<PAGE>   1

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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                          WASHINGTON, D.C. 20549-1004
                            ------------------------
                                   FORM 10-K
(Mark One)
[X]           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
                  For the fiscal year ended December 31, 1999

                                       OR
[  ]        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
                For the transition period from                to

                         Commission File Number 2-44197

                      ASSOCIATES FIRST CAPITAL CORPORATION
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                 <C>
                     DELAWARE                                           06-0876639
 (State or other jurisdiction of incorporation or          (I.R.S. Employer Identification No.)
                   organization)
            250 EAST CARPENTER FREEWAY                                  75062-2729
                   IRVING, TEXAS                                        (Zip Code)
     (Address of principal executive offices)
</TABLE>

               Registrant's Telephone Number, including area code
                                  972-652-4000

          Securities Registered Pursuant to Section 12(b) of the Act:

<TABLE>
<CAPTION>
                                                                   NAME OF EACH EXCHANGE
TITLE OF EACH CLASS                                                 ON WHICH REGISTERED
-------------------                                                ---------------------
<S>                                                 <C>
               Class A Common Stock,                              New York Stock Exchange
             par value $0.01 per share
</TABLE>

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.  Yes [X]     No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [ ]

The aggregate market value of the voting stock held by non-affiliates of the
registrant, based on the most recent New York Stock Exchange Composite
Transaction closing price of the Class A Common Stock ($19.625 per share), which
occurred on March 27, 2000, was $9,822,814,822. For purposes of this
computation, all officers, directors, and 5% beneficial owners of the registrant
are deemed to be affiliates. Such determination should not be deemed an
admission that such officers, directors, and beneficial owners are, in fact,
affiliates of the registrant. At March 27, 2000, 728,338,437 shares of the
Company's Class A Common Stock, par value $0.01 per share, were outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE*

<TABLE>
<CAPTION>
                   DOCUMENT                                  WHERE INCORPORATED
                   --------                                  ------------------
<S>                                            <C>
           Proxy Statement for 2000                  Part III (Items 10, 11, 12 and 13)
        Annual Meeting of Stockholders
</TABLE>

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

*  As stated under various Items of this Report, only certain specified portions
   of such document are incorporated by reference herein.
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<PAGE>   2

                                     PART I

ITEM 1. BUSINESS.

COMPANY OVERVIEW

     Associates First Capital Corporation ("First Capital" or the "Company"), a
Delaware corporation, is a leading, diversified financial services organization
providing finance, leasing, insurance and related services to individual
consumers and businesses in the United States and internationally. As successor
to Associates Investment Company, founded in 1918, First Capital had 2,771
offices worldwide and employed approximately 32,500 persons at December 31,
1999. Corporate headquarters are located in Irving, Texas.

     For the year ended December 31, 1999, First Capital had total managed
revenues of $13.3 billion and net earnings of $1.5 billion. At December 31,
1999, managed finance receivables were $84.4 billion, total managed assets were
$95.1 billion and stockholders' equity was $9.8 billion.

     The Company's finance receivables are geographically dispersed. At December
31, 1999, approximately 81% of total managed receivables were dispersed across
the United States with 9% in California, 7% in Texas and 6% in Florida; no more
than 4% in any other state. The remaining 19% of total managed receivables were
dispersed across 13 foreign countries, with 9% in Japan and no more than 5% in
any other foreign country.

     The Company significantly expanded its consumer finance operations with the
acquisition of the assets of Avco Financial Services, Inc. (See "-- Significant
1999 Transactions"). This acquisition added over 2 million customers, over 1,200
branches at the time of the acquisition, and expanded the Company's present
geographic coverage to include Ireland, Spain, France, Sweden, Hong Kong, and
India.

SIGNIFICANT 1999 TRANSACTIONS

     During 1999, First Capital completed several significant strategic
acquisitions and dispositions. Set forth below is a summary of the most
significant.

     Significant 1999 Acquisitions:

     - Avco Financial Services, Inc. ("Avco")

     - Shell Oil and British Petroleum Private Label Credit Card Programs

     - Newcourt Credit Group's Canadian and United Kingdom fleet leasing
       operations ("Newcourt")

     Significant 1999 Dispositions:

     - 128 U.S. consumer finance branches acquired from Avco

     - Associates recreational vehicle finance operations (Fleetwood Credit
       Corporation)

     - 41 consumer finance branches located in Canada (28 of which were former
       Avco branches)

     - The Australia and New Zealand operations acquired from Avco

     - The SPS Network Transaction Services electronic transaction processing
       services operation acquired in 1998.

     - Balboa Life and Casualty Insurance Companies ("Balboa") which comprised
       Avco's non-affiliate insurance business

     The Avco acquisition was the largest in Company history and is described in
more detail below. The other acquisitions listed above are described in more
detail in the "-- Reportable Segments" and "-- Product Information" sections and
in Note 3 to the consolidated financial statements.

                                        1
<PAGE>   3

  Acquisition of Avco Financial Services, Inc.

     On January 6, 1999, the Company purchased the assets and assumed the
liabilities of Avco. Avco, formerly a subsidiary of Textron Inc., was a global,
diversified financial services company with approximately $9 billion in assets,
8,000 employees, over 1,200 branches and over 2 million customers at the time of
the acquisition. Avco's product offerings included home equity lending, retail
sales finance and consumer loans, equipment, inventory and vendor finance, and
credit and collateral-related insurance. Prior to the acquisition, Avco had the
fourth largest U.S. consumer finance branch network and operations in Canada,
the United Kingdom, Puerto Rico, Australia, Hong Kong, France, Sweden, Spain,
New Zealand, Ireland and India.

     As described in Note 3 to the consolidated financial statements, during
1999 the Company sold Avco's operations in Australia and New Zealand, as well as
156 former Avco branches (128 domestic and 28 Canadian) and Avco's non-affiliate
insurance business, Balboa Life and Casualty Insurance Companies. These sales
were initiated pursuant to the Company's acquisition, integration and capital
planning activities.

     During the first two quarters of 1999, the Company consolidated certain
headquarters activities in the United States, the United Kingdom and Canada,
resulting in a reduction in the Company's workforce. In the United States,
Avco's headquarters in Costa Mesa, California, were closed in the second quarter
of 1999, as all corporate functions were consolidated with the Company's
headquarters in Irving, Texas. Most of the 400 jobs at Avco's headquarters were
eliminated. Internationally, the Company closed its United Kingdom headquarters
in Slough, England and consolidated functions into the existing Avco facilities
in Reading, England. In addition, the Company closed its Canadian consumer
finance headquarters in Toronto, Ontario and consolidated these functions into
Avco's Canadian headquarters in London, Ontario. Certain other facilities
including the Avco Technology Center in Costa Mesa and Avco's Denver Purchasing
Center were also closed during 1999.

  Pending Acquisitions

     In December 1999, the Company announced an agreement to enter into an agent
bank partnership with KeyCorp, under which the companies will jointly manage
KeyCorp's credit card program. On January 31, 2000, the Company acquired
KeyCorp's credit card portfolio of approximately $1.3 billion in receivables and
nearly 600,000 active VISA(R) and MasterCard(R) accounts. In addition, the
Company acquired the rights to market credit card related products to KeyCorp's
more than 3 million customers through approximately 900 KeyCorp branches.

     In November 1999, the Company announced an agreement to acquire Arcadia
Financial Ltd. ("Arcadia"). Arcadia is a leading U.S. independent automobile
finance company which services over $5 billion in finance receivables. The
acquisition is expected to close during the first half of 2000. The Company also
entered into a continuous asset purchase and sale agreement under which the
Company purchased from Arcadia an aggregate of approximately $500 million of
retail installment sales contracts in November and December 1999. In the event
of a termination of the merger agreement between the Company and Arcadia,
approximately $200 million of these receivables may be repurchased by Arcadia.
Additionally, the Company purchased an aggregate of approximately $350 million
of retail installment sales contracts in January, February and March 2000.

     In August 1999, the Company announced an agreement to acquire and manage
the proprietary credit card program of CITGO Petroleum Corporation. The
transaction closed in March 2000 and the Company acquired approximately $130
million in receivables under this agreement.

REPORTABLE SEGMENTS

     The Company is organized into five primary business units: U.S. credit
card, U.S. consumer branch, U.S. home equity, commercial and international
finance. The U.S. consumer branch and U.S. home equity business units are
aggregated into one reportable U.S. consumer finance segment due to their
similar operating characteristics. The Company's corporate activities include,
among others, managing the operations of its domestic and foreign subsidiaries,
accessing the global debt, securitization and capital markets and managing the
mix of businesses in its portfolio. The Company fully allocates its corporate
activities to its business segments primarily based upon managed receivables. In
1999, these allocations included gains or losses on

                                        2
<PAGE>   4

business dispositions and assets sold and securitized as set forth in Notes 3
and 7 to the consolidated financial statements. For additional information about
specific products and services offered by the Company, see the "-- Product
Information" section.

     Some of the information disclosed in this section is presented on a Managed
Basis. Unless specifically identified as "managed" or "Managed Basis", the
financial information contained herein is presented on a basis consistent with
the amounts reported in the historical financial statements on an "Owned Basis".
See the "Management's Discussion and Analysis-Managed Basis Reporting" section
for more information on Managed Basis reporting. In addition, prior year amounts
presented have been restated, as necessary, to conform to the current year
presentation.

U.S. CREDIT CARD SEGMENT

     The Company's U.S. credit card segment offers private label retail credit
card and revolving programs ("Private Label Cards") and VISA(R) and
Mastercard(R) retail bankcard credit card products ("Retail Bankcards") to
customers throughout the United States. Various credit-related and other
insurance products are also provided, including credit life, credit accident and
health, accidental death and dismemberment, involuntary unemployment and
personal property insurance. In addition, the U.S. credit card segment provides
emergency roadside assistance and auto club services.

     The Company's credit card related revenues are derived from finance charges
on revolving accounts, the interchange fees resulting from merchant discounts,
annual membership and other account fees, as well as fees earned from the sale
of insurance and other fee-based products. The Company's credit card receivables
typically bear variable interest rates tied to movements in the prime lending
rate.

     The Private Label Card business consists of customized revolving credit
programs for oil and retail companies. The Company's retail Private Label Card
program includes Radio Shack, Gateway, Goodyear, Staples, Office Depot and
Office Max, among others. The Company's oil Private Label program includes
Texaco, Amoco, Shell Oil and British Petroleum. The Shell Oil and British
Petroleum credit card programs were acquired during 1999, establishing the
Company as the leading provider of oil company credit cards in the United
States. In August 1999, the Company announced an agreement to acquire and manage
the proprietary credit card program of CITGO Petroleum Corporation. This
transaction closed in March 2000.

     Retail Bankcards are issued across a wide spectrum of customers with
interest rates based on customer credit profiles. Bankcard operations were
expanded through the December 1998 agent bank agreement with Washington Mutual
Bank, FA. As mentioned below, in January 2000 the Company acquired the bankcard
portfolio from KeyCorp and entered into an ongoing agent bank partnership.

     The following table shows certain information regarding the Company's U.S.
credit card segment:

                                U.S. CREDIT CARD

<TABLE>
<CAPTION>
                                                            YEAR ENDED OR AT DECEMBER 31
                                                    --------------------------------------------
                                                        1999            1998            1997
                                                    ------------     -----------     -----------
                                                    (DOLLARS IN MILLIONS, ON A MANAGED BASIS(1))
<S>                                                 <C>              <C>             <C>
Total revenue.....................................   $ 2,542.3        $1,968.9        $1,659.2
Net interest margin...............................     1,737.9         1,377.8         1,163.0
Net losses........................................       721.4           623.3           573.9
60+days delinquency(2)............................        4.21%           4.79%           3.99%
Segment earnings..................................   $   441.1        $  299.8        $  199.7
Finance receivables...............................    10,928.3         9,622.0         7,839.3
</TABLE>

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

(1) See the "Management's Discussion and Analysis -- Managed Basis Reporting"
    section for more information on Managed Basis reporting.

(2) As a percentage of gross managed receivables.

     Customers. The Company's U.S. credit card segment customers are primarily
consumers who span a wide range of income levels and credit histories. The
Company uses a proprietary credit scoring model to

                                        3
<PAGE>   5

evaluate risk and other factors in extending credit to its customers.
Information considered by the Company in the credit scoring model includes,
among other things, the customer's capacity to repay (e.g., income, debt ratio,
and employment stability) and credit history. In addition, the U.S. credit card
segment serves business customers principally through its private label
products.

     Delivery of Products and Services. The Company distributes its U.S. credit
card products through three subsidiaries, Hurley State Bank ("HSB"), Associates
National Bank (Delaware) ("ANB") and Associates Capital Bank, Inc. ("ACB").
Through these subsidiaries, the Company offers a number of Private Label and
Retail Bankcards directly to the public and through co-operative marketing
programs with other companies.

     Private Label Cards are distributed through seven centralized operating
centers that provide marketing support for the merchant relationship, as well as
credit collection and card holder services. Retail Bankcards are distributed
through one centralized operating center that provides credit and collection
services, cardholder services and marketing support. A shared utility group
provides cardholder fulfillment services, including credit card embossing.
Emergency roadside assistance and autoclub services are provided through
centralized support facilities in Dallas, Texas and Gray, Tennessee.

     Acquisitions. During 1999, the Company further strengthened its leadership
position in the oil private label credit card market through the acquisitions of
the Shell Oil and British Petroleum Private Label Cards programs. Approximately
three million new active customer accounts and approximately $400 million in
receivables were added through these acquisitions. Additionally, in August 1999
the Company announced an agreement to acquire approximately $130 million in
receivables from CITGO Petroleum Corporation and to manage its proprietary
credit card program. This transaction closed in March 2000. In December 1999,
the Company announced an agreement to acquire KeyCorp's retail bankcard
portfolio and jointly manage KeyCorp's credit card program. The transaction
closed on January 31, 2000. In addition, the Company acquired the rights to
market credit card related products to KeyCorp's more than 3 million customers
through approximately 900 KeyCorp branches.

U.S. CONSUMER FINANCE SEGMENT

     The Company's U.S. consumer finance segment offers a variety of consumer
finance and insurance products and services to customers throughout the United
States (excluding Hawaii and Puerto Rico, which are included in the
international finance segment). Finance products and services offered by this
segment include home equity loans, personal loans, automobile financing and
retail sales finance. In addition, the Company, through certain subsidiaries and
third parties, makes available various credit-related and other insurance
products to its U.S. consumer finance customers, including credit life, credit
accident and health, involuntary unemployment, personal property insurance and
other non-credit products.

     The following table shows certain information regarding the Company's U.S.
consumer finance segment:

                             U.S. CONSUMER FINANCE

<TABLE>
<CAPTION>
                                                            YEAR ENDED OR AT DECEMBER 31
                                                   ----------------------------------------------
                                                       1999             1998             1997
                                                   ------------    --------------    ------------
                                                    (DOLLARS IN MILLIONS, ON A MANAGED BASIS(1))
<S>                                                <C>             <C>               <C>
Total revenue...................................    $ 4,442.2        $ 3,828.7        $ 3,633.6
Net interest margin.............................      2,266.7          2,080.8          2,056.3
Net losses......................................        765.2            615.7            514.8
60+days delinquency(2)..........................         3.77%            3.22%            2.73%
Segment earnings................................    $   688.7        $   655.9        $   665.6
Finance receivables.............................     31,566.8         26,810.5         23,985.0
</TABLE>

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

(1) See the "Management's Discussion and Analysis -- Managed Basis Reporting"
    section for more information on Managed Basis reporting.

(2) As a percentage of gross managed receivables.

                                        4
<PAGE>   6

     Customers. The Company's U.S. consumer finance customers span a wide range
of income levels and credit histories. These customers generally have a history
of using credit from a variety of sources and include homeowners and purchasers
of automobiles and consumer durables (such as furniture, electronics and
appliances). The Company uses credit scoring models to evaluate risk and other
factors in extending credit to its customers. Information considered by the
Company in the credit scoring model includes, among other things, the customer's
capacity to repay (e.g., income, debt ratio and employment stability), credit
history and available collateral to secure the loan, including home ownership.

     Delivery of Products and Services. The Company distributes its U.S.
consumer finance and insurance products through branch offices and centralized
consumer lending operations as described below:

     Branch System. At December 31, 1999, the Company's U.S. consumer finance
branch system consisted of approximately 1,081 geographically dispersed offices
with locations in the continental United States. These locations operate under
four different nameplates -- Associates Financial Services, TranSouth Financial,
First Family Financial Services and Kentucky Finance. In addition, the U.S. home
equity branch system consisted of 257 direct sales offices. All former Avco
branches are now operating under the Associates Financial Services nameplate.
Products distributed include direct origination of home equity loans, personal
loans, automobile finance and retail sales finance.

     Centralized Lending. At December 31, 1999, the Company distributed home
equity, personal loans, sales finance and automobile lending through seven
regional service centers and centralized lending operations. The Company
distributes its centralized home equity products primarily through Associates
Home Equity Services, Inc. ("AHES"). AHES offers both fixed and variable rate
closed-end loans and lines of credit, secured by residential property. Home
equity loans are originated through unaffiliated mortgage brokers, financial
institutions and existing customer relationships targeted through direct mail
and telemarketing efforts. Mortgage brokers are independent agents who match
their customers with a lender based on the customer's needs and the credit
profile requirements of the lender. The Company distributes its revolving
personal lending and sales finance products through its federally insured Utah
industrial thrift, ACB, and its retail auto lending products through TranSouth
Financial's retail auto center.

     Avco Acquisition. On January 6, 1999, the Company completed the acquisition
of Avco. Avco's domestic finance receivables included in the U.S. consumer
finance segment were approximately $3.7 billion at December 31, 1998. These
receivables primarily consisted of home equity and personal loans and retail
installment contracts. The Company subsequently sold 128 branches which included
approximately $525 million of finance receivables. The acquisition of Avco
solidified the Company's market position in the domestic consumer finance sector
by increasing the Company's customer base at the time of the acquisition by over
2 million customers and adding over 4,000 dealers and merchant agreements. For
additional information regarding the Avco acquisition, see the "-- Company
Overview" section and Note 3 to the consolidated financial statements.

COMMERCIAL SEGMENT

     The Company's commercial segment offers a variety of commercial finance and
insurance products to customers in the United States and Canada. Finance
products and services offered by this segment in the United States and Canada
include retail and wholesale financing and leasing products and services for
heavy-duty (Class 8) and medium-duty (Classes 3 through 7) trucks and truck
trailers and construction, material handling and other industrial and
communications equipment. The Company engages in a number of other commercial
activities, including auto fleet leasing and fleet management services,
government guaranteed lending, employee relocation services, truck trailer
rental services, warehouse lending and public finance.

     The Company, through certain subsidiaries and third parties, also makes
available various credit-related and other insurance products to its commercial
segment customers and other customers, including commercial auto and dealers'
open lot physical damage, credit life and motor truck cargo insurance, and
commercial and public auto liability insurance. The Company also offers
specialty lines including general liability, directors and officers and errors
and omission insurance, and personal lines including homeowner and recreational
vehicle insurance.

                                        5
<PAGE>   7

     The Company has a centralized warehouse lending operation, which is
conducted through First Collateral Services, Inc. ("FCS"). FCS provides
short-term financing, secured by real estate mortgages, to mortgage companies
and other mortgage lenders.

                                   COMMERCIAL

<TABLE>
<CAPTION>
                                                           YEAR ENDED OR AT DECEMBER 31
                                                  ----------------------------------------------
                                                      1999             1998             1997
                                                  ------------     ------------     ------------
                                                   (DOLLARS IN MILLIONS, ON A MANAGED BASIS(1))
<S>                                               <C>              <C>              <C>
Total revenue(2)................................   $ 3,285.2        $ 2,591.7        $ 2,152.9
Net interest margin.............................     1,028.4          1,008.1            875.7
Net losses(3)...................................       245.8            111.3             67.3
60+days delinquency(3)(4).......................        1.26%            1.21%            1.02%
Segment earnings(2).............................   $   506.9        $   510.5        $   439.7
Finance receivables(3)..........................    27,948.6         26,469.6         22,304.2
</TABLE>

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

(1) See the "Management's Discussion and Analysis -- Managed Basis Reporting"
    section for more information on Managed Basis reporting.

(2) Includes the revenues and earnings of the Company's non-affiliate insurance
    operations of $504.7 million and $35.3 million, respectively in 1999. The
    non affiliate insurance operations had no effect on net interest margin.

(3) As described in Note 22 to the consolidated financial statements, in January
    2000 the Company announced its decision to discontinue the origination of
    manufactured housing financing products. In addition, the Company sold its
    recreational vehicle business in March, 1999. Net losses, on a pro forma
    basis, excluding the impact of manufactured housing and recreational vehicle
    operations would have been $104.8 million, $53.7 million and $36.4 million
    for the years ended December 31, 1999, 1998 and 1997, respectively. 60+days
    delinquency, on a pro forma basis, excluding the impact of manufactured
    housing and recreational vehicle operations would have been 1.16%, 1.03% and
    1.04% for the years ended December 31, 1999, 1998 and 1997, respectively.
    Finance receivables, on a pro forma basis, excluding the manufactured
    housing and recreational vehicle operations would have been $22.5 billion,
    $19.2 billion and $17.1 billion at December 31, 1999, 1998 and 1997,
    respectively.

(4) As a percentage of gross managed receivables.

     Delivery of Products and Services. The Company distributes its commercial
finance and insurance products through branch and regional offices and
centralized commercial lending, leasing and service operations and general and
independent insurance agents, brokers and program administrators described
below:

     Branch System. The Company provides truck and truck trailer financing,
equipment financing and leasing services, manufactured housing financing and
related insurance through 85 branch offices in the United States and Canada.
Additionally, approximately 300 salespeople regularly contact truck and truck
trailer dealers, construction equipment dealers and manufactured home retailers
to purchase finance contracts made between those dealers and retailers and the
ultimate end-user. The Company also provides short-term trailer rentals through
23 U.S. branch offices. In addition, insurance products are offered through
approximately 5,500 general and independent agents and brokers.

     Centralized Lending, Leasing and Services. The Company utilizes ten
centralized operations to distribute lending, leasing and fee-based products and
services. The auto fleet leasing and fleet management services operation is
directed through Associates Fleet Services. Additionally, centralized operations
are used to provide material handling and industrial and communications
equipment products, employee relocation services and small business lending
programs.

     Discontinuation of Manufactured Housing Loan Origination Activities. In
January 2000, the Company announced its decision to discontinue the origination
of retail installment and wholesale financing products for the manufactured
housing sector. The Company's decision follows disappointing operating results
and the unfavorable outlook for the sector. The Company closed substantially all
of its sales purchase offices in February 2000 and will close its regional loan
origination centers in the second quarter of 2000. The Company will service the
liquidation of the existing receivables through its centralized service facility
in Knoxville, Tennessee. The Company will limit its origination activities to
support of its contractual arrangements and loss mitigation initiatives. See
Note 22 to the consolidated financial statements.

                                        6
<PAGE>   8

     Sale of Recreational Vehicle Finance Business. Through March 1999, the
Company offered various recreational vehicle financing products. As described in
Note 3 to the consolidated financial statements, in March 1999 the Company sold
its recreational vehicle finance operation to NationsBank, N.A., a unit of
BankAmerica Corporation.

INTERNATIONAL FINANCE SEGMENT

     The Company's international finance segment offers a variety of consumer
finance products and services to customers in Japan, Canada, the United Kingdom,
Puerto Rico, Sweden, Hong Kong, Spain, India, Mexico, Taiwan, Ireland and Costa
Rica. Commercial financing products are also offered in the United Kingdom, Hong
Kong, Puerto Rico, France, Mexico, Japan, India and Spain. Commercial finance
products offered in Canada are managed by the Company's commercial segment, and
are included in the commercial segment results. The Company, through certain
subsidiaries and other third parties, also offers various credit-related and
other insurance products to its customers, including credit life, credit
accident and health, accidental death and dismemberment, involuntary
unemployment and personal property insurance. The characteristics of the
international finance segment's customers are similar to those of their
counterparts in the U.S. consumer finance, U.S. credit card and commercial
segments.

     In January 1999, the Company acquired the operations of Avco, expanding its
presence in Canada, the United Kingdom and Puerto Rico. Through the acquisition,
the Company also entered new markets in Sweden, Hong Kong, Spain, France, India,
Ireland, Australia and New Zealand. In June 1999, the Company completed the sale
of its Australia and New Zealand operations.

     The following table shows certain information regarding the Company's
international finance segment:

                             INTERNATIONAL FINANCE

<TABLE>
<CAPTION>
                                                            YEAR ENDED OR AT DECEMBER 31
                                                    --------------------------------------------
                                                        1999            1998            1997
                                                    ------------     -----------     -----------
                                                    (DOLLARS IN MILLIONS, ON A MANAGED BASIS(1))
<S>                                                 <C>              <C>             <C>
Total revenue.....................................   $ 2,981.3        $1,640.2        $1,024.8
Net interest margin...............................     2,191.4         1,278.1           791.0
Net losses........................................       483.7           215.7            94.0
60+days delinquency(2)............................        2.60%           2.58%           1.93%
Segment earnings..................................   $   740.2        $  474.3        $  335.0
Finance receivables...............................    13,971.0         8,462.2         4,278.0
</TABLE>

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

(1) See the "Management's Discussion and Analysis -- Managed Basis Reporting"
    section for more information on Managed Basis reporting.

(2) As a percentage of gross managed receivables.

     Delivery of Products and Services. The Company delivers international
finance products and services through approximately 1,300 consumer and
commercial branches and 25 centralized facilities. The Company's international
locations employ operational policies, practices and disciplines similar to
those of the Company's other segments but give appropriate consideration to
local laws and customs. Set forth below is a description of the Company's
international delivery systems at December 31, 1999.

          - Japan. The Company operates 675 consumer branches, 10 centralized
     consumer and credit card facilities and one commercial operation in Japan.
     In addition, the Company offers consumer loans through 178 automated loan
     machines ("ALMs"). These operations are principally conducted by AIC
     Corporation ("AIC") and DIC Finance Co., Ltd., ("DIC"). Products offered by
     AIC and DIC include home equity and personal loans, MasterCard(R) credit
     cards, retail sales finance contracts and commercial transportation and
     construction and industrial equipment financing.

          - Canada. The Company operates 318 consumer finance branches and five
     centralized consumer finance lending operations through which the Company
     purchases retail sales finance contracts and makes personal and home equity
     loans. Commercial finance products are also offered in Canada, but are

                                        7
<PAGE>   9

     managed by the Company's commercial finance operations. Accordingly,
     Canada's commercial operations are included in the operations of the
     commercial segment.

          - United Kingdom. The Company operates 112 consumer and commercial
     branches and three centralized lending and credit facilities through which
     home equity and personal loans, credit cards, purchased consumer retail
     sales finance contracts and commercial transportation and construction
     equipment financing products are offered. In 1999, the consumer and
     commercial operations expanded through the acquisition of Avco.

          - Other International Operations. The Company has 83 branches in
     Puerto Rico; 51 in Mexico; 11 in Spain; 10 in France; eight in Hong Kong;
     seven in India; seven in Ireland; five in Costa Rica, two in Taiwan and one
     in Sweden through which various consumer and commercial finance products
     are provided. In February 2000, the Company discontinued loan originations
     in Costa Rica. Accordingly, the Company consolidated its branch operations
     into two offices which will liquidate the existing receivables portfolio.
     Also, in January 2000, the Company expanded its international operations
     into Norway.

PRODUCT INFORMATION

     This section provides additional information about the products and
services offered by the Company. This information is provided on a Company-wide
product line basis. For information about the Company's reportable business
segments including selected segment financial information, product delivery
systems and customers see the "-- U.S. Credit Card Segment", "-- U.S. Consumer
Finance Segment", "-- Commercial Segment" and "-- International Finance Segment"
sections.

     The following table shows certain information with respect to the Company's
managed receivables outstanding by product (in millions):

                       MANAGED RECEIVABLES OUTSTANDING(1)

<TABLE>
<CAPTION>
                                                             AT DECEMBER 31
                                        ---------------------------------------------------------
                                          1999        1998        1997        1996        1995
                                        ---------   ---------   ---------   ---------   ---------
<S>                                     <C>         <C>         <C>         <C>         <C>
Home Equity...........................  $27,480.3   $22,622.3   $18,796.0   $16,691.4   $14,316.3
Personal Lending/Retail Sales
  Finance.............................   16,012.4    11,459.2     8,731.6     7,425.1     6,225.1
Truck and Truck Trailer...............   13,130.3    10,783.6     9,688.9     8,598.3     7,724.0
Credit Card...........................   11,733.6    10,296.8     8,323.7     6,023.8     4,984.6
Equipment.............................    6,977.3     6,114.0     5,300.5     4,571.8     3,781.7
Manufactured Housing(2)...............    5,494.8     5,193.5     3,526.9     2,547.5     2,049.3
Recreational Vehicles(3)..............         --     2,036.9     1,665.4     1,315.6          --
Auto Fleet Leasing....................    2,070.1     1,589.7     1,551.1     1,090.8       330.8
Other Financial Services..............    1,515.9     1,268.3       822.4       358.5       290.7
                                        ---------   ---------   ---------   ---------   ---------
          Total(4)....................  $84,414.7   $71,364.3   $58,406.5   $48,622.8   $39,702.5
                                        =========   =========   =========   =========   =========
</TABLE>

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

(1) See the "Management's Discussion and Analysis -- Managed Basis Reporting"
    section for more information on Managed Basis reporting.
(2) As described in Note 22 to the consolidated financial statements, in January
    2000, the Company announced its intention to discontinue its manufactured
    housing loan origination activities.
(3) In March 1999 the Company sold its recreational vehicle finance business to
    NationsBank, N.A., a unit of BankAmerica Corporation. See Note 3 to the
    consolidated financial statements.
(4) Excluding manufactured housing and recreational vehicle receivables,
    proforma managed receivables from ongoing operations would have been $78.9
    billion, $64.1 billion, $53.2 billion, $44.8 billion and $37.7 billion at
    December 31, 1999, 1998, 1997, 1996 and 1995, respectively.

     Home Equity. Home equity lending activities consist of originating and
servicing fixed and variable rate mortgage loans that are secured primarily by
single-family residential properties. Typically, such loans are not used for the
acquisition of homes, but are made to borrowers primarily for the purpose of
debt consolidation, including the refinancing of existing mortgage loans, home
improvements and a variety of other purposes.

                                        8
<PAGE>   10

     Home equity loans have maturities of up to 360 months. Fixed rates were
charged on approximately 93% of home equity managed receivables outstanding at
December 31, 1999. Home equity loans may be secured by either first or second
mortgages. At December 31, 1999, approximately 76% of the aggregate net
outstanding balance of home equity lending receivables was secured by first
mortgages.

     Personal Lending/Retail Sales Finance. The Company's personal lending
business consists of direct origination and servicing of secured and unsecured
personal loans to individuals. Personal loans are direct consumer loans that are
generally not secured by real estate. Such loans may be secured by existing
personal property (the realizable value of which may be less than the amount of
the loan secured), including automobiles and consumer durables. Personal loan
contract terms range up to 60 months and generally require payments on an
installment basis. In general, personal loans are made for the purpose of debt
consolidation, home improvement, education and purchasing automobiles,
appliances and other durable goods. Personal loans are marketed through direct
mail, advertising, referrals and the solicitation of existing retail sales
finance customers.

     Retail sales finance contracts are generally for the purchase of items such
as household electronics and appliances, automobiles, furniture and home
improvements. These contracts are generally purchased from retailers of such
items, and provide an important source of new customers. The sales finance
relationship often leads to other types of financing for the customer based upon
the individual's needs. The terms of retail sales finance contracts differ based
on the amount financed and the credit quality of the customer. Generally, retail
sales finance contracts have terms ranging from 24 to 36 months. Automobile
contracts can be written for up to 72 months.

     Truck and Truck Trailer Financing and Leasing. The Company believes that it
is one of the leading independent sources of financing and leasing for
heavy-duty trucks and truck trailers in the United States based on receivables
outstanding. The Company provides retail financing and leasing for purchasers
and users of medium-duty trucks, heavy-duty trucks and truck trailers, as well
as wholesale financing, accounts receivable financing and working capital loans
to dealers and trucking companies. The Company also provides financing and
leasing for truck and truck trailer purchases by truck leasing and rental
companies. Truck and truck trailer customers are principally located in the
United States and, to a lesser extent, in Canada and other countries.

     The Company provides retail financing and leasing of new and used
medium-duty trucks, heavy-duty trucks and truck trailers primarily on an
indirect basis through truck and truck trailer dealers. Under an installment
sales contract, the dealer and purchaser enter into a financing arrangement for
the installment purchase of a truck or truck trailer. Subject to credit approval
by the Company, the dealer assigns the installment contract to the Company. The
Company funds the transaction by a payment to the dealer for the net amount
financed in the contract. Retail truck and truck trailer financing and leasing
is also sourced directly with truck or truck trailer purchasers.

     Generally, retail financing transactions provide for terms up to 60 months
for trucks and up to 84 months for truck trailers at fixed rates of interest.
The interest rate varies depending on, among other things, the credit quality of
the purchaser, the transaction size, the term and down payment, and whether the
collateral is new or used.

     Fleet leasing is provided for users of medium-duty trucks, heavy-duty
trucks and truck trailers. Most truck and truck trailer leases are
non-maintenance, open-end terminal rental adjustment clause ("TRAC") leases.
Under such leases, the customer is responsible for the maintenance and terminal
or residual value of the vehicle and the Company generally retains the tax
depreciation benefit.

     The Company also provides truck trailer rental services through short-term
operating leases. Under these leases, the Company is the owner of the equipment
and the lessee enjoys the use of the equipment for periods from a few days to
several months.

     In addition, new and used vehicle wholesale financing is provided to truck
and truck trailer dealers throughout the United States and, to a lesser extent,
Canada. Generally, such loans are short-term with variable (prime rate based)
rates and are secured by inventory.

                                        9
<PAGE>   11

     Credit Card Receivables. Credit card receivables consist primarily of
VISA(R) and MasterCard(R) bankcards and private label credit cards which are
marketed to the public directly and through co-operative marketing programs with
other companies. Bankcards are issued across a wide spectrum of customers with
interest rates based on customer credit profiles. Bankcard operations were
expanded through the December 1998 agent bank agreement with Washington Mutual
Bank, FA. In addition, in December 1999, the Company announced an agreement to
acquire the bankcard operations from KeyCorp and enter into an ongoing agent
bank partnership. The KeyCorp transaction closed on January 31, 2000. Combined
these relationships give the Company rights to market credit card products to
approximately 9 million customers through approximately 2,000 branches.

     The private label credit card business consists of customized revolving
credit programs for retail and oil companies. The Company's retail Private Label
Card program includes Radio Shack, Gateway, Goodyear, Staples, Office Depot and
Office Max, among others. The Company's private label oil program includes
Texaco, Amoco, Shell Oil and British Petroleum. The Shell Oil and British
Petroleum credit card programs were acquired during 1999, establishing the
Company as the leading provider of oil company credit cards in the United
States. In August 1999, the Company announced an agreement to acquire and manage
the proprietary credit card program of CITGO Petroleum Corporation. In March
2000, the Company acquired approximately $130 million in receivables under this
agreement. The Company's private label relationships include approximately 38
million oil and retail customers and approximately 82,000 oil and retail
outlets. These relationships allow the Company to leverage the oil and retail
companies' brand names in order to cross sell related products and services to
these customers.

     The Company's credit card related revenues are derived from finance charges
on revolving accounts, the interchange fees resulting from merchant discounts,
annual membership and other account fees, as well as fees earned from the sale
of insurance and other fee-based products. The Company's credit card receivables
typically bear variable interest rates tied to movements in the prime lending
rate.

     Equipment Financing and Leasing. The Company believes that, based on
receivables outstanding, it is one of the leading independent sources of
financing and leasing, of new and used construction, mining, forestry,
industrial, machine tool, material handling, aircraft, communications and turf
maintenance equipment and golf cars in the United States, Canada, the United
Kingdom, Puerto Rico and France and to a lesser extent in other countries.
Wholesale and rental fleet financing is offered to dealers (who may either sell
or rent the equipment to end-users) and retail financing and leasing is offered
to equipment end-users.

     The Company provides retail financing for the purchase of new and used
equipment through installment sales contracts purchased from dealers and
distributors, and through direct loans to purchasers. Generally, retail
financing transactions for equipment provide for maturities of up to 60 months
at fixed rates of interest. The interest rate depends on, among other things,
the credit quality of the purchaser, transaction size, term, down payment and
whether the collateral is new or used.

     Leasing for end-users of equipment, either directly to the customer or
through dealers is also provided. Finance leases typically include an option for
the lessee to acquire the equipment at a set time before the termination of the
lease for a specified price (designed to offer the lessee an incentive to
purchase as part of residual risk management) and typically include an option
for the lessee to acquire the equipment at the end of the lease term for the
fair market value. Under certain lease transactions, the Company retains the
depreciation tax benefit.

     In addition, the Company provides wholesale and rental fleet financing for
selected dealers. Generally, wholesale loans are short-term loans with variable
(prime rate based) rates and are secured by inventory.

     Discontinuation of Manufactured Housing Loan Origination Activities. As
described in Note 22 to the consolidated financial statements, in January 2000,
the Company announced that it would discontinue its manufactured housing retail
installment loan origination operations. The Company will limit its origination
activities to support its contractual arrangements and loss mitigation
activities. Prior to this announcement, the Company purchased manufactured
housing retail installment contracts originated by retail dealers and provided
wholesale financing to approved manufactured housing dealers. In addition,
commercial business

                                       10
<PAGE>   12

loans were offered to certain manufactured housing dealers to provide capital to
build new retail sales centers, update existing facilities or expand into
community parks.

     Auto Fleet Leasing. The Company believes it is one of the leading providers
of auto fleet leasing and management services for corporations in the United
States, Canada and the United Kingdom with auto and light truck fleets of
generally 100 or more vehicles. These operations were expanded substantially in
June 1999 through the acquisition of Newcourt Credit Group's Canadian and U.K.
fleet management operations. Management services, which are provided through a
centralized operation, primarily include vehicle purchasing and sales, license
and title administration, vehicle maintenance management, accident management,
fuel card management, driver expense report processing and other tailored
services to allow companies to fully outsource their fleet management
operations.

     Other Financial Services. The Company's other activities principally
include the following:

          Warehouse Lending -- The Company provides short-term financing,
     secured by real estate mortgages, to mortgage companies and other mortgage
     lenders.

          Government Guaranteed Lending -- SBA and B&I Loans. The Company
     extends credit to small businesses that is partially guaranteed by the
     United States government under the Small Business Administration 7(a), 504,
     LowDoc, and SBAExpress programs, as well as the USDA Business and
     Industrial Loan program. These programs provide financing of $50,000 to $5
     million for working capital, equipment, commercial real estate, debt
     refinancing and business acquisitions. The Company maintains Preferred
     Lender Status in 14 SBA Districts and it plans to extend its Preferred
     Lender Status to additional SBA districts in the upcoming year.

          Employee Relocation Services. The Company provides corporations and
     certain federal government agencies with assistance in employee relocation,
     origination of mortgages and management and disposition of residential real
     estate.

          Public Finance. The Company provides financing for the acquisition of
     real and personal property by state and local government entities,
     not-for-profit (sec.501(c)(3)) corporations and qualified industrial
     companies in the United States.

          Emergency Roadside Assistance and Auto Club Services. The Company
     offers various emergency roadside assistance and related auto club services
     to consumers through major corporations, primarily automobile
     manufacturers.

     Related Insurance Products and Services. Historically the Company has
offered various credit and non-credit insurance products to its finance
customers through its consumer and commercial finance product delivery systems.
The Company expanded its insurance products and delivery systems through the
acquisitions of The Northland Company ("Northland") in December 1998 and Avco in
January 1999, as described below. Consumer related insurance products include
credit life, credit accident and health, accidental death and dismemberment,
involuntary unemployment and personal property insurance. Commercial related
insurance products offered include commercial auto and dealers' open lot
physical damage, credit life and motor truck cargo insurance. In addition to
insurance underwriting, the Company also receives compensation for certain
insurance programs underwritten by other companies. The Company underwrites
liability insurance in certain states for its commercial auto physical damage
customers.

     The purchase of insurance by a finance customer is optional, with the
exception of physical damage insurance on loan collateral, which is generally
required. The customer can purchase such insurance from the Company or an
alternative carrier chosen by the customer.

                                       11
<PAGE>   13

     The following table sets forth certain information relating to the
Company's insurance operations (in millions):

                         INSURANCE STATISTICAL DATA(1)

<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31
                                           --------------------------------------------
                                           1999(2)     1998     1997     1996     1995
                                           --------   ------   ------   ------   ------
<S>                                        <C>        <C>      <C>      <C>      <C>
Net Written Premium
  Credit life, accident and other
     related.............................  $  384.9   $290.1   $307.1   $282.2   $240.6
  Physical damage........................     351.2    197.8    210.3    186.2    180.3
  Other casualty and liability...........     436.6    103.7     91.3     75.9     69.6
                                           --------   ------   ------   ------   ------
          Total..........................  $1,172.7   $591.6   $608.7   $544.3   $490.5
                                           ========   ======   ======   ======   ======
Premium Revenue(3)
  Credit life, accident and other
     related.............................  $  306.6   $210.6   $201.4   $183.8   $164.8
  Physical damage........................     344.8    171.2    152.9    155.1    148.5
  Other casualty and liability...........     404.3     89.7     66.4     63.2     57.3
                                           --------   ------   ------   ------   ------
          Total..........................  $1,055.7   $471.5   $420.7   $402.1   $370.6
                                           ========   ======   ======   ======   ======
Investment Income........................  $  198.9   $ 98.5   $ 82.6   $ 71.7   $ 68.5
                                           ========   ======   ======   ======   ======
Benefits Paid or Provided................  $  447.0   $158.1   $145.7   $148.2   $142.5
                                           ========   ======   ======   ======   ======
</TABLE>

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

(1) This table does not reflect any direct or indirect expenses that may be
    associated with the Company's insurance operations. The Company markets its
    insurance products through its consumer and commercial distribution systems
    and, accordingly, does not allocate overhead and related expenses to its
    insurance operations. This table also does not include the non-affiliate
    insurance operations of Balboa, which were sold in 1999.

(2) The increase in the 1999 Net Written Premium and Premium Revenue relates
    primarily to the acquisition of Northland and the affiliate insurance
    operations of Avco.

(3) Includes compensation for insurance policies underwritten by other
    companies.

     As described below, the Company enhanced existing lines of insurance
products through the December 1998 acquisition of Northland and the January 1999
acquisition of Avco. The acquisition of Northland in December 1998 did not have
a significant impact on 1998 operating results.

     Northland. The addition of Northland increased the Company's property and
casualty insurance business and enhanced the Company's existing lines of
insurance products. Northland operates through approximately 5,500 general
agents, independent agents and brokers. Historically, the Company has sold
credit-related insurance, mainly to customers of its consumer finance and
commercial finance operations. Northland's insurance products, which include
commercial auto (predominantly trucking), excess and surplus lines and
non-standard auto, complemented the Company's insurance business and
significantly expand its distribution capability. Nearly half of Northland's
writings are in lines of businesses the Company serves extensively through its
commercial finance operations. Northland completed its 13th consecutive year of
underwriting profit in 1999 with a combined ratio of 92.7. Northland and its
subsidiaries operate in 50 states and the District of Columbia and have
approximately 750 employees at their St. Paul, Minnesota headquarters and a
subsidiary in Scottsdale, Arizona. Northland is rated A+ (Superior) by A.M.
Best.

     Avco. The acquisition of Avco included the operations of Balboa Casualty
and Life Insurance Companies. Balboa operated both affiliate and non-affiliate
insurance businesses. In November 1999, the Company sold its Balboa's
non-affiliate insurance business to Countrywide Insurance Group, Inc. The Balboa
acquisition significantly expanded the affiliate insurance business of the
Company's U.S. and international operations. Affiliate insurance relates to
insurance products distributed through the finance affiliates. Avco offered
insurance products to consumers and businesses in the United States, Canada and
the United Kingdom through its affiliated finance operations, as well as to
non-credit related customers. See Note 3 to the

                                       12
<PAGE>   14

consolidated financial statements and the "-- Company Overview" section for more
information on the Avco acquisition and related dispositions.

ADDITIONAL INFORMATION REGARDING THE COMPANY

  ALLOWANCE FOR LOSSES, CREDIT LOSSES AND CONTRACTUAL DELINQUENCY

     The Company maintains an allowance for losses on finance receivables at an
amount that it believes is sufficient to provide for losses in its existing
receivables portfolios. The allowance is determined principally on the basis of
historical loss experience, and reflects management's judgment of the present
loss exposure at the end of the period considering economic conditions and the
nature and characteristics of the underlying finance receivables. The Company
records an allowance for losses when it believes the event causing the loss has
occurred. The allowance is evaluated on an aggregate basis considering, among
other things, the relationship of the allowance to net finance receivables and
historical net credit losses. Additions to the allowance are generally charged
to the provision for losses on finance receivables.

     Finance receivables are charged to the allowance for losses when they are
deemed to be uncollectible. As set forth below, the Company's policy generally
provides for charge-off of various types of accounts on a contractual basis.
Consumer direct and other installment and credit card receivables are charged to
the allowance for losses when they become 180 days contractually delinquent. All
other finance receivables are charged to the allowance for losses when any of
the following conditions occur: (i) the related security has been converted or
destroyed; (ii) the related security has been repossessed and sold or held for
sale for one year; or (iii) the related security has not been repossessed and
the receivable has become contractually delinquent for one year. A contractually
delinquent account is one on which the customer has not made payments as
contractually agreed. Finance charge accruals are suspended on accounts when
they become 60 days contractually delinquent. The accrual is resumed when the
loan becomes contractually current. Recoveries on losses previously charged to
the allowance are credited to the allowance at the time recovery is collected.

     The following table sets forth information as of the dates shown regarding
the allowance for losses. For further information concerning allowance for
losses, net credit losses and contractual delinquencies, see "-- Management's
Discussion and Analysis of Financial Condition and Results of Operations".

                ALLOWANCE FOR LOSSES TO NET FINANCE RECEIVABLES

<TABLE>
<CAPTION>
                                                                YEAR ENDED OR AT DECEMBER 31
                                                  ---------------------------------------------------------
                                                    1999        1998        1997        1996        1995
                                                  ---------   ---------   ---------   ---------   ---------
<S>                                               <C>         <C>         <C>         <C>         <C>
OWNED BASIS
Allowance for Losses Amount (in millions).......  $ 2,174.4   $ 1,978.7   $ 1,949.9   $ 1,563.1   $ 1,268.6
Allowance for Losses to Net Finance
  Receivables...................................       3.16%       3.25%       3.53%       3.36%       3.20%
Allowance for Losses to Net Credit Losses(1)....       1.50x       1.74x       1.59x       1.77x       2.03x
</TABLE>

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

(1) Calculated as a ratio of the allowance for losses to related trailing or
    annualized net credit losses on receivables owned at the end of the period
    (as adjusted to exclude net credit losses related to securitized receivables
    and to reflect the impact of significant acquisitions).

     The Company's ten largest accounts at December 31, 1999 (all of which were
current at December 31, 1999) represented less than 1% of the Company's total
managed finance receivables outstanding. All of such accounts are secured
commercial finance accounts.

  COMPETITION

     The markets in which the Company operates are highly competitive. Many
competitors are large companies that have substantial capital and technological
and marketing resources. Some of these competitors are larger than the Company
in some markets and may have access to capital at a lower cost than the Company.
The Company believes that the finance charge rate is one of the primary
competitive factors in many of its markets. From time to time, competitors of
the Company may seek to compete aggressively on the

                                       13
<PAGE>   15

basis of pricing, and the Company may lose market share to the extent it is not
willing to match competitor pricing, in order to maintain interest margins.

     U.S. Credit Card. Competition in the credit card industry has been intense
over the last several years. Large money-center banks have been seeking to
expand their credit card units through, among other things, aggressive pricing,
marketing and acquisitions. In addition, many non-bank competitors specialize in
certain growth strategies, such as partnership and database marketing. The
Company addresses these competitive pressures by focusing on targeted segments
of the domestic consumer market, co-branding relationships and its private label
credit card programs.

     U.S. Consumer Finance. Traditional competitors in the U.S. consumer finance
segment include independent finance companies, banks and thrift institutions,
credit unions, industrial banks, credit card issuers, leasing companies,
manufacturers and vendors. On a local level, community banks and smaller
independent finance and/or mortgage companies are a competitive force. Some
competitors have substantial local market positions; others are part of large,
diversified organizations. Because of their longstanding insured deposit base,
many banks that compete with the Company are able to offer financial services on
very competitive terms.

     Competition varies across products offered. While there is considerable
competition in the home equity loan market, the market is fragmented with no
single competitor claiming a significant market share. The Company, which is
primarily a portfolio lender, maintains considerable product and delivery
flexibility, which the Company believes is a competitive advantage.

     Competition also varies by delivery system and geographic region. For
example, competitors of the Company's branch system are distinct from the
competitors of the Company's centralized lending operations.

     Commercial. In its commercial segment, the Company competes with captive
and independent finance companies, commercial banks, thrifts and other financial
institutions, leasing companies, lease brokers, manufacturers, vendors and
others.

     The Company believes, based on its experience in the industry, that the
primary competitive factors in the commercial finance and leasing business are
price, product quality, risk management, new account marketing and retention of
customers through emphasis on superior customer service. In addition, the
Company believes that innovation is necessary to compete in the industry,
including enhanced customer service, specialization in certain types of
equipment, use of alternative channels of distribution and, in certain lines of
business, optimization of tax treatment between owner and user. Purchasers of
equipment financed by the Company generally seek transactions that are simple,
flexible and customer responsive.

     International Finance. The competitors of the Company in the international
finance segment include those types of business entities which have
traditionally competed in the local and international markets. Competition
varies on the basis of product and local jurisdiction, with commercial banks,
credit card issuers, finance companies and vendors frequently constituting an
established source of competition. The Company's experience indicates that
primary competitive factors in its international markets vary from market to
market but may include product quality, customer service, risk management and
capital resources.

     Insurance. The Company also competes with international, national and
regional insurance companies, as well as self-insurance programs and captive
insurers, to provide its credit related and non-credit related insurance
products. Competition in the insurance business is based upon price, product
design and service levels rendered to producers and policyholders. The insurance
business is extremely competitive, in both price and services, and no single
insurer is dominant. The Company believes that its ability to market its
insurance products through its distribution systems gives it a distinct
competitive advantage over its competitors who do not have such ability.

  REGULATION

     The Company is subject to regulation in most of the countries in which it
has operations, and is often required to obtain governmental licensing or
approval before commencing business. The Company's opera-

                                       14
<PAGE>   16

tions in the United States are subject to extensive state and federal regulation
including, but not limited to, the following federal statutes and regulations:
The Consumer Credit Protection Act of 1968, as amended (including certain
provisions thereof, commonly known as the "Truth-in-Lending Act" or "TILA"), the
Equal Credit Opportunity Act of 1974, as amended (the "ECOA"), the Fair Credit
Reporting Act of 1970, as amended (the "FCRA"), and the Real Estate Settlement
Procedures Act, as amended ("RESPA"). In addition, the Company is subject to
state laws and regulations with respect to the amount of interest and other
charges which lenders can collect on loans.

     In the judgment of the Company, existing statutes and regulations have not
had a materially adverse effect on the operations of the Company. However, it is
not possible to forecast the nature of future legislation, regulations, judicial
decisions, orders or regulatory interpretations or their impact on the future
business, financial condition or prospects of the Company.

     U.S. Credit Card. HSB is regulated by the FDIC and the South Dakota
Department of Commerce and Regulation -- Banking Division. ANB is under the
supervision of, and subject to examination by, the Office of the Comptroller of
the Currency ("OCC"). ANB's charter limits its activities to credit card
operations. In addition, ANB is subject to the rules and regulations of the
FDIC. ACB (formerly Associates Investment Corporation) is regulated by the FDIC
and the Utah Department of Financial Institutions. HSB, ANB and ACB are subject
to regulation relating to capital adequacy, leverage, loans, deposits, consumer
protection, community reinvestment, the payment of dividends, transactions with
affiliates and other aspects of operations.

     In addition, the Company is subject to the ECOA which, in part, prohibits
credit discrimination on the basis of race, color, religion, sex, marital
status, national origin or age. Regulation B, promulgated under ECOA, restricts
the type of information that may be obtained by creditors in connection with a
credit application. It also requires certain disclosures by the lender regarding
consumer rights and requires lenders to advise applicants who are denied credit
of the reasons therefor. In instances where a loan application is denied or the
rate or charge on a loan is increased as a result of information obtained from a
consumer credit agency, the FCRA requires the lender to supply the applicant
with the name and address of the reporting agency.

     U.S. Consumer Finance. These segments are generally subject to detailed
supervision by governmental authorities under legislation and regulations which
generally require licensing of the lender, limitations on the amount, duration
and charges for various categories of loans, adequate disclosure of certain
contract terms and limitations on collection practices and creditor remedies.
Licenses are renewable, and may be subject to revocation for violations of such
laws and regulations. In addition, most states in the United States have usury
laws which limit interest rates. Federal legislation in the United States
preempts state interest rate ceilings on first mortgage loans and state laws
which restrict various types of alternative home equity receivables, except in
those states which have specifically opted out of such preemption.

     The Company is subject to the TILA and Regulation Z promulgated thereunder
in the United States. The TILA requires, among other things, disclosure of
pertinent elements of consumer credit transactions, including the finance
charges and the comparative costs of credit expressed in terms of an annual
percentage rate. The TILA disclosure requirements are designed to provide
consumers with uniform, understandable information with respect to the terms and
conditions of loans and credit transactions in order to enable them to compare
credit terms. The TILA also guarantees consumers a three-day right to cancel
certain credit transactions, including purchase money loan refinancing and home
equity loans secured by a consumer's primary residence. Section 32 of Regulation
Z mandates that applicants for real estate loans which contain certain rate and
fee amounts be provided an additional three-day waiting period prior to signing
loan documents.

     In addition, the Company is subject to the ECOA which, in part, prohibits
credit discrimination on the basis of race, color, religion, sex, marital
status, national origin or age. Regulation B, promulgated under ECOA, restricts
the type of information that may be obtained by creditors in connection with a
credit application. It also requires certain disclosures by the lender regarding
consumer rights and requires lenders to advise applicants who are denied credit
of the reasons therefor. In instances where a loan application is denied

                                       15
<PAGE>   17

or the rate or charge on a loan is increased as a result of information obtained
from a consumer credit agency, the FCRA requires the lender to supply the
applicant with the name and address of the reporting agency.

     RESPA covers real estate secured loans that are subordinated to other
mortgage loans. RESPA and Regulation X promulgated thereunder require disclosure
of certain information to customers within prescribed time frames and regulate
the receipt or payment of fees or charges for services performed.

     Federal and state legislation seeking to regulate the maximum interest rate
and/or other charges on consumer finance receivables has been introduced in the
past, and may from time to time be changed in the future. However, it is not
possible to predict the nature of future legislation with respect to the
foregoing or its impact on the future business, financial condition or prospects
of the Company.

     Commercial. Although most jurisdictions do not regulate commercial finance,
certain jurisdictions do require licensing of lenders and financiers,
limitations on interest rates and other charges, adequate disclosure of certain
contract terms and limitations on certain collection practices and creditor
remedies. In the United States the Company is also required to comply with
certain provisions of the ECOA which are applicable to commercial loans.

     Small Business Administration loans made by the Company are governed by the
United States Small Business Act and the Small Business Investment Act of 1958,
as amended, and may be subject to the same regulations by certain states in the
United States as are other commercial finance operations. The Federal statutes
and regulations specify the types of loans and loan amounts which are eligible
for the Small Business Administration's guaranty as well as the servicing
requirements imposed on the lender to maintain Small Business Administration
guarantees.

     International Finance. The international segment of the Company's finance
business is subject to diverse regulatory frameworks. Regulatory qualifications,
licensing procedures, interest rates, lending practices and regulatory reporting
requirements vary substantially from jurisdiction to jurisdiction.

     In December 1999, the Japanese Government enacted legislation effective
June 1, 2000, which reduces the maximum allowable rate for all new loans and
borrowings, after the effective date, which financial institutions may charge
from 40.004% to 29.2%. As of December 31, 1999, approximately half of the
Company's consumer loans in Japan were below the newly enacted rate ceiling of
29.2%. While the legislation will have the effect of decreasing the maximum rate
of interest the Company may charge on new loans and borrowings, the Company
believes that the change will not have a material adverse impact on the
Company's operations. The Company is reviewing its products and services in
Japan as well as distribution channels, new products, and expense attributes to
minimize any impact of the rate change. Based on previous experiences, the
Company believes the decreases in the interest rate ceiling will result in
industry consolidation, creating opportunities for portfolio or business
acquisitions in Japan.

     Insurance. The domestic and foreign operations of the Company are subject
to detailed regulation and supervision in each state or other jurisdiction in
which they conduct insurance related business. The laws of the various
jurisdictions establish supervisory and regulatory agencies with broad
administrative powers. Generally, such laws cover, among other things, types of
insurance that may be sold, policy forms, reserve requirements, permissible
investments, premiums charged, trade practices, limitations on the amount of
dividends payable by any insurance company and guidelines and standards with
respect to dealings between insurance companies and affiliates.

     Ownership Limitations. Due to the nature of the Company's business and the
various countries in which certain of the Company's businesses are domiciled,
the acquisition of its equity securities beyond certain percentage levels may
not be permitted without regulatory approval. U.S. Federal and state banking
laws and state insurance regulations may limit ownership of the Company's equity
securities by certain entities. In addition, regulations of various governing
bodies in foreign countries where the Company or a subsidiary conducts business
also may limit an entity or affiliated entity's interest in the Company. The
information set forth herein is not meant to be complete, and any person or
entity investing in the Company should consult their own legal counsel regarding
such investment.

                                       16
<PAGE>   18

ITEM 2. PROPERTIES.

     The furniture, equipment and other physical property owned by the Company
and its subsidiaries represent less than 1% of total assets at December 31, 1999
and are therefore not significant in relation to total assets. Branch finance
operations are generally conducted on leased premises under operating leases
with terms not normally exceeding five years. At December 31, 1999, the Company
had 2,771 offices worldwide. The Company owns its administrative headquarters in
Irving, Texas, consisting of approximately 550,000 square feet, and a
centralized processing center also located in Irving, Texas, consisting of
approximately 440,000 square feet.

ITEM 3. LEGAL PROCEEDINGS.

     Various legal actions and proceedings and claims are pending or may be
instituted or asserted in the future against the Company and its subsidiaries.
Certain of the pending legal actions are, or purport to be, class actions. Some
of the foregoing matters involve or may involve compensatory, punitive or treble
damage claims which, if adversely held against the Company, would require large
expenditures or could affect the manner in which the Company conducts its
business.

     In addition, the Company, like many other companies that operate in
regulated businesses, is from time to time the subject of various governmental
inquiries and investigations. The Company is currently the subject of certain
investigations and inquiries by federal and state governmental authorities
relating generally to the Company's lending practices. The Company does not have
sufficient information to predict with certainty the ultimate outcome of such
investigations and inquiries or their ultimate effect, if any, on the Company's
results of operations or financial condition or the manner in which the Company
operates its business.

     Legal actions, governmental inquiries and investigations are subject to
many uncertainties, and the outcome of individual matters is not predictable
with assurance. Some of the matters discussed in the foregoing paragraphs could
be decided unfavorably to the Company or the subsidiary involved and could
require the Company or such subsidiary to pay damages or make other expenditures
in amounts or a range of amounts that cannot be estimated at December 31, 1999.
The Company does not reasonably expect, based on its analysis, that any adverse
outcome from such matters would have a material effect on future consolidated
financial statements for a particular year, although such an outcome is
possible.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     None.

                                       17
<PAGE>   19

                                    PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     The Class A Common Stock of the Company is listed on the New York Stock
Exchange under the symbol AFS. The high and low sales prices for the Class A
Common Stock and the dividends paid per share of the Class A Common Stock for
each of the quarterly periods indicated were as follows:

<TABLE>
<CAPTION>
                                                       CLASS A COMMON STOCK PRICE PER SHARE(1)
                                           ---------------------------------------------------------------
                                           FIRST QUARTER   SECOND QUARTER   THIRD QUARTER   FOURTH QUARTER
                                           -------------   --------------   -------------   --------------
<S>                                        <C>             <C>              <C>             <C>
1999
High.....................................  47 1/2          49               43 7/8          39 13/16
Low......................................  36 7/16         38 1/2           33 11/16        26 3/16
Dividends per share of Class A Common
  Stock and Class B Common Stock.........  $0.055          $0.055           $0.055          $0.065
1998
High.....................................  41 5/16         42 3/4           43 3/8          43 11/16
Low......................................  32 7/8          35 11/16         28 3/32         22 21/32
Dividends per share of Class A Common
  Stock and Class B Common Stock(2)......  $0.050          $0.050           $0.050          $0.055
1997
High.....................................  26 5/16         29 11/16         33 1/8          36 9/32
Low......................................  21 1/4          21 1/16          27 5/8          29 3/8
Dividends per share of Class A Common
  Stock and Class B Common Stock.........  $0.050          $0.050           $0.050          $0.050
</TABLE>

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

(1) Prices reflect composite exchange transactions. Prices and dividends are
    adjusted to give retroactive recognition to a two-for-one split distributed
    in the form of a dividend (the "Split") of the Company's Class A Common
    Stock on December 23, 1998. One additional common share was issued on
    December 23, 1998 for every common share held by stockholders of record as
    of the close of business on December 9, 1998. The Split-adjusted initial
    public offering price on May 8, 1996 would have been $14.50 per share.

(2) On April 7, 1998 all of the issued and outstanding shares of the Company's
    Class B Common Stock were converted at par value to an equal number of the
    shares of the Company's Class A Common Stock and, correspondingly no
    dividends were paid on Class B Common Stock after such date.

     As of March 27, 2000, stockholders of record of the Company included
approximately 187,367 holders of the Class A Common Stock. See Note 1 of the
consolidated financial statements regarding Ford's Spin-Off of its interest in
the Company.

     The Company relies primarily on dividends and other intercompany fees from
its subsidiaries for the payment of dividends to holders of its Class A Common
Stock. Historically, the terms of certain agreements governing outstanding
indebtedness of Associates Corporation of North America ("Associates"), First
Capital's principal operating subsidiary, contain certain limitations on the
payment of dividends and certain other transfers of funds to the Company. The
Company's banking subsidiaries, HSB, ANB and ACB, and the Company's insurance
subsidiaries may pay dividends and make certain other transfers of funds to the
Company only up to amounts permitted by applicable banking and insurance
regulations, respectively, and the repatriation of funds from the Company's
foreign subsidiaries may be subject to withholding taxes or other restrictions.

     The Company issued 340,668 and 115,000 restricted shares of Class A Common
Stock in 1999 and 1998, respectively. The Company awarded these shares to
certain employees contingent on their continued employment with the Company.
Such shares vest on the fifth anniversary of the date of issuance. The Company
believes the issuance of the above shares of common stock was exempt from the
registration requirements of the Securities Act of 1933 (the "Act") pursuant to
Section 4(2) of the Act.

                                       18
<PAGE>   20

ITEM 6. SELECTED FINANCIAL DATA.

     The following table sets forth selected consolidated financial information
regarding the Company's financial position and operating results, which has been
extracted from the Company's consolidated financial statements for the five
years ended December 31, 1999. The information contained herein is presented on
a basis consistent with amounts reported in the historical financial statements
on an Owned Basis and should be read in conjunction with Item 7 -- "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements and accompanying notes included elsewhere
in this report (dollar amounts in millions, except per share information):

<TABLE>
<CAPTION>
                                                     YEAR ENDED OR AT DECEMBER 31
                                     ------------------------------------------------------------
                                       1999         1998         1997         1996        1995
                                     ---------    ---------    ---------    ---------   ---------
<S>                                  <C>          <C>          <C>          <C>         <C>
Results of Operations
  Total revenue....................  $12,131.2    $ 9,376.8    $ 8,278.6    $ 7,098.2   $ 6,107.2
  Finance charge revenue...........    9,106.4      7,910.4      7,560.2      6,481.0     5,560.8
  Interest expense.................    3,906.5      3,196.7      2,775.2      2,456.0     2,177.9
  Net interest margin..............    5,199.9      4,713.7      4,785.0      4,025.0     3,382.9
  Operating expenses...............    3,894.4      2,798.0      2,339.6      2,002.9     1,754.7
  Provision for losses.............    1,506.4      1,283.5      1,378.1      1,086.5       834.0
  Insurance benefits paid..........      447.0        158.1        145.7        148.2       142.5
  Earnings before provision for
     income taxes..................    2,376.9      1,940.5      1,640.0      1,404.6     1,198.1
  Provision for income taxes.......      886.5        717.0        608.3        547.6       475.0
  Net earnings.....................    1,490.4      1,223.5      1,031.7        857.0       723.1
  Basic earnings per share(1)......       2.05         1.76         1.49         1.24        1.04
  Diluted earnings per share(1)....       2.04         1.75         1.48         1.23        1.04
Balance Sheet Data
  Finance receivables, net of
     unearned finance income.......  $68,817.1    $60,939.0    $55,215.6    $46,512.9   $39,702.5
  Allowance for losses.............    2,174.4      1,978.7      1,949.9      1,563.1     1,268.6
  Total assets.....................   82,956.8     75,175.4     57,232.7     48,268.4    41,303.9
  Short-term debt (notes
     payable)......................   27,253.4     25,709.8     20,970.6     17,075.2    13,747.3
  Long-term debt(2)................   41,404.0     37,596.7     28,228.0     24,029.5    21,372.6
  Stockholders' equity.............    9,800.5      8,526.5      6,268.6      5,437.5     4,801.1
  Stockholders' equity per
     share(1)(3)...................      13.46        11.72         9.05         7.84        6.92
Selected Data and Ratios
  Total debt to equity(4)..........      7.0:1        7.4:1        7.8:1        7.5:1       7.2:1
  Total debt to tangible
     equity(4)(5)..................     11.3:1        9.5:1        9.5:1        9.7:1       9.9:1
  Return on average assets(6)......       1.78%        1.90%        1.95%        1.89%       1.89%
  Return on average equity(6)......      16.28        17.94        17.78        18.31       15.66
  Return on average adjusted
     equity(6)(7)..................      18.03        20.30        21.10        22.86       20.26
  Allowance for losses to net
     finance receivables...........       3.16         3.25         3.53         3.36        3.20
  Allowance for losses to net
     credit losses(8)..............       1.50x        1.74x        1.59x        1.77x       2.03x
Number of employees................     32,486       28,662       22,582       18,984      16,647
Number of branch offices
  Domestic.........................      1,470        1,478        1,568        1,634       1,543
  International....................      1,301        1,044          697          499         404
                                     ---------    ---------    ---------    ---------   ---------
          Total....................      2,771        2,522        2,265        2,133       1,947
                                     =========    =========    =========    =========   =========
</TABLE>

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

(1) Per share information has been adjusted to give retroactive recognition to
    the December 23, 1998 stock dividend described in Note 20 to the
    consolidated financial statements.
(2) Includes current portion of long-term debt.
(3) Based on the basic shares outstanding for each year.
(4) Calculated net of short term investments.

                                       19
<PAGE>   21

(5) Tangible equity is calculated as stockholders' equity minus goodwill as set
    forth in Note 9 to the consolidated financial statements. Total debt to
    tangible equity as adjusted on a pro forma basis to reflect the treatment as
    equity of a $500 million debt security issued in July 1999, would have been
    10.40:1 at December 31, 1999.

(6) During the first quarter of 1996, the Company paid a dividend to Ford
    totaling $1.85 billion, of which $1.75 billion was in the form of an
    intercompany interest bearing note. The Company repaid the $1.75 billion
    intercompany note with Ford during the second quarter of 1996 and received
    $1.85 billion as a result of the initial public offering. The amounts
    presented for 1996 include the effect of these transactions. Excluding the
    impact of these transactions, the Company's return on average assets, on
    average equity and on average adjusted equity for the year ended December
    31, 1996 would have been 1.93%, 17.09% and 20.94%, respectively.

(7) Excludes the push-down goodwill created by Ford's acquisition of foreign
    affiliates of the Company in 1989.

(8) Calculated as a ratio of the allowance for losses to related trailing or
    annualized net credit losses on receivables owned at the end of the period
    (as adjusted to exclude net credit losses related to securitized receivables
    and to reflect the impact of significant acquisitions).

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

GENERAL

     The Company is a leading diversified finance organization, which provides
finance, leasing, insurance and related services to individual consumers and
businesses. The Company's revenues principally consist of finance charge income
and, to a lesser extent, insurance premiums and investment income, servicing
related income and other fee income. The Company's primary expenses are interest
expense from the funding of its finance business, provision for loan losses and
operating expenses. A principal factor determining the profitability of the
Company is finance charge revenue less interest expense ("net interest margin").

     The following discussion and analysis provides information that management
believes to be relevant to understanding the Company's consolidated financial
condition and results of operations. This discussion should be read in
conjunction with the consolidated financial statements of the Company and the
related notes thereto.

MANAGED BASIS REPORTING

     The discussion that follows includes amounts reported in the historical
financial statements ("Owned Basis") adjusted on a pro forma basis to include
certain effects of receivables held for securitization and receivables sold with
servicing retained ("Managed Basis"). On an Owned Basis, the net earnings on the
Company's retained securitization interests and receivables held for
securitization, as well as gains from subsequent sales in revolving
securitization structures, are included in servicing related income in the
consolidated statement of earnings. On a pro forma Managed Basis, these earnings
are reclassified and presented as if the receivables had neither been held for
securitization nor sold. The initial gains recorded on securitization
transactions are recorded in investment and other income on both an Owned and
Managed Basis. Management believes the discussion of pro forma Managed Basis
information is useful in evaluating the Company's operating performance.

                                       20
<PAGE>   22

     The following table contains selected pro forma Managed Basis financial
information (in millions):

<TABLE>
<CAPTION>
                                                                   YEARS ENDED DECEMBER 31
                                                              ---------------------------------
                                                                1999        1998        1997
                                                              ---------   ---------   ---------
<S>                                                           <C>         <C>         <C>
Finance charges.............................................  $11,483.0   $ 9,215.0   $ 7,832.2
Insurance premiums..........................................    1,055.7       471.5       420.7
Investment and other income.................................      712.3       343.0       217.6
                                                              ---------   ---------   ---------
  Total revenue.............................................   13,251.0    10,029.5     8,470.5
                                                              ---------   ---------   ---------
Interest expense............................................    4,258.6     3,470.2     2,946.2
Operating expenses..........................................    3,894.4     2,798.0     2,339.6
Provision for losses........................................    2,274.1     1,662.7     1,399.0
Insurance benefits paid or provided.........................      447.0       158.1       145.7
                                                              ---------   ---------   ---------
  Total expenses............................................   10,874.1     8,089.0     6,830.5
                                                              ---------   ---------   ---------
Earnings before provision for income taxes..................    2,376.9     1,940.5     1,640.0
Provision for income taxes..................................      886.5       717.0       608.3
                                                              ---------   ---------   ---------
Net earnings................................................  $ 1,490.4   $ 1,223.5   $ 1,031.7
                                                              =========   =========   =========
Net Finance Receivables
  End of period.............................................  $84,414.7   $71,364.3   $58,406.5
  Average...................................................  $79,088.6   $64,505.8   $53,899.7

Total Assets
  End of period.............................................  $95,088.0   $80,878.3   $60,154.8
  Average...................................................  $89,575.4   $68,836.8   $55,364.3
</TABLE>

RESULTS OF OPERATIONS

  Summary of Results of Operations

     The following table summarizes the Company's net earnings and related data
(dollars in millions):

                           EARNINGS AND RELATED DATA

<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31
                                                              --------------------------------
                                                                1999        1998        1997
                                                              --------    --------    --------
<S>                                                           <C>         <C>         <C>
Earnings before provision for income taxes..................  $2,376.9    $1,940.5    $1,640.0
Net earnings................................................   1,490.4     1,223.5     1,031.7
Change in net earnings
  Amount....................................................  $  266.9    $  191.8    $  174.7
  Percent...................................................      21.8%       18.6%       20.4%
Basic earnings per share....................................  $   2.05    $   1.76    $   1.49
Diluted earnings per share..................................      2.04        1.75        1.48
Return on average
  Managed assets............................................      1.66%       1.78%       1.86%
  Equity....................................................     16.28       17.94       17.78
  Adjusted equity...........................................     18.03       20.30       21.10
</TABLE>

     Earnings before provision for income taxes and net earnings increased in
each of the years ended December 31, 1999, 1998 and 1997. The principal factors
that influenced the changes in the Company's net earnings are described in the
sections that follow.

     Management believes that the overall business factors and trends affecting
the profitability of the foreign subsidiaries are primarily the same as those
affecting the Company taken as a whole. Any business factors that are
significant and unique to international operations are discussed in this
section. See also the discussion of the impact of foreign currency and
regulatory related risks in the "-- Market Risk" section, the discussion in

                                       21
<PAGE>   23

the "-- Competition" and "-- Regulation" sections, and in Note 17 to the
consolidated financial statements. As illustrated in Note 18 to the consolidated
financial statements, the Company derived approximately 31%, 24% and 20% of its
earnings before provision for income taxes in 1999, 1998 and 1997, respectively,
from its international finance segment.

  Net Interest Margin -- Managed Basis

     The Company's Managed Basis net interest margin was as follows (dollars in
millions):

                      NET INTEREST MARGIN -- MANAGED BASIS

<TABLE>
<CAPTION>
                                                          YEAR ENDED DECEMBER 31
                                 ------------------------------------------------------------------------
                                          1999                     1998                     1997
                                 ----------------------   ----------------------   ----------------------
SEGMENT                           AMOUNT    % OF AMR(1)    AMOUNT    % OF AMR(1)    AMOUNT    % OF AMR(1)
-------                          --------   -----------   --------   -----------   --------   -----------
<S>                              <C>        <C>           <C>        <C>           <C>        <C>
U.S. Credit Card...............  $1,737.9      17.18%     $1,377.8      17.27%     $1,163.0      15.02%
U.S. Consumer Finance..........   2,266.7       7.43       2,080.8       8.14       2,056.3       9.19
Commercial.....................   1,028.4       3.91       1,008.1       4.14         875.7       4.40
International Finance..........   2,191.4      18.04       1,278.1      19.36         791.0      20.50
                                 --------                 --------                 --------
          Total Company........  $7,224.4       9.13%     $5,744.8       8.91%     $4,886.0       9.06%
                                 ========                 ========                 ========
</TABLE>

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

(1) Expressed as a percentage of Average Managed Receivables ("AMR") of the
    respective segment for the period.

     The Company's total Managed Basis net interest margin increased on a dollar
basis in each segment in 1999 and 1998, primarily due to growth in average
managed finance receivables. The 1999 acquisition of Avco and the 1998
acquisitions of Associates Commerce Solutions Inc. ("ACS") (formerly SPS Payment
Systems Inc.), DIC Finance Co. Ltd, and Beneficial Canada Holdings, Inc.
("Beneficial Canada") contributed to the growth. Managed Basis net interest
margin expressed as a percentage of average managed receivables outstanding
("interest margin ratio") during 1999 increased primarily due to a slight shift
in product mix toward more unsecured receivables. Unsecured receivables
generally have a higher net interest margin than secured finance products.

     The U.S. credit card segment increase in net interest margin on a dollar
basis in 1998 and 1999 was due primarily to the growth in average managed
receivables outstanding during both years. The increase in the interest margin
ratio in 1999 and 1998 compared to 1997 was primarily due to pricing initiatives
implemented during 1998 that effectively increased the amount of fee income
generated from these receivables.

     The interest margin ratio for the U.S. consumer finance segment declined in
1999 as compared to 1998 and 1997 primarily as a result of a decline in finance
charge rates and a shift in product mix toward receivables secured by real
estate. Receivables secured by real estate generally have lower finance charge
rates than the other unsecured receivables offered by this segment, resulting in
a lower net interest margin.

     A general decline in finance charge rates, due primarily to competitive
pressures, caused the decreases in the interest margin ratio for the commercial
segment during 1999 as compared to 1998 and 1997. The effect of this decline on
the 1999 ratio was somewhat offset by the impact of the Company's sale of the
recreational vehicle operations during the first quarter of 1999. Recreational
vehicle receivables generally had lower finance charge rates and interest margin
ratios than the other receivable products offered by the commercial segment.

     The interest margin ratio for the international finance segment declined in
1999 as compared to 1998 and 1997, primarily as a result of the 1999 acquisition
of Avco and the 1998 acquisition of Beneficial Canada. The interest margin ratio
for the international finance segment is influenced by the higher margins in
Japan. With the acquisitions of Avco and Beneficial Canada, the amount of
receivables in Japan as a percent of total international finance receivables
declined and, accordingly, the impact of Japan's higher interest margin ratio on
the total international finance segment declined resulting in a lower average
interest margin ratio for the segment in 1999 and 1998. See discussion of the
impact of the June 2000 change in Japan's usury laws in the "-- Regulation"
section of Item 1.

                                       22
<PAGE>   24

  Finance Charges -- Managed Basis

     The finance charge revenue and yield for the Company were as follows
(dollars in millions):

                        FINANCE CHARGES -- MANAGED BASIS

<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31
                                                              -------------------------------
                                                                1999        1998       1997
                                                              ---------   --------   --------
<S>                                                           <C>         <C>        <C>
Finance Charge Revenue......................................  $11,483.0   $9,215.0   $7,832.2
Yield(1)....................................................      14.51%     14.29%     14.53%
</TABLE>

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

(1) Calculated as finance charge revenue as a percentage of average managed
    finance receivables outstanding for the indicated period.

     Finance charge revenue increased, on a dollar basis, primarily due to the
growth in the average managed finance receivables during each period. The
principal factors which influence the trend of finance charge yields are (i) the
composition of the finance receivable portfolios (i.e., "product mix"); (ii) the
interest rate environment; and (iii) the level of business competition. A
changing interest rate environment, changes in product mix and increased
competition were the primary causes of the movements in finance charge yield
from 1997 to 1999.

  Interest Expense -- Managed Basis

     Total dollars of Managed Basis interest expense increased in each of the
three years ended 1999. In each year, the increase was principally due to higher
average outstanding managed debt as a result of the Company's growth in managed
finance receivables. The increase in Managed Basis interest expense as a result
of growth in 1999 and 1998 was partially offset by a decline in the Company's
average borrowing rate in each period.

  Insurance Premium Revenue

     Insurance premium revenue was $1,055.7 million, $471.5 million, and $420.7
million for the years ended December 31, 1999, 1998 and 1997, respectively.
Insurance premium revenue, which is earned over the coverage term, increased
$584.2 million (123.9 %) in 1999, $50.8 million (12.1%) in 1998, and $18.6
million (4.6%) in 1997. The insurance operation is engaged in underwriting
credit-related and other specialized insurance products for finance customers.
Therefore, a significant portion of insurance sales, and resulting revenue, are
largely dependent on finance business activities and volume. The increase in
insurance revenue in each of the years was principally caused by increased sales
of insurance products associated with the increase in managed receivables
outstanding, the December 1998 acquisition of The Northland Company and the
January 1999 acquisition of the insurance operations of Avco Financial Services,
Inc. See Note 3 to the consolidated financial statements for more information
about these acquisitions.

 Investment and Other Income -- Managed Basis

     Managed Basis investment and other income for the years ended December 31,
1999, 1998 and 1997 was $712.3 million, $343.0 million and $217.6 million,
respectively. Managed Basis investment and other income primarily is derived
from fee-based businesses, such as employee relocation services, emergency
roadside assistance and auto club services, real estate title and appraisal
fees, trailer rental income, portfolio income and investment gains and losses.
Gains and losses on asset securitizations transactions and on sales and
dispositions of assets held for sale are also included in investment and other
income.

     The increase in investment and other income in 1999 was primarily due to
(i) increased investment income of approximately $100 million on the insurance
portfolios principally due to the Northland and Avco acquisitions, (ii) net
gains of approximately $100 million on the securitization and sale of
receivables during 1999, (iii) approximately $117 million in income generated
from certain businesses and assets sold during 1999 and (iv) growth in the
Company's fee based businesses. The net operating results of business units and

                                       23
<PAGE>   25

branches held for sale were recorded in investment and other income. No such
businesses were held for sale during 1998 or 1997. See Notes 3 and 7 to the
consolidated financial statements.

     The increase in investment and other income from 1997 to 1998 was
principally due to higher investment income due to the growth in the Company's
investment portfolio and growth in fee-based businesses.

  Operating Expenses

     Operating expenses, on an Owned and Managed Basis, were as follows (dollars
in millions):

                               OPERATING EXPENSES

<TABLE>
<CAPTION>
                                                          YEAR ENDED DECEMBER 31
                                          ------------------------------------------------------
                                                1999               1998               1997
                                          ----------------   ----------------   ----------------
                                           AMOUNT    % AMR    AMOUNT    % AMR    AMOUNT    % AMR
                                          --------   -----   --------   -----   --------   -----
<S>                                       <C>        <C>     <C>        <C>     <C>        <C>
Salaries and Benefits...................  $1,700.2   2.15%   $1,290.1   2.00%   $1,110.5   2.06%
Occupancy and Supplies..................     456.4   0.58       329.1   0.51       288.9   0.54
Data Processing and Communications......     416.8   0.53       297.3   0.46       251.9   0.47
Advertising.............................     272.2   0.34       215.4   0.33       176.8   0.33
Other...................................   1,048.8   1.32       666.1   1.04       511.5   0.94
                                          --------   ----    --------   ----    --------   ----
          Total.........................  $3,894.4   4.92%   $2,798.0   4.34%   $2,339.6   4.34%
                                          ========   ====    ========   ====    ========   ====
Managed Basis Efficiency Ratio..........             45.6%              43.7%              43.5%
                                                     ====               ====               ====
</TABLE>

     Total operating expenses on a dollar basis increased from 1997 to 1999,
principally due to increased levels of business volume and outstanding
receivables in each of the years. As a percentage of average managed
receivables, total operating expenses increased from 1998 to 1999 and remained
flat from 1997 to 1998. In addition, the Company's total Managed Basis operating
efficiency, as measured by the ratio of total operating expenses to Managed
Basis revenues net of Managed Basis interest expense and insurance benefits paid
or provided (the "Efficiency Ratio") increased from 1997 to 1999. The increase
in other expenses included approximately $140 million in goodwill and other
intangible asset amortization, approximately $105 million in new business
expense and approximately $35 million in Avco related integration costs.
Furthermore, a slight shift in business mix toward more fee based business
caused by the acquisitions of The Northland Company and ACS during the fourth
quarter of 1998 also contributed to the overall increase. The Efficiency Ratio
has declined during each quarter of 1999 and in the fourth quarter 1999 reached
the pre-Avco acquisition level.

  Allowance for Losses -- Owned Basis

     The Company maintains an allowance for losses on finance receivables at an
amount that it believes is sufficient to provide for losses in its existing
receivables portfolios. The allowance is determined principally on the basis of
historical loss experience, and reflects management's judgment of the present
loss exposure at the end of the period considering economic conditions and the
nature and characteristics of the underlying finance receivables. The Company
records an allowance for losses when it believes the event causing the loss has
occurred. The allowance is evaluated on an aggregate basis considering, among
other things, the relationship of the allowance to net finance receivables and
historical net credit losses. Additions to the allowance are generally charged
to the provision for losses on finance receivables.

     Finance receivables are charged to the allowance for losses when they are
deemed to be uncollectible. As set forth below, the Company's policy generally
provides for charge-off of various types of accounts on a contractual basis.
Consumer direct and other installment and credit card receivables are charged to
the allowance for losses when they become 180 days contractually delinquent. All
other finance receivables are charged to the allowance for losses when any of
the following conditions occur: (i) the related security has been converted or
destroyed; (ii) the related security has been repossessed and sold or held for
sale for one year; or (iii) the related security has not been repossessed and
the receivable has become contractually delinquent for one year. A contractually
delinquent account is one on which the customer has not made

                                       24
<PAGE>   26

payments as contractually agreed. Finance charge accruals are suspended when
they become 60 days contractually delinquent. The accrual is resumed when the
loan becomes contractually current. Recoveries on losses previously charged to
the allowance are credited to the allowance at the time recovery is collected.
At December 31, 1999 and 1998, net finance receivables on which revenue was not
being accrued approximated $1.9 billion and $1.5 billion, respectively. The
interest income that would have been recorded if these nonaccruing receivables
had been current was approximately $51 million in 1999 and $34 million in 1998.

     The components of the changes in the allowance for losses were as follows
(dollars in millions):

               COMPONENTS OF CHANGES IN THE ALLOWANCE FOR LOSSES

<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31
                                                              ---------------------------------
                                                                1999        1998        1997
                                                              ---------   ---------   ---------
<S>                                                           <C>         <C>         <C>
Balance at Beginning of Period..............................  $ 1,978.7   $ 1,949.9   $ 1,563.1
  Provision for losses......................................    1,506.4     1,283.5     1,378.1

  Recoveries on receivables charged off.....................      268.8       237.7       224.9
  Losses sustained..........................................   (1,717.1)   (1,424.6)   (1,454.0)
                                                              ---------   ---------   ---------
          Net credit loss experience........................   (1,448.3)   (1,186.9)   (1,229.1)
                                                              ---------   ---------   ---------
  Reserves of receivables sold or held for
     securitization(1)......................................     (214.0)     (334.7)         --
  Reserves of acquired businesses and other.................      351.6       266.9       237.8
                                                              ---------   ---------   ---------
Balance at End of Period....................................  $ 2,174.4   $ 1,978.7   $ 1,949.9
                                                              =========   =========   =========
Allowance for Losses to Net Finance Receivables.............       3.16%       3.25%       3.53%
Loss Coverage Ratio(2)......................................       1.50x       1.74x       1.59x
</TABLE>

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

(1) The reserves related to receivables sold during 1997 were not significant.

(2) Calculated as a ratio of the allowance for losses to related trailing or
    annualized net credit losses on receivables owned at the end of the period
    (as adjusted to exclude net credit losses related to securitized receivables
    and to reflect the impact of significant acquisitions).

     The allowance for losses as a percent of net finance receivables declined
in both 1999 and 1998, principally due to the securitization and sale of credit
card receivables. The 1999 and 1998 securitization transactions described in
Note 7 to the consolidated financial statements contributed to a general shift
in product mix on an owned basis from 1997 to 1999 towards more secured
portfolios. Secured portfolios generally have lower loss rates and therefore
lower allowance requirements than unsecured portfolios.

     Management believes the allowance for losses at December 31, 1999 is
sufficient to provide for losses in its portfolios. Although the allowance for
losses on finance receivables reflected in the Company's consolidated balance
sheet at December 31, 1999 is considered adequate by management, there can be no
assurance that this allowance will prove to be adequate over time to cover
ultimate losses in connection with the Company's finance receivables. This
allowance may prove to be inadequate due to unanticipated adverse changes in the
economy or discrete events adversely affecting specific customers or industries.
The Company's results of operations and financial condition could be materially
adversely affected to the extent that the Company's allowance is insufficient to
cover such changes or events.

                                       25
<PAGE>   27

  Net Credit Losses and Contractual Delinquency

     The Company's Managed Basis 60+days contractual delinquency and Managed
Basis net credit losses as a percentage of average managed receivables ("AMR")
for each of these years are set forth in the following table (dollars in
millions):

          MANAGED BASIS CONTRACTUAL DELINQUENCY AND NET CREDIT LOSSES

<TABLE>
<CAPTION>
                                                               YEAR ENDED OR AT DECEMBER 31
                                                              ------------------------------
SEGMENT                                                         1999       1998       1997
-------                                                       --------   --------   --------
<S>                                                           <C>        <C>        <C>
60+Days Contractual Delinquency(1)
  U.S. Credit Card..........................................      4.21%      4.79%      3.99%
  U.S. Consumer Finance.....................................      3.77       3.22       2.73
  Commercial(2).............................................      1.26       1.21       1.02
  International Finance.....................................      2.60       2.58       1.93
          Total.............................................      2.77%      2.57%      2.15%
          Total dollars delinquent..........................  $2,478.7   $1,951.9   $1,355.1
Net Credit Losses to AMR
  U.S. Credit Card..........................................      7.13%      7.81%      7.41%
  U.S. Consumer Finance.....................................      2.51       2.41       2.30
  Commercial(2).............................................      0.93       0.46       0.34
  International Finance.....................................      3.98       3.27       2.44
          Total.............................................      2.80%      2.43%      2.32%
          Total dollars.....................................  $2,216.1   $1,566.0   $1,250.0
</TABLE>

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

(1) As a percentage of gross managed receivables

(2) Commercial segment 60+days delinquency, on a pro forma basis, excluding the
    impact of manufactured housing and recreational vehicle operations would
    have been 1.16%, 1.03% and 1.04% for the years ended December 31, 1999, 1998
    and 1997, respectively. Commercial segment managed net losses to average
    managed receivables, on a pro forma basis, excluding the impact of
    manufactured housing and recreational vehicle operations would have been
    0.50%, 0.30% and 0.24% for the years ended December 31, 1999, 1998 and 1997,
    respectively.

     Managed basis contractual delinquencies and net credit losses on a dollar
basis increased in 1999 and 1998 primarily as a result of the growth in finance
receivables. As a percentage of AMR, managed basis contractual delinquencies and
net credit losses increased in 1999 and 1998 primarily as a result of the shift
in product mix toward more unsecured receivables. Unsecured receivables
generally have higher losses and delinquencies.

     The U.S. credit card segment managed basis net credit losses to AMR
declined in 1999 compared to 1998 primarily because of decreasing loss levels in
private label portfolios. The increase in 1998 compared to 1997 was primarily
due to generally higher loss rates caused by the increase in consumer bankruptcy
levels during 1998.

     The U.S. consumer finance segment managed basis contractual delinquencies
and net credit losses to AMR increased from 1998 to 1999 primarily as a result
of the Avco acquisition. This caused a shift in product mix toward more
unsecured receivables and higher losses in the home equity receivables
portfolio. From 1997 to 1998, the primary factor in the increase of contractual
delinquencies and net losses to AMR was higher consumer bankruptcy levels.

     The commercial segment managed net credit losses to AMR increased in each
comparable period primarily due to higher losses in the retail manufactured
housing portfolio. In January 2000, the Company announced plans to discontinue
the origination of retail installment and wholesale financing products for the
manufactured housing sector. See Note 22 to the consolidated financial
statements.

     The international finance segment managed contractual delinquencies and net
credit losses to AMR increased in each comparable period. The increases were
primarily the result of the first quarter 1999 acquisition of Avco, the first
quarter 1998 acquisition of Beneficial Canada and the second quarter 1998

                                       26
<PAGE>   28

acquisition of DIC Finance Co. Ltd. These acquisitions resulted in a shift in
the segment product mix toward more unsecured portfolios. Unsecured portfolios
typically have higher losses than secured portfolios. Rising bankruptcy levels
also contributed to the increase in 1998.

  Insurance Benefits Paid or Provided

     Insurance benefits paid or provided were $447.0 million in 1999, $158.1 in
1998 and $145.7 in 1997. Benefits paid or provided are influenced by the amount
of insurance in force, underwriting standards, loss experience, term of coverage
and product mix. Benefits paid or provided increased in 1999 as compared to 1998
and 1997, primarily as a result of more insurance in force resulting from the
acquisitions of Northland in December 1998 and Avco in January 1999.

  Provision for Income Taxes

     The Company's provision for income taxes and effective tax rates were as
follows (dollars in millions):

                           PROVISION FOR INCOME TAXES

<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31
                                           ------------------------------------------------------------
                                                  1999                 1998                 1997
                                           ------------------   ------------------   ------------------
                                                    EFFECTIVE            EFFECTIVE            EFFECTIVE
                                                       TAX                  TAX                  TAX
                                           AMOUNT     RATE      AMOUNT     RATE      AMOUNT     RATE
                                           ------   ---------   ------   ---------   ------   ---------
<S>                                        <C>      <C>         <C>      <C>         <C>      <C>
U.S. statutory rate......................  $831.9     35.0%     $679.2     35.0%     $574.0     35.0%
  State income taxes.....................    26.9      1.1        27.1      1.4        22.6      1.4
  Non-deductible goodwill................    26.2      1.1        17.9      0.9         6.1      0.4
  Other..................................     1.5      0.1        (7.2)    (0.3)        5.6      0.3
                                           ------     ----      ------     ----      ------     ----
Provision for income taxes...............  $886.5     37.3%     $717.0     37.0%     $608.3     37.1%
                                           ======     ====      ======     ====      ======     ====
</TABLE>

     The effective tax rate decreased in 1998 principally due to an increase in
the utilization of foreign tax credits available to the Company. The available
foreign tax credits primarily related to estimated taxes paid or accrued by the
Company on its Japan-based earnings. In addition, the Company was allocated
foreign tax credits under a tax sharing agreement with Ford in 1998 and 1997.

     The effective tax rate increase in 1999 compared to 1998 and 1997 is due to
an increase in non-deductible goodwill due primarily to the 1998 acquisitions of
the stock of Beneficial Canada and Northland.

     The reduction in the effective state income tax rate in 1999 compared to
1998 and 1997 is attributable to an increase in foreign earnings as a percentage
of total Company earnings.

                                       27
<PAGE>   29

FINANCIAL CONDITION

  Growth in Managed Finance Receivables

     The Company experienced growth in managed finance receivables in 1999 and
1998 as follows (dollars in millions):

                     GROWTH IN MANAGED FINANCE RECEIVABLES

<TABLE>
<CAPTION>
                                                       YEAR ENDED OR AT DECEMBER 31
                                         ---------------------------------------------------------
                                                    1999                          1998
                                         ---------------------------   ---------------------------
                                                      INCREASE FROM                 INCREASE FROM
                                                       PRIOR YEAR                    PRIOR YEAR
                                                     ---------------               ---------------
SEGMENT                                   BALANCE     AMOUNT      %     BALANCE     AMOUNT      %
-------                                  ---------   ---------   ---   ---------   ---------   ---
<S>                                      <C>         <C>         <C>   <C>         <C>         <C>
U.S. Credit Card Finance...............  $10,928.3   $ 1,306.3   14    $ 9,622.0   $ 1,782.7   23
U.S. Consumer Finance..................   31,566.8     4,756.3   18     26,810.5     2,825.5   12
Commercial(1)..........................   27,948.6     1,479.0    6     26,469.6     4,165.4   19
International Finance..................   13,971.0     5,508.8   65      8,462.2     4,184.2   98
                                         ---------   ---------         ---------   ---------
          Total Managed Receivables....  $84,414.7   $13,050.4   18    $71,364.3   $12,957.8   22
                                         =========   =========         =========   =========
</TABLE>

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

(1) Excluding manufactured housing and recreational vehicle receivables, the
    managed receivables, dollar increase from prior year and percentage increase
    from prior year would have been $22.5 billion, $3.2 billion and 17%, and
    $19.2 billion, $2.1 billion and 12% for December 31, 1999 and 1998,
    respectively.

     The growth in managed receivables was primarily due to the January 6, 1999
acquisition of Avco. Internal managed receivable growth for 1999 adjusted for
announced acquisitions and dispositions was 44%. Had the Avco acquisition closed
at the end of 1998, internal managed receivable growth adjusted for announced
acquisitions and dispositions in 1999 would have been approximately 90%.

  Debt

     Total outstanding debt was $68.7 billion and $63.3 billion at December 31,
1999 and 1998, respectively. Such amounts of debt reflect net increases of $5.4
billion (8.5%) in 1999 and $14.1 billion (28.7%) in 1998. In both years, the
increase was primarily a result of the growth in net finance receivables. At
December 31, 1999 and 1998, short-term debt, including the current portion of
long-term debt, as a percent of total debt was 52% for both years. The current
portion of long-term debt at December 31, 1999 and 1998 was $8.8 billion and
$7.7 billion, respectively.

  Stockholders' Equity

     Stockholders' equity increased to $9.8 billion in 1999 from $8.5 billion in
1998. This increase was primarily due to 1999 net earnings and an unrealized
foreign currency gain of $31.7 million. This increase in stockholders' equity
was partially offset in 1999 by dividends paid of $167.5 million and unrealized
loss on securities of $93.8 million. The effects of foreign currency movements
were partially offset through the Company's use of derivative financial
instruments as described in Note 17 to the consolidated financial statements.

  Liquidity/Capital Resources

     Through its asset and liability management function, the Company maintains
a disciplined approach to the management of liquidity, capital, interest rate
risk and foreign exchange rate risk. The Company has a formal process for
managing its liquidity to ensure that funds are available at all times to meet
the Company's commitments.

     The Company's principal sources of cash are proceeds from the issuance of
short and long-term debt, cash provided from the Company's operations and asset
securitizations. Management believes the Company

                                       28
<PAGE>   30

has available sufficient liquidity, from a combination of cash provided from
operations, external borrowings and asset securitizations to support its
operations.

     A principal strength of the Company is its ability to access the global
debt and capital markets in a cost-efficient manner. Continued access to the
public and private debt markets is critical to the Company's ability to continue
to fund its operations. The Company seeks to maintain a conservative liquidity
position and actively manages its liability and capital levels, debt maturities,
diversification of funding sources and asset liquidity to ensure that it is able
to meet its obligations as they mature. The Company's domestic operations are
principally funded through domestic and international borrowings and asset
securitizations. The Company's foreign subsidiaries are principally funded
through private and public debt borrowings in the transactional currency and
fully hedged intercompany borrowings.

     At December 31, 1999 and 1998, the Company had short- and long-term debt
outstanding of $68.7 billion and $63.3 billion, respectively. Short-term debt
principally consists of commercial paper and represents the Company's primary
source of short-term liquidity. Long-term debt principally consists of senior
unsecured long-term debt issued publicly and privately by the Company's
principal operating subsidiary, Associates Corporation of North America, in the
United States and abroad, and to a lesser extent, private and public borrowings
made by the Company's foreign subsidiaries. During the years ended December 31,
1999 and 1998, the Company raised term debt aggregating $9.9 billion and $13.3
billion, respectively, through public and private offerings.

     Substantial additional liquidity is available to the Company's operations
through established credit facilities in support of its net short-term
borrowings. Such credit facilities provide a means of refinancing its maturing
short-term obligations as needed. At December 31, 1999, these credit facilities
were allocated to provide at least 75% coverage of the Company's recurring
commercial paper borrowings and utilized uncommitted lines of credit. See Note
10 to the consolidated financial statements.

     The Company has access to other sources of liquidity such as the issuance
of alternative forms of capital, the issuance of common and preferred stock and
the increased use of asset securitization. The Company's securitization
transactions up to this point have included the manufactured housing, home
equity and credit card asset-backed classes. The Company has additional asset
classes in its portfolio which can be securitized, including asset classes
within its foreign operations.

     The Company has entered into various support agreements on behalf of its
foreign subsidiaries. Under these support agreements, the Company has either
guaranteed specific issues of such subsidiaries' debt or agreed to supervise
operations in a responsible manner and to provide additional support on a
lender's reasonable request. See Notes 10, 11 and 17 to the consolidated
financial statements for a further description of these borrowings and currency
hedging activities.

     The Company has entered into agreements with certain debt and asset backed
security holders which may require the Company to purchase such securities. See
Notes 12 and 16 to the consolidated financial statements. Management believes it
has sufficient liquidity to support these requirements.

YEAR 2000 COMPLIANCE

     The inability of computers, software and other equipment utilizing
microprocessors to recognize and properly process date fields containing a
2-digit year is commonly referred to as the Year 2000 Compliance issue.

     The Company had a company-wide initiative that addressed the Year 2000
Compliance issue. A team of technology professionals began addressing the Year
2000 Compliance issue in 1995. Since then, all significant third party and
internal applications that required modification to ensure Year 2000 Compliance
have been identified and addressed.

     The transition from 1999 to 2000 was closely monitored to assure any
unforeseen problems were quickly resolved. No significant Year 2000 Compliance
related problems were identified. The Company will continue

                                       29
<PAGE>   31

monitoring through the first quarter of 2000 to assure any problem that may
occur is quickly identified and resolved.

     There can be no guarantee that the systems of other companies on which the
Company's systems rely will be converted in a timely manner, or that a failure
to convert by another company, or a conversion that is incompatible with the
Company's systems, would not have a material adverse effect on the Company. In
addition, there are many risks associated with the Year 2000 Compliance issue,
including but not limited to the possible failure of the Company's computer and
information technology systems. Any such failure could have a material adverse
affect on the Company including the inability to properly bill and collect
payments from customers and errors or omissions in accounting and financial
data. In addition, the Company is exposed to the inability of third parties to
perform as a result of Year 2000 Compliance. Any such failure by a third party
bank, regulatory agency, group of investors, securities exchange or clearing
agency, software product or service provider, utility or other entity may have a
material adverse financial or operational effect on the Company. The Company has
not yet experienced any such failure.

     From the inception of the Year 2000 readiness project through December 31,
1999 the Company incurred and expensed approximately $31 million for incremental
costs primarily related to third party vendors, outside contractors and
additional staff dedicated to the Year 2000 readiness project. The Company
expects that it will incur additional future incremental costs related to the
project of approximately $2 million. These incremental costs do not include
existing resources allocated to the project effort. The Company's Year 2000
project is expected to continue through March 2000. The first quarter of the
Year 2000 effort is specifically designed to monitor all Year 2000 transition
activities.

     These costs and the date on which the Company plans to complete the Year
2000 project are based on management's best estimates, which were derived
utilizing numerous assumptions of future events including the continued
availability of certain resources, third party modification plans and other
factors. However, there can be no guarantee that these estimates will be
achieved and actual results could differ from those plans.

RECENT ACCOUNTING PRONOUNCEMENTS

     Statement of Financial Accounting Standards No. 133 ("SFAS 133"),
Accounting for Derivative Instruments and Hedging Activities, was issued by the
Financial Accounting Standards Board in June 1998. This Statement requires
companies to record derivatives on the balance sheet as assets or liabilities,
measured at fair value. Generally, changes in the fair value of derivatives must
be recognized in income when they occur, except when the derivative qualifies as
a hedge in accordance with the standard. This statement will be effective for
the Company for the 2001 fiscal year. The Financial Accounting Standards Board
is considering amending SFAS 133, as a result, the Company has not yet
determined the impact SFAS 133 and any related amendment will have on its
earnings or financial position. The Company has been proactive in evaluating
various strategies which management believes will qualify for hedge accounting
treatment under SFAS 133.

FORWARD-LOOKING STATEMENTS UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995

     The Company desires to take advantage of the "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995 (the "1995 Act"). The 1995
Act provides a "safe harbor" for forward-looking statements to encourage
companies to provide information without fear of litigation so long as those
statements are identified as forward-looking and are accompanied by meaningful
cautionary statements identifying important factors that could cause actual
results to differ materially from those projected. Although the Company does not
anticipate that it will make forward-looking statements as a general policy, the
Company will make forward-looking statements as required by law or regulation,
and from time to time may make such statements with respect to management's
estimation of the future operating results and business of the Company.

     The following is a summary of the factors the Company believes important
and that could cause actual results to differ from the Company's expectations.
The Company is publishing these factors pursuant to the 1995 Act. Such factors
should not be construed as exhaustive or as an admission regarding the adequacy
of disclosure made by the Company prior to the effective date of the 1995 Act.
Readers should understand that

                                       30
<PAGE>   32

many factors govern whether any forward-looking statement will be or can be
achieved. Any one of those factors could cause actual results to differ
materially from those projected. No assurance is or can be given that any
important factor set forth below will be realized in a manner so as to allow the
Company to achieve the desired or projected results. The words "believe,"
"expect," "anticipate," "intend," "aim," "will" and similar words identify
forward-looking statements. The Company cautions readers that the following
important factors, among others, could affect the Company's actual results and
could cause the Company's actual consolidated results to differ materially from
those expressed in any forward-looking statements made by or on behalf of the
Company.

     - Rapid changes in interest rates, which may (i) limit the Company's
       ability to generate new finance receivables (ii) decrease the Company's
       net interest margins and (iii) adversely affect the valuation of the
       Company's interest sensitive assets.

     - Increase in contractual delinquencies, non-performing loans and credit
       losses.

     - Decline in the values of collateral securing customer obligations
       resulting in increased credit losses.

     - Rapid changes in receivable prepayment rates.

     - Adverse changes, or any announcement relating to a possible or
       contemplated adverse change, in the ratings obtained from any of the
       independent rating agencies relating to the Company's debt securities or
       other financial instruments.

     - The inability of the Company to access capital and financing on terms
       acceptable to the Company.

     - The decline in stock price adversely affecting the Company's ability to
       access the equity markets.

     - Changes in any domestic or foreign governmental regulation affecting the
       Company's ability to declare and pay dividends, conduct business, the
       manner in which it conducts business or the level of product pricing.

     - Heightened competition, including the intensification of price
       competition, the entry of new competitors and the introduction of new
       products by new and existing competitors.

     - Adverse publicity and news coverage about the Company or about any of its
       proposed products or services.

     - Adverse results in litigation matters and governmental proceedings
       involving the Company.

     - General economic and inflationary conditions affecting consumer debt
       levels and credit losses and overall increases in the cost of doing
       business.

     - Changes in social and economic conditions such as increasing consumer
       bankruptcies, inflation and monetary fluctuations, foreign currency
       exchange rate fluctuations and changes in tax rates or tax laws.

     - Changes in generally accepted accounting policies and practices, and the
       application of such policies and practices to the Company.

     - Loss or retirement of key executives, employees or technical personnel.

     - The effect of changes within the Company's organization or in
       compensation and benefit plans and the ability of the Company to attract
       and retain experienced and qualified management personnel.

     - Natural events and acts of God such as earthquakes, fires or floods
       affecting the Company's branches and other operating facilities.

     - The Company's ability and the ability of third parties with whom the
       Company has relationships to ensure that systems are year 2000 compliant.

     - The Company's ability to integrate the operations of acquisitions into
       its operations and to efficiently exit selected operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     The risk management discussion and the estimated amounts generated from the
analysis that follows are forward-looking statements of market risk assuming
certain adverse market conditions occur. Actual results in the future may differ
materially from these projected results due to changes in the Company's product
and

                                       31
<PAGE>   33

debt mix and developments in the global financial markets. The analytical
methods used by the Company to assess and mitigate these risks should not be
considered projections of future events or operating performance.

     The Company is exposed to a variety of market risks, including the effects
of movements in interest rates and foreign currency. Interest rate and foreign
exchange rate exposures are monitored and managed by the Company as an integral
part of its overall risk management program. The principal goal of the Company's
risk management program is to reduce the potential impact of interest rate and
foreign exchange exposures on the Company's financial position and operating
performance. The Company utilizes derivative instruments, including foreign
currency forward exchange agreements and currency swaps as well as interest rate
swap and treasury lock agreements, as part of its overall risk management
program. See Notes 2 and 17 to the consolidated financial statements for a
further discussion of the Company's use of derivative financial instruments. The
Company also believes that its overall balance sheet structure has repricing and
cash flow characteristics that mitigate the impact of long-term interest rate
movements.

  Interest Rate Risk -- Managed Basis

     Beginning in 1999, the Company began measuring interest rate risk on a
Managed Basis including both on- and off-balance sheet assets and liabilities.
Accordingly, certain prior period interest rate risk measures have been restated
to conform to the current year presentation. Interest rate risk is measured and
controlled through the use of static gap analysis and financial forecasting,
both of which incorporate assumptions about future events. The Company's gap
position is defined as the sum of floating rate asset balances and scheduled
principal payments on fixed rate assets, less the sum of floating rate liability
balances and scheduled principal payments on fixed rate liabilities, all on a
Managed Basis. The Company measures its gap position at various time horizons,
ranging from three months to five years. At December 31, 1999, 1998 and 1997,
the one-year gap was a negative 5%, and a positive 3% and 8%, respectively. A
positive one year gap indicates that a greater percentage of assets than
liabilities will reprice within a one-year time frame.

     The Company also uses a simulation model to evaluate the impact on earnings
under a variety of scenarios. These scenarios may include a change in the
absolute level of interest rates, prepayments, interest rate spread
relationships, loan rates and floors, state and national usury ceilings, and
changes in the volumes and rates of various managed asset and liability
categories. For an immediate 1% increase in rates, projected annual after-tax
earnings on managed assets would have declined by 3.5% at December 31, 1999 and
less than 1% at December 31, 1998 and 1997. An immediate 1% rise in interest
rates is a hypothetical rate scenario, used to calibrate risk, and does not
currently represent the Company's view of future market developments.

     For purposes of the United States Securities and Exchange Commission
disclosure requirements, the Company has also performed an enterprise-wide value
at risk ("VAR") analysis of the Company's Managed assets and liabilities and
their exposure to changes in interest rates. The VAR was calculated using an
historical simulation risk model to calculate changes in earnings due to changes
in interest rates on all significant on- and off-balance sheet exposures on a
Managed Basis. The simulation generates monthly interest rate scenarios over a
forecast horizon of 12 months. The VAR analysis calculates the potential after-
tax earnings at risk associated with changes in interest rates, with a 95%
confidence level (as required under applicable United States Securities and
Exchange Commission rules) over this forward 12-month period. The model assumes
interest rates are normally distributed and draws volatilities from various
market sources. At December 31, 1999, 1998 and 1997, interest rate movements
would affect annual after-tax earnings by approximately $60 million, $19 million
and $11 million, respectively, as calculated under the VAR methodology. This
interest rate VAR averaged $23 million in 1999 and $17 million in 1998. The
primary reason for the 1999 increase in the results of the simulation model and
the VAR is attributed to an increase in the mix of floating rate debt at the end
of 1999.

  Foreign Currency Risk

     The Company is exposed to foreign currency risk from changes in the value
of underlying assets and liabilities of its non-United States dollar denominated
foreign investments. The Company has employed a variety of risk management tools
such as borrowing and lending in local currencies, converting offshore

                                       32
<PAGE>   34

funding to US Dollars, as well as using derivative instruments to hedge its
investment in foreign subsidiaries. The Company has also performed a VAR
analysis on the Company's exposure to changes in foreign currency exchange
rates. The VAR is calculated using an historical simulation model to calculate
changes in earnings from foreign currency risk on all significant on and
off-balance sheet exposures. The simulation generates foreign currency exchange
rate scenarios and volatilities over a 12-month horizon and calculates the
potential after-tax earnings at risk associated with foreign currency
fluctuations, with a 95% confidence level (as required under applicable United
States Securities and Exchange Commission rules). The model assumes currency
prices are normally distributed and draws volatility and cross currency
correlation data from JP Morgan Risk Metrics(TM) for the Company's three
material currency exposures, Japanese Yen, Canadian Dollars and British Pounds
Sterling. At December 31, 1999, 1998 and 1997 currency volatility would affect
annual after-tax earnings by approximately $4 million, $11 million and $4
million, respectively, as calculated under the VAR methodology. This currency
rate VAR averaged $1 million in 1999 and $3 million in 1998.

     The Company utilizes a wide variety of risk management methods, including
those discussed above, and believes that no single risk model provides a
reliable method of monitoring and controlling risk. While these models are
sophisticated, the quantitative risk information generated is limited by the
model's parameters. Therefore, such models do not substitute for the experience
or judgment of management to adjust positions and revise strategies as deemed
necessary.

                                       33
<PAGE>   35

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

                         REPORT OF INDEPENDENT AUDITORS

Board of Directors
Associates First Capital Corporation

     We have audited the accompanying consolidated balance sheets of Associates
First Capital Corporation and subsidiaries as of December 31, 1999 and 1998, and
the related consolidated statements of earnings, changes in stockholders'
equity, and cash flows for each of the three years in the period ended December
31, 1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Associates
First Capital Corporation and subsidiaries as of December 31, 1999 and 1998, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States.

                                            ERNST & YOUNG LLP

Dallas, Texas
January 27, 2000

                                       34
<PAGE>   36

                      ASSOCIATES FIRST CAPITAL CORPORATION

                       CONSOLIDATED STATEMENT OF EARNINGS
                    (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31
                                                              -------------------------------
                                                                1999        1998       1997
                                                              ---------   --------   --------
<S>                                                           <C>         <C>        <C>
REVENUE
  Finance charges...........................................  $ 9,106.4   $7,910.4   $7,560.2
  Servicing related income..................................    1,256.8      651.9       80.1
  Insurance premiums........................................    1,055.7      471.5      420.7
  Investment and other income...............................      712.3      343.0      217.6
                                                              ---------   --------   --------
                                                               12,131.2    9,376.8    8,278.6
EXPENSES
  Interest expense..........................................    3,906.5    3,196.7    2,775.2
  Operating expenses........................................    3,894.4    2,798.0    2,339.6
  Provision for losses on finance receivables...............    1,506.4    1,283.5    1,378.1
  Insurance benefits paid or provided.......................      447.0      158.1      145.7
                                                              ---------   --------   --------
                                                                9,754.3    7,436.3    6,638.6
                                                              ---------   --------   --------
EARNINGS BEFORE PROVISION FOR INCOME TAXES..................    2,376.9    1,940.5    1,640.0
PROVISION FOR INCOME TAXES..................................      886.5      717.0      608.3
                                                              ---------   --------   --------
NET EARNINGS................................................  $ 1,490.4   $1,223.5   $1,031.7
                                                              =========   ========   ========
NET EARNINGS PER SHARE
  Basic.....................................................  $    2.05   $   1.76   $   1.49
                                                              =========   ========   ========
  Diluted...................................................  $    2.04   $   1.75   $   1.48
                                                              =========   ========   ========
</TABLE>

                See notes to consolidated financial statements.

                                       35
<PAGE>   37

                      ASSOCIATES FIRST CAPITAL CORPORATION

                           CONSOLIDATED BALANCE SHEET
                             (DOLLARS IN MILLIONS)

                                     ASSETS

<TABLE>
<CAPTION>
                                                                   DECEMBER 31
                                                              ---------------------
                                                                1999        1998
                                                              ---------   ---------
<S>                                                           <C>         <C>
CASH AND CASH EQUIVALENTS...................................  $ 1,026.3   $ 4,665.6
INVESTMENTS IN DEBT AND EQUITY SECURITIES...................    7,176.5     6,678.7
FINANCE RECEIVABLES, net of unearned finance income,
  allowance for credit losses and insurance policy and
  claims reserves...........................................   65,656.8    57,496.4
OTHER ASSETS................................................    9,097.2     6,334.7
                                                              ---------   ---------
          Total assets......................................  $82,956.8   $75,175.4
                                                              =========   =========
                       LIABILITIES AND STOCKHOLDERS' EQUITY
NOTES PAYABLE, unsecured short-term
  Commercial Paper..........................................  $25,991.9   $24,144.3
  Bank Loans................................................    1,261.5     1,565.5
ACCOUNTS PAYABLE AND ACCRUALS...............................    4,498.9     3,342.4
LONG-TERM DEBT
  Senior Notes..............................................   40,978.8    37,171.4
  Subordinated and Capital Notes............................      425.2       425.3
                                                              ---------   ---------
                                                               41,404.0    37,596.7
STOCKHOLDERS' EQUITY
  Series A Junior Participating Preferred Stock, $0.01 par
     value, 734,500 shares authorized, no shares issued or
     outstanding............................................         --          --
  Class A Common Stock, $0.01 par value, 1,150,000,000
     shares authorized, and 728,747,443 and 728,228,488
     shares issued in 1999 and 1998, respectively...........        7.3         7.3
  Class B Common Stock, $0.01 par value, 144,118,820 shares
     authorized, no shares issued or outstanding............         --          --
  Paid-in Capital...........................................    5,282.1     5,273.7
  Retained Earnings.........................................    4,501.8     3,178.9
  Accumulated Other Comprehensive Income....................       44.7       106.8
  Less 597,785 and 980,314 shares of Class A Common Stock
     held at cost in Treasury in 1999 and 1998,
     respectively...........................................      (35.4)      (40.2)
                                                              ---------   ---------
          Total stockholders' equity........................    9,800.5     8,526.5
                                                              ---------   ---------
          Total liabilities and stockholders' equity........  $82,956.8   $75,175.4
                                                              =========   =========
</TABLE>

                See notes to consolidated financial statements.

                                       36
<PAGE>   38

                      ASSOCIATES FIRST CAPITAL CORPORATION

           CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                     (IN MILLIONS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                      ACCUMULATED
                                                                         OTHER                      TOTAL
                                      COMMON   PAID-IN    RETAINED   COMPREHENSIVE   TREASURY   STOCKHOLDERS'
                                      STOCK    CAPITAL    EARNINGS      INCOME        STOCK        EQUITY
                                      ------   --------   --------   -------------   --------   -------------
<S>                                   <C>      <C>        <C>        <C>             <C>        <C>
DECEMBER 31, 1996...................   $3.5    $4,007.5   $1,204.3      $222.2        $   --      $5,437.5
  Comprehensive income
    Net earnings....................                       1,031.7                                 1,031.7
    Other comprehensive loss, net of
      tax...........................                                     (49.6)                      (49.6)
                                                          --------      ------                    --------
         Total comprehensive
           income...................                       1,031.7       (49.6)                      982.1
  Cash dividends on Common Stock
    ($0.20 per share)...............                        (138.6)                                 (138.6)
  Treasury stock and other..........               (2.9)                                (9.5)        (12.4)
                                       ----    --------   --------      ------        ------      --------
DECEMBER 31, 1997...................    3.5     4,004.6    2,097.4       172.6          (9.5)      6,268.6
  Comprehensive income
    Net earnings....................                       1,223.5                                 1,223.5
    Other comprehensive loss, net of
      tax...........................                                     (65.8)                      (65.8)
                                                          --------      ------                    --------
         Total comprehensive
           income...................                       1,223.5       (65.8)                    1,157.7
  Sale of Class A Common Stock......    0.2     1,266.5                                            1,266.7
  Cash dividends on Common Stock
    ($0.205 per share)..............                        (142.0)                                 (142.0)
  Stock dividend....................    3.6        (3.6)                                                --
  Treasury stock and other..........                6.2                                (30.7)        (24.5)
                                       ----    --------   --------      ------        ------      --------
DECEMBER 31, 1998...................    7.3     5,273.7    3,178.9       106.8         (40.2)      8,526.5
  Comprehensive income
    Net Earnings....................                       1,490.4                                 1,490.4
    Other comprehensive loss, net of
      tax...........................                                     (62.1)                      (62.1)
                                                          --------      ------                    --------
         Total comprehensive
           income...................                       1,490.4       (62.1)                    1,428.3
  Cash dividends on Common Stock
    ($0.23 per share)...............                        (167.5)                                 (167.5)
  Treasury stock and other..........                8.4                                  4.8          13.2
                                       ----    --------   --------      ------        ------      --------
DECEMBER 31, 1999...................   $7.3    $5,282.1   $4,501.8      $ 44.7        $(35.4)     $9,800.5
                                       ====    ========   ========      ======        ======      ========
</TABLE>

                See notes to consolidated financial statements.

                                       37
<PAGE>   39

                      ASSOCIATES FIRST CAPITAL CORPORATION

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (IN MILLIONS)

<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31
                                                           ------------------------------------
                                                              1999         1998         1997
                                                           ----------   ----------   ----------
<S>                                                        <C>          <C>          <C>
Cash Flows from Operating Activities
  Net earnings...........................................  $  1,490.4   $  1,223.5   $  1,031.7
  Adjustments to reconcile net earnings for non-cash and
     other operating activities:
     Provision for losses on finance receivables.........     1,506.4      1,283.5      1,378.1
     Amortization of goodwill and other intangible
       assets............................................       234.0         92.9         51.6
     Depreciation and other amortization.................       278.0        247.1        271.0
     Increase in insurance policy and claims reserves....       131.7          2.5         70.7
     Purchases of trading securities, net of sales and
       maturities........................................          --         (0.3)      (117.7)
     (Decrease) increase in accounts payable and
       accruals..........................................    (1,207.1)        78.6         21.6
     Deferred income taxes...............................       173.3         28.2        (31.8)
     Net gains on sale of assets and other...............      (155.2)        (3.6)        (3.0)
                                                           ----------   ----------   ----------
          Net cash provided from operating activities....     2,451.5      2,952.4      2,672.2
                                                           ----------   ----------   ----------

Cash Flows from Investing Activities
  Finance receivables originated or purchased............   (64,840.7)   (55,346.9)   (52,136.8)
  Finance receivables liquidated.........................    55,705.9     44,118.2     40,715.6
  Proceeds from securitizations and sales of finance
     receivables.........................................     7,285.7      3,559.8      1,345.9
  Sale of finance businesses and branches................     2,216.8           --           --
  Acquisitions of other finance businesses, net..........    (4,170.5)    (2,692.4)       (39.7)
  Purchases of available-for-sale securities.............    (2,503.5)    (2,212.1)      (319.3)
  Sales and maturities of available-for-sale
     securities..........................................     1,497.6      1,482.3        301.9
  Increase in other assets...............................      (925.9)      (807.4)      (794.3)
                                                           ----------   ----------   ----------
          Net cash used for investing activities.........    (5,734.6)   (11,898.5)   (10,926.7)
                                                           ----------   ----------   ----------

Cash Flows from Financing Activities
  Issuance of long-term debt.............................     9,892.7     13,266.1      8,183.5
  Retirement of long-term debt...........................    (9,015.7)    (5,048.7)    (3,773.3)
  (Decrease) increase in notes payable...................    (1,279.3)     3,966.0      3,903.1
  Cash dividends.........................................      (167.5)      (142.0)      (138.6)
  Sale of Class A Common Stock...........................          --      1,266.7           --
  Treasury stock and other...............................        22.4        (17.0)       (12.4)
                                                           ----------   ----------   ----------
          Net cash (used for) provided from financing
            activities...................................      (547.4)    13,291.1      8,162.3
Effect of foreign currency translation adjustment on
  cash...................................................       191.2       (112.6)        78.5
                                                           ----------   ----------   ----------
(Decrease) increase in cash and cash equivalents.........    (3,639.3)     4,232.4        (13.7)
Cash and cash equivalents at beginning of year...........     4,665.6        433.2        446.9
                                                           ----------   ----------   ----------
Cash and cash equivalents at end of year.................  $  1,026.3   $  4,665.6   $    433.2
                                                           ==========   ==========   ==========
Cash paid for:
  Interest...............................................  $  3,889.4   $  3,208.9   $  2,741.5
                                                           ==========   ==========   ==========
  Income taxes...........................................  $    641.1   $    584.6   $    712.2
                                                           ==========   ==========   ==========
</TABLE>

                See notes to consolidated financial statements.

                                       38
<PAGE>   40

                      ASSOCIATES FIRST CAPITAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- THE COMPANY

     Associates First Capital Corporation ("First Capital" or the "Company"), a
Delaware corporation, is a leading diversified financial services organization
providing finance, leasing, insurance and related services to individual
consumers and businesses in the United States and internationally.

     From October 31, 1989 to April 7, 1998, First Capital was a subsidiary of
Ford FSG, Inc. and an indirect-owned subsidiary of Ford Motor Company ("Ford").
On May 8, 1996, the Company made an initial public offering of 67 million shares
of its Class A Common Stock representing a 19.3% interest in the Company. On
April 7, 1998, Ford completed a spin-off (the "Spin-Off") of its 80.7% interest
in First Capital in the form of a tax-free distribution of its First Capital
Class A Common Stock to Ford common and Class B stockholders. Immediately prior
to, and in connection with the Spin-Off, all of the issued and outstanding
shares of the Company's Class B Common Stock were converted at par value to an
equal number of shares of the Company's Class A Common Stock. Effective with
this distribution, First Capital was no longer a subsidiary of Ford and became a
fully independent company.

NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES

     The following is a summary of significant accounting policies:

  Basis of Presentation and Consolidation

     The consolidated financial statements include the accounts of the Company
and its subsidiaries after elimination of all significant intercompany balances
and transactions. Certain prior period amounts have been reclassified to conform
to the current period presentation.

     The preparation of these consolidated financial statements in conformity
with generally accepted accounting principles requires the use of management
estimates. These estimates are subjective in nature and involve matters of
judgment. Actual results could differ from these estimates.

  Revenue Recognition

     Finance charges on receivables are recognized as revenue using the interest
(actuarial) method. Premiums and discounts on purchased receivables are
considered as yield adjustments. The unamortized balance is included in finance
receivables and the associated amortization is included in finance charge
revenue. Finance charge accruals are generally suspended when the accounts
become 60 days contractually delinquent. The accrual is resumed when the loan
becomes contractually current. At December 31, 1999 and 1998, net finance
receivables on which revenue was not being accrued approximated $1.9 billion and
$1.5 billion, respectively. The interest income that would have been recorded in
1999 and 1998 if these nonaccruing receivables had been current was
approximately $51 million and $34 million, respectively.

     Insurance premiums are recorded as unearned premiums when collected or when
written and are subsequently amortized into income based on the nature and term
of the underlying insurance contracts. The methods of amortization used are pro
rata, sum-of-the-years-digits and a combination thereof.

     Gains or losses on sales of securities classified as available-for-sale are
included in investment and other income when realized. Unrealized gains or
losses on securities classified as available-for-sale are reported, net of tax,
as a component of accumulated other comprehensive income. Realized and
unrealized gains or losses on trading securities (principally preferred stock)
are included in investment and other income as incurred. The cost basis of
securities sold is determined by the first-in, first-out method.

                                       39
<PAGE>   41
                      ASSOCIATES FIRST CAPITAL CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  Advertising Costs

     Advertising costs are expensed as incurred. The advertising costs for 1999,
1998 and 1997 were $272 million, $215 million and $177 million, respectively.

  Receivables Sold with Servicing Retained

     The Company periodically securitizes certain pools of receivables in both
public and private markets and accounts for such transactions in accordance with
Statement of Financial Accounting Standards No. 125 ("SFAS 125"), Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.
Under SFAS 125, a sale is recognized when control over the receivables is
relinquished. In applying SFAS 125, the Company recognizes the resulting gains
at the time of initial sale and each subsequent sale for revolving receivable
arrangements. Initial gains on securitization transactions are recorded in the
consolidated statement of earnings as investment and other income. The income
earned on securitization related securities retained by the Company, including
the recognition of the yield on such securities as well as subsequent sales for
revolving receivable arrangements, is recorded in the consolidated statement of
earnings as servicing related income.

     Initial gains on securitization transactions represent the difference
between the net proceeds received and the allocated carrying amount of the
receivables sold. The allocation of carrying amount is based on the relative
fair value of the individual financial components sold and retained pursuant to
the transaction. The financial components typically consist of such items as the
interests sold, retained senior securities, retained subordinated securities,
retained interest only strips and retained servicing rights. No servicing asset
or liability has been recorded related to the securitization transactions
because the Company earns service fees at rates which approximate adequate
compensation.

     Senior securities are typically valued at par while subordinated securities
are typically valued at a discount using an estimated market discount rate and
cash flow estimates which consider the effects prepayments and losses will have
on the timing of the subordinated interest cash flows. The fair value of
interest only strips represents the present value of future excess cash flows,
using the "cash-out" method. Such future cash flows are estimated using
valuation assumptions appropriate for the type of receivable and transaction
structure. The resulting estimated cash flows represent the difference between
the finance charge and fee income received from the obligors on the finance
receivables and the sum of the interest paid to the investors in the
asset-backed securities, credit losses, servicing fees and other expenses.
Significant valuation assumptions relate to the average lives of the receivables
sold, including the anticipated prepayment speeds and the anticipated credit
losses, as well as the appropriate market discount rate. Significant changes in
these assumptions could impact the recorded value of retained securitization
interests.

     The securitization related securities are accounted for under Statement of
Financial Accounting Standards No. 115, Accounting for Certain Investments in
Debt and Equity Marketable Securities. Because such assets can be contractually
prepaid or otherwise settled in such a way that the holder would not recover all
of its recorded investment, the assets are classified as available-for-sale
investments and measured at fair value. Any unrealized holdings gains or losses
are reported, net of income tax effects, as a component of accumulated other
comprehensive income in the consolidated balance sheet until realized. On a
quarterly basis, the Company assesses the carrying value of its securitization
related securities for impairment. If a decline in fair value is deemed other
than temporary, the securities are adjusted to their fair value through a charge
to operations.

     There can be no assurance that the Company's estimates used to determine
the fair value of the securitization related securities, including those used to
determine the related gains, will remain appropriate for the life of each
securitization.

                                       40
<PAGE>   42
                      ASSOCIATES FIRST CAPITAL CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  Finance Receivables

     Receivables origination and commitment fees and loan origination costs
generally are deferred and amortized as a component of finance charges over the
life of the related receivable. Receivables which are expected to be securitized
and sold are included in other assets as receivables held for sale and recorded
at the lower of cost or market. The aggregate method is used in determining the
lower of cost or market of receivables held for sale. Finance receivables
include the Company's share of aggregate rentals on lease financing transactions
and residual values, net of related unearned income. Lease financing
transactions are principally direct financing leases. Unearned income is
amortized under a method which substantially results in an approximately level
rate of return when related to the unrecovered lease investment. Gains and
losses from sales of residual values of leased equipment are included in finance
income.

  Allowance for Losses on Finance Receivables

     The Company maintains an allowance for losses on finance receivables at an
amount that it believes is sufficient to provide for losses in its existing
receivables portfolios. The allowance is determined principally on the basis of
historical loss experience, and reflects management's judgment of the present
loss exposure at the end of the period considering economic conditions and the
nature and characteristics of the underlying finance receivables. The Company
records an allowance for losses when it believes the event causing the loss has
occurred. The allowance is evaluated on an aggregate basis considering, among
other things, the relationship of the allowance to net finance receivables and
historical net credit losses. Additions to the allowance are generally charged
to the provision for losses on finance receivables.

     Finance receivables are charged to the allowance for losses when they are
deemed to be uncollectible. As set forth below, the Company's policy generally
provides for charge-off of various types of accounts on a contractual basis.
Consumer direct and other installment and credit card receivables are charged to
the allowance for losses when they become 180 days contractually delinquent. All
other finance receivables are charged to the allowance for losses when any of
the following conditions occur: (i) the related security has been converted or
destroyed; (ii) the related security has been repossessed and sold or held for
sale for one year; or (iii) the related security has not been repossessed and
the receivable has become contractually delinquent for one year. A contractually
delinquent account is one on which the customer has not made payments as
contractually agreed. Recoveries on losses previously charged to the allowance
are credited to the allowance at the time the recovery is collected.

     Although the allowance for losses on finance receivables reflected in the
Company's consolidated balance sheet at December 31, 1999 is considered adequate
by the Company's management, there can be no assurance that this allowance will
prove to be adequate over time to cover ultimate losses in connection with the
Company's finance receivables. This allowance may prove to be inadequate due to
unanticipated adverse changes in the economy or discrete events adversely
affecting specific customers or industries. The Company's results of operations
and financial condition could be materially adversely affected to the extent
that the Company's allowance is insufficient to cover such changes or events.

  Insurance Reserves

     The reserves for future benefits and refunds upon cancellation of credit
life and health insurance and property and casualty insurance for the affiliate
insurance business are provided for in the unearned premium reserve for each
class of insurance. Affiliate insurance relates to insurance products
distributed through the finance affiliates. The Company classifies its
affiliated insurance reserves as a component of finance receivables because the
related policy benefits are generally included in the financed receivable
balance as shown in Note 7. The reserves for future benefits and refunds upon
cancellation of credit life and health insurance and property and casualty
insurance for the non-affiliate insurance business are provided for in accounts
payable and accruals for each class of insurance. In addition, reserves for
reported claims on credit accident and health
                                       41
<PAGE>   43
                      ASSOCIATES FIRST CAPITAL CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

insurance are established based on standard morbidity tables used in the
insurance business for such purposes. Claim reserves for reported property and
casualty insurance claims are based on estimates of costs and expenses to settle
each claim. Additional amounts of reserves, based on prior experience and
insurance in force, are provided for each class of insurance for claims which
have been incurred but not reported as of the balance sheet date.

  Intangible Assets

     Amounts of goodwill relating to acquisitions are being amortized using the
straight-line method over periods not exceeding forty years. Other intangible
assets, which are made up primarily of customer lists, operating agreements,
trademarks and credit card customer relationships are amortized using the
straight-line method over the assets' estimated useful lives ranging from five
to twenty years. The carrying value of goodwill and other intangible assets is
reviewed if the facts and circumstances suggest that it may be impaired. If the
review indicates that goodwill or the other intangible assets will not be
recoverable, as determined based on undiscounted cash flows, the carrying value
of the goodwill or the other intangible asset is reduced by the estimated
short-fall of discounted cash flows.

  Foreign Currency

     Assets and liabilities of foreign subsidiaries are translated at the rate
of exchange in effect on the balance sheet date; income and expenses are
translated at the average rate of exchange prevailing during the year. The
related balance sheet translation adjustments are reflected in the stockholders'
equity section of the consolidated balance sheet while the impact of foreign
currency changes on income and expense items are included in earnings.

     Foreign currency transactions resulted in net gains of approximately $3.2
million and $3.0 million during the years ended December 31, 1999 and 1998,
respectively, and a net loss of approximately $2.1 million during the year ended
December 31, 1997.

  Income Taxes

     Deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax basis of assets and liabilities using
statutory tax rates in effect for the year in which the differences are expected
to reverse.

  Cash and Cash Equivalents

     The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. The amounts reported
in the consolidated balance sheet approximate fair value.

  Segment Reporting

     In 1998, the Company adopted Statement of Financial Accounting Standards
No. 131 ("SFAS 131") Disclosures about Segments of an Enterprise and Related
Information. SFAS 131 supersedes Statement of Financial Accounting Standards No.
14, Financial Reporting for Segments of a Business Enterprise, replacing the
"industry segment" approach with the "management" approach. The management
approach designates the internal organization that is used by management for
making operating decisions and assessing performance as the source of the
Company's reportable segments. SFAS 131 also requires disclosures about products
and services, geographic areas, and major customers. The adoption of SFAS 131
did not affect results of operations or financial position of the Company, but
did affect the disclosure of segment information as illustrated in Note 18.

                                       42
<PAGE>   44
                      ASSOCIATES FIRST CAPITAL CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  Derivative Financial Instruments

     The Company uses derivative financial instruments for the purpose of
hedging specific exposures as part of its risk management program and generally
holds derivatives for purposes other than trading. Deferral (hedge) accounting
is applied only if the derivative reduces the risk of the underlying hedged item
and is designated at inception as a hedge with respect to the underlying hedged
item. Additionally, the derivative must result in cash flows that are expected
to be inversely correlated to those of the underlying hedged item. Such
instruments to date have been limited to foreign currency forward exchange,
currency swap, interest rate swap and treasury lock agreements. See Note 17 for
additional information related to derivative financial instruments.

     Forward currency exchange agreements are used to hedge the Company's net
investment in Japan. Accordingly, unrealized translation gains and losses on
these agreements are recorded, net of tax, as a separate component of
accumulated other comprehensive income. The economic discount on such agreements
is recognized over the agreement life on a straight-line basis as an adjustment
to interest expense.

     Foreign currency swap and interest rate swap agreements are used to hedge
debt obligations and financing transactions. Accordingly, the differential paid
or received by the Company on these agreements is recognized as an adjustment to
interest expense over the term of the underlying transaction.

     Treasury lock agreements are used to hedge anticipated asset securitization
transactions or debt issuances of the Company. Accordingly, the differential
paid or received by the Company on maturity of a treasury lock agreement is
recognized as an adjustment to interest expense over the term of the underlying
financing transaction.

     Treasury futures and option contracts are used to minimize fluctuations in
the value of certain investments classified as available-for-sale. Accordingly,
unrealized gains and losses on these agreements are recorded, net of tax, as a
separate component of accumulated other comprehensive income.

  Recent Accounting Pronouncements

     Statement of Financial Accounting Standards No. 133 ("SFAS 133"),
Accounting for Derivative Instruments and Hedging Activities, was issued by the
Financial Accounting Standards Board in June 1998. This Statement requires
companies to record derivatives on the balance sheet as assets or liabilities,
measured at fair value. Generally, changes in the fair value of derivatives must
be recognized in income when they occur, except when the derivative qualifies as
a hedge in accordance with the standard. This statement will be effective for
the Company for the 2001 fiscal year. The Financial Accounting Standards Board
is considering amending SFAS 133, as a result, the Company has not yet
determined the impact SFAS 133 and any related amendment will have on its
earnings or financial position. The Company has been proactive in evaluating
various strategies which management believes will qualify for hedge accounting
treatment under SFAS 133.

NOTE 3 -- SIGNIFICANT ACQUISITIONS AND DISPOSITIONS

  1999 Significant Acquisitions

     In June 1999, the Company acquired the Newcourt Credit Group automotive
fleet management business. The transaction included Newcourt Fleet Services,
which operates in Canada, and Newcourt Automotive Services Limited, which
operates in the United Kingdom. The fair market value of the total assets
acquired was approximately $460 million.

     In February 1999, the Company acquired the Shell Oil Proprietary Credit
Card program. The fair market value of the private label credit card receivables
acquired was approximately $260 million.

                                       43
<PAGE>   45
                      ASSOCIATES FIRST CAPITAL CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     On January 6, 1999, the Company purchased the assets and assumed the
liabilities of Avco Financial Services, Inc. ("Avco") for $3.9 billion. Prior to
the acquisition, Avco, formerly a subsidiary of Textron Inc., was a global,
diversified financial services company with approximately $9 billion in assets.
Founded in 1927, Avco's product offerings included home equity lending, retail
sales finance and consumer loans, equipment, inventory and vendor finance, and
credit and collateral-related insurance. At the date of acquisition, Avco had
operations in the U.S., Canada, Puerto Rico, Australia, the United Kingdom, New
Zealand, France, Hong Kong, Spain, Ireland, India and Sweden. All intangibles
resulting from this transaction, primarily consisting of goodwill, customer
lists and trademarks, are being amortized using the straight-line method. As
described in the "Significant Dispositions" section that follows, certain of
these operations were subsequently sold by First Capital. The Company assumed
from Avco approximately $7.5 billion in debt and, after giving effect for the
sale of these operations, acquired approximately $6.0 billion in finance
receivables, $2.1 billion in goodwill and $690 million in other intangible
assets. In 1999 the Company expensed approximately $100 million in Avco related
goodwill and other intangible asset amortization and approximately $35 million
in Avco related integration costs. In addition, the Company established an
integration plan that identified the activities that would not be continued
after the acquisition and the cost of exiting those activities. Those costs
primarily consisted of severance costs and related expenses, lease termination
costs and other contractual liabilities. The total amount of the integration
cost reserve was approximately $146 million at the date of the Avco acquisition.
At December 31, 1999, the remaining integration reserve balance was
approximately $44 million. This amount was primarily comprised of unpaid lease
termination costs.

  1998 Significant Acquisitions

     In December 1998, the Company acquired The Northland Company ("Northland")
for approximately $660 million. Based in St. Paul, Minnesota, Northland provides
insurance products through Jupiter Holdings, Inc. and mortgage banking, real
estate management brokerage and related services through various other
subsidiaries. The Company acquired the insurance related business of Northland
only. Northland divested its other businesses prior to acquisition.

     In October 1998, the Company purchased substantially all of the assets of
SPS Transaction Services, Inc. ("SPS"), including its wholly-owned subsidiaries,
SPS Payment Systems Inc. and Hurley State Bank. In addition, the Company
purchased certain receivables managed by SPS that were owned by an affiliate of
SPS, Mountain West Financial Corporation. The total purchase price was
approximately $1.4 billion. SPS processes credit card transactions, administers
consumer private-label credit card programs, processes commercial accounts
receivable and handles inbound telemarketing services. The Company completed
this transaction in October 1998, which added approximately $2.1 billion in
managed credit card receivables.

     In April 1998, the Company acquired DIC Finance Co. Ltd., a consumer
finance company based in Japan. The fair market value of total assets acquired
and liabilities assumed was approximately $1.9 billion and $1.3 billion,
respectively.

     In February 1998, the Company acquired Beneficial Canada Holdings
Incorporated, the Canadian consumer finance subsidiary of Beneficial
Corporation. The fair market value of total assets acquired and liabilities
assumed was approximately $1.0 billion and $716 million, respectively.

     All of the transactions described above were accounted for as purchases,
and as such, the results of these operations are included in the consolidated
results of the Company from the respective acquisition dates.

     The unaudited pro forma combined revenues, net earnings and net earnings
per basic and diluted share of the Company including the above transactions were
approximately $12.2 billion, $1.5 billion, $2.04 and $2.03, respectively, for
the year ended December 31, 1999 and $11.8 billion, $1.2 billion, $1.71 and
$1.70, respectively, for the year ended December 31, 1998. These unaudited pro
forma results include the historical

                                       44
<PAGE>   46
                      ASSOCIATES FIRST CAPITAL CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

operating results of the significant 1999 and 1998 acquisitions and dispositions
related to these acquisitions and assume that these transactions occurred at the
beginning of each applicable period. Certain adjustments, including additional
common shares outstanding and interest and amortization expenses associated with
these purchases are reflected in the pro forma results. This information has
been prepared for comparative purposes only, and is based on the historical
operating results of these entities prior to their acquisition by the Company
and does not include cost savings and other profit enhancement initiatives
introduced by the Company that management believes will be reflected in the
post-acquisition operating results. As a result, management does not believe
that these pro forma results are indicative of the actual results that would
have occurred had the acquisitions closed at the beginning of each period.

  Pending Acquisitions

     In December 1999, the Company announced an agreement to enter into an agent
bank partnership with KeyCorp, under which the companies will jointly manage
KeyCorp's credit card program. Under the terms of the agreement, First Capital
also will acquire KeyCorp's credit card portfolio of approximately $1.3 billion
in receivables and nearly 600,000 active VISA(R) and MasterCard(R) accounts. The
transaction closed on January 31, 2000 (unaudited) and will be accounted for as
a purchase.

     In November 1999, the Company announced an agreement to acquire Arcadia
Financial Ltd. ("Arcadia"). Arcadia is a leading U.S. independent automobile
finance company which services over $5 billion in finance receivables. The
acquisition is expected to close during the first half of 2000. The Company
entered into a continuous asset purchase and sale agreement under which the
Company purchased from Arcadia approximately $500 million of retail installment
sales contracts in November and December 1999. In the event of a termination of
the merger between the Company and Arcadia, approximately $200 million of these
receivables may be repurchased by Arcadia. Additionally, the Company purchased
approximately $350 million of retail installment sales contracts in January,
February and March 2000 (unaudited).

     In August 1999, the Company announced an agreement to acquire and manage
the proprietary credit card program of CITGO Petroleum Corporation. The
transaction closed in March 2000 (unaudited) and the Company acquired
approximately $130 million in receivables.

  Significant Dispositions

     In November 1999, the Company closed the sale of its Balboa Life and
Casualty Insurance Group ("Balboa") to a subsidiary of Countrywide Credit
Industries, Inc. for approximately $425 million. First Capital acquired Balboa
when it purchased Avco Financial Services, Inc. in January 1999.

     In July 1999, the Company sold the Network Transaction Services unit of its
Associates Commerce Solutions, Inc. subsidiary (formerly SPS Payment Systems,
Inc.) to Alliance Data Systems, a leading provider of electronic transaction
processing services for approximately $169 million.

     In June 1999, the Company sold its Avco consumer and commercial finance
operations in Australia and New Zealand, which were acquired in the Avco
transaction, to General Electric Capital Corporation, a subsidiary of General
Electric Company, for approximately $493 million.

     In June 1999, the Company sold 41 of its Canadian consumer branches to
Commercial Credit Corporation CCC Limited, a subsidiary of Citigroup, Inc., for
approximately $155 million. All of these branches were acquired from Avco in
January 1999.

     In March 1999, the Company sold Fleetwood Credit Corporation, its
recreational vehicle financing subsidiary, to NationsBank, N.A., a unit of
BankAmerica Corporation for approximately $227 million.

                                       45
<PAGE>   47
                      ASSOCIATES FIRST CAPITAL CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     In March 1999, the Company sold 128 domestic consumer finance branches to
Commercial Credit Corporation, a subsidiary of Citigroup, Inc., for
approximately $640 million. All of these branches were acquired from Avco in
January 1999.

     The operating income recorded on the above dispositions was included in
investment and other income from January 1, 1999 through the date of the related
sale. The operating income and any related net gains or losses on the above
dispositions recorded in investment and other income during 1999 was
approximately $117 million.

NOTE 4 -- EARNINGS PER SHARE

     Earnings per share on a basic and diluted basis is calculated as follows
(in millions, except per share amounts and adjusted for the stock dividend
described in Note 20):

<TABLE>
<CAPTION>
                                                             YEAR ENDED DECEMBER 31
                                                         ------------------------------
                                                           1999       1998       1997
                                                         --------   --------   --------
<S>                                                      <C>        <C>        <C>
Basic net earnings per share:
  Net earnings.........................................  $1,490.4   $1,223.5   $1,031.7
  Weighted average shares outstanding..................     728.1      695.8      693.0
                                                         $   2.05   $   1.76   $   1.49
                                                         ========   ========   ========
Diluted net earnings per share:
  Net earnings.........................................  $1,490.4   $1,223.5   $1,031.7
  Weighted average shares outstanding plus assumed
     conversions.......................................     731.5      699.9      695.9
                                                         $   2.04   $   1.75   $   1.48
                                                         ========   ========   ========
Calculation of weighted average shares outstanding plus
  assumed conversions:
  Weighted average shares outstanding..................     728.1      695.8      693.0
  Effect of dilutive securities options(1).............       3.4        4.1        2.9
                                                         --------   --------   --------
                                                            731.5      699.9      695.9
                                                         ========   ========   ========
</TABLE>

(1) At December 31, 1999, 12,251,465 outstanding stock options were not included
    in the computation of 1999 diluted net earnings per share because these
    options' exercise price was greater than the average market price of common
    shares outstanding.

NOTE 5 -- COMPREHENSIVE INCOME (LOSS)

     The Company adopted Statement of Financial Accounting Standards No. 130
("SFAS 130"), Reporting Comprehensive Income, on January 1, 1998. SFAS 130
requires the reporting of all items which are required to be recognized under
generally accepted accounting standards as components of comprehensive income
(loss) in the financial statements. Accordingly, total comprehensive income for
the years ended 1999, 1998 and 1997 is reported in the Company's consolidated
statement of changes in stockholders' equity. Total

                                       46
<PAGE>   48
                      ASSOCIATES FIRST CAPITAL CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

accumulated other comprehensive income is reported in the Company's consolidated
balance sheet. The components of accumulated other comprehensive income, net of
tax, are as follows (in millions):

<TABLE>
<CAPTION>
                                                                   DECEMBER 31
                                                            -------------------------
                                                             1999      1998     1997
                                                            -------   ------   ------
<S>                                                         <C>       <C>      <C>
Foreign currency translation adjustments..................  $ 148.8   $117.1   $168.2
Net unrealized (loss) gain on available-for-sale
  securities..............................................   (104.1)   (10.3)     4.4
                                                            -------   ------   ------
  Accumulated other comprehensive income..................  $  44.7   $106.8   $172.6
                                                            =======   ======   ======
</TABLE>

     The components of other comprehensive income (loss) are as follows:

<TABLE>
<CAPTION>
                                                         YEAR ENDED DECEMBER 31, 1999
                                                    ---------------------------------------
                                                    BEFORE TAX   TAX (EXPENSE)   NET-OF-TAX
                                                      AMOUNT        BENEFIT        AMOUNT
                                                    ----------   -------------   ----------
<S>                                                 <C>          <C>             <C>
Foreign currency translation adjustments..........   $  50.6        $(18.9)        $ 31.7
Unrealized losses on available-for-sale
  securities:
  Unrealized holding losses arising during the
     period.......................................    (140.7)         50.4          (90.3)
  Less: reclassification for gains realized in net
     income.......................................      (5.5)          2.0           (3.5)
                                                     -------        ------         ------
          Net unrealized losses...................    (146.2)         52.4          (93.8)
                                                     -------        ------         ------
  Other comprehensive income (loss)...............   $ (95.6)       $ 33.5         $(62.1)
                                                     =======        ======         ======
</TABLE>

<TABLE>
<CAPTION>
                                                         YEAR ENDED DECEMBER 31, 1998
                                                    ---------------------------------------
                                                    BEFORE TAX   TAX (EXPENSE)   NET-OF-TAX
                                                      AMOUNT        BENEFIT        AMOUNT
                                                    ----------   -------------   ----------
<S>                                                 <C>          <C>             <C>
Foreign currency translation adjustments..........   $ (81.1)       $  30.0       $ (51.1)
Unrealized losses on available-for-sale
  securities:
  Unrealized holding losses arising during the
     period.......................................     (23.4)           8.6         (14.8)
  Less: reclassification for losses realized in
     net income...................................       0.2           (0.1)          0.1
                                                     -------        -------       -------
          Net unrealized losses...................     (23.2)           8.5         (14.7)
                                                     -------        -------       -------
  Other comprehensive income (loss)...............   $(104.3)       $  38.5       $ (65.8)
                                                     =======        =======       =======
</TABLE>

NOTE 6 -- INVESTMENTS IN DEBT AND EQUITY SECURITIES

  Available-for-Sale Securities

     Available-for-sale securities consist of retained securitization interests
(as described in Notes 2 and 7), bonds, notes and preferred stock and other
equity securities. As applicable, the Company invests in these securities with
the intention of holding them to maturity. However, if market conditions change,
the Company may sell them prior to maturity. Accordingly, the Company classifies
these securities as available-for-sale securities and adjusts their recorded
value to market.

     During 1999, gross realized gains and losses on sales of investments in
debt and equity securities amounted to $6.3 million and $11.4 million,
respectively. During 1998, gross realized gains and losses on sales of
investments in debt and equity securities amounted to $26.0 million and $2.4
million, respectively. Unrealized gains or losses are reported as a component of
accumulated other comprehensive income, net of tax. During the fourth quarter of
1999, the Company wrote down its retained interests in certain manufactured
housing transactions by approximately $26 million. This write down represented a
permanent impairment in the value of these investments. Accordingly, the loss
resulting from this write down was recorded in investment and other income.

                                       47
<PAGE>   49
                      ASSOCIATES FIRST CAPITAL CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The following tables set forth, by type of available-for-sale security
issuer, the amortized cost, gross unrealized holding gains, gross unrealized
holding losses, and estimated market value at December 31, 1999 and 1998 (in
millions):

<TABLE>
<CAPTION>
                                                                   1999
                                              -----------------------------------------------
                                                            GROSS        GROSS
                                                          UNREALIZED   UNREALIZED   ESTIMATED
                                              AMORTIZED    HOLDING      HOLDING      MARKET
                                                COST        GAINS        LOSSES       VALUE
                                              ---------   ----------   ----------   ---------
<S>                                           <C>         <C>          <C>          <C>
Retained securitization interests...........  $4,040.7      $  --       $ (25.9)    $4,014.8
Preferred stock.............................     708.3       13.5         (93.6)       628.2
Municipal bonds.............................     250.1        3.0          (4.1)       249.0
Other.......................................      33.0         --            --         33.0
Insurance Subsidiaries
  Mortgage-backed...........................     602.1        0.1         (15.9)       586.3
  Municipal obligations.....................     417.1        0.1         (23.6)       393.6
  Corporate obligations.....................     573.4        0.1         (17.9)       555.6
  Preferred stock...........................     200.9        1.1         (16.2)       185.8
  U.S. government obligations...............     317.9        0.2         (10.3)       307.8
  Other equity securities...................       5.2        1.0          (0.3)         5.9
  Other.....................................     194.4        0.4          (5.1)       189.7
                                              --------      -----       -------     --------
          Total available-for-sale
            securities......................  $7,343.1      $19.5       $(212.9)    $7,149.7
                                              ========      =====       =======     ========
</TABLE>

<TABLE>
<CAPTION>
                                                                   1998
                                              -----------------------------------------------
                                                            GROSS        GROSS
                                                          UNREALIZED   UNREALIZED   ESTIMATED
                                              AMORTIZED    HOLDING      HOLDING      MARKET
                                                COST        GAINS        LOSSES       VALUE
                                              ---------   ----------   ----------   ---------
<S>                                           <C>         <C>          <C>          <C>
Retained securitization interests...........  $4,016.8      $ 0.9       $    --     $4,017.7
Preferred stock.............................     718.7        2.4         (28.7)       692.4
Other.......................................       2.5         --            --          2.5
Insurance Subsidiaries
  Mortgage-backed...........................     567.9        3.7          (0.6)       571.0
  Municipal obligations.....................     431.3        2.9            --        434.2
  Corporate obligations.....................     338.7        1.5          (1.0)       339.2
  Preferred stock...........................     149.9        0.8          (0.6)       150.1
  U.S. government obligations...............     108.9        0.9          (1.0)       108.8
  Other equity securities...................     105.9         --            --        105.9
  Other.....................................     235.4        1.1          (0.4)       236.1
                                              --------      -----       -------     --------
          Total available-for-sale
            securities......................  $6,676.0      $14.2       $ (32.3)    $6,657.9
                                              ========      =====       =======     ========
</TABLE>

                                       48
<PAGE>   50
                      ASSOCIATES FIRST CAPITAL CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The amortized cost and estimated market value of available-for-sale
securities at December 31, 1999 by contractual maturity are shown below (in
millions):

<TABLE>
<CAPTION>
                                                                      1999
                                                              ---------------------
                                                                          ESTIMATED
                                                              AMORTIZED    MARKET
                                                                COST        VALUE
                                                              ---------   ---------
<S>                                                           <C>         <C>
Due in one year or less.....................................  $  112.9    $  115.1
Due in one year through five years..........................     638.3       625.3
Due after five years through ten years......................     642.1       615.2
Due after ten years.........................................     977.7       942.4
                                                              --------    --------
     Subtotal...............................................   2,371.0     2,298.0
Retained securitization interests...........................   4,040.7     4,014.8
Equity securities...........................................     931.4       836.9
                                                              --------    --------
          Total.............................................  $7,343.1    $7,149.7
                                                              ========    ========
</TABLE>

  Trading Securities

     Trading securities consist of investments in equity securities which are
recorded at market value. Unrealized gains or losses on trading securities are
included in earnings. The estimated market value at December 31, 1999 and 1998
was $26.8 million and $20.8 million, respectively. Historical cost at December
31, 1999 and 1998 was $17.1 million and $15.5 million, respectively. On July 1,
1998, the Company's preferred stock investments of $582.5 million were
redesignated by management as available-for-sale securities. Previously,
preferred stock investments were designated as trading securities.

NOTE 7 -- FINANCE RECEIVABLES

  Composition of Net Finance Receivables

     At December 31, 1999 and 1998, net finance receivables consisted of the
following products (in millions):

<TABLE>
<CAPTION>
                                                                1999        1998
                                                              ---------   ---------
<S>                                                           <C>         <C>
Home equity.................................................  $25,015.0   $22,458.2
Personal lending and retail sales finance...................   16,012.4    11,459.2
Truck and truck trailer.....................................   13,130.3    10,783.6
Equipment...................................................    6,977.3     6,114.0
Credit card.................................................    2,247.1     3,138.1
Auto fleet leasing..........................................    2,070.1     1,589.7
Manufactured housing(1).....................................    1,849.0     3,648.2
Recreational vehicles(2)....................................         --       479.7
Warehouse lending and other(3)..............................    1,515.9     1,268.3
                                                              ---------   ---------
  Finance receivables, net of unearned finance income ("net
     finance receivables")(4)...............................   68,817.1    60,939.0
Allowance for losses on finance receivables.................   (2,174.4)   (1,978.7)
Insurance policy and claims reserves(5).....................     (985.9)   (1,463.9)
                                                              ---------   ---------
  Finance receivables, net of unearned finance income,
     allowance for losses and insurance policy and claims
     reserves...............................................  $65,656.8   $57,496.4
                                                              =========   =========
</TABLE>

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

(1) As described in Note 22, in January 2000, the Company announced its
    intention to discontinue its manufactured housing loan origination
    operations.

                                       49
<PAGE>   51
                      ASSOCIATES FIRST CAPITAL CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(2) As described in Note 3, the Company sold its recreational vehicle finance
    business in March 1999.

(3) Includes warehouse lending, government guaranteed lending and municipal
    finance.

(4) Unearned finance income was approximately $4.7 billion and $4.0 billion at
    December 31, 1999 and 1998, respectively.

(5) At December 31, 1998, insurance policy and claims reserves included
    approximately $678 million of non-affiliate insurance reserves. The December
    31, 1999 balance only includes affiliate insurance reserves: non-affiliate
    insurance reserves of approximately $721 million are included in accounts
    payable and accruals.

  Securitizations and Sales of Finance Receivables

     During 1999 approximately $1.6 billion of the Company's private label
credit card receivables were securitized and sold to a master trust.
Additionally, approximately $2.3 billion of the Company's investment in the
Bankcard securitization master trust formed in 1998 was sold during 1999. The
Company received $3.2 billion in proceeds from these transactions, of which $2.6
billion was in the fourth quarter, and retained securitization interests in the
master trust of approximately $770 million.

     During the fourth quarter of 1999, the Company securitized and sold
approximately $2.4 billion of home equity receivables. The Company received
approximately $2.0 billion in proceeds from this transaction and retained
approximately $460 million in interests in the securitization trusts. Also
during the fourth quarter of 1999, the Company sold a home equity receivables
portfolio of approximately $80 million.

     During the third quarter of 1999, approximately $2.5 billion of the
Company's manufactured housing receivables were securitized and sold to a trust.
The Company received $2.0 billion in proceeds from this transaction and retained
$500 million in interests in the trust.

     During the fourth quarter of 1998, approximately $1.8 billion of the
Company's private label credit card receivables were securitized and sold to a
master trust. The Company received $1.3 billion in proceeds from the transaction
and retained a $0.5 billion certificated interest in the master trust.

     During the second quarter of 1998, approximately $5.2 billion of the
Company's U.S. bankcard credit card receivables were securitized and sold to a
master trust. The Company received $2.0 billion in proceeds from the transaction
and retained a $3.2 billion certificated interest in the master trust.

     During the first quarter of 1998, approximately $235 million of home equity
lending receivables were also securitized and sold by the Company.

     During 1997, the Company securitized and sold approximately $800 million of
manufactured housing, retail finance receivables and approximately $533 million
of recreational vehicle retail finance receivables, respectively.

     In the aggregate, the Company recorded a net gain of approximately $100
million in 1999 on the above transactions, of which approximately $68 million
was recorded in the fourth quarter. No significant net gain or loss was recorded
in the 1998 or 1997 securitization transactions.

     In each of these transactions, the Company retained servicing
responsibilities for the receivables sold. The retained securitization
interests, as described in Notes 2 and 6, are classified as available-for-sale
investment securities on the consolidated balance sheet.

                                       50
<PAGE>   52
                      ASSOCIATES FIRST CAPITAL CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The table below summarizes the significant assumptions used to value the
Company's retained securitization interests at December 31, 1999:

<TABLE>
<CAPTION>
                                                              CREDIT   HOME EQUITY   MANUFACTURED
                                                               CARD      LENDING       HOUSING
                                                              ------   -----------   ------------
<S>                                                           <C>      <C>           <C>
Weighted average discount rate(1)...........................     12%         10%           11%
Projected prepayment rate...................................    n/m       20-30%        10-12%
Projected loss rate(2)......................................   8-10%          8%         9-12%
</TABLE>

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

(1) Represents the weighted average discount rate used to value the retained
    interest components which include interest only strips and subordinated and
    other retained interests.

(2) Loss rates are annualized and exclude recoveries for credit card and
    cumulative for home equity and manufactured housing.

     The above assumptions are consistent with those used to determine the
initial retained interest valuation and the gains on 1999 securitization
transactions. In addition to the assumptions noted above, the Company utilized
certain transaction structures that included written put options to the
investors. These put options had the impact of reducing the securitization gains
recognized in 1999 by approximately $23 million. See Note 16 for additional
information.

  Contractual Maturities of Net Finance Receivables

     At December 31, 1999, contractual maturities of net finance receivables
were as follows (in millions):

<TABLE>
<CAPTION>
YEAR DUE                                                         TOTAL
--------                                                       ---------
<S>                                                            <C>
2000........................................................   $15,889.9
2001........................................................    10,609.7
2002........................................................     8,072.5
2003........................................................     6,436.5
2004 and thereafter.........................................    27,808.5
                                                               ---------
                                                               $68,817.1
                                                               =========
</TABLE>

     It is the Company's experience that a substantial portion of the loan
portfolio generally is renewed or repaid prior to contractual maturity dates.
The above maturity schedule should not be regarded as a forecast of future cash
collections.

  Direct Financing Leases

     Included in net finance receivables are direct financing leases as follows
(in millions):

<TABLE>
<CAPTION>
                                                                    DECEMBER 31
                                                               ---------------------
                                                                 1999        1998
                                                               ---------   ---------
<S>                                                            <C>         <C>
Minimum lease rentals.......................................   $ 7,766.4   $ 6,841.8
Unearned finance income.....................................    (1,143.5)   (1,016.0)
                                                               ---------   ---------
Net investment in direct financing leases...................   $ 6,622.9   $ 5,825.8
                                                               =========   =========
</TABLE>

                                       51
<PAGE>   53
                      ASSOCIATES FIRST CAPITAL CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Future net minimum lease rentals on direct financing leases for each of the
years succeeding December 31, 1999 are as follows (in millions):
2000 -- $1,884.9; 2001 -- $1,333.9; 2002 -- $1,231.1; 2003 -- $1,111.4;
2004 -- $619.1 and 2005 and thereafter -- $442.5.

  Dispersion of Finance Receivables

     The Company has geographically dispersed finance receivables. At December
31, 1999, approximately 77% of the Company's Owned Basis total receivables were
dispersed across the United States, and the remaining 23% were in foreign
countries. Of the total receivables, 11% were in Japan, 8% in California, 6% in
Canada, 6% in Texas and 5% in Florida; no other individual state or foreign
country had more than 4%.

NOTE 8 -- ALLOWANCE FOR LOSSES ON FINANCE RECEIVABLES

     Changes in the allowance for losses on finance receivables during the
periods indicated were as follows (in millions):

<TABLE>
<CAPTION>
                                                           YEAR ENDED DECEMBER 31
                                                      ---------------------------------
                                                        1999        1998        1997
                                                      ---------   ---------   ---------
<S>                                                   <C>         <C>         <C>
Balance at beginning of period......................  $ 1,978.7   $ 1,949.9   $ 1,563.1
  Provision for losses..............................    1,506.4     1,283.5     1,378.1
  Recoveries on receivables charged off.............      268.8       237.7       224.9
  Losses sustained..................................   (1,717.1)   (1,424.6)   (1,454.0)
  Reserves of receivables sold or held for
     securitization(1)..............................     (214.0)     (334.7)         --
  Reserves of acquired businesses and other.........      351.6       266.9       237.8
                                                      ---------   ---------   ---------
Balance at end of period............................  $ 2,174.4   $ 1,978.7   $ 1,949.9
                                                      =========   =========   =========
</TABLE>

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

(1) The reserves related to receivables sold during 1997 were not significant.

NOTE 9 -- OTHER ASSETS

     The components of other assets at December 31, 1999 and 1998 were as
follows (in millions):

<TABLE>
<CAPTION>
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
Goodwill, net...............................................  $3,747.8   $1,890.4
Notes and other receivables.................................   1,877.9    1,172.9
Other intangible assets, net................................   1,579.4      929.8
Property and equipment......................................     662.2      608.7
Collateral held for resale..................................     431.7      297.4
Relocation client advances..................................     185.4      171.8
Finance receivables held for sale or securitization, net....     153.0      812.2
Other.......................................................     459.8      451.5
                                                              --------   --------
          Total.............................................  $9,097.2   $6,334.7
                                                              ========   ========
</TABLE>

     Reductions as a result of goodwill amortization were $128.8 million and
$67.1 million for 1999 and 1998, respectively. Reductions as a result of other
intangible asset amortization were $105.2 million and $25.8 million for 1999 and
1998, respectively. Goodwill and other intangible assets are net of accumulated
amortization of $644.3 million and $396.0 million at December 31, 1999 and 1998,
respectively, and related deferred tax liabilities. Other changes in the amount
of goodwill were principally due to changes in foreign exchange rates which
impact the translation of foreign currency denominated goodwill recorded on the
books of the Company's international subsidiaries.

                                       52
<PAGE>   54
                      ASSOCIATES FIRST CAPITAL CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 10 -- CREDIT FACILITIES

     At December 31, 1999, the Company had the following credit facilities (in
millions):

<TABLE>
<CAPTION>
                                                                FACILITY
                                                               AMOUNTS(1)
                                                               ----------
<S>                                                            <C>
Domestic
  Lines of credit...........................................   $ 4,272.8
  Syndicated credit facilities..............................    14,455.0
                                                               ---------
          Total domestic....................................    18,727.8
Foreign
  Lines of credit...........................................        45.0
  Syndicated credit facilities..............................     2,821.1
                                                               ---------
          Total foreign.....................................     2,866.1
                                                               ---------
          Total domestic and foreign........................   $21,593.9
                                                               =========
</TABLE>

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

(1) Included in these amounts are $210 million and $2.2 billion of lines of
    credit and syndicated credit facilities, respectively, that are available to
    either First Capital or Associates Corporation of North America.

     Lines of credit and syndicated credit facilities may be withdrawn only
under certain standard conditions, including, as to the credit facilities
identified above, failure to pay principal or interest when due, breach of
representations, warranties or covenants, default on other debt, or bankruptcy
or other insolvency-type proceedings. As to the credit facilities of the foreign
operations, in addition to the foregoing standard conditions, certain facilities
contain provisions which prohibit withdrawals as a result of any material
adverse changes in the financial conditions of such operations. The Company
principally pays fees for the availability of its credit facilities. These
credit facilities are used to support commercial paper borrowings and utilized
uncommitted lines of credit.

  Limitation on Minimum Tangible Net Worth

     Restrictions defined in certain syndicated credit facilities require the
Company to maintain a minimum tangible net worth, as defined, of $2.5 billion.
At December 31, 1999, the Company's tangible net worth, as defined in the
syndicated credit facilities, was approximately $6.1 billion.

NOTE 11 -- NOTES PAYABLE

     Commercial paper notes are issued by the Company in the minimum amount of
$100,000 with terms generally from one to 270 days. Bank loan terms range from
one to 365 days. Information pertaining to the Company's commercial paper notes
and bank loans is set forth below for the periods indicated (dollar amounts in
millions):

<TABLE>
<CAPTION>
                                                              COMMERCIAL        BANK
                                                              PAPER NOTES      LOANS
                                                              -----------     --------
<S>                                                           <C>             <C>
Domestic Notes Payable
  Ending balance at December 31, 1999.......................   $18,991.0      $  990.7
  Weighted average interest rate at December 31, 1999.......        5.62%         4.92%
  Ending balance at December 31, 1998.......................   $20,578.6      $1,070.7
  Weighted average interest rate at December 31, 1998.......        5.18%         6.05%
</TABLE>

                                       53
<PAGE>   55
                      ASSOCIATES FIRST CAPITAL CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
                                                              COMMERCIAL        BANK
                                                              PAPER NOTES      LOANS
                                                              -----------     --------
<S>                                                           <C>             <C>
Foreign Notes Payable
  Ending balance at December 31, 1999.......................   $ 7,000.9      $  270.8
  Weighted average interest rate at December 31, 1999.......        5.58%         4.01%
  Ending balance at December 31, 1998.......................   $ 3,565.7      $  494.8
  Weighted average interest rate at December 31, 1998.......        5.28%         4.29%
Total Notes Payable
  Ending balance at December 31, 1999.......................   $25,991.9      $1,261.5
  Weighted average interest rate at December 31, 1999.......        5.61%         4.72%
  Ending balance at December 31, 1998.......................   $24,144.3      $1,565.5
  Weighted average interest rate at December 31, 1998.......        5.20%         5.49%
</TABLE>

NOTE 12 -- LONG-TERM DEBT

     Outstanding balances of long-term debt at December 31 were as follows (in
millions):

<TABLE>
<CAPTION>
                                          1999          1999
                                        INTEREST      WEIGHTED
                                          RATE        AVERAGE    MATURITIES
                                         RANGE          RATE      THROUGH       1999        1998
                                     --------------   --------   ----------   ---------   ---------
<S>                                  <C>              <C>        <C>          <C>         <C>
Senior Notes:
  Domestic:
     Notes.........................  5.25% - 11.40%     6.10%       2037      $34,128.5   $32,585.2
     Investment notes..............  6.10% -  7.37%     7.37%       2001           50.9       104.3
                                                                              ---------   ---------
                                                                               34,179.4    32,689.5
                                                                              ---------   ---------
  Foreign:
     Japan.........................  1.23% -  8.00%     2.57%       2004        2,062.2     2,346.6
     All other foreign.............  0.22% - 32.00%     5.04%       2004        4,737.2     2,135.3
                                                                              ---------   ---------
                                                                                6,799.4     4,481.9
                                                                              ---------   ---------
          Total senior notes.......                                            40,978.8    37,171.4
                                                                              ---------   ---------
Subordinated and Capital Notes:
  Domestic:
     Subordinated..................  6.88% -  8.15%     7.25%       2009          425.0       425.0
     Capital.......................  4.68% -  9.00%     6.73%       2002            0.2         0.3
                                                                              ---------   ---------
          Total subordinated and
            capital debt notes.....                                               425.2       425.3
                                                                              ---------   ---------
          Total long-term debt.....                                           $41,404.0   $37,596.7
                                                                              =========   =========
</TABLE>

     The weighted average interest rate for total long-term debt was 5.82% at
December 31, 1999 and 6.12% at December 31, 1998.

     In 1999, the Company issued a $500 million senior note to a trust which in
turn issued $500 million in trust securities to an institutional investor in a
private transaction. The trust securities and senior notes mature in 2002.

     In 1997, the Company issued a $500 million senior note to a trust which in
turn issued $500 million in trust securities to institutional investors. The
trust securities and senior notes mature in September 2000.

                                       54
<PAGE>   56
                      ASSOCIATES FIRST CAPITAL CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Long-term borrowing maturities during the next five years, including the
current portion of notes payable after one year are: 2000, $8,758.9 million;
2001, $7,313.2 million; 2002, $7,943.5 million; 2003, $5,815.1 million; 2004,
$3,514.4 million and 2005 and thereafter, $8,058.9 million. Certain debt issues
are subject to put or call redemption provisions whereby repayment may be
required prior to the maturity date. As applicable, the amount of the option
premium received by the Company is deferred and amortized over the expected life
of the debt obligation.

NOTE 13 -- INCOME TAXES

     The following table sets forth the components of the provision for income
taxes and deferred income tax (benefit) for the periods indicated (in millions):

<TABLE>
<CAPTION>
                                                        UNITED STATES
                                                       ---------------
                                                       FEDERAL   STATE   FOREIGN   TOTAL
                                                       -------   -----   -------   ------
<S>                                                    <C>       <C>     <C>       <C>
Year Ended December 31, 1999
  Current...........................................   $438.8    $38.0   $236.4    $713.2
  Deferred..........................................     90.8      3.3     79.2     173.3
                                                       ------    -----   ------    ------
                                                       $529.6    $41.3   $315.6    $886.5
                                                       ======    =====   ======    ======
Year Ended December 31, 1998
  Current...........................................   $463.2    $41.7   $183.9    $688.8
  Deferred..........................................     22.1       --      6.1      28.2
                                                       ------    -----   ------    ------
                                                       $485.3    $41.7   $190.0    $717.0
                                                       ======    =====   ======    ======
Year Ended December 31, 1997
  Current...........................................   $443.5    $34.8   $161.8    $640.1
  Deferred..........................................    (14.5)      --    (17.3)    (31.8)
                                                       ------    -----   ------    ------
                                                       $429.0    $34.8   $144.5    $608.3
                                                       ======    =====   ======    ======
</TABLE>

     At December 31, 1999 and 1998, the components of the Company's net deferred
tax asset were as follows (in millions):

<TABLE>
<CAPTION>
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
Deferred tax assets:
  Provision for losses on finance receivables and other.....  $1,439.2   $1,040.3
  Foreign tax credits.......................................      87.7       27.9
  Postretirement and other employee benefits................     112.4       66.4
                                                              --------   --------
                                                               1,639.3    1,134.6
Deferred tax liabilities:
  Leasing transactions......................................    (579.0)    (513.6)
  Goodwill..................................................    (373.6)    (269.0)
  Finance revenue and other.................................    (563.0)    (223.6)
                                                              --------   --------
                                                              (1,515.6)  (1,006.2)
                                                              --------   --------
     Net deferred tax asset.................................  $  123.7   $  128.4
                                                              ========   ========
</TABLE>

     Prior to the Spin-Off in April 1998, First Capital and its subsidiaries
were included in the consolidated federal income tax return of Ford. First
Capital and its subsidiaries filed a consolidated First Capital federal income
tax return for the period of April 8, 1998 through December 31, 1998. The
provision for income taxes for both the period before the Spin-Off and after the
Spin-Off was computed on a consolidated, stand-alone basis.

                                       55
<PAGE>   57
                      ASSOCIATES FIRST CAPITAL CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The effective tax rate differed from the statutory United States federal income
tax rate as follows:

<TABLE>
<CAPTION>
                                                                % OF PRETAX INCOME
                                                              YEAR ENDED DECEMBER 31
                                                              -----------------------
                                                              1999     1998     1997
                                                              ----     -----    -----
<S>                                                           <C>      <C>      <C>
Statutory tax rate..........................................  35.0%    35.0%    35.0%
State tax rate..............................................   1.1      1.4      1.4
Non-deductible goodwill.....................................   1.1      0.9      0.4
Other.......................................................   0.1     (0.3)     0.3
                                                              ----     ----     ----
  Effective tax rate........................................  37.3%    37.0%    37.1%
                                                              ====     ====     ====
</TABLE>

     Effective with the April 1998 Spin-Off, Ford and the Company entered into
an amended and restated tax sharing agreement which, among other matters,
required the Company to pay a net amount of $22.4 million effectively settling
certain amounts due to and from Ford.

NOTE 14 -- LEASE COMMITMENTS

     Leases on the Company's branch and operating center facilities are
primarily short-term and generally provide for renewal options not exceeding the
initial term. Total rent expense for the years ended December 31, 1999, 1998 and
1997 was $198.5 million, $145.2 million, and $123.8 million, respectively.
Minimum rental commitments as of December 31, 1999 for all noncancelable leases
(primarily office leases) for the years ending December 31, 2000, 2001, 2002,
2003 and 2004 are $108.8 million, $81.9 million, $57.6 million, $37.4 million
and $44.9 million, respectively, and $45.1 million thereafter.

NOTE 15 -- EMPLOYEE BENEFITS

  Pension and Other Post-Retirement Benefits

     The Company sponsors various qualified and non-qualified pension plans,
which together cover substantially all United States-based employees who meet
certain eligibility requirements. The Company also provides certain
post-retirement benefits through unfunded plans. These benefits are currently
provided to substantially all United States-based employees who meet certain
eligibility requirements. The benefits of such plans can be modified or
terminated at the discretion of the Company. The health care plans are
contributory, with participants' contributions adjusted annually; the life
insurance plans are also contributory.

     The funded status of these Plans is as follows (dollars in millions):

<TABLE>
<CAPTION>
                                                          PENSION BENEFITS    OTHER BENEFITS
                                                          ----------------   -----------------
                                                           1999      1998     1999      1998
                                                          -------   ------   -------   -------
<S>                                                       <C>       <C>      <C>       <C>
Change in benefit obligation:
  Benefit obligation at beginning of year...............  $ 562.8   $492.7   $ 123.4   $ 129.8
  Service cost..........................................     36.5     24.7       9.0       5.9
  Interest cost.........................................     37.5     32.7      10.2       7.4
  Plan participants' contributions......................       --       --       0.4       0.2
  Plan amendment........................................     (1.2)      --     (18.3)       --
  Acquisition...........................................       --       --      32.5        --
  Actuarial (gains)/losses..............................    (88.7)    24.6     (20.6)    (16.7)
  Benefits paid.........................................    (15.1)   (11.9)     (4.5)     (3.2)
                                                          -------   ------   -------   -------
          Benefit obligation at end of year.............  $ 531.8   $562.8   $ 132.1   $ 123.4
                                                          =======   ======   =======   =======
</TABLE>

                                       56
<PAGE>   58
                      ASSOCIATES FIRST CAPITAL CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
                                                          PENSION BENEFITS    OTHER BENEFITS
                                                          ----------------   -----------------
                                                           1999      1998     1999      1998
                                                          -------   ------   -------   -------
<S>                                                       <C>       <C>      <C>       <C>
Change in plan assets:
  Fair value of plan assets at beginning of year........  $ 538.6   $473.5   $    --   $    --
  Actual return on plan assets..........................    101.2     75.8        --        --
  Employer contributions................................     29.9      1.2       4.1       3.0
  Plan participants' contributions......................       --       --       0.4       0.2
  Benefits paid.........................................    (15.1)   (11.9)     (4.5)     (3.2)
                                                          -------   ------   -------   -------
          Fair value of plan assets at end of year......  $ 654.6   $538.6   $    --   $    --
                                                          =======   ======   =======   =======
  Funded status.........................................  $ 122.8   $(24.2)  $(132.1)  $(123.4)
  Unrecognized net transition obligation................      1.4      1.7        --        --
  Unrecognized net actuarial (gain)/loss................   (137.8)    13.8     (27.4)     (6.7)
  Unrecognized prior service cost.......................       --      1.5     (17.7)     (0.9)
                                                          -------   ------   -------   -------
          Net amount recognized.........................  $ (13.6)  $ (7.2)  $(177.2)  $(131.0)
                                                          =======   ======   =======   =======
Amounts recognized in the consolidated balance sheet:
  Prepaid benefit cost..................................  $  25.4   $ 25.4   $    --   $    --
  Accrued benefit liability.............................    (46.0)   (41.6)   (177.2)   (131.0)
  Intangible asset......................................      7.0      9.0        --        --
                                                          -------   ------   -------   -------
          Net amount recognized.........................  $ (13.6)  $ (7.2)  $(177.2)  $(131.0)
                                                          =======   ======   =======   =======
Weighted-average assumptions as of December 31:
  Discount rate.........................................     7.75%    6.50%     7.75%     6.50%
  Expected return on plan assets........................     9.00%    9.00%       --%       --%
  Rate of compensation increase.........................     5.00%    5.00%       --%       --%
</TABLE>

     For measurement purposes, a 10.0% annual rate of increase in the per capita
cost of covered health care benefits was assumed for 1999. The rate was assumed
to decrease gradually to 5.5% by 2010 and remain at that level thereafter.
Additionally, no future increase in retiree premiums was assumed.

     The pension plan assets are allocated 72.1% to equity securities and 27.9%
to debt securities at December 31, 1999.

     The net periodic pension cost for the years indicated includes the
following components (in millions):

<TABLE>
<CAPTION>
                                           PENSION BENEFITS          OTHER BENEFITS
                                       ------------------------   ---------------------
                                        1999     1998     1997    1999    1998    1997
                                       ------   ------   ------   -----   -----   -----
<S>                                    <C>      <C>      <C>      <C>     <C>     <C>
Components of net periodic benefit
  cost:
  Service cost.......................  $ 36.5   $ 24.7   $ 20.1   $ 9.0   $ 5.9   $ 7.1
  Interest cost......................    37.5     32.7     29.4    10.2     7.4     8.2
  Expected return on plan assets.....   (43.0)   (37.1)   (31.2)     --      --      --
  Amortization of transition
     liability.......................     0.3      0.3      0.3      --      --      --
  Amortization of prior service
     cost............................     0.3      1.6      1.6    (1.5)   (1.5)   (1.5)
  Recognized net actuarial (gain)
     loss............................     4.6      2.2      2.6     0.1    (0.2)    0.1
                                       ------   ------   ------   -----   -----   -----
          Net periodic benefit
            cost.....................  $ 36.2   $ 24.4   $ 22.8   $17.8   $11.6   $13.9
                                       ======   ======   ======   =====   =====   =====
</TABLE>

     For the pension plans with accumulated benefit obligations in excess of
plan assets, the projected benefit obligation and accumulated benefit obligation
were $54.9 million and $40.8 million, respectively as of

                                       57
<PAGE>   59
                      ASSOCIATES FIRST CAPITAL CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

December 31, 1999 and $53.5 million and $41.6 million, respectively as of
December 31, 1998. The assets of these plans had no fair value as of December
31, 1999 and 1998.

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

<TABLE>
<CAPTION>
                                                                1-PERCENTAGE-        1-PERCENTAGE-
                                                                    POINT                POINT
                                                                   INCREASE             DECREASE
                                                              ------------------   ------------------
<S>                                                           <C>                  <C>
     Effect on total of service and interest cost
       components...........................................        $ 1.9                $ (1.9)
     Effect on post-retirement benefit obligations..........         10.7                 (10.6)
</TABLE>

     The Company also sponsors two qualified pension plans, which cover
substantially all of the employees of its Japan operations who meet certain
eligibility requirements. For the year ended December 31, 1999 the Company's net
periodic benefit cost of these plans was $4.7 million. As of December 31, 1999
the total benefit obligation and fair value of plan assets was $26.7 million and
$28.3 million respectively.

  Associates Savings and Profit-Sharing Plan

     The Company sponsors a defined contribution plan that covers substantially
all United States-based employees who meet certain eligibility requirements, is
intended to provide assistance in accumulating personal savings for retirement
and is designed to qualify for favorable tax treatment under Sections 401(a) and
401(k) of the United States Internal Revenue Code of 1986, as amended. For the
years ended December 31, 1999, 1998 and 1997, the Company's pre-tax
contributions to the plan were $43.7 million, $32.4 million and $25.6 million,
respectively. Among other options, the plan provides as an investment option the
Associates Stock Fund which invests principally in the Company's Class A Common
Stock.

  Associates Discounted Employee Stock Purchase Plan

     The Company sponsors a discounted employee stock purchase plan which,
beginning in 1999, allows employees to purchase Class A Common Stock of the
Company at a discount. The price of the stock is discounted 15% from the closing
price at the lower of the beginning or the end of the offering period.

INCENTIVE COMPENSATION PROGRAMS

     The Company sponsors the following compensation plans covering certain
officers and employees:

  Incentive Compensation Plan and Long-Term Performance Plan

     The Company sponsors the Incentive Compensation Plan (the "ICP"), which
beginning in 1997 has provided for corporate annual performance pay bonuses, in
addition to other types of compensation. The bonuses are paid out of one of two
pools. The size of each bonus pool is determined based, in part, on the
performance of the Company. Prior to 1997, corporate annual performance pay
bonuses were provided under the Corporate Annual Performance Plan which was a
separate plan prior to being incorporated into the ICP in 1997. The Long Term
Performance Plan ("LTPP") for 1999 was a long term cash incentive plan. The size
of the LTPP incentive pool was determined for the performance period ending
December 31, 1999, based, in part, on the success of the Company in achieving a
target level of profits established for each year of the performance period,
with such annual performance then averaged for the performance period. Bonuses
reflect individual participants' performances during the applicable performance
period. Amounts charged to expense for these bonus plans amounted to $31.6
million, $29.0 million and $25.1 million during the years ended December 31,
1999, 1998 and 1997, respectively.

                                       58
<PAGE>   60
                      ASSOCIATES FIRST CAPITAL CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  Deferred Compensation Plan

     The Company sponsors the Deferred Compensation Plan (the "DCP"), a
non-qualified defined contribution plan. Under the DCP, participants may elect
to defer payment of current cash compensation. Deferred amounts are deemed
invested as the participants elect among available investment measures, but no
actual investments are made. Among the available investment measures is a deemed
investment in Class A Common Stock, with the value of the deferred amount
adjusted to reflect the performance of Class A Common Stock.

  Stock-Based Compensation Plans

     The ICP also includes an equity compensation plan, formerly known as the
Long-Term Equity Compensation Plan, which was established in 1996 and amended
and merged into the ICP effective January 1, 1997. The Company had no
outstanding grants under any other stock-based compensation plan prior to 1996.
The ICP allows the Company to issue to eligible employees awards of up to
41,598,536 shares of its Class A Common Stock ("Common Stock"). In addition to
awards of corporate annual performance pay, awards may be made as nonqualified
or incentive stock options, stock appreciation rights, restricted stock,
performance units or performance shares. Through December 31, 1999, the Company
had only issued non-qualified stock options and restricted stock under the ICP.

     Stock Options -- Stock options have contractual terms of 10 years and an
exercise price equal to the fair market value of the stock underlying the option
at grant. Options generally vest at 33.33% each year beginning on the first
anniversary of the date of grant. A summary of the activity of option grants by
the Company under the ICP for the years ended December 31, 1999, 1998 and 1997
is presented below.

<TABLE>
<CAPTION>
                                                1999                          1998                          1997
                                     ---------------------------   ---------------------------   --------------------------
                                                  WEIGHTED-AVG.                 WEIGHTED-AVG.                WEIGHTED-AVG.
                                      OPTIONS     EXERCISE PRICE    OPTIONS     EXERCISE PRICE    OPTIONS    EXERCISE PRICE
                                     ----------   --------------   ----------   --------------   ---------   --------------
<S>                                  <C>          <C>              <C>          <C>              <C>         <C>
Outstanding at beginning of year...  12,938,752       $26.17        8,389,702       $18.31       4,748,880       $14.54
  Granted..........................   7,767,630        42.27        6,503,140        35.37       4,772,050        21.80
  Exercised........................  (1,294,758)       22.05       (1,083,794)       18.18        (433,208)       15.05
  Forfeited........................  (1,215,557)       38.25         (870,296)       29.02        (698,020)       18.48
                                     ----------                    ----------                    ---------
Outstanding at end of year.........  18,196,067        32.55       12,938,752        26.17       8,389,702        18.31
                                     ==========                    ==========                    =========
Options exercisable at year end....   6,253,629        22.82        3,206,324        17.28       1,040,838        14.55
Weighted-average fair value of
  options granted during the
  year.............................                    13.83                          8.90                         5.62
</TABLE>

     The fair value of each stock option granted is estimated on the date of
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions:

<TABLE>
<CAPTION>
ASSUMPTIONS                                                   1999    1998    1997
-----------                                                   -----   -----   -----
<S>                                                           <C>     <C>     <C>
Expected Term in years......................................   4.00    4.00    4.00
Expected Volatility.........................................  34.83%  21.28%  22.00%
Expected Dividend Yield.....................................   0.52%   0.58%   0.51%
Risk-Free Interest Rate.....................................   4.72%   5.59%   6.24%
</TABLE>

                                       59
<PAGE>   61
                      ASSOCIATES FIRST CAPITAL CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The weighted average remaining life and weighted average exercise price for
total options outstanding and exercisable options outstanding at December 31,
1999 is summarized below:

<TABLE>
<CAPTION>
                                           OPTIONS OUTSTANDING
                                      ------------------------------      OPTIONS EXERCISABLE
                                      WEIGHTED-AVG.                    --------------------------
RANGE OF                                REMAINING     WEIGHTED-AVG.                WEIGHTED-AVG.
EXERCISE PRICES           OPTIONS         LIFE        EXERCISE PRICE    OPTIONS    EXERCISE PRICE
---------------          ----------   -------------   --------------   ---------   --------------
                                         (YEARS)
<S>                      <C>          <C>             <C>              <C>         <C>
$14.50 to $24.50.......   5,770,402        6.70           $18.20       4,425,157       $17.73
 27.63 to  35.31.......   5,260,756        8.04            35.12       1,762,419        35.00
 37.50 to  44.69.......   7,164,909        9.01            42.23          66,053        38.50
                         ----------                                    ---------
 14.50 to  44.69.......  18,196,067        8.00            32.55       6,253,629        22.82
                         ==========                       ======       =========
</TABLE>

     Restricted Stock -- Under the ICP, in 1999, 1998 and 1997 the Company
issued 340,668, 115,000 and 84,000 respective shares of restricted Common Stock
to employees. At December 31, 1999, 789,988 were outstanding. Restrictions
generally will not lapse until the fifth anniversary of the date of issuance.

     Deemed Investment in Stock -- Prior to 1996, the Company sponsored a
long-term cash incentive plan, the Phantom Stock Appreciation Right Plan (The
"PSAR Plan"). The Company terminated the PSAR Plan as of December 1995 and
extinguished, principally by cash payment, all outstanding phantom stock
appreciation rights ("PSAR"). A PSAR granted under the PSAR Plan entitled the
holder to receive a specified amount of cash upon the exercise of the PSAR. Upon
termination of the PSAR Plan, certain officers of the Company were required to
defer a portion of the amount payable in satisfaction of the termination of the
PSAR Plan. The amounts deferred are administered in accordance with the terms of
the Equity Deferral Plan (the "EDP"), sponsored by the Company.

     In 1999, 1998 and 1997 under the EDP, the Company credited PSAR amounts
deferred by selected employees to unfunded accounts that are deemed to be
invested in shares of Common Stock, which amounts are then deemed to be
reinvested in Common Stock. Approximately 1,129, 1,160 and 1,720 deemed shares
were issued during 1999, 1998 and 1997, respectively, and related to the
reinvestment of dividends. On December 31, 1999, the EDP was merged into the DCP
and the PSAR amounts were reinvested in the DCP. At December 31, 1999, there
were no PSAR amounts outstanding.

     Accounting for Stock-Based Compensation Plans -- The Company has elected to
apply Accounting Principles Board Opinion 25 ("APB 25") rather than the optional
provisions of Statement of Financial Accounting Standards No. 123 ("SFAS 123")
in accounting for its stock-based compensation plans. Had the compensation cost
of the Company's stock-based compensation plans been determined based on the
optional provisions of SFAS 123, in the years ended December 31, 1999, 1998 and
1997 the Company's net income, basic earnings per share and diluted earnings per
share would have been $1,451 million, $1,204 million and $1,023 million; $1.99,
$1.73 and $1.48; and $1.98, $1.72 and $1.47, respectively.

     All share, per share, option and fair value amounts, as applicable, in this
Note have been adjusted to reflect the Stock Dividend described in Note 20.

NOTE 16 -- COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS

     The Company grants revolving lines of credit to certain of its credit card
and other revolving customers. At December 31, 1999, the unused portion of these
lines aggregated $56.1 billion.

     The Company also grants lines of credit to certain dealers of trucks,
construction equipment and manufactured housing. At December 31, 1999, the
unused portion of these lines aggregated $865 million.

                                       60
<PAGE>   62
                      ASSOCIATES FIRST CAPITAL CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Various legal actions and proceedings and claims are pending or may be
instituted or asserted in the future against the Company and its subsidiaries.
Certain of the pending legal actions are, or purport to be, class actions. Some
of the foregoing matters involve or may involve compensatory, punitive or treble
damage claims which, if adversely held against the Company, would require large
expenditures or could affect the manner in which the Company conducts its
business.

     In addition, the Company like many other companies that operate in
regulated businesses is from time to time the subject of various governmental
inquiries and investigations. The Company is currently the subject of certain
investigations and inquiries by federal and state governmental authorities
relating generally to the Company's lending practices. The Company does not have
sufficient information to predict with certainty the ultimate outcome of such
investigations and inquiries or their ultimate effect, if any, on the Company's
results of operations or financial condition or the manner in which the Company
operates its business.

     Legal actions, governmental inquiries and investigations are subject to
many uncertainties, and the outcome of individual matters is not predictable
with assurance. Some of the matters discussed in the foregoing paragraphs could
be decided unfavorably to the Company or the subsidiary involved and could
require the Company or such subsidiary to pay damages or make other expenditures
in amounts or a range of amounts that cannot be estimated at December 31, 1999.
The Company does not reasonably expect, based on its analysis, that any adverse
outcome from such matters would have a material effect on future consolidated
financial statements for a particular year, although such an outcome is
possible.

     To broaden its investor base and improve execution in connection with its
asset securitization program, the Company wrote "put options" which require it
to purchase, upon request of the holders, securities issued in four
securitization transactions. These put options include: a put option,
exercisable any time after February 17, 2000, with respect to an aggregate of up
to $500 million principal amounts of certificates backed by credit card
receivables; a put option, exercisable in October of each year beginning in
October 2000, with respect to an aggregate of up to approximately $2 billion
principal amount of certificates backed by manufactured housing contract
receivables; a put option, exercisable at any time after June 15, 2000, with
respect to an aggregate of up to approximately $1 billion principal amount of
notes secured by home equity loan receivables, only to the extent the
securitization trust cannot meet its obligation under a separate put option by
the trust which is exercisable at any time after March 15, 2000, and a put
option, exercisable at any time after June 15, 2000, with respect to an
aggregate of up to approximately $1 billion of notes secured by home equity loan
receivables only to the extent the securitization trust cannot meet its
obligation under a separate put option issued by the trust. In each case, if
exercised, the Company will be obligated to purchase the certificates or notes
at par plus accrued interest. The Company has recorded liabilities totaling
approximately $23 million in connection with these options. Subsequent to their
initial issuance, such options are marked to market with the fluctuation being
reflected in the statement of earnings.

NOTE 17 -- FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISKS

     The Company maintains cash, cash equivalents, investments and certain other
financial instruments with various major financial institutions. To the extent
such deposits exceed maximum insurance levels, they are uninsured.

     The Company uses derivative financial instruments for the purpose of
hedging specific exposures as part of its risk management program. Such
instruments to date have been limited to foreign currency forward exchange,
currency swap, interest rate swap, treasury lock agreements, municipal bond
futures and treasury futures and option contracts.

     Foreign currency forward exchange agreements are generally held for
purposes other than trading and have been designated for accounting purposes as
hedges of certain of the Company's foreign currency denominated net investments.
Under these agreements, the Company is obligated to deliver specific foreign

                                       61
<PAGE>   63
                      ASSOCIATES FIRST CAPITAL CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

currencies in exchange for United States dollars at varying times over the next
five years. The aggregate notional amount of these agreements at December 31,
1999 and 1998 was $2.8 billion and $2.5 billion, respectively. The fair value of
such agreements at December 31, 1999 and 1998 would have been a liability of
$389.0 million and $134.4 million, respectively.

     Foreign currency swap agreements are held for purposes other than trading
and have been designated for accounting purposes as hedges of specific foreign
currency exposures under certain debt obligations. Under these agreements, the
Company and the agreement counter parties are obligated to exchange specific
foreign currencies at varying times over the next four years. The aggregate
notional amount of these agreements at December 31, 1999 and 1998 was $5.9
billion and $4.4 billion, respectively. The fair value of such agreements at
December 31, 1999 and 1998 would have been a liability of $307.9 million and
$118.5 million, respectively.

     Interest rate swap agreements are held for purposes other than trading and
are used by the Company to hedge the effect of interest rate movements on
existing debt. The aggregate notional amount of interest rate swap agreements at
December 31, 1999 was $9.2 billion. The fair value of such agreements at
December 31, 1999 would have been a liability of $46.7 million. These agreements
mature on varying dates over the next 19 years. In addition, treasury lock
agreements were used by the Company at December 31, 1998 to hedge the effect of
interest rate movements on anticipated debt issuances. The aggregate notional
amount of interest rate swap and treasury lock agreements at December 31, 1998
was $4.3 billion. The fair value of such agreements at December 31, 1998 would
have been a liability of $81.3 million.

     Treasury futures and option contracts are used to minimize fluctuations in
the value of preferred stock investments and are held for purposes other than
trading. The aggregate notional amount of futures and option contracts at
December 31, 1999 and 1998 was $536.2 million and $720.6 million, respectively.
The fair value of these contracts would have been an asset of $12.4 million and
a liability of $5.2 million at December 31, 1999 and 1998, respectively. Such
contracts mature on varying dates through 2000.

     Municipal bond futures are used to minimize fluctuations in the value of
municipal bond investments and are held for purposes other than trading. The
aggregate notional amount of municipal bond futures contracts at December 31,
1999 was $180.1 million. The fair value of these contracts would have been an
asset of $2.4 million at December 31, 1999. Such contracts mature on varying
dates through 2000. The Company did not hold municipal bond futures during 1998.

NOTE 18 -- BUSINESS SEGMENT INFORMATION

  Reportable Segment Overview

     The Company is organized into five primary business units: U.S. credit
card, U.S. consumer branch, U.S. home equity, commercial and international
finance. The U.S. consumer branch and U.S. home equity business units are
aggregated into one reportable U.S. consumer finance segment due to their
similar operating characteristics. The Company's corporate activities include,
among others, managing the operations of its domestic and foreign subsidiaries,
accessing the global debt, securitization and capital markets and managing the
mix of businesses in its portfolio. The Company fully allocates its corporate
activities to its business segments primarily based upon managed receivables. In
1999, these allocations included gains or losses on business dispositions and
assets sold and securitized as set forth in Notes 3 and 7.

  U.S. Credit Card

     The U.S. credit card finance segment offers bankcard, private label credit
card and related insurance products to customers throughout the United States.

                                       62
<PAGE>   64
                      ASSOCIATES FIRST CAPITAL CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  U.S. Consumer Finance

     The U.S. consumer finance reportable segment includes the Company's U.S.
consumer branch and U.S. home equity lending business units. These business
units have been aggregated into one reportable segment because they have similar
operating characteristics. Finance products and services offered by this segment
include home equity loans, personal loans, automobile financing, retail sales
finance and related insurance products in the United States (excluding Hawaii
and Puerto Rico, which are included in the international finance segment).

  Commercial

     The commercial segment is principally engaged in the financing and leasing
of transportation, industrial and communication equipment, auto fleet leasing
and fleet management services, manufactured housing financing, warehouse
lending, government guaranteed lending, municipal finance, employee relocation
services and insurance products in the United States and Canada.

  International Finance

     The international finance segment is primarily engaged in consumer lending,
and to a lesser extent, credit card and commercial lending activities and
related insurance products in Japan, Canada, the United Kingdom, Puerto Rico,
Hawaii, Sweden, Hong Kong, Spain, France, India, Mexico, Taiwan, Ireland and
Costa Rica.

  Measurement

     The Company allocates resources to and evaluates the performance of its
segments primarily based on total revenue, net interest margin, segment earnings
and managed finance receivables adjusted to include the impact of receivables
either held for sale or sold with servicing retained ("Managed Basis"). The
table below presents this Managed Basis information for each reportable segment
(in millions):

<TABLE>
<CAPTION>
                                           U.S.         U.S.
                                          CREDIT      CONSUMER                    INTERNATIONAL     TOTAL
                                           CARD       FINANCE     COMMERCIAL(1)      FINANCE       COMPANY
                                         ---------   ----------   -------------   -------------   ---------
<S>                                      <C>         <C>          <C>             <C>             <C>
Year Ended or at December 31, 1999
  Total revenue........................  $ 2,542.3   $ 4,442.2      $ 3,285.2       $ 2,981.3     $13,251.0
  Net interest margin..................    1,737.9     2,266.7        1,028.4         2,191.4       7,224.4
  Segment earnings.....................      441.1       688.7          506.9           740.2       2,376.9
  Finance receivables..................   10,928.3    31,566.8       27,948.6        13,971.0      84,414.7
Year Ended or at December 31, 1998
  Total revenue........................  $ 1,968.9   $ 3,828.7      $ 2,591.7       $ 1,640.2     $10,029.5
  Net interest margin..................    1,377.8     2,080.8        1,008.1         1,278.1       5,744.8
  Segment earnings.....................      299.8       655.9          510.5           474.3       1,940.5
  Finance receivables..................    9,622.0    26,810.5       26,469.6         8,462.2      71,364.3
Year Ended or at December 31, 1997
  Total revenue........................  $ 1,659.2   $ 3,633.6      $ 2,152.9       $ 1,024.8     $ 8,470.5
  Net interest margin..................    1,163.0     2,056.3          875.7           791.0       4,886.0
  Segment earnings.....................      199.7       665.6          439.7           335.0       1,640.0
  Finance receivables..................    7,839.3    23,985.0       22,304.2         4,278.0      58,406.5
</TABLE>

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

(1) 1999 total revenue and earnings include the results of the non-affiliate
    insurance operations of $504.7 million and $35.3 million, respectively. The
    non-affiliate insurance operations had no affect on net margin.

                                       63
<PAGE>   65
                      ASSOCIATES FIRST CAPITAL CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  Reconciliation of Segment and Consolidated Information

     A reconciliation of total Company revenue, net interest margin and net
finance receivables as of and for the years ended December 31, 1999, 1998 and
1997 to the related consolidated totals is as follows (in millions):

<TABLE>
<CAPTION>
                                                       1999         1998        1997
                                                    ----------   ----------   ---------
<S>                                                 <C>          <C>          <C>
Total Revenue
  Total Company Managed Basis revenue.............  $ 13,251.0   $ 10,029.5   $ 8,470.5
  Managed Basis adjustments.......................    (1,119.8)      (652.7)     (191.9)
                                                    ----------   ----------   ---------
          Consolidated revenue....................  $ 12,131.2   $  9,376.8   $ 8,278.6
                                                    ==========   ==========   =========
Net Interest Margin
  Total Company Managed Basis net interest
     margin.......................................  $  7,224.4   $  5,744.8   $ 4,886.0
  Managed Basis adjustments.......................    (2,024.5)    (1,031.1)     (101.0)
                                                    ----------   ----------   ---------
          Consolidated net interest margin........  $  5,199.9   $  4,713.7   $ 4,785.0
                                                    ==========   ==========   =========
Finance Receivables
  Total Company Managed Basis finance
     receivables..................................  $ 84,414.7   $ 71,364.3   $58,406.5
  Managed Basis adjustments.......................   (15,597.6)   (10,425.3)   (3,190.9)
                                                    ----------   ----------   ---------
          Consolidated net finance receivables....  $ 68,817.1   $ 60,939.0   $55,215.6
                                                    ==========   ==========   =========
</TABLE>

     Segment earnings and consolidated earnings before income taxes are equal;
therefore, no reconciliation is presented.

  Information About Geographic Areas

     The following is finance charge information by geographic area as of and
for the years ended December 31, 1999, 1998 and 1997 (in millions):

<TABLE>
<CAPTION>
                                                           1999       1998       1997
                                                         --------   --------   --------
<S>                                                      <C>        <C>        <C>
Finance charges
  United States........................................  $6,361.0   $6,305.8   $6,563.4
  Japan................................................   1,628.5    1,042.7      696.1
  Canada...............................................     553.8      256.5       94.7
  United Kingdom.......................................     470.6      215.6      146.0
  All other............................................      92.5       89.8       60.0
                                                         --------   --------   --------
          Consolidated finance charges.................  $9,106.4   $7,910.4   $7,560.2
                                                         ========   ========   ========
</TABLE>

  Information About Products and Services

     The Company manages its product and service offering primarily through
these reportable segments. Therefore, pursuant to the provisions of SFAS 131, no
enterprise-wide disclosures of information about products and services are
necessary.

  Information About Major Customers

     The Company has no customer that represents greater than 10% of total
revenue.

                                       64
<PAGE>   66
                      ASSOCIATES FIRST CAPITAL CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 19 -- FAIR VALUE OF FINANCIAL INSTRUMENTS

     The information provided below is required by Statement of Financial
Accounting Standards No. 107, Disclosures about Fair Value of Financial
Instruments. Amounts disclosed represent estimates of fair values at a
particular point in time. Significant assumptions regarding economic conditions,
loss experience and risk characteristics associated with particular financial
instruments and other factors were used for purposes of this disclosure. These
assumptions are subjective in nature and involve matters of judgment. Changes in
assumptions could have a material impact on these estimates.

     At December 31, 1999 and 1998, the carrying value and estimated fair value
of certain of the Company's financial instruments were as follows (in millions):

<TABLE>
<CAPTION>
                                                    1999                     1998
                                           ----------------------   ----------------------
                                           CARRYING    ESTIMATED    CARRYING    ESTIMATED
                                             VALUE     FAIR VALUE     VALUE     FAIR VALUE
                                           --------    ----------   ---------   ----------
<S>                                        <C>         <C>          <C>         <C>
Cash and cash equivalents(1).............  $ 1,026.3   $ 1,026.3    $ 4,665.6   $  4,665.6
Investment securities(2).................    7,176.5     7,176.5      6,678.7      6,678.7
Net finance receivables(3)...............   68,817.1    72,740.7     60,939.0     64,770.2
Notes payable(1)
  Commercial paper.......................   25,991.9    25,991.9     24,144.3     24,144.3
  Bank Loans.............................    1,261.5     1,261.5      1,565.5      1,565.5
Long-term debt(4)........................   41,404.0    40,961.9     37,596.7     38,904.2
</TABLE>

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

(1) The estimated fair value approximates their carrying value.

(2) Estimated market values of investment securities are based on quoted market
    prices. If quoted prices are not available, the fair value was estimated by
    discounting the expected cash flows from the investments at discount rates
    which approximate the rates that would achieve an expected return on assets
    with similar risk characteristics.

(3) In order to determine the fair values of loans, the loan portfolio was
    segmented based on loan type, credit quality and repricing characteristics.
    The fair value was estimated by discounting the expected cash flows from
    such loans at discount rates which approximate gross finance charge rates
    that would achieve an expected return on assets with similar risk
    characteristics. The estimated fair value of the credit card receivables was
    based on the Company's experience in pricing similar portfolios for
    acquisition purposes.

(4) The fair value of long-term debt was determined by discounting expected cash
    flows at discount rates currently available to the Company for debt with
    similar terms and remaining maturities.

     See Note 17 for fair value information regarding derivative financial
instruments.

NOTE 20 -- STOCK DIVIDEND

     On October 6, 1998 the Company announced a two-for-one split of the
Company's Class A Common Stock to be distributed in the form of a dividend (the
"Stock Dividend"). One additional common share was issued on December 23, 1998
for every common share held by stockholders of record as of the close of
business on December 9, 1998. All per share and related weighted average share
amounts in this report have been restated to reflect the Stock Dividend.

NOTE 21 -- TRANSACTIONS AND BALANCES WITH RELATED PARTIES

     The Company paid cash dividends to Ford of $25.6 million and $111.8 million
during the years ended December 31, 1998 and 1997, respectively.

     The Company provided certain emergency roadside assistance and auto club
services and employee relocation services to Ford. Revenues related to these
services while the Company was a subsidiary of Ford were $33.8 million and $36.0
million for the years ended December 31, 1998 and 1997, respectively.

                                       65
<PAGE>   67
                      ASSOCIATES FIRST CAPITAL CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Prior to the Spin-Off, the Company paid fees for certain administrative
services provided by its Ford-affiliated parent. Such fees were $2.3 million and
$8.0 million for the years ended December 31, 1998 and 1997, respectively.

NOTE 22 -- SUBSEQUENT EVENT (UNAUDITED)

     In January 2000, the Company announced its intention to discontinue the
loan origination operations of its Associates Housing Finance ("AHF") unit. AHF
originates and services loans for manufactured homes. As a result, the Company
plans to take a special pre-tax charge against first quarter 2000 earnings of
approximately $112 million. This charge will cover exit costs, including
severance, noncancellable contractual obligations and related costs, as well as
a provision for increased losses on the disposition of repossessions and
fair-value adjustments of related assets. The Company closed substantially all
of its sales purchase offices in February 2000 and will close its regional loan
origination centers in the second quarter of 2000. The Company will service the
liquidation of the existing receivables through its centralized service facility
in Knoxville, Tennessee. The Company will limit its origination activities to
support of its contractual arrangements and loss mitigation activities.

NOTE 23 -- UNAUDITED QUARTERLY FINANCIAL DATA

     The following table sets forth the unaudited quarterly results of
operations (in millions, except earnings per share):

<TABLE>
<CAPTION>
                                                                 1999
                                               -----------------------------------------
                                                FOURTH     THIRD      SECOND     FIRST
                                               QUARTER    QUARTER    QUARTER    QUARTER
                                               --------   --------   --------   --------
<S>                                            <C>        <C>        <C>        <C>
Finance charges..............................  $2,318.8   $2,241.6   $2,262.1   $2,283.9
                                               ========   ========   ========   ========
Interest expense.............................  $  988.7   $  992.5   $  965.3   $  960.0
                                               ========   ========   ========   ========
Earnings before provision for income taxes...  $  646.4   $  618.6   $  573.0   $  538.9
Provision for income taxes...................     237.7      231.8      214.9      202.1
                                               --------   --------   --------   --------
Net earnings.................................  $  408.7   $  386.8   $  358.1   $  336.8
                                               ========   ========   ========   ========
Net earnings per share
  Basic......................................  $   0.56   $   0.53   $   0.49   $   0.46
                                               ========   ========   ========   ========
  Diluted....................................  $   0.56   $   0.53   $   0.49   $   0.46
                                               ========   ========   ========   ========
</TABLE>

<TABLE>
<CAPTION>
                                                                 1998
                                               -----------------------------------------
                                                FOURTH     THIRD      SECOND     FIRST
                                               QUARTER    QUARTER    QUARTER    QUARTER
                                               --------   --------   --------   --------
<S>                                            <C>        <C>        <C>        <C>
Finance charges..............................  $2,053.0   $1,930.6   $1,881.8   $2,045.0
                                               ========   ========   ========   ========
Interest expense.............................  $  846.6   $  807.3   $  785.5   $  757.3
                                               ========   ========   ========   ========
Earnings before provision for income taxes...  $  525.1   $  504.5   $  464.9   $  446.0
Provision for income taxes...................     193.1      186.9      172.0      165.0
                                               --------   --------   --------   --------
Net earnings.................................  $  332.0   $  317.6   $  292.9   $  281.0
                                               ========   ========   ========   ========
Net earnings per share
  Basic......................................  $   0.47   $   0.46   $   0.42   $   0.41
                                               ========   ========   ========   ========
  Diluted....................................  $   0.47   $   0.46   $   0.42   $   0.40
                                               ========   ========   ========   ========
</TABLE>

                                       66
<PAGE>   68
                      ASSOCIATES FIRST CAPITAL CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 24 -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY ONLY)

     Condensed unconsolidated financial information of First Capital as of or
for the years ended December 31, 1999, 1998 and 1997 was as follows (in
millions):

                        CONDENSED STATEMENT OF EARNINGS
                                 (IN MILLIONS)

<TABLE>
<CAPTION>
                                                             YEAR ENDED DECEMBER 31
                                                         ------------------------------
                                                           1999       1998       1997
                                                         --------   --------   --------
<S>                                                      <C>        <C>        <C>
Revenue
  Interest and other income............................  $  448.5   $  217.1   $   58.8
  Dividends from subsidiaries..........................     658.7      231.9       52.5
                                                         --------   --------   --------
                                                          1,107.2      449.0      111.3
Expenses
  Interest expense.....................................     701.7      128.6       44.4
  Operating expenses...................................      97.4       47.3       34.9
  Provision for losses on finance receivables..........       6.5        2.9         --
                                                         --------   --------   --------
                                                            805.6      178.8       79.3
                                                         --------   --------   --------
Income before credit for federal income taxes and
  equity in undistributed earnings of subsidiaries.....     301.6      270.2       32.0
Tax benefit............................................     237.2       36.7       40.2
                                                         --------   --------   --------
Earnings before equity in undistributed earnings of
  subsidiaries.........................................     538.8      306.9       72.2
Equity in undistributed earnings of subsidiaries, net
  of tax...............................................     951.6      916.6      959.5
                                                         --------   --------   --------
Net earnings...........................................  $1,490.4   $1,223.5   $1,031.7
                                                         ========   ========   ========
</TABLE>

                 See notes to condensed financial information.

                                       67
<PAGE>   69
                      ASSOCIATES FIRST CAPITAL CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                            CONDENSED BALANCE SHEET
                                 (IN MILLIONS)

<TABLE>
<CAPTION>
                                                                   DECEMBER 31
                                                              ---------------------
                                                                1999        1998
                                                              ---------   ---------
<S>                                                           <C>         <C>
Assets
  Investment in subsidiaries................................  $13,665.8   $10,158.2
  Finance receivables, net of unearned income and allowance
     for credit losses......................................      668.8       662.4
  Advances to subsidiaries, eliminated in consolidation, and
     other..................................................    7,238.8     4,299.1
                                                              ---------   ---------
          Total assets......................................  $21,573.4   $15,119.7
                                                              =========   =========
Liabilities and Stockholders' Equity
  Accounts payable and accruals.............................  $   759.6   $   310.7
  Short-term notes payable..................................    9,625.9     5,473.2
  Long-term debt............................................    1,387.4       809.3
  Stockholders' equity......................................    9,800.5     8,526.5
                                                              ---------   ---------
          Total liabilities and stockholders' equity........  $21,573.4   $15,119.7
                                                              =========   =========
</TABLE>

     The estimated fair value of notes payable and long-term debt at December
31, 1999 and 1998 was $11,003.1 million and $6,268.1 million, respectively. Fair
values were estimated by discounting expected cash flows at discount rates
currently available to the Company for debt with similar terms and remaining
maturities.

                 See notes to condensed financial information.

                                       68
<PAGE>   70
                      ASSOCIATES FIRST CAPITAL CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                       CONDENSED STATEMENT OF CASH FLOWS
                                 (IN MILLIONS)

<TABLE>
<CAPTION>
                                                                   YEARS ENDED DECEMBER 31
                                                              ---------------------------------
                                                                1999        1998        1997
                                                              ---------   ---------   ---------
<S>                                                           <C>         <C>         <C>
Cash Flows from Operating Activities
  Net earnings..............................................  $ 1,490.4   $ 1,223.5   $ 1,031.7
  Adjustments to net earnings for non-cash items:
     Provision for losses on finance receivables............        6.5         2.9          --
     Depreciation and amortization..........................       10.5         0.4          --
     Increase (decrease) in accounts payable and accruals...      263.0       123.5       (12.9)
     Equity in undistributed earnings of subsidiaries.......     (951.6)     (916.6)     (959.5)
                                                              ---------   ---------   ---------
     Net cash provided from operating activities............      818.8       433.7        59.3
                                                              ---------   ---------   ---------
Cash Flows from Investing Activities
  Finance receivables originated or purchased...............     (584.3)   (1,207.3)         --
  Finance receivables liquidated............................      571.4       542.0          --
  Acquisition of other finance businesses, net..............   (4,170.5)   (1,767.4)         --
  Sale of other finance businesses..........................    2,162.8          --          --
  Cash dividends from subsidiaries..........................      658.7       231.9        52.5
  Increase in investments in and advances to subsidiaries...   (3,647.2)   (3,011.1)     (717.6)
  (Increase) decrease in other assets.......................     (495.1)     (370.8)        1.2
                                                              ---------   ---------   ---------
     Net cash used for investing activities.................   (5,504.2)   (5,582.7)     (663.9)
                                                              ---------   ---------   ---------
Cash Flows from Financing Activities
  Increase in notes payable and long-term debt..............    5,805.7     4,345.0       891.6
  Retirement of long-term debt..............................   (1,074.9)     (115.1)     (214.0)
  Sale of Class A Common Stock..............................         --     1,266.7          --
  Cash dividends............................................     (167.5)     (142.0)     (138.6)
  Treasury stock and other..................................       22.4       (17.0)      (12.4)
                                                              ---------   ---------   ---------
     Net cash provided from financing activities............    4,585.7     5,337.6       526.6
Effect of foreign currency translation adjustments on
  cash......................................................      191.2      (112.6)       78.5
                                                              ---------   ---------   ---------
Increase in cash and cash equivalents.......................       91.5        76.0         0.5
Cash and cash equivalents at beginning of year..............       77.2         1.2         0.7
                                                              ---------   ---------   ---------
Cash and cash equivalents at end of year....................  $   168.7   $    77.2   $     1.2
                                                              =========   =========   =========
</TABLE>

                 See notes to condensed financial information.

                                       69
<PAGE>   71
                      ASSOCIATES FIRST CAPITAL CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTES TO CONDENSED FINANCIAL INFORMATION:

     (1) The ability of the Company's subsidiaries to transfer funds to the
Company in the form of cash dividends is restricted pursuant to the terms of
certain debt agreements entered into by the Company's principal domestic
operating subsidiary, Associates Corporation of North America. See Note 10 for a
summary of the most significant of these restrictions.

     (2) Notes payable and long-term debt bear interest at rates from 5.50% to
8.87%. The estimated maturities of the notes outstanding, at December 31, 1999,
during subsequent years were as follows (in millions):

<TABLE>
<CAPTION>
YEAR                                                            AMOUNT
----                                                           --------
<S>                                                            <C>
2000........................................................   $  727.0
2001........................................................      260.4
2002........................................................      200.0
2003........................................................         --
2004........................................................         --
Thereafter..................................................      200.0
                                                               --------
Total.......................................................   $1,387.4
                                                               ========
</TABLE>

     (3) Effective January 1, 1999, First Capital entered into a tax sharing
agreement with certain of its subsidiaries included in First Capital's
consolidated return, which requires an allocation of the consolidated tax
liability among these subsidiaries.

                                       70
<PAGE>   72

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

     Incorporated by reference to the Company's Current Report on Form 8-K filed
with the Commission on May 28, 1999.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

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

ITEM 11. EXECUTIVE COMPENSATION.

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

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The information called for by Item 12 is incorporated by reference from the
information under the caption "Security Ownership" in the Company's Proxy
Statement for its 2000 annual meeting of stockholders.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

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

                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K.

     (a) Financial Statements

        (1)

<TABLE>
<CAPTION>
                                                               PAGE
                                                               ----
<S>                                                            <C>
               Report of Independent Auditors...............    34
               Consolidated Statement of Earnings for the
              years ended December 31, 1999, 1998 and
              1997..........................................    35
               Consolidated Balance Sheet at December 31,
              1999 and 1998.................................    36
               Consolidated Statement of Changes in
              Stockholders' Equity for the years ended
              December 31, 1999, 1998 and 1997..............    37
               Consolidated Statement of Cash Flows for the
              years ended December 31, 1999, 1998 and
              1997..........................................    38
               Notes to consolidated financial statements...    39
</TABLE>

        (2)

          The financial statement schedules required by regulation S-X are
          either not applicable or are included in the information provided in
          the notes to the consolidated financial statements which are filed as
          part of this report.

                                       71
<PAGE>   73

     (b) Reports on Form 8-K

        During the quarter ended December 31, 1999, First Capital filed Current
        Reports on Form 8-K dated October 12, 1999 (announcing 3rd quarter 1999
        earnings); November 15, 1999 (announcing a definitive agreement to
        acquire Arcadia Financial Ltd.); and December 16, 1999 (announcing the
        naming of Michael C. Lenora as head of its International Operations,
        replacing Wilfred Y. Horie).

     (c) Exhibits

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER
        -------
<C>                      <S>
          3.1            -- Restated Certificate of Incorporation. (3.1)*
          3.2            -- By-laws.
          4.1            -- Instruments with respect to issues of long-term debt have
                            not been filed as exhibits to this annual report on Form
                            10-K as the authorized principal amount of any one of
                            such issues does not exceed 10% of the total assets of
                            the registrant and its consolidated subsidiaries.
                            Registrant agrees to furnish to the Commission a copy of
                            each such instrument upon its request.
          4.2            -- Rights Agreement dated as of April 13, 1998, between the
                            Company and First Chicago Trust Company of New York as
                            Rights Agent. (4)**
         10.1            -- Form of Employment Agreement.
         10.2            -- The Company's Deferred Compensation Plan. (4)***
         10.3            -- The Company's Incentive Compensation Plan. (10.8)****
         10.4            -- The Company's Long-Term Performance Plan. (10.12)*
         10.5            -- The Company's Supplemental Retirement Income Plan.
                            (10.16)*
         10.6            -- The Company's Excess Benefits Plan. (10.17)*
         10.7            -- Form of Company's Incentive Compensation Plan Stock
                            Option Award Agreement.
         10.8            -- Form of Restricted Stock Award Agreement. (10.23)****
         12.             -- Computation of Ratio of Earnings to Fixed Charges.
         21.             -- Subsidiaries of the Registrant.
         23.             -- Consent of Independent Auditors.
         24.             -- Powers of Attorney.
         27.             -- Financial Data Schedule.
</TABLE>

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

*     Incorporated by reference to the exhibit listed in parentheses contained
      in the Company's registration statement on Form S-1 filed with the
      Securities and Exchange Commission on February 8, 1996.

**   Incorporated by reference to the Company's Current Report on Form 8-K as
     filed with the Commission on April 13, 1998.

***  Incorporated by reference to the exhibit listed in parentheses contained in
     the Company's Registration Statement on Form S-8 as filed with the
     Commission on March 31, 1998.

**** Incorporated by reference to the exhibit listed in parentheses contained in
     the Company's Annual Report on Form 10-K for the fiscal year ended December
     31, 1997.

                                       72
<PAGE>   74

                                   SIGNATURES

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

                                        ASSOCIATES FIRST CAPITAL CORPORATION

                                        By        /s/ ROY A. GUTHRIE
                                          --------------------------------------
                                                      Roy A. Guthrie
                                             Senior Executive Vice President,
                                             Principal Financial Officer and
                                                         Director
                                                      March 28, 2000

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

<TABLE>
<CAPTION>
                      SIGNATURE                                   TITLE                     DATE
                      ---------                                   -----                     ----
<C>                                                    <S>                            <C>
                /s/ KEITH W. HUGHES*                   Chairman of the Board,
-----------------------------------------------------    Principal Executive
                  (Keith W. Hughes)                      Officer and Director

                /s/ J. CARTER BACOT*                   Director
-----------------------------------------------------
                  (J. Carter Bacot)

                 /s/ ERIC S. DOBKIN*                   Director
-----------------------------------------------------
                  (Eric S. Dobkin)

                /s/ WILLIAM M. ISAAC*                  Director
-----------------------------------------------------
                 (William M. Isaac)

               /s/ JUDY JOLLEY MOHRAZ*                 Director
-----------------------------------------------------
                (Judy Jolley Mohraz)

              /s/ H. JAMES TOFFEY, JR.*                Director
-----------------------------------------------------
               (H. James Toffey, Jr.)

                /s/ KENNETH WHIPPLE*                   Director
-----------------------------------------------------
                  (Kenneth Whipple)

                 /s/ ROY A. GUTHRIE                    Senior Executive Vice
-----------------------------------------------------    President, Principal
                  (Roy A. Guthrie)                       Financial Officer and
                                                         Director

                 /s/ JOHN F. STILLO*                   Executive Vice President,
-----------------------------------------------------    Comptroller and Principal
                  (John F. Stillo)                       Accounting Officer
</TABLE>

     By signing his name hereto, Roy A. Guthrie signs this document on behalf of
himself and each of the other persons indicated above pursuant to powers of
attorney duly executed by such persons.

                                            *By     /s/ ROY A. GUTHRIE
                                              ----------------------------------
                                                       Attorney-in-fact

                                                              March 28, 2000
<PAGE>   75

                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER
        -------
<C>                      <S>
          3.1            -- Restated Certificate of Incorporation. (3.1)*
          3.2            -- By-laws.
          4.1            -- Instruments with respect to issues of long-term debt have
                            not been filed as exhibits to this annual report on Form
                            10-K as the authorized principal amount of any one of
                            such issues does not exceed 10% of the total assets of
                            the registrant and its consolidated subsidiaries.
                            Registrant agrees to furnish to the Commission a copy of
                            each such instrument upon its request.
          4.2            -- Rights Agreement dated as of April 13, 1998, between the
                            Company and First Chicago Trust Company of New York as
                            Rights Agent. (4)**
         10.1            -- Form of Employment Agreement.
         10.2            -- The Company's Deferred Compensation Plan. (4)***
         10.3            -- The Company's Incentive Compensation Plan. (10.8)****
         10.4            -- The Company's Long-Term Performance Plan. (10.12)*
         10.5            -- The Company's Supplemental Retirement Income Plan.
                            (10.16)*
         10.6            -- The Company's Excess Benefits Plan. (10.17)*
         10.7            -- Form of Company's Incentive Compensation Plan Stock
                            Option Award Agreement.
         10.8            -- Form of Restricted Stock Award Agreement. (10.23)****
         12.             -- Computation of Ratio of Earnings to Fixed Charges.
         21.             -- Subsidiaries of the Registrant.
         23.             -- Consent of Independent Auditors.
         24.             -- Powers of Attorney.
         27.             -- Financial Data Schedule.
</TABLE>

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

*     Incorporated by reference to the exhibit listed in parentheses contained
      in the Company's registration statement on Form S-1 filed with the
      Securities and Exchange Commission on February 8, 1996.

**   Incorporated by reference to the Company's Current Report on Form 8-K as
     filed with the Commission on April 13, 1998.

***  Incorporated by reference to the exhibit listed in parentheses contained in
     the Company's Registration Statement on Form S-8 as filed with the
     Commission on March 31, 1998.

**** Incorporated by reference to the exhibit listed in parentheses contained in
     the Company's Annual Report on Form 10-K for the fiscal year ended December
     31, 1997.