease cost in fiscal
1999  compared to fiscal 1998 was due to the Sale.  See "Risk  Factors  that May
Affect  Future  Results"  for a  discussion  of factors  that  could  affect the
Operating  Lease Margin.  The Sales-type  Lease Margin  decreased in fiscal 1999
compared to the prior year  primarily  because of lower  margins on  electronics
equipment remarketing.

   The following  graph presents the Lease Margin for total  leasing,  operating
and sales-type leases for the five years ended September 30, 1999:

                           95       96      97       98       99
                           --       --      --       --       --
Total leasing              35%      31%     27%      26%      26%
Operating lease            26%      24%     21%      20%      19%
Sales-type lease           28%      26%     30%      30%      25%


                                      -29-
<PAGE>
SALES:  Revenue from sales, which includes  remarketing and buy/sell activities,
in fiscal 1999, 1998 and 1997 is shown in the table below:
(IN MILLIONS)
<TABLE>
<CAPTION>

                                                         1999                      1998                      1997
                                     ------------------------  ------------------------  ------------------------
                                     Revenue  Expense  Margin  Revenue  Expense  Margin  Revenue  Expense  Margin
                                     -------  -------  ------  -------  -------  ------  -------  -------  ------
<S>                                 <C>      <C>      <C>     <C>      <C>      <C>     <C>      <C>      <C>
Sales                                  $ 293    $ 250     15%    $ 329    $ 275     16%    $ 269    $ 210     22%
Sale of mainframe portfolio              485      485       -        -        -       -        -       -       -
Sale of vendor portfolio                  95       93      2%        -        -       -        -       -       -
Sale of medical refurbishment business    18       18       -        -        -       -        -       -       -
                                       -----    -----     ---    -----    -----     ---    -----    -----     ---
                                       $ 891    $ 846      5%    $ 329    $ 275     16%    $ 269    $ 210     22%
                                       =====    =====     ===    =====    =====     ===    =====    =====     ===
</TABLE>

    Margins  in  fiscal  1997  were  unusually  high,  primarily  as a result of
significant sales of distributed systems equipment.

TECHNOLOGY  SERVICES:  Revenue from technology  services was $522 million,  $433
million  and $354  million  in fiscal  1999,  1998 and 1997,  respectively.  The
increases  are  primarily  the result of the growth in  products  and  services.
Revenue  from  continuity  contracts,  which is  recognized  monthly  during the
noncancelable  continuity  contract and is therefore  recurring and predictable,
was  approximately  $325  million,  $298 million and $280 million  during fiscal
1999, 1998 and 1997, respectively,  representing  approximately 62%, 69% and 79%
of technology services revenue.

VENTURES: Ventures revenue of approximately $229 million in fiscal 1999 and $114
million in fiscal 1998 represent an increase of 100% and 20%, respectively, over
the prior year periods.  The increases were due to higher total leasing  revenue
and,  in  fiscal  1999,  higher  revenue  from the sale of equity  interests  in
early-high  stage  technology  companies and higher  interest  income on venture
debt.  Total  leasing  revenue of $118 million for the year ended  September 30,
1999 represented an increase of 39% compared to the prior year. Revenue from the
sale of equity interests  obtained in conjunction  with the company's  financing
transactions  with early-stage high technology  companies,  which is included in
"Other  revenue" on the  Statement of  Earnings,  was $80 million in fiscal 1999
compared to $15  million and $17 million in fiscal 1998 and 1997,  respectively.
See "Risk  Factors that May Affect  Future  Results" for a discussion of factors
that could affect the timing of, and the amounts received, from the sales of the
company's equity interests in these companies.

PRISM:  Prism is a start up  company,  and,  as such,  has only  recently  began
developing a revenue  base.  Revenues  were  approximately  $1 million in fiscal
1999.

OTHER  REVENUE:  Other  revenue was $91 million,  $46 million and $80 million in
fiscal 1999, 1998 and 1997,  respectively.  In addition to the Ventures  revenue
previously  discussed,  fiscal 1999 includes a reduction in Ventures  revenue of
$20 million as an increase to the allowance for credit  losses,  and fiscal 1998
and 1997  includes $5 million and $4  million,  respectively,  of gains from the
sale of direct  financing and sales-type  receivables.  Other revenue for fiscal
1997 includes a gain of $25 million ($16 million  after-tax,  or $.10 per common
share-diluted)   resulting   from  the  receipt  of  amounts  in  settlement  of
litigation.  In addition,  fiscal 1997 other revenue includes  approximately $11
million of gains from the sale of other investments owned by the company.

COSTS AND EXPENSES
Total costs and  expenses  were $4.1 billion and $3.0 billion in fiscal 1999 and
1998,  respectively.  The increase in fiscal 1999  compared to the prior year is
primarily  due to the Sale and the Charge.  Other  factors  contributing  to the
higher  costs and  expenses in fiscal 1999 and 1998  compared to the prior years
were increased  leasing costs related to increased  operating lease revenue and,
in fiscal 1999,  increased  sales-type  revenue,  and increased costs associated
with the company's technology services.

SELLING,  GENERAL  AND  ADMINISTRATIVE:   Selling,  general  and  administrative
expenses  totaled $306 million in fiscal 1999,  $249 million in fiscal 1998, and
$244 million in fiscal 1997. The increase in fiscal 1999 compared to fiscal 1998
is primarily due to higher  compensation and personnel costs.  Despite the level
of growth in fiscal 1998, cost containment efforts begun in fiscal 1997 resulted
in a modest increase in selling, general and administrative costs in fiscal 1998
compared to fiscal 1997.

                                      -30-
<PAGE>

INTEREST: Interest expense for fiscal 1999 totaled $337 million in comparison to
$326 million  infiscal 1998 and $299 million in fiscal 1997,  respectively.  The
increase  in interest  expense in fiscal 1999  compared to fiscal 1998 is due to
higher  average  daily  borrowings   resulting  from  the  company's   increased
investment in leasing,  Ventures and Prism compared to the prior period,  offset
by lower average rates.

PRISM: PRISM INITIALLY  INTRODUCED ITS SERVICES,  MARKETED UNDER THE REDSM brand
name, in Manhattan in January 1999 and has subsequently  expanded its service to
the  greater New York area,  Newark,  Jersey  City and  Rutherford.  The company
intends  to  continue  Prism's  network  expansion  into a  total  of 36  cities
throughout North America.  Since January 1999, Prism's principal activities have
included:  o developing  criteria for market  selection and analyzing  potential
markets   against   these   criteria;
o   obtaining   required    governmental authorizations;
o   negotiating and entering into interconnection agreements with traditional
    telephone  companies;
o   acquiring  space in traditional  telephone  companies'  central  offices and
    installing  Prism's  network  equipment in those offices;
o   launching service in target markets;
o   selling and marketing to, and installing service for, customers  in  markets
    where Prism has  established service;
o   hiring management and other personnel;
o   developing and implementing operations support systems and other information
    systems.

      Prism has  incurred  losses in every  month  since its  inception  and the
company  expects to  substantially  increase its  operating  expenditures  in an
effort to rapidly expand its network  infrastructure  and service  areas.  Prism
expects to incur substantial operating losses, net losses and net operating cash
outflows during its network build-out and during the initial penetration of each
new market.  Its losses and net operating cash outflows are expected to continue
and to increase as it expands its operations.

OTHER:  See  "Business"  for a discussion  of the Charge  recorded in the second
quarter of fiscal 1999.

      In the second  quarter of fiscal  1997,  the  company  recorded a noncash,
non-operating  charge of $25 million ($16 million after-tax,  or $.10 per common
share) as an addition to its equipment valuation allowance.

INCOME TAXES
Note 9 of Notes to Consolidated Financial Statements on page 47 provides details
about the company's income tax provision.


INTERNATIONAL OPERATIONS
The company  operates  principally in four geographic  areas: the United States,
Europe,  Canada and the Pacific Rim. In its  operations,  the company works with
multinational  corporations,  and the company  provides global  solutions in its
services.

      Revenue from  international  operations,  excluding export sales, was $905
million in fiscal 1999  compared to $659 million and $570 million in fiscal 1998
and 1997, respectively.  International revenues represented 22% of the company's
total revenue in fiscal 1999 and 20% in both fiscal 1998 and fiscal 1997.

      Geographic  area  data is  included  in Note 16 of Notes  to  Consolidated
Financial Statements on page 52.

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS
This  Report  contains   forward-looking   statements  that  involve  risks  and
uncertainties.  The company's  actual  revenues and results of operations  could
differ materially from those anticipated in these forward-looking  statements as
a result of certain  factors,  including  those set forth in the following  risk
factors and elsewhere in this Report.

POTENTIAL FLUCTUATIONS IN OPERATING RESULTS: The company's operating results are
subject to quarterly fluctuations resulting from a variety of factors, including
earnings  contributions  from  remarketing  activities  and  services,   product
announcements  by  manufacturers,  economic  conditions  and  variations  in the
financial mix of leases written. The financial mix of leases written is a result
of a combination of factors,  including, but not limited to, changes in customer
demands and/or requirements,  new product announcements,  price changes, changes
in delivery dates,  changes in maintenance  policies and the pricing policies of
equipment  manufacturers,  and price  competition from other lessors and finance
companies.

                                      -31-
<PAGE>

EARNINGS CONTRIBUTIONS FROM LEASING: Lower margins on large systems transactions
(mainframes  and  related  peripherals,  including  DASD and tape  drives)  have
resulted  in  lower  margins  on  leasing.  Although  the  company  has sold its
mainframe residual leasing business, which may have a positive impact on leasing
margins in future quarters, the market for leasing and services is characterized
by rapid technological developments,  evolving customer demands and frequent new
product  announcements and  enhancements.  Failure to anticipate or adapt to new
technological  developments  or to recognize  changing market  conditions  could
adversely  affect the company's  business,  including its lease volume,  leasing
revenue and earnings contributions from leasing.

      Furthermore,  notwithstanding  the sale of the mainframe lease  portfolio,
remarketing has been and will continue to be an important  factor in determining
quarterly  earnings.  To  meet  earnings  goals  for  fiscal  2000,  remarketing
contributions,  primarily for the company's global equipment leasing businesses,
must be at or above  the level  achieved  in fiscal  1999.  Quarterly  operating
results  depend  substantially  upon the  remarketing  transactions  within  the
quarter,  which are  difficult  to  forecast  accurately.  While the  company is
devoting resources to its remarketing activities, there can be no assurance that
the company will achieve the appropriate level of activity  necessary to meet or
match the company's prior and desired operating results.

      The emergence of the communications  market--  facilities-based  broadband
communications    companies,    Internet    Service    Providers    and    other
telecommunications  carriers--and the growth of broadband networks, provides the
company  with an  industry  in which  leasing is an  attractive  alternative  to
ownership.  The  company's  communications  equipment  customers  are  generally
companies with accumulated net deficits and extensive liquidity requirements. To
the extent that these  companies  are unable to meet their  business  plans,  or
unable to obtain  funding or  funding  at  reasonable  rates to  complete  their
business plans,  there could be an increase in the company's credit losses above
historical levels.

EARNINGS  CONTRIBUTIONS FROM SERVICES: As a result of the evolving nature of its
services  business,  particularly  the emerging  desktop  management and managed
network services, the company has limited meaningful historical data in which to
base its planned operating expenses.  Accordingly,  a significant portion of the
company's  expense  levels  (investment  in continuity  facilities and hardware,
consultants,  experts  and  back  office  personnel)  are  based  in part on its
expectations as to future services revenues,  and are, to a large extent, fixed.
Conversely,  the company's  revenue base has become more diverse with the growth
of other  technology  services  revenue,  and therefore  less recurring and less
predictable  than in prior years. To attain its services  earnings  contribution
goals  for  fiscal  2000,  the  company  must  meet its  obligations  under  the
agreements  underlying  transactions  in process  at  September  30,  1999 (also
referred  to by the  company  as  its  "sales  backlog");  expand  its  contract
subscription  base  (through  new  contract  signings  and  contract  renewals);
increase its revenues from other technology services;  develop, promote and sell
additional  service  products,  such  as IT  CAP  Solutions,  advanced  recovery
services,  availability options,  remote computing services and web hosting; and
contain costs.  The company must also  successfully  compete with  organizations
offering  similar  services.  The  company's  ability to obtain new business and
realize  revenue  on its sales  backlog  depends on its  ability  to  anticipate
technological  changes,  develop  services  to meet  customer  requirements  and
achieve delivery of services that meet customer requirements. In addition, there
can be no assurance  that the company will be able to maintain  and/or  increase
its margins on technology services in fiscal 2000.

      One of the  impacts  of  the  company's  changing  business  model  is the
lengthening of the sales cycle--the length of time between initial sales contact
and  final  delivery  of  contracts--as  compared  to  its  traditional  leasing
business. This increase in sales cycle results in an increase in negotiations in
progress  which  ultimately  impacts the timing of revenue,  earnings and volume
recognition.

VENTURES: Through Ventures, the company has made loans to and equity investments
in various privately held companies.  These companies  typically are in an early
stage  of  development  and  may  be  expected  to  incur  substantial   losses.
Accordingly, investments in these companies may not result in any return and the
company  may  lose  its  entire  investment  and/or  principal  balance.  Equity
instruments held by the company are generally subject to lockups restricting its
ability to sell until  several  months  after an initial  public  offering.  The
public  market  for high  technology  and other  emerging  growth  companies  is
extremely  volatile.  Such  volatility  may adversely  affect the ability of the
company to dispose of the equity securities and the value of those securities on
the date of sale.

                                      -32-
<PAGE>
PRISM:  Prism is a start up company  that has  incurred  operating  losses since
inception and the company expects that Prism's operating losses will continue to
increase  as it  introduces  its  services  throughout  New  York  City  and the
Northeast  corridor.  In  addition,  Prism will require  substantial  additional
capital to support its data  network,  to expand its  services,  to increase its
sales and  marketing  efforts  and to support  its  growth.  To the extent  that
revenues do not grow at  anticipated  rates or that  increases in such operating
expenses precede or are not subsequently  followed by commensurate  increases in
revenues,  or that the  company  is unable to adjust  operating  expense  levels
and/or  capital  expenditures  of Prism  accordingly,  the  company's  business,
results of operations and financial  condition could be significantly  affected.
There can be no  assurance  that in the  future  Prism will be  profitable  on a
quarterly or annual basis.

      Prism operates in a highly  regulated  environment.  Changes in regulatory
policies may adversely  impact its ability to provide  services and increase the
costs of providing those services.

ECONOMIC CONDITIONS:  With respect to economic conditions, a recession can cause
customers  to put off new  investments  and  increase  the  company's  bad  debt
experience.

OTHER FACTORS: Other uncertainties include continued business conditions,  trend
of movement to client/server  environment,  competition,  including  competition
from other technology  service  providers,  reductions in technology budgets and
related  spending  plans,   price  competition  from  other  technology  service
providers, and the Year 2000 readiness of the company's customers, suppliers and
business partners.

    Due to all of the foregoing  factors,  in some future  quarter the company's
operating  results may fall below the  expectations  of securities  analysts and
investors.  In such an event,  the trading price of the  company's  common stock
would likely be materially and adversely affected.

      The company  undertakes  no  obligation  to publicly  update or revise any
forward-looking  statements  whether  as a result  of new  information,  further
events or otherwise.

OTHER MATTERS
QUALITATIVE  INFORMATION  ABOUT MARKET RISK:  The company's  primary market risk
exposure   is  interest   rate  risk,   primarily   related  to  the   company's
interest-bearing  obligations.  Generally,  a changing interest rate environment
does not  impact  the  company's  margins  since the  effects of higher or lower
borrowing  costs would be  reflected  in the rates on newly  leased  assets.  In
addition,  the company  attempts to match the maturities of its borrowings  with
the cash flows from its leased assets and notes  receivables,  thereby  reducing
the company's interest rate exposure.

      The company has an on-going  program to manage its assets and liabilities.
This  program  includes  establishing  levels of fixed and  floating  rate debt,
liquidity  and  duration  analysis,  monitoring  credit  quality  of  the  lease
portfolio and related  account review  procedures and oversight of interest rate
and  foreign  exchange  hedging  policies.  This  program  includes  the  use of
derivatives in certain identifiable  situations to manage risk. The company does
not speculate on interest rates,  but rather manages its portfolio of assets and
liabilities  to mitigate the impact of interest rate  fluctuations.  The company
does  not  use  derivatives  for  trading  purposes.  See  Note  7 of  Notes  to
Consolidated Financial Statements for information on the company's average daily
borrowings, the company's derivative financial instruments,  comprising interest
rate  swaps and  foreign  currency  forward  exchange  contracts  and  effective
interest rates.

      The table  below  presents  principal  (or  notional)  amounts and related
weighted-average  interest  rates by year of maturity  for the  company's  notes
payable, term notes and senior notes.

(IN MILLIONS)
<TABLE>
<CAPTION>
                               00       01          02         03         04+
                           ------    -----      ------      -----      -----
<S>                       <C>       <C>        <C>         <C>        <C>
Notes payable
  Fixed rate ..........    $  820    $  --      $   --      $  --      $  --
  Average interest rate      4.87%
Term notes
  Floating rate .......       550       --          --         --         --
  Average interest rate      5.25%
Senior notes
  Fixed rate ..........       851      857       1,435        268        275
  Average interest rate      6.69%    6.51%       6.42%      6.14%      6.13%
</TABLE>

      As the  above  table  incorporates  only  the  company's  interest-bearing
obligations and not its lease portfolio,  the information  presented therein has
limited predictive value.

      The company's  investment in equity  securities is subject to market price
risk.  A 10% decrease in market  values  would reduce the carrying  value of the

                                      -33-
<PAGE>
company's publicly traded equity securities by $20 million. Many of these equity
securities are highly volatile stocks.

RECENTLY ISSUED PROFESSIONAL ACCOUNTING STANDARDS:  The company does not believe
that SFAS 133, Accounting for Derivative Instruments and Hedging Activity, which
will  become  effective  in  fiscal  2001,  will have a  material  impact on the
company's financial statements.

YEAR  2000:  The  company  has  substantially  completed  a program  to  assess,
remediate, mitigate and contingency plan for the potential impact of "Year 2000"
issues  throughout  the company.  "Year 2000" issues arise where  date-sensitive
software  uses two digit year date fields,  sorting the year 2000 ("00")  before
the year 1999 ("99").  As a result,  these  systems may not process dates beyond
1999,  resulting in data  corruption and processing  errors and possible  system
failures.

      The  company's  program has addressed  its internal  computer  systems and
applications,  facilities,  equipment  portfolio,  and  continuity  and  network
services  operations.  This program  includes  assessment and mitigation of Year
2000 issues with respect to information technology and other equipment that uses
software  embedded on computer chips. In addition,  the company is attempting to
monitor the Year  2000-compliance  status of its vendors,  suppliers and service
providers.  The company believes that it is taking the necessary steps regarding
Year 2000  compliance with respect to matters within its control to provide that
Year 2000 issues will not materially impact the company.  However,  there can be
no assurance that Year 2000 issues will not adversely affect the company.

      The SEC issued an interpretive  guidance regarding disclosure of Year 2000
issues and  consequences,  effective  August 4, 1999. On September 23, 1999, the
company  provided  this  disclosure  in a Form  8-K  filing,  a copy of which is
available  for download at the SEC Internet home page  (www.sec.gov).  This Year
2000 Readiness is  incorporated  by reference in the company's  Annual Report on
Form 10-K for the year ended September 30, 1999.

EURO  COMPLIANCE:  While the company will continue to evaluate the impact of the
Euro  introduction  over  time,  based  on  currently   available   information,
management does not believe that the introduction of the Euro currency will have
a material adverse impact on the company's financial condition or overall trends
in results of operations.

INFLATION: The company does not consider the present rate of inflation to have a
significant impact on the businesses in which it operates.


PRICE RANGE OF COMMON STOCK
The  company's  common  stock is listed on the New York Stock  Exchange  and the
Chicago Stock Exchange  under the symbol CDO. At September 30, 1999,  there were
approximately  1,900  holders  of  record of the  company's  common  stock.  The
following table shows the quarterly  price range of the company's  common stock,
as traded on the New York  Stock  Exchange,  and cash  dividends  paid on common
stock for fiscal 1999 and 1998,  adjusted for the  two-for-one  stock split (See
Note 12 of Notes to Consolidated Financial Statements).

<TABLE>
<CAPTION>

                            99                                 98
              ------------------------------      -----------------------------
Quarter         High       Low     Dividends        High      Low     Dividends
-------       ------    ------     ---------      ------   ------     ---------
<S>          <C>       <C>        <C>            <C>      <C>        <C>
First         $19.44    $12.50         $.025      $16.88   $14.16         $.025
Second         17.88     10.75          .025       21.94    14.88          .025
Third          30.88     15.81          .025       22.44    16.50          .025
Fourth         26.94     17.50          .025       20.88    12.44          .025

</TABLE>

                                      -34-
<PAGE>



CONSOLIDATED STATEMENTS OF EARNINGS
COMDISCO, INC. AND SUBSIDIARIES
(IN MILLIONS EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>


                                             YEARS ENDED SEPTEMBER 30,
                                             1999      1998       1997
                                          -------   -------    -------
<S>                                      <C>       <C>        <C>
REVENUE
Leasing:
    Operating .........................   $ 1,938   $ 1,897    $ 1,635
    Direct financing ..................       174       162        145
    Sales-type ........................       543       376        336
    Total leasing .....................     2,655     2,435      2,116
    Sales .............................       891       329        269
    Technology services ...............       522       433        354
    Other .............................        91        46         80
                                          -------   -------    -------
          Total revenue ...............     4,159     3,243      2,819
                                          -------   -------    -------
COSTS AND EXPENSES
Leasing:
    Operating .........................     1,563     1,528      1,297
    Sales-type ........................       406       263        237
                                          -------   -------    -------
          Total leasing ...............     1,969     1,791      1,534
Sales .................................       846       275        210
Technology services ...................       440       362        296
Selling, general and administrative ...       306       249        244
Interest ..............................       337       326        299
Prism Communication Services ..........        36        --         --
Other .................................       150        --         25
                                          -------   -------    -------
    Total costs and expenses ..........     4,084     3,003      2,608
                                          -------   -------    -------
Earnings before income taxes ..........        75       240        211
Income taxes ..........................        27        87         80
                                          -------   -------    -------
Net earnings before preferred dividends        48       153        131
Preferred dividends ...................        --        (2)        (8)
                                          -------   -------    -------
Net earnings to common stockholders ...   $    48   $   151    $   123
                                          =======   =======    =======
Net earnings per common share:
    Earnings per common share-basic ...   $   .32   $   .99    $   .83
                                          =======   =======    =======
    Earnings per common share-diluted .   $   .30   $   .93    $   .78
                                          =======   =======    =======
See accompanying notes to consolidated financial statements.
</TABLE>

                                      -35-
<PAGE>




CONSOLIDATED BALANCE SHEETS
COMDISCO, INC. AND SUBSIDIARIES
(IN MILLIONS EXCEPT NUMBER OF SHARES AND PER SHARE DATA)
<TABLE>
<CAPTION>

                                                                        SEPTEMBER 30,

                                                                       1999       1998
                                                                    -------    -------
<S>                                                                <C>        <C>
ASSETS
Cash and cash equivalents .......................................   $   387    $    63
Cash-legally restricted .........................................        46         30
Receivables, net ................................................       696        340
Inventory of equipment ..........................................       115        165
Leased assets:
    Direct financing and sales-type .............................     2,107      1,779
    Operating (net of accumulated depreciation) .................     3,516      4,121
       Net leased assets ........................................     5,623      5,900
Buildings, equipment and other, net .............................       229        137
Other assets ....................................................       711        428
                                                                    -------    -------
                                                                    $ 7,807    $ 7,063
                                                                    =======    =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable ...................................................   $   820    $ 1,121
Term notes ......................................................       550        550
Senior notes ....................................................     3,686      2,768
Accounts payable ................................................       263        308
Income taxes:
    Current .....................................................        15         14
    Deferred ....................................................       367        319
Other liabilities ...............................................       531        408
Discounted lease rentals ........................................       515        596
                                                                    -------    -------
                                                                      6,747      6,084
                                                                    =======    =======
Stockholders' equity:
    Preferred stock $.10 par value. Authorized 100,000,000 shares        --         --
    Common stock $.10 par value. Authorized 750,000,000 shares;
       issued 223,464,344 shares (221,657,318 in 1998) ..........        22         22
    Additional paid-in capital ..................................       302        257
    Accumulated other comprehensive income ......................        58        (13)
    Retained earnings ...........................................     1,134      1,101
                                                                    -------    -------
                                                                      1,516      1,367
    Common stock held in treasury, at cost; 70,672,094 shares
       (69,556,956 in 1998) .....................................      (456)      (388)
                                                                    -------    -------
       Total stockholders' equity ...............................     1,060        979
                                                                    -------    -------
                                                                    $ 7,807    $ 7,063
                                                                    =======    =======
See accompanying notes to consolidated financial statements.
</TABLE>
                                      -36-
<PAGE>


CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
COMDISCO, INC. AND SUBSIDIARIES

(IN MILLIONS EXCEPT PER SHARE DATA)
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
<TABLE>
<CAPTION>


                                                                                         Accumulated
                                                                 Additional   Deferred        other                 Common
                                            Preferred   Common     paid-in     compen-    comprehen-   Retained   stock in
                                                stock    stock     capital      sation   sive income   earnings   treasury    Total
                                            ---------   ------   ---------     --------  -----------   --------   --------    -----
<S>                                           <C>      <C>         <C>         <C>           <C>        <C>        <C>      <C>

BALANCE AT SEPTEMBER 30, 1996 ...............  $   89   $    7      $  165      $   (5)       $    5     $  856     $ (318)  $  799
Net earnings ................................                                                               131                 131
Translation adjustment ......................                                                    (25)                           (25)
     Total comprehensive income .............                                                                                   106
Cash dividends-preferred ....................                                                                (8)                 (8)
Cash dividends-common ($.10 per share) ......                                                               (14)                (14)
Stock options exercised .....................                           10                                               6       16
Reduction of guaranteed ESOP debt ...........                                        2                                            2
Purchase of common stock ....................                                                                          (45)     (45)
Retire treasury stock .......................                           (2)                                              2       --
Stock split .................................                4          (4)                                                      --
Income tax benefits resulting from the
     exercise of non-qualified stock options                             9                                                        9
                                               ------   ------      ------      ------        ------     ------     ------   ------
BALANCE AT SEPTEMBER 30, 1997 ..............       89       11         178          (3)          (20)       965       (355)     865
                                               ------   ------      ------      ------        ------     ------     ------   ------
Net earnings ...............................                                                                153                 153
Translation adjustment .....................                                                       7                              7
     Total comprehensive income ............                                                                                    160
Cash dividends-preferred ...................                                                                 (2)                 (2)
Cash dividends-common ($.10 per share) .....                                                                (15)                (15)
Shared Investment Program ..................                            77                                              31      108
Stock options exercised ....................                            (4)                                             24       20
Reduction of guaranteed ESOP debt ..........                                         3                                          3
Purchase of preferred stock ................      (89)                                                                          (89)
Purchase of common stock ...................                                                                           (88)     (88)
Stock split ................................                11         (11)                                                      --
Income tax benefits resulting from the
     exercise of non-qualified stock options                            17                                                       17
                                               ------   ------      ------      ------        ------     ------     ------   ------
BALANCE AT SEPTEMBER 30, 1998 ..............       --       22         257          --           (13)     1,101       (388)     979
                                               ------   ------      ------      ------        ------     ------     ------   ------
Net earnings ...............................                                                                 48                  48
Translation adjustment .....................                                                     (21)                           (21)
Change in unrealized gain ..................                                                      92                             92
     Total comprehensive income ............                                                                                    119
Cash dividends-common ($.10 per share) .....                                                                (15)                (15)
Stock options exercised ....................                            21                                              14       35
Purchase of common stock ...................                                                                           (82)     (82)
Income tax benefits resulting from the
     exercise of non-qualified stock options                            24                                                       24
                                               ------   ------      ------      ------        ------     ------     ------   ------
BALANCE AT SEPTEMBER 30, 1999 ..............   $   --   $   22      $  302      $   --        $   58     $1,134     $ (456)  $1,060
                                               ======   ======      ======      ======        ======     ======     ======   ======

See accompanying notes to consolidated financial statements
</TABLE>
                                      -37-

<PAGE>




CONSOLIDATED STATEMENTS OF CASH FLOWS
COMDISCO, INC. AND SUBSIDIARIES
(IN MILLIONS)
<TABLE>
<CAPTION>


                                                                     YEARS ENDED SEPTEMBER 30,
                                                                    1999       1998       1997
                                                                 -------    -------    -------
<S>                                                             <C>        <C>        <C>

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
Cash flows from operating activities:
    Operating lease and other leasing receipts ...............   $ 2,002    $ 2,013    $ 1,739
    Direct financing and sales-type leasing receipts .........       958        905        861
    Sale of direct financing and sales-type receivables ......      --          125         81
    Leasing costs, primarily rentals paid ....................       (14)       (20)       (32)
    Sales ....................................................       818        335        264
    Sales costs ..............................................      (105)       (69)       (84)
    Technology services receipts .............................       485        408        343
    Technology services costs ................................      (390)      (278)      (204)
    Other revenue ............................................        83         44         55
    Notes receivable receipts ................................        66         33         16
    Selling, general and administrative expenses .............      (289)      (249)      (225)
    Litigation settlement ....................................        --         --         25
    Interest .................................................      (338)      (326)      (291)
    Income taxes .............................................       (12)       (34)       (44)
                                                                 -------    -------    -------
       Net cash provided by operating activities .............     3,264      2,887      2,504
                                                                 -------    -------    -------
Cash flows from investing activities:
    Equipment purchased for leasing ..........................    (2,838)    (3,026)    (2,940)
    Investment in continuity and network services facilities .      (151)       (87)       (61)
    Notes receivable .........................................      (324)       (57)       (28)
    Acquisition and investment in Prism Communication Services      (136)        (8)      --
    Other ....................................................       (31)        (2)       (19)
                                                                 -------    -------    -------
       Net cash used in investing activities .................    (3,480)    (3,180)    (3,048)
                                                                 -------    -------    -------
Cash flows from financing activities:
    Discounted lease proceeds ................................       341        279        430
    Net increase (decrease) in notes payable .................      (301)        97       (103)
    Issuance of term notes and senior notes ..................     1,842      1,017      1,151
    Maturities of term notes and senior notes ................      (924)      (617)      (378)
    Principal payments on secured debt .......................      (322)      (425)      (469)
    Decrease (increase) in legally restricted cash ...........       (16)        15        (18)
    Preferred stock purchased ................................        --        (89)        --
    Common stock purchased and placed in treasury ............       (82)       (88)       (45)
    Dividends paid on common stock ...........................       (15)       (15)       (14)
    Dividends paid on preferred stock ........................        --         (2)        (8)
    Shared Investment Program ................................        --        109         --
    Other ....................................................        17         38          6
                                                                 -------    -------    -------
       Net cash provided by financing activities .............       540        319        552
                                                                 -------    -------    -------
Net increase in cash and cash equivalents ....................       324         26          8
Cash and cash equivalents at beginning of year ...............        63         37         29
                                                                 -------    -------    -------
Cash and cash equivalents at end of year .....................   $   387    $    63    $    37
                                                                 =======    =======    =======

See accompanying notes to consolidated financial statements
</TABLE>
                                      -38-

<PAGE>



CONSOLIDATED STATEMENTS OF CASH FLOWS
COMDISCO, INC. AND SUBSIDIARIES
(IN MILLIONS)
<TABLE>
<CAPTION>


                                                                           YEARS ENDED SEPTEMBER 30,
                                                                           1999     1998     1997
                                                                         ------   ------   ------
<S>                                                                     <C>      <C>      <C>
RECONCILIATION OF NET EARNINGS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net earnings .........................................................   $   48   $  153   $  131
Adjustments to reconcile net earnings to net cash provided
by operating activities:
    Leasing costs, primarily depreciation and amortization ...........    1,954    1,771    1,502
    Leasing revenue, primarily principal portion of direct
       financing and sales-type lease rentals ........................      371      478      484
    Sale of direct financing and sales-type receivables ..............       --      125       81
    Cost of sales ....................................................      641      193      126
    Technology services costs, primarily depreciation and amortization       50       84       92
    Income taxes .....................................................       15       45       36
    Interest .........................................................       --       --        8
    Other expense ....................................................      150       --       --
    Other, net .......................................................       35       38       44
                                                                         ------   ------   ------
    Net cash provided by operating activities ........................   $3,264   $2,887   $2,504
                                                                         ======   ======   ======
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES:
    Reduction of discounted lease rentals in lease portfolio sale ....   $  100   $   --   $   --
                                                                         ======   ======   ======
See accompanying notes to consolidated financial statements
</TABLE>

                                      -39-

<PAGE>




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)

NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS:  Comdisco provides global technology  services to help its
customers maximize  technology  functionality,  predictability and availability.
The company offers a complete suite of information technology services including
business continuity, managed network services, and IT control and predictability
solutions.  Through its subsidiary,  Prism Communication Services Inc., Comdisco
is  developing  a  high-speed,  always-on  digital  network,  which will provide
customers  with  leading-edge  connectivity.   Comdisco  also  offers  equipment
services to key  vertical  industries,  including  electronics,  communications,
laboratory and scientific,  and computer-integrated  manufacturing.  Through its
Ventures  group,  Comdisco  provides  equipment  leasing and other financing and
services to venture capital backed start-up companies.

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.

PRINCIPLES OF CONSOLIDATION:  The consolidated  financial statements include the
accounts of the company and its wholly-owned subsidiaries. Intercompany accounts
and transactions have been eliminated.

TRANSLATION  ADJUSTMENTS:  All assets  and  liabilities  denominated  in foreign
currencies  are  translated  at the  exchange  rate on the  balance  sheet date.
Revenues,  costs and  expenses  are  translated  at  average  rates of  exchange
prevailing during the period. Translation adjustments are deferred as a separate
component  of  stockholders'  equity.  Gains and losses  resulting  from foreign
currency transactions are included in the consolidated statements of earnings.

INCOME  TAXES:  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.

LEASE ACCOUNTING:  See "Leasing" section on pages 42 and 43 for a description of
lease accounting policies, lease revenue recognition and related costs.

TECHNOLOGY SERVICES:  Revenue from continuity contracts is recognized monthly as
subscription  fees  become  due.  Revenue  from  other  technology  services  is
recognized  over  the  terms  of the  related  contracts  or as the  service  is
provided.

CASH AND CASH EQUIVALENTS:  Cash equivalents are comprised of highly liquid debt
instruments with original maturities of 90 days or less.

CASH - LEGALLY  RESTRICTED:  Legally  restricted  cash  represents cash and cash
equivalents  that  are  restricted  solely  for  use as  collateral  in  secured
borrowings and are not available to other creditors.

INVENTORY OF EQUIPMENT: Inventory of equipment is stated at the lower of cost or
market by categories of similar equipment.

INVESTMENT  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 market value discount to reflect any  restrictions on  transferability,  with
unrealized  gains and losses reported as a separate  component of  stockholders'
equity. Equity investments for which there is no readily determinable fair value
are carried at cost, less any appropriate valuation allowance.

                                      -40-
<PAGE>
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 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 earnings when
received.

DERIVATIVES:  Interest rate differentials on swaps are accrued as interest rates
change over the contract  period.  Amounts  receivable  under cap agreements are
accrued as a  reduction  of  interest  expense.  Unrealized  gains and losses on
forward  contracts are deferred on the balance  sheet until they are  exercised.
See Note 7 of the  Notes to  Consolidated  Financial  Statements  for  financial
information concerning derivatives.

EARNINGS  PER COMMON  SHARE:  Earnings  per common  share-basic  are computed by
dividing the net earnings to common  stockholders by the weighted average number
of common  shares  outstanding  for the period.  All shares held in the Employee
Stock  Ownership  Plan  (ESOP)  are  considered  outstanding  for both basic and
diluted  earnings  per share  calculations.  Earnings  per common  share-diluted
reflect the maximum dilution that would have resulted from the exercise of stock
options.  Earnings  per common  share-diluted  are  computed by dividing the net
earnings to common  stockholders by the weighted average number of common shares
outstanding and all dilutive stock options  (dilutive stock options are based on
the treasury  stock  method).  Anti-dilutive  stock options were  immaterial for
fiscal 1999, 1998 and 1997.

STOCK-BASED COMPENSATION:  The company utilizes the intrinsic value based method
of accounting for its stock-based compensation arrangements.

RECLASSIFICATIONS: Certain reclassifications have been made in the 1997 and 1998
financial statements to conform to the 1999 presentation.

NOTE 2
ACQUISITIONS AND SALE OF ASSETS

On  February  28,  1999,  the  company   completed  the   acquisition  of  Prism
Communication   Services,   Inc.   ("Prism")  for  a  cash  purchase   price  of
approximately $53 million, of which approximately $45 million was paid in fiscal
1999.  Prism is a  provider  of  dedicated  high-speed  connectivity  and  other
services to small businesses, telecommuters and other power users.

    The Prism  acquisition  has been  accounted  for by the  purchase  method of
accounting  and,  accordingly,  the results of operations of Prism from February
28, 1999 are included in the  accompanying  consolidated  financial  statements.
Assets  acquired and  liabilities  assumed have been recorded at their estimated
fair  values,  and  are  subject  to  adjustment  when  additional   information
concerning asset and liability valuations is finalized.

    The excess of cost over the estimated fair value of net assets  acquired was
approximately  $61 million and has been  recorded  as  goodwill,  which is being
amortized  on a  straight-line  basis  over 10 years.  The  following  selected,
unaudited  pro forma data is  presented  to  provide a summary  of the  combined
results of the company and Prism as if the  acquisition  had been made as of the
beginning  of fiscal  1999.  The  effect of the  acquisition  on the year  ended
September 30, 1998 is not material and, accordingly,  has been excluded from the
pro forma presentation (in millions except per share data):

YEAR ENDED SEPTEMBER 30, 1999

          Total revenue                         $ 4,159
          Net earnings                          $    35
          Net earnings per common share:
              Basic                             $   .23
              Diluted                           $   .22

    The selected,  unaudited pro forma data is for  informational  purposes only
and may not  necessarily  reflect the results of  operations  had the  companies
operated as one for the year ended  September 30, 1999. No effect has been given
for  synergies,  if any,  that  may be  realized  through  the  acquisition.  In
addition, the company expects to expand its network within existing and into new
regions,  which will require significant  capital  expenditures as well as sales
and  marketing   expenditures.   Accordingly,   the  company  expects  to  incur
substantial  and  increasing  operating  expenses  and  net  losses  from  Prism
operations for at least the next few years.

    On March  24,  1999,  the  company  announced  a major  shift  in  corporate
strategy,  including  focusing on  high-margin  service  businesses and shedding
low-margin  businesses,   including  its  mainframe  leasing  and  vendor  lease
portfolios  and its medical  refurbishing  business.  In  conjunction  with this
repositioning,  the  company  recorded  a pre-tax  charge of $150  million,  $96

                                      -41-
<PAGE>
million after tax, or approximately  $0.59 per share, in the quarter ended March
31, 1999. The components of the pre-tax charge included $100 million  associated
with the company's plan to exit the mainframe  residual  leasing  business,  $20
million to exit the medical  refurbishing  business  and $30 million  associated
with the realignment of the company's services  businesses.  On May 3, 1999, the
company announced it had reached an agreement in principle to sell its mainframe
computer leasing portfolio.  The sale of the mainframe portfolio and the sale of
the medical  refurbishing  business  were both  concluded in the fiscal  quarter
ended June 30, 1999.  The sale of a majority of the vendor lease  portfolio  was
completed in the quarter ended September 30, 1999.

LEASING

NOTE 3
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, 1999.

o Initial  direct  costs  related  to  operating  and direct  financing  leases,
including  salesperson's  commissions,  are  capitalized  and amortized over the
lease term.

NOTE 4
LEASED ASSETS

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

(IN MILLIONS)

                                          99         98
                                     -------    -------
Minimum lease payments receivable    $ 2,162    $ 1,790
Estimated residual values ........       219        203
Less: unearned revenue ...........      (274)      (214)
                                     -------    -------
Net investment in direct financing
    and sales-type leases ........   $ 2,107    $ 1,779
                                     =======    =======


    Unearned  revenue is  recorded  as  leasing  revenue  over the lease  terms.
    Operating leased assets include the following as of September 30:

(IN MILLIONS)

                                      99         98
                                 -------    -------
Operating leased assets ......   $ 6,054    $ 6,803
Less: accumulated depreciation
    and amortization .........    (2,538)    (2,682)
                                 -------    -------
Net ..........................   $ 3,516    $ 4,121
                                 =======    =======
                                      -42-
<PAGE>
NOTE 5
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, 1999 (in millions):

                                     Projected year of lease termination
                              -----------------------------------------------
                  Cost at
Year lease          lease
commenced       inception         00       01         02         03       04+
-----------     ---------     ------   ------     ------     ------    ------
1995
  and prior        $  854     $  520   $  185     $  125     $   18    $   6
1996                  781        433      265         70          8        5
1997                1,844        998      356        318        132       40
1998                2,756        712    1,003        508        464       69
1999                2,922        167      642      1,342        394      377
                   ------     ------   ------     ------     ------    ------
                   $9,157     $2,830   $2,451     $2,363     $1,016    $ 497
                   ======     ======   ======     ======     ======    ======

    The  following  table  summarizes  the  estimated  net  book  value at lease
termination  for all leased assets  recorded at September 30, 1999. The table is
presented  by  year  of  lease  commencement  and by  year  of  projected  lease
termination (in millions):
                                     Projected year of lease termination
                              -----------------------------------------------
                 Net book
                 value at
Year lease          lease
commenced     termination         00       01         02         03       04+
----------    -----------     ------   ------     ------     ------    ------
1995
  and prior        $   37     $   30   $    2     $    5     $    -    $   -
1996                   84         43       39          2          -        -
1997                  225        149       44         31          1        -
1998                  437        118      171         70         75        3
1999                  465         51      101        210         67       36
                   ------     ------   ------     ------     ------    ------
                   $1,248     $  391   $  357     $  318     $  143    $  39
                   ======     ======   ======     ======     ======    ======

LIQUIDITY

NOTE 6
FUTURE CONTRACTUAL CASH FLOWS

Presented  below is a summary  of future  noncancelable  lease  rentals on owned
equipment  and  future  technology  services  revenue  including   noncancelable
continuity contracts (collectively, "cash in-flows").

    The summary  presents  expected  cash  in-flows due in  accordance  with the
contractual terms in existence as of September 30, 1999.
<TABLE>
<CAPTION>

                                                     YEARS ENDING SEPTEMBER 30,
                                      ---------------------------------------------------
                                          00       01       02       03       04+   Total
                                      ------   ------   ------   ------   -------  ------
<S>                                  <C>      <C>      <C>      <C>      <C>      <C>
Expected future cash in-flows:
    Operating leases-leasing ......   $1,322   $  803   $  362   $   96   $   23   $2,606
    Operating leases-ventures .....      129      109       67       11       --      316
    Notes receivable-ventures .....      130      153      107       13       --      403
    Direct financing and sales-type
      leases-leasing ..............      989      652      317      118       81    2,157
    Direct financing and sales-type
      leases-ventures .............        3        2       --       --       --        5
    Technology services ...........      483      353      232      131       45    1,244
                                      ------   ------   ------   ------   ------   ------
      Total .......................   $3,056   $2,072   $1,085   $  369   $  149   $6,731
                                      ======   ======   ======   ======   ======   ======
</TABLE>
                                      -43-
<PAGE>
FINANCING

NOTE 7
INTEREST-BEARING LIABILITIES

Interest-bearing liabilities include the following:
(IN MILLIONS)
<TABLE>
<CAPTION>
                                               1999                                     1998
                              ------------------------------------   ------------------------------------
                                 At September 30        Average        At September 30        Average
                              Balance      Rate   Balance     Rate   Balance     Rate   Balance      Rate
                              -------     -----   -------    -----   -------    -----   -------     -----
<S>                          <C>         <C>     <C>        <C>     <C>        <C>     <C>         <C>
Notes payable:
    Credit lines and loan
    participation contracts    $  369     4.19%    $  593    5.04%    $  774    5.39%    $  541     6.20%
    Commercial paper              451     5.42%       586    5.11%       347    5.21%       606     5.72%
Term notes                        550     5.25%       550    5.52%       550    5.52%       526     6.41%
Senior notes                    3,686     6.45%     3,155    6.59%     2,768    6.47%     2,576     6.76%
Discounted lease rentals          515     6.60%       576    6.76%       596    7.29%       676     7.32%
                               ------     -----    ------    -----    ------    -----    ------     -----
                               $5,571     6.11%    $5,460    6.17%    $5,035    6.21%    $4,925     6.62%
                               ======     =====    ======    =====    ======    =====    ======     =====
</TABLE>

The changes in  financing  activities  for the years ended  September 30 were as
follows (notes payable changes are shown net):
(IN MILLIONS)
<TABLE>
<CAPTION>

                                                  1999                                                      1998
                         -------------------------------------------------------     -----------------------------------------------
                         Outstanding              Maturities                         Outstanding            Maturities
                           beginning                     and         Outstanding       beginning                   and   Outstanding
                             of year  Issuances  repurchases  Other  end of year         of year Issuances repurchases   end of year
                         -----------  ---------  -----------  -----  -----------      ---------- --------- -----------   -----------
<S>                     <C>          <C>        <C>          <C>         <C>           <C>       <C>        <C>            <C>
Notes payable:
  Credit lines and
  loan participation
  contracts ...........      $  774      $   --      $  (405) $  --      $  369        $  505    $  269     $    --        $  774
  Commercial paper ....         347         104           --     --         451            519        --       (172)          347
Term notes ............         550          --           --     --         550            497       100        (47)          550
Senior notes ..........       2,768       1,842         (924)    --       3,686          2,421       917       (570)        2,768
Discounted
  lease rentals .......         596         341         (322)  (100)        515            742       279       (425)          596
                             ------      ------      -------  -----      ------         ------    ------    -------        ------
                             $5,035      $2,287      $(1,651) $(100)     $5,571         $4,684    $1,565    $(1,214)       $5,035
                             ======      ======      =======  =====      ======         ======    ======    =======        ======
</TABLE>
    The annual maturities of all  interest-bearing  liabilities at September 30,
1999 are shown in the table at right:

(IN MILLIONS)
YEARS ENDING SEPTEMBER 30,

                       00     01       02     03   04+    Total
                   ------   ----   ------   ----  ----   ------
Notes payable:
  Credit lines
   and loan
   participation
   contracts       $  369   $  -   $    -   $  -  $  -   $  369
  Commercial
   paper              451      -        -      -     -      451
Term notes            550      -        -      -     -      550
Senior notes          851    857    1,435    268   275    3,686
Discounted
  lease rentals       303    139       51     19     3      515
                   ------   ----   ------   ----  ----   ------
                   $2,524   $996   $1,486   $287  $278   $5,571
                   ======   ====   ======   ====  ====   ======

                                      -44-
<PAGE>
NOTES PAYABLE:  The company had the following  unsecured bank lines available in
the United States and foreign countries at September 30:

(IN MILLIONS)

                                           99           98
                                       ------       ------
Total credit lines:
  Committed                            $1,312       $1,253
  Uncommitted                             289          393
                                       ------       ------
                                       $1,601       $1,646
                                       ======       ======
Utilized at September 30:
  Committed                            $  756       $  644
  Uncommitted                              44          149
    Total credit lines                    800          793
  Loan participation contracts             20          328
                                       ------       ------
    Total notes payable                $  820       $1,121
                                       ======       ======
Credit lines available at
  September 30                         $  801       $  853
                                       ======       ======
Maximum amount outstanding
  at any month end                     $1,441       $1,304
                                       ======       ======


COMMITTED  LINES:  The  company's  committed  lines have been  established  with
twenty-nine  banks,  six of which are U.S.  banks.  A majority  of the banks are
rated AA or better by rating  agencies.  At September 30, 1999,  the company had
committed domestic and foreign unsecured lines of credit as follows:

Facility                      Number of banks       Expiration date
Multi-Option Facilities             11
    $275 million facility                            December, 2002
    $275 million facility                            December, 1999
Global Facilities                   17
    $275 million facility                            December, 2002
    $275 million facility                            December, 1999
Other credit agreements:
    $ 75 million - domestic
       and foreign                   1               April, 2000
    $137 million - foreign           5               Various

    There  are no  compensating  balance  requirements  on any of the  committed
lines. At September 30, 1999, the company had $756 million outstanding under its
committed  lines,  including $451 million  supporting  the company's  commercial
paper program.

    The multi-option revolving credit agreements and the global revolving credit
agreements (collectively, the "Facilities") permit the company to borrow in U.S.
dollars or in other currencies,  on a revolving credit basis.  Interest rates on
debt  outstanding  under  the  Facilities  are  negotiated  at the  time  of the
borrowings based either on "bid rates" from the participating  banks, LIBOR plus
twenty basis points or, for the two $275 million  facilities  expiring December,
1999,  twenty-two  basis points,  or at the banks' then current base rates.  The
Facilities  call for the  company to pay a weighted  average  annual fee of nine
basis  points  per annum on the total  committed  amount.  The two $275  million
facilities  are  renewable  annually  and should the banks  decide not to renew,
include  provisions to convert any amounts then outstanding to term loans with a
final maturity of December, 2000.

UNCOMMITTED LINES AND LOAN PARTICIPATION CONTRACTS: In addition to the committed
lines, the company maintains various domestic and international  lines of credit
for  short-term  debt  with  banks,  including  approximately  $289  million  of
uncommitted lines of credit,  under which the company can borrow on an unsecured
basis on such terms as the company and banks may mutually agree. The majority of
these  arrangements  do not have  maturity  dates,  and can be  withdrawn at the
banks' option. There are no fees or compensating balances associated with either
the uncommitted lines or the loan participation contracts.

COMMERCIAL  PAPER:  At  September  30,  1999,  the company  had $900  million of
commercial  paper facilities (of which $451 million was outstanding at September
30,  1999) all of which are  supported  by its  committed  lines of credit.  The
facilities were rated D-2 by Duff & Phelps,  P-2 by Moodys and A-2 by Standard &
Poors.

TERM NOTES:  At September  30, 1999,  the company had $550 million of receivable
backed  commercial paper. This floating rate term note is due during fiscal year
2000.


SENIOR NOTES: Senior notes include the following at September 30:

(IN MILLIONS)
<TABLE>
                                               99         98
                                           ------     ------
<S>                                        <C>        <C>
Medium term notes (5.75% to 9.95%)         $1,461     $1,200
7.750%  Senior Notes due 1999                   -         89
6.500%  Senior Notes due 1999                   -        250
6.500%  Senior Notes due 2000                 200        200
5.750%  Senior Notes due 2001                 250        250
6.375%  Senior Notes due 2002                 250        250
6.000%  Senior Notes due 2002                 350          -
5.950%  Senior Notes due 2002                 350          -
7.250%  Senior notes due 2002<F1>             300          -
6.125%  Senior notes due 2003<F2>             250        250
6.130%  Senior Notes due 2006                 275        279
                                           ------     ------
    Total senior notes                     $3,686     $2,768
                                           ======     ======
<FN>
<F1> The company had interest  rate swap  agreements  at September 30, 1999 that
effectively  converted  $100  million of 7.250%  Senior  Notes to floating  rate
obligations  with an  effective  interest  rate of 6.190%.

<F2> The company had interest  rate swap  agreements  at September 30, 1999 that
effectively  converted  $200  million of 6.125%  Senior  Notes to floating  rate
obligations with an effective interest rate of 5.152%.

The average remaining terms of these swap agreements was greater than 2 years at
September 30, 1999.
</FN>
</TABLE>
                                      -45-
<PAGE>

    On October 9, 1998 the company  filed a  registration  statement on Form S-3
with the Securities and Exchange  Commission (the "SEC") for a shelf offering of
up to $1.5 billion of senior debt  securities  on terms to be set at the time of
each sale (the "1998 Shelf").  On January 19, 1999, the company  designated $600
million in Senior Debt Securities as "Senior  Medium-Term Notes, Series H" to be
issued  under the 1998  Shelf,  of which $182  million  remained  available  for
issuance as of September 30, 1999.  Pursuant to the 1998 Shelf, the company,  on
January 26, 1999, issued $350 million of 6.0% Senior Notes due January 30, 2002,
and,  on April 21,  1999,  $350  million of 5.95% Notes due April 30,  2002.  On
August  26,  1999,  the  company  redesignated  $100  million  of the  Series  H
Medium-Term  Notes, which together with the remaining $200 million in securities
previously unallocated under the shelf registration,  were issued by the company
as $300 million of 7.25% Notes due September 1, 2002.

    On September 24, 1999 the company filed a registration statement on Form S-3
with the SEC for a shelf offering of up to $1.5 billion  senior debt  securities
on terms to be set at the time of each sale ("1999 Shelf").  As of September 30,
1999, the entire 1999 Shelf remains available for sale.

    There are no sinking fund requirements  associated with any of the company's
senior notes.

DISCOUNTED LEASE RENTALS:  The company utilizes its lease rentals receivable and
underlying  equipment  in leasing  transactions  as  collateral  to borrow  from
financial institutions at fixed rates on a nonrecourse basis. In return for this
secured interest,  the company receives a discounted cash payment.  In the event
of a default  by a lessee,  the  financial  institution  has a first lien on the
underlying  leased  equipment,  with no further  recourse  against the  company.
Proceeds from  discounting are recorded on the balance sheet as discounted lease
rentals;  as lessees make  payments to  financial  institutions,  lease  revenue
(i.e.,  interest  income on direct  financing and  sales-type  leases and rental
revenue on operating leases) and interest expense are recorded. Discounted lease
rentals are reduced by the interest method.

    Future minimum lease payments and interest  expense on leases that have been
discounted as of September 30, 1999 are as follows (in millions):

YEARS ENDING SEPTEMBER 30,

             Rentals to be
               received by      Discounted
                 financial           lease         Interest
              institutions         rentals          expense
             -------------      ----------         --------
2000                  $331            $303             $ 28
2001                   150             139               11
2002                    54              51                3
2003                    20              19                1
2004                     3               3                -
                      ----            ----             ----
                      $558            $515             $ 43
                      ====            ====             ====

    Interest expense on discounted  lease rentals was $38 million,  $49 million,
and $55 million in fiscal 1999, 1998 and 1997, respectively.

INTEREST RATE SWAP AGREEMENTS AND OTHER DERIVATIVE  FINANCIAL  INSTRUMENTS:  The
company  is a party to  interest  rate and  cross-currency  interest  rate  swap
agreements and other  financial  instruments in order to limit its exposure to a
loss  resulting  from  adverse  fluctuations  in foreign  currency  exchange and
interest rates. Interest rate swap contracts generally represent the contractual
exchange  of  fixed  and   floating   rate   payments  of  a  single   currency.
Cross-currency  interest rate swap contracts  generally  involve the exchange of
payments  which are  based on the  interest  reference  rates  available  at the
inception of the contract on two different  currency  notional balances that are
exchanged.  The principal  balances are re-exchanged at an agreed upon rate at a
specified  future  date.  Credit  and market  risk  exist with  respect to these
instruments.

    The  following  table  presents  the  contract  or notional  (face)  amounts
outstanding  and the  fair  value  of the  contracts  based  generally  on their
termination values at September 30:

(IN MILLIONS)

                                      1999                    1998
                       -------------------    --------------------
                       Notional       Fair    Notional        Fair
                         amount      value      amount       value
                       --------      -----    --------       -----
Interest rate swap
  agreements               $820        $ 5        $460         $ 2
Cross-currency interest
  rate swap agreements       96         (6)         33           4
Forwards and futures         86          6          65          (3)

    The impact of these  contracts  on interest  expense for fiscal  years 1999,
1998 and 1997 was immaterial.  The average  notional  amount  outstanding of the
floating rate to fixed rate contracts in fiscal 1999,  including  those noted in
the discussions  above, was $234 million,  with an average pay rate of 5.44% and
an average receive rate of 5.18%. The average notional amount outstanding of the
fixed rate to floating  rate  contracts in fiscal 1999 was $29 million,  with an
average pay rate of 5.265% and an average receive rate of 6.384%. The company is
exposed to credit loss in the event of  non-performance  by the other parties to
the interest rate swap agreements. Although contract or notional amounts provide
one  measure  of the volume of these  transactions,  they do not  represent  the
amount of the company's  exposure to credit risk. The amounts  subject to credit
risk  (arising  from the possible  inability of the  counterparties  to meet the
terms of their contracts) are generally limited to the amounts, if any, by which
the counterparties'  obligation(s)  exceed the obligation(s) of the company. The
company  controls  credit risk through credit  approvals,  limits and monitoring
procedures.

                                      -46-
<PAGE>
OTHER FINANCIAL INFORMATION

NOTE 8

RECEIVABLES

Receivables include the following as of September 30:

(IN MILLIONS)

                                           99           98
                                         ----         ----
Notes                                    $354         $ 75
Accounts                                  297          215
Income taxes                                6            6
Other                                      82           68
Total receivables                         739          364
Allowance for credit losses               (43)         (24)
                                         ----         ----
Total                                    $696         $340
                                         ====         ====

NOTES: The company provides loans to early-stage high technology  privately held
companies in networking, communications, software and Internet based industries.
The company's loans are generally  structured as equipment loans or subordinated
loans.  Subordinated loans totaled $250 million and $33 million at September 30,
1999 and  1998,  respectively.  Interest  income  on notes  is  recorded  in the
statement  of earnings as direct  financing  income for  equipment  loans and as
other revenue for subordinated loans.

    The amount of each loan varies,  but generally does not exceed $5.0 million.
The loans bear fixed interest rates with coupons  currently ranging from 8.0% to
13% per annum. In addition,  loan processing fees typically ranging from 1.5% to
2% of the principal  amount of the loan may be paid at loan closing.  As part of
the loan  transaction,  the  company  receives  warrants  to  purchase an equity
interest in the borrower at a nominal exercise price. The amount of the warrants
received and the exercise  price varies based upon  borrower-specific  valuation
factors.

Loans provide current income from interest and fees.

    Contractual  maturities of total notes receivables as of September 30, 1999,
were as follows:  2000- $137 million;  2001- $155  million;  2002- $108 million;
2003 and thereafter- $16 million.  Actual cash flows will vary from  contractual
maturities due to prepayments and charge-offs.

ALLOWANCE:  The allowance for credit loss 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,  1999,
including   estimated   losses  on  future   noncancelable   lease  rentals  and
subscription  fees,  net of estimated  recoveries  from  remarketing  of related
leased equipment.  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.

NOTE 9
INCOME TAXES

The geographical sources of earnings before income taxes were as follows:

(IN MILLIONS)

                              99         98         97
                            ----       ----       ----
United States               $ 12       $183       $163
Outside United States         63         57         48
                            ----       ----       ----
                            $ 75       $240       $211
                            ====       ====       ====

    Cumulative  unremitted  earnings  of foreign  operations  amounting  to $179
million after  foreign taxes at September 30, 1999,  were expected by management
to be reinvested.  Accordingly,  no provision has been made for additional  U.S.
taxes which would be payable if such  earnings were to be remitted to the parent
company as dividends.  The amount of U.S.  taxes, if any, are  impracticable  to
determine.

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

(IN MILLIONS)

                                99        98        97
                              ----      ----      ----
Current:
  U.S. Federal                $ (3)     $ 28      $ 24
  U.S. state and local           3         2         7
  Outside United States         13        36         8
                              ----      ----      ----
                                13        66        39
                              ----      ----      ----
Deferred:
  U.S. Federal                   7        33        35
  U.S. state and local          (2)        9         2
  Outside United States          9       (21)        4
                                14        21        41
                              ----      ----      ----
    Total tax provision       $ 27      $ 87      $ 80
                              ====      ====      ====

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

                                99         98         97
                              ----       ----       ----
U.S. Federal income
  tax rate                    35.0%      35.0%      35.0%
Increase (reduction)
  resulting from:
   State income taxes, net
     of U.S. Federal tax
     benefit                    .7        3.0        3.0
   Foreign income tax rate
     differential              2.8        2.0         .8
   Tax effect of foreign
     losses utilized          (2.2)      (4.0)      (2.9)
   Other, net                  (.3)         -        2.1
                              ----       ----       ----
                              36.0%      36.0%      38.0%
                              ====       ====       ====

                                      -47-
<PAGE>
Deferred  tax assets and  liabilities  at  September  30,  1999 and 1998 were as
follows:

(IN MILLIONS)

                                         99                   98
                                     ------               ------
Deferred tax assets (liabilities):
  Equity transactions                $  260               $  264
  Foreign loss carryforwards             13                   12
  U.S. net operating loss
    carryforwards                        68                   61
  AMT credit carryforwards              120                  123
  Deferred income                        44                   35
  Deferred expenses                     (20)                   5
  Other, net                            101                   82
                                     ------               ------
  Lease accounting                    (839)                (873)
  Other comprehensive income           (60)                    -
  Foreign                              (26)                 (16)
                                     ------               ------
  Gross deferred tax liabilities      (339)                (307)
  Less: valuation allowance            (28)                 (12)
                                     ------               ------
Net deferred tax liabilities         $(367)               $(319)
                                     ======               ======

    For financial reporting purposes,  the company has approximately $28 million
of foreign net operating  loss  carryforwards,  most of which have no expiration
date. The company has recognized a valuation  allowance of $13 million to offset
this deferred tax asset.  During fiscal 1999, changes in the valuation allowance
included a decrease of $2 million  from  utilizing  foreign net  operating  loss
carryforwards, increases totalling $3 million from foreign exchange rate and tax
rate changes, and an increase of $15 million relating to Prism's  pre-acquisiton
net  operating  losses.  These losses are subject to certain  limitations  under
Section 382 of the Internal Revenue Code of 1986 as amended.

    At September 30, 1999, the company has available for U.S. Federal income tax
purposes, the following carryforwards (in millions):

Year scheduled to expire        Net operating loss
------------------------        ------------------
          2004                        $    2
          2005                             5
          2006                             3
          2007                            82
          2009                             3
          2012                            27
          2018                            54
                                      ------
                                      $  176
                                      ======

    For U.S.  Federal income tax purposes,  the company has  approximately  $120
million of  alternative  minimum tax ("AMT") credit  carryforwards  available to
reduce regular taxes in future years.  AMT credit  carryforwards  do not have an
expiration date.

    All years prior to fiscal year 1989 are closed to further  assessment by the
Internal Revenue Service (the "Service") due to the expiration of the Statute of
Limitations.

    The company and the Service have tentatively reached a settlement  agreement
for fiscal years  1989-1995.  The Service is currently  completing their Revenue
Agent's  Report for these  years.  It is  anticipated  that the company  will be
assessed  approximately $8 million of tax plus interest thereon.  As a result of
the above  mentioned  settlement,  amended federal income tax returns for fiscal
years 1996, 1997, and 1998 will be filed requesting  refunds of approximately $9
million.  Additionally,  the company has requested  interest  netting which will
substantially reduce any cash payment of tax and interest.

     The Service is  expected to commence a routine  income tax audit for fiscal
years 1996,  1997,  and 1998 during fiscal year 2000. The company also undergoes
audits by foreign, state and local tax jurisdictions.  As of September 30, 1999,
no material assessments have been made by these tax authorities.

NOTE 10
EQUITY SECURITIES

The  company  invests in equity  instruments  of  privately  held  companies  in
networking,  communications,  software, Internet-based and other industries. For
equity instruments, 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 1999 and 1998,  certain of
these   investments  in  privately  held  companies  became   available-for-sale
securities when the investees completed initial public offerings.

    Equity securities, which are included in Other Assets, include the following
as of September 30:

(IN MILLIONS)

                                       99       98
                                     ----     ----

Available-for-sale-securities:
  Cost                               $ 49      $45
  Unrealized gain                     152        -
  Market value                        201       45
Equity instruments (at cost
  less valuation adjustments)          51       35
                                     ----     ----
  Carrying value                     $252      $80
                                     ====     ====

                                      -48-
<PAGE>
    Realized gains or losses are recorded upon disposition of investments  based
upon the difference between the proceeds and the cost basis determined using the
specific  identification method. All other changes in the valuation of portfolio
investments   are  included  as  changes  in  the  unrealized   appreciation  or
depreciation  of  investments  in  the  accumulated  comprehensive  income.  Net
realized  gains from the sales of equity  investments  were $1 million in fiscal
1999 and 1998 and $10  million in fiscal  1997.  Gross  realized  gains from the
sales of equity  securities were $9 million in fiscal 1999, $3 million in fiscal
1998, and $15 million in fiscal 1997.

    The company  records the proceeds  received from the sale or  liquidation of
warrants  received in conjunction  with its lease or other  financings as income
when received.  These proceeds were $75 million,  $14 million and $13 million in
fiscal 1999, 1998 and 1997, respectively.

NOTE 11
PREFERRED STOCK

There are 100,000,000  authorized shares of preferred stock - $.10 par value, of
which none were  outstanding  at  September  30,  1999.  The board of  directors
establishes  and  designates  the  series and fixes the number of shares and the
relative rights, preferences and limitations of the respective series. Dividends
paid on preferred  stock were $2 million and $8 million,  respectively in fiscal
1998, and 1997.

    On November 4, 1997,  the board of  directors  of the company  adopted a new
shareholder  rights  plan  (the "New  Rights  Plan") to  replace  the  company's
existing  plan,  which expired on November 17, 1997.  Under the New Rights Plan,
shareholders of record on November 17, 1997 received a dividend  distribution of
one preferred stock purchase right for each share of the company's  common stock
then held.  Like the  shareholder  rights plan it replaced,  the New Rights Plan
continues the company's policy of ensuring fair value to all shareholders in the
event of an unsolicited takeover offer for the company. The New Rights Plan will
expire on November 17, 2007. The New Rights Plan is incorporated by reference in
the company's Form 10-K for fiscal 1999.

8.75% CUMULATIVE  PREFERRED STOCK: On September 19, 1997, the company  announced
the  redemption,  effective  October  20,  1997,  of all  shares of the Series A
Preferred  Stock  (2,738,200  shares) at the redemption  price per share of $25,
plus accrued and unpaid  dividends.  On July 13, 1998, the company announced the
redemption,  effective  July 13,  1998,  of all shares of the Series B Preferred
Stock (824,000  shares) at the redemption  price of $25, plus accrued and unpaid
dividends.

NOTE 12
COMMON STOCK

All  references in the financial  statements and notes to common share data have
been adjusted to reflect the two-for-one stock split distributed in June, 1998.

    On February 2, 1998, the company  announced that 106 senior  managers of the
company  purchased  over six million  shares of the  company's  common stock for
approximately  $109 million.  Under the voluntary  program,  the senior managers
took out full recourse,  personal loans to purchase the shares.  The company has
guaranteed  repayment of the loans in the event of default. The purchased shares
represented over 4% of the then current total shares outstanding.

    The share amounts for basic and diluted earnings per share  calculations was
as follows (in thousands):
                                             YEARS ENDED SEPTEMBER 30,
                                            99                98             97
                                      --------           -------        --------
Average shares issued                  222,454           220,910        218,907
Average shares held in treasury       (70,376)           (69,663)       (71,859)
                                      --------           -------       --------
Basic shares outstanding               152,078           151,247        147,048
Stock options                            9,709            11,523         10,541
                                      --------           -------       --------
Diluted shares outstanding             161,787           162,770        157,589
                                      ========           =======       ========

    There are no  adjustments to net earnings to common  stockholders  for basic
and diluted earnings per share calculations for any of the years ended September
30, 1999, 1998 and 1997.

    During  fiscal 1999 and 1998,  the company  entered into a series of forward
purchase agreements on its common stock. These agreements can be settled, at the
option of the  company,  by paying  cash for the  forward  purchase  amount  and
receiving the underlying  shares of common stock, or on a net basis in shares of
the company's stock.
                                      -49-
<PAGE>

    Information on these forward agreements is as follows:

(IN MILLIONS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>

                                                       1999                                  1998
                                         ------------------------------     ---------------------------------
                                                                Average                               Average
                                                          forward price                         forward price
                                         Amount   Shares      per share     Amount     Shares       per share
                                         ------   ------  -------------     ------     ------   -------------
<S>                                        <C>         <C>       <C>           <C>          <C>       <C>
Agreements in place at September 30        $ 61        3         $20.41        $16          1         $ 13.74
Settlements during fiscal year               59        4          16.26         33          4            9.31

</TABLE>

    In June 1997, FASB issued  Statement of Financial  Accounting  Standards No.
130-   Reporting   Comprehensive   Income,   which  requires   presentation   of
comprehensive  earnings (net earnings (loss) plus all changes in net assets from
non-owner sources) and its components in the financial statements.

    Components of other comprehensive earnings (loss) consists of the following:

(IN MILLIONS)

                                 99        98        97
                              -----     -----     -----
Foreign currency
  translation adjustments     $ (21)    $   7     $ (25)
Change in net unrealized
  gains and losses on
  marketable securities         152         -         -
Income tax                      (60)        -         -
Other comprehensive
  income/(loss)                  71         7       (25)
Net earnings                     48       153       131
                              -----     -----     -----
Total comprehensive income    $ 119     $ 160     $ 106
                              =====     =====     =====


NOTE 13
EMPLOYEE BENEFIT PLANS

In fiscal 1988,  the company  established  the  Comdisco,  Inc.  Employee  Stock
Ownership Trust (the "Trust").  The Trust borrowed $20 million (the "ESOP Debt")
to purchase  4.6 million  shares of common stock held in treasury by the company
at a market  price at the date of purchase of $4.42 per share.  The  outstanding
balance of the ESOP Debt was recorded in term notes payable in the  consolidated
balance  sheet and a like  amount of  deferred  compensation  was  recorded as a
reduction of stockholders' equity.

    The company has a profit  sharing  plan which,  together  with the  Employee
Stock Ownership Plan (the "Plans"), covers substantially all domestic employees.
Company  contributions  to the  Plans are based on a  percentage  of  employees'
compensation,  as defined.  Benefits are  accumulated on an individual  employee
basis.

    The company's stock option plans provide for the granting of incentive stock
options and/or  nonqualified  options to employees and agents to purchase shares
of common stock.

    Additionally, under the 1989 Non-Employee Directors' Stock Option Plan, each
October 1, each individual who is a Non-Employee Director during the fiscal year
shall  automatically  be  granted an option  for 9,450  shares of the  company's
common stock at the then fair market value.

    The  company  applies APB  Opinion  No. 25 and  related  Interpretations  in
accounting for its plans. Accordingly,  no compensation cost has been recognized
for its fixed stock option plans. Had compensation  cost for the company's stock
option  plans  been  determined  consistent  with FASB  Statement  of  Financial
Accounting  Standards No. 123 ("FAS 123"), the company's net earnings  available
to common stockholders and earnings per common and common equivalent share would
have been reduced to the pro forma amounts indicated below:

(IN MILLIONS EXCEPT PER SHARE DATA)

                                       99       98
                                    -----    -----
Net earnings
 -to common stockholders
 -As reported                       $  48    $ 151
  Pro forma                            42      147
Earnings per common share:
  As reported-basic                 $ .32    $ .99
  Pro forma-basic                     .27      .97
  As reported-diluted                 .30      .93
  Pro forma-diluted                   .26      .90


    Under the stock option plans,  the exercise  price of each option equals the
market price of the company's common stock on the date of grant. For purposes of
calculating  the  compensation  cost  consistent with FAS 123, the fair value of
each option  grant is  estimated  on the date of grant  using the  Black-Scholes
option-pricing  model with the following  weighted-average  assumptions used for
grants in fiscal  1999 and 1998,  respectively:  dividend  yield of 1.0% for all
years;  expected  volatility  of 40 percent and 32 percent;  risk free  interest
rates of 5.26% and 6.07%; and expected lives of five years.

                                      -50-
<PAGE>

    Additional information on shares subject to options is as follows:

(IN THOUSANDS EXCEPT WEIGHTED-
AVERAGE EXERCISE PRICE)
<TABLE>
<CAPTION>
                                                     99                        98                         97
                                          ---------------------      --------------------       ---------------------
                                                      Weighted-                 Weighted-                   Weighted-
                                                        average                   average                     average
                                            Number     exercise         Number   exercise          Number    exercise
                                          of shares       price      of shares      price       of shares       price
                                          ---------  ----------      ---------  ---------       ---------   ---------
<S>                                      <C>        <C>             <C>        <C>             <C>         <C>
Outstanding at beginning of year .....      17,983    $     7          19,185    $     6          19,096    $     5
Granted ..............................       5,001         15           3,274         13           5,282          9
Exercised ............................      (5,198)         7          (3,953)         5          (4,288)         4
Forfeited ............................        (809)         9            (523)         7            (905)         6
                                            ------    -------          ------    -------          ------    -------
Outstanding at the end of year .......      16,977    $    10          17,983    $     7          19,185    $     6
                                            ======    =======          ======    =======          ======    =======
Options exercisable at year-end ......      11,930    $     8          12,858    $     6          12,578    $     5
                                            ======    =======          ======    =======          ======    =======
Weighted-average fair value of options
    granted during the year ..........      $ 5.46                     $ 4.72                     $ 2.89
                                            ======                     ======                     ======
</TABLE>

    The following table summarizes  information about stock options  outstanding
at September 30, 1999 (number of shares in thousands):
<TABLE>
<CAPTION>
                                             OPTIONS OUTSTANDING                   OPTIONS EXERCISABLE
                               ---------------------------------------------    -------------------------
                                                     Weighted-     Weighted-                    Weighted-
                                                       average       average                      average
                                  Number             remaining      exercise         Number      exercise
                               of shares      contractual life         price      of shares         price
                               ---------      ----------------     ---------      ---------     ---------
<S>                           <C>            <C>                  <C>            <C>           <C>
Range of exercise prices
$0 to 6                            4,960             4.0 years          $  4          4,753          $  6
$6 to 10                           5,381             6.5 years             8          5,097             8
$10 to 16                          4,554             8.0 years            14          1,424            13
$16 to 30                          2,082             8.0 years            18            656            17
                                  ------             ---------          ----         ------          ----
                                  16,977             6.5 years          $ 10         11,930          $  8
                                  ======             =========          ====         ======          ====
</TABLE>

NOTE 14
FAIR VALUE OF FINANCIAL INSTRUMENTS

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

                                                                 99                    98
                                                        --------------------  -------------------
                                                        Carrying              Carrying
                                                          amount  Fair value    amount  Fair value
                                                        --------  ----------  --------  ----------
<S>                                                    <C>       <C>         <C>       <C>
Assets:
Cash and cash equivalents ...........................   $   387   $   387    $    63    $    63
Equity securities ...................................       252       252         80         80
Notes receivable including noncurrent portion .......       354       354         75         75
Liabilities:
Notes payable and commercial paper ..................       820       820      1,121      1,121
Term notes, senior notes and discounted lease rentals     4,751     4,681      3,914      3,729
Off-balance sheet financial instruments:
Interest rate swap agreements .......................        --         5         --          2
Cross-currency interest rate swap agreements ........        --        (6)        --          4
Forwards and futures ................................        --         6         --         (3)
</TABLE>

                                      -51-
<PAGE>

Fair values were determined as follows:

    The  carrying  amounts  of cash  and cash  equivalents,  notes  payable  and
commercial paper  approximates fair value because of the short-term  maturity of
these instruments.

    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.

    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.

    The fair value of term notes,  senior notes and discounted lease rentals was
estimated  based  generally  on quoted  market  prices  for the same or  similar
instruments or on current rates offered the company for similar debt of the same
maturity.

    Off-balance  sheet financial  instruments were estimated by obtaining quotes
from brokers.

NOTE 15
QUARTERLY FINANCIAL DATA (UNAUDITED)

Summarized  quarterly  financial  data for the fiscal years ended  September 30,
1999 and 1998, is as follows (in millions except for per share amounts):

<TABLE>
<CAPTION>
                                                                         QUARTER ENDED
                                               ------------------------------------------------------------------
                                                December 31,        March 31,         June 30,     September 30,
                                               -------------    ---------------    --------------  --------------
                                                  98      97       99        98        99      98      99      98
                                               -----   -----    -----     -----    ------   -----   -----   -----
<S>                                           <C>     <C>      <C>       <C>      <C>      <C>     <C>     <C>
Total revenue                                  $ 921   $ 744    $ 952     $ 777    $1,302   $ 817   $ 984   $ 904
Net earnings (loss) to common stockholders     $  38   $  34    $ (56)    $  37    $   36   $  40   $  30   $  40
Net earnings (loss) per common share-diluted   $ .24   $ .21    $(.37)    $ .23    $  .22   $ .24   $ .19   $ .25
</TABLE>

    In  accordance  with  Statement  of  Financial   Accounting   Standards  No.
128-Earnings  Per Share,  no potential  common  shares (the assumed  exercise of
stock  options) are included in the  computation of any diluted per share amount
when a loss exists.

NOTE 16
INDUSTRY SEGMENT AND OPERATIONS BY GEOGRAPHIC AREAS

The company adopted SFAS No. 131,  "Disclosures  about Segments of an Enterprise
and  Related  Information"  in fiscal  1999 which  changes  the way the  company
reports information about its operating  segments.  The information for 1998 and
1997 has been restated from the prior year's presentation in order to conform to
the 1999 presentation.

    The company's  operations are conducted  through its principal office in the
Chicago area and approximately one hundred offices in North America,  Europe and
the Pacific Rim.  Coordination of the business units is accomplished through the
Office of the President,  which is responsible  for overall  corporate  control,
coordination  and  strategic  planning,   regional  reporting   structures  that
coordinate  marketing and support efforts across business units, and through the
home office with centralized budgeting and shared services. In Europe, the local
subsidiaries report directly to one European home office,  which in turn reports
to the Office of the President.

LEASING: This segment provides leasing, asset management,  equipment remarketing
and equipment  refurbishment  services.  The principal  markets for this segment
include  North  America,  Europe and the Pacific Rim.  Customers  include  major
multi-national corporations,  independent and national or state-owned companies,
"Fortune  500"  corporations  or  companies of a similar size as well as smaller
organizations.

                                      -53-
<PAGE>
TECHNOLOGY  SERVICES:  This segment  consists of four  business  units--Business
Continuity, Professional Services, Network Management and IT CAP Solutions--that
provide  platform  based  hotsite  recovery,  mobile,  workarea  and trade floor
recovery,  continuity and recovery  planning  services  (services that emphasize
data  availability  across  data  centers,  networks  and work  areas),  network
assessment,  design,  implementation  and professional  management  services and
services  designed to help  companies  plan,  manage,  and  accomplish  their IT
initiatives  through  increased  control  and  predictability  of  spending  and
infrastructure  to a broad range of industries.  The principal  markets for this
segment include all major  manufacturing and financial services regions of North
America and Europe.

VENTURES:  Ventures is a leading provider of venture debt and venture leasing to
emerging technology companies. The existing venture debt and equity portfolio is
diversified across many sectors, including communications, networking, Internet,
life sciences,  computer hardware & semiconductors  and computer  services.  The
principal  markets for this segment are the high-tech  regions in California and
Massachusetts.

PRISM  COMMUNICATION  SERVICES:  The company  finalized the acquisition of Prism
during the quarter  ended March 31, 1999.  Prism is building  out a  high-speed,
always-on  digital  network,  which will  provide  customers  with  leading-edge
connectivity.  Prism  markets its  services to  enterprise  customers to provide
employees with  high-speed  remote access to their Local Area Network to improve
employee  productivity  and reduce  operating  costs, and to consumer end users.
Prism's  services are provided over standard  copper  telephone  lines at speeds
significantly faster that the speed available through a 56.6 Kilobits per second
modem.  Prism  introduced its services in the New York City area in January 1999
and has subsequently expanded its build out plans to New Jersey and Canada.

    The  accounting  policies of the  reportable  segments are the same as those
described in Note 1 of Notes to Consolidated  Financial Statements.  The company
evaluates the  performance of its operating  segments  based on earnings  before
income  taxes.  Intersegment  sales are not  significant.  Summarized  financial
information  concerning  the  company's  reportable  segments  is  shown  in the
following table.

(IN MILLIONS)

                               Leasing  Services   Ventures   Prism   Total
                              --------  --------   --------   -----   -----
1999
Revenues ....................   $3,407    $  522   $  229   $    1    $4,159
Segment profit (loss) .......      (12)       52       71      (36)       75
Total assets ................    6,358       479      846      124     7,807
Capital expenditures ........    2,748       151      490       91     3,480
Depreciation and amortization    1,860        50       88        6     2,004

1998
Revenues ....................   $2,696    $  433   $  114   $  --     $3,243
Segment profit ..............      140        71       29      --        240
Total assets ................    6,403       379      281      --      7,063
Capital expenditures ........    2,920        87      173      --      3,180
Depreciation and amortization    1,711        84       60      --      1,855

1997
Revenues ....................   $2,370    $  354   $   95   $  --     $2,819
Segment profit ..............      128        58       25      --        211
Total assets ................    5,841       308      201      --      6,350
Capital expenditures ........    2,867        61      120      --      3,048
Depreciation and amortization    1,459        92       43      --      1,594


    The following  table  presents  revenue by geographic  location based on the
location of the company's local office:
(IN MILLIONS)

                                  99           98           97
                              ------       ------       ------
North America                 $3,254       $2,584       $2,249
Europe                           628          592          537
Pacific Rim                      277           67           33
                              ------       ------       ------
Total                         $4,159       $3,243       $2,819
                              ======       ======       ======

    The following  table presents  total assets by geographic  location based on
the location of the asset:

(IN MILLIONS)

                                 99           98           97
                             ------       ------       ------
North America                $6,272       $5,556       $5,334
Europe                        1,029        1,181          852
Pacific Rim                     506          326          164
                             ------       ------       ------
Total                        $7,807       $7,063       $6,350
                             ======       ======       ======

                                      -53-
<PAGE>

INDEPENDENT AUDITORS' REPORT

THE  STOCKHOLDERS  AND BOARD OF  DIRECTORS,  COMDISCO,  INC We have  audited the
accompanying  consolidated balance sheets of Comdisco,  Inc. and subsidiaries as
of  September  30, 1999 and 1998,  and the related  consolidated  statements  of
earnings,  stockholders'  equity,  and cash  flows  for each of the years in the
three-year  period  ended  September  30,  1999.  These  consolidated  financial
statements   are  the   responsibility   of  the   company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

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

    In our opinion,  the  consolidated  financial  statements  referred to above
present fairly, in all material  respects,  the financial  position of Comdisco,
Inc. and  subsidiaries  at September 30, 1999 and 1998, and the results of their
operations and their cash flows for each of the years in the  three-year  period
ended  September  30, 1999 in  conformity  with  generally  accepted  accounting
principles.


/s/ KPMG LLP

Chicago, Illinois
November 2, 1999

                                      -54-