<PAGE>   1
 
================================================================================
 
                                 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, 1996
 
                                       OR
[ ]         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
             For the transition period from           to
 
                         Commission file number 1-6154
                    ASSOCIATES CORPORATION OF NORTH AMERICA
             (Exact name of registrant as specified in its charter)
 
<TABLE>
<C>                                            <C>
                   DELAWARE                                      74-1494554
       (State or other jurisdiction of              (I.R.S. Employer Identification No.)
        incorporation or 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>
<C>                                            <C>
             TITLE OF EACH CLASS                 NAME OF EACH EXCHANGE ON WHICH REGISTERED
---------------------------------------------- ----------------------------------------------
  6.00% Senior Debentures due June 15, 2001               New York Stock Exchange
 8.15% Subordinated Debentures due August 1,              New York Stock Exchange
                     2009
</TABLE>
 
          Securities registered pursuant to Section 12(g) of the Act:
                                      None
 
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.  Yes [X]     No [ ]
 
State the aggregate market value of the voting stock held by non-affiliates of
the registrant - None.
 
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. - Not Applicable.
 
As of December 31, 1996, the registrant had 260 shares of Common Stock and
1,000,000 shares of Class B Common Stock issued and outstanding, all of which
were owned directly or indirectly by Associates First Capital Corporation. The
registrant meets the conditions set forth in General Instruction J.(1)(a) and
(b) to Form 10-K and is therefore filing this Form 10-K with the reduced
disclosure format.
================================================================================
<PAGE>   2
 
                                     PART I
 
ITEM 1. BUSINESS.
 
     Associates Corporation of North America ("Associates" or the "Company"), a
Delaware corporation, is a wholly-owned subsidiary operating unit of Associates
First Capital Corporation ("First Capital"), which in turn is a majority
indirect-owned subsidiary of Ford Motor Company ("Ford"). All the outstanding
stock of Associates is owned directly or indirectly by First Capital. Unless the
context otherwise requires, reference to Associates or to the Company includes
Associates and all its subsidiaries.
 
     On May 8, 1996, First Capital made an initial public offering (the
"Offering") of 67 million shares of its Class A Common Stock representing a
19.3% interest in First Capital. Immediately following the Offering, Ford
continued to own a controlling interest in First Capital's common stock.
 
     The Company is a leading, diversified consumer and commercial finance
organization which provides finance, leasing and related services to individual
consumers and businesses in the United States. At or for the year ended December
31, 1996, the Company had aggregate net finance receivables of $41.8 billion,
total assets of $42.6 billion, net earnings of $823.1 million and stockholders'
equity of $5.1 billion. The Company believes that it is the second largest
independent finance company in the United States based on aggregate net finance
receivables outstanding. The Company's finance receivables are geographically
dispersed across the United States. At December 31, 1996, 11% of such
receivables were in California, 7% in Florida, 6% in Texas, and no other
individual state had more than 4%.
 
     The Company divides its diverse activities into consumer finance and
commercial finance. The Company's consumer finance operations consist of a
variety of specialized consumer financing products and services, including home
equity lending, personal lending, retail sales finance and purchasing
participations in credit card receivables originated by an affiliate, Associates
National Bank (Delaware) ("ANB"). The Company's commercial finance operations
primarily provide retail financing, leasing and wholesale financing for
heavy-duty and medium-duty trucks and truck trailers, construction, material
handling and other industrial equipment, manufactured housing and auto fleet
leasing and other commercial products and services. Although financial and
statistical information relating to manufactured housing financing presented
herein is included with the consumer finance information, the Company manages
its manufactured housing financing as part of its commercial finance operations.
Accordingly, the manufactured housing financing operations are described under
"-- Commercial Finance" below.
 
     As part of its consumer finance and commercial finance activities, the
Company makes available to its customers credit-related and other insurance
products. See NOTE 17 to the consolidated financial statements for financial
information by business segment.
 
     Although the Company's finance operations are confined to the United
States, certain subsidiaries of First Capital which are also affiliates of the
Company operate outside the United States, including in Japan, the United
Kingdom, Canada, Puerto Rico and Mexico. The Company provides certain management
and other services relating to these foreign operations. See NOTE 14 to the
consolidated financial statements. The results of such foreign operations are
not included in the financial or statistical information of the Company
presented herein.
 
     At December 31, 1996, Associates had 1,625 branch offices geographically
dispersed throughout the United States and employed approximately 16,230
persons. Corporate headquarters are located in Irving, Texas.
 
     Certain prior year ratios presented herein have been restated to conform to
current year methodology.
 
CONSUMER FINANCE
 
  GENERAL
 
     The Company's consumer finance business consists of a variety of consumer
financing products and services and purchasing participations in credit card
receivables originated by an affiliate, ANB. The Company
 
                                        1
<PAGE>   3
 
distributes its consumer finance products through multiple delivery systems,
which include (i) approximately 1,550 consumer branch offices; (ii) a
centralized lending operation, principally home equity loans sourced from third
parties; and (iii) centralized credit card operations managed by ANB. Home
equity loans account for the largest portion of the Company's consumer finance
portfolio, and are distributed through a branch delivery system and a
centralized lending operation. The Company also offers personal installment
loans and purchases consumer retail sales finance contracts through its branch
delivery system. In addition, the Company purchases participations in ANB's
credit card receivables principally generated from the issuance of VISA(R) and
MasterCard(R) bankcards and private label credit cards. The Company, through
certain subsidiaries and others, also makes available various credit-related and
non-credit-related insurance products to its consumer finance customers,
including credit life, credit accident and health, accidental death and
dismemberment, involuntary unemployment and personal property insurance. See
"-- Related Insurance."
 
     The Company's consumer finance customers span a wide range of income
levels, age groups and credit histories. These customers generally have a
history of using credit from a variety of sources and include homeowners,
purchasers of consumer durables (such as furniture, electronics and appliances)
and college students. In extending credit, the Company considers, among other
things, each customer's job stability, length of time at residence and, in many
cases, home ownership.
 
     The following table shows net finance receivables outstanding attributable
to the various types of consumer financing products (in millions):
 
                  CONSUMER NET FINANCE RECEIVABLES OUTSTANDING
 
<TABLE>
<CAPTION>
                                                                  AT DECEMBER 31
                                             ---------------------------------------------------------
                                               1996        1995        1994        1993        1992
                                             ---------   ---------   ---------   ---------   ---------
<S>                                          <C>         <C>         <C>         <C>         <C>
Home Equity Lending........................  $15,453.4   $13,273.9   $11,362.0   $ 9,832.5   $ 8,991.6
Personal Lending/Sales Finance.............    5,700.0     4,736.1     4,153.8     3,454.3     2,855.2
Credit Card................................    5,178.6     4,459.7     3,682.6     2,949.6     2,483.9
Manufactured Housing(1)....................    1,235.1     2,034.1     1,669.2     1,290.2       983.9
Accruals and Other.........................      430.0       105.4       292.2       453.2       493.1
                                             ---------   ---------   ---------   ---------   ---------
Total Consumer.............................  $27,997.1   $24,609.2   $21,159.8   $17,979.8   $15,807.7
                                             =========   =========   =========   =========   =========
</TABLE>
 
---------------
 
(1) Information concerning manufactured housing is set forth below under
    "-- Commercial Finance". The Company considers its manufactured housing
    activities to be a commercial business principally because the predominant
    portion of its financing receivables is obtained from its relationships with
    manufacturers and dealers, notwithstanding that the credit and related risks
    typically are those of the consumer purchaser of the housing.
 
     During 1996, the finance charge yield (finance charge revenue divided by
average net receivables) on all types of consumer net finance receivables
averaged approximately 16% per annum. Variable rates were charged on 28% of the
consumer net finance receivables outstanding at such date. State laws often
establish maximum allowable finance charges for certain consumer loans;
approximately 92% of the outstanding consumer net finance receivables were
either not subject to such state maximums, or if subject, were not materially
restricted by such as to the interest rates charged. See "-- Additional
Information Regarding the Company -- Regulation".
 
  HOME EQUITY LENDING, PERSONAL LENDING AND RETAIL SALES FINANCE
 
     Overview. At December 31, 1996, home equity loans accounted for the largest
share of the Company's consumer finance portfolio and were distributed through
its branch delivery system and a centralized lending operation. The Company
offers personal installment loans and purchases retail sales finance contracts
from retailers through its branch delivery system.
 
     Home Equity Lending. The Company's home equity lending activities consist
of originating and servicing fixed and variable rate mortgage loans that are
primarily secured by single family residential properties. Such loans are made
to borrowers primarily for the purpose of debt consolidation, including the
refinancing of
 
                                        2
<PAGE>   4
 
existing mortgage loans, home improvements and a variety of other purposes.
Relatively few of the Company's originations of home equity loans are mortgages
used for the acquisition of homes.
 
     The following table shows certain information with respect to the Company's
home equity lending receivables:
 
                              HOME EQUITY LENDING
 
<TABLE>
<CAPTION>
                                                           AT DECEMBER 31
                                     -----------------------------------------------------------
                                       1996         1995         1994         1993        1992
                                     ---------    ---------    ---------    --------    --------
<S>                                  <C>          <C>          <C>          <C>         <C>
Net Receivables (in millions)......  $15,453.4    $13,273.9    $11,362.0    $9,832.5    $8,991.6
Average Account Balance............  $  42,561    $  40,784    $  39,542    $ 35,934    $ 34,608
Number of Accounts.................    363,089      325,470      287,343     273,630     259,810
</TABLE>
 
     The Company's home equity loans typically have maturities of up to 180
months. Approximately 22% of the Company's home equity loans are variable rate
loans. While home equity loans may be secured by either first or second
mortgages, at December 31, 1996, approximately 79% of the aggregate net
outstanding balance of home equity lending receivables was secured by first
mortgages.
 
     Personal Lending. 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, as well as consumer durables and/or guarantees by third
parties. Personal loans generally involve disbursements at the inception of the
loan with installment payments leading to full amortization by maturity, which
ranges up to 60 months. In general, personal loans are made for debt
consolidation, home improvement, education, vacation, taxes and major purchases
of appliances and other durable goods. The Company sources personal loan
customers through solicitation of existing retail sales finance customers,
direct mail, advertising and referrals.
 
     Retail Sales Finance. Retail sales finance contracts are generally for the
purchase of items such as household electronic appliances, furniture and home
improvements. The Company generally purchases retail finance sales contracts
from retailers of such items. These activities provide an important source of
new loan customers, since, following the purchase of a retail sales finance
contract, the Company has a direct relationship with the borrower. The
newly-established relationship often leads to other types of financing for the
customer based on the individual's credit needs. As with personal loans, 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.
 
     Statistical information for average personal loan and average retail sales
finance contract receivables is generally similar. For example, at December 31,
1996, the average balance of the Company's outstanding personal loans was
$2,328, and the average balance of the Company's outstanding retail sales
finance contracts was $1,877.
 
     The following table shows certain information with respect to the Company's
aggregate personal lending and retail sales finance contract receivables:
 
                     PERSONAL LENDING/RETAIL SALES FINANCE
 
<TABLE>
<CAPTION>
                                                         AT DECEMBER 31
                                    --------------------------------------------------------
                                      1996        1995        1994        1993        1992
                                    --------    --------    --------    --------    --------
<S>                                 <C>         <C>         <C>         <C>         <C>
Net Receivables (in millions).....  $5,700.0    $4,736.1    $4,153.8    $3,454.3    $2,855.2
Average Account Balance...........  $  2,129    $  2,078    $  2,078    $  2,065    $  2,004
Number of Accounts................  2,677,735   2,279,006   1,999,316   1,673,150   1,424,604
</TABLE>
 
                                        3
<PAGE>   5
 
     Delivery of Home Equity Loans, Personal Loans and Retail Sales Financing.
The Company provides its home equity and personal loans and retail sales
financing through its branch delivery system and through a centralized lending
operation which are further described as follows:
 
     Branch System. At December 31, 1996, the Company's consumer finance branch
system consisted of 1,475 geographically dispersed locations in the United
States. These locations operate under four different nameplates -- Associates
Financial Services, TranSouth Financial, First Family Financial Services and
Kentucky Finance. The Company retained the latter three nameplates following
their acquisitions by the Company in order to retain name recognition and
awareness, customer relationships and market niches.
 
     Centralized Lending. The Company's centralized home equity lending
operation, conducted through Ford Consumer Finance Company ("FCFC"), a
subsidiary of Associates, extends both closed-end loans and lines of credit to
customers. A majority of the home equity loans at December 31, 1996 in the
Company's centralized home equity lending operation were originated through
financial institutions and mortgage brokers. 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 remainder of the home equity
loans in the centralized lending operation at December 31, 1996 were originated
as a result of existing customer relationships, direct mail and telemarketing
efforts or customer referrals. The Company's centralized lending operation
covers most of the United States through three regional service centers and 49
district sales offices located in 27 states.
 
  CREDIT CARDS
 
     The Company purchases participations in credit card receivables originated
by ANB. ANB's credit card receivables consist primarily of VISA(R) and
MasterCard(R) bankcards and private label credit cards to consumers directly to
the public and through co-marketing programs. ANB issues its credit cards across
a wide spectrum with interest rates based on customer credit profiles. The
private label credit card business has principally consisted of a customized
private label revolving charge program for customers of Amoco Oil Company
("Amoco"), who utilize the cards to purchase gasoline and other automotive
products at Amoco gasoline stations nationwide.
 
     The following table shows certain information regarding the Company's
participations in credit card receivables:
 
                                  CREDIT CARD
 
<TABLE>
<CAPTION>
                                                             AT DECEMBER 31
                                        ---------------------------------------------------------
                                          1996        1995        1994        1993        1992
                                        ---------   ---------   ---------   ---------   ---------
<S>                                     <C>         <C>         <C>         <C>         <C>
Net Receivables (in millions).........  $ 5,178.6   $ 4,459.7   $ 3,682.6   $ 2,949.6   $ 2,483.9
Average Account Balance(1)............  $     857   $     761   $     694   $   1,385   $   1,522
Number of Accounts....................  6,039,921   5,860,315   5,302,709   2,129,227   1,631,507
</TABLE>
 
---------------
 
(1) In 1994, ANB acquired Amoco's private label gasoline credit card program,
    which added 3.2 million accounts. These accounts generally carried smaller
    balances than ANB's bankcard accounts, which had the effect of decreasing
    the average balance for the Company's credit card receivables in 1994, 1995
    and 1996.
 
     The Company's revenues from its participations are derived from finance
charges on revolving accounts, the interchange fees derived from merchant
discounts, annual membership and other account fees and fees earned from the
sale of insurance and other fee-based products. ANB's credit card receivables
typically bear variable interest rates.
 
COMMERCIAL FINANCE
 
  GENERAL
 
     The Company's commercial finance business provides a variety of retail and
wholesale financing and leasing products and services for heavy-duty (Class 8)
and medium-duty (Classes 3 through 7) trucks and
 
                                        4
<PAGE>   6
 
truck trailers, construction and material handling equipment and other
industrial equipment. The Company also engages in a number of other commercial
activities, including auto fleet leasing and management, Small Business
Administration lending, employee relocation services and emergency roadside
assistance and auto club services. The Company, through certain subsidiaries and
others, also makes available various credit-related and non-credit-related
insurance products to its commercial finance customers, including commercial
auto and dealers' open lot physical damage, credit life and motor truck cargo
insurance; the Company has recently also started offering commercial auto
liability insurance in certain states. See "-- Related Insurance".
 
     The Company provides truck and truck trailer financing and leasing services
from 36 branch offices in the United States. The Company provides equipment
financing and leasing services from 19 branch offices in the United States and,
in the case of material handling and certain other equipment, utilizes two
centralized lending and service operations. Fee-based services are provided from
centralized locations. The Company provides manufactured housing financing
through five regional offices and 15 sales purchase offices. The Company markets
its insurance products to its commercial finance customers through the same
delivery systems used to market its commercial finance products.
 
     The following table shows net finance receivables outstanding attributable
to the various types of commercial financing products (in millions):
 
                 COMMERCIAL NET FINANCE RECEIVABLES OUTSTANDING
 
<TABLE>
<CAPTION>
                                                                    AT DECEMBER 31
                                                ------------------------------------------------------
                                                  1996        1995        1994       1993       1992
                                                ---------   ---------   --------   --------   --------
<S>                                             <C>         <C>         <C>        <C>        <C>
Truck and Truck Trailer.......................  $ 7,984.4   $ 7,341.0   $6,495.0   $5,420.3   $4,320.9
Equipment.....................................    4,231.4     3,702.3    2,883.3    2,423.6    2,246.9
Auto Fleet Leasing and Other(1)...............    1,164.5       412.5      332.7      345.3      324.7
Accruals and Other............................      401.5       303.3      104.9       30.1       (8.5)
                                                ---------   ---------   --------   --------   --------
Total Commercial..............................  $13,781.8   $11,759.1   $9,815.9   $8,219.3   $6,884.0
                                                =========   =========   ========   ========   ========
Manufactured Housing(2).......................  $ 1,235.1   $ 2,034.1   $1,669.2   $1,290.2   $  983.9
                                                =========   =========   ========   ========   ========
</TABLE>
 
---------------
 
(1) Includes auto fleet leasing, warehouse lending, Small Business
    Administration lending and fee-based businesses.
 
(2) Except as otherwise indicated, the dollar amount of manufactured housing
    receivables is included in the dollar amount of total consumer net finance
    receivables throughout this document, because the credit and related risks
    of the manufactured housing business are similar to those of the Company's
    consumer finance business. Manufactured housing receivables are included
    with consumer net finance receivables in determining the percentage of total
    net finance receivables which are consumer net finance receivables. However,
    manufactured housing operations are described below under "-- Commercial
    Finance -- Manufactured Housing" as part of the Company's commercial
    activities because the marketing and management of manufactured housing
    finance products are more closely related to commercial finance products.
    During 1996, the Company securitized and sold approximately $1.3 billion of
    manufactured housing finance receivables. Prior to year end, the servicing
    rights to such securitizations were transferred to an affiliate. Subsequent
    to the end of the year, the Company sold the manufactured housing finance
    receivables to an affiliate, Associates Housing Finance Services, Inc., and
    expects to continue its investment in manufactured housing finance
    receivables through the purchase of participations in the transferred
    receivables.
 
     At December 31, 1996, the interest rates charged on approximately 20% of
the commercial net finance receivables were variable rates. Commercial finance
receivables are generally not subject to maximum finance charges established by
state law, and where such restrictions apply, at the present time, they do not
materially restrict the interest rates charged. See "-- Regulation". At December
31, 1996, the finance charge yield on all types of commercial finance
receivables averaged approximately 10% per annum, and original maturities of
such receivables averaged 51 months.
 
     Except for lease or rental transactions in which the Company owns the
equipment, liens on the equipment financed secure the receivables. In certain
instances, the dealer and/or manufacturer provides some form of loss protection
to the Company.
 
  TRUCK AND TRUCK TRAILER FINANCING AND LEASING
 
     The Company believes that it is a leading independent source of financing
and leasing for heavy-duty trucks and truck trailers in the United States. The
Company provides retail financing and leasing for purchasers and users of
medium-duty through heavy-duty trucks and truck trailers, as well as wholesale
 
                                        5
<PAGE>   7
 
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.
 
     The following table shows certain information regarding the Company's truck
and truck trailer financing and leasing receivables:
 
                            TRUCK AND TRUCK TRAILER
 
<TABLE>
<CAPTION>
                                                             AT DECEMBER 31
                                          -----------------------------------------------------
                                            1996        1995        1994       1993      1992
                                          ---------   ---------   ---------   -------   -------
<S>                                       <C>         <C>         <C>         <C>       <C>
Net Receivables (in millions)...........  $ 7,984.4   $ 7,341.0   $ 6,495.0   $5,420.3  $4,320.9
Retail and Leasing Receivables
  Average account balance...............  $  42,287   $  36,641   $  35,899   $32,454   $29,201
  Number of accounts....................    188,815     172,826     161,029   150,091   137,178
Wholesale Receivables
  Average balance per dealer............  $1,117,283  $1,442,143  $1,021,429  $819,403  $551,754
</TABLE>
 
     The Company provides retail financing of new and used medium-duty through
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. The Company also sources retail truck and truck trailer financing on a
direct basis with the truck or truck trailer purchaser.
 
     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.
 
     The Company also provides fleet leasing for users of medium-duty through
heavy-duty trucks and truck trailers. Most of the Company's truck and truck
trailer leases are non-maintenance, net open-end leases. Under such leases, the
customer is responsible for the maintenance and residual value of the vehicle
and the Company retains the depreciation benefit.
 
     The Company also provides new and used vehicle wholesale financing to truck
and truck trailer dealers throughout the United States and provides wholesale
financing for truck and truck trailer manufacturers' dealer organizations.
Generally, wholesale loans are short-term loans with variable rates (prime rate
based) and are secured by inventory.
 
  EQUIPMENT FINANCING AND LEASING
 
     The Company believes that it is a leading independent source of financing
and leasing of new and used construction, mining, forestry, industrial, machine
tool, material handling, communications and turf maintenance equipment and golf
cars in the United States. The Company offers wholesale and rental fleet
financing to dealers (who may either sell or rent the equipment to end-users)
and retail financing and leasing to end-users of equipment in niche markets.
 
                                        6
<PAGE>   8
 
     The following table shows certain information regarding the Company's
equipment financing and leasing receivables:
 
                                   EQUIPMENT
 
<TABLE>
<CAPTION>
                                                              AT DECEMBER 31
                                              -----------------------------------------------
                                               1996      1995      1994      1993      1992
                                              -------   -------   -------   -------   -------
<S>                                           <C>       <C>       <C>       <C>       <C>
Net Receivables (in millions)...............  $4,231.4  $3,702.3  $2,883.3  $2,423.6  $2,246.9
Retail and Leasing Receivables
  Average account balance...................  $26,725   $25,145   $21,672   $19,175   $17,678
  Number of accounts........................  133,949   124,121   110,691   105,076   103,395
Wholesale Receivables
  Average balance per dealer................  $611,284  $723,889  $597,444  $458,764  $558,667
</TABLE>
 
     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 varies depending on, among other
things, the credit quality of the purchaser, transaction size, term, down
payment and whether the collateral is new or used.
 
     The Company also provides leasing for end-users of equipment, either
directly to the customer or through dealers. As part of residual risk
management, 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) and typically
include an option for the lessee to acquire the equipment at the end of the
lease term for the fair market value.
 
     The Company also provides wholesale and rental fleet financing for selected
dealers. Generally, wholesale loans are short-term loans with variable rates
(prime rate based) and are secured by inventory.
 
  MANUFACTURED HOUSING
 
     The Company believes it is the third largest provider of financing to
dealers and purchasers of manufactured housing in the United States. The Company
purchases manufactured housing retail installment contracts originated by retail
dealers, originates and services direct loans to purchasers, and provides
wholesale financing to approved manufactured housing dealers. The Company also
offers commercial business loans to selected dealers to provide capital to build
new retail sales centers, update existing facilities or expand into community
park sales.
 
     The following table sets forth certain information regarding the Company's
manufactured housing receivables:
 
                              MANUFACTURED HOUSING
 
<TABLE>
<CAPTION>
                                                                  AT DECEMBER 31
                                               ----------------------------------------------------
                                                 1996       1995       1994       1993       1992
                                               --------   --------   --------   --------   --------
<S>                                            <C>        <C>        <C>        <C>        <C>
Net Receivables (in millions)(1).............  $1,235.1   $2,034.1   $1,669.2   $1,290.2   $  983.9
Retail Receivables
  Average account balance....................  $ 25,485   $ 23,990   $ 22,134   $ 20,306   $ 19,045
  Number of accounts(1)......................    30,104     66,762     60,052     51,339     42,656
Wholesale Receivables
  Average balance per dealer.................  $477,157   $443,135   $354,906   $312,753   $283,471
</TABLE>
 
---------------
 
(1) During 1996, the Company securitized and sold approximately $1.3 billion of
    manufactured housing finance receivables. Prior to year end, the servicing
    rights to such securitizations were transferred to an affiliate. Subsequent
    to the end of the year, the Company sold the manufactured housing finance
    receivables to an affiliate, Associates Housing Finance Services, Inc., and
    expects to continue its investment in manufactured housing finance
    receivables through the purchase of participations in the transferred
    receivables.
 
                                        7
<PAGE>   9
 
     Retail finance products provided by the Company include (i) the purchase of
a retail installment contract or a direct loan for the purchase of a
manufactured home only; (ii) a retail installment contract or loan on a
manufactured home and added amenities such as furnishings, air conditioning,
skirting, appliances and patios; and (iii) loans covering both a manufactured
home and the related real estate. Additionally, the Company purchases retail
loans from captive finance companies of manufacturers which normally carry some
form of loss protection. Retail financing products are generally secured by a
lien on the home and have varying maturities, down payments and interest rates.
Original loan terms range up to 25 years. Rates offered include fixed, variable
and graduated rate programs.
 
     The Company also provides revolving lines of credit to approved
manufactured housing dealers in connection with their inventory purchases of
manufactured homes from pre-approved manufacturers. Generally, wholesale loans
are short-term loans with variable rates (prime rate based) and are secured by
inventory.
 
  AUTO FLEET LEASING AND OTHER COMMERCIAL ACTIVITIES
 
     Auto Fleet Leasing. The Company believes it is a leading provider of auto
fleet leasing and management services for corporations and municipalities in the
United States that generally have auto and light truck fleets of 100 or more
vehicles. At December 31, 1996, the Company had $1.1 billion in auto fleet
leasing receivables outstanding. This has substantially increased from prior
periods principally due to the July 1996 acquisition of certain auto leasing
assets of USL Capital, an affiliate and Ford subsidiary. This acquisition is
further described in NOTE 3 to the consolidated financial statements.
 
     The Company's other commercial activities principally include the following
products and services:
 
     Small Business Administration Lending. The Company extends credit to
individuals and businesses that is partially guaranteed by the federal
government under the Small Business Administration loan program.
 
     Employee Relocation Services. The Company provides corporations and certain
agencies of the federal government with assistance in employee relocation,
origination of mortgages and management and disposition of residential real
estate.
 
     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,
including Ford (the largest client of the Company's auto club).
 
RELATED INSURANCE
 
     The Company, through certain subsidiaries and others, makes available
various credit and non-credit insurance products to its finance customers.
Insurance products offered to the Company's consumer finance customers include
credit life, credit accident and health, accidental death and dismemberment,
involuntary unemployment and personal property insurance. Insurance products
offered to the Company's commercial finance customers 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 required.
The customer can purchase such insurance either from the Company or an
alternative carrier. Premiums for insurance coverage are generally financed as
part of the insured's finance obligation.
 
                                        8
<PAGE>   10
 
     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
                                                ----------------------------------------------
                                                 1996      1995      1994      1993      1992
                                                ------    ------    ------    ------    ------
<S>                                             <C>       <C>       <C>       <C>       <C>
Net Written Premium
  Credit life, accident and other related.....  $232.2    $187.9    $201.7    $158.9    $116.7
  Physical damage.............................   186.2     180.3     168.7     138.9     107.7
  Other casualty and liability................    51.4      46.4      35.5      20.1      25.0
                                                ------    ------    ------    ------    ------
     Total....................................  $469.8    $414.6    $405.9    $317.9    $249.4
                                                ======    ======    ======    ======    ======
Premium Revenue(2)
  Credit life, accident and other related.....  $170.5    $164.8    $136.1    $111.4    $ 92.6
  Physical damage.............................   143.8     115.7     130.0     114.3      95.2
  Other casualty and liability................    40.5      44.6      27.4      16.5      22.1
                                                ------    ------    ------    ------    ------
     Total....................................  $354.8    $325.1    $293.5    $242.2    $209.9
                                                ======    ======    ======    ======    ======
Investment Income.............................  $ 68.4    $ 65.3    $ 44.9    $ 38.4    $ 41.5
                                                ======    ======    ======    ======    ======
Benefits Paid or Provided.....................  $142.9    $135.7    $144.1    $114.9    $100.0
                                                ======    ======    ======    ======    ======
</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.
(2) Includes compensation for insurance proceeds underwritten by other
    companies.
 
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 which it believes is sufficient to provide adequate protection against
anticipated losses in the portfolios. The allowance is determined principally on
the basis of historical loss experience, and reflects management's judgment of
additional loss potential considering future economic conditions and the nature
and characteristics of the underlying finance receivables. Additions to the
allowance are charged to the provision for losses on finance receivables. An
analysis of changes in the allowance for losses is contained in NOTE 4 to the
consolidated financial statements.
 
     Finance receivables are charged to the allowance for losses when they are
deemed to be uncollectible. Additionally, Company 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 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 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 recovery is collected.
 
                                        9
<PAGE>   11
 
     The following table sets forth information as of the dates shown regarding
net credit losses, allowance for losses and contractual delinquency. This
information should be read in conjunction with the discussion of the Company's
financial condition under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
 
     NET CREDIT LOSSES, ALLOWANCE FOR LOSSES TO NET FINANCE RECEIVABLES AND
                        60+DAYS CONTRACTUAL DELINQUENCY
 
<TABLE>
<CAPTION>
                                                            YEAR ENDED OR AT DECEMBER 31
                                                    --------------------------------------------
                                                      1996      1995     1994     1993     1992
                                                    --------   ------   ------   ------   ------
<S>                                                 <C>        <C>      <C>      <C>      <C>
Net Credit Losses
  Amount (in millions)............................  $  798.0   $557.7   $456.7   $387.5   $416.4
  As a Percentage of Average Net Receivables
     Consumer.....................................      2.82%    2.35%    2.29%    2.16%    2.54%
     Commercial...................................      0.33     0.19     0.09     0.30     0.63
          Total...................................      2.02%    1.66%    1.60%    1.59%    1.95%
Allowance for Losses to Net Finance Receivables...      3.28%    3.05%    3.01%    3.05%    3.04%
60+Days Contractual Delinquency
  Amount (in millions)............................  $1,038.9   $698.6   $463.8   $406.8   $429.6
  As a Percentage of Finance Receivables
     Consumer.....................................      2.90%    2.24%    1.81%    1.77%    2.06%
     Commercial...................................      1.12     0.64     0.28     0.53     0.82
          Total...................................      2.29%    1.72%    1.33%    1.38%    1.69%
</TABLE>
 
     The Company's ten largest accounts at December 31, 1996 (all of which were
current at December 31, 1996) represented 1.0% of the Company's total gross
finance receivables outstanding. All ten of such accounts are commercial finance
accounts and are secured.
 
  COMPETITION
 
     The markets in which the Company operates are highly competitive. Many of
the competitors of the Company in different segments and regions are large
companies that have substantial capital, technological and marketing resources,
and some of these competitors are larger than the Company 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 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.
 
     Consumer Finance. Traditional competitors in the consumer finance business
include captive and independent finance companies, commercial 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.
Additionally, substantial national financial services networks have been formed
by insurance companies and bank holding companies. 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 more than a 10% market share. The Company, as a
portfolio lender, maintains considerable product and delivery flexibility, which
the Company believes is a competitive advantage.
 
                                       10
<PAGE>   12
 
     Competition also differs between the operating divisions of the Company.
For example, competitors of the Company's branch system are distinct from the
competitors of the Company's centralized lending operation. In addition,
competition varies a great deal across geographic regions.
 
     Commercial Finance. In its commercial finance business, the Company
competes with captive and independent finance companies, commercial banks,
thrift and other financial institutions, leasing companies, lease brokers,
manufacturers, vendors and others who extend or arrange credit for the
acquisition of truck and truck trailers and equipment.
 
     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, exploitation 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.
 
     Insurance. Competitors in the insurance business include national, regional
and local insurance companies, as well as self-insurance programs and captive
insurers. 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 consumer and commercial distribution systems
gives it a distinct competitive advantage over its competitors who do not have
such ability.
 
  REGULATION
 
     The Company's operations are subject to extensive state and Federal
regulations 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 (the "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.
 
     Consumer Finance. The Company's consumer finance business, including its
credit card business, is subject to detailed supervision by Federal and state
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 have usury laws which limit interest
rates. Federal legislation 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 required to comply with TILA and Regulation Z promulgated
thereunder. 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. TILA also
guarantees consumers a three-day right to cancel certain credit transactions,
including refinanced mortgages and junior mortgage loans on 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
days waiting period prior to signing loan documents.
 
                                       11
<PAGE>   13
 
     In addition, the Company is required to comply with the ECOA which, in
part, prohibits credit discrimination on the basis of race, color, religion,
sex, marital status, national origin and 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.
 
     RESPA has been extended to cover real estate secured loans that are
subordinated to other mortgage loans. RESPA and Regulation X 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.
 
     Associates Investment Corporation, a Utah industrial loan company
("Associates Investment"), is regulated by the Federal Deposit Insurance
Corporation and the Utah Department of Financial Institutions in regard to
capital adequacy, leverage, loans, deposits, consumer protection, community
reinvestment, the payment of dividends, transactions with affiliates and other
aspects of operations.
 
     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 introduced 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 Finance. Although most states do not regulate commercial
finance, certain states do require licensing of lenders and financers,
limitations on interest rates and other charges, adequate disclosure of certain
contract terms and limitations on certain collection practices and creditor
remedies. 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
Small Business Act and the Small Business Investment Act of 1958, as amended,
and may be subject to the same regulations by certain 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.
 
     Insurance. The insurance operations of the Company are subject to detailed
regulation and supervision in each state or other jurisdiction in which they
conduct 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.
 
ITEM 2. PROPERTIES.
 
     The furniture, equipment and other physical property owned by Associates
and its subsidiaries represent less than 1% of total assets at December 31, 1996
and are therefore not significant in relation to total assets. The branch
finance operations are generally conducted on leased premises under short-term
operating leases normally not exceeding five years. At December 31, 1996, the
Company had 1,625 offices in the United States.
 
ITEM 3. LEGAL PROCEEDINGS.
 
     The Company is a defendant in various lawsuits arising in the ordinary
course of its business. The Company assesses appropriate responses to its
lawsuits in light of a number of factors, including potential impact of the
actions on the conduct of the Company's operations. While, in the opinion of
management, the resolution of any of these matters is not expected to have a
material adverse effect on the Company's financial condition or results of
operations, there can be no assurance that an adverse decision in one or more of
such
 
                                       12
<PAGE>   14
 
lawsuits will not have such a material adverse effect. The outcome of various
individual lawsuits, however, may affect the manner in which the Company
conducts its business.
 
     The Company and certain of its subsidiaries are defendants in a relatively
higher concentration of lawsuits in the State of Alabama than in the remainder
of the United States. Management believes that the aggregate number of lawsuits
instituted in Alabama represents additional exposure to the Company because of
the recent history of juries in Alabama awarding significant damages, both
compensatory and punitive, in civil cases. At December 31, 1996, there were
approximately 100 actions pending against the Company in Alabama.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 
     Omitted in accordance with General Instruction J.(2)(c) to Form 10-K.
 
                                    PART II
 
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
 
     All of the outstanding Common Stock of Associates is owned by First Capital
and all of the Class B Common Stock is owned by Associates World Capital
Corporation, a directly wholly-owned subsidiary of First Capital. There is no
market for Associates stock.
 
     Dividends on the Common Stock and Class B Common Stock are paid when
declared by the Board of Directors. Dividends of $14.20 per share per annum on
the Class B Common Stock outstanding must be paid each year before any dividends
may be paid on the Common Stock. Dividends of $14.2 million were paid on Class B
Common Stock during each of the years ended December 31, 1996 and 1995. Annual
Common Stock dividends of $204.7 million and $265.8 million were paid during the
years ended December 31, 1996 and 1995, respectively.
 
     Associates is subject to various limitations under the provisions of its
outstanding debt and revolving credit agreements, including limitations on the
payment of dividends. A restriction contained in one series of public debt
securities, maturing March 15, 1999, generally limits payments of cash dividends
on the Company's Common Stock during any fiscal year, beginning with the fiscal
year ending December 31, 1996, to not more than 50% of consolidated net earnings
for such year, subject to certain exceptions, plus increases in contributed
capital and extraordinary gains. Any such amounts available for the payment of
dividends in any fiscal year and not so paid, may be paid in any one or more of
the five subsequent fiscal years. A restriction contained in certain revolving
credit agreements requires Associates to maintain a minimum tangible net worth,
as defined, of $1.5 billion. At December 31, 1996, Associates tangible net worth
was $4.7 billion.
 
                                       13
<PAGE>   15
 
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, 1996. This information is being provided in lieu of the
information called for by Item 6 of Form 10-K, in accordance with General
Instruction J.(2)(a) to Form 10-K. The information 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):
 
<TABLE>
<CAPTION>
                                                           YEAR ENDED OR AT DECEMBER 31
                                             ---------------------------------------------------------
                                               1996        1995        1994        1993        1992
                                             ---------   ---------   ---------   ---------   ---------
<S>                                          <C>         <C>         <C>         <C>         <C>
Results of Operations
  Total revenue............................  $ 6,221.4   $ 5,384.4   $ 4,387.9   $ 3,689.6   $ 3,324.6
  Finance charge revenue...................    5,580.3     4,805.3     3,866.7     3,250.7     2,931.9
  Interest expense.........................    2,206.7     1,979.8     1,509.7     1,291.8     1,222.8
  Net interest margin......................    3,373.6     2,825.5     2,357.0     1,958.9     1,709.1
  Operating expenses.......................    1,603.3     1,417.8     1,191.6       979.6       807.4
  Provision for losses.....................      963.4       729.7       569.9       468.9       504.0
  Insurance benefits paid..................      142.9       135.7       144.1       114.9       100.0
  Earnings before provision for income
     taxes and cumulative effect of changes
     in accounting principles..............    1,305.1     1,121.4       972.6       834.4       690.4
  Provision for income taxes...............      482.0       413.3       369.1       310.7       240.7
  Net earnings.............................      823.1       708.1       603.5       523.7       439.7
 
Balance Sheet Data
  Finance receivables, net of unearned
     finance income:
     Consumer..............................  $27,997.1   $24,609.2   $21,159.8   $17,979.8   $15,807.7
     Commercial............................   13,781.8    11,759.1     9,815.9     8,219.3     6,884.0
                                             ---------   ---------   ---------   ---------   ---------
          Total............................   41,778.9    36,368.3    30,975.7    26,199.1    22,691.7
                                             =========   =========   =========   =========   =========
  Allowance for losses.....................   (1,371.4)   (1,109.2)     (932.4)     (798.0)     (690.0)
  Total assets.............................   42,598.1    37,023.7    31,687.2    27,365.1    23,624.5
  Short-term debt (notes payable)..........   15,714.4    13,434.7    12,211.9    10,208.2     8,844.6
  Long-term debt...........................   20,816.9    18,311.5    14,963.2    13,042.5    11,277.2
  Stockholders' equity.....................    5,086.2     4,444.0     3,786.1     3,274.2     2,790.2
 
Selected Data and Ratios
  Net interest margin as a percentage of
     average net finance receivables.......       8.53%       8.39%       8.24%       8.01%       8.01%
  Earnings to fixed charges(a).............       1.59x       1.56x       1.64x       1.64x       1.56x
  Total debt to equity.....................      7.1:1       7.1:1       7.1:1       7.0:1       7.2:1
  60+days contractual delinquency..........       2.29%       1.72%       1.33%       1.38%       1.69%
  Net credit losses to average net finance
     receivables...........................       2.02        1.66        1.60        1.59        1.95
  Allowance for losses to net finance
     receivables...........................       3.28        3.05        3.01        3.05        3.04
  Allowance for losses to net credit
     losses................................       1.72x       1.99x       2.04x       2.06x       1.66x
</TABLE>
 
---------------
 
(a) For purposes of computing the Ratio of Earnings to Fixed Charges, "earnings"
    represent earnings before provision for income taxes and cumulative effect
    of changes in accounting principles, plus fixed charges. "Fixed charges"
    represent interest expense and a portion of rentals representative of an
    implicit interest factor for such rentals.
 
                                       14
<PAGE>   16
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.
 
GENERAL
 
     The Company is in the consumer and commercial finance business, providing
finance, leasing and related insurance products as well as other services. The
Company's revenues principally consist of finance charge income and, to a lesser
extent, insurance premiums and investment 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 the Company's 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. It has been prepared in accordance with
General Instruction J.(2)(a) to Form 10-K. This discussion should be read in
conjunction with the consolidated financial statements of the Company and the
related notes thereto.
 
RESULTS OF OPERATIONS
 
  SUMMARY OF RESULTS OF OPERATIONS
 
     The following table summarizes the Company's net earnings and related data
(dollars in millions):
 
                         NET EARNINGS AND RELATED DATA
 
<TABLE>
<CAPTION>
                                                             YEAR ENDED DECEMBER 31
                                                           --------------------------
                                                            1996      1995      1994
                                                           ------    ------    ------
<S>                                                        <C>       <C>       <C>
Net Earnings.............................................  $823.1    $708.1    $603.5
Change in Net Earnings
  Amount.................................................  $115.0    $104.6    $ 79.8
  Percent................................................    16.2%     17.3%     15.2%
</TABLE>
 
     The principal factors which influenced the changes in the Company's net
earnings in each period are finance charge revenue and interest expense,
operating expenses and provision for loan losses, all of which are described
below.
 
  FINANCE CHARGE REVENUE AND INTEREST EXPENSE
 
     The Company's net interest margin was as follows (dollars in millions):
 
                              NET INTEREST MARGIN
 
<TABLE>
<CAPTION>
                                                     YEAR ENDED DECEMBER 31
                              ---------------------------------------------------------------------
                                      1996                    1995                    1994
                              ---------------------   ---------------------   ---------------------
                               AMOUNT    PERCENT(1)    AMOUNT    PERCENT(1)    AMOUNT    PERCENT(1)
                              --------   ----------   --------   ----------   --------   ----------
<S>                           <C>        <C>          <C>        <C>          <C>        <C>
Finance Charge Revenue......  $5,580.3     14.12%     $4,805.3     14.27%     $3,866.7     13.53%
Interest Expense............   2,206.7      6.34       1,979.8      6.72       1,509.7      5.99
                              --------                --------                --------
Net Interest Margin.........  $3,373.6      8.53%     $2,825.5      8.39%     $2,357.0      8.24%
                              ========                ========                ========
</TABLE>
 
---------------
 
(1) Finance charge revenue and net interest margin are expressed as a percent of
    average net finance receivables outstanding for the indicated period;
    interest expense is expressed as a percent of average debt outstanding for
    the indicated period.
 
                                       15
<PAGE>   17
 
     Finance charge revenue increased on a dollar basis in each of the years.
The increase in each year principally resulted from growth in net finance
receivables, which caused a corresponding increase in the average net finance
receivables outstanding ("ANR"). A decrease in the finance charge yield (finance
charge revenue divided by ANR) in 1996 partially offset some of the increase in
finance charge revenue caused by growth; correspondingly, an increase in the
finance charge yield in 1995 and 1994 contributed to the overall increase in
finance charge revenue for those years. The components of the change in finance
charge revenue attributable to growth in receivables and changes in the finance
charge yield are set forth in the following table (in millions):
 
                COMPONENTS OF CHANGES IN FINANCE CHARGE REVENUE
 
<TABLE>
<CAPTION>
                                                             YEAR ENDED DECEMBER 31
                                                           --------------------------
                                                            1996      1995      1994
                                                           ------    ------    ------
<S>                                                        <C>       <C>       <C>
Change Due to:
  Growth in receivables..................................  $826.6    $725.6    $560.2
  Finance charge yield...................................   (51.6)    213.0      55.8
                                                           ------    ------    ------
          Total..........................................  $775.0    $938.6    $616.0
                                                           ======    ======    ======
</TABLE>
 
     The finance charge yields to ANR for each of the Company's business
segments were as follows:
 
                          FINANCE CHARGE YIELDS TO ANR
 
<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31
                                                              -----------------------
                                                              1996     1995     1994
                                                              -----    -----    -----
<S>                                                           <C>      <C>      <C>
Consumer Segment............................................  16.16%   16.41%   15.92%
Commercial Segment..........................................  10.14    10.08     9.62
  Total Company.............................................  14.12%   14.27%   13.53%
</TABLE>
 
     The principal factors which influence the trend of finance charge yields
are (i) the interest rate environment; (ii) the level of business competition;
and (iii) the varying composition of the finance receivable portfolios (i.e.,
"product mix"). Historically, the consumer segment composite finance charge
yield has been principally influenced by shifts in product mix between higher
yielding unsecured finance products and lower yielding secured finance products.
Change in product mix was the principal cause of the movements in finance charge
yield from 1994 to 1996. Additionally, in 1996, reductions in finance charge
rates on new loans principally in the real estate and manufactured housing
portfolios, both as a consequence of increased competition and generally lower
market interest rates, contributed to the overall reduction in the consumer
segment finance charge yield. The commercial segment composite finance charge
yield is principally influenced by the level of business competition and the
interest rate environment and not by the mix of secured and unsecured products,
since substantially all commercial finance receivables are secured. In spite of
increased competition from other commercial lenders and a generally lower market
interest rate environment during the period 1994 through 1996, the commercial
segment was able to increase its finance charge rates through disciplined
initiatives designed specifically to increase pricing in substantially all of
its portfolios.
 
                                       16
<PAGE>   18
 
     Total dollars of interest expense increased in each of the three years
ended 1996. In each year the increase was principally due to higher average
outstanding debt as a result of the Company's growth in net finance receivables.
In 1996, the increase in expense as a result of growth was offset partially by a
decline in the Company's average borrowing rate (interest expense divided by
average outstanding debt). In 1995, the Company's average borrowing rate
increased from the prior year and contributed to the increase in interest
expense due to growth. Changes in the Company's average borrowing rate in each
of the years was principally caused by changes in market interest rates which
varied over the corresponding periods. Total interest expense and average short-
and long-term borrowing rates were as follows (dollars in millions):
 
                  INTEREST EXPENSE AND AVERAGE BORROWING RATES
 
<TABLE>
<CAPTION>
                                              YEAR ENDED OR AT DECEMBER 31
                           ------------------------------------------------------------------
                                   1996                   1995                   1994
                           --------------------   --------------------   --------------------
                                       AVERAGE                AVERAGE                AVERAGE
                           INTEREST   BORROWING   INTEREST   BORROWING   INTEREST   BORROWING
                           EXPENSE      RATE      EXPENSE      RATE      EXPENSE      RATE
                           --------   ---------   --------   ---------   --------   ---------
<S>                        <C>        <C>         <C>        <C>         <C>        <C>
Short-term Debt..........        --     5.49%           --     5.93%           --     4.32%
Long-term Debt(1)........        --     7.02            --     7.33            --     7.32
          Total..........  $2,206.7     6.34%     $1,979.8     6.72%     $1,509.7     5.99%
                           ========               ========               ========
</TABLE>
 
---------------
 
(1) Includes the current portion of long-term debt.
 
     The short-term interest expense and average borrowing rate for short-term
debt relates principally to commercial paper issued by the Company, and to a
lesser extent, bank loans. Such borrowings typically are for a duration of 270
days or less. In contrast, the long-term interest expense and average borrowing
rate for long-term debt relate principally to debt issued by the Company with a
typical duration in the range of 3-7 years. The changes in short- and long-term
average borrowing rates from 1994 to 1996 are principally due to changes in
market interest rates for debt of a comparable term and credit quality.
Short-term interest rates generally increased during 1995 and 1994 and decreased
during 1996; long-term interest rates generally decreased in 1996, were flat in
1995 and decreased in 1994. Additionally, the Company's average long-term
borrowing rate was reduced in 1996, in part, by refinancing maturing debt at
lower prevailing market rates.
 
     For purposes of measuring business segment profitability, the Company
generally allocates the interest expense incurred to the business segments based
on ANR. Management believes that analysis of the principal components of change
in interest expense is only meaningful on a total Company basis. The change in
interest expense attributable to growth in average outstanding debt and changes
in average borrowing rates are set forth in the following table (in millions):
 
                   COMPONENTS OF CHANGES IN INTEREST EXPENSE
 
<TABLE>
<CAPTION>
                                                             YEAR ENDED DECEMBER 31
                                                           --------------------------
                                                            1996      1995      1994
                                                           ------    ------    ------
<S>                                                        <C>       <C>       <C>
Change Due to:
  Growth in debt.........................................  $339.4    $285.5    $211.2
  Borrowing rate.........................................  (112.5)    184.6       6.7
                                                           ------    ------    ------
          Total..........................................  $226.9    $470.1    $217.9
                                                           ======    ======    ======
</TABLE>
 
     As a result of the forgoing changes in finance charge revenue and interest
expense, the Company's net interest margin measured in dollars and as a
percentage of ANR increased in each of the three years ended December 31, 1996,
1995 and 1994, respectively. The increase as measured in dollars was principally
due to growth in net finance receivables. The increase as measured as a percent
of ANR was principally due to reduced borrowing costs.
 
                                       17
<PAGE>   19
 
  INSURANCE PREMIUM REVENUE
 
     Insurance premium revenue was $354.8 million, $325.1 million and $293.5
million for the years ended December 31, 1996, 1995 and 1994, respectively.
Insurance premium revenue, which is earned over the coverage term, increased
$29.7 million (9.1%) in 1996, $31.6 million (10.8%) in 1995, and $51.3 million
(21.2%) in 1994. The insurance operation is engaged in underwriting
credit-related and other specialized insurance products for customers of the
consumer and commercial finance businesses. Therefore, insurance sales, and
resulting revenue, are largely dependent on the business activities and volumes
of the consumer and commercial finance businesses. The increase in insurance
revenue in each of the years was caused principally by increased sales of
insurance products associated with the increase in net finance receivables
outstanding.
 
  INVESTMENT AND OTHER INCOME
 
     Investment and other income for the years ended December 31, 1996, 1995 and
1994 was $286.3 million, $254.0 million and $227.7 million, respectively.
Investment income is derived from realized or unrealized returns on the
Company's investments in equity securities and realized returns on investments
in debt securities, both of which are principally owned by the Company's
insurance operation. Other income is derived from fee-based services, such as
employee relocation services and emergency roadside assistance and auto club
services and from royalty, guarantee and service fees the Company receives from
its foreign affiliates as further described below. The increase in 1996 from
1995 was principally due to revenue recorded on the securitization of
approximately $1.3 billion of manufactured housing finance receivables, related
excess servicing income and other revenue related to growth in fee-based
businesses. Prior to year-end 1996, the servicing rights to such securitized
receivables were transferred to an affiliate. The increase in the years 1995 and
1994 was principally due to increases in the Company's investments in debt and
equity securities and related returns and, to a lesser extent, increases in
other revenue related to the growth in fee-based businesses.
 
  OPERATING EXPENSES
 
     Operating expenses, which do not include interest expense, were as follows
(dollars in millions):
 
                               OPERATING EXPENSES
 
<TABLE>
<CAPTION>
                                                YEAR ENDED DECEMBER 31
                                ------------------------------------------------------
                                      1996               1995               1994
                                ----------------   ----------------   ----------------
                                 AMOUNT    % ANR    AMOUNT    % ANR    AMOUNT    % ANR
                                --------   -----   --------   -----   --------   -----
<S>                             <C>        <C>     <C>        <C>     <C>        <C>
Salaries and Benefits.........  $  828.8   2.10%   $  711.9   2.11%   $  628.8   2.20%
Occupancy, Data Processing and
  Other.......................     774.5   1.96       705.9   2.10       562.8   1.97
                                --------   ----    --------   ----    --------   ----
          Total...............  $1,603.3   4.06%   $1,417.8   4.21%   $1,191.6   4.17%
                                ========   ====    ========   ====    ========   ====
</TABLE>
 
     Total operating expenses on a dollar basis increased from 1994 to 1996,
principally due to higher levels of business volume and outstanding receivables
in each of the years. As a percentage of ANR, total operating expenses decreased
from 1995 to 1996. This decrease reflects continued reductions in the proportion
of incremental expense required to support the higher business volumes and
outstanding net receivables and results from improved operating efficiency.
 
  ALLOWANCE FOR LOSSES, LOSSES AND ASSET QUALITY
 
     The Company maintains an allowance for losses on finance receivables at an
amount which it believes is sufficient to provide adequate protection against
losses in its portfolios. The allowance is determined principally on the basis
of historical loss experience and reflects management's judgment of additional
loss potential considering future economic conditions and the nature and
characteristics of the underlying finance receivables. For purposes of measuring
business segment profitability, each business segment establishes an allowance
for loan loss when a loan is made with a corresponding charge to the provision
for losses. The
 
                                       18
<PAGE>   20
 
Company manages its allowance for losses on finance receivables on a
Company-wide basis taking into account actual and expected losses in each
business segment and the relationship of the allowance to net finance
receivables and total net credit losses; the resulting charge is included in the
provision for losses.
 
     The balance of the allowance for losses was principally influenced by the
provision for losses and by net credit loss experience. Additions to the
allowance, principally due to growth in finance receivables, were charged to the
provision for losses at the time the growth occurred. Losses were charged to the
allowance as incurred and recoveries on losses previously charged to the
allowance were credited to the allowance at the time recovery was collected. 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
                                          --------------------------------
                                            1996        1995        1994
                                          --------    --------    --------
<S>                                       <C>         <C>         <C>
Balance at Beginning of Period..........  $1,109.2    $  932.4    $  798.0
  Provision for losses..................     963.4       729.7       569.9
 
  Recoveries on receivables charged
     off................................     127.7       112.3        99.8
  Losses sustained......................    (925.7)     (670.0)     (556.5)
                                          --------    --------    --------
          Net credit loss experience....    (798.0)     (557.7)     (456.7)
                                          --------    --------    --------
  Reserves of acquired businesses and
     other..............................      96.8         4.8        21.2
                                          --------    --------    --------
Balance at End of Period................  $1,371.4    $1,109.2    $  932.4
                                          ========    ========    ========
Allowance for Losses to Net Finance
  Receivables...........................     3.28%       3.05%       3.01%
Allowance for Losses to Net Credit
  Losses................................     1.72x       1.99x       2.04x
</TABLE>
 
     The allowance for losses as a percent of net finance receivables (the
"allowance ratio") increased in each of the three years, reflecting management's
opinion that delinquency and net credit losses may increase. However, in spite
of the increase in the allowance ratio, the loss coverage ratio (allowance for
losses as a percent of net credit losses) decreased in 1996 and in 1995; the
loss coverage ratio increased in 1994. The decrease in the loss coverage ratio
in 1996 and 1995 principally resulted from losses growing at a faster rate than
the allowance for losses. Notwithstanding the decrease in the loss coverage
ratio in 1996, management believes the allowance for losses at December 31, 1996
is sufficient to provide adequate protection against losses in its portfolios.
Although the allowance for losses on finance receivables reflected in the
Company's consolidated balance sheet at December 31, 1996 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.
 
     A principal component of the change in the balance of allowance for losses
in each year was the provision for losses. The following table summarizes the
components of the changes in the provision for losses (in millions):
 
               COMPONENTS OF CHANGES IN THE PROVISION FOR LOSSES
 
<TABLE>
<CAPTION>
                                            YEAR ENDED DECEMBER 31
                                          --------------------------
                                           1996      1995      1994
                                          ------    ------    ------
<S>                                       <C>       <C>       <C>
Change Due to:
  Change in net loss experience.........  $143.2    $ 19.6    $  3.3
  Growth in receivables, change in
     reserves and other.................    90.5     140.2      97.7
                                          ------    ------    ------
          Total.........................  $233.7    $159.8    $101.0
                                          ======    ======    ======
</TABLE>
 
                                       19
<PAGE>   21
 
     Net loss experience in 1996 increased 36 basis points to 2.02% of ANR from
1.66% of ANR in 1995. By comparison, net losses in 1995 increased 6 basis points
from 1.60% in 1994. The increase in the year-over-year growth in net finance
receivables was a principal cause of the increase in the provision for losses in
each of the years. Additionally, in 1996 and 1995 the increase in the allowance
ratio also contributed to the change in the provision for losses in those years.
 
     The Company experienced an increase in net credit losses across
substantially all of its portfolios in 1996 and 1995 in contrast to its
experience in 1994 during which net credit losses declined from the prior year.
The Company's 60+days contractual delinquency and net credit losses for each of
these years are set forth in the following table (dollars in millions):
 
                 CONTRACTUAL DELINQUENCY AND NET CREDIT LOSSES
 
<TABLE>
<CAPTION>
                                            YEAR ENDED OR AT DECEMBER 31
                                            ----------------------------
                                              1996       1995      1994
                                            --------    ------    ------
<S>                                         <C>         <C>       <C>
60+Days Contractual Delinquency
  Consumer..............................        2.90%     2.24%     1.81%
  Commercial............................        1.12      0.64      0.28
          Total.........................        2.29%     1.72%     1.33%
          Total dollars delinquent......    $1,038.9    $698.6    $463.8
Net Credit Losses to ANR
  Consumer..............................        2.82%     2.35%     2.29%
  Commercial............................        0.33      0.19      0.09
          Total.........................        2.02%     1.66%     1.60%
          Total dollars.................    $  798.0    $557.7    $456.7
</TABLE>
 
     Contractual delinquency and net credit losses generally improved, on a
ratio basis, across all portfolios from 1993, approaching historical lows in
1994, reflecting similar trends in overall economic conditions. These trends
reversed across all portfolios in 1995, principally as a result of generally
less favorable trends in economic conditions, including rising consumer debt
levels and decreased manufacturing capacity utilization in areas of the
commercial market served by the Company; this trend continued throughout 1996.
 
  INSURANCE BENEFITS PAID OR PROVIDED
 
     Insurance benefits paid or provided were $142.9 million in 1996, $135.7
million in 1995 and $144.1 million in 1994. 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 1996 compared to 1995 primarily as a result of more insurance in
force. For 1995, benefits paid or provided decreased when compared to 1994
primarily as a result of favorable loss experience.
 
  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
                                 ------------------------------------------------------------
                                        1996                 1995                 1994
                                 ------------------   ------------------   ------------------
                                          EFFECTIVE            EFFECTIVE            EFFECTIVE
                                 AMOUNT   TAX RATE    AMOUNT   TAX RATE    AMOUNT   TAX RATE
                                 ------   ---------   ------   ---------   ------   ---------
<S>                              <C>      <C>         <C>      <C>         <C>      <C>
U.S. Statutory Rate............  $456.8      35.0%    $392.5      35.0%    $340.4      35.0%
  State income taxes...........    20.3       1.6       13.6       1.2       20.2       2.1
  Non-deductible goodwill and
     other.....................     4.9       0.3        7.2       0.7        8.5       0.8
                                 ------      ----     ------      ----     ------      ----
Provision for Income Taxes.....  $482.0      36.9%    $413.3      36.9%    $369.1      37.9%
                                 ======      ====     ======      ====     ======      ====
</TABLE>
 
                                       20
<PAGE>   22
 
     The provision for state income taxes and state effective tax rate decreased
in 1995 principally due to a one-time benefit provided to the Company by Ford
under its state tax-sharing agreement. Had the Company not received such
benefit, 1995 provision and resulting impact on the effective rate would have
been substantially the same as that in 1994.
 
  NET EARNINGS
 
     As a result of the foregoing, net earnings of the Company for the years
ended December 31, 1996, 1995 and 1994 increased $115.0 million (16.2%), $104.6
million (17.3%) and $79.8 million (15.2%), respectively.
 
FINANCIAL CONDITION
 
  GROWTH IN NET FINANCE RECEIVABLES
 
     The Company experienced growth in its consumer and commercial finance
receivable portfolios in 1996 and 1995 as follows (dollars in millions):
 
                       GROWTH IN NET FINANCE RECEIVABLES
 
<TABLE>
<CAPTION>
                                                         AT DECEMBER 31
                                   ----------------------------------------------------------
                                              1996                           1995
                                   ---------------------------    ---------------------------
                                                INCREASE FROM                  INCREASE FROM
                                                 PRIOR YEAR                     PRIOR YEAR
                                               ---------------                ---------------
                                    BALANCE     AMOUNT     %       BALANCE     AMOUNT     %
                                   ---------   --------   ----    ---------   --------   ----
<S>                                <C>         <C>        <C>     <C>         <C>        <C>
Consumer Finance.................  $27,997.1   $3,387.9   13.8%   $24,609.2   $3,449.4   16.3%
Commercial Finance...............   13,781.8    2,022.7   17.2     11,759.1    1,943.2   19.8
                                   ---------   --------           ---------   --------
          Total..................  $41,778.9   $5,410.6   14.9%   $36,368.3   $5,392.6   17.4%
                                   =========   ========           =========   ========
</TABLE>
 
     Approximately 59% of the growth in net finance receivables during 1996
resulted from the acquisition of finance receivables and companies; acquisition
growth in 1995 represented less than 10% of the total growth. A substantial
portion of growth in both years was generated from internal sources principally
through additional expansion of the Company's branch network system, increased
penetration in its existing markets and entry into new markets and offering of
new products.
 
  DEBT
 
     Total outstanding debt was $36.5 billion and $31.7 billion at December 31,
1996 and 1995, respectively. Such amounts of debt reflect net increases of $4.8
billion (15.1%) in 1996 and $4.5 billion (16.8%) in 1995. In both years, the
increase was primarily a result of the growth in net finance receivables. Debt
is the primary source of funding to support the Company's growth in net finance
receivables. At December 31, 1996 and 1995, short-term debt, including the
current portion of long-term debt, as a percent of total debt was 51% and 50%,
respectively. The current portion of long-term debt at December 31, 1996 and
1995 was $3.1 billion and $2.6 billion, respectively.
 
  STOCKHOLDERS' EQUITY
 
     Stockholders' equity increased to $5.1 billion in 1996 from $4.4 billion in
1995. In each year, the increase was principally as a result of the
aforementioned increase in net earnings. Stockholders' equity was also adjusted
in 1996 and 1995 by unrealized (losses)/gains of $(12.7) million and $29.8
million, respectively, related to its insurance subsidiary's investments in
marketable debt securities. During 1996 and 1995, the Company paid cash
dividends to First Capital on its common stock in the amount of $218.9 million
and $280.0 million, respectively. During 1996 the Company received a
contribution of $82.1 million from its parent in the form of shares of an
affiliate, Financial Reassurance Company, Ltd., which approximated its fair
value. In 1995, the Company received a capital contribution from First Capital
in the form of cash in the amount of $200.0 million. Also, as referenced in NOTE
3 to these consolidated financial statements, in 1996 the
 
                                       21
<PAGE>   23
 
Company paid a cash dividend to First Capital in the amount of $31.4 million
related to its acquisition of certain assets from a Ford affiliate. The dividend
represents the difference between the purchase price and historical value of the
net assets acquired.
 
LIQUIDITY/CAPITAL RESOURCES
 
     Through its asset and liability management function, the Company maintains
a disciplined approach to the management of liquidity, capital and interest 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-term and long-term debt and cash provided from the Company's operations.
While First Capital has made periodic capital contributions to the Company in
the past, no assurance can be made with respect to future capital contributions
by First Capital to the Company. Nevertheless, the Company believes that it has
available sufficient liquidity, from a combination of cash provided from
operations and external borrowings, to support its operations.
 
     A principal strength of the Company is its ability to access the global
debt 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 manage its liability and capital levels, debt maturities,
diversification of funding sources and asset liquidity to ensure that the
Company is able to meet its obligations. The Company's operations are
principally funded through domestic borrowings made by the Company.
 
     At December 31, 1996, the Company had short-term debt outstanding of $15.7
billion. Short-term debt principally consists of commercial paper issued by the
Company and represents the Company's primary source of short-term liquidity.
Commercial paper is issued with maturities ranging from 1 to 270 days. The
average interest rate on short-term debt in 1996 and 1995 was 5.49% and 5.93%,
respectively. The change in average rates was principally due to the overall
changes in market rates during such years.
 
     At December 31, 1996, the Company had long-term debt outstanding of $20.8
billion. Long-term debt principally consists of unsecured long-term debt issued
publicly and privately by the Company in the United States. During the years
ended 1996 and 1995, the Company raised debt aggregating $5.1 billion and $5.2
billion, respectively, through public and private offerings at weighted average
effective interest rates and weighted average terms of 6.57% and 4.8 years and
6.87% and 6.0 years, respectively. The change in effective average interest
rates was primarily caused by overall changes in market rates during such years.
A portion of the long-term debt raised was used to retire outstanding
indebtedness. For the years ended 1996 and 1995, the Company replaced maturing
long-term debt in the amount of $2.6 billion and $2.0 billion, respectively.
 
     Interest rate risk is measured and controlled through the use of two
different techniques: static gap analysis and financial forecasting, both of
which incorporate assumptions as to future events. The Company's gap position is
defined as the sum of floating rate asset balances and principal payments on
fixed rate assets, less the sum of floating rate liability balances and
principal payments on fixed rate liabilities. The Company measures its gap
position at various time horizons, ranging from three months to five years. The
Company seeks to maintain a positive one-year gap position within a range of 15%
of total earning assets, although the one-year gap position is not necessarily
illustrative of the gap position at shorter or longer time horizons. The
Company's twelve-month gap indicates that a greater percentage of assets than
liabilities reprice within a one-year time frame. Generally, the combination of
a positive gap position and a rising rate environment will result in assets
repricing to higher rates more quickly than liabilities, thereby producing wider
lending spreads over a given time frame. Conversely, the combination of a
positive gap and a falling rate environment will generally result in narrowing
lending spreads over a given time frame. The Company believes that its portfolio
has repricing characteristics that mitigate the impact of rate movements over
both the short- and long-term. In addition to the gap analysis, the Company uses
financial forecasting to evaluate the impact on earnings under a variety of
scenarios that may incorporate changes in the absolute level of interest rates,
the shape of the yield curve, prepayments, interest rate spread relationships
and changes in the volumes and rates of various asset and liability categories.
 
                                       22
<PAGE>   24
 
     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, 1996, short-term bank lines,
revolving credit facilities and receivable purchase facilities totaled $12.4
billion, none of which was in use at that date. These facilities represented 75%
of net short-term indebtedness outstanding at December 31, 1996.
 
     Additionally, the Company believes it has access to other sources of
liquidity, which to date it has either accessed only on a limited basis, such as
securitization of assets, or has not accessed, such as the issuance of
alternative forms of capital, including preferred stock.
 
YEAR 2000 COMPLIANCE
 
     The Company has and will continue to make certain investments in its
software systems and applications to ensure the Company is year 2000 compliant.
The financial impact to the Company has not been and is not anticipated to be
material to its financial position or results of operations in any given year.
 
RECENT ACCOUNTING PRONOUNCEMENTS
 
     In June 1996, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities" ("SFAS 125"). SFAS 125
establishes accounting and reporting standards for transfers of financial assets
effective for transactions occurring after December 31, 1996. While the new
standard will apply to the Company's periodic manufactured housing and
recreational vehicle receivables-backed securities transactions, the Company
does not believe that adoption of SFAS 125 will have a material effect on the
Company's consolidated financial position or results of operations.
 
                                       23
<PAGE>   25
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA.
 
                       REPORT OF INDEPENDENT ACCOUNTANTS
 
Board of Directors
Associates Corporation of North America
 
     We have audited the accompanying consolidated balance sheets of Associates
Corporation of North America (a wholly-owned subsidiary of Associates First
Capital Corporation) as of December 31, 1996 and 1995, 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, 1996. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Associates
Corporation of North America as of December 31, 1996 and 1995 and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
 
                                            COOPERS & LYBRAND L.L.P.
 
Dallas, Texas
January 28, 1997
 
                                       24
<PAGE>   26
 
                    ASSOCIATES CORPORATION OF NORTH AMERICA
 
                       CONSOLIDATED STATEMENT OF EARNINGS
                                 (IN MILLIONS)
 
<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31
                                                              ------------------------------
                                                                1996       1995       1994
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
REVENUE
  Finance charges...........................................  $5,580.3   $4,805.3   $3,866.7
  Insurance premiums........................................     354.8      325.1      293.5
  Investment and other income...............................     286.3      254.0      227.7
                                                              --------   --------   --------
                                                               6,221.4    5,384.4    4,387.9
EXPENSES
  Interest expense..........................................   2,206.7    1,979.8    1,509.7
  Operating expenses........................................   1,603.3    1,417.8    1,191.6
  Provision for losses on finance receivables -- NOTE 4.....     963.4      729.7      569.9
  Insurance benefits paid or provided.......................     142.9      135.7      144.1
                                                              --------   --------   --------
                                                               4,916.3    4,263.0    3,415.3
                                                              --------   --------   --------
EARNINGS BEFORE PROVISION FOR INCOME TAXES..................   1,305.1    1,121.4      972.6
PROVISION FOR INCOME TAXES -- NOTE 8........................     482.0      413.3      369.1
                                                              --------   --------   --------
NET EARNINGS................................................  $  823.1   $  708.1   $  603.5
                                                              ========   ========   ========
</TABLE>
 
                See notes to consolidated financial statements.
 
                                       25
<PAGE>   27
 
                    ASSOCIATES CORPORATION OF NORTH AMERICA
 
                           CONSOLIDATED BALANCE SHEET
                                 (IN MILLIONS)
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                               DECEMBER 31
                                          ----------------------
                                            1996         1995
                                          ---------    ---------
<S>                                       <C>          <C>
CASH AND CASH EQUIVALENTS...............  $   278.4    $   309.2
INVESTMENTS IN DEBT AND EQUITY
  SECURITIES -- NOTE 16.................    1,044.4        884.7
FINANCE RECEIVABLES, net of unearned
  finance income, allowance for credit
  losses and insurance policy and claims
  reserves -- NOTE 3....................   39,714.5     34,656.3
OTHER ASSETS -- NOTE 13.................    1,560.8      1,173.5
                                          ---------    ---------
          Total assets..................  $42,598.1    $37,023.7
                                          =========    =========
 
              LIABILITIES AND STOCKHOLDERS' EQUITY
 
NOTES PAYABLE -- NOTE 6
  Commercial Paper......................  $14,712.6    $12,732.7
  Bank Loans............................    1,001.8        702.0
ACCOUNTS PAYABLE AND ACCRUALS...........      980.6        833.5
LONG-TERM DEBT -- NOTES 7 and 9.........   20,816.9     18,311.5
STOCKHOLDERS' EQUITY
  Class B Common Stock, $100 par value,
     2,000,000 shares authorized,
     1,000,000 shares issued and
     outstanding........................      100.0        100.0
  Common Stock, no par value, 5,000
     shares authorized, 260 shares
     issued and outstanding, at stated
     value..............................       47.0         47.0
  Paid-in Capital.......................    1,612.7      1,530.6
  Retained Earnings.....................    3,327.0      2,754.2
  Unrealized (Loss) Gain on
     Available-for-Sale
     Securities -- NOTES 2 and 16.......       (0.5)        12.2
                                          ---------    ---------
          Total stockholders' equity....    5,086.2      4,444.0
                                          ---------    ---------
          Total liabilities and
            stockholders' equity........  $42,598.1    $37,023.7
                                          =========    =========
</TABLE>
 
                See notes to consolidated financial statements.
 
                                       26
<PAGE>   28
 
                    ASSOCIATES CORPORATION OF NORTH AMERICA
 
           CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                                 (IN MILLIONS)
 
<TABLE>
<CAPTION>
                                                                          UNREALIZED
                                                                             GAIN
                                                                          (LOSS) ON
                                                                          AVAILABLE-       TOTAL
                                           COMMON   PAID-IN    RETAINED    FOR-SALE    STOCKHOLDERS'
                                           STOCK    CAPITAL    EARNINGS   SECURITIES      EQUITY
                                           ------   --------   --------   ----------   -------------
<S>                                        <C>      <C>        <C>        <C>          <C>
DECEMBER 31, 1993........................  $147.0   $1,130.6   $1,992.6     $  4.0        $3,274.2
  Net Earnings...........................                         603.5                      603.5
  Contributions from Parent..............              200.0                                 200.0
  Cash Dividends
     Class B Common Shares...............                         (14.2)                     (14.2)
     Common Shares.......................                        (255.8)                    (255.8)
  Current Period Adjustment..............                                    (21.6)          (21.6)
                                           ------   --------   --------     ------        --------
DECEMBER 31, 1994........................  147.0     1,330.6    2,326.1      (17.6)        3,786.1
  Net Earnings...........................                         708.1                      708.1
  Contributions from Parent..............              200.0                                 200.0
  Cash Dividends
     Class B Common Shares...............                         (14.2)                     (14.2)
     Common Shares.......................                        (265.8)                    (265.8)
  Current Period Adjustment..............                                     29.8            29.8
                                           ------   --------   --------     ------        --------
DECEMBER 31, 1995........................  147.0     1,530.6    2,754.2       12.2         4,444.0
  Net Earnings...........................                         823.1                      823.1
  Contributions from Parent..............               82.1                                  82.1
  Cash Dividends
     Class B Common Shares...............                         (14.2)                     (14.2)
     Common Shares.......................                        (204.7)                    (204.7)
     Other...............................                         (31.4)                     (31.4)
  Current Period Adjustment..............                                    (12.7)          (12.7)
                                           ------   --------   --------     ------        --------
DECEMBER 31, 1996........................  $147.0   $1,612.7   $3,327.0     $ (0.5)       $5,086.2
                                           ======   ========   ========     ======        ========
</TABLE>
 
                See notes to consolidated financial statements.
 
                                       27
<PAGE>   29
 
                    ASSOCIATES CORPORATION OF NORTH AMERICA
 
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (IN MILLIONS)
 
<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31
                                                         --------------------------------------
                                                            1996          1995          1994
                                                         ----------    ----------    ----------
<S>                                                      <C>           <C>           <C>
Cash Flows from Operating Activities
  Net earnings.........................................  $    823.1    $    708.1    $    603.5
  Adjustments to net earnings for noncash items:
     Provision for losses on finance receivables.......       963.4         729.7         569.9
     Depreciation and amortization.....................       204.5         149.4         145.2
     Increase (decrease) in accounts payable and
       accruals........................................       111.2          61.3          (9.5)
     Increase in insurance policy and claims
       reserves........................................        90.3          57.2         115.8
     Deferred income taxes.............................        42.8          18.5         (88.3)
     Unrealized loss (gain) on trading securities......         1.7          (3.6)         (1.6)
  Purchases of trading securities......................                      (5.8)        (23.8)
  Sales and maturities of trading securities...........         0.6          38.7          17.4
  Other................................................                                    (6.8)
                                                         ----------    ----------    ----------
          Net cash provided from operating
            activities.................................     2,237.6       1,753.5       1,321.8
                                                         ----------    ----------    ----------
Cash Flows from Investing Activities
  Finance receivables originated or purchased..........   (38,876.6)    (33,433.9)    (28,127.4)
  Finance receivables liquidated.......................    32,648.0      27,772.2      23,287.1
  Acquisitions of other finance businesses, net........                    (143.9)       (463.4)
  Proceeds from sale of investment in mortgage
     servicing rights..................................                                    97.1
  Decrease (increase) in real estate loans held for
     sale..............................................        13.5          (3.7)         51.9
  (Increase) decrease in other assets..................      (487.2)        (20.6)         67.1
  Purchases of available-for-sale securities...........      (542.5)       (893.9)       (274.1)
  Sales and maturities of available-for-sale
     securities........................................       359.4         636.8         285.0
                                                         ----------    ----------    ----------
          Net cash used for investing activities.......    (6,885.4)     (6,087.0)     (5,076.7)
                                                         ----------    ----------    ----------
Cash Flows from Financing Activities
  Issuance of long-term debt...........................     5,133.1       5,154.5       3,932.2
  Retirement of long-term debt.........................    (2,627.6)     (2,015.7)     (2,011.5)
  Increase in notes payable............................     2,279.7       1,222.8       2,003.7
  Cash contribution from parent........................        82.1         200.0         200.0
  Cash dividends to parent.............................      (250.3)       (280.0)       (270.0)
                                                         ----------    ----------    ----------
          Net cash provided from financing
            activities.................................     4,617.0       4,281.6       3,854.4
                                                         ----------    ----------    ----------
(Decrease) increase in cash and cash equivalents.......       (30.8)        (51.9)         99.5
Cash and cash equivalents at beginning of period.......       309.2         361.1         261.6
                                                         ----------    ----------    ----------
Cash and cash equivalents at end of period.............  $    278.4    $    309.2    $    361.1
                                                         ==========    ==========    ==========
Cash paid for:
  Interest.............................................  $  2,190.8    $  1,950.6    $  1,516.7
                                                         ==========    ==========    ==========
  Income taxes.........................................  $    407.2    $    431.8    $    486.5
                                                         ==========    ==========    ==========
</TABLE>
 
                See notes to consolidated financial statements.
 
                                       28
<PAGE>   30
 
                    ASSOCIATES CORPORATION OF NORTH AMERICA
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 1 -- THE COMPANY
 
     Associates Corporation of North America ("Associates" or the "Company"), a
Delaware corporation, is a wholly-owned subsidiary and principal operating unit
of Associates First Capital Corporation ("First Capital"), which in turn is a
majority indirect-owned subsidiary of Ford Motor Company ("Ford"). All the
outstanding Common Stock of Associates is owned by First Capital. All shares of
Class B Common Stock are owned by Associates World Capital Corporation, a
wholly-owned subsidiary of First Capital. Class B Common Stock is redeemable
only at the option of the issuer.
 
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
 
     The following is a summary of significant accounting policies:
 
  Basis of Consolidation
 
     The accompanying consolidated financial statements consolidate Associates
and its subsidiaries. Amounts of goodwill relating to acquisitions are being
amortized by the straight-line method over periods not exceeding forty years.
The carrying value of goodwill is reviewed if the facts and circumstances
suggest that it may be impaired. If the review indicates that goodwill will not
be recoverable, as determined based on undiscounted cash flows, the carrying
value of the goodwill is reduced by the estimated short-fall of discounted cash
flows.
 
     All significant intercompany balances and transactions have been eliminated
in consolidation. Certain prior period financial statement amounts have been
reclassified to conform to the current year presentation.
 
     The preparation of these consolidated financial statements in conformity
with generally accepted accounting principles requires the use of management's
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 suspended on accounts when they become 60
days contractually delinquent. The accrual is resumed when the loan becomes
contractually current. At December 31, 1996 and 1995, net finance receivables on
which revenue was not accrued approximated $956.7 million and $625.5 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 debt securities are included in revenue when
realized. Unrealized gains or losses on debt securities are reported as a
component of stockholders' equity, net of tax. Realized and unrealized gains or
losses on equity securities are included in revenue as incurred. The cost of
debt and equity securities sold is determined by the specific identification
method.
 
  Allowance for Losses on Finance Receivables
 
     The Company maintains an allowance for losses on finance receivables at an
amount which it believes is sufficient to provide adequate protection against
losses in the portfolios. The allowance is determined principally on the basis
of historical loss experience, and reflects management's judgment of additional
loss potential considering future economic conditions and the nature and
characteristics of the underlying finance
 
                                       29
<PAGE>   31
 
                    ASSOCIATES CORPORATION OF NORTH AMERICA
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
receivables. The allowance is managed on an aggregate basis considering the
relationship of the allowance to net finance receivables and net credit losses.
Additions to the allowance are 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. Additionally, Company policy provides for charge-off
of various types of accounts on a contractual basis described as follows:
Consumer direct and other installment and credit card receivables are charged to
the allowance for losses when they become 180 days 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 one year delinquent. A delinquent account is one on which the
customer has not made payments as contractually agreed. Extensions are granted
on receivables from customers with satisfactory credit and with prior approval
of management. 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, 1996 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 are provided for
in the unearned premium reserve for each class of insurance. In addition,
reserves for reported claims on credit accident and health 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.
 
  Income Taxes
 
     Associates and its subsidiaries are included in the consolidated federal
income tax return of Ford. The provision for income taxes is computed on a
separate-return basis. Deferred tax assets and liabilities are determined based
on the difference between the financial statement and tax basis of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
 
     On May 6, 1996, the Company entered into a modified tax sharing agreement
with Ford which addressed the United States federal and state taxes. This
agreement is discussed further in NOTE 8 to the consolidated financial
statements.
 
  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.
 
                                       30
<PAGE>   32
 
                    ASSOCIATES CORPORATION OF NORTH AMERICA
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
  Disclosures about Fair Value of Financial Instruments
 
     The consolidated financial statements present the information required by
Statement of Financial Accounting Standards ("SFAS") 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.
 
  Derivative Financial Instruments
 
     The Company does not hold or issue derivative financial instruments for
trading purposes. The Company's derivative activity is limited to financial
currency exchange contracts designed to hedge certain specific yen denominated
fees paid to the Company by its Japan affiliate. These contracts are designed to
hedge the Company's currency risk on such fees. Accordingly, gains and losses on
these hedges are deferred and are recognized in income or as adjustments of
carrying amounts when the hedged transaction occurs. See NOTE 15 to the
consolidated financial statements for additional information related to
financial currency exchange contracts.
 
NOTE 3 -- FINANCE RECEIVABLES
 
  Composition of Finance Receivables
 
     At December 31, 1996 and 1995, finance receivables consisted of the
following (in millions):
 
<TABLE>
<CAPTION>
                                                                1996         1995
                                                              ---------    ---------
<S>                                                           <C>          <C>
Consumer Finance
  Home equity lending.......................................  $15,435.9    $13,190.4
  Personal lending and retail sales finance.................    5,786.5      4,752.7
  Credit card...............................................    5,517.1      4,616.8
  Manufactured housing(1)...................................    1,257.6      2,049.3
                                                              ---------    ---------
                                                               27,997.1     24,609.2
                                                              ---------    ---------
Commercial Finance
  Truck and truck trailer...................................    8,077.6      7,415.7
  Equipment.................................................    4,261.4      3,729.1
  Auto fleet leasing and other..............................    1,442.8        614.3
                                                              ---------    ---------
                                                               13,781.8     11,759.1
                                                              ---------    ---------
          Finance receivables net of unearned finance income
            ("net finance receivables").....................   41,778.9     36,368.3
Allowance for losses on finance receivables.................   (1,371.4)    (1,109.2)
Insurance policy and claims reserves........................     (693.0)      (602.8)
                                                              ---------    ---------
          Finance receivables, net of unearned finance
            income, allowance for losses and insurance
            policy and claims reserves......................  $39,714.5    $34,656.3
                                                              =========    =========
</TABLE>
 
---------------
 
(1) During 1996, the Company securitized and sold approximately $1.3 billion of
    manufactured housing finance receivables. Prior to year end, the servicing
    rights to such securitizations were transferred to an affiliate.
 
                                       31
<PAGE>   33
 
                    ASSOCIATES CORPORATION OF NORTH AMERICA
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     At December 31, 1996, contractual maturities of net finance receivables
were as follows (in millions):
 
<TABLE>
<CAPTION>
                                                        CONSUMER     COMMERCIAL
 YEAR DUE                                               FINANCE        FINANCE         TOTAL
----------                                              --------   ---------------    --------
<S>        <C>                                          <C>        <C>                <C>
 1997.................................................  $3,990.0   $      5,241.4     $9,231.4
 1998.................................................   3,356.6          3,615.8      6,972.4
 1999.................................................   2,932.5          2,403.1      5,335.6
 2000.................................................   2,286.7          1,334.1      3,620.8
 2001 and thereafter..................................  15,431.3          1,187.4     16,618.7
                                                        --------   ---------------    --------
                                                        $27,997.1  $     13,781.8     $41,778.9
                                                        ========   ===============    ========
</TABLE>
 
     It is the Company's experience that a substantial portion of the consumer
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.
 
     Included in commercial finance receivables are direct financing leases as
follows (in millions):
 
<TABLE>
<CAPTION>
                                                                  DECEMBER 31
                                                              --------------------
                                                                1996        1995
                                                              --------    --------
<S>                                                           <C>         <C>
Minimum lease rentals.......................................  $4,199.5    $3,080.8
Unguaranteed residual values................................     307.0        76.6
                                                              --------    --------
  Future minimum lease rentals..............................   4,506.5     3,157.4
Unearned finance income.....................................    (596.7)     (437.1)
                                                              --------    --------
  Net investment in direct financing leases.................  $3,909.8    $2,720.3
                                                              ========    ========
</TABLE>
 
     Future net minimum lease rentals on direct financing leases for each of the
years succeeding December 31, 1996 are as follows (in millions):
1997 -- $1,219.1; 1998 -- $1,025.8; 1999 -- $818.8; 2000 -- $508.2;
2001 -- $233.4 and 2002 and thereafter -- $104.5.
 
  Estimated Fair Value of Net Finance Receivables
 
     The estimated fair value of net finance receivables at December 31, 1996
and 1995 was $44.7 billion and $39.4 billion, respectively. 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.
 
  Dispersion of Finance Receivables
 
     The Company has geographically dispersed finance receivables. The Company's
total receivables were dispersed across the United States at December 31, 1996
as follows: 11% were in California, 7% in Florida, 6% in Texas, and no other
individual state had more than 4%.
 
  Acquisitions of Finance Businesses
 
     During the years ended December 31, 1996, 1995 and 1994, the Company made
acquisitions of finance receivables and finance businesses, the most significant
of which were as follows:
 
          In August 1996, Associates acquired $1.2 billion of net finance
     receivables, principally home equity and personal lending receivables and
     other assets and liabilities, from Fleet Financial Group. The fair market
     value of total assets acquired and liabilities assumed was $1.3 billion and
     $1.0 million, respectively.
 
                                       32
<PAGE>   34
 
                    ASSOCIATES CORPORATION OF NORTH AMERICA
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
          In July 1996, Associates acquired $837.6 million of certain assets of
     USL Capital, an affiliate and Ford subsidiary. Such assets acquired
     consisted principally of vehicle fleet leasing receivables. The transaction
     was accounted for at historical cost. The excess of purchase price over the
     historical value of assets acquired was $31.4 million which was recorded as
     an adjustment to stockholders' equity.
 
          In October 1995, Associates acquired the assets of LCA Corporation,
     principally consisting of leasing receivables. The fair market value of
     total assets acquired and liabilities assumed was $253 million and $225
     million, respectively.
 
          In January 1995, Associates acquired $116 million of net home equity
     receivables and certain other assets from Ford Motor Credit Company, an
     affiliate. The transaction was recorded at historical cost, which
     approximated market.
 
          In December 1994, Associates acquired the assets of First Collateral
     Services, Inc., principally consisting of warehouse loan facilities
     extended to mortgage brokers secured by mortgage contracts. The fair market
     value of total assets acquired and liabilities assumed was $62 million and
     $3 million, respectively.
 
          In September 1994, Associates acquired the credit card portfolio and
     certain other assets of Amoco Oil Company. The fair market value of assets
     acquired totaled $405 million.
 
     The pro forma effect of the above acquisitions, when taken in aggregate for
each reporting period, was not significant.
 
NOTE 4 -- 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
                                                         -----------------------------
                                                           1996       1995      1994
                                                         --------   --------   -------
<S>                                                      <C>        <C>        <C>
Balance at beginning of period.........................  $1,109.2   $  932.4   $ 798.0
  Provision for losses.................................     963.4      729.7     569.9
  Recoveries on receivables charged off................     127.7      112.3      99.8
  Losses sustained.....................................    (925.7)    (670.0)   (556.5)
  Reserves of acquired businesses and other............      96.8        4.8      21.2
                                                         --------   --------   -------
Balance at end of period...............................  $1,371.4   $1,109.2   $ 932.4
                                                         ========   ========   =======
</TABLE>
 
NOTE 5 -- CREDIT FACILITIES
 
     At December 31, 1996, available credit facilities were as follows (in
millions):
 
<TABLE>
<CAPTION>
                                                  FACILITY
   ENTITY        CREDIT FACILITY DESCRIPTION       AMOUNT
   ------        ---------------------------      ---------
<S>           <C>                                 <C>
Associates    Lines of Credit                     $ 4,128.2*
              Revolving Lines                       6,505.0*
              Receivable Purchase Facilities        1,775.0
                                                  ---------
                                                  $12,408.2
                                                  =========
</TABLE>
 
---------------
 
* Included in Associates Lines of Credit and Revolving Lines are $90.0 million
  and $2.6 billion of Lines of Credit and Revolving Lines, respectively, that
  are available either to First Capital or to the Company. The Company would not
  be responsible for any borrowing by First Capital thereunder.
 
                                       33
<PAGE>   35
 
                    ASSOCIATES CORPORATION OF NORTH AMERICA
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Lines of Credit, Revolving Lines and Receivables Purchase Facilities may be
withdrawn only under certain standard conditions, including 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. Associates principally pays fees for the availability of its credit
facilities. Bank fees incurred during 1996, 1995 and 1994 were $9.8 million,
$11.5 million and $11.0 million, respectively, and are .07 to .25 of 1% per
annum of the amount of the facilities.
 
NOTE 6 -- NOTES PAYABLE
 
     Commercial paper notes are issued by Associates in the minimum amount of
$100,000 with terms from 1 to 270 days. Bank loan terms are all 3 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>
Ending balance at December 31, 1996.........................   $14,712.6    $1,001.8
Weighted average interest rate at December 31, 1996.........        5.82%       7.94%
Ending balance at December 31, 1995.........................   $12,732.7    $  702.0
Weighted average interest rate at December 31, 1995.........        5.73%       6.42%
</TABLE>
 
     The amounts reported in the consolidated balance sheet approximate fair
value.
 
NOTE 7 -- LONG-TERM DEBT
 
     Outstanding balances of long-term debt at December 31 were as follows (in
millions):
 
<TABLE>
<CAPTION>
                                          INTEREST     MATURITIES
                                         RATE RANGE     THROUGH       1996        1995
                                        ------------   ----------   ---------   ---------
<S>                                     <C>            <C>          <C>         <C>
Senior Notes..........................  3.63%-11.40%    2010        $20,391.4   $18,169.7
Subordinated and Capital:
  Subordinated........................   6.88%-8.15%    2009            425.0       141.2
  Capital.............................   4.68%-9.00%    2002              0.5         0.6
                                                                    ---------   ---------
                                                                        425.5       141.8
                                                                    ---------   ---------
     Total long-term debt.............                              $20,816.9   $18,311.5
                                                                    =========   =========
</TABLE>
 
     The weighted average interest rate for total long-term debt was 7.02% at
December 31, 1996 and 7.08% at December 31, 1995.
 
     The estimated fair value of long-term debt at December 31, 1996 and 1995
was $21.2 billion and $19.2 billion, respectively. The fair value was determined
by discounting expected cash flows at discount rates currently available to the
Company for debt with similar terms and remaining maturities.
 
     Long-term borrowing maturities during the next five years, including the
current portion of notes payable after one year are: 1997, $3,080.5 million;
1998, $3,654.3 million; 1999, $3,974.0 million; 2000, $2,383.2 million; 2001,
$2,400.2 million and 2002 and thereafter, $5,324.7 million.
 
     Certain debt issues contain call provisions or may be subject to repayment
provisions at the option of the holder on specified dates prior to the maturity
date. At December 31, 1996, six warrants were outstanding to purchase $150
million aggregate principal amount of senior notes at par with an interest rate
of 7.00%. The warrants are exercisable at various dates through October 1, 1999
at a price of $25,000,000.
 
                                       34
<PAGE>   36
 
                    ASSOCIATES CORPORATION OF NORTH AMERICA
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
NOTE 8 -- 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>
                                                            FEDERAL   STATE    TOTAL
                                                            -------   -----   -------
<S>                                                         <C>       <C>     <C>
Year Ended December 31, 1996
  Current.................................................  $ 407.9   $31.3   $ 439.2
                                                            -------   -----   -------
  Deferred:
     Leasing transactions.................................    102.5             102.5
     Finance revenue......................................     (6.9)             (6.9)
     Provision for losses on finance receivables and
       other..............................................    (52.8)            (52.8)
                                                            -------   -----   -------
          Total deferred..................................     42.8              42.8
                                                            -------   -----   -------
                                                            $ 450.7   $31.3   $ 482.0
                                                            =======   =====   =======
Year Ended December 31, 1995
  Current.................................................  $ 373.9   $20.9   $ 394.8
                                                            -------   -----   -------
  Deferred:
     Leasing transactions.................................     66.7              66.7
     Finance revenue......................................     14.0              14.0
     Provision for losses on finance receivables and
       other..............................................    (62.2)            (62.2)
                                                            -------   -----   -------
          Total deferred..................................     18.5              18.5
                                                            -------   -----   -------
                                                            $ 392.4   $20.9   $ 413.3
                                                            =======   =====   =======
Year Ended December 31, 1994
  Current.................................................  $ 426.4   $31.0   $ 457.4
                                                            -------   -----   -------
  Deferred:
     Leasing transactions.................................     29.2              29.2
     Finance revenue......................................     (5.7)             (5.7)
     Provision for losses on finance receivables and
       other..............................................   (111.8)           (111.8)
                                                            -------   -----   -------
          Total deferred..................................    (88.3)            (88.3)
                                                            -------   -----   -------
                                                            $ 338.1   $31.0   $ 369.1
                                                            =======   =====   =======
</TABLE>
 
     At December 31, 1996 and 1995, the components of the Company's net deferred
tax asset were as follows (in millions):
 
<TABLE>
<CAPTION>
                                                               1996       1995
                                                              -------    -------
<S>                                                           <C>        <C>
Deferred tax assets:
  Provision for losses on finance receivables and other.....  $ 614.4    $ 577.1
  Postretirement and other employee benefits................     69.3       55.9
                                                              -------    -------
                                                                683.7      633.0
Deferred tax liabilities:
  Leasing transactions......................................   (344.3)    (241.8)
  Finance revenue and other.................................   (179.4)    (235.4)
                                                              -------    -------
                                                               (523.7)    (477.2)
                                                              -------    -------
     Net deferred tax asset.................................  $ 160.0    $ 155.8
                                                              =======    =======
</TABLE>
 
                                       35
<PAGE>   37
 
                    ASSOCIATES CORPORATION OF NORTH AMERICA
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The Company is included in Ford's federal consolidated income tax group,
and the Company's federal income tax liability will be included in the
consolidated federal income tax liability of Ford and its subsidiaries.
 
     In certain circumstances, certain of the Company's subsidiaries will also
be included with certain Ford subsidiaries in combined, consolidated or unitary
income tax groups for state and local tax purposes. On May 6, 1996, the Company
entered into a modified tax sharing agreement with Ford. Pursuant to this
agreement, the amount of taxes to be paid by the Company will be determined as
though the Company were to file separate federal, state and local income tax
returns as the common parent of an affiliate group of corporations filing
combined, consolidated or unitary (as applicable) federal, state and local
income tax returns.
 
     Due to the Company's earnings level, no valuation allowance related to the
deferred tax asset has been recorded.
 
     The effective tax rate differed from the statutory U.S. Federal income tax
rate as follows:
 
<TABLE>
<CAPTION>
                                                                % OF PRETAX INCOME
                                                              YEAR ENDED DECEMBER 31
                                                              -----------------------
                                                              1996     1995     1994
                                                              -----    -----    -----
<S>                                                           <C>      <C>      <C>
Statutory tax rate..........................................   35.0%    35.0%    35.0%
State income taxes..........................................    1.6      1.2      2.1
Other non-deductible items..................................    0.3      0.7      0.8
                                                               ----     ----     ----
          Effective tax rate................................   36.9%    36.9%    37.9%
                                                               ====     ====     ====
</TABLE>
 
NOTE 9 -- DEBT RESTRICTIONS
 
     Associates is subject to various limitations under the provisions of its
outstanding debt and credit facilities. The most significant of these
limitations are summarized as follows:
 
  Limitation on Payment of Dividends
 
     A restriction contained in one issue of debt securities which matures on
March 15, 1999, generally limits payments of cash dividends on the Company's
Common Stock in any year to not more than 50% of consolidated net earnings for
such year, subject to certain exceptions, plus increases in contributed capital
and extraordinary gains. Any such amounts available for the payment of dividends
in such fiscal year and not so paid, may be paid in any one or more of the five
subsequent fiscal years. In accordance with this provision, $274.7 million was
available for dividends at December 31, 1996.
 
  Limitation on Minimum Tangible Net Worth
 
     A restriction contained in certain revolving credit agreements requires
Associates to maintain a minimum tangible net worth, as defined, of $1.5
billion. At December 31, 1996, Associates tangible net worth was approximately
$4.7 billion.
 
NOTE 10 -- LEASE COMMITMENTS
 
     Leases are primarily short-term and generally provide for renewal options
not exceeding the initial term. Total rent expense for the years ended December
31, 1996, 1995 and 1994 was $77.7 million, $67.0 million, and $53.1 million,
respectively. Minimum rental commitments as of December 31, 1996 for all
noncancelable leases (primarily office leases) for the years ending December 31,
1997, 1998, 1999, 2000 and 2001 are $67.4 million, $56.1 million, $41.3 million,
$24.5 million and $13.0 million, respectively, and $5.5 million thereafter.
 
                                       36
<PAGE>   38
 
                    ASSOCIATES CORPORATION OF NORTH AMERICA
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
NOTE 11 -- EMPLOYEE BENEFITS
 
  Defined Benefit Plans
 
     The Company participates in various qualified and nonqualified pension
plans (the "Plan" or "Plans") sponsored by First Capital, which together cover
substantially all employees (except temporary employees) who meet certain
eligibility requirements.
 
     Net periodic pension cost for the years indicated includes the following
components (in millions):
 
<TABLE>
<CAPTION>
                                                                  DECEMBER 31
                                                           --------------------------
                                                            1996      1995      1994
                                                           ------    ------    ------
<S>                                                        <C>       <C>       <C>
Service cost.............................................  $ 18.8    $ 13.1    $ 13.7
Interest cost............................................    26.4      23.1      21.3
Actual return on Plan assets.............................   (49.3)    (51.1)     (0.4)
Net amortization.........................................    28.7      33.9     (10.9)
                                                           ------    ------    ------
  Net periodic pension cost..............................  $ 24.6    $ 19.0    $ 23.7
                                                           ======    ======    ======
Assumed discount rate, beginning of year.................    7.00%     8.25%     7.00%
</TABLE>
 
     The funded status of the Plan is as follows (in millions):
 
<TABLE>
<CAPTION>
                                                                 DECEMBER 31
                                             ---------------------------------------------------
                                                       1996                       1995
                                             ------------------------   ------------------------
                                             QUALIFIED   NONQUALIFIED   QUALIFIED   NONQUALIFIED
                                               PLAN          PLAN         PLAN          PLAN
                                             ---------   ------------   ---------   ------------
<S>                                          <C>         <C>            <C>         <C>
Actuarial present value of benefit
  obligation:
  Vested...................................   $275.0        $25.3        $255.9        $23.7
  Nonvested................................     12.1          0.3          11.5          0.3
                                              ------        -----        ------        -----
Accumulated benefit obligation.............    287.1         25.6         267.4         24.0
Effect of projected future salary
  increases................................     77.5         10.6          76.1          9.3
                                              ------        -----        ------        -----
Projected benefit obligation...............    364.6         36.2         343.5         33.3
Plan assets at fair market value...........    376.1                      322.0
                                              ------        -----        ------        -----
(Excess)/shortage of plan assets over plan
  obligation...............................    (11.5)        36.2          21.5         33.3
Unamortized transition obligation and
  amendments...............................     (3.6)        (3.4)         (5.1)        (3.8)
Unamortized net loss.......................    (15.0)        (8.6)        (53.0)        (8.8)
Adjustment required to recognize minimum
  liability................................                   1.4                        3.3
                                              ------        -----        ------        -----
  (Prepaid)/accrued pension liability......   $(30.1)       $25.6        $(36.6)       $24.0
                                              ======        =====        ======        =====
Assumed discount rate......................     7.25%        7.25%         7.00%        7.00%
Projected compensation increases...........     6.00%        6.00%         6.00%        6.00%
Expected return............................     9.00%        9.00%         9.00%        9.00%
</TABLE>
 
---------------
 
Amounts in the previous two tables are presented using First Capital data as all
calculations are made at the First Capital level. The corresponding amounts for
the Company are not significantly different.
 
  Associates Savings and Profit Sharing Plan
 
     The Company participates in a defined contribution plan sponsored by First
Capital intended to provide assistance in accumulating personal savings for
retirement and is designed to qualify under Sections 401(a)
 
                                       37
<PAGE>   39
 
                    ASSOCIATES CORPORATION OF NORTH AMERICA
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
and 401(k) of the Internal Revenue Code. For the years ended December 31, 1996,
1995 and 1994, the Company's pretax contributions to the plan were $19.1
million, $16.6 million and $15.0 million, respectively.
 
  Employers' Accounting for Postretirement Benefits Other Than Pensions
 
     The Company provides certain postretirement benefits through unfunded plans
sponsored by First Capital. These benefits are currently provided to
substantially all employees (except temporary employees) who meet certain
eligibility requirements. The benefits of such plans can be modified or
terminated at the discretion of the Company. The amount paid for postretirement
nonpension benefits for the years ended December 31, 1996, 1995 and 1994 was
approximately $2.7 million, $2.0 million and $1.8 million, respectively.
 
     Net periodic postretirement benefit cost for 1996, 1995 and 1994 includes
the following components (in millions):
 
<TABLE>
<CAPTION>
                                                                 DECEMBER 31
                                                              ------------------
                                                              1996   1995   1994
                                                              ----   ----   ----
<S>                                                           <C>    <C>    <C>
Service cost................................................  $7.5   $5.5   $5.5
Interest cost...............................................   8.2    7.7    6.3
Net amortization............................................  (0.7)  (1.3)  (1.0)
                                                              ----   ----   ----
  Net periodic postretirement benefit cost..................  $15.0  $11.9  $10.8
                                                              ====   ====   ====
Assumed discount rate, beginning of year....................  7.25%  8.75%  7.50%
</TABLE>
 
     Accrued postretirement benefit cost at December 31, 1996 and 1995 is
composed of the following (in millions):
 
<TABLE>
<CAPTION>
                                                                DECEMBER 31
                                                              ----------------
                                                               1996      1995
                                                              ------    ------
<S>                                                           <C>       <C>
Accumulated postretirement benefit obligation ("APBO"):
  Retired participants......................................  $ 45.2    $ 45.2
  Fully eligible participants...............................    24.9      26.9
  Other active participants.................................    45.1      45.7
                                                              ------    ------
          Total APBO........................................   115.2     117.8
Unamortized amendments......................................     3.9       5.4
Unrecognized actuarial loss.................................    (7.9)    (24.2)
                                                              ------    ------
  Accrued postretirement benefit cost.......................  $111.2    $ 99.0
                                                              ======    ======
Assumed discount rate.......................................    7.50%     7.25%
</TABLE>
 
---------------
 
Amounts in the previous two tables are presented using First Capital data as all
calculations are made at the First Capital level. The corresponding amounts for
the Company are not significantly different.
 
     For measurement purposes, an 11.67% and 12.10% weighted average annual rate
of increase in per capita cost of covered health care benefits was assumed for
1996 and 1995, respectively, decreasing gradually to 5.50% by the year 2010.
Increasing the assumed health care cost trend rate by one percentage point each
year would increase the APBO as of December 31, 1996 and 1995 by $8.4 million
and $8.6 million, respectively, and the aggregate of the service and interest
cost components of the net periodic postretirement benefit cost by $1.2 million
and $1.0 million, respectively.
 
                                       38
<PAGE>   40
 
                    ASSOCIATES CORPORATION OF NORTH AMERICA
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
INCENTIVE COMPENSATION PROGRAMS
 
     The Company sponsors compensation plans covering certain officers and
employees.
 
  Corporate Annual Performance Plan and Long-Term Performance Plan
 
     The Corporate Annual Performance Plan ("CAPP") is an annual bonus plan. The
size of the CAPP bonus pool is determined based on the performance of the
Company. The Long-Term Performance Plan ("LTPP") is a long-term cash incentive
plan. The size of the LTPP incentive pool is determined for a performance period
based 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. Individual CAPP and LTPP
bonuses reflect individual participants' performances during the applicable
performance period. Amounts charged to expense under CAPP and LTPP amounted to
$23.3 million, $16.1 million and $16.2 million during the years ended December
31, 1996, 1995 and 1994, respectively.
 
  Phantom Stock Appreciation Right Plan
 
     The Company participated in a long-term cash plan, the Phantom Stock
Appreciation Right Plan (the "PSAR Plan"). First Capital terminated the PSAR
Plan as of December 1995 and extinguished, principally by cash payment, all
outstanding phantom stock appreciation rights ("PSARs"). A PSAR granted under
the PSAR Plan entitled the holder thereof to receive from the Company, upon
exercise of such PSAR, a specified amount of cash. A PSAR had a term of five
years and vested 100% on the first anniversary of the date of grant. Amounts
charged to expense by the Company under the PSAR Plan amounted to zero, $30.1
million and $4.1 million during the years ended December 31, 1996, 1995 and
1994, respectively. First Capital also amended the PSAR Plan to provide that
certain officers of the Company (all of whom were granted PSARs in 1995) were
required to defer one-half of the amount payable in satisfaction of their
respective PSARs granted in 1995. The amounts so deferred are administered by
the Company in accordance with the terms of the Associates First Capital
Corporation Equity Deferral Plan (the "EDP").
 
  Stock-Based Compensation Plans
 
     Equity Compensation Plan -- The Company participates in one stock-based
compensation plan: the Long-Term Equity Compensation Plan (the "ECP") sponsored
by First Capital. The ECP allows First Capital to issue to employees up to
20,789,000 shares of its Common Stock in the form of nonqualified and incentive
stock options, stock appreciation rights, restricted stock, performance shares
and performance units.
 
     The ECP was established in 1996. First Capital had no outstanding grants
under any other stock-based compensation plan prior to 1996. In May 1996, the
First Capital granted 2,419,290 stock options pursuant to the ECP with an option
price per share equal to the fair market value of one share of First Capital
Common Stock on the date of grant ($29.00 per share in 1996), and with a term of
10 years. In July and October 1996, First Capital granted a total of 17,000
stock options pursuant to the ECP to employees of the Company with an option
price per share equal to the fair market value of one share of First Capital
Common Stock on the date of grant. The weighted-average exercise price of all
stock options granted in 1996 pursuant to the ECP was $29.07 (range of exercise
price of $29.00-$41.38) with a weighted average remaining contractual term of
9.35 years. Approximately 471,580 of the ECP stock options will vest on the
fifth anniversary of the date of grant with the remainder vesting one-third per
year on each of the first three anniversaries of the dates of grant. None of the
options was exercisable in 1996 and 61,850 options were forfeited during 1996.
The forfeited options had a weighted average exercise price of $29.00. The
weighted average fair value of all options granted during 1996 was $9.32. The
fair value was determined at the date of each grant using an option-pricing
model which assumed a dividend yield range of 0.97%-1.38%, expected volatility
of 30.44%, a risk free interest rate range of 6.30%-6.66% and an expected option
life range of 4-6 years.
 
                                       39
<PAGE>   41
 
                    ASSOCIATES CORPORATION OF NORTH AMERICA
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Restricted Stock -- In May 1996, First Capital issued 169,630 shares of
restricted Common Stock to employees of the Company under the ECP, all of which
awards were outstanding at December 31, 1996. Such shares were issued at fair
market value, which was $29.00 per share on the issue date. These shares vest on
the fifth anniversary of the date of issuance.
 
     Deemed Investment in Stock -- In 1996 under the EDP, First Capital retained
compensation amounts deferred by selected employees of the Company in unfunded
accounts that are deemed to be invested in shares of First Capital Common Stock.
Dividends paid on First Capital Common Stock are deemed to be reinvested in
First Capital Common Stock. Amounts deferred in 1996 are fully vested and
payable in March 2001, subject to earlier distribution upon a participant's
death, disability, retirement or termination of employment, in cash and/or
shares of Common Stock. Approximately 131,890 deemed shares were issued by First
Capital during 1996, including 608 shares related to the reinvestment of
dividends, all of which were outstanding at December 31, 1996. The value of all
such shares at year end based on $44.125 per common share was $5.8 million.
 
     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, the Company's net income for 1996 would have
been approximately $820 million.
 
NOTE 12 -- COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS
 
     The Company is a defendant in various lawsuits arising in the ordinary
course of its business. The Company assesses appropriate responses to its
lawsuits in light of a number of factors, including potential impact of the
actions on the conduct of the Company's operations. While, in the opinion of
management, the resolution of any of these matters is not expected to have a
material adverse effect on the Company's financial condition or results of
operations, there can be no assurance that an adverse decision in one or more of
such lawsuits will not have such a material adverse effect. The outcome of
various individual lawsuits, however, may affect the manner in which the Company
conducts its business.
 
     The Company and certain of its subsidiaries are defendants in a relatively
higher concentration of lawsuits in the State of Alabama than in the remainder
of the United States. Management believes that the aggregate number of lawsuits
instituted in Alabama represents additional exposure to the Company because of
the recent history of juries in Alabama awarding significant damages, both
compensatory and punitive, in civil cases. At December 31, 1996, there were
approximately 100 actions pending against the Company in Alabama.
 
NOTE 13 -- OTHER ASSETS
 
     The components of Other Assets at December 31, 1996 and 1995 were as
follows (in millions):
 
<TABLE>
<CAPTION>
                                                                  DECEMBER 31
                                                              --------------------
                                                                1996        1995
                                                              --------    --------
<S>                                                           <C>         <C>
Balances with related parties -- NOTE 14....................  $   46.8    $  256.3
Goodwill....................................................     353.1       345.7
Property and equipment......................................     127.9        82.4
Collateral held for resale..................................     161.5       113.3
Other.......................................................     871.5       375.8
                                                              --------    --------
          Total other assets................................  $1,560.8    $1,173.5
                                                              ========    ========
</TABLE>
 
                                       40
<PAGE>   42
 
                    ASSOCIATES CORPORATION OF NORTH AMERICA
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
NOTE 14 -- TRANSACTIONS AND BALANCES WITH RELATED PARTIES
 
     Associates provides debt financing or advances to certain of its former
foreign subsidiaries. At December 31, 1996 and 1995, amounts due from foreign
affiliates totaled $35.2 million and $70.7 million, respectively, and were
included in Other Assets. These receivables or advances bear fluctuating
interest rates (as applicable) and are payable on demand. Interest income
related to these transactions was $6.4 million, $7.9 million and $14.4 million
for the years ended December 31, 1996, 1995, and 1994, respectively. The
estimated fair value of these receivables was $35.2 million and $72.2 million at
December 31, 1996 and 1995, respectively.
 
     Associates, from time to time, invests a portion of its working capital
funds in variable rate demand notes of First Capital. The balances of its
investment at December 31, 1996 and 1995 were $(162.6) million and $3.7 million,
respectively, and were included in Other Assets. Income from such investments
totaled $15.8 million, $14.3 million and $16.4 million for the years ended
December 31, 1996, 1995 and 1994, respectively.
 
     Associates occasionally makes advances to Associates National Bank
(Delaware) ("ANB"), a wholly-owned subsidiary of First Capital. The balances of
such advances at December 31, 1996 and 1995 were $174.2 million and $181.9
million, respectively, and were included in Other Assets. Income from such
advances totaled $8.6 million, $6.9 million and $4.2 million for the years ended
December 31, 1996, 1995 and 1994, respectively.
 
     At December 31, 1996 and 1995, the net consumer finance receivables
included participations in credit card receivables owned or originated by ANB,
an affiliate of Associates. The balances of these receivables were $5.5 billion
and $4.6 billion at December 31, 1996 and 1995, respectively, and were included
in Finance Receivables.
 
     The Company provides certain services of an administrative nature, use of
certain tangible and intangible assets, including trademarks, guarantees of debt
and related interest, and other management services to certain of its foreign
affiliates in Japan, Canada, Puerto Rico, Mexico and the United Kingdom.
Services and usage are charged to the affiliates based on the nature of the
service. Fees for financial accommodations range from .25% to 1% of the average
outstanding debt guaranteed. Management believes such charges reflect the market
value for such services, usage and guarantees. The amounts paid or accrued under
these arrangements for the years ended December 31, 1996, 1995 and 1994 were
$74.7 million, $68.4 million and $53.7 million, respectively.
 
     The Company provides certain emergency roadside assistance and auto club
services and employee relocation services to Ford. Revenues related to these
services were $33.4 million, $29.7 million and $19.4 million for the years ended
December 31, 1996, 1995 and 1994, respectively.
 
     At December 31, 1996 and 1995, the Company was a guarantor on debt and
related accrued interest of its foreign affiliates in Canada and Puerto Rico
amounting to $811.7 million and $487.2 million, respectively.
 
     Associates receives a fee for services it provides to First Capital. During
each of the years ended December 31, 1996, 1995 and 1994, Associates received
$6.0 million in fees for these services.
 
     At December 31, 1996 and 1995, Associates current income taxes
payable/(receivable) to First Capital amounted to $25.9 million and $(9.0)
million, respectively.
 
NOTE 15 -- 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.
 
                                       41
<PAGE>   43
 
                    ASSOCIATES CORPORATION OF NORTH AMERICA
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The Company's derivative transactions are not material to its consolidated
balance sheet and do not represent a material exposure to its consolidated net
earnings. The notional amounts under currency and interest rate swap contracts
at December 31, 1996 and 1995 were $108.7 million and $55.7 million,
respectively. The fair value of such amounts at December 31, 1996 and 1995 was
$7.4 million and $1.1 million, respectively. The fair value was determined based
on the foreign currency exchange rates/ interest rates for similar transactions
in effect at the balance sheet date. In both periods, the Company was at market
risk should the counterparty fail to meet the terms of the contracts. At
December 31, 1996 and 1995, the Company's estimated exposure to loss in the
event of nonperformance by certain counterparties was $7.4 million and $1.1
million, respectively.
 
     The consumer finance business grants revolving lines of credit to certain
of its customers. At December 31, 1996 and 1995, the unused portion of these
lines aggregated $2.6 billion and $661.1 million, respectively. The potential
risk associated with, and the estimated fair value of, the unused credit lines
are not considered to be significant.
 
     The commercial finance business grants lines of credit to certain dealers
of truck, construction equipment and manufactured housing. At December 31, 1996
and 1995, the unused portion of these lines aggregated $1.3 billion and $1.2
billion, respectively. The potential risk associated with, and the estimated
fair value of, the unused credit lines are not considered to be significant.
 
NOTE 16 -- INVESTMENTS IN DEBT AND EQUITY SECURITIES
 
  Debt Securities
 
     The Company invests in debt securities, principally bonds and notes held by
the Company's insurance subsidiaries, with the intention of holding them to
maturity. However, if market conditions change, the Company may sell these
securities prior to maturity. Accordingly, the Company classifies its
investments in debt securities as available-for-sale and adjusts its recorded
value to market. During 1996, gross realized gains and losses on sales amounted
to $3.5 million and $0.1 million, respectively. Gross realized gains on sales
during 1995 amounted to $0.2 million. Unrealized gains or losses are reported as
a component of stockholders' equity, net of tax. The following tables set forth,
by type of security issuer, the amortized cost, gross unrealized holding gains,
gross unrealized holding losses, and estimated market value at December 31, 1996
and 1995 (in millions):
 
<TABLE>
<CAPTION>
                                                                  1996
                                           --------------------------------------------------
                                                          GROSS         GROSS
                                                        UNREALIZED    UNREALIZED    ESTIMATED
                                           AMORTIZED     HOLDING       HOLDING       MARKET
                                             COST         GAINS         LOSSES        VALUE
                                           ---------    ----------    ----------    ---------
<S>                                        <C>          <C>           <C>           <C>
U.S. Government obligations..............  $  267.1       $ 4.8         $(1.2)      $  270.7
Corporate obligations....................     282.6         1.2          (4.3)         279.5
Mortgage-backed..........................     475.2         1.3          (2.7)         473.8
Other....................................      10.0         0.1                         10.1
                                           --------       -----         -----       --------
          Total debt securities..........  $1,034.9       $ 7.4         $(8.2)      $1,034.1
                                           ========       =====         =====       ========
</TABLE>
 
                                       42
<PAGE>   44
 
                    ASSOCIATES CORPORATION OF NORTH AMERICA
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
<TABLE>
<CAPTION>
                                                                  1995
                                           --------------------------------------------------
                                                          GROSS         GROSS
                                                        UNREALIZED    UNREALIZED    ESTIMATED
                                           AMORTIZED     HOLDING       HOLDING       MARKET
                                             COST         GAINS         LOSSES        VALUE
                                           ---------    ----------    ----------    ---------
<S>                                        <C>          <C>           <C>           <C>
U.S. Government obligations..............  $  400.2       $14.4         $           $  414.6
Corporate obligations....................     222.3         3.5                        225.8
Mortgage-backed..........................     215.6         0.8                        216.4
Other....................................      15.3                                     15.3
                                           --------       -----         -----       --------
          Total debt securities..........  $  853.4       $18.7         $           $  872.1
                                           ========       =====         =====       ========
</TABLE>
 
     The amortized cost and estimated market value of debt securities at
December 31, 1996 and 1995, by contractual maturity, are shown below (in
millions):
 
<TABLE>
<CAPTION>
                                                       1996                    1995
                                               ---------------------   ---------------------
                                                           ESTIMATED               ESTIMATED
                                               AMORTIZED    MARKET     AMORTIZED    MARKET
                                                 COST        VALUE       COST        VALUE
                                               ---------   ---------   ---------   ---------
<S>                                            <C>         <C>         <C>         <C>
Due in one year or less......................  $   67.0    $   67.5     $158.5      $159.0
Due after one year through five years........     410.3       412.0      384.3       394.9
Due after five years through ten years.......     269.5       267.9      187.2       194.3
Due after ten years..........................     288.1       286.7      123.4       123.9
                                               --------    --------     ------      ------
                                               $1,034.9    $1,034.1     $853.4      $872.1
                                               ========    ========     ======      ======
</TABLE>
 
  Equity Securities
 
     Equity security investments are recorded at market value. The Company
classifies its investments in equity securities as trading securities and
includes in earnings unrealized gains or losses on such securities. The
estimated market value at December 31, 1996 and 1995 was $10.3 million and $12.6
million, respectively. Historical cost at December 31, 1996 and 1995 was $7.8
million and $8.5 million, respectively.
 
     Estimated market values of debt and equity securities are based on quoted
market prices.
 
NOTE 17 -- BUSINESS SEGMENT INFORMATION
 
     Associates primary business activities are consumer finance and commercial
finance. The consumer finance operation is engaged in making and investing in
home equity, personal lending and sales finance receivables, purchasing
participations in credit card receivables, and providing sales financing for
manufactured housing. The commercial finance operation is principally engaged in
financing sales of transportation and industrial equipment and leasing, and
sales of other financial services, including auto fleet leasing and management,
employee relocation services and emergency roadside assistance and auto club
services. The Company has an insurance operation which is engaged in
underwriting credit life, credit accident and health, property and casualty, and
accidental death and dismemberment insurance, principally for customers of the
finance operations. Such insurance activity is conducted by the Company's
licensed insurance agents and managed as a separate activity. Insurance sales
are dependent on the business activities and volumes of the consumer and
commercial business. Accordingly, insurance revenues and related claims are
included in the consumer and commercial business to which they relate.
 
                                       43
<PAGE>   45
 
                    ASSOCIATES CORPORATION OF NORTH AMERICA
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The following table sets forth information by business segment (in
millions):
 
<TABLE>
<CAPTION>
                                                        BUSINESS SEGMENT
                                                     ----------------------
                                                     CONSUMER    COMMERCIAL
                                                      FINANCE    FINANCE(1)   CONSOLIDATED
                                                     ---------   ----------   ------------
<S>                                                  <C>         <C>          <C>
Year Ended or at December 31, 1996
  Revenue..........................................  $ 4,493.2   $ 1,728.2     $ 6,221.4
                                                     =========   =========     =========
  Operating income(2)..............................  $   914.5   $   390.6     $ 1,305.1
                                                     =========   =========     =========
  Total assets.....................................  $27,665.6   $14,932.5     $42,598.1
                                                     =========   =========     =========
Year Ended or at December 31, 1995
  Revenue..........................................  $ 3,882.4   $ 1,502.0     $ 5,384.4
                                                     =========   =========     =========
  Operating income(2)..............................  $   795.9   $   325.5     $ 1,121.4
                                                     =========   =========     =========
  Total assets.....................................  $23,278.0   $13,745.7     $37,023.7
                                                     =========   =========     =========
Year Ended or at December 31, 1994
  Revenue..........................................  $ 3,147.6   $ 1,240.3     $ 4,387.9
                                                     =========   =========     =========
  Operating income(2)..............................  $   665.1   $   307.5     $   972.6
                                                     =========   =========     =========
  Total assets.....................................  $20,032.4   $11,654.8     $31,687.2
                                                     =========   =========     =========
</TABLE>
 
---------------
 
(1) Includes information pertaining to the financing of manufactured housing
    purchases which are managed by the commercial operation.
(2) Includes operating income pertaining to the Company's non-operating
    subsidiaries.
 
     Capital expenditures and depreciation and amortization expense are not
significant.
 
NOTE 18 -- SUBSEQUENT EVENTS
 
     Subsequent to year end, an affiliate of the Company acquired a portfolio of
approximately $800 million in credit card receivables from The Bank of New York.
J. Carter Bacot, a director of First Capital, is Chairman and Chief Executive
Officer of The Bank of New York. The Bank of New York and the Company are not
otherwise affiliated. In addition, affiliates of the Company have signed
agreements with Texaco Refining and Marketing, Inc. and its affiliate, Star
Enterprise, to purchase proprietary credit card receivables and stock in the
amount of approximately $700 million. An affiliate of the Company also signed an
agreement with J.C. Penney, Inc. in the first quarter of 1997 to purchase
approximately $740 million in bankcard receivables. Both the Texaco and J.C.
Penney transactions are expected to close in the second quarter of 1997 after
receipt of all regulatory approvals and the Company expects to participate in
these receivables.
 
NOTE 19 -- UNAUDITED QUARTERLY FINANCIAL DATA
 
     The following table sets forth the unaudited quarterly results of
operations (in millions):
 
<TABLE>
<CAPTION>
                                                                1996
                                            --------------------------------------------
                                             FOURTH      THIRD       SECOND      FIRST
                                            QUARTER     QUARTER     QUARTER     QUARTER
                                            --------    --------    --------    --------
<S>                                         <C>         <C>         <C>         <C>
Finance charges...........................  $1,478.0    $1,439.8    $1,354.2    $1,308.3
                                            ========    ========    ========    ========
Interest expense..........................  $  579.3    $  581.4    $  531.3    $  514.7
                                            ========    ========    ========    ========
Earnings before provision for income
  taxes...................................  $  345.6    $  326.4    $  324.3    $  308.8
Provision for income taxes................     128.9       119.3       118.8       115.0
                                            --------    --------    --------    --------
Net earnings..............................  $  216.7    $  207.1    $  205.5    $  193.8
                                            ========    ========    ========    ========
</TABLE>
 
                                       44
<PAGE>   46
 
                    ASSOCIATES CORPORATION OF NORTH AMERICA
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
<TABLE>
<CAPTION>
                                                                1995
                                            --------------------------------------------
                                             FOURTH      THIRD       SECOND      FIRST
                                            QUARTER     QUARTER     QUARTER     QUARTER
                                            --------    --------    --------    --------
<S>                                         <C>         <C>         <C>         <C>
Finance charges...........................  $1,268.3    $1,234.2    $1,181.6    $1,121.2
                                            ========    ========    ========    ========
Interest expense..........................  $  519.1    $  507.5    $  490.7    $  462.5
                                            ========    ========    ========    ========
Earnings before provision for income
  taxes...................................  $  288.2    $  298.7    $  274.9    $  259.6
Provision for income taxes................     107.0       110.5       102.2        93.6
                                            --------    --------    --------    --------
Net earnings..............................  $  181.2    $  188.2    $  172.7    $  166.0
                                            ========    ========    ========    ========
</TABLE>
 
                                       45
<PAGE>   47
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.
 
     None.
 
                                    PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
 
ITEM 11. EXECUTIVE COMPENSATION.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
 
     The information required by Items 10-13 has been omitted in accordance with
General Instruction J.(2)(c) to Form 10-K.
 
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K.
 
     (a) Financial Statements
 
<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Report of Independent Accountants...........................   24
Consolidated Statement of Earnings for the years ended
  December 31, 1996, 1995 and 1994..........................   25
Consolidated Balance Sheet at December 31, 1996 and 1995....   26
Consolidated Statement of Changes in Stockholders' Equity
  for the years ended December 31, 1996, 1995 and 1994......   27
Consolidated Statement of Cash Flows for the years ended
  December 31, 1996, 1995 and 1994..........................   28
Notes to consolidated financial statements..................   29
</TABLE>
 
     (b) Reports on Form 8-K
 
          During the quarter ended December 31, 1996, Associates filed Current
          Reports on Form 8-K dated October 15, 1996, November 11, 1996, related
          to earnings release or issuances of debt securities pursuant to Rule
          415.
 
                                       46
<PAGE>   48
 
     (c) Exhibits
 
<TABLE>
<S>                      <C>
        (3)              (a) Certificate of Incorporation. Incorporated by reference
                            to Exhibit 3(a) to the Company's Form 10-K for the fiscal
                             year ended October 31, 1986.
                         (b) By-laws. Incorporated by reference to Exhibit 3 to the
                            Company's Form 10-K for the year ended December 31, 1990.
        (4)              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.
       (12)              Computation of Ratio of Earnings to Fixed Charges.
       (21)              Subsidiaries of the registrant. Omitted in accordance with
                            General Instruction J.(2)(b) to Form 10-K.
       (23)              Consent of Independent Accountants.
       (24)              Powers of Attorney.
       (27)              Financial Data Schedule.
</TABLE>
 
                                       47
<PAGE>   49
 
                                   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 CORPORATION OF NORTH AMERICA
 
                                     By        /s/  KEVIN P. HEGARTY
                                         Senior Vice President and Comptroller
                                                    March 25, 1997
 
     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,
                  (Keith W. Hughes)                      Principal Executive Officer
                                                         and Director
 
                 /s/  HAROLD D. MARSHALL*              Director
                (Harold D. Marshall)
 
                /s/  JOSEPH M. McQUILLAN*              Director
                (Joseph M. McQuillan)
 
                     /s/  ROY A. GUTHRIE*              Executive Vice President,
                  (Roy A. Guthrie)                       Principal Financial Officer
                                                         and Director                   March 25, 1997
 
                    /s/  KEVIN P. HEGARTY              Senior Vice President,
                 (Kevin P. Hegarty)                      Comptroller and Principal
                                                         Accounting Officer
</TABLE>
 
     By signing his name hereto, Kevin P. Hegarty 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/  KEVIN P. HEGARTY
                                                    Attorney-in-fact
 
                                       48
<PAGE>   50
 
                               INDEX TO EXHIBITS
 
<TABLE>
<CAPTION>
                                                                            SEQUENTIALLY
  EXHIBIT                                                                     NUMBERED
   NUMBER                                EXHIBIT                                PAGE
  -------                                -------                            ------------
<C>            <S>                                                          <C>
     (3)       (a) Certificate of Incorporation. Incorporated by reference
               to Exhibit 3(a) to the Company's Form 10-K for the fiscal
                   year ended October 31, 1986.
               (b) By-laws. Incorporated by reference to Exhibit 3 to the
               Company's Form 10-K for the year ended December 31, 1990.
     (4)       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.
    (12)       Computation of Ratio of Earnings to Fixed Charges.
    (21)       Subsidiaries of the registrant. Omitted in accordance with
               General Instruction J.(2)(b) to Form 10-K.
    (23)       Consent of Independent Accountants.
    (24)       Powers of Attorney.
    (27)       Financial Data Schedule.
</TABLE>