<PAGE>

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


                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                             Washington D.C. 20594

                                   FORM 10-Q

               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934

                 For the Quarterly Period Ended June 30, 2001

                        Commission File Number 1-11011


                             THE FINOVA GROUP INC.
            (Exact Name of Registrant as Specified in Its Charter)

                Delaware                                      86-0695381
    (State or Other Jurisdiction of                        (I.R.S. Employer
     Incorporation or Organization)                       Identification No.)

       4800 North Scottsdale Road                             85251-7623
             Scottsdale, AZ                                   (Zip Code)
(Address of Principal Executive Offices)

       Registrant's Telephone Number, Including Area Code: 480-636-4800

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

                                 Yes  X  No__
                                     ---

                     APPLICABLE ONLY TO CORPORATE ISSUERS:
As of July 31, 2001, approximately 61,150,000 shares of Common Stock ($0.01 par
value) were outstanding.


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

<PAGE>

                             THE FINOVA GROUP INC.

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                     Page No.
                                                                                                     --------
<S>                                                                                                  <C>
Part I       Financial Information                                                                          1

     Item 1. Financial Statements                                                                           1
             Condensed Consolidated Balance Sheets                                                          1
             Condensed Statements of Consolidated Operations                                                2
             Condensed Statements of Consolidated Cash Flows                                                3
             Notes to Interim Condensed Consolidated Financial Information                                  4

     Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations         14

     Item 3. Quantitative and Qualitative Disclosure About Market Risk                                     22

Part II      Other Information                                                                             23

     Item 1. Legal Proceedings                                                                             23

     Item 6. Exhibits and Reports on Form 8-K.                                                             24

     Signatures                                                                                            25
</TABLE>
<PAGE>

                         PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.
-----------------------------

                             THE FINOVA GROUP INC.
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                            (Dollars in Thousands)
                                  (Unaudited)

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
                                                                             June 30,                December 31,
                                                                               2001                      2000
-----------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>                      <C>
ASSETS

Cash and cash equivalents                                                  $   2,750,669            $     699,228
Investment in financing transactions:
  Loans and other financing contracts                                          6,672,898                7,835,698
  Direct financing leases                                                        497,472                  557,471
  Operating leases                                                               477,583                  561,698
  Leveraged leases                                                               220,160                  803,581
  Financing contracts held for sale                                              690,996                  421,956
-----------------------------------------------------------------------------------------------------------------
                                                                               8,559,109               10,180,404
  Less reserve for credit losses                                                (686,650)                (578,750)
-----------------------------------------------------------------------------------------------------------------
Net investment in financing transactions                                       7,872,459                9,601,654
Investments                                                                      283,343                  285,934
Goodwill, net of accumulated amortization                                         43,901                   45,417
Other assets                                                                     431,559                  294,630
Net assets of discontinued operations                                            456,466                1,162,223
-----------------------------------------------------------------------------------------------------------------
                                                                           $  11,838,397            $  12,089,086
=================================================================================================================

LIABILITIES AND SHAREOWNERS' EQUITY

Liabilities not subject to Chapter 11 proceedings:
   Accounts payable and accrued expenses                                   $      30,853            $
Liabilities subject to Chapter 11 proceedings:
   Secured:
     Fixed-rate nonrecourse notes                                                  2,820                    5,813
   Unsecured:
     Accounts payable and accrued expenses                                       144,408                  128,311
     Interest payable                                                            372,951                  129,402
     Senior debt                                                              10,991,563               10,991,874
     Deferred income taxes, net                                                   38,748                   49,202
-----------------------------------------------------------------------------------------------------------------
                                                                              11,581,343               11,304,602
-----------------------------------------------------------------------------------------------------------------
Commitments and contingencies
Company-obligated mandatory redeemable convertible preferred
  securities of subsidiary trust solely holding convertible
  debentures of FINOVA, net of expenses ("TOPrS")                                111,550                  111,550
Shareowners' equity:
  Common stock, $0.01 par value, 400,000,000 shares authorized,
  64,849,000 shares issued                                                           648                      648
  Additional capital                                                           1,113,317                1,107,575
  Retained deficit                                                              (795,646)                (283,435)
  Accumulated other comprehensive (loss) income                                     (117)                  15,154
  Common stock in treasury, 3,698,000 and 3,554,000 shares,
   respectively                                                                 (172,698)                (167,008)
-----------------------------------------------------------------------------------------------------------------
                                                                                 145,504                  672,934
-----------------------------------------------------------------------------------------------------------------
                                                                           $  11,838,397            $  12,089,086
==================================================================================================================
</TABLE>

See notes to interim consolidated condensed financial statements.


                                       1
<PAGE>

                             THE FINOVA GROUP INC.
                CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS
                 (Dollars in Thousands, except per share data)
                                  (Unaudited)

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
                                                                        Three Months Ended                Six Months Ended
                                                                             June 30,                         June 30,
                                                                       2001             2000            2001             2000
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>              <C>             <C>              <C>
Interest, fees and other income                                    $    161,670     $    237,194    $    377,303     $    479,259
Financing lease income                                                   19,990           24,759          40,326           49,889
Operating lease income                                                   15,990           27,105          39,397           54,342
---------------------------------------------------------------------------------------------------------------------------------
Income earned from financing transactions                               197,650          289,058         457,026          583,490
Interest expense                                                        158,715          151,042         331,265          292,857
Operating lease depreciation                                             26,349           17,234          47,180           33,072
---------------------------------------------------------------------------------------------------------------------------------
Interest margins earned                                                  12,586          120,782          78,581          257,561
Provision for credit losses                                             162,999            9,212         224,749           30,110
---------------------------------------------------------------------------------------------------------------------------------
Net interest margins earned                                            (150,413)         111,570        (146,168)         227,451
(Losses) gains on investments and disposal of assets                   (261,155)          13,463        (254,504)          34,493
---------------------------------------------------------------------------------------------------------------------------------
                                                                       (411,568)         125,033        (400,672)         261,944
Operating expenses                                                       39,976           35,935          94,964           92,760
Reorganization items (income)                                           (17,675)                          (8,056)
---------------------------------------------------------------------------------------------------------------------------------
(Loss) income from continuing operations before income
 taxes and  preferred dividends                                        (433,869)          89,098        (487,580)         169,184
Income tax benefit (expense)                                                296          (32,476)         (2,047)         (64,036)
---------------------------------------------------------------------------------------------------------------------------------
(Loss) income from continuing operations before
 preferred dividends                                                   (433,573)          56,622        (489,627)         105,148
Preferred dividends, net of tax in 2000                                   2,238              945           3,184            1,891
---------------------------------------------------------------------------------------------------------------------------------
(Loss) income from continuing operations                               (435,811)          55,677        (492,811)         103,257
Discontinued operations (net of a tax expense of $428
 and a net tax benefit of $8,402 for the three months
 ended June 30, 2001 and 2000, respectively and net of
 a tax expense of $1,157 and a net tax benefit of
 $33,193 for the six months ended June 30, 2001 and 2000,
 respectively)                                                            4,543          (12,744)         (1,403)         (49,912)
Net loss on disposal of operations                                       (5,197)                         (17,997)
---------------------------------------------------------------------------------------------------------------------------------
Net (loss) income                                                  $   (436,465)    $     42,933    $   (512,211)    $     53,345
=================================================================================================================================

Basic (loss) earnings per share:
(Loss) income from continuing operations                           $      (7.14)    $       0.91    $      (8.07)    $       1.69
Loss from discontinued operations                                         (0.01)           (0.21)          (0.32)           (0.81)
---------------------------------------------------------------------------------------------------------------------------------
Net (loss) income per share                                        $      (7.15)    $       0.70    $      (8.39)    $       0.88
=================================================================================================================================
Adjusted weighted average shares outstanding                         61,019,000       61,000,000      61,044,000       60,955,000
=================================================================================================================================

Diluted (loss) earnings per share:
(Loss) income from continuing operations                           $      (7.14)    $       0.89    $      (8.07)    $       1.64
Loss from discontinued operations                                         (0.01)           (0.20)          (0.32)           (0.78)
---------------------------------------------------------------------------------------------------------------------------------
Net (loss) income per share                                        $      (7.15)    $       0.69    $      (8.39)    $       0.86
=================================================================================================================================
Adjusted weighted average shares outstanding                         61,019,000       63,938,000      61,044,000       64,243,000
=================================================================================================================================

Dividends per common share                                         $                $       0.18    $                $       0.36
=================================================================================================================================
</TABLE>

See notes to interim consolidated condensed financial statements.

                                       2
<PAGE>
bPAGE>

                             THE FINOVA GROUP INC.
                CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
                            (Dollars in Thousands)
                                  (Unaudited)



<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
                                                                                                Six Months Ended June 30,
                                                                                             2001                     2000
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>                      <C>
-------------------------------------------------------------------------------------------------------------------------------
    NET CASH PROVIDED BY CONTINUING OPERATING ACTIVITIES                                  $  210,651               $   130,583
-------------------------------------------------------------------------------------------------------------------------------

INVESTING ACTIVITIES:

  Proceeds from disposal of leases and other owned assets                                     20,912                    55,860
  Proceeds from sales of investments                                                          31,897                    55,950
  Proceeds from loan sales                                                                    18,950                   413,517
  Principal collections on financing transactions                                          1,590,190                 1,091,585
  Expenditures for investments and other income producing activities                         (37,704)                  (30,437)
  Expenditures for financing transactions                                                   (470,152)               (1,742,555)
  Recoveries of loans previously written-off                                                   3,533                       364
-------------------------------------------------------------------------------------------------------------------------------
    NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES                                       1,157,426                  (155,716)
-------------------------------------------------------------------------------------------------------------------------------


FINANCING ACTIVITIES:

  Net change in commercial paper and short term borrowings                                                           1,261,295
  Proceeds from issuance of term notes                                                                                 120,000
  Repayment of term notes                                                                     (2,993)                 (915,900)
  Proceeds from exercise of stock options                                                                                1,308
  Dividends                                                                                                            (22,049)
-------------------------------------------------------------------------------------------------------------------------------
    NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES                                          (2,993)                  444,654
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
    NET CASH PROVIDED (USED) BY DISCONTINUED OPERATIONS                                      686,357                   (88,939)
-------------------------------------------------------------------------------------------------------------------------------

INCREASE IN CASH AND CASH EQUIVALENTS                                                      2,051,441                   330,582

CASH AND CASH EQUIVALENTS, beginning of period                                               699,228                   100,344

-------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS,  end of period                                                 $2,750,669               $   430,926
===============================================================================================================================
</TABLE>


See notes to interim consolidated condensed financial statements.

                                       3
<PAGE>

                             THE FINOVA GROUP INC.
         NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000
            (Dollars in thousands in tables, except per share data)

NOTE A    ORGANIZATION AND BASIS OF PREPARATION

     The consolidated financial statements present the financial position,
results of operations and cash flows of The FINOVA Group Inc. and its
subsidiaries (collectively, "FINOVA" or the "Company"), including FINOVA Capital
Corporation and its subsidiaries (collectively, "FINOVA Capital"). All
significant intercompany balances have been eliminated in consolidation.

     The interim condensed consolidated financial information is unaudited. In
the opinion of management, all adjustments, consisting of normal recurring items
necessary to present fairly the financial position as of June 30, 2001 and the
results of operations for the quarter and six months ended June 30, 2001 and
2000 and cash flows for the six months ended June 30, 2001 and 2000, have been
included. Interim results of operations are not necessarily indicative of the
results of operations for the full year. The enclosed financial statements
should be read in connection with the consolidated financial statements and
notes thereto included in the Company's Annual Report on Form 10-K/A for the
year ended December 31, 2000, which describes significant business developments
culminating in the March 2001 filing for protection pursuant to Chapter 11,
Title 11, of the United States Code, in the United States Bankruptcy Court for
the District of Delaware.

     Certain reclassifications have been made to reflect discontinued
operations. These reclassifications resulted from the Company's decision in the
third quarter of 2000 to sell or liquidate some of its more broad based
businesses and focus on its niche based businesses. The businesses discontinued
include Corporate Finance, Business Credit, Growth Finance, Distribution &
Channel Finance and Commercial Services. See Note F for more information on
discontinued operations. Certain other reclassifications have been made to the
prior years consolidated financial statements to conform with the 2001
presentation.

Going Concern

     The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States ("GAAP"). During
the year ended December 31, 2000 and the first half of 2001, the Company
experienced a significant deterioration in the credit quality of its portfolio,
the loss of its investment grade credit ratings and the resulting loss of access
to capital and increased cost of funds. The Company was not in compliance with
its debt covenants as of December 31, 2000 and, along with eight of its direct
or indirect subsidiaries, filed for protection from its creditors under Chapter
11 of the United States Bankruptcy Code on March 7, 2001. As further discussed
in Note G, a reorganization plan (the "Plan") has been filed with the bankruptcy
court which, if approved, may result in the adjustment of the carrying amounts
of assets and liabilities in accordance with the "Fresh-Start" reporting
provisions of Statement of Position 90-7 "Financial Reporting by Entities in
Reorganization Under the Bankruptcy code" ("SOP 90-7"). Under these provisions,
assets and liabilities may be restated to the then-current values as defined in
the Statement of Position.

     These conditions and events raise substantial doubt about the Company's
ability to continue as a going concern. The ability of the Company to continue
as a going concern is dependent on many factors including the confirmation of
the Plan and successful execution of management's plans for the collection of
its portfolio. The accompanying condensed consolidated financial statements do
not include any adjustments relating to the recoverability and classification of
asset amounts or the amounts and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern or should
the company adopt the Fresh-Start reporting provisions of SOP 90-7 upon
emergence from bankruptcy proceedings.

Bankruptcy Accounting

     Entering a reorganization, although a significant event, does not
ordinarily affect or change the application of GAAP followed by a company. The
accompanying financial statements have been prepared assuming that FINOVA will
continue as a going concern in accordance with SOP 90-7. As such, asset and
liability carrying amounts do not purport to represent realizable or settlement
values as contemplated by the Bankruptcy Code.

Reporting upon Emergence from Bankruptcy

     Upon emergence from Chapter 11, the provisions of SOP 90-7 may require
assets to be stated at their reorganization value under Fresh-Start reporting.
Additionally, SOP 90-7 will require liabilities to be stated at the present
value of amounts expected to be paid, discounted at appropriate interest rates.

                                       4
<PAGE>

     If Fresh-Start reporting is required, the reorganization value of assets
will be determined by discounting expected future cash flows at interest rates
reflecting the business and financial risks involved, which would be allocated
to individual assets in accordance with the procedures specified for assets
acquired in a business combination under purchase accounting.  As interest rates
reflecting the business and financial risks involved are expected to exceed
contractual interest rates, asset values may be significantly less  than current
carrying amounts upon emergence from Chapter 11.

     The stated value of liabilities may be less than the face amount of such
liabilities, primarily if the contractual rate on the new senior notes is less
than an appropriate market interest rate for those obligations. This difference
may be reflected in the market price of the New Senior Notes during a short
period of time following their issuance upon emergence from Chapter 11.

     Any interest rate or market value related discounts or premiums recorded on
assets and liabilities as a result of the application of SOP 90-7 will be
amortized against future reported income or loss.

Liabilities Subject to Chapter 11 Proceedings

     Liabilities subject to Chapter 11 proceedings, including claims that become
known after the petition date, are reported at their expected allowable claim
amount in accordance with Statement of Financial Accounting Standards ("SFAS")
No. 5, "Accounting for Contingencies." To the extent that the amounts of claims
change as a result of actions in the bankruptcy case or other factors, the
recorded amount of liabilities subject to Chapter 11 proceedings will be
adjusted. FINOVA has revised accrued interest through June 30, 2001, to the
post-petition interest rates used to determine payment of interest upon
emergence from bankruptcy, which is approximately $37 million less than
contractual interest rates including fees and default interest.
Reorganization Items

     Reorganization items are income and expenses that are realized or incurred
by FINOVA because it is in reorganization. For the three and six months ended
June 30, 2001, reorganization items resulted in income of $17.7 million and $8.1
million, respectively. The components of reorganization items are as follows:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
                                                                           Three Months            Six Months
                                                                              Ended                  Ended
                                                                          June 30, 2001          June 30, 2001
---------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>                      <C>
Unamortized gains on terminated and cash settled interest rate swaps              $ 1,745             $ 23,942
Interest income earned on unpaid interest and debt payments                        17,519               18,323
Unamortized debt origination costs                                                                     (15,095)
Professional service fees                                                          (1,589)             (11,188)
Unamortized debt discounts                                                                              (7,926)
---------------------------------------------------------------------------------------------------------------
Total reorganization items                                                        $17,675             $  8,056
===============================================================================================================
</TABLE>

     The financial statements of the Company are substantially the same as the
financial statements of the entities in bankruptcy.

Corporate Offices - Operating Leases

     In connection with the Reorganization Proceedings, the Company has
indicated its intention to reject a number of the lease agreements for its
office space.  As a result, the obligations to make the lease payments reflected
in the 2000 10-K/A (see Note U to Notes to Consolidated Financial Statements)
may be reduced.  Management is exploring alternative facilities for its
operations and is in negotiation with some of the landlords to determine whether
acceptable concessions can be made for continued use of all or portions of the
space at those facilities.

NOTE B    SIGNIFICANT ACCOUNTING POLICIES

Other Comprehensive Income

     The Company reports other comprehensive income (loss) in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income." Total comprehensive (loss) income was $(435.5) million
and $22.9 million for the three months ended June 30, 2001 and 2000,
respectively and $(527.5) million and $23.0 million for the

                                       5
<PAGE>

six months ended June 30, 2001 and 2000, respectively. The primary component of
comprehensive (loss) income other than the net (loss) income of $512.2 million
for the six months ended June 30, 2001 was a change in net unrealized gains on
securities.

New Accounting Standards

     In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes new accounting and
reporting standards for derivative instruments. In June 1999, the FASB issued
SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133," and in June 2000, the
FASB issued SFAS No. 138, "Accounting for Certain Derivative Instruments and
Certain Hedging Activities - An Amendment of FASB Statement No. 133." SFAS 133,
as amended, establishes accounting and reporting standards requiring that
derivative instruments, including certain derivative instruments embedded in
other contracts, be recorded in the statement of financial position as either an
asset or liability measured at its fair value. SFAS 133 requires that changes in
the derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met.

     FINOVA adopted the provisions of SFAS 133, as amended, on January 1, 2001,
which resulted in an immaterial impact on FINOVA's consolidated results of
operations and financial position.

     In July 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards ("SFAS") No. 141, "Business Combinations," and
No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 supercedes APB
opinion No. 16, "Business Combinations" and amends or supercedes a number of
related interpretations of APB 16. SFAS No. 141 eliminates the pooling-of-
interests method of accounting for business combinations, and changes the
criteria to recognize intangible assets apart from goodwill. SFAS No. 142
supercedes APB opinion No. 17, "Intangible Assets." Under SFAS No. 142, goodwill
and indefinite lived intangible assets are no longer amortized but are reviewed
annually, or more frequently if impairment indicators arise, for impairment.

     Management plans to adopt the provisions of SFAS No. 141 for any business
combination accounted for by the purchase method that is completed after June
30, 2001. Management will consider adopting SFAS No. 142 upon FINOVA's emergence
from Chapter 11. Management does not believe the adoption of the provisions of
SFAS No's. 141 and 142 will have a material impact on FINOVA's results of
operations and financial position.

NOTE C    SEGMENT REPORTING

     FINOVA's business is organized into three market groups, which are also its
reportable segments: Specialty Finance, Commercial Finance and Capital Markets.
Management has not yet determined whether its reportable segments will be
reorganized as a result of its pending reorganization proceedings. Management
historically relied principally on total revenue, (loss) income before taxes and
allocations and managed assets in evaluating the business performance of each
reportable segment.

     Total net revenue is the sum of interest margins earned and (losses) gains
on investments and disposal of assets. (Loss) income before taxes and
allocations is income before income taxes, preferred dividends, corporate
overhead expenses and the unallocated portion of the provision for credit
losses. Managed assets include each segment's investment in financing
transactions plus securitizations.

     The Company expects that managed assets in all segments will decline
significantly over the next several years as available cash flow will be used
principally for debt service rather than the funding of new business.

     Information for FINOVA's reportable segments that are part of continuing
operations as of and for the six months ended June 30, 2001 and 2000, reconciles
to FINOVA's consolidated totals as follows:

                                       6
<PAGE>

<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------
                                                                                     Six Months Ended June 30
                                                                               2001                       2000
----------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>                       <C>
Total net revenue:
  Specialty Finance                                                     $    (177,990)            $      187,381
  Commercial Finance                                                           18,018                     28,839
  Capital Markets                                                              24,944                     79,779
  Corporate and other                                                         (40,895)                    (3,945)
----------------------------------------------------------------------------------------------------------------
Consolidated total                                                      $    (175,923)            $      292,054
================================================================================================================
Income (loss) before income taxes, preferred dividends and allocations:
  Specialty Finance                                                     $    (280,851)            $      148,018
  Commercial Finance                                                            4,032                     23,400
  Capital Markets                                                             (13,976)                    22,364
  Corporate and other, overhead and unallocated provision for credit         (196,785)                   (24,598)
 losses
----------------------------------------------------------------------------------------------------------------
(Loss) income from continuing operations before income taxes and
 preferred dividends                                                    $    (487,580)            $      169,184
================================================================================================================
----------------------------------------------------------------------------------------------------------------
                                                                                          As of June 30,
                                                                             2001                       2000
----------------------------------------------------------------------------------------------------------------
Managed assets:
  Specialty Finance                                                     $   7,080,870             $    8,615,264
  Commercial Finance                                                        1,095,259                  1,127,204
  Capital Markets                                                             626,637                    950,625
  Corporate and other                                                          52,228                     64,880
----------------------------------------------------------------------------------------------------------------
Consolidated total                                                      $   8,854,994             $   10,757,973
Less securitizations                                                          295,885                    420,679
----------------------------------------------------------------------------------------------------------------
Investment in financing transactions                                    $   8,559,109             $   10,337,294
================================================================================================================
</TABLE>

                                       7
<PAGE>

NOTE D                 (LOSS) EARNINGS PER SHARE

     Basic earnings or losses per share exclude the effects of dilution and are
computed by dividing (loss) income available to common shareowners by the
weighted average amount of common stock outstanding for the period. Diluted
earnings or losses per share reflect the potential dilution that could occur if
options and convertible preferred stock were exercised or converted into common
stock, at assumed rates of conversion. Basic and diluted (loss) earnings per
share calculations are presented for the six months ended June 30, 2001 and 2000
on the Condensed Statements of Consolidated Operations and are detailed below:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
                                                 Three Months Ended June 30,              Six Months Ended June 30,
                                                   2001              2000                    2001           2000
---------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>                <C>                       <C>              <C>
Basic (Loss) Earnings Per Share Computation:

(Loss) income from continuing operations       $    (435,811)      $      55,677          $    (492,811)     $     103,257
===========================================================================================================================

Weighted average shares outstanding               61,153,000          61,286,000             61,178,000         61,241,000
Contingently issued shares                          (134,000)           (286,000)              (134,000)          (286,000)
---------------------------------------------------------------------------------------------------------------------------
Adjusted weighted average shares                  61,019,000          61,000,000             61,044,000         60,955,000
===========================================================================================================================

Basic (loss) income from                       $       (7.14)      $        0.91          $       (8.07)     $        1.69
 continuing operations per share
===========================================================================================================================

Diluted (Loss) Earnings Per Share
Computation:

(Loss) income from continuing                  $    (435,811)      $      55,677          $    (492,811)     $     103,257
 operations
Preferred dividends, net of tax                                              945                                     1,891
---------------------------------------------------------------------------------------------------------------------------
(Loss) income before preferred                 $    (435,811)      $      56,622          $    (492,811)     $     105,148
 dividends
===========================================================================================================================

Weighted average shares outstanding               61,153,000          61,286,000             61,178,000         61,241,000
Contingently issued shares                          (134,000)           (286,000)              (134,000)          (286,000)
Incremental shares from assumed conversion:
Stock options                                                                                                      350,000
Convertible preferred securities                                       2,938,000                                 2,938,000
---------------------------------------------------------------------------------------------------------------------------
Total potential dilutive common shares                                 2,938,000                                 3,288,000
---------------------------------------------------------------------------------------------------------------------------
Adjusted weighted average shares                  61,019,000          63,938,000             61,044,000         64,243,000
===========================================================================================================================

Diluted (loss) income from continuing          $       (7.14)      $       $0.89          $       (8.07)     $        1.64
  operations per share
===========================================================================================================================
</TABLE>

NOTE E    PORTFOLIO QUALITY

     The following table presents a distribution (by line of business) of the
Company's investment in financing transactions before the reserve for credit
losses at June 30, 2001.

                                       8
<PAGE>

                     INVESTMENT IN FINANCING TRANSACTIONS
                              BY LINE OF BUSINESS
                                 June 30, 2001
                            (Dollars in Thousands)

<TABLE>
<CAPTION>
                                            Revenue Accruing                         Nonaccruing
                              -------------------------------------------------     ------------------------
                              Performing at
                               Contractual                  Repossessed               Repossessed   Lease &    Total Carrying
                                 Terms          Impaired       Assets      Impaired      Assets      Other        Amount        %
                              -------------------------------------------    --------------------------------    -------------------
<S>                           <C>             <C>          <C>          <C>           <C>         <C>         <C>            <C>
Specialty Finance Group
  Transportation Finance      $   1,356,308   $  117,161   $            $  364,788    $           $           $ 1,838,257     21.6
  Resort Finance                  1,258,999      156,843      12,635       207,675       4,610                  1,640,762     19.2
  Franchise Finance                 750,635        8,111                    88,779       1,623          74        849,222      9.9
  Healthcare Finance                450,130       66,989       1,417       239,372                   5,606        763,514      8.9
  Specialty Real Estate             628,045        5,972      24,840        10,121       7,546                    676,524      7.9
  Finance
  Commercial Equipment Finance      390,492                                 51,634       5,824       9,958        457,908      5.3
  Communications Finance            264,362                                180,391                                444,753      5.2
  Public Finance                    108,847                                  5,199                                114,046      1.3
                              -------------   ----------   ---------    ----------    --------    --------    -----------    -----
                                  5,207,818      355,076      38,892     1,147,959      19,603      15,638      6,784,986     79.3
                              -------------   ----------   ---------    ----------    --------    --------    -----------    -----
Commercial Finance Group
  Rediscount Finance                921,379       49,605           5       119,942       4,328                  1,095,259     12.8
                              -------------   ----------   ---------    ----------    --------    --------    -----------    -----
                                    921,379       49,605           5       119,942       4,328                  1,095,259     12.8
                              -------------   ----------   ---------    ----------    --------    --------    -----------    -----
Capital Markets Group
  Realty Capital                    283,183       22,514                    19,095       4,558                    329,350      3.8
  Mezzanine Capital                 158,489        8,104                   105,609                                272,202      3.2
  Investment Alliance                16,369        4,241                     4,475                                 25,085      0.3
                              -------------   ----------   ---------    ----------    --------    --------    -----------    -----
                                    458,041       34,859                   129,179       4,558                    626,637      7.3
                              -------------   ----------   ---------    ----------    --------    --------    -----------    -----

Other                                52,227                                                                        52,227      0.6
                              -------------   ----------   ---------     ---------    --------    --------    -----------    -----
Total Continuing Operations       6,639,465      439,540      38,897      1,397,080      28,489      15,638      8,559,109   100.0
 (1)                          -------------   ----------   ---------     ----------   ---------   ---------   ------------   =====

Discontinued Operations (2)         342,908                                 138,974       4,266       4,174        490,322
                              -------------   ----------   ---------     ---------    --------    --------    -----------
TOTAL                         $   6,982,373   $  439,540   $  38,897     $1,536,054     $32,755   $  19,812   $  9,049,431
                              =============   ==========   =========     ==========     =======   =========   ============
</TABLE>


NOTES:
(1)    Excludes $295.9 million of assets sold which the Company manages, $186.1
       million in Commercial Equipment Finance and $109.8 million in Franchise
       Finance.
(2)    Discontinued nonaccruing contains gross assets of $369.4 million less
       $222.0 million of net realizable value adjustments, at June 30, 2001.
                                 __________________________________

                                       9
<PAGE>

Financing Contracts Held for Sale

     Financing contracts held for sale are carried at the lower of cost or
market with adjustment, if any, recorded in operations. During 2000, the Company
designated loans generated by the Realty Capital line of business as being held
for sale and recorded a loss of $43.2 million to write-down the assets to their
estimated sales price and recorded an additional loss of $5.1 million during the
first quarter of 2001. During the second quarter of 2001, the Company designated
leveraged leases generated by the Transportation Finance line of business as
being held for sale and recorded a loss of $198.1 million to write-down the
assets to their estimated sales price.

     The following table presents the balances and changes in FINOVA's financing
contracts held for sale:

<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------------------------------------------
                                                                                       Transportation
                                                               Realty Capital             Finance                    Total
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>                    <C>                      <C>
As of December 31, 2000 (net of a $43.2 million mark-down)          $421,956               $                          $ 421,956
   Runoff (amortization and prepayments), net of fundings            (41,516)                                           (41,516)
   Additional mark-down to estimated sales price                      (5,147)                                            (5,147)
--------------------------------------------------------------------------------------------------------------------------------
As of March 31, 2001                                                 375,293                                            375,293
   Runoff (amortization and prepayments), net of fundings            (45,944)                                           (45,944)
   Assets reclassified to held for sale                                                       559,717                   559,717
   Mark-down to estimated sales price                                                        (198,070)                 (198,070)
--------------------------------------------------------------------------------------------------------------------------------
As of June 30, 2001                                                 $329,349               $  361,647                 $ 690,996
================================================================================================================================
</TABLE>

Reserve for Credit Losses

     The reserve for credit losses at June 30, 2001 represents 8.4% of the
Company's investment in financing transactions (excluding financing contracts
held for sale) and securitized assets. Changes in the reserve for credit losses
were as follows:

<TABLE>
<CAPTION>

                       --------------------------------------------------------------------------------------
                                                                             Six Months Ended June 30,
                                                                      2001                             2000
                       --------------------------------------------------------------------------------------
                      <S>                                         <C>                               <C>
                       Balance, beginning of year                  $ 578,750                         $178,266
                       Provision for credit losses                   224,749                           30,110
                       Write-offs                                   (120,263)                         (31,735)
                       Recoveries                                      3,499                              362
                       Other                                             (85)                             301
                       --------------------------------------------------------------------------------------
                       Balance, end of period                      $ 686,650                         $177,304
                       ======================================================================================
</TABLE>

     At June 30, 2001, the total carrying amount of impaired loans was $1.8
billion, of which $439.5 million were revenue accruing. A specific impairment
reserve for credit losses of $331.0 million has been established for $888.2
million of nonaccruing impaired loans. Additionally, $7.6 million was
established for other accounts. As a result, 49.3% of FINOVA's reserve for
credit losses is allocated to specific reserves. The remaining $348.1 million or
50.7% of the reserve for credit losses is designated for general purposes and
represents management's best estimate of inherent losses in the remaining
portfolio considering delinquencies, loss experience and collateral. Actual
results could differ from estimates and values, and there can be no assurance
that the reserves will be sufficient to cover portfolio losses. Additions to the
general and specific reserves are reflected in current operations. Management
may transfer reserves between the general and specific reserves as considered
necessary.

     At June 30, 2001, discontinued operations included $369.4 million of
nonaccruing assets (before $222 million of net realizable value adjustments).
Since the assets of the discontinued operations have been written down to
estimated net realizable value, no reserves for credit losses are carried
against those assets.

                                       10
<PAGE>

NOTE F      DISCONTINUED OPERATIONS

     During the third quarter of 2000, FINOVA's Board of Directors approved a
plan to discontinue and offer for sale its Corporate Finance, Distribution &
Channel Finance and Commercial Services lines of business. As a result, the
Company has reported these lines of business as discontinued operations in
accordance with Accounting Principles Board Opinion ("APB") No. 30, Reporting
the Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions.

     At June 30, 2001 and 2000, FINOVA had total net assets of discontinued
operations of the following:

<TABLE>
<CAPTION>
           -----------------------------------------------------------------------------------------------
                                                                                           June 30,
                                                                                  2001                2000
           -----------------------------------------------------------------------------------------------
           <S>                                                               <C>                <C>
           Investment in financing transactions                              $ 490,322         $ 2,792,903
           Investments                                                           1,656               4,744
           Other assets                                                                            115,829
           Due to clients                                                                         (166,419)
           Accounts payable and accrued expenses                               (35,512)             (5,793)
           -----------------------------------------------------------------------------------------------
           Net assets of discontinued operations                             $ 456,466         $ 2,741,264
           -----------------------------------------------------------------------------------------------
</TABLE>
     Loss from discontinued operations in the Condensed Statements of
Consolidated Operations for the quarters ended June 30, 2001 and 2000 were as
follows:

<TABLE>
<CAPTION>

          -----------------------------------------------------------------------------------------------
                                                                              Three Months Ended June 30,
                                                                                 2001              2000
          -----------------------------------------------------------------------------------------------
          <S>                                                                 <C>              <C>
           Discontinued operations, net of tax                               $   4,543         $  (12,744)
          ===============================================================================================
</TABLE>

     The cumulative net loss on disposal of operations is comprised of the
following adjustments from September 30, 2000 (quarter of discontinuance):

<TABLE>
<CAPTION>
          -----------------------------------------------------------------------------------------------
          <S>                                                                                  <C>
          As of September 30, 2000 on a pre-tax basis:
            Net realizable value mark-downs                                                    $ (232,760)
            Goodwill charged-off                                                                 (107,338)
            Proceeds in excess of assets sold                                                      29,172
            Accrued expenses                                                                      (44,497)
            Income tax benefit                                                                    140,570
          -----------------------------------------------------------------------------------------------
          Net loss on disposal of operations as of September 30, 2000                            (214,853)
            Additional net realizable value mark-downs                                           (114,751)
            Additional accrued expenses                                                           (18,200)
            Income tax benefit                                                                     10,093
          -----------------------------------------------------------------------------------------------
          Net loss on disposal of operations as of December 31, 2000                             (337,711)
            Additional net realizable value mark-downs                                            (12,800)
          -----------------------------------------------------------------------------------------------
          Net loss on disposal of operations as of March 31, 2001                                (350,511)
            Additional net realizable value mark-downs                                             (5,197)
          -----------------------------------------------------------------------------------------------
          Net loss on disposal of operations as of June 30, 2001                               $ (355,708)
          ===============================================================================================
</TABLE>

     The additional $5.2 million of net realizable value mark-downs in the
second quarter of 2001 were attributable to a further deterioration in the
Distribution & Channel Finance portfolio.

NOTE G    REORGANIZATION PROCEEDINGS

     As discussed more fully in the 2000 10-K/A, FINOVA and FINOVA Capital have
entered into a proposed transaction with Berkshire Hathaway Inc. ("Berkshire"),
Leucadia National Corporation ("Leucadia") and Berkadia LLC ("Berkadia"), an
entity jointly owned by Berkshire and Leucadia. The terms of the proposed
transaction, as amended, form the basis for FINOVA's Third

                                       11
<PAGE>

Amended and Restated Joint Plan of Reorganization of Debtors under Chapter 11 of
the Bankruptcy Code. The Plan was submitted to the creditors and equity interest
holders for approval and is subject to confirmation by the Bankruptcy Court. The
voting deadline was August 1, 2001. The results of the voting are not yet known.

     The Plan generally provides for Berkadia to make a secured loan of up to
$6 billion to FINOVA Capital. Pursuant to the Plan, the proceeds of that loan,
along with available cash on hand, is expected to be used to pay the holders of
allowed unsecured claims against FINOVA Capital a cash payment equal to 70% of
those claims plus 100% of the pre- and post-petition interest with respect to
those claims. In addition, 7.5% New Senior Notes are expected to be issued by
FINOVA having a principal amount equal to 30% of those claims. Depending on the
amount and nature of other allowed claims, the creditors will receive
reinstatement, cash or a combination of cash and new senior notes. In the case
of allowed secured claims, the Plan also permits the surrender of the asset
securing the claim. The terms of the New Senior Notes are described more fully
in the Company's Report on Form 8-K filed with the SEC on June 22, 2001.

     The confirmation hearing on the Plan is currently scheduled for August 10,
2001. If the court confirms the Plan on that date, the earliest effective date
for the Plan and the consummation of the Berkadia loan would be August 21, 2001.
Berkadia's $6 billion loan commitment expires on August 31, 2001, absent
agreement to extend that date.

NOTE H    COMMITMENT & CONTINGENCIES

Legal Proceedings

     FINOVA is a party either as plaintiff or defendant to various actions,
proceedings and pending claims, including legal actions, some of which involve
claims for compensatory, punitive or other damages in significant amounts.
Litigation often results from FINOVA's attempts to enforce its lending
agreements against borrowers and other parties to those transactions. Litigation
is subject to many uncertainties. It is possible that some of the legal actions,
proceedings or claims could be decided against FINOVA. Other than the matters
described below, FINOVA believes that any resulting liability for their
litigation matters should not materially affect FINOVA's financial position,
results of operations or cash flows. One or more of the following matters could
have a material adverse impact on FINOVA's financial position, results of
operations or cash flow.

     Between March 29, 2000 and May 23, 2000, five shareowner lawsuits were
filed against FINOVA and Samuel Eichenfield, FINOVA's former chairman,
president, and chief executive officer; two of the lawsuits also named FINOVA
Capital as a defendant, and one named three other executive officers. All of the
lawsuits purport to be on behalf of the named plaintiffs (William K. Steiner,
Uri Borenstein, Jerry Krim, Mark Kassis, and the Louisiana School Employees
Retirement System), and others who purchased FINOVA common stock during the
class period of July 15, 1999, through either March 26, 2000, or May 7, 2000.
The suit brought by the Louisiana School Employees Retirement System also
purported to be on behalf of all those who purchased FINOVA Capital's 7.25%
Notes which are due November 8, 2004, pursuant to the registration statement and
prospectus supplement dated November 1, 1999.

     In an order by the U.S. District Court for the District of Arizona dated
August 30, 2000, these five lawsuits were consolidated and captioned In re:
FINOVA Group Inc. Securities Litigation. The court also selected the Louisiana
School Employees Retirement System ("LSERS") as the lead plaintiff in the
consolidated cases. LSERS filed its Amended Consolidated Complaint on September
29, 2000, naming FINOVA, FINOVA Capital, Samuel Eichenfield, Matthew Breyne, and
Bruno Marszowski as defendants. The consolidated amended complaint generally
alleged that the defendants made materially misleading statements regarding
FINOVA's loss reserves, and otherwise violated the federal securities laws in an
effort to bolster FINOVA's stock price, among other reasons. Among other things,
the complaint sought unspecified damages for losses incurred by shareowners,
plus interest, and other relief, and rescission with regard to the notes
purchased.

     Since consolidation of the original five shareowner lawsuits, other related
lawsuits have been initiated against the Company and current and former officers
and directors. Three shareowner lawsuits were filed in the United States
District Court for the Middle District of Tennessee, in which the named
plaintiffs (John Cartwright, Sirrom Partners and Sirrom G-1, and Caldwell
Travel) assert claims relating to the Company's acquisition in 1999 of Sirrom
Capital Corporation, and the exchange of shares of Sirrom stock for shares of
FINOVA stock. The Cartwright complaint purports to be a class action lawsuit on
behalf of all Sirrom shareowners that exchanged their Sirrom stock for FINOVA
stock as a result of the acquisition. The defendants named are Sirrom Capital
Corporation, Samuel Eichenfield, John W. Teets, Constance Curran, G. Robert
Durham, James L. Johnson, Kenneth Smith, Shoshana Tancer, Bruno Marszowski, and
FINOVA Group. The complaints allege that the defendants made materially
misleading statements regarding FINOVA's loss reserves, and otherwise violated
the federal securities laws in an effort to reduce the total consideration
provided to Sirrom shareowners at the time of the acquisition. The complaints
seek unspecified damages for losses incurred by shareowners, plus interest, and
other relief.

                                       12
<PAGE>

     Another lawsuit was filed on September 13, 2000, in the Circuit Court for
Davidson County, Tennessee, by Ronald Benkler against several former officers of
Sirrom Capital Corporation. In various agreements entered into in connection
with the Sirrom acquisition, FINOVA had agreed to indemnify the former officers
of Sirrom named as defendants. The complaint alleges that the Sirrom officers
breached various duties to Sirrom in connection with the acquisition of Sirrom
by the Company in 1999, and with the exchange of Sirrom stock for FINOVA stock
as a result of the acquisition. The plaintiffs agreed to a stay of discovery in
this case, pending the final determination of the motion to dismiss the
consolidated securities litigation.

     On January 4, 2001, the United States District Court for the Middle
District of Tennessee granted a motion brought by FINOVA and the other
defendants to transfer the Cartwright and Sirrom Partners cases to the United
States District Court for the District of Arizona. The plaintiff in Caldwell
Travel agreed to dismiss that case without prejudice. Pursuant to a Stipulation
and Order entered in March 2001, the Cartwright case was consolidated for all
purposes with the previous five cases in the FINOVA Group Securities Litigation,
and the Sirrom Partners case was consolidated for all pre-trial purposes.

     On May 4, 2001, the lead plaintiffs filed a Second Amended Consolidated
Complaint for all of the consolidated and transferred actions pending in the
United States District Court in Arizona. Among other things, the Second Amended
Consolidated Complaint expanded the original class period for the shareholder
class to all those who had purchased FINOVA Common Stock, and certain debt
securities, between January 14, 1999 and November 13, 2000. It also asserted
claims on behalf of a purported subclass of those who exchanged shares of Sirrom
stock for FINOVA stock in connection with the 1999 Sirrom acquisition.

     By agreement of the parties, the time for the defendants to answer or move
to dismiss the Second Amended Consolidated Complaint was extended to August 24,
2001. After extensive negotiations, the parties reached an agreement in
principle to resolve all of the various claims in the Consolidated Securities
Litigation, including the claims in the Tennessee actions that had been
transferred and consolidated in January, and the claims asserted in the
Tennessee state court action brought by Ronald Benkler. As described more fully
below, the Company, FINOVA Capital and seven of their subsidiaries have been
petitioners in a jointly administered Chapter 11 proceeding filed on March 7,
2001, and currently pending in the United States Bankruptcy Court for the
District of Delaware. This agreement in principle remains subject to several
material conditions, including the approval from the Bankruptcy Court, the
United States District Court in Arizona, and the court-appointed rehabilitator
of one of the Company's carriers. On July 25, 2001, the Company filed a motion
with the Bankruptcy Court seeking authorization to enter into the settlement
agreement, and to take the actions necessary to proceed with implementation of
the settlement. The Company anticipates that the hearing on this motion will be
held on August 10, 2001.

     There have also been two shareowners' derivative lawsuits filed against
current and former officers and directors of FINOVA Group, one in the United
States District Court for the District of Arizona, and one in the Court of
Chancery for Newcastle County, Delaware. Both complaints were filed on September
11, 2000, and both purport to be brought by the named plaintiffs (William Kass
and Cindy Burkholter) derivatively on behalf of the Company against the officers
and directors, alleging generally breaches of fiduciary and other duties as
directors. These actions seek unspecified money damages and other relief. As
with the consolidated securities litigation, the allegations center generally on
claims that there were materially misleading statements regarding FINOVA's loss
reserves. The Plan of Reorganization in the Company's bankruptcy case provides
that the Company may enforce any claims or causes of action arising before or
after the petition that the Company has against any entity or person, that the
Company may pursue or abandon such claims or causes of action as it deems
appropriate, and that no creditor or shareholder may pursue or commence such
litigation, whether direct or derivative, in regard to such claims and causes of
action.

     On March 6, 2001, one of FINOVA Capital's subsidiaries, FINOVA (Canada)
Capital Corporation, had an involuntary Petition for Receiving Order filed
against it in the Ontario, Canada, Superior Court of Justice in Bankruptcy. The
action was filed by the Bank of Nova Scotia, as agent for the lenders on a $150
million (Canadian) bank facility. That same day, the courts in Canada issued a
temporary injunction prohibiting transfers of assets out of the Canadian
subsidiary to its other affiliates. FINOVA has not received service of process
in those proceedings, but has agreed to refrain from transferring assets to its
affiliates without court order.

     On March 7, 2001, FINOVA, FINOVA Capital and seven of their subsidiaries
filed voluntary petitions for protection from creditors pursuant to Chapter 11,
Title 11, United States Code, in the United States Bankruptcy Court for the
District of Delaware. The other subsidiaries were FINOVA (Canada) Capital
Corporation, FINOVA Capital plc, FINOVA Loan Administration Inc., FINOVA
Mezzanine Capital Inc., FINOVA Portfolio Services, Inc., FINOVA Technology
Finance Inc., and FINOVA Trust Finance.

     FINOVA obtained orders from the bankruptcy court on the first day
permitting FINOVA to continue its operations in the ordinary course including
honoring its obligations to borrowers. The orders also permit the filing
entities to pay certain pre- and post-petition expenses and claims, such as to
employees (other than executive officers, with exceptions), taxing authorities
and foreign trade vendors. The cases have been jointly administered.

                                       13
<PAGE>

     On May 2, 2001, FINOVA and the other filing subsidiaries filed a proposed
Joint Plan of Reorganization and Disclosure Statement which was subsequently
amended three times. The Third Amended Joint Plan of Reorganization has been
sent to creditors and equity interest holders for approval, along with the
related updated Disclosure Statement. The voting deadline for approval of the
Plan was August 1, 2001. The confirmation hearing is scheduled for August 10,
2001. See Note G for more information regarding the reorganization proceedings.

                                       14
<PAGE>

  ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
  -------    ---------------------------------------------------------------
                            RESULTS OF OPERATIONS.
                            ----------------------

               COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 2001
                     TO THE SIX MONTHS ENDED JUNE 30, 2000

     The following discussion relates to The FINOVA Group Inc. and its
subsidiaries (collectively "FINOVA" or the "Company"), including FINOVA Capital
Corporation and its subsidiaries ("FINOVA Capital"). The FINOVA Group Inc. is a
financial services holding company. Through its principal operating subsidiary,
FINOVA Capital, the Company has provided a broad range of financing and capital
markets products, primarily to mid-size businesses. FINOVA Capital has been in
operation since 1954.

     On March 7, 2001, The FINOVA Group Inc., FINOVA Capital Corporation and
seven of their subsidiaries filed for protection pursuant to Chapter 11, Title
11, of the United States Code in the United States Bankruptcy Court for the
District of Delaware to enable them to restructure their debt (the
"Reorganization Proceedings"). Historically, the Company has relied upon
borrowed funds together with internal cash flow to finance its operations.
Profit has largely been recorded from the spread between the cost of borrowing
and the rates paid by its customers, less operating costs. The Company also
generates revenues through loan servicing and related activities and the sale of
assets. Beginning late in the first quarter of 2000, a series of events impeded
FINOVA's access to lower cost capital in the public and private markets. Those
events have generally been described in The FINOVA Group Inc. Form 10-K/A for
the year ended December 31, 2000 (the "2000 10-K/A") that has been filed with
the Securities and Exchange Commission.

Recent Developments and Business Outlook

     As discussed more fully in the 2000 10-K/A, FINOVA and FINOVA Capital have
entered into a proposed transaction with Berkshire Hathaway Inc. ("Berkshire"),
Leucadia National Corporation ("Leucadia") and Berkadia LLC ("Berkadia"), an
entity jointly owned by Berkshire and Leucadia.  The terms of the proposed
transaction, as amended, form the basis for FINOVA's Third Amended and Restated
Joint Plan of Reorganization of Debtors under Chapter 11 of the Bankruptcy Code
(the "Plan").  The Plan was submitted to the creditors and equity interest
holders for approval.  The voting deadline was August 1, 2001.  The results of
the voting are not yet known.

     The Plan generally provides for Berkadia to make a secured loan of up to
$6 billion to FINOVA Capital.  Pursuant to the Plan, the proceeds of that loan,
along with available cash on hand, is expected to be used to pay the holders of
allowed unsecured claims against FINOVA Capital a cash payment equal to 70% of
those claims plus 100% of the pre- and post-petition interest with respect to
those claims. In addition, 7.5% New Senior Notes are expected to be issued by
FINOVA having a principal amount equal to 30% of those claims.  Depending on the
amount and nature of other allowed claims, the creditors will receive
reinstatement, cash or a combination of cash and new senior notes.  In the case
of allowed secured claims, the Plan also permits the surrender of the asset
securing the claim. The terms of the New Senior Notes are described more fully
in the Company's Report on Form 8-K filed with the SEC on June 22, 2001.

     The confirmation hearing on the Plan is currently scheduled for August 10,
2001.  If the court confirms the Plan on that date, the earliest effective date
for the Plan and the consummation of the Berkadia loan would be August 21, 2001.
Berkadia's commitment to lend FINOVA the $6 billion expires August 31, 2001,
absent agreement to extend that date.

     In July 2001, FINOVA sold of $303.3 million, net of previously established
markdown of $27.0 million Realty Capital assets for proceeds of $303.3 million.
remaining assets in Realty Capital total $26.9 million, net of a $11.9 million
mark-down to their estimated selling price.

Results of Operations

     The results for the six months of 2001 reflected a continuation of trends
noted in the 2000 10-K/A. These results were adversely impacted by some of the
events of 2000 and a continued softening of the U.S. and international
economies. Significant items included the valuation of assets held for sale,
increases in delinquencies, write-offs, higher nonaccruing assets and cost of
funds (resulting in lower interest margins earned) and the inability to
recognize tax benefits.

     For the six months ended June 30, 2001, FINOVA reported a net loss of
$512.2 million or $8.39 per diluted share compared to net income of $53.3
million or $0.86 per diluted share for the six months of 2000. The 2001 results
included a net loss from continuing operations of $492.8 million or $8.07 per
diluted share and a net loss from discontinued operations of $19.4 million or
$0.32 per diluted share.

                                       15
<PAGE>

This compares to income from continuing operations for the six months of 2000 of
$103.3 million or $1.64 per diluted share and a net loss from discontinued
operations of $49.9 million or $0.78 per diluted share.

Continuing Operations

     Loss from Continuing Operations. The decline in results for the six months
of 2001 when compared to the same period in 2000 was primarily due to the
following:
  .  Losses on investments and disposal of assets, caused primarily by valuation
adjustments for assets designated as held for sale.
  .  Higher loss provisions to bolster the reserve for credit losses in response
to continued increases in impaired and nonearning assets.
  .  A higher level of nonaccruing assets due in part to the continued softening
economy.
  .  Increases in the Company's cost of funds.
  .  The inability to recognize any federal and state income tax benefits in
2001.

     Interest margins earned. Interest margins earned represents the difference
between (a) interest, fee, lease and other income earned from financing
transactions and (b) interest expense and depreciation on operating leases.
Interest margins earned in the six months of 2001 declined from the comparable
period in 2000 by $179.0 million to $78.6 million due to a higher level of
nonaccruing assets (which totaled $1.4 billion at June 30, 2001), a higher cost
of funds and a reduction in managed assets. Interest margins earned do not
include $18.3 million of interest earned on cash and cash equivalents since
March 7, 2001. Interest margins earned as a percentage of average earning assets
declined to 2.0% in the period from 5.3% in the six months of 2000. The higher
cost of funds was the result of the events of 2000, primarily the various
downgrades of FINOVA Capital's senior debt and the elimination of its commercial
paper program resulting in draw downs under its back-up bank facilities. Through
June 30, 2001, FINOVA has accrued post-petition interest at rates used to
determine payment of interest upon emergence from bankruptcy, which is
approximately $37 million less than contractual interest rates including fees
and default interest.

     The portfolio (ending managed assets) declined to $8.9 billion at June 30,
2001 from $10.8 billion at June 30, 2000. The reduction was primarily due to
portfolio runoff and the curtailment of new business activities during the last
12 months. As the Company indicated in the 2000 10-K/A, it has effectively
eliminated new business development activities and for the foreseeable future,
intends to focus on managing and maximizing the value of its existing portfolio.
Those events will include the continued collection of its portfolio pursuant to
contractual terms and may include efforts to retain certain customer
relationships, restructure or terminate other relationships or sell certain
assets if buyers can be found at acceptable prices. The Company will continue to
fund its backlog of commitments, estimated to be $1.5 billion ($2.4 billion
including discontinued operations) at June 30, 2001. These amounts represent
total potential fundings under existing lines of credit. Historically, FINOVA
has not funded the full availability under these commitments, which have
utilizations that vary by line of business.

     Provision for credit losses. The provision for credit losses applicable to
continuing operations in 2001 increased by $194.6 million to $224.7 million
compared to $30.1 million in the first six months of 2000 due to increases in
problem accounts and higher net write-offs during the period ($116.8 million in
2001 vs. $31.4 million in 2000). The businesses with the highest level of net
write-offs during the 2001 period were Communications Finance ($57.1 million),
Mezzanine Capital ($25.6 million), Transportation Finance ($13.6 million) and
Rediscount Finance ($10.0 million). Net write-offs as a percent of managed
assets in the six months of 2001 were 2.4% annualized compared to 0.6% for the
2000 period. A discussion of the increase in problem accounts is included under
the caption "Financial Condition, Liquidity and Capital Resources."

     FINOVA monitors developments affecting its loan and lease portfolio, taking
into account each borrower's financial developments and prospects, the estimated
value of collateral, legal developments and other available information. Based
upon that information, FINOVA adjusts its loan loss reserves and when considered
appropriate, writes down the values of the loans. Depending on developments,
there is the substantial possibility that the loan loss reserves and/or write-
downs will increase in the future.

     (Losses)/gains on investments and disposal of assets. Losses for the six
months of 2001 were $254.5 million compared to gains of $34.5 million for the
2000 period. The losses in 2001 were primarily due to a charge of $198.1 million
recorded in the second quarter to mark-down FINOVA's investment in
Transportation Finance's leveraged leases to estimated net sales proceeds. The
Company concluded that selling these assets currently rather than holding them
to maturity and using the proceeds to reduce its indebtedness would maximize the
value of these assets. Other losses resulted from the mark-down of residuals and
off lease assets recorded in other assets ($68.7 million), the write-off of an
investment in a sports franchise ($7.0 million) and a further write-down to fair
value of Realty Capital's assets held for sale ($5.1 million). These losses were
partially offset by gains of

                                       16
<PAGE>

$28.4 million, primarily from equity participations, the largest coming from
Commercial Equipment Finance ($15.4 million) and Mezzanine Capital Finance
($10.5 million).

     Operating expenses. For the six months of 2001, operating expenses
increased to $95.0 million from $92.8 million in the comparable 2000 period. The
increase was primarily due to higher professional service fees, sales and
franchise taxes and problem account costs which were partially offset by cost
savings resulting from a reduction in employees (576 at June 30, 2001, compared
to 860 at June 30, 2000) and lower goodwill amortization ($1.1 million in 2001
vs. $8.4 million in 2000). The total number of employees at June 30, 2001,
including employees in discontinued operations was 689 compared to 1,361 at June
30, 2000.

     Reorganization items. Reorganization items reflect income and expense items
that are directly associated with the reorganization, as compared to those from
the ongoing operations of the business, as required by generally accepted
accounting principles for entities in reorganization under the Bankruptcy Code.
For the six months of 2001, the net of reorganization items resulted in income
of $8.1 million and included interest earned ($18.3 million) on the cash
retained and invested as a result of the moratorium on payment of interest and
principal applicable to FINOVA's outstanding debt and gains from cash settled
interest rate swap terminations ($23.9 million) partially offset by the charge-
off of debt origination costs ($15.1 million), professional services fees ($11.2
million) and the full amortization of debt discounts ($7.9 million).

     Income taxes. Income taxes were provided for in the six months ended June
30, 2001, in spite of losses before income taxes for the period, due to taxable
income being generated by foreign operations (primarily in the United Kingdom
and Canada). Income tax benefits were offset by an increase in the valuation
allowance during 2001 due to the uncertainty of being able to utilize such
benefits. This also applies to discontinued operations, which provided for
income taxes on income from foreign operations while recording net pre-tax
losses for the period. The effective income tax rates for the six months of 2000
were 37.9% for continuing operations and 39.8% for discontinued operations.

     Preferred dividends. Dividends (with no related accrued tax benefits) due
on $115 million of outstanding Company-obligated mandatory redeemable
convertible preferred securities ("TOPrS") have been accrued since the first
quarter of 2001, but not paid. In conjunction with the Reorganization
Proceedings, the Company suspended paying dividends on the TOPrS and interest on
the underlying convertible debentures. Dividends paid in 2000 were net of taxes.

Discontinued Operations

     During the third quarter of 2000, FINOVA's Board of Directors approved the
sale or liquidation of some of its more broad based businesses so the Company
could focus more on its niche-based businesses. The businesses included in
discontinued operations consist of Commercial Services (substantially sold
during the third quarter of 2000), Corporate Finance (which includes Business
Credit and Growth Finance) and Distribution & Channel Finance. During the first
six months of 2001, $309 million of Corporate Finance assets were sold at a
discount of $9.2 million. Sales of additional assets could occur for all or
portions of the discontinued business assets. The Company intends to liquidate
the remaining assets in an orderly manner.

     Losses from discontinued operations in the six months of 2001 were $19.4
million (after-tax) and primarily consisted of $18.0 million of charges to value
the assets to be sold or liquidated at estimated net realizable amounts, the
effects of higher nonaccruing assets and operating losses. Nonaccruing assets in
discontinued operations were $147.4 million ($369.4 million less $222.0 million
of net realizable value adjustments) at June 30, 2001, down $27.4 million from
$174.8 million ($433.2 million less $258.4 million of net realizable value
adjustments) at March 31, 2001 and down $63.5 million from $210.9 million
($486.2 million less $275.3 million of net realizable value adjustments) at
December 31, 2000. Losses in the 2000 period were principally due to a pre-tax
charge to earnings to replenish loss reserves after a write-off of a loan to a
single customer in the Distribution & Channel Finance line of business.

Financial Condition, Liquidity and Capital Resources

     The following primarily relates to continuing operations, except as noted.

     Managed assets were $8.85 billion at June 30, 2001 compared to $10.54
billion at December 31, 2000. Included in managed assets at June 30, 2001 were
$8.56 billion in funds employed and $295.9 million of securitized assets. The
decrease in managed assets was due to prepayments and asset sales accompanied by
normal portfolio amortization, partially offset by funded new business of $470.4
million for the six months ended June 30, 2001.

                                       17
<PAGE>

     The reserve for credit losses, which pertains to continuing operations,
increased to $686.7 million at June 30, 2001 from $578.8 million at December 31,
2000. At June 30, 2001 and December 31, 2000, the reserve for credit losses was
8.4% and 5.7% of ending managed assets (excluding financing contracts held for
sale), respectively. The reserve for credit losses as a percent of nonaccruing
assets declined to 47.6% at June 30, 2001, from 62.8% at December 31, 2000, due
to the increase in nonaccruing assets. Nonaccruing assets increased to $1.44
billion or 16.3% of ending managed assets at June 30, 2001 from $921.4 million
or 8.7% at the end of 2000. The largest increases to nonaccruing assets during
the six months of 2001 occurred in Transportation Finance ($226.8 million),
Communications Finance ($87.6 million), Resort Finance ($70.3 million),
Mezzanine Capital ($61.7 million), Commercial Equipment Finance ($48.5 million)
and Franchise Finance ($40.3 million).

     The $226.8 million increase in nonaccruing assets in Transportation Finance
involved seventeen aircraft-secured transactions. The single largest transaction
($60.6 million) moving to nonaccrual status since December 31, 2000 was a loan
on four MD-83 aircraft to an operating lessor. The other significant moves to
nonaccrual involved a loan on six 737 aircraft ($43.1 million) to an operating
lessor; one 757-200 aircraft ($26.5 million) on operating lease to a charter
carrier; two MD-82 aircraft ($20.2 million) formerly on lease to a carrier in
bankruptcy and now on lease to a financially more solvent carrier at a reduced
rate; three 727 cargo aircraft ($17.6 million), two of which are on a loan, with
the other in process of being returned from an operating lease; one DC10-30
cargo aircraft ($17.6 million) which is not currently employed; two DC10-30
aircraft ($15.0 million) which are not currently employed; three 727-200 cargo
aircraft ($14.9 million) out on operating lease; one DC10-30 cargo aircraft
($11.1 million) which is currently under a letter of intent to sell; three DC9-
41 aircraft ($8.3 million) which are currently off lease; two 727 aircraft ($8.1
million) leased to a scheduled carrier; and three DC9 aircraft ($7.4 million)
currently off lease with return conditions being negotiated. The remaining
accounts newly transferred to nonearning aggregate $11.8 million. FINOVA wrote-
off $13.6 million of Transportation Finance assets in the first two quarters of
2001.

     The transportation industry continues its downward cycle in both the
passenger and cargo markets. As a result, off-lease and repossessed aircraft are
increasing. FINOVA strives to anticipate these events in an effort to position
the planes for re-lease as soon as possible; however, the current state of the
industry and the U.S. and international economies has resulted in the off-lease
timeframes increasing. Aircraft values continue to experience significant
pressure. The high cost of fuel has negatively impacted the older, less
efficient aircraft market. This has created more supply as operators are moving
to the newer aircraft whenever possible. FINOVA's increased write-offs reflect
this market condition.

     The $87.6 million increase in the Communications Finance nonaccruing assets
is represented by eleven account relationships in seven different market niches.
The largest increase comes from the television sector, as one relationship
totaling $68.6 million moved into nonaccrual status. Also moving to nonaccruing
was a $15.3 million loan (FINOVA's participation share) to an internet provider
and a $14.7 million loan to a rural cable operator. A $13.0 million loan to both
the radio and television sectors and one other account relationship ($8.9
million) in the radio and television sectors was moved to nonaccruing. The
largest of the remaining new nonaccruing accounts was $5.2 million.

     The $70.3 million of new nonaccruing accounts in Resort Finance was
comprised of three accounts. The largest ($43.4 million) is secured by
receivables and unsold inventory of a timeshare developer with three projects in
Florida and Tennessee. Previous cash shortfalls caused the receivables line to
become overadvanced and FINOVA is currently working with the borrower to bring
their advance ratio back in line. In addition, a developer of a residential golf
community ($22.3 million) was moved into nonaccruing status due to a slow down
in lot sales causing operating deficits. The third account ($4.5 million)
involves a timeshare project in Scotland. A lack of current financial and
operational information, along with late payments, caused this account to be
moved to nonaccruing. Specific reserves of $11.4 million have been assigned to
these new nonaccruing accounts.

     The Mezzanine Capital portfolio continues to experience the difficulties
caused by the weakening economy and the reduced availability of capital. The
increase in nonaccruing accounts ($61.7 million) is represented by senior lien
transactions ($34.8 million) and subordinated lien transactions ($47.5 million).
Included in the increase are accounts with balances totaling $49.5 million that
remain current in payments. These accounts have been moved to nonaccruing status
due to poor financial performance, industry conditions, and/or management
concerns. The largest accounts are represented by a manufacturer of refractories
($10.5 million) and a reseller of paging services ($9.2 million). Specific
reserves of $44.7 million have been assigned to these new nonaccruing accounts.

     The $48.5 million increase in nonaccruing assets in Commercial Equipment
Finance was principally due to the addition of a $41.0 million loan to a
corporate aircraft charter operator who is experiencing cash flow difficulties.
The balance of the increase was due to the addition of seven other accounts
affected by the slowing economy. Three of the accounts are in bankruptcy.
Specific reserves of $11.5 million have been assigned against the new
nonaccruing assets.

                                       18
<PAGE>

     The $40.3 million increase in the Franchise Finance division is primarily
due to one operator ($29.4 million) of a casual dining chain. This borrower is
attempting to obtain additional sources of working capital to support a
satisfactory resolution. The next largest new nonaccruing account ($6.9 million)
is represented by a franchisee of quick serve food stores. The other increases
are represented by multi-unit franchisees that have been impacted by the
competitive environment and the slowing economy. Specific reserves of $13.6
million have been assigned against the total new nonaccruing assets.

     Earning impaired assets increased during the six months ended June 30, 2001
to $439.5 million, or 5.0% of ending managed assets, from $235.8 million, or
2.2% of ending managed assets at December 31, 2000. The largest additions to
earning impaired assets were in Healthcare Finance ($67.0 million),
Transportation Finance ($56.1 million), Resort Finance ($23.0 million), Realty
Capital ($22.5 million), Rediscount Finance ($17.2 million), and Mezzanine
Capital ($8.1 million). The increase in Healthcare Finance is attributable to
three accounts. The first is a developer of assisted living facilities whose
financing was provided for renovation and construction of five facilities. The
second is a participation in a bank facility to finance an operator of skilled
nursing and assisted living facilities in California, Texas, and Arizona. All
the assets of the company secure the facility. The final Healthcare transaction
is also a participation for an operator of assisted living facilities. The
transaction matured at the end of May with no plan for refinancing in place.
The increase in Transportation Finance is represented by six accounts secured by
aircraft, where FINOVA has approved, or anticipates, some type of payment
modification in the near-term. The increase in Resort Finance is primarily
attributable to one account secured by timeshare receivables and unsold
inventory in a recently developed golf course community. The timeshare sales
have underperformed budget and the developer has been supporting operations. The
increase in Realty Capital is primarily attributable to one account secured by a
two-story R&D/Office complex in California. The account was moved to earning
impaired status as a result of losing one of its major tenants. The increase in
Rediscount Finance represents one account that operates as a consumer sales
finance company based in Florida. The account was considered impaired due to an
out of formula condition with the underlying collateral of automobile finance
contracts. The increase in Mezzanine Capital is represented by three accounts.
One is a manufacturer of industrial chemical products. Although payments
continue to be made, the loan matured in April with no refinancing source. The
next account is a similar situation for an operator of retail tire stores.
Payments continue to be made, but the principal has not been repaid. The third
account is a software development and sales company. Poor financial performance
has driven the decision to place the account on the earning impaired list.

     There can be no assurance that any of the potential transactions noted
above will be consummated on anticipated terms.

     The carrying amount of FINOVA's accounts that were 31-90 days delinquent in
payment at June 30, 2001 and December 31, 2000 were 1.1% and 1.2%, respectively
of managed assets.

     FINOVA's internally generated funds and asset sales financed liquidity
during the six months ended June 30, 2001. On February 27, 2001, FINOVA
announced a moratorium on repayments of principal on its outstanding bank and
bond debt. On March 7, 2001, FINOVA filed for protection from its creditors as
noted above to enable it to restructure the timing of its debt repayments. The
Reorganization Proceedings seek to enable FINOVA to restructure the debt
maturities, among other items. No principal or interest payments will be made on
the debt until the Plan defining repayment terms has been approved by the court.

     In 2001, substantially all of FINOVA's interest rate swaps were terminated
as a result of the Reorganization Proceedings. Historically, FINOVA entered into
derivative transactions as part of its interest rate risk management policy of
match funding its assets and liabilities. Therefore, FINOVA's asset and
liabilities are not match funded going forward. The interest rate swaps had an
estimated value of approximately $63 million, of which $20 million were cash
settled and recognized into income in the six months of 2001 and included as a
reorganization item. Pursuant to the Company's various agreements, the
institutions exercised their right to offset the amounts due to the Company,
with respect to approximately $43 million of the cash termination value of the
swaps, against the amount due by the Company on the debt outstanding. No swap
termination gains have been recognized on these swaps since the amounts have not
been approved by the bankruptcy court.

     At June 30, 2001, FINOVA had $11.0 billion of debt outstanding, including
$115.0 million of TOPrS, and a common equity base of $145.5 million. As a result
of its moratorium on debt payments, its subsequent filing of Bankruptcy under
Chapter 11 and defaults under various financial covenants under its bank
agreements, FINOVA Capital is in default under its debt agreements.

New Accounting Standards

     In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes new accounting and
reporting standards for derivative instruments. In June 1999, the FASB issued
SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133," and in June 2000, the
FASB issued SFAS No. 138, "Accounting for Certain Derivative Instruments and
Certain Hedging Activities - An

                                       19
<PAGE>

Amendment of FASB Statement No. 133." SFAS 133, as amended, establishes
accounting and reporting standards requiring that derivative instruments,
including certain derivative instruments embedded in other contracts, be
recorded in the statement of financial position as either an asset or liability
measured at its fair value. SFAS 133 requires that changes in the derivative's
fair value be recognized currently in earnings unless specific hedge accounting
criteria are met.

     FINOVA adopted the provisions of SFAS 133, as amended, on January 1, 2001,
which resulted in an immaterial impact on FINOVA's consolidated results of
operations and financial position.

     In July 2001, the Financial Accounting Standards Board Issued Statements of
Financial Accounting Standards ("SFAS") No. 141, "Business Combinations" and No.
142, "Goodwill and Other Intangible Assets". SFAS No. 141 supercedes APB opinion
No. 16, "Business Combinations" and amends or supercedes a number of related
interpretations of APB 16. SFAS No. 141 eliminates the pooling-of-interests
method of accounting for business combinations, and changes the criteria to
recognize intangible assets apart from goodwill. SFAS No. 142 supercedes APB
opinion No. 17. "Intangible Assets." Under SFAS No. 142, goodwill and indefinite
lived intangible assets are no longer amortized but are reviewed annually, or
more frequently if impairment indicators arise, for impairment.

     Management plans to adopt the provisions of SFAS No. 141 for any business
combination accounted for by the purchase method that is completed after June
30, 2001. Management will consider adopting SFAS No. 142 upon FINOVA's emergence
from Chapter 11. Management does not believe the adoption of the provisions of
SFAS No's. 141 and 142 will have a material impact on FINOVA's results of
operations and financial position.

Special Note Regarding Forward-Looking Statements

     Certain statements in this report are "forward-looking," in that they do
not discuss historical fact, but instead note future expectations, projections,
intentions or other items. These forward-looking statements include matters in
the sections of this report captioned "Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Item 3.
Quantitative and Qualitative Disclosure About Market Risk." They are also made
in documents incorporated in this report by reference, or in which this report
may be incorporated, such as a prospectus.

     Forward-looking statements are subject to known and unknown risks,
uncertainties and other factors that may cause FINOVA's actual results or
performance to differ materially from those contemplated by the forward-looking
statements. Many of those factors are noted in conjunction with the forward-
looking statements in the text. Other important factors that could cause actual
results to differ include:

  .  The results of FINOVA's efforts to implement its business strategy,
     including successful completion of the Reorganization Proceedings. Failure
     to fully implement its business strategy might result in adverse effects,
     including materially adverse impacts on its financial position and results
     of operations. The current focus on maximizing portfolio values and
     liquidity while minimizing or eliminating new business generation will
     likely result in financial results that differ materially from prior
     periods. Similarly adoption of "Fresh Start" reporting upon emergence will
     result in revaluating of certain assets and liabilities and other
     adjustments to the financial Statements.

  .  The effect of economic conditions and the performance of FINOVA's
     borrowers. Economic conditions in general or in particular market segments
     could impact the ability of FINOVA's borrowers to operate or expand their
     businesses, which might result in decreased performance, impacting
     repayment of their obligations. The rate of borrower defaults or
     bankruptcies may increase. Economic conditions could adversely affect
     FINOVA's ability to realize gains from sales of assets and investments and
     estimated residual values. Those items could be particularly sensitive to
     changing market conditions. Certain changes in fair market values must be
     reflected in FINOVA's reported financial results.

  .  The cost of FINOVA's capital. That cost has increased significantly as a
     result of the events of 2000 and will increase further if the Berkadia
     transaction is consummated. The impact of these developments will be a
     significant reduction in profit margins.

  .  Loss of employees. FINOVA must retain a sufficient number of employees with
     relevant knowledge and skills to continue to monitor and collect its
     portfolio. Failure to do so could result in additional losses.

  .  Changes in air worthiness directives. These changes could have a
     significant impact on airplane values, especially FINOVA's portfolio of
     airplanes, which are of an older vintage.

  .  Changes in government regulations, tax rates and similar matters. For
     example, government regulations could significantly increase the cost of
     doing business or could eliminate certain tax advantages of some of
     FINOVA's financing products. The current financial condition of FINOVA also
     makes it difficult to record potential tax benefits that may never be
     recognized.

  .  Necessary technological changes, such as implementation of information
     management systems, may be more difficult, expensive or time consuming than
     anticipated.

  .  Potential liabilities associated with dispositions of assets or lines of
     business.

  .  Changes in interest rates could adversely affect financial results.

  .  Other risks detailed in FINOVA's other SEC reports or filings.

                                       20
<PAGE>

     FINOVA does not intend to update forward-looking information to reflect
actual results or changes in assumptions or other factors that could affect
those statements. FINOVA cannot predict the risk from reliance on forward-
looking statements in light of the many factors that could affect their
accuracy.

                                       21
<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
-----------------------------------------------------------------

     FINOVA's primary market risk has been exposure to the volatility of
interest rates. FINOVA sought to manage interest rate risk and preserve income
through a diversified borrowing base and a matched funding policy. A diversified
borrowing base consisted of short and long-term debt with a fixed or variable
rate. FINOVA's matched funding policy required that floating-rate assets be
financed with similar floating-rate liabilities and fixed-rate assets be
financed with similar fixed-rate liabilities. Under the matched funding policy,
the difference between floating-rate assets and floating-rate liabilities was
managed to not exceed 3% of total assets for any extended period.

     As a result of the developments described in the Company's 2000 10-K/A, the
Company cannot determine the nature of its borrowing base or achieve a matched
funding policy. In addition, substantially all of the Company's interest rate
swap agreements were terminated as a result of the bankruptcy filing. During the
pendancy of the bankruptcy, the interest rate which will be applied to the
Company's debt obligations is also uncertain.

     Since approximately 50% of the Company's assets earn at a floating-rate,
any decline in market rates could adversely affect the Company since it would
earn less on its assets while the nature of its financing costs is uncertain.
Alternatively, any increase in market rates would increase its return on
floating-rate assets; however, if its financing costs also become floating any
potential increases in asset returns could be offset by rising costs of capital.
Until a plan of reorganization is approved and its financing costs determined,
the Company does not expect to be able to mitigate its exposure to changes in
interest rates.

     Under the terms of Berkadia's commitment, the New Senior Notes will have an
interest rate of 7.5% per year and will mature as to principal in eight years.
The Berkadia Loan will be at LIBOR plus 225 basis points per year. If the
Berkadia transaction is consummated, a successful strategy to mitigate the
Company's exposure to changes in market interest rates could be developed;
however, no assurance can be given that the Company will be able to implement
any such strategy at an acceptable cost or will seek to do so. In addition, no
assurance can be given that the transaction will be consummated.

                                       22
<PAGE>

                          PART II  OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS
-------------------------

     See Part I, Item 1, Note H for a discussion of pending legal proceedings.

                                       23
<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.
-----------------------------------------

     (a)  The following exhibits are filed herewith:

 Exhibit No.                              Document
-------------   -----------------------------------------------------------
    12          Computation of Ratio of (Losses) Income to Fixed Charges
                (interim period).

     (b)  Reports on Form 8-K:

     A report on Form 8-K dated June 22, 2001 was filed by FINOVA, which
included a copy of the Company's Third Amended and Restated Disclosure Statement
and accompanying Third Amended Joint Plan of Reorganization of Debtors under the
Bankruptcy Code, along with the Company's press release regarding the
Reorganization Proceedings.

                                       24
<PAGE>

                             THE FINOVA GROUP INC.

SIGNATURES
----------

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                             THE FINOVA GROUP INC.

                                                 (Registrant)



Dated: August 1, 2001        By:           /s/ Bruno A. Marszowski
                                 ---------------------------------------------
                                 Bruno A. Marszowski, Senior Vice President,
                                 Chief Financial Officer and Controller
                                 Principal Financial and Accounting Officer

                                       25
<PAGE>

                             THE FINOVA GROUP INC.
                        COMMISSION FILE NUMBER 1-11011
                                 EXHIBIT INDEX
                            JUNE 30, 2001 FORM 10-Q

<TABLE>
<CAPTION>
 Exhibit No.                                        Document
-------------   ---------------------------------------------------------------------------------
<S>             <C>
     12         Computation of Ratio of (Losses) Income to Fixed Charges (interim period).
</TABLE>

                                      26